UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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the fiscal year ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to _________
Commission
file number:
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| incorporation or organization) | Identification No.) |
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| Securities registered pursuant to Section 12(b) of the Act: |
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| Securities registered pursuant to Section 12(g) of the Act: |
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Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
o
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
o
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | o | Accelerated filer | o |
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x | Smaller reporting company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12-b of the Act). Yes
o
On
November 30, 2024, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market
value of the registrant’s outstanding shares of common equity held by non-affiliates of the registrant was $
As of August 29, 2025, there were shares of the registrant’s common stock outstanding.
Documents Incorporated by Reference: None.
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LAREDO OIL, INC.
TABLE OF CONTENTS
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Forward-Looking Statements
From time to time, we may provide information, whether orally or in writing, including certain statements in this Annual Report on Form 10-K (this “Form 10-K”), which are deemed to be “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Litigation Reform Act”). These forward-looking statements and other information included in this Form 10-K are based on our beliefs as well as assumptions made by us using information currently available.
The words “believe,” “plan,” “expect,” “intend,” “anticipate,” “estimate,” “may,” “will,” “should” and similar expressions are intended to identify forward-looking statements. Such statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended or using other similar expressions. We do not intend to update these forward-looking statements, except as required by law.
In accordance with the provisions of the Litigation Reform Act, we are making investors aware that such forward-looking statements, because they relate to future events, are by their very nature subject to many important factors that could cause actual results to differ materially from those contemplated by the forward-looking statements contained in this Form 10-K, any exhibits to this Form 10-K and other public statements we make.
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PART I
Item 1. Business
We were incorporated under the laws of the State of Delaware on March 31, 2008 under the name of “Laredo Mining, Inc.” As of that date, we had 90,000,000 authorized shares of common stock at $0.0001 par value and 10,000,000 authorized shares of preferred stock at $0.0001 par value. On October 21, 2009 our name was changed to “Laredo Oil, Inc.” During May of 2023, our board of directors voted to increase the authorized shares of our common stock to 120,000,000 shares at $0.0001 par value, which increase was approved by the holders of a majority of the shares of our common stock then outstanding.
We are an oil exploration and production company, primarily engaged in acquisition and exploration efforts to find mineral reserves on various properties. From our inception in March 2008 through October 2009, we were primarily engaged in acquisition and exploration efforts for mineral properties. Beginning in October 2009, we shifted our focus to locating mature oil fields with the intention of acquiring those oil fields and recovering “stranded” oil reserves using proprietary enhanced recovery methods known as underground gravity drainage, or UGD.
The original UGD method uses conventional mining processes to establish a drilling chamber underneath an existing oil field from which closely spaced wellbores are drilled directionally up into the reservoir, using residual radial pressure and gravity to then drain the targeted reservoir through the wellbores. As we gained experience through practical application of the processes involved in oil recovery, we have developed and evaluated variations of the UGD concept. We believe that the UGD method is applicable to mature oil fields that have very specific geological and reservoir characteristics. We have done extensive research and have identified oil fields within the United States and globally that we believe are applicable for UGD recovery methods. Our primary business and focus is now to pursue and recover stranded oil from selected mature fields as necessary funds become available.
We believe the costs of implementing the UGD method are significantly lower than those presently experienced by other commonly used Enhanced Oil Recovery (“EOR”) methods. We also estimate that we can materially increase the field oil production rate from prior periods and recover amounts of oil equal to or greater than amounts previously recovered from selected mature fields. We intend to implement the UGD method in oil fields with a minimum of 25 million barrels of estimated recoverable oil.
When we acquire a targeted oil field, we will continue to operate the producing field and expect to generate revenue from doing so. Once we have developed the underground chamber and the UGD method is prepared for operation, we will cap the conventional wells and begin UGD production. We believe the effect of such operations should result in minimal disruption of oil production from our field investments.
On June 14, 2011, we entered into several exclusive licensing and management agreements with Stranded Oil Resources Corporation, or SORC, a wholly owned subsidiary of Alleghany Corporation, or Alleghany. to manage the acquisition and operation of mature oil fields in Kansas, Wyoming and Louisiana, focused on the recovery of “stranded” oil from those mature fields primarily using UGD. We performed those management services in exchange for a carried interest in SORC, a quarterly management fee and reimbursement from SORC for our employee-related expenses. Such fees and reimbursements were effectively all of our revenues prior to our acquisition of SORC pursuant to the closing of the Securities Purchase Agreement with Alleghany described below.
On December 31, 2020, we entered into a Securities Purchase Agreement with Alleghany. Under that agreement, we purchased all of the issued and outstanding shares of SORC. As consideration for the SORC shares, we paid Alleghany $72,678 in cash and agreed to pay Alleghany a seven-year royalty of 5.0% of our future revenues and net profits from our oil, gas, gas liquids and all other hydrocarbon operations, subject to certain adjustments. Currently, SORC is a wholly owned subsidiary of Laredo and is not conducting any ongoing operations. All intellectual property generated by SORC prior to December 31, 2020 transferred with the stock purchase.
Prior to purchasing the shares of SORC, while implementing UGD projects for Allegheny, we gained specialized know-how, intellectual property and operational experience in evaluating, acquiring, operating and developing oil and gas properties, as well as expertise in designing, drilling and producing conventional oil wells. Based upon that know-how, we identified and acquired 45,246 gross acres, and 37,932 net acres, of mineral property interests in the State of Montana in the Lustre and Midfork fields and the West Fork area. To develop our acquired mineral property acreage, we established relationships with several organizations and investment groups, including the following entities: (1) Olfert 11-4 Holdings, LLC, (2) Texakoma Exploration and Production, LLC, or Texakoma, (3) Erehwon Oil & Gas, LLC, or Erehwon, (4) an independent investor group through Hell Creek Crude LLC, or HCC, and (5) West Fork Resources, LLC, or WFR. As of May 31, 2025, we and Texakoma have drilled five wells in the Lustre and Midfork fields. None of these wells have been economically successful due primarily to encountering excess water due to lack of 3D seismic information to which we now have access. Exploratory drilling in the project located in the West Fork area with WFR is ongoing. We are continually attempting to raise additional funds to develop our other mineral property interests that we have purchased in the area. We also selectively acquire and dispose of mineral leases as we develop the area. Our ability to secure additional funding will determine whether we can achieve any future production for the acreage, and if we can secure such financing, the pace of any field development.
