Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
May 31, 2016 | Aug. 29, 2016 | Nov. 30, 2015 | |
Document And Entity Information | |||
Entity Registrant Name | Laredo Oil, Inc. | ||
Entity Central Index Key | 1,442,492 | ||
Document Type | 10-K | ||
Document Period End Date | May 31, 2016 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --05-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 4,900,000 | ||
Entity Common Stock, Shares Outstanding | 54,514,765 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,016 |
Balance Sheets
Balance Sheets - USD ($) | May 31, 2016 | May 31, 2015 |
Current Assets | ||
Cash and cash equivalents | $ 393,937 | $ 85,835 |
Prepaid expenses and other current assets | 46,293 | 155,922 |
Total Current Assets | 440,230 | 241,757 |
TOTAL ASSETS | 440,230 | 241,757 |
Current Liabilities | ||
Accounts payable | 33,363 | 35,043 |
Accrued payroll liabilities | 1,057,280 | 1,010,158 |
Accrued liabilities – related party | 170,079 | 0 |
Accrued interest | 129,632 | 102,413 |
Deferred management fee revenue | 45,833 | 45,833 |
Warrant liabilities | 0 | 251,991 |
Notes payable | 350,000 | 350,000 |
Total Current Liabilities | 1,786,187 | 1,795,438 |
Total Liabilities | 1,786,187 | 1,795,438 |
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 53,998,569 issued and outstanding, respectively | 5,451 | 5,400 |
Additional paid in capital | 8,188,199 | 7,320,378 |
Accumulated deficit | (9,539,607) | (8,879,459) |
Total stockholders' Deficit | (1,345,957) | (1,553,681) |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ 440,230 | $ 241,757 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | May 31, 2016 | May 31, 2015 |
Stockholders' deficit: | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, authorized shares | 10,000,000 | 10,000,000 |
Preferred stock, issued shares | 0 | 0 |
Preferred stock, outstanding shares | 0 | 0 |
Common stock, par value | $ .0001 | $ 0.0001 |
Common stock, authorized shares | 90,000,000 | 90,000,000 |
Common stock, issued shares | 54,514,765 | 53,998,569 |
Common stock, outstanding shares | 54,514,765 | 53,998,569 |
Statements of Operations
Statements of Operations - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Income Statement [Abstract] | ||
Management fee revenue | $ 10,896,736 | $ 8,819,371 |
Direct costs | 10,624,321 | 8,840,924 |
Gross profit (loss) | 272,415 | (21,553) |
General, selling and administrative expenses | 494,715 | 564,016 |
Consulting and professional services | 385,339 | 478,727 |
Total Operating Expense | 880,054 | 1,042,743 |
Operating loss | (607,639) | (1,064,296) |
Non-operating income (expense) | ||
(Loss) Gain on revaluation of warrant liability | (24,424) | 384,437 |
Interest expense | (28,085) | (26,464) |
Net loss | $ (660,148) | $ (706,323) |
Net loss per share, basic and diluted | $ (0.01) | $ (0.01) |
Weighted average number of basic and diluted common shares outstanding | 54,454,050 | 53,687,223 |
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, 2014 | 53,600,013 | 0 | |||
Beginning Balance - Amount at May. 31, 2014 | $ 5,360 | $ 0 | $ 6,684,403 | $ (8,173,136) | $ (1,483,373) |
Exercise of warrants, shares | 372,556 | ||||
Exercise of warrants, amount | $ 37 | 15,585 | 15,622 | ||
Exercise of options, shares | 26,000 | ||||
Exercise of options, amount | $ 3 | 6,497 | 6,500 | ||
Vested restricted stock | 30,000 | 30,000 | |||
Share based compensation | 583,893 | 583,893 | |||
Net loss | (706,323) | (706,323) | |||
Ending Balance, shares at May. 31, 2015 | 53,998,569 | 0 | |||
Ending Balance, amount at May. 31, 2015 | $ 5,400 | $ 0 | 7,320,378 | (8,879,459) | (1,553,681) |
Exercise of warrants, shares | 516,196 | ||||
Exercise of warrants, amount | $ 51 | (51) | 0 | ||
Reclassification from warrant liability to equity | 276,414 | 276,414 | |||
Exercise of options, amount | 0 | ||||
Vested restricted stock | 11,944 | 11,944 | |||
Share based compensation | 579,514 | 579,514 | |||
Net loss | (660,148) | (660,148) | |||
Ending Balance, shares at May. 31, 2016 | 54,514,765 | 0 | |||
Ending Balance, amount at May. 31, 2016 | $ 5,451 | $ 0 | $ 8,188,199 | $ (9,539,607) | $ (1,345,957) |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (660,148) | $ (706,323) |
Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operating Activities: | ||
Stock issued for services | 11,944 | 30,000 |
Share based compensation | 579,514 | 583,893 |
Loss (Gain) on revaluation of warrant liability | 24,424 | (384,437) |
Decrease (Increase) in prepaid expenses and other current assets | 109,629 | (107,699) |
Increase in accounts payable and accrued liabilities | 242,739 | 560,008 |
NET CASH USED IN OPERATING ACTIVITIES | 308,102 | (24,558) |
CASH FLOWS FROM INVESTING ACTIVITIES | 0 | 0 |
Exercise of warrants | 0 | 15,622 |
Exercise of options | 0 | 6,500 |
CASH FLOW FROM FINANCING ACTIVITIES | 0 | 22,122 |
Net increase (decrease) in cash and cash equivalents | 308,102 | (2,436) |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 85,835 | 88,271 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ 393,937 | $ 85,835 |
1. ORGANIZATION AND DESCRIPTION
1. ORGANIZATION AND DESCRIPTION OF BUSINESS | 12 Months Ended |
May 31, 2016 | |
Accounting Policies [Abstract] | |
