Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
May 31, 2020 | Aug. 31, 2020 | Nov. 29, 2019 | |
Document And Entity Information | |||
Entity Registrant Name | Laredo Oil, Inc. | ||
Entity Central Index Key | 0001442492 | ||
Document Type | 10-K | ||
Document Period End Date | May 31, 2020 | ||
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 | 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 Public Float | $ 560,000 | ||
Entity Common Stock, Shares Outstanding | 54,514,765 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2020 |
Balance Sheets
Balance Sheets - USD ($) | May 31, 2020 | May 31, 2019 |
Current Assets | ||
Cash and cash equivalents | $ 1,532,511 | $ 289,559 |
Receivable - related party | 32,058 | 27,990 |
Prepaid expenses and other current assets | 58,492 | 39,551 |
Total Current Assets | 1,623,061 | 357,100 |
TOTAL ASSETS | 1,623,061 | 357,100 |
Current Liabilities | ||
Accounts payable | 20,954 | 11,690 |
Accrued payroll liabilities | 1,581,847 | 1,427,940 |
Accrued interest | 259,133 | 223,083 |
Deferred management fee revenue | 45,833 | 45,833 |
Notes payable - related party | 350,000 | 350,000 |
Current note payable | 473,778 | 0 |
Total Current Liabilities | 2,731,545 | 2,058,546 |
Long-term note, net of current note payable | 759,878 | 0 |
TOTAL LIABILITIES | 3,491,423 | 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 and 54,514,765 issued and outstanding, respectively | 5,451 | 5,451 |
Additional paid in capital | 8,844,592 | 8,844,592 |
Accumulated deficit | (10,718,405) | (10,551,489) |
Total Stockholders' Deficit | (1,868,362) | (1,701,446) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 1,623,061 | $ 357,100 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | May 31, 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
Statements of Operations - USD ($) | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Income Statement [Abstract] | ||
Management fee revenue | $ 8,145,167 | $ 8,479,855 |
Direct costs | 7,968,985 | 8,283,877 |
Gross profit (loss) | 176,182 | 195,978 |
General, selling and administrative expenses | 75,000 | 77,894 |
Consulting and professional services | 232,048 | 230,615 |
Total Operating Expense | 307,048 | 308,509 |
Operating income/(loss) | (130,866) | (112,531) |
Interest expense | (36,050) | (33,596) |
Net income/(loss) | $ (166,916) | $ (146,127) |
Net income/(loss) per share, basic and diluted | $ 0 | $ 0 |
Weighted average number of basic and diluted common shares outstanding | 54,514,765 | 54,514,765 |
Statement of Stockholders' Defi
Statement of 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 loss | (146,127) | (146,127) | |||
Ending balance, shares at May. 31, 2019 | 54,514,765 | 0 | |||
Ending balance, amount at May. 31, 2019 | $ 5,451 | $ 0 | 8,844,592 | (10,551,489) | (1,701,446) |
Net loss | (166,916) | (166,916) | |||
Ending balance, shares at May. 31, 2020 | 54,514,765 | 0 | |||
Ending balance, amount at May. 31, 2020 | $ 5,451 | $ 0 | $ 8,844,592 | $ (10,718,405) | $ (1,868,362) |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income/(loss) | $ (166,916) | $ (146,127) |
Adjustments to Reconcile Net Income/(Loss) to Net Cash Used in Operating Activities: | ||
Share based compensation | 0 | 14,061 |
(Increase)/decrease in receivable - related party | (4,068) | 92,134 |
(Increase)/decrease in prepaid expenses and other current assets | (18,941) | 430 |
(Decrease)/Increase in accounts payable and accrued liabilities | 199,221 | 222,750 |
NET CASH PROVIDED BY/ (USED IN) OPERATING ACTIVITIES | 9,296 | 183,248 |
CASH FLOWS FROM INVESTING ACTIVITIES | 0 | 0 |
Proceeds from PPP loan | 1,233,656 | 0 |
CASH FLOW FROM FINANCING ACTIVITIES | 1,233,656 | 0 |
Net decrease in cash and cash equivalents | 1,242,952 | 183,248 |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 289,559 | 106,311 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ 1,532,511 | $ 289,559 |
1. ORGANIZATION AND DESCRIPTION
1. ORGANIZATION AND DESCRIPTION OF BUSINESS | 12 Months Ended |
May 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