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We also have a 50% interest in the Cat Creek oil field, located west of our mineral rights described above, which is recorded with no value on our financial statements.
Competition
Our operating results are largely impacted by competition from other exploration and production companies in all areas of operation, including the acquisition of mature fields. Our competitors include large, well-established companies with substantially more capital resources than us.
Oil and Gas Price Volatility
For the last two years beginning on June 1, 2023, market prices for oil and gas have fluctuated in the $70-85 per barrel range. However, oil and gas prices still remain volatile.
Operating Hazards and Uninsured Risks
Oil and gas drilling activities are subject to many risks, including, but not limited to, the risk that those activities will not produce commercially viable oil and gas reserves. The cost and timing of drilling, completing and operating wells is often uncertain and drilling operations may be curtailed, delayed or canceled as a result of numerous factors, including low oil and gas prices, title problems, reservoir characteristics, weather conditions, equipment failures, delays imposed by project participants, compliance with governmental requirements, shortages or delays in the delivery of equipment and services and increases in the cost for such equipment and services. Our future oil recovery activities may not be successful. If so, such failure may have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our operations are subject to hazards and risks inherent in drilling for and producing and transporting petroleum products, including fires, natural disasters, explosions, encountering formations with abnormal pressures, blowouts, craterings, and pipeline ruptures and spills. Any of these events may result in the loss of hydrocarbons, environmental pollution, personal injury claims and other damage to our properties and those of others. We maintain insurance against some, but not all, of the risks described above. In particular, the insurance we maintain does not cover claims relating to failure of title to oil leases, loss of surface equipment at well locations, business interruption, loss of revenue due to low commodity prices or loss of revenues due to well failure. The occurrence of any such event that is not covered, or not fully covered, by insurance that we maintain or may acquire, could have a material adverse effect on our operations.
Governmental Regulation
Oil and natural gas exploration, production, transportation and marketing activities are subject to extensive laws, rules and regulations promulgated by federal and state legislatures and agencies, including but not limited to the Mine Safety and Health Administration, or MSHA, the Federal Energy Regulatory Commission, or FERC, the Environmental Protection Agency, or EPA, the Bureau of Land Management, BLM, and various other federal or state regulatory agencies. Our failure to comply with any such laws, rules and regulations may result in substantial penalties, including the delay or prohibition of our operations. The legislative and regulatory burden on the oil industry described above increases our cost of doing business.
State regulatory agencies, as well as the federal government when we operate on federal or Indian lands, require permits for drilling operations, drilling bonds and reports, and impose other requirements relating to the exploration and production of oil and gas. There are also statutes or regulations addressing conservation matters, including provisions for the unitization or pooling of oil and natural gas properties, the establishment of maximum rates of production from wells and the regulation of spacing, plugging and abandonment of such wells. In each jurisdiction, we may need exceptions to some applicable regulations requiring regulatory approval. All of these matters could affect our operations.
Environmental Matters
The oil industry is subject to extensive and changing federal, state and local laws and regulations relating to environmental protection, including the generation, storage, handling, emission, transportation and discharge of materials into the environment, as well as safety and health. The recent trend in environmental legislation and regulation is generally toward stricter standards, and this trend is likely to continue. These laws and regulations may require a permit or other authorization before construction or drilling commences, and for certain other activities, limit or prohibit access, seismic acquisition, construction, drilling and other activities on certain lands lying within wilderness and other protected areas, impose substantial liabilities for pollution resulting from its operations, and require the reclamation of certain lands.
The permits that are required for oil and gas operations are subject to revocation, modification and renewal by issuing authorities.
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Federal regulations require certain owners or operators of facilities that store or otherwise handle petroleum products to prepare and implement spill prevention, control countermeasures and response plans relating to the possible discharge of oil into surface waters. The Oil Pollution Act of 1990, or OPA, contains numerous requirements relating to the prevention of and response to oil spills into waters of the United States. For onshore and offshore facilities that may affect waters of the United States, the OPA requires the operator to demonstrate the financial ability to respond to discharges. Regulations are currently being developed under federal and state laws concerning oil pollution prevention and other matters that may impose additional regulatory burdens on participants in the oil and gas industry. In addition, the Clean Water Act and analogous state laws require permits to be obtained to authorize discharge into surface waters or to construct facilities in wetland areas. The Clean Air Act of 1970 and its subsequent amendments impose permit requirements and necessitate certain restrictions on point source emissions of volatile organic carbons (nitrogen oxides and sulfur dioxide) and particulates with respect to certain of our operations. The EPA and designated state agencies have in place regulations concerning discharges of storm water runoff and stationary sources of air emissions. These programs require covered facilities to obtain individual permits, participate in a covered group or seek coverage under an EPA general permit. A number of agencies, including but not limited to MSHA, the EPA, the BLM, and similar state commissions, have adopted regulatory guidance in consideration of the operational limitations on oil and gas facilities and their potential to emit pollutants.
Facilities
Our principal executive office is located at 2021 Guadalupe Street, Ste. 260, Austin, Texas 78705.
Personnel
As of May 31, 2025, we had five full-time employees and no part-time employees.
Website Access
We make available on our web site our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and all amendments to those reports, as soon as reasonably practicable after we file such reports electronically with the Securities and Exchange Commission. Information on our website is not included as part of this report.
Item 1A. Risk Factors
Not Applicable
Item 1B. Unresolved Staff Comments
Not Applicable
Item 1C. Cybersecurity
We have a range of security measures that are designed to protect against the unauthorized access to and misappropriation of our information, corruption of data, intentional or unintentional disclosure of confidential information, or disruption of operations. We have cloud security tools and governance processes designed to assess, identify, and manage material risks from cybersecurity threats. In addition, we maintain an information security training program designed to address phishing and email security, password security, data handling security, cloud security, operational technology security processes, and cyber-incident response and reporting processes.
