Cover
Cover - shares | 3 Months Ended | |
Aug. 31, 2023 | Oct. 16, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Aug. 31, 2023 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2024 | |
Current Fiscal Year End Date | --05-31 | |
Entity File Number | 333-153168 | |
Entity Registrant Name | Laredo Oil, Inc. | |
Entity Central Index Key | 0001442492 | |
Entity Tax Identification Number | 26-2435874 | |
Entity Incorporation, State or Country Code | DE | |
Entity Address, Address Line One | 2021 Guadalupe Street | |
Entity Address, Address Line Two | Ste. 260 | |
Entity Address, City or Town | Austin | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 78705 | |
City Area Code | 337-1199 | |
Local Phone Number | (512) | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 67,619,066 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Aug. 31, 2023 | May 31, 2023 |
Current Assets | ||
Cash and cash equivalents | $ 2,951 | $ 13,754 |
Other Receivable | 175,000 | |
Receivables – related party | 1,779 | |
Prepaid expenses and other current assets | 35,359 | 36,549 |
Total Current Assets | 213,310 | 52,082 |
Property and Equipment | ||
Oil and gas acquisition and drilling costs | 4,434,055 | 4,547,740 |
Property and equipment, net | 204,700 | 209,182 |
Total Property and Equipment, net | 4,638,755 | 4,756,922 |
Other assets | 30,000 | 30,000 |
TOTAL ASSETS | 5,148,527 | 5,126,127 |
Current Liabilities | ||
Accounts payable | 2,180,468 | 2,197,975 |
Accrued payroll liabilities | 2,491,328 | 2,262,450 |
Accrued interest | 278,576 | 210,414 |
Deferred well development costs | 1,799,260 | 1,799,260 |
Convertible debt, net of debt discount and debt issuance costs | 878,388 | 839,798 |
Revolving note | 1,035,061 | 933,000 |
Note payable – related party | 292,099 | 292,099 |
Note payable – Alleghany, net of debt discount | 617,934 | 617,934 |
Note payable, current portion | 528,568 | 449,624 |
Total Current Liabilities | 10,101,682 | 9,602,554 |
Asset retirement obligation | 69,482 | 67,938 |
Long-term note, net of current portion | 456,382 | 536,974 |
Total Noncurrent Liabilities | 525,864 | 604,912 |
TOTAL LIABILITIES | 10,627,546 | 10,207,466 |
Commitments and Contingencies (Note 13) | ||
Stockholders Deficit | ||
Preferred stock: $0.0001 par value; 10,000,000 shares authorized; none issued and outstanding | ||
Common stock: $0.0001 par value; 120,000,000 shares authorized; 66,220,206 issued and outstanding as of August 31, 2023 and May 31, 2023 | 6,622 | 6,622 |
Additional paid in capital | 10,711,488 | 9,990,378 |
Accumulated deficit | (16,197,129) | (15,078,339) |
Total Stockholders Deficit | (5,479,019) | (5,081,339) |
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT | 5,148,527 | 5,126,127 |
Olfert [Member] | ||
Property and Equipment | ||
Equity method investment – Cat Creek | 37,630 | 37,630 |
Cat Creek [Member] | ||
Property and Equipment | ||
Equity method investment – Cat Creek | $ 228,832 | $ 249,493 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Aug. 31, 2023 | May 31, 2023 |
Statement of Financial Position [Abstract] | ||
Preferred Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
Preferred Stock, Shares Authorized | 10,000,000 | 10,000,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Common Stock, Par or Stated Value Per Share | $ 0.0001 | $ 0.0001 |
Common Stock, Shares Authorized | 120,000,000 | 120,000,000 |
Common Stock, Shares, Issued | 66,220,206 | 66,220,206 |
Common Stock, Shares, Outstanding | 66,220,206 | 66,220,206 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Aug. 31, 2023 | Aug. 31, 2022 | |
Income Statement [Abstract] | ||
Revenue | $ 0 | $ 0 |
Direct costs | ||
Gross profit (loss) | ||
General, selling and administrative expenses | 1,177,124 | 592,380 |
Consulting and professional services | 174,618 | 335,353 |
Total Operating expenses | 1,351,742 | 927,733 |
Operating loss | (1,351,742) | (927,733) |
Other income (expense) | ||
Other non-operating income | 175,000 | 1,521 |
Gain on sale of assets | 175,000 | 22,364 |
Income from employee retention credit | 122,682 | |
Equity method loss | (20,662) | (10,905) |
Interest expense, net | (96,386) | (82,554) |
Net income/(loss) | $ (1,118,790) | $ (874,625) |
Net income/(loss) per share, basic and diluted | $ (0.02) | $ (0.02) |
Weighted average number of basic and common shares outstanding | 66,220,306 | 55,200,901 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Stockholders' Deficit (Equity) (Unaudited) - USD ($) | Common Stock [Member] | Preferred Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total |
Beginning balance, value at May. 31, 2022 | $ 5,451 | $ 9,179,088 | $ (11,982,488) | $ (2,797,949) | |
Ending Balance, Shares at May. 31, 2022 | 54,514,765 | ||||
Stock based compensation | 133,110 | 133,110 | |||
Net Income | (874,625) | (874,625) | |||
Restricted stock issued to consultants | $ 127 | 187,130 | 187,130 | ||
Restricted stock issued to consultants, Shares | 1,272,574 | ||||
Cumulative effect of accounting change | (55,918) | 16,200 | (39,718) | ||
Ending balance, value at Aug. 31, 2022 | $ 5,578 | 9,443,410 | (12,840,913) | (3,391,925) | |
Ending Balance, Shares at Aug. 31, 2022 | 55,787,339 | ||||
Beginning balance, value at May. 31, 2023 | $ 6,622 | 9,990,378 | (15,078,339) | (5,081,339) | |
Ending Balance, Shares at May. 31, 2023 | 66,220,306 | ||||
Stock based compensation | 721,110 | 721,110 | |||
Net Income | (1,118,790) | (1,118,790) | |||
Ending balance, value at Aug. 31, 2023 | $ 6,622 | $ 10,711,488 | $ (16,197,129) | $ (5,479,019) | |
Ending Balance, Shares at Aug. 31, 2023 | 66,220,306 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Aug. 31, 2023 | Aug. 31, 2022 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income (loss) | $ (1,118,790) | $ (874,625) |
Adjustments to Reconcile Net Income (Loss) to Net Cash used in Operating Activities | ||
Restricted stock expense | 187,257 | |
Stock based compensation expense | 721,110 | 133,110 |
Depreciation expense | 5,100 | 12,875 |
Accretion expense | 1,544 | 1,544 |
Amortization of debt discount | 13,578 | 21,708 |
Equity method (loss)/income | 20,662 | 10,905 |
Gain on sale of assets | (175,000) | (22,364) |
Change in operating assets and liabilities | ||
Receivables -related party | 1,779 | |
Prepaid expenses and other current assets | 1,190 | (2,936) |
Accounts payable and accrued liabilities | 158,405 | (33,865) |
Accrued payroll | 228,878 | 143,526 |
Accrued interest | 68,162 | 20,710 |
NET CASH USED IN OPERATING ACTIVITIES | (73,382) | (402,155) |
CASH FLOWS USED IN INVESTING ACTIVITIES | ||
Investment in equity method investment | (18,438) | |
Investment in property, plant and equipment | (303) | |
Acquisition of oil and gas assets | (62,846) | (930,710) |
NET CASH USED IN INVESTING ACTIVITIES | (62,846) | (949,451) |
Repayment of convertible debt | (59,988) | (89,698) |
Proceeds from notes payable and revolving note | 187,061 | 798,000 |
Proceeds from prefunded drilling costs | 715,438 | |
PPP loan repayments | (1,648) | (64,619) |
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 125,425 | 1,359,121 |
Net increase (decrease) in cash and cash equivalents | (10,803) | 7,515 |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 13,754 | 109,183 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 2,951 | 116,698 |
NONCASH INVESTING ACTIVITIES | ||
Oil and gas acquisition costs in accounts payable | 175,913 | 474,750 |
Interest paid | 14,642 | 29,584 |
Sale of assets in exchange for note payable repayment | $ 136,479 |
ORGANIZATION AND DESCRIPTION OF
ORGANIZATION AND DESCRIPTION OF BUSINESS | 3 Months Ended |
Aug. 31, 2023 | |
