Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
May 31, 2021 | Sep. 14, 2021 | Nov. 30, 2020 | |
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, 2021 | ||
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 | $ 390,000 | ||
Entity Common Stock, Shares Outstanding | 54,514,765 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2021 |
Balance Sheets
Balance Sheets - USD ($) | May 31, 2021 | May 31, 2020 |
Current Assets | ||
Cash and cash equivalents | $ 1,196,650 | $ 1,532,511 |
Receivables | 168,522 | 0 |
Receivable - related party | 0 | 32,058 |
Prepaid expenses and other current assets | 267,150 | 58,492 |
Total Current Assets | 1,632,322 | 1,623,061 |
Property and Equipment | ||
Oil and gas acquisition costs | 389,480 | 0 |
Property and equipment, net | 419,723 | 0 |
Total property and equipment, net | 809,203 | 0 |
Equity method investment | 329,283 | 0 |
TOTAL ASSETS | 2,770,808 | 1,623,061 |
Current Liabilities | ||
Accounts payable | 267,643 | 20,954 |
Accrued payroll liabilities | 1,559,283 | 1,581,847 |
Accrued interest | 17,491 | 259,133 |
Deferred management fee revenue | 95,373 | 45,833 |
Notes payable - Alleghany | 0 | 350,000 |
Notes payable, current portion | 1,220,825 | 473,778 |
Total Current Liabilities | 3,160,615 | 2,731,545 |
Long-term note payable - Alleghany | 600,305 | 0 |
Long-term note, net of current portion | 1,246,486 | 759,878 |
Total Noncurrent Liabilities | 1,846,791 | 759,878 |
TOTAL LIABILITIES | 5,007,406 | 3,491,423 |
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 | (11,086,641) | (10,718,405) |
Total Stockholders' Deficit | (2,236,598) | (1,868,362) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 2,770,808 | $ 1,623,061 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | May 31, 2021 | May 31, 2020 |
Stockholders' Deficit | ||
Preferred stock, par value | $ .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, 2021 | May 31, 2020 | |
Income Statement [Abstract] | ||
Revenue - related party and other | $ 4,592,626 | $ 8,145,167 |
Direct costs | 4,775,976 | 7,968,985 |
Gross profit (loss) | (183,350) | 176,182 |
General, selling and administrative expenses | 119,350 | 75,000 |
Consulting and professional services | 379,982 | 232,048 |
Total Operating Expense | 499,332 | 307,048 |
Operating income/(loss) | (682,682) | (130,866) |
Non-operating income (expense) | ||
Equity method income/(loss) | (119,617) | 0 |
Gain on bargain purchase | 486,294 | 0 |
Interest expense | (52,231) | (36,050) |
Net income/(loss) | $ (368,236) | $ (166,916) |
Net income/(loss) per share, basic and diluted | $ (0.01) | $ 0 |
Weighted average number of basic and 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, 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 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) |
Net loss | (368,236) | (368,236) | |||
Ending balance, shares at May. 31, 2021 | 54,514,765 | 0 | |||
Ending balance, amount at May. 31, 2021 | $ 5,451 | $ 0 | $ 8,844,592 | $ (11,086,641) | $ (2,236,598) |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 12 Months Ended | |
May 31, 2021 | May 31, 2020 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income/(loss) | $ (368,236) | $ (166,916) |
Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operating Activities | ||
Amortization of debt discount | 12,439 | 0 |
Bargain purchase gain | (486,294) | 0 |
Equity method loss | 119,617 | 0 |
Depreciation | 13,953 | 0 |
Change in assets and liabilities | ||
(Increase)/decrease in receivable - related party | (136,464) | (4,068) |
(Increase)/decrease in prepaid expenses and other current assets | (109,243) | (18,941) |
(Decrease)/increase in accounts payable | (343,380) | 9,264 |
(Decrease)/increase in accrued payroll liabilities | (22,564) | 153,907 |
Increase in accrued interest | 39,792 | 36,050 |
Increase in deferred revenue | 49,540 | 0 |
Net cash (used in) provided by operating activities | (1,230,840) | 9,296 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Proceeds from sale of property and equipment | 13,500 | 0 |
Investment in oil and gas field rights | (265,555) | 0 |
Investment in SORC, net of cash acquired | 375,779 | 0 |
Investment in equity method investment | (448,900) | 0 |
Net cash used in investing activities | (325,176) | 0 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Repayment of note payable | (13,500) | 0 |
Proceeds from PPP loan | 1,233,655 | 1,233,656 |
Net cash provided by financing activities | 1,220,155 | 1,233,656 |
Net change in cash and cash equivalents | (335,861) | 1,242,952 |
Cash and cash equivalents at beginning of period | 1,532,511 | 289,559 |
Cash and cash equivalents at end of period | 1,196,650 | 1,532,511 |
NONCASH INVESTING ACTIVITIES | ||
Oil and gas acquisition costs in accounts payable | $ 123,925 | $ 0 |
1. ORGANIZATION AND DESCRIPTION
1. ORGANIZATION AND DESCRIPTION OF BUSINESS | 12 Months Ended |
May 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
1. ORGANIZATION AND DESCRIPTION OF BUSINESS | The accompanying consolidated 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, 2021 and 2020 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.” Laredo Oil, Inc. (“the Company”) is an oil exploration and production (“E&P”) company primarily engaged in acquisition and exploration efforts for mineral properties. From June 14, 2011 to December 31, 2020, the Company was a management services company managing the acquisition and conventional operation of mature oil fields and the further recovery of stranded oil from those fields using enhanced oil recovery (“EOR”) methods for its sole customer, Stranded Oil Resources Corporation (“SORC”), a 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 EOR methods. The Company was unable to raise the capital required to purchase any suitable oil fields. On June 14, 2011, the Company entered into several agreements with SORC to seek recovery of stranded crude oil from mature, declining oil fields by using the EOR method known as Underground Gravity Drainage (“UGD”). Such agreements consisted of a license agreement between the Company and SORC (the “SORC License Agreement”), a license agreement between the Company and Mark See, the Company’s Chairman and Chief