We are committed to maintaining the highest standards of cybersecurity to protect our data, intellectual property, and customer information from cyber threats. As part of this commitment, we leverage a sophisticated cybersecurity framework that integrates the robust capabilities of the Microsoft cloud ecosystem. We use an outside third-party cloud provider to provide communication and computer services, including email, internet access and file storage and sharing. Access passwords are changed on a regular basis. All employees have received formal training on password controls and on email safety procedures. Our policy requires all employees to send any suspicious emails to our contracted computer expert for evaluation. Access to any sensitive databases is on a limited and need-to-know basis. Should there be a data breach, our board of directors is immediately notified. As of the filing date of this report, to the best of our knowledge, we have not encountered any cyber security incidents.
The Microsoft cloud ecosystem, including Microsoft 365, Azure, SharePoint Online, Microsoft Defender, and Microsoft InTune, forms the backbone of our cybersecurity infrastructure. These platforms offer advanced security features such as data encryption in transit and at rest, network security controls, identity and access management, and threat protection capabilities. Microsoft’s constant investment in cybersecurity research and development ensures that we benefit from cutting-edge security technologies and practices.
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Item 2. Properties
We have mineral leases for 45,766 gross acres and 38,153 net acres of mineral property interests in Montana. We are the operator of the Olfert 11-4 well located in the Lustre field and the Reddig 11-21 well located in the Midfork field. Both of these wells are currently shut in and are not producing.
Item 3. Legal Proceedings
On February 4, 2021, our subsidiary, Lustre Oil Company, LLC (“Lustre”) filed a lawsuit captioned Lustre Oil Company LLC and Erehwon Oil & Gas, LLC v. Anadarko Minerals, Inc. and A&S Mineral Development Co., LLC in the Montana Seventeenth Judicial District Court for Valley County to initiate a quiet title action confirming Lustre’s rights under certain mineral leases in Valley County, Montana. Lustre is also seeking damages with respect to actions taken by A&S Mineral Development Co., LLC to improperly produce oil on the property subject to Lustre’s mineral leases. On January 14, 2022, the District Court granted the defendants’ Motion to Dismiss without addressing the merits of Lustre’s quiet title action. Lustre appealed the decision to the Montana Supreme Court. On April 6, 2023, in a unanimous decision, the Montana Supreme Court reversed the District Court’s decision related to Lustre’s quiet title action and remanded the case to the District Court for further proceedings. On June 1, 2023, Lustre filed a First Amended Complaint with the District Court reopening the original suit with a different judge. On February 27, 2024, we announced that Lustre entered into a mutually agreeable confidential Settlement Agreement (the “Settlement Agreement”) among Lustre, Erehwon Oil & Gas, LLC (“Erehwon”), and A&S Minerals Development Company, LLC (“ASMD”). The Settlement Agreement provides for an undisclosed cash amount and settles the quiet title dispute between the parties.
On March 20, 2023, Capex Oilfield Services, Inc. (“Capex”) filed a lawsuit against Lustre in the Montana Tenth Judicial District Court, Petroleum County, demanding payment of $377,190, plus interest and collection costs for services provided by Capex to drill the Olfert 11-4 well. On January 29, 2024, the court issued a Stipulated Judgment and Order in favor of Capex for $354,267.29 plus interest in the amount of $79,224.89 and future accruing costs and interest of 18% per annum. On the same day, Lustre entered into a payment arrangement plan to pay Capex $5,000 per month until the judgement is satisfied.
On May 18, 2023, Capstar Drilling, Inc.(“Capstar”) filed a lawsuit against Lustre in the Montana Seventeenth Judicial District Court, Valley County, demanding payment of $298,050, plus interest and collection costs, for services provided by Capstar to drill the Olfert 11-4 well. On July 18, 2024, the court issued an Order to Adopt Stipulation to Judgment in favor of Capstar in the sum of $276,815 principal balance, plus interest in the amount of $49,675 and court costs for a total judgment of $326,650 with post judgment interest of 10% per annum.
On August 29, 2023, Warren Well Service, Inc. (“Warren Well”) 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 Olfert 11-4 well. On March 31, 2025, Lustre agreed in mediation to pay $750 per month until all outstanding amounts owed to Warren Well are satisfied.
On January 14, 2024 Nine Downhole Technologies, LLC aka Nine Energy Service (“Nine Downhole”) filed a complaint against Lustre in the Montana Tenth Judicial District Court, Petroleum County, demanding payment plus accrued interest until the debt is paid in full. On June 1, 2025, Nine Downhole’s Motion for a summary disposition was granted in the amount of $41,842 together with costs and any post judgment interest until amount is paid in full.
Except as set forth above, we are not currently involved in any other legal proceedings, and we are not aware of any other pending or potential legal actions.
Item 4. Mine Safety Disclosures
Not Applicable
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is currently traded under the symbol LRDC on the over-the-counter market and is quoted on the Pink Sheets, which is not recognized by the Securities and Exchange Commission, or the SEC, as a stock exchange for reporting purposes.
Since our stock began trading on the Pink Sheets on November 5, 2009, there has been a limited trading market for our common stock. The following table presents the range of high and low bid information for our common equity for each full quarterly period within the two most recent fiscal years.
Laredo Oil, Inc. High/Low Market Bid Prices ($)
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Fiscal
Q1:
Jun 2024 — Aug 2024 |
Fiscal
Q2:
Sep 2024 — Nov 2024 |
Fiscal
Q3:
Dec 2024 — Feb 2025 |
Fiscal
Q4:
Mar 2025 — May 2025 |
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| High Bid | 0.70 | 0.47 | 0.43 | 0.4101 | ||||
| Low Bid | 0.24 | 0.3557 | 0.26 | 0.2557 | ||||
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Fiscal
Q1:
Jun 2023 — Aug 2023 |
Fiscal
Q2:
Sep 2023 — Nov 2023 |
Fiscal
Q3:
Dec 2023 — Feb 2024 |
Fiscal
Q4:
Mar 2024 — May 2024 |
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| High Bid | 0.091 | 0.1301 | 0.2725 | 0.81 | ||||
| Low Bid | 0.0483 | 0.0501 | 0.047 | 0.191 |
Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type, size and format, as the SEC shall require by rule or regulation. The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a suitably written statement.