1. ORGANIZATION AND DESCRIPTION OF BUSINESS | The accompanying financial statements have been prepared by management of Laredo Oil, Inc. (the Company). In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows as of and for the years ended May 31, 2016 and 2015 presented have been made. The Company was incorporated under the laws of the State of Delaware on March 31, 2008 under the name of Laredo Mining, Inc. with authorized common stock of 90,000,000 shares at $0.0001 par value and authorized preferred stock of 10,000,000 shares at $0.0001 par value. On October 21, 2009 the name was changed to Laredo Oil, Inc. The Company is a management services company managing the acquisition and conventional operation of mature oil fields and the further recovery of stranded oil from those fields using enhanced oil recovery (EOR) methods for its sole customer, Stranded Oil Resources Corporation (SORC), an indirect, wholly owned subsidiary of Alleghany Corporation (Alleghany). From its inception through October 2009, the Company was primarily engaged in acquisition and exploration efforts for mineral properties. After a change in control in October 2009, the Company shifted its focus to locating mature oil fields with the intention of acquiring those oil fields and recovering stranded oil using enhanced oil recovery methods. The Company was unable to raise the capital required to purchase any suitable oil fields. On June 14, 2011, the Company entered into agreements with Stranded Oil Resources Corporation (SORC) to seek recovery of stranded crude oil from mature, declining oil fields by using the Enhanced Oil Recovery (EOR) method known as Underground Gravity Drainage (UGD). Such agreements include license agreements, management services agreements, and other agreements (collectively the Agreements). SORC is a subsidiary of Alleghany Capital Corporation (Alleghany Capital) which is a subsidiary of Alleghany Corporation (Alleghany). The Agreements stipulate that the Company and Mark See, the Companys 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 SORCs net profits as defined in the Agreements (the Royalty). The Management Service Agreement (MSA) outlines that the Company will provide the services of key employees (Key Persons), including Mark See, in exchange for monthly and quarterly management service fees. The monthly management service fees provide funding for the salaries, benefit costs, and FICA taxes for the Key Persons identified in the MSA. SORC remits payment for the monthly management fees in advance and is payable on the first day of each calendar month. The quarterly management fee is $137,500 and is paid on the first day of each calendar quarter, and, as such, $45,833 has been recorded as deferred management fee revenue at May 31, 2016. In addition, SORC will reimburse the Company for monthly expenses incurred by the Key Persons in connection with their rendition of services under the MSA. The Company may submit written requests to SORC for additional funding for payment of the Companys operating costs and expenses, which SORC, in its sole and absolute discretion, will determine whether or not to fund. As of the filing date, no such additional funding requests have been made. As consideration for the licenses to SORC, the Company will receive a 19.49% interest in SORC net profits as defined in the SORC License Agreement (the SORC License Agreement). Under the SORC License Agreement, the Company agreed that a portion of the Royalty equal to at least 2.25% of the net profits (Incentive Royalty) be used to fund a long term incentive plan for the benefit of its employees, as determined by the Companys board of directors. On October 11, 2012, the Laredo Royalty Incentive Plan (the Plan) was approved and adopted by the Board and the Incentive Royalty was assigned by the Company to Laredo Royalty Incentive Plan, LLC, a special purpose Delaware limited liability company and wholly owned subsidiary of Laredo Oil, Inc. formed to carry out the purposes of the Plan (the Plan Entity). Through May 31, 2016 the subsidiary has received no distributions from SORC. As a result of the assignment of the Incentive Royalty to the Plan Entity, the Royalty retained by the Company has been reduced from 19.49% to 17.24% subject to reduction to 15% under certain events stipulated in the SORC License Agreement. Additionally, in the event of a SORC initial public offering or certain other defined corporate events, the Company will receive 17.24%, subject to reduction to 15% under the SORC License Agreement, of the SORC common equity or proceeds emanating from the event in exchange for termination of the Royalty. Under certain circumstances regarding termination of exclusivity and license terminations, the Royalty could be reduced to 7.25%. If any Incentive Royalty is funded as a result of those conditions being met, the Company may record compensation expense for the fair value of the Incentive Royalty, once all pertinent factors are known and considered probable. Basic and Diluted Loss per Share The Companys basic and diluted earnings per share (EPS) amounts have been computed based on the weighted-average number of shares of common stock outstanding for the period. As the Company realized a net loss for the years ended May 31, 2016 and 2015, no potentially dilutive securities were included in the calculation of diluted loss per share as their impact would have been anti-dilutive. |
2. GOING CONCERN
2. GOING CONCERN | 12 Months Ended |
May 31, 2016 | |
Text Block [Abstract] | |