1. ORGANIZATION AND DESCRIPTION OF BUSINESS | The accompanying financial statements have been prepared by management of Laredo Oil, Inc. (“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 as of and for the years ended May 31, 2020 and 2019 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.” with authorized common stock of 90,000,000 shares at $0.0001 par value and authorized preferred stock of 10,000,000 shares at $0.0001 par value. On October 21, 2009 the name was changed to “Laredo Oil, Inc.” The Company is 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 sole customer, Stranded Oil Resources Corporation (“SORC”), an indirect, wholly owned subsidiary of Alleghany Corporation (“Alleghany”). From its inception through October 2009, the Company was primarily engaged in acquisition and exploration efforts for mineral properties. After a change in control 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 enhanced oil recovery methods. The Company was unable to raise the capital required to purchase any suitable oil fields. 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 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 May 31, 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 May 31, 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. 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. For the years ended May 31, 2020 and 2019, all options and warrants potentially convertible into common equivalent shares are considered antidilutive and have been excluded in the calculation of diluted earnings per share. |
2. GOING CONCERN
2. GOING CONCERN | 12 Months Ended |
May 31, 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 on 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. This situation raises substantial doubt about the Company’s ability to continue as a going concern within one year of the issuance date of the financial statements. 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. 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 Management Services Agreement. 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. SUMMARY OF SIGNIFICANT ACCOU
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
May 31, 2020 | |
Accounting Policies [Abstract] | |
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | USE OF ESTIMATES Management uses estimates and assumptions in preparing these 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. 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. As a result, the Company records deferred revenue for service that have not been provided. Monthly management fee revenues of $7,595,167 and $7,929,855, respectively, were recognized for the years ended May 31, 2020 and 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, the Company recorded deferred revenue for services that have not been provided of $45,833 as of May 31, 2020 and 2019. Quarterly management fees recognized for the years ended May 31, 2020 and 2019 were $550,000 and $550,000, respectively. CASH AND CASH EQUIVALENTS All highly liquid investments with a maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of May 31, 2020 and 2019. At times, the Company maintains cash balances deposited at its financial institution that exceed FDIC insured limits. RECEIVABLE – RELATED PARTY Receivable – related party balances arise from employee expense reports and estimated monthly license fees incurred in accordance with the Company’s revenue recognition policy, but not paid at period end. PREPAID EXPENSES AND OTHER CURRENT ASSETS The Company prepaid directors’ and officers’ insurance is recorded and amortized to expense over the 12-month contract life. 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 average maturities, the fair value of notes payable approximate their carrying value. FASB ASC 820, Fair Value Measurements , The three level fair value hierarchies for disclosure of fair value measurements defined by FASB ASC 820 are as follows: Level 1 Level 2 Level 3 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. As of May 31, 2020 and 2019, there are no remaining assets measured at fair value on a recurring basis. SHARE BASED EXPENSES FASB ASC 718, Compensation - Stock Compensation a b The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity - Based Payments to Non-Employees. a b INCOME TAXES The Company accounts for income taxes by the asset and liability method in accordance with FASB ASC 740, Income Taxes. In addition, the Company utilizes the two-step approach to recognizing and measuring uncertain tax positions taken or expected to be taken in a tax return. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company recognizes interest and penalties accrued on unrecognized tax benefits within general and administrative expense. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction in general and administrative expenses in the period that such determination is made. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe 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. |