Accounting Policies [Abstract] | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS The accompanying consolidated financial statements have been prepared by the management of Laredo Oil, Inc. (the Company). The Company was incorporated under the laws of the State of Delaware on March 31, 2008 under the name of Laredo Mining, Inc. On October 21, 2009, the Company changed its name to Laredo Oil, Inc. The Company is an oil exploration and production company, primarily engaged in acquisition and exploration efforts to find mineral reserves on various properties. From its inception in March 2008 through October 2009, the Company was primarily engaged in acquisition and exploration efforts for mineral properties. Beginning 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 recovery methods. From June 14, 2011 to December 31, 2020, the Company was a management services company, managing the acquisition and operation of mature oil fields, focused on the recovery of stranded oil from those mature fields using enhanced oil recovery methods for its then sole customer, Stranded Oil Resources Corporation, or SORC, then a wholly owned subsidiary of Alleghany Corporation. The Company performed those services in exchange for a quarterly management fee and the reimbursement from SORC of its employee related expenses, which fees and reimbursements were effectively all of the Companys revenues prior to the closing of the Securities Purchase Agreement with Alleghany described below. On December 31, 2020, the Company entered into a Securities Purchase Agreement with Alleghany Corporation. Under that agreement, the Company purchased all the issued and outstanding shares of SORC. Currently, there are no ongoing operations being conducted by SORC. Under the Securities Purchase Agreement with Alleghany, the Company also entered into a Consulting Agreement, under which Alleghany paid the Company an aggregate of approximately $1.245 million during calendar year 2021 in exchange for providing Alleghany with one to three years of consulting services from certain of the Companys employees, including Mark See, its Chief Executive Officer. Alleghany no longer pays the Company any management fees or reimbursement payments for the monthly expenses of its employees. Those fees and reimbursements were effectively all of the Companys revenues prior to the closing of the Securities Purchase Agreement with Alleghany described above. While the Company was providing services to Alleghany prior to December 31, 2020, it gained know-how and operational experience in evaluating, acquiring, operating and developing oil and gas properties using enhanced oil recovery methods. The Company also gained experience in designing, drilling and producing conventional oil wells using those methods. During the period from June 14, 2011 through December 31, 2020, when the 2011 SORC Agreements were in effect, Company management gained specialized know-how and operational experience in evaluating, acquiring, operating and developing oil and gas properties while implementing UGD projects, as well as gaining expertise designing, drilling and producing conventional oil wells. Based upon the knowledge gained, as of August 31, 2023, the Company has identified and acquired 45,766 gross acres and 38,153 net acres of mineral property interests in Montana. The Company drilled one exploratory well during May 2022, which has been shut-in pending gaining access to a saltwater disposal well allowing economically feasible water disposal. The Company plans to continue to develop the field as funding allows. In connection with securing this acreage in Montana, Lustre Oil Company LLC, a wholly-owned subsidiary of the Company (“Lustre”), entered into an Acquisition and Participation Agreement (the Erehwon APA) with Erehwon Oil & Gas, LLC (Erehwon) to acquire oil and gas interests and drill, complete, re-enter, re-complete, sidetrack, and equip wells in Valley County, Daniels County and Roosevelt County, Montana. The Erehwon APA specifies calculations for royalty interests and working interests for the first ten well completions and first ten well recompletions and for all additional wells and recompletions thereafter. Lustre will acquire initial mineral leases and pay 100% of the costs with a cap of $500,000. When the $500,000 cap is exceeded, Erehwon will have the option to acquire a 10% working interest (WI) in a lease by paying 10% of any lease acquisition cost, resulting in Lustre paying 90% of the lease costs, on a lease-by-lease basis. Until amounts paid to complete the first ten new wells and first ten recompletions are repaid (Payback), the WI split is 10% for Erehwon and 90% for Lustre. Thereafter, the split between Erehwon and Lustre will be 20%/80%. Additional wells and recompletions will have a WI split equal to their respective working interest in the leases. This will be 10% for Erehwon and 90% for Lustre, unless Erehwon exercises its option to increase its WI by ten percentage points to 20%, as described above. Under the Erehwon APA, Lustre will fund 100% of the construction costs of the first ten wells and first ten completions. Any additional wells will be funded 80% by Lustre and 20% by Erehwon; provided, however, that Erehwon has the option to pay 10% of the construction cost to increase its WI to 20%. Royalty expense will consist of the sum of royalty interest to the landowner and an overriding royalty interest to two individuals (Prospect Generators), not to exceed 6% nor be less than 3%. For the first ten new wells and first ten recompletions, Prospect Generators will receive an amount equal to 5% of the cost of each completed producing well. In January 2022, the Company and Lustre executed a Net Profits Interest Agreement (the NPI Agreement) with Erehwon and Olfert No. 11-4 Holdings, LLC (Olfert Holdings) for the purpose of funding the first well, Olfert #11-4, (the Well) under the Erehwon Acquisition and Participation Agreement (APA). In connection with the NPI Agreement, the Company was credited with a contribution totaling $59,935 of well development costs, as determined by agreement with Olfert on behalf of Olfert Holding representing a 5.5% interest in the entity as of May 31, 2022 based on the carrying value of assets contributed to Olfert. The total investment recorded by Laredo was $19,435 as of May 31, 2022. The difference between the $59,935 contribution recorded at the Olfert level and the investment recorded by the Company is due to the investment at the Company being recorded at the carrying value of the assets contributed. As the Company also currently serves as the manager of Olfert, it exercises significant influence. Accordingly, the amount paid by the Company is recorded as an equity method investment as of August 31, 2023. See further disclosures in Note 8. On June 30, 2020, the Company entered into the Limited Liability Company Agreement (the Cat Creek Agreement) of Cat Creek Holdings, LLC (Cat Creek), a Montana limited liability company formed as a joint venture with Lipson Investments LLC (Lipson) and Viper Oil & Gas, LLC (Viper) for the purchase of certain oil and gas properties in the Cat Creek Field, located in Petroleum and Garfield Counties in the State of Montana (the Cat Creek Properties). In accordance with the Cat Creek Agreement, the Company invested $448,900 of cash in Cat Creek for 50% of the ownership interests in Cat Creek. Lipson Investments LLC and Viper Oil & Gas, LLC, the other two members of Cat Creek, each have 25% ownership interests in Cat Creek in consideration of their respective investments of $224,450. Cat Creek is managed by a Board of Directors consisting of four directors, two of which are designated by the Company. Lustre and Erehwon entered into an Exploration and Development Agreement, dated July 18, 2023 (the Development Agreement), with Texakoma Exploration & Production Company (Texakoma), for the exploration and development of the Lustre Field Prospect, as described in the Development Agreement. Lustre and Erehwon are parties to an existing Acquisition and Participation Agreement, under which those parties agreed to acquire certain oil and gas interests, and drill, complete, re-enter, re-complete, sidetrack, and equip wells, in certain counties in Montana. Under the terms of the Development Agreement, Texakoma agreed to pay Lustre and Erehwon (jointly, LOC), the following amounts: (i) $175,000 on or before July 21, 2023; and (ii) another $175,000 upon the spudding of the initial test well, which is scheduled to occur prior to November 1, 2023, subject to rig availability. Upon the spudding of that test well, LOC is required