2. GOING CONCERN | These financial statements have been prepared on a going concern basis. The Company has no significant operating history as of May 31, 2016 and has a net loss of $660,148 for the year ended May 31, 2016. The Company entered into the Agreements with SORC to fund operations and to provide working capital. However, there is no assurance that in the future such financing will be available to meet the Companys needs. Management has undertaken steps as part of a plan to improve operations with the goal of sustaining our operations for the next twelve months and beyond. These steps include (a) providing services and expertise under the Agreements to expand operations; and (b) controlling overhead and expenses. 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 Companys headcount at a time of expanding demand for its services under the Management Services Agreement. Further, the Company works closely with SORC to obtain its approval in advance of committing to material costs and expenditures in order to keep the Companys expenses in line with the management fee revenue. There can be no assurance that the Company can successfully accomplish these steps and it is uncertain that the Company will achieve a profitable level of operations and obtain additional financing. There can be no assurance that any additional financing will be available to the Company on satisfactory terms and conditions, if at all. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern. |
3. SUMMARY OF SIGNIFICANT ACCOU
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
May 31, 2016 | |
Accounting Policies [Abstract] | |
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | USE OF ESTIMATES Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. REVENUE RECOGNITION Revenue is recognized from services when it is realized or realizable and earned. Management fee revenue is considered realized and earned when persuasive evidence of an arrangement exists, the service has been performed, the sales price is fixed and determinable, no significant unfulfilled obligation exists, and collection is reasonably assured. 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, 2016 and 2015. At times, the Company maintains cash balances deposited at its financial institution that exceed FDIC insured limits. PREPAID EXPENSES AND OTHER CURRENT ASSETS The Company financed directors and officers insurance and is amortizing the expense over the 12 month contract life. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments as defined by Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 825-10-50, Financial Instruments, Based on the borrowing rates currently available to the Company for loans with similar terms and average maturities, the fair value of notes payable approximate their carrying value. FASB ASC 820, Fair Value Measurements , The three level fair value hierarchies for disclosure of fair value measurements defined by FASB ASC 820 are as follows: Level 1 Level 2 Level 3 A financial instruments level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company had warrant liabilities which were measured at fair value on a recurring basis until the underlying warrants were exercised in July 2015. The Company recorded a loss on revaluation of warrant liability of $24,424 and a gain on revaluation of warrant liability of $384,437 for the fiscal years ended May 31, 2016 and 2015, respectively. The Company measured the fair value of the warrant liabilities using the Black Scholes method. Inputs used to determine fair value under this method include the Companys stock price volatility and expected remaining life as disclosed in Note 6. The following table presents the fair value hierarchy for those assets measured at fair value on a recurring basis as of May 31, 2016 and 2015: Fair Value Measurements on a Recurring Basis Quoted prices in active markets Other observable inputs Unobservable inputs Current Liability Level 1 Level 2 Level 3 Total Warrant Liabilities May 31, 2015 $ - $ 251,991 $ - $ 251,991 There were no assets or liabilities measured at fair value on a non-recurring basis as of May 31, 2016 or 2015. SHARE BASED EXPENSES FASB ASC 718, Compensation - Stock Compensation a b The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity - Based Payments to Non-Employees. a b INCOME TAXES The Company accounts for income taxes by the asset and liability method in accordance with FASB ASC 740, Income Taxes. In addition, the Company utilizes the two-step approach to recognizing and measuring uncertain tax positions taken or expected to be taken in a tax return. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company recognizes interest and penalties accrued on unrecognized tax benefits within general and administrative expense. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction in general and administrative expenses in the period that such determination is made. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 2014, the FASB issued ASU 2014-12, "Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period." This ASU provides more explicit guidance for treating share-based payment awards that require a specific performance target that affects vesting and that could be achieved after the requisite service period as a performance condition. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2015. The Company does not expect the adoption of this guidance to have a material impact on the results of operations, cash flows or financial position. In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements - Going Concern (Subtopic 205-40) - Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ", which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and interim periods thereafter. Early application is permitted. The adoption of ASU 2014-15 is not expected to have a material effect on the Companys results of operations, cash flows or financial position. In January 2015, the FASB issued ASU No. 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items . In February 2016, the FASB issued ASU No. 2016-02 , leases classified as operating leases under previous GAAP. This standard will be effective for the Company beginning in the first quarter of fiscal year 2020, with early adoption permitted. This standard will be adopted using a modified retrospective approach. The Company is currently evaluating the impact this standard will have on its financial statements. In March 2016, the FASB issued ASU No. 2016-09, CompensationStock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting , The Company is currently evaluating the impact this standard will have on its financial statements. Management does not believe that any other recently issued, but not yet effective accounting standards, if currently adopted, would have a material effect on the accompanying financial statements. |
4. LOSS PER SHARE
4. LOSS PER SHARE | 12 Months Ended |
May 31, 2016 | |
Earnings Per Share [Abstract] | |
4. LOSS PER SHARE | Basic and diluted earnings per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. As of May 31, 2016 and 2015, warrants to purchase 5,374,501 and 6,349,501 shares of common stock, respectively and options to purchase 9,584,000 and 10,074,000 shares of common stock, respectively, were not included in the computation of diluted net loss per share because they were anti-dilutive. For the Year Ended May 31, 2016 2015 Numerator - net loss attributable to common stockholders $ (660,148 ) $ (706,323 ) Denominator - weighted average number of common shares outstanding 54,454,050 53,687,223 Basic and diluted loss per common share $ (0.01 ) $ (0.01 ) |
5. RELATED PARTY TRANSACTIONS
5. RELATED PARTY TRANSACTIONS | 12 Months Ended |
May 31, 2016 | |
Related Party Transactions [Abstract] | |
5. RELATED PARTY TRANSACTIONS | Transactions between related parties are considered to be related party transactions even though they may not be given accounting recognition. FASB ASC 850, Related Party Disclosures Affiliates of the entity; Entities for which investments in their equity securities is typically accounted for under the equity method by the investing entity; Trusts for the benefit of employees; Principal owners of the entity and members of their immediate families; Management of the entity and members of their immediate families. Other parties that can significantly influence the management or operating policies of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. SORC and Alleghany are considered related parties under FASB ASC 850. All management fee revenue reported by the Company for the years ended May 31, 2016 and 2015 is generated from charges to SORC. The Company has also recorded an approximate $31,000 receivable from SORC for employee expense reports presented in prepaid expenses and other current assets on the balance sheet and a $170,000 payable to SORC for payroll liabilities covered by SORC pursuant to the management services agreements. All outstanding notes payable at May 31, 2016 and 2015, respectively, are held by Alleghany. See Note 7. Mr. Donald Beckham, a director of the Company, provided consulting services to SORC related to the Teapot Dome Oilfield acquired by SORC in January 2015. During the years ended May 31, 2016 and 2015, respectively, Mr. Beckham was paid approximately $62,000 and $151,000 by SORC as consideration for such services. This consulting arrangement terminated on July 24, 2015. |
6. STOCKHOLDERS' DEFICIT
6. STOCKHOLDERS' DEFICIT | 12 Months Ended |
May 31, 2016 | |
Equity [Abstract] | |
6. STOCKHOLDERS' DEFICIT | Share Based Compensation Effective November 6, 2011, the holders of a majority of the shares of common stock approved the Plan to reserve 10,000,000 shares of common stock for issuance to eligible recipients. Effective December 2014, an additional 5,000,000 shares of common stock were reserved for issuance to eligible recipients under the Plan. Shares under the plan can be issued in the form of options, restricted stock, and other forms of equity securities. The Companys board of directors has the discretion to set the amount and vesting period of award grants. As of May 31, 2016, 2,865,000 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. The following table summarizes share-based compensation: Year Ended May 31, 2016 May 31, 2015 Share-based compensation: General, selling and administrative expenses $ 426,825 $ 373,650 Consulting and professional services 164,633 240,243 591,458 613,893 Share-based compensation by type of award: Stock options 579,514 583,893 Restricted stock 11,944 30,000 $ 591,458 $ 613,893 Stock Options On January 2, 2015, the Company granted 1,100,000 stock options to a consultant with an exercise price of $0.38 per share, the fair market value on the date of grant. The options vest monthly over three years beginning February 1, 2015 and expire on January 2, 2025. The grant date fair value of this employee stock option grant amounted to approximately $410,000. The assumptions used in calculating these values were based on an expected term of 7.0 years, volatility of 177% and a 