These disclosure requirements may have the effect of reducing trading activity in the secondary market for our stock if it becomes subject to these penny stock rules. Therefore, if our common stock becomes subject to the penny stock rules, stockholders may have difficulty selling those securities.
Holders
As of August 29, 2025, we had 74,887,755 shares of common stock issued and outstanding, and there were 37 holders of record and more than 700 beneficial holders of our common stock, including those who own their shares through their brokers in “street name.”
Dividends
We have not paid any dividends on our common stock since our inception. Our board of directors does not anticipate that it will declare dividends on our common stock in the foreseeable future.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
As of May 31, 2025, our cash and cash equivalents and restricted cash balance was $277,367. Our total debt outstanding as of May 31, 2025 was $3,966,351, including (i) $617,934 owed to Alleghany, which is classified as a current note payable, and (ii) $887,430 pursuant to notes under the Paycheck Protection Program, or PPP, of which we have classified $825,701 as long-term debt, net of the current portion totaling $61,729, which is classified as a current note payable, (iii) $352,478 short term bridge notes, net of deferred debt discount, (iv) a $310,061 revolving note classified as short-term, (v) a $750,000 note payable to Cali Fields LLC, classified as short-term, (vi) a $181,349 promissory note, net of deferred debt discount classified as short-term, (vii) a $292,099 note payable due to our Chief Financial Officer, classified as short-term and (viii) $575,000 convertible debt contributed for net working interest.
Our cash and cash equivalents balance at May 31, 2024 was $1,990,189. Our total debt outstanding as of May 31, 2024 was $3,212,828, including (i) $617,934 owed to Alleghany, which is classified as a current note payable, and (ii) $954,112 pursuant to notes under the Paycheck Protection Program, or PPP, of which we have classified $887,733 as long-term debt, net of the current portion totaling $66,379, which is classified as a current note payable, (iii) $288,622 short term convertible notes, net of deferred debt discount, (iv) a $310,061 revolving note classified as short-term, (v) a $750,000 note payable due to Cali Fields LLC, classified as short-term, and (vi) a $292,099 note payable due to our Chief Financial Officer, classified as short-term.
We have continued financing our business with a combination of stock sales and issuances of debt securities, as described above. During fiscal year 2025, we sold 2,894,490 shares of our common stock to accredited investors at an average price of $0.437 per share for gross proceeds of $1,265,200 of which $50,000 is recorded as an unissued stock subscription. There were no finder’s fees related to the sales of the shares described above. The issued shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements under the Securities Act.
During 2025, we are seeing increased interest from multiple investors/funds and oil field ownership interests in our UGD methods, both nationally and internationally. We believe this interest is due to a change in the climate for U.S. based energy projects. We believe that this change in the financial markets has made it easier for us to raise equity related funds, and we expect this to continue for the foreseeable future.
Results of Operations
We recognized revenues and direct costs totaling $9,423 and $36,482, respectively through our interest in oil and gas sales for the year ended May 31, 2025 and 2024. During the years ending May 31, 2025 and 2024, we incurred operating expenses of $3,331,853 and $3,426,709, respectively. These expenses consisted primarily of general operating expenses incurred in connection with the day-to-day operation of our business, the preparation and filing of our required public reports, stock option compensation expense. In addition, lease operating expenses and impairment expenses are included in total operating expenses. The decrease in expenses for the year ended May 31, 2025, as compared to the same period in 2024, is primarily attributable to a decrease in stock-based compensation totaling approximately $1 million, offset by an increase in increases in other legal and accounting professional fees including public relations totaling $165,000 and increases in lease operating expenses primarily from the operation of the Reddig 11-21 well totaling $201,118. Further, there is increase in long-term asset impairment loss on the Reddig 11-21 well which has been shut in and we determined may not be recoverable totaling $653,874 for the year ended May 31, 2025, as compared to $56,555 in the year ending May 31, 2024
During the year ended May 31, 2025, we recognized $300,000 other income on the sale of our working interest in Hell Creek Crude and $328,702 related to payments required under the Texakoma Development Agreement. During the year ended May 31, 2024, we recognized other income and expenses of $175,000 related to the sale of drilling equipment, $727,901 offset by $285,412 in direct lease acquisition costs related to payments required under the Texakoma Development Agreement, and an undisclosed payment related to a confidential legal settlement.
During fiscal 2025, we focused our efforts on developing our UGD business model which requires substantial investment to acquire access to, and to develop oil and gas properties for production. We also continued to develop our mineral rights through conventional drilling.
Underground Gravity Drainage (UGD)
In future operations, we plan to use an Enhanced Oil Recovery (“EOR”) method entitled Underground Gravity Drainage (‘UGD”). The original UGD method uses conventional mining processes to establish a drilling chamber underneath an existing oil field from where closely spaced wellbores are intended to be drilled up into the reservoir, using residual radial pressure and gravity to then drain the targeted reservoir through the wellbores. As we gain experience through practical application of the processes involved in oil recovery, variants of the UGD concept are continually developed and evaluated. The UGD method is applicable to mature oil fields that have very specific geological characteristics. We have done extensive research and have identified oil fields within the United States that it believes are qualified for UGD recovery methods. We intend to pursue and recover stranded oil from selected mature fields chosen from this group as funds become available.
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We believe the costs of implementing the UGD method are radically lower than those presently experienced by commonly used EOR methods. We also estimate that we can materially increase the field oil production rate from prior periods and recover amounts of oil equal to or greater than amounts previously recovered from the mature fields selected. We intend to seek oil fields with a minimum of 25 million barrels of estimated recoverable oil.
When we acquire a targeted oil field, we will continue to operate the producing field and expect to generate revenue and profit from doing so. Once development of the underground chamber and the UGD method is prepared for operation, the conventional wells will be capped and UGD production begun. The effect of such operations should result in minimal disruption of oil production from our field investments.