to deliver to Texakoma a partial assignment of an 85% working interest in the oil and gas leases covering the first two initial drilling and spacing units. The first payment under the Development Agreement was paid by Texakoma at the end of August 2023. Texakoma will pay 100% of the costs associated with the drilling and completion of two initial test wells. LOC will jointly have an undivided 15% working interest, carried through the tanks, in the initial two wells. Texakoma will have the option, but not the obligation, to participate in the development of the remainder of the Lustre Field Prospect, which may be exercised by Texakoma by giving Lustre and Erehwon written notice of its intent to participate within 90 days after the completion rig moves off the second test well location. If Texakoma duly exercises its option, Texakoma agrees to drill eight additional wells, with LOC having a 15% working interest carried through the tanks, and pay LOC $706,603 for an 85% leasehold interest in the next eight drill sites and a 50% leasehold interest in the balance of the Lustre Field Prospect acreage. The working and net revenue interest in any wells drilled subsequent to the first ten wells shall be shared by Texakoma and LOC on a 50:50 basis. Following the Texakoma transaction, the Company will retain a 100% leasehold interest and full control of an additional 30,556 net mineral acres in northeastern Montana at the western edge of the Williston Basin. Basic and Diluted 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. As the Company realized a net loss for the three-month periods ended August 31, 2023 and 2022, no potentially dilutive securities were included in the calculation of diluted loss per share as their impact would have been anti-dilutive. Diluted earnings/(loss) per share is computed by dividing the net income (loss) by the weighted-average number of common and dilutive common equivalent shares outstanding during the period. |
GOING CONCERN
GOING CONCERN | 3 Months Ended |
Aug. 31, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
GOING CONCERN | NOTE 2 – GOING CONCERN These consolidated financial statements have been prepared on a going concern basis. The Company has routinely incurred losses since inception, resulting in an accumulated deficit, and historically has been dependent on one customer for its revenue. There is no assurance that in the future any financing will be available to meet the Companys needs. This situation raises substantial doubt about the Companys 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 an ongoing effort to (a) controlling overhead and expenses; (b) raising funds connected with specific well development; and (b) raising funds through notes payable and convertible debt to expand and fund property acquisitions exploration and development as well as maintaining operations. The Company has worked to attract and retain key personnel with significant experience in the industry. At the same time, to control costs, the Company has required several of its personnel to multi-task and cover a wider range of responsibilities to restrict the growth of the Companys 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. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Aug. 31, 2023 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES | NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES Use of Estimates Management uses estimates and assumptions in preparing these consolidated financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. Principles of Consolidation Equity Method Investment Property and Equipment Oil and Gas Acquisition Costs Schedule of Oil and Gas Acquisition and Drilling Cost August 31, May 31, 2023 2023 Intangible and tangible drilling costs $ 3,266,737 $ 3,410,832 Acquisition costs 1,164,701 1,136,908 Oil and gas acquisition and drilling costs $ 4,431,438 $ 4,547,740 |
RECENT AND ADOPTED ACCOUNTING S
RECENT AND ADOPTED ACCOUNTING STANDARDS | 3 Months Ended |
Aug. 31, 2023 | |
Accounting Changes and Error Corrections [Abstract] | |
RECENT AND ADOPTED ACCOUNTING STANDARDS | NOTE 4 – RECENT AND ADOPTED ACCOUNTING STANDARDS 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. |
ACCOUNTING FOR ASSET RETIREMENT
ACCOUNTING FOR ASSET RETIREMENT AND ENVIRONMENTAL OBLIGATIONS | 3 Months Ended |
Aug. 31, 2023 | |
Asset Retirement Obligation Disclosure [Abstract] | |
ACCOUNTING FOR ASSET RETIREMENT AND ENVIRONMENTAL OBLIGATIONS | NOTE 5 – ACCOUNTING FOR ASSET RETIREMENT AND ENVIRONMENTAL OBLIGATIONS The Company accounts for its asset retirement obligations in accordance with Accounting for Asset Retirement and Environmental Obligations. This requires that legal obligations associated with the retirement of long-lived assets be recognized at fair value when incurred and capitalized as part of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized asset is depreciated over the useful life of the long-lived asset. In the absence of quoted market prices, the Company estimates the fair value of its asset retirement obligations using present value techniques, in which estimates of future cash flows associated with retirement activities are discounted using a credit-adjusted risk-free rate. The Companys estimated liability could change significantly if actual costs vary from assumptions or if governmental regulations change significantly. The Companys asset retirement obligation was established in May 2022 when it commenced drilling the Olfert#11-4 well in the Lustre oil field. On August 31, 2023 and May 31, 2023 the asset retirement obligation totaled $69,482 and $67,938, respectively. The cash flow estimate for the asset retirement obligation is based upon the assumption of a 25-year expected life of the well, discounted using a credit-adjusted risk-free interest rate of 10%. The Company has recorded accretion expense totaling $1,544 in each of the three-month periods ending August 31, 2023 and 2022. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Aug. 31, 2023 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | NOTE 6 – FAIR VALUE MEASUREMENTS Fair Value of Financial Instruments The carrying values of cash and cash equivalents, accounts and other receivables, accounts payable and accrued current liabilities approximate their fair values due to the short-term nature of the instruments. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis The estimated fair value of oil and gas properties and the asset retirement obligation incurred in the drilling of oil and gas wells or assumed in the acquisitions of additional oil and gas working interests are based on an estimated discount cash flow model and market assumptions. The significant Level 3 assumptions used in the calculation of estimated discounted cash flow model include future commodity prices, projections of estimated quantities of oil and gas reserves, expectations for timing and amount of future development, operating and asset retirement costs, projections of future rates of production, expected recovery rates and risk adjusted discount rates. See Note 3 for additional information regarding oil and gas property acquisitions. The Company estimates the fair value of asset retirement obligations based on the projected discounted future cash outflows required to settle abandonment and restoration liabilities. Such an estimate requires assumptions and judgments regarding the existence of liabilities, the amount and timing of cash outflows required to settle the liability, what constitutes adequate restoration, inflation factors, credit adjusted discount rates, and consideration of changes in legal, regulatory, environmental and political environments. Abandonment and restoration cost estimates are determined in conjunction with the Companys reserve engineers based on historical information regarding costs incurred to abandon and restore similar well sites, information regarding current market conditions and costs, and knowledge of subject well sites and properties. Asset retirement obligation fair value measurements in the current period were Level 3 fair value measurements. As further described in Note 5, the Company recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. Asset retirement obligations are not measured at fair value subsequent to initial recognition. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Aug. 31, 2023 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 7 – 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. On April 4, 2022, Cat Creek, in which the Company has an equity investment, loaned the Company $ 136,479 In accordance with the NPI Agreement, between October 2021 and August 2022, Olfert #11-4 Holdings transferred funds totaling $1,859,195 to Lustre, the Companys wholly owned subsidiary, to provide funds for drilling expenses incurred by Lustre with respect to the development of one well. On June 22, 2022, the Company assigned the right to purchase up to 356,243 of the 500,000 membership interests in Olfert #11-4 to the Companys Chief Financial Officer in exchange for his payment of $356,243 of the Companys capital commitment to Olfert #11-4. On October 26, 2022, the Company borrowed $150,000 from the Companys Chief Financial Officer pursuant to a demand note bearing an annual interest rate of 10%. The demand note is secured by all of the Companys interests in Lustre, pursuant to the terms of a Membership Interest Pledge Agreement. In February through May 2023, the Companys Chief Financial Officer made several advances to the Company, totaling $142,099. The advances were not made pursuant to a promissory note, and the advances are not secured. Advances by the Companys Chief Financial Officer currently total $292,099. |
NET PROFITS INTEREST AGREEMENT
NET PROFITS INTEREST AGREEMENT | 3 Months Ended |
Aug. 31, 2023 | |
Net Profits Interest Agreement | |
NET PROFITS INTEREST AGREEMENT | NOTE 8 – NET PROFITS INTEREST AGREEMENT The Company and Lustre executed the NPI Agreement with Erehwon and Olfert Holdings in January 2022, to be effective as of October 2021. The NPI Agreement was executed for the purpose of funding the Olfert Well under the Erehwon APA. The NPI Agreement grants Olfert Holdings an Applicable Percentage of available funds from the Olfert Well in exchange for Olfert Holdings funding development of the Olfert Well. The Applicable Percentage is defined in the NPI Agreement as 90% prior to Payout and 50% after Payout, with Payout being defined as the point in time when the aggregate of all Net Profits Interest payments made to Olfert Holdings under the NPI Agreement equals 105% of the well development costs. In January 2022, the Company entered into an Amended and Restated Limited Liability Company Operating Agreement of Olfert Holdings, dated to be effective as of November 2021 (the Olfert Holdings Operating Agreement). Pursuant to the Olfert Holdings Operating Agreement, the Company agreed to make a $500,000 capital contribution, out of a total of $1,500,000 to be raised by Olfert Holdings. During October and November of 2021, the Company received advance payments totaling $1.0 million from four investors, through Lustre, pursuant to the NPI Agreement. The Company was credited with $59,935 of well development costs as part of its capital contribution under the Olfert Holding Operating Agreement. In May 2022, a vendor made an in-kind capital contribution of $83,822 to Olfert Holdings in the form of services rendered. In June 2022, the Companys Chief Financial Officer invested $356,243 in Olfert Holdings pursuant to the NPI Agreement. These three contributions fulfilled the Companys initial capital contribution commitment under the Olfert Holdings Operating Agreement. On August 3, 2022, the Company, as Manager of Olfert Holdings, issued a capital call to the investors in Olfert Holdings for payment of an additional $461,440 to cover expenses that Lustre is obligated to pay pursuant to the NPI Agreement. As of August 31, 2023, the investors had paid $358,747 of that capital call. As of August 31, 2023, Lustre had incurred approximately $3,300,000 in expenses related to the development of the Olfert Well. The Olfert Well has exceeded its original budget, and there are certain construction costs that have not been satisfied. To pay the amounts owed, the Company issued another capital call to the investors in Olfert Holdings to pay an additional $1.7 million. The investors do not have an obligation to make further investments, and Olfert Holdings did not raise the requested additional amount from that capital call. Subsequently, several unpaid contractors have attached mechanic liens on the Olfert Well. Three creditors have filed a lawsuit for payment against Lustre, the operator of the Olfert Well in Montana. The Company believes that the Olfert Well is still economically viable, and it intends to attempt to raise sufficient additional capital for Olfert Holdings, complete the Olfert Well, and pay all amounts owed to contractors. NOTE 8 – NET PROFITS INTEREST AGREEMENT continued In connection with the NPI Agreement, the Company was credited with a contribution totaling $59,935 of well development costs under an agreement with Olfert Holdings. The initial investment in Olfert Holdings recorded by the Company was $19,435. The difference between the $59,935 contribution recorded by Olfert Holdings and the $19,435 investment recorded by the Company is due to the Companys investment being recorded at the carrying value of the assets contributed by the Company. In connection with the August 2022 capital call, the Company contributed an additional $18,438 to Olfert Holdings resulting in a 4.2% interest in Olfert Holdings as of August 31, 2023. As the Company currently serves as the manager of Olfert Holdings, the Company exercises significant influence over Olfert Holdings. Accordingly, the amount the Company paid to Olfert Holdings is recorded as an equity method investment as of August 31, 2023. |
STOCKHOLDERS_ DEFICIT
STOCKHOLDERS’ DEFICIT | 3 Months Ended |
Aug. 31, 2023 | |
Equity [Abstract] | |
STOCKHOLDERS’ DEFICIT | NOTE 9 – STOCKHOLDERS DEFICIT Share Based Compensation The Company made grants of options for the purchase of 15,075,000 shares of the Companys common stock, at a price of $0.06 per share, during the first quarter of fiscal year 2024. The grants were issued under the Laredo Oil, Inc. 2023 Equity Incentive Plan, which became effective with the filing of a Registration Statement on Form S-8 on June 14, 2023. Except for an option to purchase 1,100,000 shares of common stock, at a price of $0.38 per share, all options previously granted under the Laredo Oil, Inc. 2011 Equity Incentive Plan, totaling 4,825,000 shares, were terminated and replaced by grants under the new incentive plan. Options to purchase 650,000 shares of common stock at a price of $0.19 per share were granted during the first quarter of fiscal year 2023. The options vested immediately and expire on June 2, 2032. Option grants for the purchase of 1,600,000 shares of common stock at a price of $0.074 per share were made during the first quarter of fiscal year 2022. The options vest monthly over three years beginning August 1, 2021 and expire on August 1, 2031. These options were canceled on June 29, 2023. The Black-Scholes option pricing model is used to estimate the fair value of options granted under our stock incentive plan. The grant date fair value of the stock option grants during the three months ending August 31, 2023 and 2022 totaled $721,110 and $123,487, respectively. The weighted average assumptions used in calculating these values were based on the following: Schedule of Fair Value Assumptions 2023 2022 Risk-free interest rate 3.99% 1.85% Expected dividend yield 0% 0% Expected volatility 281.3% 314.9% Expected life of options 5.0 years 6.0 years The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for a bond with a similar term. The Company does not anticipate declaring dividends in the foreseeable future. Volatility is estimated based on the historical share prices over the same period as the expected life of the option. The Company uses the simplified method for determining the expected term of its stock options. Share based compensation for stock option grants totaling $ 721,110 123,487 Restricted