1.92% risk free interest rate at the date of grant. On May 8, 2015, the Company granted 600,000 stock options to an employee with an exercise price of $0.40 per share, the fair market value on the date of grant. The options vest monthly over three years beginning June 1, 2015 and expire on May 8, 2025. The grant date fair value of this employee stock option grant amounted to approximately $236,000. The assumptions used in calculating these values were based on an expected term of 7.0 years, volatility of 176% and a 1.89% risk free interest rate at the date of grant. On August 17, 2015, the Company granted options for the purchase of 925,000 shares of common stock with an exercise price of $0.405 per share, the fair market value on the date of the grant. The options vest monthly over three years beginning September 1, 2015 and expire on August 8, 2025. The grant date fair value of this employee stock option grant amounted to approximately $365,000. The assumptions used in calculating these values were based on an expected term of 7.0 years, volatility of 174% and a 1.92% risk free interest rate at the date of grant. For the years ended May 31, 2016 and 2015, respectively, $579,514 (for 1,378,752 vested shares) and $583,893 (for 2,441,389 vested shares) was recognized as expense related to the stock options. As of May 31, 2016, $761,285 of expense was not recognized for 1,978,859 unvested shares with a weighted average vesting period of 0.8 years. As of May 31, 2015, $1,020,267 in expense was not recognized for 2,922,611 unvested shares with a weighted average vesting period of 1.52 years. The following table summarizes information about options granted during the years ended May 31, 2016 and 2015: Number of Shares Weighted Average Exercise Price Balance, May 31, 2014 8,400,000 $ 0.75 Options granted and assumed 1,700,000 0.39 Options expired - - Options cancelled, forfeited - - Options exercised (26,000 ) (0.25 ) Balance, May 31, 2015 10,074,000 $ 0.69 Options granted and assumed 925,000 0.405 Options expired - - Options cancelled, forfeited (490,000 ) (0.27 ) Options exercised - Balance, May 31, 2016 10,509,000 $ 0.68 All stock options are exercisable upon vesting. As of May 31, 2016 and 2015, 10,509,000 and 10,074,000 options have been granted at a weighted average exercise price of $0.68 and $0.69, respectively. Restricted Stock During fiscal years ending May 31, 2016 and 2015, no restricted stock has been granted. The Company granted 1.6 million shares of restricted stock during fiscal year 2014. As of May 31, 2016, a total of 1,566,667 shares has vested. The Company recognized $11,944 and $30,000 in expense for the years ended May 31, 2016 and 2015, respectively. The unvested portion of the shares amounts to $1,389 and is expected to be recognized as expense over the next fiscal year. Warrants During July 2015, warrants to purchase 975,000 shares of common stock were exercised on a cashless basis, resulting in the issuance of 516,196 shares of common stock. During the year ended May 31, 2015, 770,000 warrants have been exercised. The majority of these warrants were exercised on a cashless basis resulting in the issuance of 372,556 shares. As of May 31, 2016 there were 5,374,501 warrants remaining to be exercised at a price of $0.70 per share to Sunrise Securities Corporation to satisfy the finders fee obligation associated with the Alleghany transaction. The warrants will expire June 14, 2021. No warrants have been granted or cancelled during the years ended May 31, 2016 and 2015 as follows: Number of Shares Weighted Average Exercise Price Balance, May 31, 2014 7,119,501 $ 0.59 Warrants granted and assumed Warrants expired Warrants cancelled, forfeited Warrants exercised 770,000 Balance, May 31, 2015 6,349,501 $ 0.63 Warrants granted and assumed Warrants expired Warrants cancelled, forfeited Warrants exercised 975,000 Balance, May 31, 2016 5,374,501 $ 0.70 All warrants are exercisable as of May 31, 2016. During fiscal year 2011, the Company issued warrants to purchase 975,000 shares of common stock in connection with a stock purchase agreement. These warrants are exercisable for five years from the date of the Companys Private Placement. The exercise price of each warrant is equal to the lesser of the stock price in a future financing arrangement or $0.25. Accordingly, these warrants contained anti-dilution provisions that adjust the exercise price of the warrants in the event additional shares of common stock or securities convertible into common stock are issued by the Company at a price less than the then applicable exercise price of the warrants. Pursuant to FASB ASC 815-40, Derivatives and Hedging, August 31, 2015 May 31, 2015 Risk-free interest rates 0.02% 0.08% Expected Term 0.4 years 0.5 years Expected volatility 163.1% 137.8% Dividend yield 0% 0% |
7. NOTES PAYABLE
7. NOTES PAYABLE | 12 Months Ended |
May 31, 2016 | |
Debt Disclosure [Abstract] | |
7. NOTES PAYABLE | During the fiscal year ended May 31, 2011, the Company entered into two Loan Agreements with Alleghany for a combined available borrowing limit of $350,000. The notes accrue interest on the outstanding principal of $350,000 at the rate of 6% per annum. As of May 31, 2016, accrued interest totaling $129,632 is recorded in current liabilities. The interest is payable in either cash or in kind. The notes have been amended and restated and now have a maturity date of December 31, 2016 and are classified as notes payable as of May 31, 2016. The loan agreements require any stock issuances for cash be utilized to pay down the outstanding loan balance unless written consent is obtained from Alleghany. |