Conventional Drilling Operations
Prior to December 31, 2020, while implementing the UGD method projects for Allegheny, we gained specialized know-how and operational experience in evaluating, acquiring, operating and developing oil and gas properties, as well as expertise in designing, drilling and producing conventional oil wells. Based upon that know-how, we identified and acquired 45,246 gross acres, and 37,932 net acres, of mineral property interests in the State of Montana. We began drilling an exploratory well in Montana during May 2022. That well, named the Olfert 11-4 well, has not yet been completed or put into production. We are continuing our efforts to complete the Olfert 11-4 well and begin commercial production. We have also developed relationships with Texakoma Exploration and Production, LLC, or Texakoma, and Erehwon Oil & Gas, LLC, or Erehwon, designed to develop our acquired mineral property acreage. We also raised $2,854,000 of which $2,835,500 has been received as of May 31, 2025 from accredited investors pursuant to a participation agreement to fund the development of up to three wells in the Midfork oil field in Montana. We are continually attempting to raise additional funds to develop the other mineral property interests we have purchased. We also have a 50% interest in the Cat Creek oil field, located in Montana. Our various projects and relationships are described in more detail below. Our ability to secure additional funding will determine whether we can achieve any future production for the acreage described above, and if we can secure such financing, the pace of field development.
Relationship with Erehwon Oil & Gas, LLC
In connection with securing this acreage in Montana, Lustre Oil Company LLC, our wholly owned subsidiary (“Lustre”), entered into an Acquisition and Participation Agreement (the “Erehwon APA”) and subsequent amendments 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 amended 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 mineral leases and pay 100% of the costs and the split between Erehwon and Lustre will be 20%/80%. Under the amended Erehwon APA, Lustre will fund 100% of the construction costs of the first ten wells and first ten completions. Until payout, as defined, is attained, the distribution split between Erehwon and Lustre will be 10%/90%, thereafter, 20%/80%. Any additional wells will be funded 80% by Lustre and 20% by Erehwon.
Royalty expenses for these wells will consist of a royalty interest to the landowner and an overriding royalty interest of between 3% and 6% to two individuals who generated the prospects. Those individuals will also receive an amount equal to 5% of the cost of the first ten new wells we complete and the first ten completed recompletions.
Hell Creek Crude, LLC Midfork Field Production Well
In January 2024, we entered into a Participation Agreement, through our wholly owned subsidiary, Hell Creek Crude, LLC (“HCC”), Erehwon, and various accredited investors. The Participation Agreement provided us with over $2.8 million to acquire certain leases and to drill a development well in the Midfork Field in Montana. Several of the investors also hold $575,000 in principal amount of our convertible debt, plus accrued interest of $73,317, which indebtedness is included as investments under the Participation Agreement.
Until a total of the $3.5 million in cash, notes and accrued interest, plus any capital calls, is repaid to the various investors under the terms of the Participation Agreement, the net working interest payments from the Participation Agreement will be split between the various investors and HCC and Erehwon, collectively on a 90%/10% basis. After the repayment to the investors, the split between the investors, on one hand, and HCC and Erehwon, on the other hand, will be on a 50%/50% basis. In December 2024, an additional investor purchased a 9% net working interest before payout and 4% net working interest after payout from HCC for $300,000. The after-payout split between the investors, on one hand, and the additional investor, HCC and Erehwon, on the other hand, will be on a 50%/4%/46% basis. After the development well is drilled under the Participation Agreement, the investors will have the option to invest in up to two additional wells in the field.
In December 2024, in lieu of another capital call to the original investors, an additional investor invested $300,000 under the Participation Agreement, sharing ratably with the original investors. The funds were spent on drilling expenses for the well. In the Spring of 2025, another capita call of $150,000 was issued to investors to fund additional perforations and acidizing the well. To date, the well has produced oil, but with accompanying water production that makes it uneconomical to operate. Currently, the well is shut in and being evaluated for additional rework enhancements or alternative uses, such as conversion to a saltwater disposal well.
10
Olfert 11-4 Montana Well
In January 2022, we executed a Net Profits Interest Agreement with Erehwon and Olfert No. 11-4 Holdings, LLC, or Olfert Holdings, for the purpose of funding the first well, named Olfert #11-4, under the Acquisition and Participation Agreement described above. In exchange for Olfert Holdings’ funding of the development of Olfert #11-4, Olfert Holdings receives 90% of amounts resulting from Olfert #11-4 prior to “Payout” and 50% after “Payout.” The Net Profits Interest Agreement defines “Payout” as the point in time when the aggregate of all ‘Net Profits Interest’ payments made to Olfert Holdings under the agreement equals 105% of the total well development costs.
The well was drilled in the first half of calendar 2023 and encountered excessive amounts of salt water. Although we still are working to put the well into production, it has been three years since the well was shut-in pending gaining access to a proximate salt-water disposal well making the well economically viable. Although the asset carrying value of the well has been reduced to zero, we will continue to evaluate the well with the plan to bring it into production.
Development Agreement with Texakoma Exploration and Production, LLC
Effective July 18, 2023, Lustre and Erehwon entered into an Exploration and Development Agreement (the “Development Agreement”), with Texakoma. The Development Agreement provides for the exploration and development of the “Lustre Field Prospect” described in the Development Agreement. Lustre and Erehwon are also 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, 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 subject to rig availability. Upon the spudding of that test well, Lustre and Erehwon were 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, and the second $175,000 payment on September 29, 2023.
The two test wells were successfully drilled and Texakoma paid 100% of the costs associated with the drilling and completion of the wells. Lustre and Erehwon jointly, have an undivided 15% working interest, carried through the tanks, in those two wells. In March 2024, Texakoma exercised its option to participate in the development of the remainder of the Lustre Field Prospect. By exercising its option, Texakoma agreed to drill eight additional wells, with Lustre and Erehwon having a 15% working interest carried through the tanks, and to pay Lustre $706,603 over four months, 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. As of August 1, 2024, Texakoma had paid the balance. The working and net revenue interest in any wells drilled subsequent to the first ten wells will be shared by Texakoma and Lustre and Erehwon, jointly, on a 50:50 basis.