Stock In May 2023 the Company received funds pursuant to a Stock Purchase Agreement with an accredited investor to purchase 6,062,886 restricted shares of the Companys common stock at a purchase price of $0.0441 per share, totaling $267,319. The shares have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state, and were issued to the investor in reliance upon exemptions from such registration. The investor is aware of the provisions of Rule 144 promulgated under the Securities Act. The Company entered into a financial advisory agreement, dated July 21, 2022 (the Advisory Agreement), pursuant to which the Company engaged Dawson James Securities, Inc. (Dawson) to render services as a corporate finance consultant. The term of the Advisory Agreement is twelve months from the date of the Advisory Agreement, unless terminated by either party with 30 days prior written notice to the other party, beginning 60 days following the date of the Advisory Agreement. Under the terms of the Advisory Agreement, Dawson will provide advice to the Company concerning business and financial planning, corporate organization and structure, private and public equity and debt financing, and such other matters as the parties may mutually agree. As compensation to Dawson for the services provided under the Advisory Agreement, the Company is obligated to pay Dawson $30,000 per calendar quarter, with the first such payment being paid one day after the date of the execution of the Advisory Agreement, and each subsequent payment being due three months after the previous payment. The Company made the first $30,000 payment in July 2022. The Company also agreed to issue to Dawson 2,600,000 shares of the Companys common stock, payable in four installments of (i) 1,000,000 shares issued within three business days after the date of the Advisory Agreement, (ii) 550,000 shares for the subsequent quarter, and (iii) 525,000 shares for each of the remaining two quarters of the term of the Advisory Agreement. The first 1,000,000 restricted shares were issued in July 2022. During the twelve months ending May 31, 2023, the Company recorded advisory service fees totaling $160,000 with respect to the 1,000,000 shares of the Companys common stock issued pursuant to the Advisory Agreement. After the first $30,000 payment and issuance of 1,000,000 shares of common stock, the Advisory Agreement has been suspended indefinitely. In April 2022, the Company entered into a consulting agreement with an individual for corporate structuring and strategic planning and compliance services. Pursuant to this agreement, the Company agreed to compensate the consultant with cash and restricted shares of the Companys common stock, which shares vest equally over the 12-month term of the consulting agreement. During the twelve months ending May 31, 2023, the Company recorded $27,257 in professional fees with respect to the issuance of the first two tranches of 272,474 restricted shares. The consulting agreement was terminated in July 2022. The Company granted no shares of restricted stock as compensation during the first quarter of fiscal year 2024. Warrants No warrants were issued during the first quarters of fiscal years 2024 or 2023. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) |
NOTES PAYABLE
NOTES PAYABLE | 3 Months Ended |
Aug. 31, 2023 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE | NOTE 10 – NOTES PAYABLE Convertible Debt In March, April and May of 2023, the Company entered into Securities Purchase Agreements with an accredited investor, pursuant to which the Company issued three convertible promissory notes in the aggregate principal amount of $ 212,025 180,000 12,750 In November of 2022, the Company entered into Securities Purchase Agreements with two accredited investors, pursuant to which the Company issued two convertible promissory notes in the aggregate principal amount of $ 140,250 120,000 7,500 In October 2022, the Company entered into a Securities Purchase Agreement with an accredited investor, pursuant to which the Company issued a convertible promissory note in the principal amount of $ 55,000 45,000 5,000 On September 6, 2022, the Company entered into a Securities Purchase Agreement with an accredited investor, pursuant to which the Company issued a convertible promissory note in the principal amount of $ 97,625 85,000 3,750 12,625 In October, November, December of 2021, and March, April and May of 2022, the Company entered into Securities Purchase Agreements with three accredited investors, pursuant to which the Company issued six convertible promissory notes in the aggregate principal amount of $ 608,575 527,500 22,500 81,075 On September 2, 2022 the Company repaid the single Convertible Note entered into on March 1, 2022. The repayment totaled $64,088, comprised of $53,625 principal and $10,463 in related accrued interest and prepayment penalty interest. The Company recorded the related deferred debt discount and debt issue costs, totaling $4,371, as interest expense. On June 27, 2022, the Company repaid the single Convertible Note entered into in December 2021. The repayment totaled $65,745, comprised of $55,000 in principal and $10,745 in related accrued interest and prepayment penalty interest. The Company recorded the related deferred debt discount and debt issue costs, totaling $4,435, as interest expense. During April and May 2022, the Company repaid the Convertible Notes entered into in October and November 2021. The repayment for the remaining Convertible Notes totaled $136,479, comprised of $114,125 in principal and $22,354 in related accrued interest and prepayment penalty interest. The Company borrowed $136,479 from Cat Creek to repay these Convertible Notes. The Convertible Note issued in November 2021 was repaid in an amount that totaled $85,469, comprised of $71,500 in principal and $13,969 in related accrued interest and prepayment penalty interest. Upon the repayment of the October 2021 and November 2021 Convertible Notes, the Company recorded the related remaining outstanding debt discount and debt issue costs, totaling $12,388, as interest expense. In August 2020, the FASB issued ASU 2020-06, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period. This accounting standard update, which was adopted by the Company effective June 1, 2022, impacts the ongoing accounting of the convertible notes. The Company adopted this standard using the modified retrospective method of transition and applied the guidance to transactions outstanding as of the beginning of the current fiscal year on June 1, 2022. Transactions that were settled (or expired) during prior reporting periods are unaffected. The cumulative effect of the change is recognized as an adjustment to the opening balance of retained earnings at the date of adoption. Due to the adoption of this accounting standard update under the modified retrospective method, prior periods were not restated. Upon adoption, the Company recorded a $16,200 cumulative-effect adjustment that increased the opening balance of retained earnings on the consolidated balance sheet due to the reduction in non-cash interest expense associated with the historical separation of debt and equity components for the Companys Convertible Notes. The Company also recorded a $39,718 increase to convertible debt and a decrease to additional paid-in capital of $55,918 due to no longer separating the embedded conversion feature of the Convertible Notes. This adoption did not have a material impact on the Companys consolidated statement of cash flows. The Company has the right to prepay the Convertible Notes at any time during the first six months the Convertible Notes are outstanding at the rate of (a) 110% of the unpaid principal amount of such note plus interest, during the first 120 days the note is outstanding, and (b) 115% of the unpaid principal amount of such note plus interest between days 121 and 180 after the issuance date of the note. The Convertible Notes may not be prepaid after the 180 th The Company agreed to reserve the number of shares of its common stock that may be issuable upon conversion of the Convertible