Executive Officer (“CEO”) (the “MS-Company License Agreement”), an Additional Interests Grant Agreement between the Company and SORC, a Management Services Agreement between the Company and SORC (the “MSA”), a Finder’s Fee Agreement between the Company and SORC (the “Finder’s Fee Agreement”), and a Stockholders Agreement (the “Stockholders Agreement”) among the Company, SORC and Alleghany Capital Corporation, a subsidiary of Alleghany (“Alleghany Capital”), each of which were dated June 14, 2011 (collectively, the “2011 SORC Agreements”). The 2011 SORC Agreements stipulated 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 totals $137,500 and is paid on the first day of each calendar quarter, with the last payment being received October 1, 2020. In addition, prior to December 31, 2020, SORC reimbursed the Company for monthly expenses incurred by Service Employees in connection with their rendition of services under the MSA. The Company could also 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, determined whether or not to fund. As consideration for the licenses to SORC, the Company was to receive an 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 to the Plan. As a result of the Securities Purchase Agreement dated December 31, 2020, (the “SORC Purchase Agreement”), there are no longer any Incentive Royalties payable pursuant to the Plan and no Royalties will be paid to the Company by SORC in the future. Pursuant to the SORC Purchase Agreement, by and among the Company, Alleghany, SORC, and SORC Holdings LLC, a wholly-owned subsidiary of the Company (“SORC Holdings”), SORC Holdings purchased all of the issued and outstanding shares of SORC stock (the “SORC Shares”) in a transaction that closed on December 31, 2020 (the “SORC Purchase Transaction”). As consideration for the SORC Shares, SORC Holdings paid Alleghany $72,678 (comprised of $55,000 purchase price plus a $17,678 working capital adjustment calculated in accordance with the SORC Purchase Agreement), and the Company agreed to pay Alleghany a revenue royalty of 5.0% of the Company’s future revenues and net profits relating to oil, gas, gas liquids and all other hydrocarbons, subject to certain adjustments, for a period of seven years after the closing. The SORC Purchase Agreement provides for customary adjustments to the purchase price based on the effective date of December 31, 2020. In connection with the SORC Purchase Transaction, the 2011 SORC Agreements were terminated effective as of December 31, 2020. Further, pursuant to the SORC Purchase Agreement, the Company and Alleghany entered into a Consulting Agreement dated as of December 31, 2020 (the “Alleghany Consulting Agreement”), pursuant to which Alleghany agreed to pay an aggregate of approximately $1.245 million during calendar year 2021 in consideration of the Company causing certain individuals, including Mark See, the Company’s Chief Executive Officer and Chairman, and Chris Lindsey, the Company’s General Counsel and Secretary, to provide consulting services to Alleghany (for a period of three years for Mr. See and one year for Mr. Lindsey). The Company believes that the SORC Purchase Transaction was advantageous as it simplified in a timely manner the unwinding of the 2011 SORC Agreements and allowed the Company to acquire vehicles and oil field assets that can be utilized in future oil recovery projects. As the Company now owns SORC and the 2011 SORC Agreements have been terminated, the Company no longer receives any payments from SORC (including any Royalty payable by SORC to the Company) outlined in the 2011 SORC Agreements. As a result, except for the payments to be made in calendar year 2021 to the Company under the Alleghany Consulting Agreement, the Company will no longer receive management fee revenue from Alleghany or reimbursement from Alleghany for the monthly expenses of its employees, which fees and reimbursements were effectively all of the Company’s revenues prior to the closing of the SORC Purchase Transaction. On June 30, 2020, the Company entered into the Limited Liability Company Agreement (the “LLC Agreement”) of Cat Creek Holdings LLC (“Cat Creek”), a Montana limited liability company formed as a joint venture with Lipson Investments LLC (“Lipson”) and Viper Oil & Gas, LLC (“Viper”) for the 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”). Cat Creek entered into an Asset Purchase and Sale Agreement (the “Cat Creek Purchase Agreement”) with Carrell Oil Company (“Carrell Oil”) on July 1, 2020 for the purchase of the Cat Creek Properties from Seller. Upon closing under the Cat Creek Purchase Agreement, Carrell received consideration of $400,000, subject to certain adjustments resulting from pre- and post-effective date revenue, expense and tax allocations. In accordance with the LLC Agreement, the Company 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 the Company. 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, 2021 and 2020, 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, 2021 | |
Going Concern | |
2. GOING CONCERN | These consolidated financial statements have been prepared on a going concern basis. The Company has routinely incurred losses since inception, resulting in an accumulated deficit, and historically has been dependent on one customer for its revenue. The Company entered into the Agreements with SORC to fund operations and to provide working capital. However, as a result of the SORC Purchase Transaction, except for payments to be made in calendar year 2021 to Laredo under the Consulting Agreement, Alleghany will no longer fund operations or provide working capital to the Company or SORC. 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 consolidated financial statements. 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. 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 consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern. |
3. SUMMARY OF SIGNIFICANT ACCOU
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
May 31, 2021 | |
Accounting Policies [Abstract] | |
