Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Feb. 29, 2020 | Apr. 14, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | Laredo Oil, Inc. | |
Entity Central Index Key | 0001442492 | |
Document Type | 10-Q | |
Document Period End Date | Feb. 29, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --05-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Interactive Data Current | Yes | |
Entity Incorporation, State or Country Code | DE | |
Entity File Number | 333-153168 | |
Entity Common Stock, Shares Outstanding | 54,514,765 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 |
Balance Sheets (Unaudited)
Balance Sheets (Unaudited) - USD ($) | Feb. 29, 2020 | May 31, 2019 |
Current Assets | ||
Cash and cash equivalents | $ 357,185 | $ 289,559 |
Receivable - related party | 307,426 | 27,990 |
Prepaid expenses and other current assets | 55,391 | 39,551 |
Total Current Assets | 720,002 | 357,100 |
TOTAL ASSETS | 720,002 | 357,100 |
Current Liabilities | ||
Accounts payable | 19,204 | 11,690 |
Accrued payroll liabilities | 1,828,454 | 1,427,940 |
Accrued interest | 249,068 | 223,083 |
Deferred management fee revenue | 45,833 | 45,833 |
Notes payable | 350,000 | 350,000 |
Total Current Liabilities | 2,492,559 | 2,058,546 |
TOTAL LIABILITIES | 2,492,559 | 2,058,546 |
Commitments and Contingencies | ||
Stockholders' Deficit | ||
Preferred stock: $0.0001 par value; 10,000,000 shares authorized; none issued and outstanding | 0 | 0 |
Common stock: $0.0001 par value; 90,000,000 shares authorized; 54,514,765 issued and outstanding | 5,451 | 5,451 |
Additional paid in capital | 8,844,592 | 8,844,592 |
Accumulated deficit | (10,622,600) | (10,551,489) |
Total Stockholders' Deficit | (1,772,557) | (1,701,446) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 720,002 | $ 357,100 |
Balance Sheets (Unaudited) (Par
Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Feb. 29, 2020 | May 31, 2019 |
Stockholders' Deficit | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, authorized shares | 10,000,000 | 10,000,000 |
Preferred stock, issued shares | 0 | 0 |
Preferred stock, outstanding shares | 0 | 0 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, authorized shares | 90,000,000 | 90,000,000 |
Common stock, issued shares | 54,514,765 | 54,514,765 |
Common stock, outstanding shares | 54,514,765 | 54,514,765 |
Statements of Operations (Unaud
Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Feb. 29, 2020 | Feb. 28, 2019 | Feb. 29, 2020 | Feb. 28, 2019 | |
Income Statement [Abstract] | ||||
Management fee revenue - related party | $ 2,185,716 | $ 2,355,716 | $ 6,307,621 | $ 6,493,941 |
Direct costs | 2,111,583 | 2,238,769 | 6,132,048 | 6,157,883 |
Gross profit | 74,133 | 116,947 | 175,573 | 336,058 |
General, selling and administrative expenses | 20,229 | 19,381 | 59,183 | 62,186 |
Consulting and professional services | 61,665 | 54,009 | 161,516 | 184,973 |
Total Operating Expense | 81,894 | 73,390 | 220,699 | 247,159 |
Operating income/(loss) | (7,761) | 43,557 | (45,126) | 88,899 |
Other income/(expense) | ||||
Interest expense | (8,792) | (8,198) | (25,985) | (25,191) |
Net income/(loss) | $ (16,553) | $ 35,359 | $ (71,111) | $ 63,708 |
Net income/(loss) per share, basic and diluted | $ 0 | $ .00 | $ .00 | $ .00 |
Weighted average number of basic and common shares outstanding | 54,514,765 | 54,514,765 | 54,514,765 | 54,514,765 |
Statements of Changes in Stockh
Statements of Changes in Stockholders' Deficit - USD ($) | Common Stock | Preferred Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, shares at May. 31, 2018 | 54,514,765 | 0 | |||
Beginning balance, amount at May. 31, 2018 | $ 5,451 | $ 0 | $ 8,830,531 | $ (10,405,362) | $ (1,569,380) |
Share based compensation | 14,061 | 14,061 | |||
Net income/(loss) | (26,758) | (26,758) | |||
Ending balance, shares at Aug. 31, 2018 | 54,514,765 | 0 | |||
Ending balance, amount at Aug. 31, 2018 | $ 5,451 | $ 0 | 8,844,592 | (10,432,120) | (1,582,077) |
Beginning balance, shares at May. 31, 2018 | 54,514,765 | 0 | |||
Beginning balance, amount at May. 31, 2018 | $ 5,451 | $ 0 | 8,830,531 | (10,405,362) | (1,569,380) |
Share based compensation | 14,061 | ||||
Net income/(loss) | 63,708 | ||||
Ending balance, shares at Feb. 28, 2019 | 54,514,765 | 0 | |||
Ending balance, amount at Feb. 28, 2019 | $ 5,451 | $ 0 | 8,844,592 | (10,341,654) | (1,491,611) |