Notes while the Convertible Notes are outstanding. The Convertible Notes provide for standard and customary events of default, such as failing to timely make payments under the Convertible Notes when due, the failure of the Company to timely comply with the Securities Exchange Act of 1934 reporting requirements and the failure to maintain a listing on the OTC Markets. The Convertible Notes also contain customary positive and negative covenants. The Convertible Notes include penalties and damages payable to the noteholders in the event the Company does not comply with the terms of the Convertible Notes, including in the event the Company does not issue shares of common stock to the noteholders upon conversion of the Convertible Notes within the time periods set forth therein. Additionally, upon the occurrence of certain defaults, as described in the Convertible Notes, the Company is required to pay the noteholders liquidated damages in addition to the amount owed under the Convertible Notes (including in some cases up to 300% of the amount of the applicable Convertible Note). At no time may the Convertible Notes be converted into shares of the Companys common stock if such conversion would result in the noteholders and their affiliates owning shares representing in excess of 4.99% of the then outstanding shares of the Companys common stock. The proceeds from the Convertible Notes could be used by the Company for general corporate purposes. 12% Secured Promissory Note On March 23, 2023, an individual accredited investor paid the Company the aggregate amount of $100,000 for a Secured Promissory Note, (the Note). The Note will accrue interest on the outstanding principal sum at the rate of 12.0% per annum and has a maturity date of March 23, 2024. Interest will be due and payable monthly in arrears. The Note is secured by certain equipment owned by the Company pursuant to a Security Agreement with the Lender. On May 23, 2023, the Note was increased by $83,000 to an aggregate principal amount of $183,000. During June and July, 2023, the investor contributed an additional $102,061 under the Note, bringing the aggregate principal amount to $285,061. 12% One Year Promissory Notes On May 20, 2022, the Company entered into a Securities Purchase Agreement with an accredited investor, pursuant to which the Company issued a promissory note in the principal amount of $200,200 and received $175,000 in net cash proceeds. On January 5, 2023, the note was satisfied in full with a final payment of $67,266. The promissory note had an original issue discount of $21,450 and $3,750 in debt issue costs were deducted from the gross proceeds. The Company was amortizing the total of $25,200 recorded as debt discount using the effective interest method through the maturity dates of the convertible promissory note. The note was due one year following the date of issuance, and accrued interest at 12% per annum (22% upon the occurrence of an event of default). Accrued, unpaid interest and outstanding principal was due in ten equal monthly payments of $22,422.40, starting on July 15, 2022. In the event of default (including a missed payment), the note was convertible at the option of the investor into shares of the Companys common stock at a discount of 25% from the lowest closing bid price during the ten trading days immediately preceding the conversion date. On January 5, 2023, the Company entered into a Securities Purchase Agreement with an accredited investor, pursuant to which the Company issued a promissory note in the principal amount of $197,313, receiving $150,000 in net cash proceeds. The convertible promissory note had an original issue discount of $21,450, and an additional $3,750 in debt issue costs were deducted from the gross proceeds. The total of $25,200 recorded as debt discount is being amortized using the effective interest method through the maturity date of the convertible promissory note. The note is due one year following the date of issuance and accrues interest at 12% per annum (22% upon the occurrence of an event of default). Accrued, unpaid interest and outstanding principal is due in ten equal monthly payments of $22,099.10, starting on February 15, 2023. In the event of default (including a missed payment), the note is convertible at the option of the investor into shares of the Companys common stock at a discount of 25% from the lowest closing bid price during the ten trading days immediately preceding the conversion date. Promissory Note The Company entered into a Secured Promissory Note, dated June 28, 2022 (the Secured Note), with the initial principal amount of $750,000. The Secured Note is payable to Cali Fields LLC (the Lender). The Secured Note accrues interest on the outstanding principal sum at the rate of 15.0% per annum. The Company may prepay the Secured Note in whole or in part, without penalty, with any such payment being applied first to any accrued and unpaid interest, and then to the principal amount. The Secured Note has a maturity date of December 31, 2023. As partial consideration for the Lenders advance of the principal amount of the Secured Note, the Company agreed to pay the Lender a quarterly revenue royalty equal to 0.5% of the consolidated revenue of the Company and its consolidated subsidiaries from the production of oil, gas, gas liquids and all other hydrocarbons, recognized by the Company during the most recent calendar quarter during the Royalty Period, from June 1, 2022 through May 31, 2027. The Secured Note is secured by the Companys fifty percent (50%) interest in Cat Creek Holdings, LLC. Secured Convertible Debt The Company entered into a Note Purchase Agreement dated September 23, 2022 (the Note Purchase Agreement), for the issuance of secured convertible promissory notes in the aggregate principal amount of up to $7,500,000. Pursuant to this Note Purchase Agreement, during September, October and November 2022, the Company issued four promissory notes in the aggregate principal amount of $290,000 and accrued interest at 10% per annum, later increased to 12% per annum. In December 2022, January 2023 and February 2023, the Company issued three additional promissory notes totaling $250,000. During June 2023 and August 2023, the Company entered into an additional $85,000 of secured convertible promissory notes increasing the aggregate principal issued to $625,000. Under the Note Purchase Agreement, the Company may issue additional promissory notes, up to the $7,500,000 total principal amount. The promissory notes accrue interest on the outstanding principal sum at the rate of 12.0% per annum, payable quarterly starting September 30, 2023, and are convertible into the Companys common stock at a conversion price of $1.00 per share. The notes issued under the Note Purchase Agreement have a maturity date of September 30, 2025. Revolving Note On May 25, 2022, the Company entered into a Revolving Credit Note (the Revolving Note) with AEI Management, Inc. (AEI), with a maximum draw amount of $1,500,000.00. In May 2022 and June 2022, the Company borrowed $62,858 and $48,000, respectively, under the Revolving Note. The Revolving Note had a maturity date of May 1, 2023, or such later date as requested by the Company and agreed in writing by AEI in its sole discretion. On May 22, 2023, the Revolving Note principal of $110,858 and accrued interest of $19,510 was paid and the Revolving Note canceled. Alleghany Notes Schedule of Notes Payable – Related Party August 31, May 31, 2023 2023 Total note payable – Alleghany $ 617,934 $ 617,934 Less amounts classified as current 617,934 617,934 Note payable – Alleghany, net of current portion $ - $ - 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 debt discount has been fully amortized as of December 31, 2021. In August 2022, the Company entered an amendment to the Senior Consolidated Note whereby the maturity date of the loan was extended to December 31, 2023 in exchange for an interest rate to 8% per annum commencing July 1, 2022. Further, the revenue royalty as defined in the Purchase Agreement increased from 5% to 6% as the loan was not paid prior to December 