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | USE OF ESTIMATES Management uses estimates and assumptions in preparing these consolidated financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. PRINCIPLES OF CONSOLIDATION EQUITY METHOD INVESTMENT - Investments classified as equity method consist of investments in companies in which the Company is able to exercise significant influence but not control. Under the equity method of accounting, the investment is initially recorded at cost, then the Company’s proportional share of investee’s underlying net income or loss is recorded as a component of “other income” with a corresponding increase or decrease to the carrying value of the investment. Distributions received from the investee reduce the Company’s carrying value of the investment. These investments are evaluated for impairment if events or circumstances arise that indicate that the carrying amount of such assets may not be recoverable. The Company has elected to record its portion of the equity method loss with a two-month lag. Accordingly, the financial results for the equity investment are reported through March 31, 2021. No impairments were recognized for the Company’s equity method investment during the year ended May 31, 2021. See Note 13. REVENUE RECOGNITION Monthly Management Fee The Company generated monthly management revenues from fees for labor and benefit costs in accordance with the Agreements. 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 $3,694,930 and $7,595,167, respectively, were recognized for the years ended May 31, 2021 and 2020. The last monthly management fee payment from SORC was paid in February 2021. Quarterly Management Fee While the Agreements were in place with Alleghany during calendar year 2020, the Company generated management fee revenue of $137,500 each quarter, payable in advance. The Company recognized that revenue over the applicable quarter on a straight-line basis. As a result, the Company recorded deferred revenue for services that have not been provided of $0 and $45,833 as of May 31, 2021 and 2020, respectively. Quarterly management fees recognized for the years ended May 31, 2021 and 2020 were $320,833 and $550,000, respectively. The last quarterly management fee payment from SORC was paid October 1, 2020. Other Revenue The Company and Alleghany have entered into a Consulting agreement (see Note 1), where Alleghany is obligated to pay the Company a total of $1,144,471, in quarterly payments beginning January 1, 2021, in consideration for making certain individuals available for their advice, assistance and support in connection with the oil and gas industry and any questions, issues or matters arising from Alleghany’s previous ownership of SORC. Two individuals are committed for a one-year period ending December 31, 2021, and one individual is committed for a three-year period ending December 31, 2023. The Company’s management believes that any work necessary under this obligation will in fact be completed by December 31, 2021, and is recognizing revenue on a monthly basis over the year ended December 31, 2021. Unearned revenue related to amounts received but not yet earned under this contract at May 31, 2021 totaled $95,373. Other revenue fees of $576,863 and zero, respectively, were recognized for the years ended May 31, 2021 and 2020. 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, 2021 and 2020. At times, the Company maintains cash balances deposited at its financial institution that exceed FDIC insured limits. RECEIVABLES Receivables include amounts due from Alleghany pursuant to the SORC Purchase Transactions as of May 31, 2021. Receivables represent related party balances arising from employee expense reports and estimated monthly license fees incurred in accordance with the Company’s revenue recognition policy, but not paid at May 31, 2020 period end. PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets are primarily comprised of prepaid directors’ and officers’ insurance which is recorded and amortized to expense over the 12-month contract life, prepaids acquired in the Company’s acquisition of SORC and prepaid wages. Certain employees are paid wages on a quarterly basis. As a result, the Company recorded one month of prepaid wages as of May 31, 2021. OIL AND GAS ACQUISITION COSTS - Oil and gas acquisition costs include expenditures representing investments in unproved and unevaluated properties and include non-producing leasehold, geological and geophysical costs associated with leasehold or drilling interests. Costs are reviewed to determine if impairment has occurred. The Company has incurred oil and gas acquisition costs totaling $389,480 and zero during the years ended May 31, 2021 and 2020, respectively. PROPERTY AND EQUIPMENT May 31, May 31, 2021 2020 Vehicles and equipment $ 433,676 $ - Less: Accumulated depreciation 13,953 - Property and equipment, net $ 419,723 $ - 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 approximates their carrying value. 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 The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated 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. ACQUISITION OF SORC
4. ACQUISITION OF SORC | 12 Months Ended |
May 31, 2021 | |
Business Combinations [Abstract] | |
4. ACQUISITION OF SORC | Purchase Price Allocation Effective December 31, 2020, the Company acquired a 100% equity interest in SORC (see Note 1). We have accounted for the acquisition of SORC as a business combination using the acquisition method. The following table represents the allocation of the total purchase price of SORC to the identifiable assets acquired and the liabilities assumed based on the fair values as of the acquisition date, as updated for identified adjustments to current assets and liabilities. The preliminary allocations of the purchase price with less than a year of ownership are subject to revisions as additional information is obtained about the facts and circumstances that existed as of the acquisition date. The revisions may Preliminary Purchase Price Allocation Consideration: Cash $ 55,000 Working capital adjustment 17,678 Total Consideration $ 72,678 Fair Value of Assets Acquired: Cash and cash equivalents $ 448,457 Prepaid expenses and other assets 99,415 Property and equipment 447,176 Amounts attributable to assets acquired $ 