4. EARNINGS_(LOSS) PER SHARE
4. EARNINGS/(LOSS) PER SHARE | 12 Months Ended |
May 31, 2020 | |
Earnings Per Share [Abstract] | |
4. EARNINGS/(LOSS) PER SHARE | Basic and diluted earnings/(loss) per share is computed by dividing net income/(loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings/(loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive earnings/(loss) per share excludes all potential common shares if their effect is anti-dilutive. For both years ended May 31, 2020 and 2019, warrants to purchase 5,374,501 shares of common stock, and options to purchase 4,679,000 shares of common stock were not included in the computation of diluted earnings/(loss) per share because they were anti-dilutive. For the Year Ended May 31, 2020 2019 Numerator - net income/(loss) attributable to common stockholders $ (166,916 ) $ (146,127 ) Denominator - weighted average number of common shares outstanding 54,514,765 54,514,765 Basic and diluted earnings/(loss) per common share $ (0.00 ) $ (0.00 ) |
5. RELATED PARTY TRANSACTIONS
5. RELATED PARTY TRANSACTIONS | 12 Months Ended |
May 31, 2020 | |
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 ● 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 years ended May 31, 2020 and 2019 is generated from charges to SORC. The Company also recorded an approximate $32,000 and $28,000 receivable from SORC as of May 31, 2020 and 2019, respectively, for employee expense reports covered by SORC pursuant to the management services agreements. Outstanding notes payable totaling $350,000 and related accrued interest at May 31, 2020 and 2019, respectively, are held by Alleghany. See Note 7. |
6. STOCKHOLDERS' DEFICIT
6. STOCKHOLDERS' DEFICIT | 12 Months Ended |
May 31, 2020 | |
Stockholders' Deficit | |
6. STOCKHOLDERS' DEFICIT | Share Based Compensation Effective November 6, 2011, the holders of a majority of the shares of common stock approved the Plan to reserve 10,000,000 shares of common stock for issuance to eligible recipients. Effective December 2014, an additional 5,000,000 shares of common stock were reserved for issuance to eligible recipients under the Plan. Shares under the plan can be issued in the form of options, restricted stock, and other forms of equity securities. The Company’s board of directors has the discretion to set the amount and vesting period of award grants. As of May 31, 2020, 8,695,000 shares remain available for issuance under the Plan. The Black-Scholes option pricing model is used to estimate the fair value of options granted under our stock incentive plan. For the years ended May 31, 2020 and May 31, 2019, respectively, the Company recorded share-based compensation expense related to stock options totaling $0 and $14,061. These stock option expenses are classified in general, selling and administrative expenses in the Statements of Operations. Stock Options For the year ended May 31, 2019, $14,061 (for 35,415 vested shares) was recognized as expense related to the stock options. As of May 31, 2020, there were no remaining unvested and unrecognized shares. The following table summarizes information about options granted during the years ended May 31, 2020 and 2019: Number of Shares Weighted Average Balance, May 31, 2018 4,754,000 $ 0.89 Options granted and assumed - - Options expired - - Options cancelled, forfeited (75,000 ) (0.41 ) Options exercised - - Balance, May 31, 2019 4,679,000 $ 0.89 Options granted and assumed - - Options expired - - Options cancelled, forfeited - - Options exercised - - Balance, May 31, 2020 4,679,000 $ 0.89 All stock options are exercisable upon vesting. As of May 31, 2020 and 2019, 4,679,000 options are outstanding at a weighted average exercise price of $0.89 for both years. Restricted Stock During fiscal years ending May 31, 2020 and 2019, no restricted stock has been granted. The Company granted 1.6 million shares of restricted stock during fiscal year 2014. As of May 31, 2020, all granted shares are fully vested. The Company recognized $0 in expense for each of the years ended May 31, 2020 and 2019. Warrants As of May 31, 2020 and 2019, 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. No warrants have been granted, exercised or cancelled during the years ended May 31, 2020 and 2019. All warrants are exercisable as of May 31, 2020. |