8. PROVISION FOR INCOME TAXES
8. PROVISION FOR INCOME TAXES | 12 Months Ended |
May 31, 2016 | |
Income Tax Disclosure [Abstract] | |
8. PROVISION FOR INCOME TAXES | We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. Per the authoritative literature when it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carryforwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carryforward period. The Company has not taken any tax positions that, if challenged, would have a material effect on the financial statements for the twelve-months ended May 31, 2016 and 2015. The Companys tax returns for the fiscal years ended May 31 of 2009 to 2015 remain subject to examination by the tax authorities. The components of the Company's deferred tax asset as of May 31, 2016 and 2015 are as follows: 2016 2015 Net operating loss $ 426,055 $ 484,780 Other 681,830 576,316 Valuation allowance (1,107,885 ) (1,061,096 ) Net deferred tax asset $ - $ - A reconciliation of income taxes computed at the statutory rate to the income tax amount recorded is as follows: 2016 2015 Tax at statutory rate (34%) $ 224,450 $ 270,440 Effect of non-deductible permanent differences (119,835 ) (9,297 ) Other (57,826 ) - (Increase) in valuation allowance (46,789 ) (261,143 ) Net deferred tax asset $ - $ - The net federal operating loss carry forward will expire between 2028 and 2036. This carry forward may be limited upon the consummation of a business combination under IRC Section 381. |
9. OFFICE LEASES
9. OFFICE LEASES | 12 Months Ended |
May 31, 2016 | |
Leases [Abstract] | |
9. OFFICE LEASES | No office leases currently extend beyond one year. Rent expense amounted to $16,336 and $66,459 for the years ending May 31, 2016 and 2015, respectively. |
3. SUMMARY OF SIGNIFICANT ACC16
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
May 31, 2016 | |
Accounting Policies [Abstract] | |
USE OF ESTIMATES | Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. |
REVENUE RECOGNITION | Revenue is recognized from services when it is realized or realizable and earned. Management fee revenue is considered realized and earned when persuasive evidence of an arrangement exists, the service has been performed, the sales price is fixed and determinable, no significant unfulfilled obligation exists, and collection is reasonably assured. |
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, 2016 and 2015. At times, the Company maintains cash balances deposited at its financial institution that exceed FDIC insured limits. |
PREPAID EXPENSES AND OTHER CURRENT ASSETS | The Company financed directors and officers insurance and is amortizing the expense over the 12 month contract life. |
FAIR VALUE OF FINANCIAL INSTRUMENTS | The Company's financial instruments as defined by Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 825-10-50, Financial Instruments, Based on the borrowing rates currently available to the Company for loans with similar terms and average maturities, the fair value of notes payable approximate their carrying value. FASB ASC 820, Fair Value Measurements , The three level fair value hierarchies for disclosure of fair value measurements defined by FASB ASC 820 are as follows: Level 1 Level 2 Level 3 A financial instruments level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company had warrant liabilities which were measured at fair value on a recurring basis until the underlying warrants were exercised in July 2015. The Company recorded a loss on revaluation of warrant liability of $24,424 and a gain on revaluation of warrant liability of $384,437 for the fiscal years ended May 31, 2016 and 2015, respectively. The Company measured the fair value of the warrant liabilities using the Black Scholes method. Inputs used to determine fair value under this method include the Companys stock price volatility and expected remaining life as disclosed in Note 6. The following table presents the fair value hierarchy for those assets measured at fair value on a recurring basis as of May 31, 2016 and 2015: Fair Value Measurements on a Recurring Basis Quoted prices in active markets Other observable inputs Unobservable inputs Current Liability Level 1 Level 2 Level 3 Total Warrant Liabilities May 31, 2015 $ - $ 251,991 $ - $ 251,991 There were no assets or liabilities measured at fair value on a non-recurring basis as of May 31, 2016 or 2015. |
SHARE BASED EXPENSES | FASB ASC 718, Compensation - Stock Compensation a b The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity - Based Payments to Non-Employees. a b |