995,048 Fair Value of Liabilities Assumed: Current Liabilities $ 436,076 Amounts attributable to liabilities assumed $ 436,076 Total identifiable net asset $ 558,972 Bargain purchase gain $ 486,294 Financial Information Pursuant to Topic 2, section 2010 of the SEC financial reporting manual, the Company evaluated the business combination. Prior to the acquisition by the Company, SORC sold all operating assets, terminated all employees and no longer maintained any of the business processes that previously existed. Accordingly, the Company has determined the transaction is considered an asset acquisition only. As a result, historical consolidated financial statements are not considered relevant to the ongoing operations and are not required. In accordance with the Securities Purchase Agreement, Laredo agreed to pay to Alleghany a revenue royalty of 5.0% of the Company’s future revenues and net profits relating to oil, gas, gas liquids and all other hydrocarbons, subject to certain adjustments, for a period of seven years after the closing. The Company has not attributed a value to this potential liability in the preliminary purchase price allocation as eligible revenues or net profits do not currently exist and are not estimable. In connection with the acquisition, the Company received tangible assets which had previously been written off by the Seller. This previous reduction in asset values in combination with the Seller’s desire to close the transaction on an accelerated basis enabled the Company to obtain the assets at a lower price resulting in the recognition of a bargain purchase gain. For the period from December 31, 2020 to May 31, 2021, SORC recognized no revenues and $12,439 interest expense recorded related to the debt discount amortization, included in the Consolidated Statement of Operations. |
5. EARNINGS_(LOSS) PER SHARE
5. EARNINGS/(LOSS) PER SHARE | 12 Months Ended |
May 31, 2021 | |
Earnings Per Share [Abstract] | |
5. 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, 2021 and 2020, warrants to purchase 5,374,501 shares of common stock, and, respectively, options to purchase 4,300,000 and 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, 2021 2020 Numerator - net income/(loss) attributable to common stockholders $ (368,236 ) $ (166,916 ) Denominator - weighted average number of common shares outstanding 54,514,765 54,514,765 Basic and diluted earnings/(loss) per common share $ (0.01 ) $ (0.00 ) |
6. RELATED PARTY TRANSACTIONS
6. RELATED PARTY TRANSACTIONS | 12 Months Ended |
May 31, 2021 | |
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. Prior to the SORC Purchase Acquisition on December 31, 2020, SORC and Alleghany were considered related parties under FASB ASC 850. See Note 1. All management fee revenue reported by the Company for the years ended May 31, 2021 and 2020 is generated from charges to SORC. The Company also recorded an approximate $0 and $32,000 receivable from SORC as of May 31, 2021 and 2020, respectively, comprised of 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 were held by Alleghany. See Note 7. |
7. STOCKHOLDERS' DEFICIT
7. STOCKHOLDERS' DEFICIT | 12 Months Ended |
May 31, 2021 | |
Stockholders' Deficit | |
7. 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, 2021, 9,074,000 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. Stock Options As of May 31, 2021 and 2020, there were no remaining unvested and unrecognized shares. The following table summarizes information about options granted during the years ended May 31, 2021 and 2020: Number of Shares Weighted Average 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 Options granted and assumed - - Options expired - - Options cancelled, forfeited 379,000 .38 Options exercised - - Balance, May 31, 2021 4,300,000 $ 0.94 All stock options are exercisable upon vesting. As of May 31, 2021 and 2020, 4,300,000 and 4,679,000 options are outstanding at a weighted average exercise price of $0.94 and $0.89, respectively. Restricted Stock During fiscal years ending May 31, 2021 and 2020, no restricted stock has been granted and accordingly, no expense has been recorded for restricted stock. The Company granted 1.6 million shares of restricted stock during fiscal year 2014. As of May 31, 2021, all granted shares are fully vested. Warrants As of May 31, 2021 and 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 expired June 14, 2021. No warrants have been granted, exercised or cancelled during the years ended May 31, 2021 and 2020. All warrants are exercisable as of May 31, 2021. |
8. NOTES PAYABLE
8. NOTES PAYABLE | 12 Months Ended |
May 31, 2021 | |
Notes Payable [Abstract] | |
8. NOTES PAYABLE | Alleghany Notes May 31, May 31, 2021 2020 Total note payable - Alleghany $ 617,934 $ 350,000 Less debt discount 17,629 Less amounts classified as current - 350,000 Note payable – Alleghany, net of current portion $ 600,305 $ - 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 accrued interest on the outstanding principal of $350,000 at the rate of 6% per annum, with an amended due date of December 31, 2020. In connection with the SORC Purchase Transaction, the notes were amended, restated and consolidated into one note including all accrued interest through December 31, 2020, for a total of $631,434 (the “Senior Consolidated Note”) with a maturity date of June 30, 2022. The Senior Consolidated Note requires any stock issuances for cash be utilized to pay down the outstanding loan balance unless written consent is obtained from Alleghany. As part of the SORC Purchase Agreement, the Company agreed to secure repayment of the Senior Consolidated Note with certain equipment and to reduce the note balance with any proceeds received from any sales of such equipment. During the five months ending May 31, 2021, the Company repaid $13,500 of the Senior Consolidated Note upon the sale of certain equipment. The note bears no interest until January 1, 2022 whereupon the interest rate increases to 5% per annum through maturity. Principal with all accrued and unpaid interest is due at maturity. In connection with the SORC acquisition purchase price allocation, the Company recorded a debt discount totaling $30,068 in recognition of