31, 2022. As of August 31 and May 31, 2023, the Senior Consolidated Note is recorded as current. Paycheck Protection Program Loan Schedule of Paycheck Protection Program August 31, May 31, 2023 2023 Total PPP Loan $ 984,950 $ 986,598 Less amounts classified as current 528,568 449,624 PPP loan, excluding current portion $ 456,382 $ 536,974 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, 2022, interest totaling $15,353 is recorded in accrued interest on the accompanying consolidated balance sheets. After the deferral period and after considering 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. The portion of the loan forgiven has been 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 commenced on September 1, 2021 and as of August 31, 2023, the Company owes $10,234 with respect to the remaining balance on the first Note. In April 2022, the Company applied for partial forgiveness of the PPP Second Draw Loan and received notice that $67,487 of the principal and related interest balance has been forgiven and is recorded as income from the extinguishment of the loan obligation. Monthly payments of $26,752 commence on June 3, 2022 and as of August 31, 2023, the Company owes $974,716 with respect to the remaining balance on the second PPP Note. The Company is currently in arrears on payments on the second PPP Note. |
EQUITY METHOD INVESTMENT
EQUITY METHOD INVESTMENT | 3 Months Ended |
Aug. 31, 2023 | |
Equity Method Investments and Joint Ventures [Abstract] | |
EQUITY METHOD INVESTMENT | NOTE 11 – EQUITY METHOD INVESTMENT Cat Creek Holdings On June 30, 2020, Laredo Oil, Inc. 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 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 Companys ownership interest in Cat Creek accounted for under the equity method for the August 31, 2023 and August 31, 2022 periods presented and has been compiled from respective company financial statements, reflects certain historical adjustments, and is reported on a two-month lag. Summarized Financial Information Balance Sheet: As of August 31, 2023 As of May 31, 2023 Current Assets $ 103,543 $ 82,890 Non-current Assets 923,210 941,340 Total Assets $ 1,026,753 $ 1,024,230 Current Liabilities $ 123,179 $ 83,342 Non-current Liabilities 445,911 441,901 Shareholders equity 457,663 498,988 Total Liabilities and Shareholders Equity $ 1,026,753 $ 1,024,230 Results of Operations: Three Months Three Months Revenue $ 161,236 $ 259,416 Gross Profit 21,901 220,188 Net Loss $ (41,324) $ (21,810) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Olfert 11-4 Holdings The following table provides summarized financial information for the Companys ownership interest in Olfert #11-4 Holding accounted for under the equity method for the August 31, 2023 period presented and has been compiled from respective company financial statements and reflects certain historical adjustments. Results of operations are excluded for periods prior to acquisition. See Note 8 for further information. Summarized Financial Information Balance Sheet: As of August 31, 2023 Current Assets $ 508 Non-current Assets 1,859,195 Total Assets $ 1,859,703 Accounts payable 5,750 Shareholders equity 1,853,593 Total Liabilities and Shareholders Equity $ 1,859,703 Results of Operations: Three Months Ended Revenue $ 0 Gross Profit 0 Net Loss $ (0 ) |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Aug. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 12 – COMMITMENTS AND CONTINGENCIES On February 4, 2021, Lustre filed a case captioned Lustre Oil Company LLC and Erehwon Oil & Gas, LLC v. Anadarko Minerals, Inc. and A&S Mineral Development Co., LLC On March 20, 2023, Capex Oilfield Services, Inc. filed a lawsuit against Lustre in the Montana Tenth Judicial District Court, Petroleum County, demanding payment of $377,189.55 plus interest and collection costs for services provided by Capex to drill the Olfert 11-4 well. On May 18, 2023, Capstar Drilling, Inc. filed a lawsuit against Lustre in the Montana Seventeenth Judicial District Court, Valley County, demanding payment of $298,049.76 plus interest and collection costs for services provided by Capstar to drill the same well. On August 29, 2023, Warren Well Service, Inc. filed a lawsuit against Lustre in the Montana Seventeenth Judicial District Court, Valley County, demanding payment of $164,235 plus interest and collection costs for services provided by Warren Well to drill the same well. Lustre intends to bring that well into production as soon as possible and reimburse unpaid vendors from proceeds from such production. Except as set forth above, the Company is not currently involved in any other legal proceedings, and it is not aware of any other pending or potential legal actions. Revenue Royalty In accordance with the Secured Note, the Company agreed to pay a revenue royalty of 0.5% on consolidated revenue of the Company arising from the direct production of oil and gas. The royalty period extends from June 1, 2022 through May 31, 2027. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Aug. 31, 2023 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 13 – SUBSEQUENT EVENTS On September 21, 2023, the Exploration & Development Agreement, dated July 18, 2023. by and between Texakoma and LOC was amended (i) to delay the anticipated spud date for the initial well from October 1, 2023 to November 1, 2023 and (ii) to change payment date of the second $175,000 tranche to be on or before October 1, 2023. The Company received the $175,000 payment on September 29, 2023. On September 14, 2023, the Company entered into a Securities Purchase Agreement with an accredited investor, pursuant to which the Company issued a convertible promissory note in the principal amount of $71,225, receiving $60,000 in net cash proceeds. The convertible promissory note had an original issue discount of $6,475. Further $4,750 debt issue costs were deducted from the gross proceeds. The total of $11,225 recorded as debt discount is being amortized using the effective interest method through the maturity dates of the convertible promissory note. The convertible note is due in one year from the date of issuance, accrues interest at 8% per annum (22% upon the occurrence of an event of default) and is convertible after 180 days into shares of the Companys common stock at a discount of 25% of the average of the three lowest trading prices during the 15 trading days immediately preceding the conversion. On September 8, 2023, the Company received $175,000 related to the August 31, 2023 sale of underground drilling equipment that formerly had been used in drilling operations in the Fredonia underground gravity drainage project. The Company recorded the sale in other receivables on the balance sheet and a gain on sale of assets in the statement of operations as of August 31, 2023. During September 2023, the Company repaid the $70,125 in principal and $2,805 in accrued interest pursuant to a Convertible Note dated March 1, 2023. To satisfy the obligation, the Company issued to the noteholder 1,398,760 shares of the Companys common stock, at an average price of $0.05214 per share. |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Aug. 31, 2023 | |
Accounting Policies [Abstract] | |
Use of Estimates | 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 | Principles of Consolidation |
Equity Method Investment | Equity Method Investment |
Property and Equipment | Property and Equipment |
Oil and Gas Acquisition Costs | Oil and Gas Acquisition Costs Schedule of Oil and Gas Acquisition and Drilling Cost August 31, May 31, 2023 2023 Intangible and tangible drilling costs $ 3,266,737 $ 3,410,832 Acquisition costs 1,164,701 1,136,908 Oil and gas acquisition and drilling costs $ 4,431,438 $ 4,547,740 |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Aug. 31, 2023 | |
Accounting Policies [Abstract] | |
Schedule of Oil and Gas Acquisition and Drilling Cost | Schedule of Oil and Gas Acquisition and Drilling Cost August 31, May 31, 2023 2023 Intangible and tangible drilling costs $ 3,266,737 $ 3,410,832 Acquisition costs 1,164,701 1,136,908 Oil and gas acquisition and drilling costs $ 4,431,438 $ 4,547,740 |