Texakoma completed three wells and with the purchase of the Cranston saltwater disposal well purchased by Lustre on September 10, 2024, Texakoma was to prepare the three wells for production pending evaluation of the well characteristics and better weather conditions in the field. When the wells were started up for production, the oil levels were not sufficient to maintain operation and the wells have been shut in pending evaluation and possibly more perforations.
Additional Acreage North of the Fort Peck Reservation
We are in the process of raising $7.5 million to drill three exploratory wells by selling units of West Fork Resources, LLC. The purpose of the raise is to prove up portions of our over 21,000 acres of mineral rights located north of the Fort Peck Reservation at the western edge of the Williston Basin. Preliminary development operations such as acquiring seismic data, site selection, and permitting are in process, as $1.0 million of the $2.25 million funds initially raised elected to commence drilling operations during fiscal year 2025. Upon request, the remaining $1.25 million was returned to the investors in May 2025. We continue to expect that the $7.5 million we seek will be completed by early Fall 2025, providing adequate funds to drill the three exploratory wells before year end and finish early in 2026, weather permitting.
Recently Issued Accounting Pronouncements
Refer to Note 3 of the Notes to Consolidated financial statements for a discussion of recently issued accounting pronouncements.
11
Critical Accounting Policies and Estimates
The process of preparing consolidated financial statements requires that we make estimates and assumptions that affect the reported amounts of liabilities and stockholders’ equity/(deficit) at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates in these consolidated financial statements include estimates related to purchase price allocation. Changes in the status of certain facts or circumstances could result in a material change to the estimates used in the preparation of the consolidated financial statements and actual results could differ from the estimates and assumptions.
Going Concern
These consolidated financial statements have been prepared on a going concern basis. We have routinely incurred losses since inception, resulting in an accumulated deficit. We have recently received loans from accredited investors to fund our operations. There is no assurance that such financing will be available in the future to meet our operating needs. This situation raises substantial doubt about our ability to continue as a going concern within the one-year period after the issuance date of the consolidated financial statements included in this report.
Our management has undertaken steps to improve operations, with the goal of sustaining operations for the next twelve months and beyond. These steps include an ongoing effort to raise funds through the issuance of debt to fund our well development program and maintain operations. We have attracted and retained key personnel with significant experience in the industry. At the same time, in an effort to control costs, we have required a number of our personnel to multi-task and cover a wider range of responsibilities in an effort to restrict the growth of our headcount. There can be no assurance that we can successfully accomplish these steps, and it is uncertain that we will achieve a profitable level of operations and obtain additional financing. We cannot assure you that any additional financing will be available to us 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 us to continue as a going concern.
Off Balance Sheet Arrangements
We do not currently have any off-balance sheet arrangements or other such unrecorded obligations, and we have not guaranteed the debt of any other party.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are not required to provide the information required by this Item as we are a “smaller reporting company,” as defined in Rule 229.10(f)(1)
Item 8. Consolidated Financial Statements and Supplementary Data
Our consolidated financial statements required by this item are included on pages immediately following the Index to Consolidated Financial Statements appearing on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, or the SEC. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives, and management is required to use its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
12
An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e). Based on that evaluation, our CEO and CFO have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are not effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for timely decisions regarding required disclosure because of a material weakness in our control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, the Company’s management has concluded that as of May 31, 2025, we had no full-time employees with the requisite expertise in the key functional areas of finance and accounting. As a result, there is a lack of proper segregation of duties necessary to ensure that all transactions are accounted for accurately and in a timely manner. Considering this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Annual Report on Form 10-K presents fairly in all material respects our financial position, results of operations and cash flows for the periods presented.
Our small size and limited resources have prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties. Further we have limited specific oil and gas accounting personnel in our accounting department due to our small size, lack of resources and limited technical accountants on staff. This led to material adjustments to oil and gas investment and asset impairment evaluations. It is difficult for us to effectively segregate accounting duties and have proper financial reporting, which creates a material weakness in internal controls. This lack of segregation of duties and limited personnel leads management to conclude that our financial reporting disclosure controls and procedures are not effective to give reasonable assurance that the information required to be disclosed in reports that we file under the Exchange Act is recorded, processed, summarized and reported as and when required.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal controls over financial reporting based on the framework in Internal Controls – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control – Integrated Framework, our management concluded that our internal controls over financial reporting were not effective as of May 31, 2025 because of a material weakness in our control over financial reporting. Specifically, our management has concluded that our small size and limited resources have prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties. Further we have limited specific oil and gas accounting personnel in our accounting department due to our small size, lack of resources and limited technical accountants on staff. This led to material adjustments to oil and gas investment and asset impairment evaluations. It is difficult for us to effectively segregate accounting duties and have proper financial reporting, which creates a material weakness in our internal controls over financial reporting.
As we grow, we are working on further improving our segregation of duties and level of supervision.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to SEC rules adopted in conformity with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Exchange Rules 13a-15(f) and 15d-15(f)) that occurred during the year ended May 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The following table sets forth as of August 29, 2025, the name, age, and position of each of our executive officers and directors, and the term of office of each of our executive officers and directors.
| Name | Age | Position Held |
Term
as Director or Officer
Since |
|||
| Donald Beckham | 65 | Independent Director | March 1, 2011 | |||
| Michael H. Price | 77 | Independent Director | August 3, 2012 | |||
| Mark See | 64 | Chief Executive Officer and Chairman | October 16, 2009 | |||
| Bradley E. Sparks | 78 | Chief Financial Officer, Treasurer and Director | March 1, 2011 | |||
Each of our directors serves for a term of three years, until his successor is elected at our annual stockholders’ meeting, and is qualified, subject to removal by our stockholders. Each officer serves at the pleasure of the Board of Directors.
Set forth below is certain biographical information regarding each of our executive officers and directors.