Beginning balance, shares at Aug. 31, 2018 | 54,514,765 | 0 | |||
Beginning balance, amount at Aug. 31, 2018 | $ 5,451 | $ 0 | 8,844,592 | (10,432,120) | (1,582,077) |
Net income/(loss) | 55,107 | 55,107 | |||
Ending balance, shares at Nov. 30, 2018 | 54,514,765 | 0 | |||
Ending balance, amount at Nov. 30, 2018 | $ 5,451 | $ 0 | 8,844,592 | (10,377,013) | (1,526,970) |
Net income/(loss) | 35,359 | 35,359 | |||
Ending balance, shares at Feb. 28, 2019 | 54,514,765 | 0 | |||
Ending balance, amount at Feb. 28, 2019 | $ 5,451 | $ 0 | 8,844,592 | (10,341,654) | (1,491,611) |
Beginning balance, shares at May. 31, 2019 | 54,514,765 | 0 | |||
Beginning balance, amount at May. 31, 2019 | $ 5,451 | $ 0 | 8,844,592 | (10,551,489) | (1,701,446) |
Net income/(loss) | (85,248) | (85,248) | |||
Ending balance, shares at Aug. 31, 2019 | 54,514,765 | 0 | |||
Ending balance, amount at Aug. 31, 2019 | $ 5,451 | $ 0 | 8,844,592 | (10,636,737) | (1,786,694) |
Beginning balance, shares at May. 31, 2019 | 54,514,765 | 0 | |||
Beginning balance, amount at May. 31, 2019 | $ 5,451 | $ 0 | 8,844,592 | (10,551,489) | (1,701,446) |
Share based compensation | 0 | ||||
Net income/(loss) | (71,111) | ||||
Ending balance, shares at Feb. 29, 2020 | 54,514,765 | 0 | |||
Ending balance, amount at Feb. 29, 2020 | $ 5,451 | $ 0 | 8,844,592 | (10,622,600) | (1,772,557) |
Beginning balance, shares at Aug. 31, 2019 | 54,514,765 | 0 | |||
Beginning balance, amount at Aug. 31, 2019 | $ 5,451 | $ 0 | 8,844,592 | (10,636,737) | (1,786,694) |
Net income/(loss) | 30,690 | 30,690 | |||
Ending balance, shares at Nov. 30, 2019 | 54,514,765 | 0 | |||
Ending balance, amount at Nov. 30, 2019 | $ 5,451 | $ 0 | 8,844,592 | (10,606,047) | (1,756,004) |
Net income/(loss) | (16,553) | (16,553) | |||
Ending balance, shares at Feb. 29, 2020 | 54,514,765 | 0 | |||
Ending balance, amount at Feb. 29, 2020 | $ 5,451 | $ 0 | $ 8,844,592 | $ (10,622,600) | $ (1,772,557) |
Statements of Cash Flows (Unaud
Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Feb. 29, 2020 | Feb. 28, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income/(loss) | $ (71,111) | $ 63,708 |
Adjustments to Reconcile Net Income/(Loss) to Net Cash provided by/(used in) Operating Activities | ||
Share based compensation | 0 | 14,061 |
Increase in receivable - related party | (279,436) | (33,532) |
Increase in prepaid expenses and other current assets | (15,840) | (8,832) |
Increase in accounts payable and accrued liabilities | 434,013 | 208,459 |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 67,626 | 243,864 |
CASH FLOWS FROM INVESTING ACTIVITIES | 0 | 0 |
CASH FLOWS FROM FINANCING ACTIVITIES | 0 | 0 |
Net change in cash and cash equivalents | 67,626 | 243,864 |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 289,559 | 106,311 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ 357,185 | $ 350,175 |
1. ORGANIZATION AND DESCRIPTION
1. ORGANIZATION AND DESCRIPTION OF BUSINESS | 9 Months Ended |
Feb. 29, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [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 (“MSA”) outlines that the Company will provide the services of various employees (“Service Employees”), including Mark See, in exchange for monthly and quarterly management service fees. The monthly management service fees provide funding for the salaries, benefit costs, and FICA taxes for the Service Employees identified in the MSA. SORC remits payment for the monthly management fees in advance and is payable on the first day of each calendar month. The quarterly management fee is $137,500 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 February 29, 2020. In addition, SORC will reimburse the Company for monthly expenses incurred by the Service Employees in connection with their rendition of services under the MSA. 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 of the filing date, no such additional funding requests have been made. 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 February 29, 2020 the subsidiary has received no distributions from SORC. 