STOCKHOLDERS_ DEFICIT (Tables)
STOCKHOLDERS’ DEFICIT (Tables) | 3 Months Ended |
Aug. 31, 2023 | |
Equity [Abstract] | |
Schedule of Fair Value Assumptions | The grant date fair value of the stock option grants during the three months ending August 31, 2023 and 2022 totaled $721,110 and $123,487, respectively. The weighted average assumptions used in calculating these values were based on the following: Schedule of Fair Value Assumptions 2023 2022 Risk-free interest rate 3.99% 1.85% Expected dividend yield 0% 0% Expected volatility 281.3% 314.9% Expected life of options 5.0 years 6.0 years |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 3 Months Ended |
Aug. 31, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of Notes Payable – Related Party | Alleghany Notes Schedule of Notes Payable – Related Party August 31, May 31, 2023 2023 Total note payable – Alleghany $ 617,934 $ 617,934 Less amounts classified as current 617,934 617,934 Note payable – Alleghany, net of current portion $ - $ - |
Schedule of Paycheck Protection Program | Paycheck Protection Program Loan Schedule of Paycheck Protection Program August 31, May 31, 2023 2023 Total PPP Loan $ 984,950 $ 986,598 Less amounts classified as current 528,568 449,624 PPP loan, excluding current portion $ 456,382 $ 536,974 |
EQUITY METHOD INVESTMENT (Table
EQUITY METHOD INVESTMENT (Tables) | 3 Months Ended |
Aug. 31, 2023 | |
Cat Creek [Member] | |
Schedule of Equity Method Investments [Line Items] | |
Summarized Financial Information | Summarized Financial Information Balance Sheet: As of August 31, 2023 As of May 31, 2023 Current Assets $ 103,543 $ 82,890 Non-current Assets 923,210 941,340 Total Assets $ 1,026,753 $ 1,024,230 Current Liabilities $ 123,179 $ 83,342 Non-current Liabilities 445,911 441,901 Shareholders equity 457,663 498,988 Total Liabilities and Shareholders Equity $ 1,026,753 $ 1,024,230 Results of Operations: Three Months Three Months Revenue $ 161,236 $ 259,416 Gross Profit 21,901 220,188 Net Loss $ (41,324) $ (21,810) |
Olfert [Member] | |
Schedule of Equity Method Investments [Line Items] | |
Summarized Financial Information | Summarized Financial Information Balance Sheet: As of August 31, 2023 Current Assets $ 508 Non-current Assets 1,859,195 Total Assets $ 1,859,703 Accounts payable 5,750 Shareholders equity 1,853,593 Total Liabilities and Shareholders Equity $ 1,859,703 Results of Operations: Three Months Ended Revenue $ 0 Gross Profit 0 Net Loss $ (0 ) |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Aug. 31, 2023 | May 31, 2023 | |
Accounting Policies [Abstract] | ||
Intangible and tangible drilling costs | $ 3,266,737 | $ 3,410,832 |
Acquisition costs | 1,164,701 | 1,136,908 |
Oil and gas acquisition and drilling costs | $ 4,431,438 | $ 4,547,740 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Aug. 31, 2023 | May 31, 2023 | Apr. 04, 2022 |
Related Party Transaction [Line Items] | |||
Notes Payable Related Parties Classified Current | $ 292,099 | $ 292,099 | |
Cat Creek Holdings [Member] | |||
Related Party Transaction [Line Items] | |||
Notes Payable Related Parties Classified Current | $ 136,479 |
STOCKHOLDERS' DEFICIT (Details)
STOCKHOLDERS' DEFICIT (Details) | 3 Months Ended | |
Aug. 31, 2023 | Aug. 31, 2022 | |
Equity [Abstract] | ||
Risk-free interest rate | 3.99% | 1.85% |
Expected dividend yield | 0% | 0% |
Expected volatility | 281.30% | 314.90% |
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Expected Term | 5 years | 6 years |
STOCKHOLDERS_ DEFICIT (Details
STOCKHOLDERS’ DEFICIT (Details Narrative) - USD ($) | 3 Months Ended | 15 Months Ended | |
Aug. 31, 2023 | Aug. 31, 2022 | Aug. 31, 2022 | |
Offsetting Assets [Line Items] | |||
Share-Based Payment Arrangement, Noncash Expense | $ 721,110 | $ 133,110 | |
Equity Option [Member] | |||
Offsetting Assets [Line Items] | |||
Share-Based Payment Arrangement, Noncash Expense | $ 721,110 | $ 123,487 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) - USD ($) | Aug. 31, 2023 | May 31, 2023 |
Debt Disclosure [Abstract] | ||
Total note payable – Alleghany | $ 617,934 | $ 617,934 |
Less amounts classified as current | 617,934 | 617,934 |
Note payable – Alleghany, net of current portion |
NOTES PAYABLE (Details 2)
NOTES PAYABLE (Details 2) - USD ($) | Aug. 31, 2023 | May 31, 2023 |
Debt Disclosure [Abstract] | ||
Total PPP Loan | $ 984,950 | $ 986,598 |
Less amounts classified as current | 528,568 | 449,624 |
PPP loan, excluding current portion | $ 456,382 | $ 536,974 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 8 Months Ended | ||||
Sep. 06, 2022 | Aug. 31, 2023 | Nov. 30, 2022 | Oct. 31, 2022 | Aug. 31, 2023 | Aug. 31, 2022 | Aug. 31, 2022 | |
Short-Term Debt [Line Items] | |||||||
Amortization of Debt Discount (Premium) | $ 13,578 | $ 21,708 | |||||
Convertible Debt 1 [Member] | |||||||
Short-Term Debt [Line Items] | |||||||
Debt Instrument, Face Amount | $ 212,025 | 212,025 | |||||
Proceeds from Convertible Debt | 180,000 | ||||||
Debt Issuance Costs, Net | 12,750 | 12,750 | |||||
Convertible Debt 2 [Member] | |||||||
Short-Term Debt [Line Items] | |||||||
Debt Instrument, Face Amount | $ 140,250 | $ 55,000 | |||||
Proceeds from Convertible Debt | 120,000 | 45,000 | |||||
Debt Issuance Costs, Net | $ 7,500 | $ 5,000 | |||||
Convertible Debt 3 [Member] | |||||||
Short-Term Debt [Line Items] | |||||||
Debt Instrument, Face Amount | $ 97,625 | ||||||
Proceeds from Convertible Debt | 85,000 | ||||||
Debt Issuance Costs, Net | 3,750 | ||||||
Amortization of Debt Discount (Premium) | $ 12,625 | ||||||
Convertible Debt 4 [Member] | |||||||
Short-Term Debt [Line Items] | |||||||
Debt Instrument, Face Amount | 608,575 | 608,575 | |||||
Proceeds from Convertible Debt | $ 527,500 | ||||||
Debt Issuance Costs, Net | $ 22,500 | $ 22,500 | |||||
Amortization of Debt Discount (Premium) | $ 81,075 |
EQUITY METHOD INVESTMENT (Detai
EQUITY METHOD INVESTMENT (Details) - USD ($) | 3 Months Ended | |||
Aug. 31, 2023 | Aug. 31, 2022 | May 31, 2023 | May 31, 2022 | |
Schedule of Equity Method Investments [Line Items] | ||||
Current Assets | $ 213,310 | $ 52,082 | ||
Total Assets | 5,148,527 | 5,126,127 | ||
Current Liabilities | 10,101,682 | 9,602,554 | ||
Non-current Liabilities | 525,864 | 604,912 | ||
Shareholders equity | (5,479,019) | $ (3,391,925) | (5,081,339) | $ (2,797,949) |
Total Liabilities and Shareholders Equity | 5,148,527 | 5,126,127 | ||
Revenue | 0 | 0 | ||
Gross Profit | ||||
Net Loss | (1,118,790) | (874,625) | ||
Cat Creek [Member] | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Current Assets | 103,543 | 82,890 | ||
Non-current Assets | 923,210 | 941,340 | ||
Total Assets | 1,026,753 | 1,024,230 | ||
Current Liabilities | 123,179 | 83,342 | ||
Non-current Liabilities | 445,911 | 441,901 | ||
Shareholders equity | 457,663 | 498,988 | ||
Total Liabilities and Shareholders Equity | 1,026,753 | $ 1,024,230 | ||
Revenue | 161,236 | 259,416 | ||
Gross Profit | 21,901 | 220,188 | ||
Net Loss | $ (41,324) | $ (21,810) |
EQUITY METHOD INVESTMENT (Det_2
EQUITY METHOD INVESTMENT (Details 2) - USD ($) | 3 Months Ended | |||
Aug. 31, 2023 | Aug. 31, 2022 | May 31, 2023 | May 31, 2022 | |
Schedule of Equity Method Investments [Line Items] | ||||
Current Assets | $ 213,310 | $ 52,082 | ||
Total Assets | 5,148,527 | 5,126,127 | ||
Shareholders equity | (5,479,019) | $ (3,391,925) | (5,081,339) | $ (2,797,949) |
Total Liabilities and Shareholders Equity | 5,148,527 | $ 5,126,127 | ||
Revenue | 0 | 0 | ||
Gross Profit | ||||
Net Loss | (1,118,790) | $ (874,625) | ||
Olfert [Member] | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Current Assets | 508 | |||
Non-current Assets | 1,859,195 | |||
Total Assets | 1,859,703 | |||
Accounts payable | 5,750 | |||
Shareholders equity | 1,853,593 | |||
Total Liabilities and Shareholders Equity | 1,859,703 | |||
Revenue | 0 | |||
Gross Profit | 0 | |||
Net Loss | $ 0 |
EQUITY METHOD INVESTMENT (Det_3
EQUITY METHOD INVESTMENT (Details Narrative) | Jun. 30, 2020 USD ($) |
Cat Creek [Member] | |
Restructuring Cost and Reserve [Line Items] | |
Business Combination, Consideration Transferred | $ 448,900 |