7. NOTES PAYABLE
7. NOTES PAYABLE | 12 Months Ended |
May 31, 2020 | |
Notes Payable [Abstract] | |
7. NOTES PAYABLE | Alleghany Notes During the fiscal year ended May 31, 2011, the Company entered into two Loan Agreements with Alleghany 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 May 31, 2020 and 2019, accrued interest totaling $257,984 and $223,083, respectively, is recorded in accrued interest on the accompanying balance sheets. 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 as of May 31, 2020. 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. Paycheck Protection Program Loan For the Year Ended May 31, 2020 2019 PPP Loan $ 1,233,656 $ - Total Long-Term Notes 1,233,656 - Less amounts classified as current 473,778 - Long-term note, excluding current portion $ 759,878 $ - On April 28, 2020, the Company entered into a Note (the “Note”) with IBERIABANK for $1,233,656.00 pursuant to the terms of the Paycheck Protection Program (“PPP”) authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act (“Program”). The Note will accrue interest on the outstanding principal sum at the rate of 1% per annum, and is due two years from the date of the Note, at which time all unpaid principal, accrued interest and any other amounts will be due and payable. No interest or principal will be due during the first six months after April 28, 2020, although interest will continue to accrue over this six-month deferral period. As of May 31, 2020, accrued interest totaling $1,149 is recorded in accrued interest on the accompanying balance sheets. After such six-month deferral period and after taking into account any loan forgiveness applicable to the Note pursuant to the Program, as approved by the Small Business Administration, an agency of the United States of America, any remaining principal and accrued interest will be payable in substantially equal monthly installments on the first day of each month over the remaining 18-month term of the Note. The Company did not provide any collateral or guarantees for the loan, nor did the Company pay any facility charge to obtain the loan. The Note provides for customary events of default, including, among others, those relating to failure to make payment, bankruptcy, breaches of representations and material adverse effects. The Company may prepay the Note at any time without payment of any penalty or premium. As noted above, under the terms of the Program, PPP loan recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and the maintenance of the Company’s payroll levels. No assurance can be given that the Company will obtain forgiveness of the loan, in whole or in part. If all or a portion of a loan is ultimately forgiven, the Company plans to record income from the extinguishment of its loan obligation when it is legally released from being the primary obligor in accordance with ASC 405-20-40-1. |
8. PROVISION FOR INCOME TAXES
8. PROVISION FOR INCOME TAXES | 12 Months Ended |
May 31, 2020 | |
Income Tax Disclosure [Abstract] | |
8. PROVISION FOR INCOME TAXES | We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. Per the authoritative literature when it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carryforwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carryforward period. The Company has not taken any tax positions that, if challenged, would have a material effect on the financial statements for the twelve-months ended May 31, 2020 and 2019. The Company’s tax returns for the fiscal years ended May 31 of 2012 to 2019 remain subject to examination by the tax authorities. The components of the Company’s deferred tax asset as of May 31, 2020 and 2019 are as follows: 2020 2019 Net operating loss $ 298,177 $ 297,665 Other 608,115 573,575 Valuation allowance (906,292 ) (871,240 ) Net deferred tax asset $ - $ - A reconciliation of income taxes computed at the statutory rate to the income tax amount recorded is as follows: 2020 2019 Tax at statutory rate (21%) $ 35,052 $ 30,687 Effect of non-deductible permanent differences - (2,953 ) Effect of change in statutory tax rate - - Other - - Increase/(decrease) in valuation allowance (35,052 ) (27,734 ) Net deferred tax asset $ - $ - The net federal operating loss carry forward will expire between 2029 and 2039. This carry forward may be limited upon the consummation of a business combination under IRC Section 381. |