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. It is expected that SORC will continue to be funded primarily by Alleghany in exchange for issuance by SORC to Alleghany of 12% Cumulative Preferred Stock. Prior to the Company receiving any Royalty cash distributions from SORC, all SORC preferred share accrued dividends must be paid (in excess of $232 million as of December 31, 2019), preferred shares redeemed ($275.9 million as of December 31, 2019), and debt retired to comply with any loan agreements ($0 as of December 31, 2019). Additionally, when SORC acquires additional oil fields, any Alleghany funds invested in SORC to finance their acquisition and development must be repaid prior to the distribution of any Royalty cash distributions to Laredo. Basic and Diluted Loss per Share The Company’s basic earnings per share (“EPS”) 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 nine-month periods ended February 29, 2020, no potentially dilutive securities were included in the calculation of diluted loss per share as their impact would have been anti-dilutive. For the three and nine-month periods ended February 28, 2019, all options and warrants potentially convertible into common equivalent shares are considered antidilutive due to the exercise prices of the instruments and have been excluded in the calculation of diluted earnings per share. Diluted net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of common and dilutive common equivalent shares outstanding during the period. |
2. GOING CONCERN
2. GOING CONCERN | 9 Months Ended |
Feb. 29, 2020 | |
Going Concern | |
2. GOING CONCERN | These financial statements have been prepared on a going concern basis. The Company has routinely incurred losses since inception, resulting in an accumulated deficit, and is dependent upon one customer for its revenue. 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 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. In that regard, the Company has worked to attract and retain key personnel with significant experience in the industry to enhance the quality and breadth of the services it provides. At the same time, in an effort to control costs, the Company has required a number of its personnel to multi-task and cover a wider range of responsibilities in an effort to restrict the growth of the Company’s headcount at a time of expanding demand for its services under the MSA. Further, the Company works closely with SORC to obtain its approval in advance of committing to material costs and expenditures in order to keep the Company’s expenses in line with the management fee revenue. 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. REVENUE RECOGNITION
3. REVENUE RECOGNITION | 9 Months Ended |
Feb. 29, 2020 | |
Revenue from Contract with Customer [Abstract] | |
3. REVENUE RECOGNITION | Monthly Management Fee The Company generates monthly management revenues from fees for labor and benefit costs. The Company recognizes revenue for these services in the month the labor and benefits are received by the customer. Monthly management fee revenues of $2,048,216 and $5,895,121 were recognized for the three and nine months ended February 29, 2020, respectively. Similarly, monthly management fee revenues of $2,218,216 and 6,081,441 were recognized for the three and nine months ended February 28, 2019. Quarterly Management Fee The Company generates management fee revenue each quarter. The Company recognizes revenue over the applicable quarter on a straight-line basis. The management fee is billed quarterly in advance. As a result, we have recorded deferred revenue for services that have not been provided of $45,833 as of February 29, 2020 and February 28, 2019. Quarterly management fees recognized for the three and nine months ended in both February 29, 2020 and February 28, 2019 were $137,500 and $412,500, respectively. |
4. RECENT AND ADOPTED ACCOUNTIN
4. RECENT AND ADOPTED ACCOUNTING STANDARDS | 9 Months Ended |
Feb. 29, 2020 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
4. 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. |
5. FAIR VALUE OF FINANCIAL INST
5. FAIR VALUE OF FINANCIAL INSTRUMENTS | 9 Months Ended |
Feb. 29, 2020 | |
Fair Value Disclosures [Abstract] | |
5. 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, 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. |
6. RELATED PARTY TRANSACTIONS
6. RELATED PARTY TRANSACTIONS | 9 Months Ended |
Feb. 29, 2020 | |
Related Party Transactions [Abstract] | |