imputed interest on the Senior Consolidated Note, to be amortized over the first year of the note term. The Senior Consolidated Note is recorded as a long-term note payable, net of debt discount as of May 31, 2021. Paycheck Protection Program Loan May 31, May 31, 2021 2020 Total PPP Loan $ 2,467,311 $ 1,233,656 Less amounts classified as current 1,220,825 473,778 PPP loan, excluding current portion $ 1,246,486 $ 759,878 On April 28, 2020, the Company entered into a Note (the “Note”) with IBERIABANK for $1,233,656 pursuant to the terms of the Paycheck Protection Program (“PPP”) authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act (“CARES Act”) In June 2020, the Flexibility Act which amended the CARES Act was signed into law. Pursuant to the Flexibility Act, the Note continues to accrue interest on the outstanding principal sum at the rate of 1% per annum. In addition, the initial two-year Note term has been extended to five years through mutual agreement with IBERIABANK as allowed under Flexibility Act provisions. In February 2021, the Company drew an additional $1,233,655 under the PPP Second Draw Loans, bringing the total principal borrowed to $2,467,311. The additional draw is under the same terms and conditions as the first PPP loan. The Flexibility Act also provides that if a borrower does not apply for forgiveness of a loan within 10 months after the last day of the measurement period (“covered period”), the PPP loan is no longer deferred and the borrower No interest or principal will be due during the deferral period, although interest will continue to accrue over this period. As of May 31, 2021, interest totaling $39,792 is recorded in accrued interest on the accompanying consolidated balance sheets. After the deferral period and after taking into account any loan forgiveness applicable to the Note, any remaining principal and accrued interest will be payable in substantially equal monthly installments over the remaining 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. The Company applied for forgiveness of the first PPP note and in July 2021 received notice that $1,209,809 of the $1,233,656 note payable balance has been forgiven. As of May 31, 2021 both PPP Notes have been recorded as debt. The portion of the loan forgiven, will be recorded as income from the extinguishment of its loan obligation as of the date when the Company is legally released from being the primary obligor in accordance with ASC 405-20-40-1. Monthly payments commence on September 1, 2021 with respect to the remaining $23,847 balance on the first Note. At this time, the Company has not yet applied for or received loan forgiveness on the PPP Second Draw Loan. No assurance can be given that the Company will obtain forgiveness of the loan, in whole or in part. Similar to the first PPP Note, any forgiveness on the PPP Second Draw Loan will be treated as 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. |
9. PROVISION FOR INCOME TAXES
9. PROVISION FOR INCOME TAXES | 12 Months Ended |
May 31, 2021 | |
Income Tax Disclosure [Abstract] | |
9. 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 consolidated financial statements for the twelve-months ended May 31, 2021 and 2020. The Company’s tax returns for the fiscal years ended May 31, 2012 through 2020 remain subject to examination by the tax authorities. The components of the Company’s deferred tax asset as of May 31, 2021 and 2020 are as follows: 2021 2020 Net operating loss $ 380,696 $ 298,177 Stock compensation 297,710 297,710 Deferred compensation 319,449 304,996 Other (17,163 ) 5,409 Valuation allowance (980,692 ) (906,292 ) Net deferred tax asset $ - $ - A reconciliation of income taxes computed at the statutory rate to the income tax amount recorded is as follows: 2021 2020 Tax at statutory rate (21%) $ (77,330 ) $ (35,052 ) Effect of non-deductible permanent differences - - Effect of change in statutory tax rate - - Other 2,930 - Increase/(decrease) in valuation allowance 74,400 35,052 Net deferred tax asset $ - $ - The net federal operating loss carry forward will expire between 2030 and 2040. This carry forward may be limited upon the consummation of a business combination under IRC Section 381. |
10. COMMITMENTS AND CONTINGENCI
10. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
May 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
10. COMMITMENTS AND CONTINGENCIES | Leases No office leases currently extend beyond one year. Rent expense amounted to $345 and $0 for each of the years ending May 31, 2021 and 2020. Revenue Royalty In accordance with the Securities Purchase Agreement, Laredo agreed to pay to Alleghany a revenue royalty of 5.0% of the Company’s future revenues and net profits relating to oil, gas, gas liquids and all other hydrocarbons, subject to certain adjustments, for a period of seven years after the closing. |
11. DEFINED CONTRIBUTION PLAN
11. DEFINED CONTRIBUTION PLAN | 12 Months Ended |
May 31, 2021 | |
Defined Benefit Plan, Accumulated Other Comprehensive (Income) Loss, before Tax [Abstract] | |
11. 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 $0 and $49,237 for the years ending May 31, 2021 and 2020, respectively. The 401(k) Plan was terminated in the fourth quarter of 2020. |
12. EMPLOYEE SEPARATIONS
12. EMPLOYEE SEPARATIONS | 12 Months Ended |
May 31, 2021 | |
Postemployment Benefits [Abstract] | |
12. EMPLOYEE SEPARATIONS | The Company establishes obligations for expected termination benefits provided under existing agreements with a former or inactive employee after employment but before retirement. These benefits generally include severance payments and medical continuation coverage. During the first quarter of 2021, the Company continued to reduce expenses in response to the impact of the COVID-19 pandemic. During third quarter of 2021 and in connection with the SORC purchase agreement and termination of the Alleghany Agreements, the Company continued to reduce expenses. These activities included further reductions in its workforce. The Company incurred severance and related charges totaling $222,023 during the first quarter 2021 and $284,113 during the third quarter 2021. As of May 31, 2021, the Company has no remaining severance accrual included in accrued payroll liabilities. There were no similar accruals as of May 31, 2020. |