INCOME TAXES | The Company accounts for income taxes by the asset and liability method in accordance with FASB ASC 740, Income Taxes. In addition, the Company utilizes the two-step approach to recognizing and measuring uncertain tax positions taken or expected to be taken in a tax return. The first step is to determine if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company recognizes interest and penalties accrued on unrecognized tax benefits within general and administrative expense. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction in general and administrative expenses in the period that such determination is made. |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | In June 2014, the FASB issued ASU 2014-12, "Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period." This ASU provides more explicit guidance for treating share-based payment awards that require a specific performance target that affects vesting and that could be achieved after the requisite service period as a performance condition. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2015. The Company does not expect the adoption of this guidance to have a material impact on the results of operations, cash flows or financial position. In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements - Going Concern (Subtopic 205-40) - Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ", which requires management to evaluate, at each annual and interim reporting period, whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date the financial statements are issued and provide related disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016 and interim periods thereafter. Early application is permitted. The adoption of ASU 2014-15 is not expected to have a material effect on the Companys results of operations, cash flows or financial position. In January 2015, the FASB issued ASU No. 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items . In February 2016, the FASB issued ASU No. 2016-02 , leases classified as operating leases under previous GAAP. This standard will be effective for the Company beginning in the first quarter of fiscal year 2020, with early adoption permitted. This standard will be adopted using a modified retrospective approach. The Company is currently evaluating the impact this standard will have on its financial statements. In March 2016, the FASB issued ASU No. 2016-09, CompensationStock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting , The Company is currently evaluating the impact this standard will have on its financial statements. Management does not believe that any other recently issued, but not yet effective accounting standards, if currently adopted, would have a material effect on the accompanying financial statements. |
3. SUMMARY OF SIGNIFICANT ACC17
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
May 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements on a Recurring Basis | Quoted prices in active markets Other observable inputs Unobservable inputs Current Liability Level 1 Level 2 Level 3 Total Warrant Liabilities May 31, 2015 $ - $ 251,991 $ - $ 251,991 |
4. LOSS PER SHARE (Tables)
4. LOSS PER SHARE (Tables) | 12 Months Ended |
May 31, 2016 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | For the Year Ended May 31, 2016 2015 Numerator - net loss attributable to common stockholders $ (660,148 ) $ (706,323 ) Denominator - weighted average number of common shares outstanding 54,454,050 53,687,223 Basic and diluted loss per common share $ (0.01 ) $ (0.01 ) |
6. STOCKHOLDERS' DEFICIT (Table
6. STOCKHOLDERS' DEFICIT (Tables) | 12 Months Ended |
May 31, 2016 | |
Stockholders Deficit Tables | |
Share-based compensation | Year Ended May 31, 2016 May 31, 2015 Share-based compensation: General, selling and administrative expenses $ 426,825 $ 373,650 Consulting and professional services 164,633 240,243 591,458 613,893 Share-based compensation by type of award: Stock options 579,514 583,893 Restricted stock 11,944 30,000 $ 591,458 $ 613,893 |
Summary of options | Number of Shares Weighted Average Exercise Price Balance, May 31, 2014 8,400,000 $ 0.75 Options granted and assumed 1,700,000 0.39 Options expired - - Options cancelled, forfeited - - Options exercised (26,000 ) (0.25 ) Balance, May 31, 2015 10,074,000 $ 0.69 Options granted and assumed 925,000 0.405 Options expired - - Options cancelled, forfeited (490,000 ) (0.27 ) Options exercised - Balance, May 31, 2016 10,509,000 $ 0.68 |
Summary of warrants | Number of Shares Weighted Average Exercise Price Balance, May 31, 2014 7,119,501 $ 0.59 Warrants granted and assumed Warrants expired Warrants cancelled, forfeited Warrants exercised 770,000 Balance, May 31, 2015 6,349,501 $ 0.63 Warrants granted and assumed Warrants expired Warrants cancelled, forfeited Warrants exercised 975,000 Balance, May 31, 2016 5,374,501 $ 0.70 |
Stock options valuation assumptions | August 31, 2015 May 31, 2015 Risk-free interest rates 0.02% 0.08% Expected Term 0.4 years 0.5 years Expected volatility 163.1% 137.8% Dividend yield 0% 0% |
8. PROVISION FOR INCOME TAXES (
8. PROVISION FOR INCOME TAXES (Tables) | 12 Months Ended |
May 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Components of deferred tax asset | 2016 2015 Net operating loss $ 426,055 $ 484,780 Other 681,830 576,316 Valuation allowance (1,107,885 ) (1,061,096 ) Net deferred tax asset $ - $ - |
Schedule of Effective Income Tax Rate Reconciliation | 2016 2015 Tax at statutory rate (34%) $ 224,450 $ 270,440 Effect of non-deductible permanent differences (119,835 ) (9,297 ) Other (57,826 ) - (Increase) in valuation allowance (46,789 ) (261,143 ) Net deferred tax asset $ - $ - |
1. ORGANIZATION AND DESCRIPTI21
1. ORGANIZATION AND DESCRIPTION OF BUSINESS (Details Narrative) - USD ($) | May 31, 2016 | May 31, 2015 |
Organization And Description Of Business Details Narrative | ||
Deferred management fee revenue | $ 45,833 | $ 45,833 |
2. GOING CONCERN (Details Narra
2. GOING CONCERN (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Going Concern Details Narrative | ||
Net loss | $ (660,148) | $ (706,323) |
3. SUMMARY OF SIGNIFICANT ACC23