6. 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 ● 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 nine months ended February 29, 2020 and February 28, 2019 is generated from charges to SORC. All outstanding notes payable at February 29, 2020 and May 31, 2019 are held by Alleghany Capital Corporation (“Alleghany Capital”), a wholly owned subsidiary of Alleghany. See Note 8. |
7. STOCKHOLDERS' DEFICIT
7. STOCKHOLDERS' DEFICIT | 9 Months Ended |
Feb. 29, 2020 | |
Stockholders' Deficit | |
7. 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 Company recognized shared based compensation expense related to stock option awards totaling $14,061 and recorded in general, selling and administrative expenses for the nine months ended February 28, 2019. Share based compensation expense is fully recorded with respect to stock option awards outstanding. Accordingly, no further share based compensation expense was recorded for periods subsequent to February 28, 2019. Stock Options No option grants were made during the first three quarters of fiscal years 2020 and 2019. Restricted Stock No restricted stock was granted during the first three quarters of fiscal years 2020 or 2019. Warrants No warrants were issued during the first three quarters of fiscal years 2020 or 2019. As of February 29, 2020, there were 5,374,501 warrants remaining to be exercised at a price of $0.70 per share to Sunrise Securities Corporation to satisfy the finders’ fee obligation associated with the Alleghany transaction. The warrants will expire June 14, 2021 and are currently exercisable. |
8. NOTES PAYABLE
8. NOTES PAYABLE | 9 Months Ended |
Feb. 29, 2020 | |
Notes Payable [Abstract] | |
8. 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 February 29, 2020, accrued interest totaling $249,068 is recorded in accrued interest. The interest is payable in either cash or in kind. The notes have been amended and restated and now have a maturity date of December 31, 2020 and are classified as short-term notes payable. The loan agreements require any stock issuances for cash be utilized to pay down the outstanding loan balance unless written consent is obtained from Alleghany Capital. |
9. SUBSEQUENT EVENTS
9. SUBSEQUENT EVENTS | 9 Months Ended |
Feb. 29, 2020 | |
Subsequent Events [Abstract] | |
9. SUBSEQUENT EVENTS | In March 2020, the COVID-19 outbreak was declared a National Public Health Emergency which continues to spread throughout the world and has adversely impacted global activity and contributed to significant declines and volatility in financial markets. The outbreak could have a continued material adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate material adverse impact of the coronavirus outbreak. Nevertheless, the outbreak presents uncertainty and risk with respect to the Company and its performance and financial results. In March 2020, the failure of an alliance between the Saudi Arabia-led Organization of Petroleum Exporting Countries and Russia to reach an agreement on oil production volumes resulted in what is widely referred to in the media as a “price war.” The price war and the declaration of the pandemic have resulted in a sharp fall in global oil prices. |
1. ORGANIZATION AND DESCRIPTI_2
1. ORGANIZATION AND DESCRIPTION OF BUSINESS (Details Narrative) - USD ($) | Feb. 29, 2020 | May 31, 2019 | Feb. 28, 2019 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Deferred management fee revenue | $ 45,833 | $ 45,833 | $ 45,833 |
3. REVENUE RECOGNITION (Details
3. REVENUE RECOGNITION (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Feb. 29, 2020 | Feb. 28, 2019 | Feb. 29, 2020 | Feb. 28, 2019 | May 31, 2019 | |
Management fee revenue - related party | $ 2,185,716 | $ 2,355,716 | $ 6,307,621 | $ 6,493,941 | |
Deferred management fee revenue | 45,833 | 45,833 | 45,833 | 45,833 | $ 45,833 |
Monthly Management Fee | |||||
Management fee revenue - related party | 2,048,216 | 2,218,216 | 5,895,121 | 6,081,441 | |
Quarterly Management Fee | |||||
Management fee revenue - related party | $ 137,500 | $ 137,500 | $ 412,500 | $ 412,500 |
7. STOCKHOLDERS' DEFICIT (Detai
7. STOCKHOLDERS' DEFICIT (Details Narrative) | 9 Months Ended |
Feb. 28, 2019USD ($) | |
General, Selling and Administrative Expenses | |
Share-based compensation | $ 14,061 |
8. NOTES PAYABLE (Details Narra
8. NOTES PAYABLE (Details Narrative) - USD ($) | Feb. 29, 2020 | May 31, 2019 |
Notes Payable [Abstract] | ||
Accrued interest | $ 249,068 | $ 223,083 |