13. EQUITY METHOD INVESTMENT
13. EQUITY METHOD INVESTMENT | 12 Months Ended |
May 31, 2021 | |
Equity Method Investment, Financial Statement, Reported Amounts [Abstract] | |
13. EQUITY METHOD INVESTMENT | 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. On September 21, 2020, upon resolving the purchase contingency under the Purchase Agreement, the Seller received consideration of $400,000, taking into effect certain adjustments resulting from pre- and post-effective date revenue, expense, and allocations. Summarized Financial Information The following table provides summarized financial information for the Company’s ownership interest in Cat Creek accounted for under the equity method for the May 31, 2021 period presented and has been compiled from respective company financial statements, reflects certain historical adjustments, and is reported on a two-month lag. Results of operations are excluded for periods prior to acquisition. Balance Sheet: As of May 31, 2021 Current Assets $ 280,495 Non-current Assets 509,479 Total Assets $ 789,974 Current Liabilities $ 67,511 Non-current Liabilities 63,897 Shareholders’ equity 658,566 Total Liabilities and Shareholders’ Equity $ 789,974 Results of Operations: Year Ended Revenue $ 288,858 Gross Profit (106,043 ) Net Loss $ (239,233 ) |
3. SUMMARY OF SIGNIFICANT ACC_2
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
May 31, 2021 | |
Accounting Policies [Abstract] | |
USE OF ESTIMATES | Management uses estimates and assumptions in preparing these consolidated financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. |
PRINCIPLES OF CONSOLIDATION | The accompanying consolidated financial statements include the accounts of Laredo Oil and its subsidiaries after elimination of intercompany balances and transactions. |
EQUITY METHOD INVESTMENT | Investments classified as equity method consist of investments in companies in which the Company is able to exercise significant influence but not control. Under the equity method of accounting, the investment is initially recorded at cost, then the Company’s proportional share of investee’s underlying net income or loss is recorded as a component of “other income” with a corresponding increase or decrease to the carrying value of the investment. Distributions received from the investee reduce the Company’s carrying value of the investment. These investments are evaluated for impairment if events or circumstances arise that indicate that the carrying amount of such assets may not be recoverable. The Company has elected to record its portion of the equity method loss with a two-month lag. Accordingly, the financial results for the equity investment are reported through March 31, 2021. No impairments were recognized for the Company’s equity method investment during the year ended May 31, 2021. See Note 13. |
REVENUE RECOGNITION | Monthly Management Fee The Company generated monthly management revenues from fees for labor and benefit costs in accordance with the Agreements. 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 $3,694,930 and $7,595,167, respectively, were recognized for the years ended May 31, 2021 and 2020. The last monthly management fee payment from SORC was paid in February 2021. Quarterly Management Fee While the Agreements were in place with Alleghany during calendar year 2020, the Company generated management fee revenue of $137,500 each quarter, payable in advance. The Company recognized that revenue over the applicable quarter on a straight-line basis. As a result, the Company recorded deferred revenue for services that have not been provided of $0 and $45,833 as of May 31, 2021 and 2020, respectively. Quarterly management fees recognized for the years ended May 31, 2021 and 2020 were $320,833 and $550,000, respectively. The last quarterly management fee payment from SORC was paid October 1, 2020. Other Revenue The Company and Alleghany have entered into a Consulting agreement (see Note 1), where Alleghany is obligated to pay the Company a total of $1,144,471, in quarterly payments beginning January 1, 2021, in consideration for making certain individuals available for their advice, assistance and support in connection with the oil and gas industry and any questions, issues or matters arising from Alleghany’s previous ownership of SORC. Two individuals are committed for a one-year period ending December 31, 2021, and one individual is committed for a three-year period ending December 31, 2023. The Company’s management believes that any work necessary under this obligation will in fact be completed by December 31, 2021, and is recognizing revenue on a monthly basis over the year ended December 31, 2021. Unearned revenue related to amounts received but not yet earned under this contract at May 31, 2021 totaled $95,373. Other revenue fees of $576,863 and zero, respectively, were recognized for the years ended May 31, 2021 and 2020. |
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, 2021 and 2020. At times, the Company maintains cash balances deposited at its financial institution that exceed FDIC insured limits. |
RECEIVABLES | Receivables include amounts due from Alleghany pursuant to the SORC Purchase Transactions as of May 31, 2021. Receivables represent related party balances arising from employee expense reports and estimated monthly license fees incurred in accordance with the Company’s revenue recognition policy, but not paid at May 31, 2020 period end. |
PREPAID EXPENSES AND OTHER CURRENT ASSETS | Prepaid expenses and other current assets are primarily comprised of prepaid directors’ and officers’ insurance which is recorded and amortized to expense over the 12-month contract life, prepaids acquired in the Company’s acquisition of SORC and prepaid wages. Certain employees are paid wages on a quarterly basis. As a result, the Company recorded one month of prepaid wages as of May 31, 2021. |