DONALD BECKHAM has served as a director since March 1, 2011. Since July 2015, he has been a Partner with Copestone Energy Partners, LLC. In 1993 he founded Beckham Resources, Inc. (“BRI”) which for the past 20 years has been a licensed, bonded and insured operator in good standing with the Railroad Commission of Texas. Through BRI, Mr. Beckham has drilled and operated fields for his own account. His expertise is in the acquisition, exploitation, exploration and production enhancement of mature oil and gas fields through which he has been able to enhance production by compressor optimization, pump design, work-over programs, stimulation techniques and identifying new pay zones. BRI has operated wells in the following fields: Hull, Liberty, Aransas Pass, McCampbell, Mission River, Garcitas Creek, Sour Lake, Batson, Barton Ranch and Dayton. Prior to BRI, Mr. Beckham was the chief operations manager for Houston Oil Fields Corporation (“HOFCO”) where he began his career. There he was responsible for drilling, production and field operations and managed approximately 100 people including engineers, geologists, land men, pumpers, and other contract personnel, as well as state and federal environmental and regulatory functions. He managed an annual capital budget of approximately $30 million and operated approximately 100 wells. HOFCO drilled about 20 wells per annum and performed approximately 30 recompletions and work over operations each year. HOFCO owned interests in about 10 key fields principally in Texas, and company-managed production was approximately 1,000 bpd of crude oil and 10 mm cfd of natural gas. Fields that he managed were as follows: Manvell, Cold Springs, Shepherd, Turtle Bay, Red Fish Bay, Dickinson, Refugio, Lost Lake, Liberty and Abbeville. Mr. Beckham is a petroleum engineer and 1984 graduate of Mississippi State University.
MICHAEL H. PRICE , has served as a director since August 1, 2012 and has over 40 years of senior financial and petroleum experience in the global oil and gas industry. He has been a principal in Octagon Energy Advisors, a Houston based energy investment advisory firm, from 2002 to the present. The firm advises financial institutions and institutional investors participating in energy investments. Since 2008, he has been a Managing Director at ING Capital which provides debt financing to domestic exploration and production companies. From 1998 through 2002, Mr. Price was the Chief Financial Officer of Forman Petroleum Corporation. Before that, Mr. Price was Managing Director at Chase Manhattan Bank for fifteen years where he was in charge of technical support for Chase’s worldwide energy merchant banking activities. In his early career, he worked as a consulting principal on domestic petroleum engineering and landowner matters, and gained extensive international experience working with major oil companies in a variety of operating positions. He holds a BS and MS from Illinois Institute of Technology, an MBA from the University of Chicago, a M.Sc. from the London School of Economics, and a MS in Petroleum Engineering from Tulane University.
MARK SEE has been our Chief Executive Officer and Chairman of the Board of Directors since October 16, 2009. He has over 30 years of experience in tunneling, natural resources and the petroleum industries. He was the founder and founding CEO of Rock Well Petroleum, a private oil & gas company from January 2005 until December 2008 and worked from then until October 2009 forming Laredo Oil. Mr. See was also President of Oil Recovery Enhancement LLC in Bozeman, Montana, a private oil company. He was selected as one of the top 25 Engineers in North America by the Engineering News Record for his innovations in the petroleum industry. He is a member of the Society of Mining Engineers and the Society of Petroleum Engineers.
BRADLEY E. SPARKS is our Chief Financial Officer and Treasurer and has been a director since March 1, 2011. Before joining us in October 2009, Mr. Sparks was the Chief Executive Officer, President and a Director of Visualant, Inc. Prior to joining Visualant, he was the Chief Financial Officer of WatchGuard Technologies, Inc. from 2005 to 2006. Before joining WatchGuard, he was the founder and managing director of Sunburst Growth Ventures, LLC, a private investment firm specializing in emerging-growth companies. Previously, he founded Pointer Communications and served as Chief Financial Officer for several telecommunications and internet companies, including eSpire Communications, Inc., Digex, Inc., Omnipoint Corporation, and WAM!NET. He also served as Vice President and Treasurer of MCI Communications from 1988-1993 and as Vice President and Controller from 1993-1995. Before his tenure at MCI, Mr. Sparks held various financial management positions at Ryder System, Inc. Mr. Sparks currently serves on the Board of Directors of Comrise. Mr. Sparks graduated from the United States Military Academy at West Point in 1969 and is a former Army Captain in the Signal Corps. He received a Master of Science in Management degree from the Sloan School of Management at the Massachusetts Institute of Technology in 1975 and is a member of the AICPA.
14
To the knowledge of our management, during the past ten years, no present or former director, executive officer or person nominated to become a director, or an executive officer of the Company has:
| (1) | filed a petition under the federal bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or similar officer appointed by the court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filings; |
| (2) | was convicted in a criminal proceeding or named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| (3) | was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting, the following activities: |
| (i) | acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; |
| (ii) | engaging in any type of business practice; or |
| (iii) | engaging in any activities in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws; |
| (4) | was the subject of any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described above under this Item, or to be associated with persons engaged in any such activities; |
| (5) | was found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission to have violated any federal or state securities law, and the judgment in such civil action or finding by the Securities and Exchange Commission has not been subsequently reversed, suspended, or vacated; |
| (6) | was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; |
| (7) | was the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: |
| (i) | Any federal or state securities or commodities law or regulation; or |
| (ii) | Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or |
| (iii) | Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| (8) | was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Section 16(a) Beneficial Ownership Reporting Compliance
During the fiscal year ended May 31, 2025, we had no class of equity securities registered pursuant to Section 12 of the Securities Exchange Act of 1934. Accordingly, no reports were required to be filed pursuant to Section 16(a) with respect to our officers, directors, and beneficial holders of more than ten percent of any class of equity securities.
15
Code of Ethics
Our Code of Ethics is included herein by reference to Exhibit 14.1 to this Annual Report on Form 10-K and can be found on our web site at www.laredo-oil.com.