9. OFFICE LEASES
9. OFFICE LEASES | 12 Months Ended |
May 31, 2020 | |
Leases [Abstract] | |
9. OFFICE LEASES | No office leases currently extend beyond one year. Rent expense amounted to $0 for each of the years ending May 31, 2020 and 2019. |
10. DEFINED CONTRIBUTION PLAN
10. DEFINED CONTRIBUTION PLAN | 12 Months Ended |
May 31, 2020 | |
Defined Benefit Plan, Accumulated Other Comprehensive (Income) Loss, before Tax [Abstract] | |
DEFINED CONTRIBUTION PLAN | The Company has a savings and investment plan (the “401(k) Plan”) covering substantially all employees. Company contributions are discretionary. Effective August 2019, the Company commenced matching employee contributions based on the level of employee contributions up to a maximum of 3% of an employee’s eligible salary, subject to an annual maximum. The Company discontinued matching in April 2020. Amounts expensed in connection with the 401(k) Plan totaled $49,237 and $0 for the years ending May 31, 2020 and 2019, respectively. |
11. SUBSEQUENT EVENTS
11. SUBSEQUENT EVENTS | 12 Months Ended |
May 31, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | On June 30, 2020, Laredo Oil, Inc. (“Laredo”) entered into a Limited Liability Company Agreement (the “LLC Agreement”) of Cat Creek Holdings LLC (“Cat Creek”), a Montana limited liability company formed as a joint venture for the purchase of certain oil and gas properties in the Cat Creek Field in Petroleum and Garfield Counties in the State of Montana (the “Cat Creek Properties”). In accordance with the LLC Agreement, Laredo invested $448,900 in Cat Creek for 50% of the ownership interests in Cat Creek using cash on hand. Each of Lipson Investments LLC and Viper Oil & Gas, LLC, the other two members of Cat Creek, have ownership interests in Cat Creek of 25% in consideration of their respective investments of $224,450. Cat Creek will be managed by a Board of Directors consisting of four directors, two of which shall be designated by Laredo. Cat Creek entered into an Asset Purchase and Sale Agreement (the “Purchase Agreement”) with Carrell Oil Company (“Seller”) on July 1, 2020 for the purchase of the Cat Creek Properties from Seller. Upon closing under the Purchase Agreement, Seller will receive consideration of $400,000, subject to certain adjustments resulting from pre- and post-effective date revenue, expense, and allocations. Closing under the Purchase Agreement is contingent upon Seller obtaining the requisite legal authority to sell the assets to Cat Creek. |
3. SUMMARY OF SIGNIFICANT ACC_2
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
May 31, 2020 | |
Accounting Policies [Abstract] | |
USE OF ESTIMATES | Management uses estimates and assumptions in preparing these 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. |
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. As a result, the Company records deferred revenue for service that have not been provided. Monthly management fee revenues of $7,595,167 and $7,929,855, respectively, were recognized for the years ended May 31, 2020 and 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, the Company recorded deferred revenue for services that have not been provided of $45,833 as of May 31, 2020 and 2019. Quarterly management fees recognized for the years ended May 31, 2020 and 2019 were $550,000 and $550,000, respectively. |
CASH AND CASH EQUIVALENTS | All highly liquid investments with a maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of May 31, 2020 and 2019. At times, the Company maintains cash balances deposited at its financial institution that exceed FDIC insured limits. |