OIL AND GAS ACQUISITION COSTS | Oil and gas acquisition costs include expenditures representing investments in unproved and unevaluated properties and include non-producing leasehold, geological and geophysical costs associated with leasehold or drilling interests. Costs are reviewed to determine if impairment has occurred. The Company has incurred oil and gas acquisition costs totaling $389,480 and zero during the years ended May 31, 2021 and 2020, respectively. |
PROPERTY AND EQUIPMENT | The carrying value of the Company’s property and equipment represents the cost incurred to acquire the property and equipment, net of any impairments. For business combinations, property and equipment cost is based on the fair values at the acquisition date. Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives of five to seven years are used for vehicles and machinery. Realization of the carrying value of property and equipment is reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets are determined to be impaired if a forecast of undiscounted estimated future net operating cash flows directly related to the asset, including disposal value, if any, is less than the carrying amount of the asset. If any asset is determined to be impaired, the loss is measured as the amount by which the carrying amount of the asset exceeds its fair value. Repairs and maintenance costs are expensed in the period incurred. May 31, May 31, 2021 2020 Vehicles and equipment $ 433,676 $ - Less: Accumulated depreciation 13,953 - Property and equipment, net $ 419,723 $ - |
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 approximates their carrying value. |
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 | The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the consolidated 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. |
3. SIGNIFICANT ACCOUNTING POLIC
3. SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
May 31, 2021 | |
Accounting Policies [Abstract] | |
Property and Equipment | May 31, May 31, 2021 2020 Vehicles and equipment $ 433,676 $ - Less: Accumulated depreciation 13,953 - Property and equipment, net $ 419,723 $ - |
4. ACQUISITION OF SORC (Tables)
4. ACQUISITION OF SORC (Tables) | 12 Months Ended |
May 31, 2021 | |
Business Combinations [Abstract] | |
Purchase price allocation | Preliminary Purchase Price Allocation Consideration: Cash $ 55,000 Working capital adjustment 17,678 Total Consideration $ 72,678 Fair Value of Assets Acquired: Cash and cash equivalents $ 448,457 Prepaid expenses and other assets 99,415 Property and equipment 447,176 Amounts attributable to assets acquired $ 995,048 Fair Value of Liabilities Assumed: Current Liabilities $ 436,076 Amounts attributable to liabilities assumed $ 436,076 Total identifiable net asset $ 558,972 Bargain purchase gain $ 486,294 |
5. EARNINGS_(LOSS) PER SHARE (T
5. EARNINGS/(LOSS) PER SHARE (Tables) | 12 Months Ended |
May 31, 2021 | |
Earnings Per Share [Abstract] | |
Schedule of earnings/(loss) per share, basic and diluted | For the Year Ended May 31, 2021 2020 Numerator - net income/(loss) attributable to common stockholders $ (368,236 ) $ (166,916 ) Denominator - weighted average number of common shares outstanding 54,514,765 54,514,765 Basic and diluted earnings/(loss) per common share $ (0.01 ) $ (0.00 ) |
7. STOCKHOLDERS' DEFICIT (Table
7. STOCKHOLDERS' DEFICIT (Tables) | 12 Months Ended |
May 31, 2021 | |
Stockholders' Deficit | |
Summary of options | Number of Shares Weighted Average 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 Options granted and assumed - - Options expired - - Options cancelled, forfeited 379,000 .38 Options exercised - - Balance, May 31, 2021 4,300,000 $ 0.94 |
8. NOTES PAYABLE (Tables)
8. NOTES PAYABLE (Tables) | 12 Months Ended |
May 31, 2021 | |
Notes Payable [Abstract] | |
Alleghany notes | May 31, May 31, 2021 2020 Total note payable - Alleghany $ 617,934 $ 350,000 Less debt discount 17,629 Less amounts classified as current - 350,000 Note payable – Alleghany, net of current portion $ 600,305 $ - |
Paycheck protection program loan | May 31, May 31, 2021 2020 Total PPP Loan $ 2,467,311 $ 1,233,656 Less amounts classified as current 1,220,825 473,778 PPP loan, excluding current portion $ 1,246,486 $ 759,878 |
9. PROVISION FOR INCOME TAXES (
9. PROVISION FOR INCOME TAXES (Tables) | 12 Months Ended |
May 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Components of deferred tax asset | 2021 2020 Net operating loss $ 380,696 $ 298,177 Stock compensation 297,710 297,710 Deferred compensation 319,449 304,996 Other (17,163 ) 5,409 Valuation allowance (980,692 ) (906,292 ) Net deferred tax asset $ - $ - |
Schedule of effective income tax rate reconciliation | 2021 2020 Tax at statutory rate (21%) $ (77,330 ) $ (35,052 ) Effect of non-deductible permanent differences - - Effect of change in statutory tax rate - - Other 2,930 - Increase/(decrease) in valuation allowance 74,400 35,052 Net deferred tax asset $ - $ - |
13. EQUITY METHOD INVESTMENT (T
13. EQUITY METHOD INVESTMENT (Tables) | 12 Months Ended |
May 31, 2021 | |
Equity Method Investment, Financial Statement, Reported Amounts [Abstract] | |
Summarized financial information | Balance Sheet: As of May 31, 2021 Current Assets $ 280,495 Non-current Assets 509,479 Total Assets $ 789,974 Current Liabilities $ 67,511 Non-current Liabilities 63,897 Shareholders’ equity 658,566 Total Liabilities and Shareholders’ Equity $ 789,974 Results of Operations: Year Ended Revenue $ 288,858 Gross Profit (106,043 ) Net Loss $ (239,233 ) |
3. SUMMARY OF SIGNIFICANT ACC_3
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | May 31, 2021USD ($) |
Property and equipment | $ 433,676 |
Less: Accumulated depreciation | 13,953 |
Property and equipment, net | 419,723 |
Vehicles and equipment | |
Property and equipment | $ 433,676 |
3. SUMMARY OF SIGNIFICANT ACC_4
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2021 | May 31, 2020 | |
Accounting Policies [Abstract] | ||
Monthly management fees | $ 3,694,930 | $ 7,595,167 |
Quarterly management fees | 320,833 | 550,000 |
Deferred management fee revenue | 95,373 | 45,833 |
Other revenue fees | $ 576,863 | $ 0 |
4. ACQUISITION OF SORC (Details
4. ACQUISITION OF SORC (Details) - USD ($) | 12 Months Ended | |
May 31, 2021 | May 31, 2020 | |
Consideration: | ||
Cash | $ 55,000 | |
Working capital adjustment | 17,678 | |
Total consideration | 72,678 | |
Fair Value of Assets Acquired: | ||