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | May 31, 2016 | May 31, 2015 |
Warrant Liabilities | $ 0 | $ 251,991 |
Level 1 | ||
Warrant Liabilities | 0 | |
Level 2 | ||
Warrant Liabilities | 251,991 | |
Level 3 | ||
Warrant Liabilities | $ 0 |
3. SUMMARY OF SIGNIFICANT ACC24
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Summary Of Significant Accounting Policies Details Narrative | ||
(Loss) Gain on revaluation of warrant liability | $ (24,424) | $ 384,437 |
4. LOSS PER SHARE (Details)
4. LOSS PER SHARE (Details) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Earnings Per Share [Abstract] | ||
Numerator - net loss attributable to common stockholders | $ (660,148) | $ (706,323) |
Denominator - weighted average number of common shares outstanding | 54,454,050 | 53,687,223 |
Basic and diluted loss per common share | $ (0.01) | $ (0.01) |
4. LOSS PER SHARE (Details Narr
4. LOSS PER SHARE (Details Narrative) - shares | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share | 5,374,501 | 6,349,501 |
Stock options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share | 9,584,000 | 10,074,000 |
5. RELATED PARTY TRANSACTIONS (
5. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Related Party Transactions Details Narrative | ||
Payments to related party for services | $ 62,000 | $ 151,000 |
6. STOCKHOLDERS' DEFICIT (Detai
6. STOCKHOLDERS' DEFICIT (Details) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Share-based compensation | $ 591,458 | $ 613,893 |
General, selling and administrative expenses | ||
Share-based compensation | 426,825 | 373,650 |
Consulting and professional services | ||
Share-based compensation | 164,633 | 240,243 |
Stock options | ||
Share-based compensation | 579,514 | 583,893 |
Restricted stock | ||
Share-based compensation | $ 11,944 | $ 30,000 |
6. STOCKHOLDERS' DEFICIT (Det29
6. STOCKHOLDERS' DEFICIT (Details 1) - Stock options - $ / shares | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Number of Shares | ||
Options/Warrants Outstanding, Beginning | 10,074,000 | 8,400,000 |
Options/Warrants granted and assumed | 925,000 | 1,700,000 |
Options/Warrants expired | 0 | 0 |
Options/Warrants cancelled, forfeited | (490,000) | 0 |
Options/Warrants exercised | 0 | (26,000) |
Options/Warrants Outstanding, Ending | 10,509,000 | 10,074,000 |
Weighted Average Exercise Price | ||
Weighted Average Exercise Price, Beginning | $ 0.69 | $ 0.75 |
Options/Warrants granted and assumed, Weighted Average Exercise Price | .405 | 0.39 |
Options/Warrants expired, Weighted Average Exercise Price | 0 | 0 |
Options/Warrants cancelled, forfeited, Weighted Average Exercise Price | (0.27) | 0 |
Options/Warrants exercised, Weighted Average Exercise Price | 0 | (0.25) |
Weighted Average Exercise Price, Ending | $ .68 | $ 0.69 |
6. STOCKHOLDERS' DEFICIT (Det30
6. STOCKHOLDERS' DEFICIT (Details 2) - Warrants - $ / shares | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Number of Shares | ||
Options/Warrants Outstanding, Beginning | 6,349,501 | 7,119,501 |
Options/Warrants granted and assumed | 0 | 0 |
Options/Warrants expired | 0 | 0 |
Options/Warrants cancelled, forfeited | 0 | 0 |
Options/Warrants exercised | 975,000 | 770,000 |
Options/Warrants Outstanding, Ending | 5,374,501 | 6,349,501 |
Weighted Average Exercise Price | ||
Weighted Average Exercise Price, Beginning | $ 0.63 | $ 0.59 |
Options/Warrants granted and assumed, Weighted Average Exercise Price | 0 | 0 |
Options/Warrants expired, Weighted Average Exercise Price | 0 | 0 |
Options/Warrants cancelled, forfeited, Weighted Average Exercise Price | 0 | 0 |
Options/Warrants exercised, Weighted Average Exercise Price | 0 | 0 |
Weighted Average Exercise Price, Ending | $ .70 | $ 0.63 |
6. STOCKHOLDERS' DEFICIT (Det31
6. STOCKHOLDERS' DEFICIT (Details 3) | 3 Months Ended | 12 Months Ended |
Aug. 31, 2015 | May 31, 2015 | |
Stockholders Deficit Tables | ||
Risk-free interest rate | 0.02% | 0.08% |
Contractual life | 4 months 24 days | 6 months |
Expected volatility | 163.10% | 137.80% |
Dividend yield | 0.00% | 0.00% |
7. NOTES PAYABLE (Details Narra
7. NOTES PAYABLE (Details Narrative) - USD ($) | May 31, 2016 | May 31, 2015 |
Notes Payable Details Narrative | ||
Notes payable | $ 350,000 | $ 350,000 |
Accrued interest | $ 129,632 | $ 102,413 |
8. PROVISION FOR INCOME TAXES33
8. PROVISION FOR INCOME TAXES (Details) - USD ($) | May 31, 2016 | May 31, 2015 |
Income Tax Disclosure [Abstract] | ||
Net operating loss | $ 426,055 | $ 484,780 |
Other | 681,830 | 576,316 |
Valuation allowance | (1,107,885) | (1,061,096) |
Net deferred tax asset | $ 0 | $ 0 |
8. PROVISION FOR INCOME TAXES34
8. PROVISION FOR INCOME TAXES (Details 1) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Income Tax Disclosure [Abstract] | ||
Tax at statutory rate (34%) | $ 224,450 | $ 270,440 |
Effect of non-deductible permanent differences | (119,835) | (9,297) |
Other | (57,826) | 0 |
(Increase) in valuation allowance | (46,789) | (261,143) |
Net deferred tax asset | $ 0 | $ 0 |
8. PROVISION FOR INCOME TAXES35
8. PROVISION FOR INCOME TAXES (Details Narrative) | 12 Months Ended |
May 31, 2016 | |
Provision For Income Taxes Details Narrative | |
Operating loss carry forward, expiration | The net federal operating loss carry forward will expire between 2028 and 2036. |
9. OFFICE LEASES (Details Narra
9. OFFICE LEASES (Details Narrative) - USD ($) | 12 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Office Leases Details Narrative | ||
Rent expense | $ 16,336 | $ 66,459 |