RECEIVABLE - RELATED PARTY | Receivable – related party balances arise from employee expense reports and estimated monthly license fees incurred in accordance with the Company’s revenue recognition policy, but not paid at period end. |
PREPAID EXPENSES AND OTHER CURRENT ASSETS | The Company prepaid directors’ and officers’ insurance is recorded and amortized to expense over the 12-month contract life. |
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 average maturities, the fair value of notes payable approximate their carrying value. FASB ASC 820, Fair Value Measurements , The three level fair value hierarchies for disclosure of fair value measurements defined by FASB ASC 820 are as follows: Level 1 Level 2 Level 3 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. As of May 31, 2020 and 2019, there are no remaining assets measured at fair value on a recurring basis. |
SHARE BASED EXPENSES | FASB ASC 718, Compensation - Stock Compensation a b The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity - Based Payments to Non-Employees. a b |
INCOME TAXES | The Company accounts for income taxes by the asset and liability method in accordance with FASB ASC 740, Income Taxes. In addition, the Company utilizes the two-step approach to recognizing and measuring uncertain tax positions taken or expected to be taken in a tax return. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company recognizes interest and penalties accrued on unrecognized tax benefits within general and administrative expense. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction in general and administrative expenses in the period that such determination is made. |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe 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. |
4. EARNINGS_(LOSS) PER SHARE (T
4. EARNINGS/(LOSS) PER SHARE (Tables) | 12 Months Ended |
May 31, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of earnings/(loss) per share, basic and diluted | For the Year Ended May 31, 2020 2019 Numerator - net income/(loss) attributable to common stockholders $ (166,916 ) $ (146,127 ) Denominator - weighted average number of common shares outstanding 54,514,765 54,514,765 Basic and diluted earnings/(loss) per common share $ (0.00 ) $ (0.00 ) |
6. STOCKHOLDERS' DEFICIT (Table
6. STOCKHOLDERS' DEFICIT (Tables) | 12 Months Ended |
May 31, 2020 | |
Stockholders' Deficit | |
Summary of options | Number of Shares Weighted Average Balance, May 31, 2018 4,754,000 $ 0.89 Options granted and assumed - - Options expired - - Options cancelled, forfeited (75,000 ) (0.41 ) Options exercised - - Balance, May 31, 2019 4,679,000 $ 0.89 Options granted and assumed - - Options expired - - Options cancelled, forfeited - - Options exercised - - Balance, May 31, 2020 4,679,000 $ 0.89 |
7. NOTES PAYABLE (Tables)
7. NOTES PAYABLE (Tables) | 12 Months Ended |
May 31, 2020 | |
Notes Payable [Abstract] | |
Paycheck protection program loan | For the Year Ended May 31, 2020 2019 PPP Loan $ 1,233,656 $ - Total Long-Term Notes 1,233,656 - Less amounts classified as current 473,778 - Long-term note, excluding current portion $ 759,878 $ - |
8. PROVISION FOR INCOME TAXES (
8. PROVISION FOR INCOME TAXES (Tables) | 12 Months Ended |
May 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Components of deferred tax asset | 2020 2019 Net operating loss $ 298,177 $ 297,665 Other 608,115 573,575 Valuation allowance (906,292 ) (871,240 ) Net deferred tax asset $ - $ - |
Schedule of effective income tax rate reconciliation | 2020 2019 Tax at statutory rate (21%) $ 35,052 $ 30,687 Effect of non-deductible permanent differences - (2,953 ) Effect of change in statutory tax rate - - Other - - Increase/(decrease) in valuation allowance (35,052 ) (27,734 ) Net deferred tax asset $ - $ - |
1. ORGANIZATION AND DESCRIPTI_2
1. ORGANIZATION AND DESCRIPTION OF BUSINESS (Details Narrative) - USD ($) | May 31, 2020 | May 31, 2019 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Deferred management fee revenue | $ 45,833 | $ 45,833 |
3. SUMMARY OF SIGNIFICANT ACC_3
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Accounting Policies [Abstract] | ||
Management fee revenue | $ 8,145,167 | $ 8,479,855 |
Deferred management fee revenue | 45,833 | 45,833 |
Quarterly management fees | $ 550,000 | $ 550,000 |
4. EARNINGS_(LOSS) PER SHARE (D