Cash and cash equivalents | 448,457 | |
Prepaid expenses and other assets | 99,415 | |
Property and equipment | 447,176 | |
Amounts attributable to assets acquired | 995,048 | |
Fair Value of Liabilities Assumed: | ||
Current liabilities | 436,076 | |
Amounts attributable to liabilities assumed | 436,076 | |
Total identifiable net asset | 558,972 | |
Bargain purchase gain | $ 486,294 | $ 0 |
5. EARNINGS_(LOSS) PER SHARE (D
5. EARNINGS/(LOSS) PER SHARE (Details) - USD ($) | 12 Months Ended | |
May 31, 2021 | May 31, 2020 | |
Earnings Per Share [Abstract] | ||
Numerator - net income/(loss) attributable to common stockholders | $ (368,236) | $ (166,916) |
Denominator - weighted average number of common shares outstanding | 54,514,765 | 54,514,765 |
Basic and diluted earnings/(loss) per common share | $ (0.01) | $ 0 |
5. EARNINGS_(LOSS) PER SHARE _2
5. EARNINGS/(LOSS) PER SHARE (Details Narrative) - shares | 12 Months Ended | |
May 31, 2021 | May 31, 2020 | |
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 | 4,300,000 | 4,679,000 |
6. RELATED PARTY TRANSACTIONS (
6. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | May 31, 2021 | May 31, 2020 |
Related Party Transactions [Abstract] | ||
Receivable - related party | $ 0 | $ 32,058 |
Outstanding notes payable and related interest | $ 0 | $ 350,000 |
7. STOCKHOLDERS' DEFICIT (Detai
7. STOCKHOLDERS' DEFICIT (Details) - $ / shares | 12 Months Ended | |
May 31, 2021 | May 31, 2020 | |
Number of Shares | ||
Options outstanding, beginning | 4,679,000 | 4,679,000 |
Options granted and assumed | 0 | 0 |
Options expired | 0 | 0 |
Options cancelled, forfeited | 379,000 | 0 |
Options exercised | 0 | 0 |
Options outstanding, ending | 4,300,000 | 4,679,000 |
Weighted Average Exercise Price | ||
Weighted average exercise price outstanding, beginning | $ .89 | $ .89 |
Weighted average exercise price granted and assumed | .00 | .00 |
Weighted average exercise price expired | (.00) | (.00) |
Weighted average exercise price cancelled, forfeited | 0.38 | .00 |
Weighted average exercise price exercised | (.00) | (.00) |
Weighted average exercise price outstanding, ending | $ .94 | $ .89 |
7. STOCKHOLDERS' DEFICIT (Det_2
7. STOCKHOLDERS' DEFICIT (Details Narrative) - USD ($) | 12 Months Ended | ||
May 31, 2021 | May 31, 2020 | May 31, 2019 | |
Stockholders' Deficit | |||
Shares remain available for issuance under the Plan | 9,074,000 | ||
Stock option expense | $ 0 | $ 0 | |
Options outstanding | 4,300,000 | 4,679,000 | 4,679,000 |
Weighted average exercise price | $ .94 | $ .89 | $ .89 |
Warrants exercisable | 5,374,501 |
8. NOTES PAYABLE (Details)
8. NOTES PAYABLE (Details) - USD ($) | May 31, 2021 | May 31, 2020 |
Notes Payable [Abstract] | ||
Total note payable - Alleghany | $ 617,934 | $ 350,000 |
Less debt discount | 17,629 | 0 |
Less amounts classified as current | 0 | 350,000 |
Note payable - Alleghany, net of current portion | $ 600,305 | $ 0 |
8. NOTES PAYABLE (Details 1)
8. NOTES PAYABLE (Details 1) - USD ($) | May 31, 2021 | May 31, 2020 |
Notes Payable [Abstract] | ||
PPP loan | $ 2,467,311 | $ 1,233,656 |
Less amounts classified as current | 1,220,825 | 473,778 |
Long-term note, excluding current portion | $ 1,246,486 | $ 759,878 |
8. NOTES PAYABLE (Details Narra
8. NOTES PAYABLE (Details Narrative) - USD ($) | May 31, 2021 | May 31, 2020 |
Notes Payable [Abstract] | ||
Notes payable | $ 1,220,825 | $ 473,778 |
Accrued interest | $ 17,491 | $ 259,133 |
9. PROVISION FOR INCOME TAXES_2
9. PROVISION FOR INCOME TAXES (Details) - USD ($) | May 31, 2021 | May 31, 2020 |
Income Tax Disclosure [Abstract] | ||
Net operating loss | $ 380,696 | $ 298,177 |
Stock compensation | 297,710 | 297,710 |
Deferred compensation | 319,449 | 304,996 |
Other | (17,163) | 5,409 |
Valuation allowance | (980,692) | (906,292) |
Net deferred tax asset | $ 0 | $ 0 |
9. PROVISION FOR INCOME TAXES_3
9. PROVISION FOR INCOME TAXES (Details 1) - USD ($) | 12 Months Ended | |
May 31, 2021 | May 31, 2020 | |
Income Tax Disclosure [Abstract] | ||
Tax at statutory rate (21%) | $ (77,330) | $ (35,052) |
Effect of non-deductible permanent differences | 0 | 0 |
Effect of change in statutory tax rate | 0 | 0 |
Other | 2,930 | 0 |
Increase/(decrease) in valuation allowance | 74,400 | 35,052 |
Net deferred tax asset | $ 0 | $ 0 |
9. PROVISION FOR INCOME TAXES_4
9. PROVISION FOR INCOME TAXES (Details Narrative) | 12 Months Ended |
May 31, 2021 | |
Income Tax Disclosure [Abstract] | |
Operating loss carry forward, expiration | Between 2030 and 2040 |
10. COMMITMENTS AND CONTINGEN_2
10. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2021 | May 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expense | $ 345 | $ 0 |
11. DEFINED CONTRIBUTION PLAN (
11. DEFINED CONTRIBUTION PLAN (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2021 | May 31, 2020 | |
Defined Benefit Plan, Accumulated Other Comprehensive (Income) Loss, before Tax [Abstract] | ||
Amounts expensed - 401(k) plan | $ 0 | $ 49,237 |
12. EMPLOYEE SEPARATIONS (Detai
12. EMPLOYEE SEPARATIONS (Details Narrative) - USD ($) | 3 Months Ended | ||
Feb. 28, 2021 | Aug. 31, 2020 | May 31, 2021 | |
Postemployment Benefits [Abstract] | |||
Severance and related charges | $ 284,113 | $ 222,023 | |
Remaining severance accrual | $ 0 |
13. EQUITY METHOD INVESTMENT (D
13. EQUITY METHOD INVESTMENT (Details) - USD ($) | 12 Months Ended | ||
May 31, 2021 | May 31, 2020 | May 31, 2019 | |
Current assets | $ 1,632,322 | $ 1,623,061 | |
Total assets | 2,770,808 | 1,623,061 | |
Current liabilities | 3,160,615 | 2,731,545 | |
Non-current liabilities | 1,846,791 | 759,878 | |
Shareholders' equity | (2,236,598) | (1,868,362) | $ (1,701,446) |
Total liabilities and shareholders' equity | 2,770,808 | 1,623,061 | |
Revenue | 4,592,626 | 8,145,167 | |
Gross profit | (183,350) | 176,182 | |
Net loss | (368,236) | $ (166,916) | |
Cat Creek | |||
Current assets | 280,495 | ||
Non-current assets | 509,479 | ||
Total assets | 789,974 | ||
Current liabilities | 67,511 | ||
Non-current liabilities | 63,897 | ||
Shareholders' equity | 658,566 | ||
Total liabilities and shareholders' equity | 789,974 | ||
Revenue | 288,858 | ||
Gross profit | (106,043) | ||
Net loss | $ (239,233) |