4. EARNINGS/(LOSS) PER SHARE (Details) - USD ($) | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Earnings Per Share [Abstract] | ||
Numerator - net income/(loss) attributable to common stockholders | $ (166,916) | $ (146,127) |
Denominator - weighted average number of common shares outstanding | 54,514,765 | 54,514,765 |
Basic and diluted earnings/(loss) per common share | $ 0 | $ 0 |
4. EARNINGS_(LOSS) PER SHARE _2
4. EARNINGS/(LOSS) PER SHARE (Details Narrative) - shares | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Warrants | ||
Antidilutive securities excluded from computation of earnings per share | 5,374,501 | 5,374,501 |
Stock options | ||
Antidilutive securities excluded from computation of earnings per share | 4,679,000 | 4,679,000 |
5. RELATED PARTY TRANSACTIONS (
5. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | May 31, 2020 | May 31, 2019 |
Related Party Transactions [Abstract] | ||
Receivable - related party | $ 32,058 | $ 27,990 |
Outstanding notes payable and related interest | $ 350,000 | $ 350,000 |
6. STOCKHOLDERS' DEFICIT (Detai
6. STOCKHOLDERS' DEFICIT (Details) - $ / shares | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Number of Shares | ||
Options outstanding, beginning | 4,679,000 | 4,754,000 |
Options granted and assumed | 0 | 0 |
Options expired | 0 | 0 |
Options cancelled, forfeited | 0 | (75,000) |
Options exercised | 0 | 0 |
Options outstanding, ending | 4,679,000 | 4,679,000 |
Weighted Average Exercise Price | ||
Weighted average exercise price outstanding, beginning | $ 0.89 | $ 0.89 |
Weighted average exercise price granted and assumed | 0 | 0 |
Weighted average exercise price expired | 0 | 0 |
Weighted average exercise price cancelled, forfeited | 0 | (0.41) |
Weighted average exercise price exercised | 0 | 0 |
Weighted average exercise price outstanding, ending | $ 0.89 | $ 0.89 |
6. STOCKHOLDERS' DEFICIT (Det_2
6. STOCKHOLDERS' DEFICIT (Details Narrative) - USD ($) | 12 Months Ended | ||
May 31, 2020 | May 31, 2019 | May 31, 2018 | |
Stockholders' Deficit | |||
Shares remain available for issuance under the Plan | 8,695,000 | ||
Stock option expense | $ 0 | $ 14,061 | |
Options outstanding | 4,679,000 | 4,679,000 | 4,754,000 |
Weighted average exercise price | $ 0.89 | $ 0.89 | $ 0.89 |
Restricted stock expense | $ 0 | $ 0 | |
Warrants exercisable | 5,374,501 | 5,374,501 |
7. NOTES PAYABLE (Details)
7. NOTES PAYABLE (Details) - USD ($) | May 31, 2020 | May 31, 2019 |
Notes Payable [Abstract] | ||
PPP loan | $ 1,233,656 | $ 0 |
Total long-term notes | 1,233,656 | 0 |
Less amounts classified as current | 473,778 | 0 |
Long-term note, excluding current portion | $ 759,878 | $ 0 |
7. NOTES PAYABLE (Details Narra
7. NOTES PAYABLE (Details Narrative) - USD ($) | May 31, 2020 | May 31, 2019 |
Notes Payable [Abstract] | ||
Notes payable | $ 473,778 | $ 0 |
Accrued interest | $ 259,133 | $ 223,083 |
8. PROVISION FOR INCOME TAXES_2
8. PROVISION FOR INCOME TAXES (Details) - USD ($) | May 31, 2020 | May 31, 2019 |
Income Tax Disclosure [Abstract] | ||
Net operating loss | $ 298,177 | $ 297,665 |
Other | 608,115 | 573,575 |
Valuation allowance | (906,292) | (871,240) |
Net deferred tax asset | $ 0 | $ 0 |
8. PROVISION FOR INCOME TAXES_3
8. PROVISION FOR INCOME TAXES (Details 1) - USD ($) | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Tax at statutory rate (21%) | $ 35,052 | $ 30,687 |
Effect of non-deductible permanent differences | 0 | (2,953) |
Effect of change in statutory tax rate | 0 | 0 |
Other | 0 | 0 |
Increase/(decrease) in valuation allowance | (35,052) | (27,734) |
Net deferred tax asset | $ 0 | $ 0 |
8. PROVISION FOR INCOME TAXES_4
8. PROVISION FOR INCOME TAXES (Details Narrative) | 12 Months Ended |
May 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Operating loss carry forward, expiration | 2029-2039 |
9. OFFICE LEASES (Details Narra
9. OFFICE LEASES (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Leases [Abstract] | ||
Rent expense | $ 0 | $ 0 |
10. DEFINED CONTRIBUTION PLAN (
10. DEFINED CONTRIBUTION PLAN (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2020 | May 31, 2019 | |
Defined Benefit Plan, Accumulated Other Comprehensive (Income) Loss, before Tax [Abstract] | ||
Amounts expensed - 401(k) plan | $ 49,237 | $ 0 |