Item 11. Executive Compensation
Compensation Summary for Executive Officers
The following table sets forth compensation paid or accrued by us for the last two years ended May 31, 2025 and 2024 with regard to individuals who served as the Principal Executive Officer, the Principal Financial Officer and for executive officers receiving compensation in excess of $100,000 during these fiscal periods.
| Name and Principal Position | Fiscal Year | Salary($) | Bonus($) |
Option
Awards($) |
All
Other
Compensation($) |
Total($) | ||||||||||||||||
| Mark See (1) | 2025 | 525,000 | - | - | - | 525,000 | ||||||||||||||||
| Chief Executive Officer and Chairman of the Board | 2024 | 525,000 | - | 285,046 | - | 810,046 | ||||||||||||||||
| Bradley E. Sparks (2) | 2025 | 415,000 | - | - | - | 415,000 | ||||||||||||||||
| Chief Financial Officer, Treasurer and Director | 2024 | 415,000 | - | 299,879 | - | 714,879 | ||||||||||||||||
| (1) | In fiscal year 2025, Mr. See’s salary includes $213,465 in cash payments and $301,535 of deferred compensation. In fiscal year 2024, Mr. See’s salary included $30,358 in cash payments, and $494,642 for deferred compensation. As of May 31, 2025, Mr. See has cumulative deferred compensation of $1,280,946. |
| (2) | The amounts shown in 2025 include $167,596 of salary paid in cash and $247,404 in deferred compensation. In fiscal 2024, Mr. Sparks’ salary includes $30,358 of cash payments and $384,642 of deferred compensation. As of May 31, 2025, Mr. Sparks has cumulative deferred compensation of $2,372,410. |
Named Executive Officers Compensation and Termination of Employment Provisions
Mark See Pursuant to a letter agreement dated October 16, 2009, and subsequently amended, between us and Mr. See, we pay Mr. See an annual base salary of $495,000 (which, together with previously approved allowances for Mr. See equaling $30,000, is an aggregate of $525,000 per year). If Mr. See is terminated by us without “Cause” (as such term is defined in the letter agreement) or if Mr. See terminates his employment with us for “Good Reason” (as such term is defined in his change in control agreement), we will pay severance to Mr. See equal to 100% of his then-current annualized base salary, and any bonuses earned, paid out on a pro rata basis over our regular payroll schedule over the two-year period following the effective date of such termination, provided that if such termination occurs within 12 months after a Change of Control, such two-year period shall be increased to a three-year period. In addition, Mr. See will continue to receive all applicable benefits under our standard benefits plans currently available to other senior executives, for a period not to exceed 24 months following the termination of his employment.
In November and December 2023, our Board of Directors awarded Mr. See fully vested options to purchase 4,925,000 shares of our common stock at $0.066 per share. These were issued to augment and replace earlier option grants that had expired. The options expire in November and December 2033.
As of May 31, 2025, Mr. See has $1,280,946 of deferred compensation owed to him under his contract, which is the cumulative difference between his contract salary and the actual cash compensation he has received thereunder through May 31, 2025. This amount also includes estimated employer payroll taxes.
Bradley Sparks Pursuant to a letter agreement dated October 20, 2009, as amended, we pay Mr. Sparks an annual base salary of $385,000 (which, together with previously approved annual payments for Mr. Sparks equaling $30,000, is an aggregate of $415,000 per year). If Mr. Sparks is terminated by us without “Cause” (as such term is defined in the letter agreement) or if Mr. Sparks terminates his employment with us for “Good Reason” (as such term is defined in the change in letter agreement),, we will pay Mr. Sparks severance equal to 100% of his then-current annualized base salary, and any bonuses earned, paid out on a pro rata basis over our regular payroll schedule over the two-year period following the effective date of such termination; provided, however, that if such termination occurs within 12 months after a Change of Control, such two-year period is increased to a three-year period. In addition, Mr. Sparks will continue to receive all applicable benefits under our standard benefits plans currently available to other senior executives, for a period not to exceed 24 months following the termination of employment.
16
In June 2023, our Board of Directors awarded Mr. Sparks fully vested options to purchase 6,500,000 shares of our common stock at $0.06 per share. The award comprised a vested options award to purchase 5,000,000 shares and an award to purchase 1,500,000 shares to replace an award dated May 28, 2022 to purchase 1,500,000 shares which was canceled. The options expire on June 23, 2033.
As of May 31, 2025, we owe Mr. Sparks $2,372,410 of cumulative deferred compensation under his letter agreement with us with respect to his compensation for his employment. The amount owed under his contract is the cumulative difference between the amount of compensation we owe Mr. Sparks under his contract salary and the actual cash compensation he has received under his agreement with us. This amount also includes estimated employer payroll taxes.
Outstanding equity awards as of May 31, 2025:
|
(a)
Name and Principal Position |
(b)
Number of Securities Underlying Unexercised Options Exercisable |
(e)
Option Exercise Price ($) |
(f)
Option Expiration Date |
|||||||
|
Bradley
E. Sparks
CFO, Treasurer & Director |
6,500,000 | 0.06 | June 23, 2033 | |||||||
|
Mark
See
CEO and Board Chairman |
4,925,000 | 0.066 | Nov & Dec 2033 | |||||||
On May 19, 2023, we approved the Laredo Oil, Inc. 2023 Equity Incentive Plan. The Equity Incentive Plan was filed with the Securities and Exchange Commission on Form S-8 on June 14, 2023 authorizing the number of shares available for issuance thereunder to an aggregate of 20,000,000 shares. The plan will expire ten years after inception, or on May 19, 2033.
In February 2011, we approved the Laredo Oil, Inc. 2011 Equity Incentive Plan. The Equity Incentive Plan was filed with the Securities and Exchange Commission on Form S-8 on November 8, 2011, and was amended in December 2014 to increase the number of shares available for issuance thereunder to an aggregate of 15,000,000 shares. The plan expired in February 2021 and had one grant still in effect for 1,100,000 shares at an exercise price of $0.38 per share, which expired on January 2, 2025.
Director Compensation
|
(a)
Name |
(b)
Fees Earned or Paid in Cash ($) |
(c)
Stock Awards ($) |
(d)
Option Awards ($) |
(j)
Total ($) |
||||||||||||
| Donald Beckham | 50,000 | - | - | 50,000 | ||||||||||||
| Michael H. Price | 50,000 | - | - | 50,000 | ||||||||||||
Historically, the compensation for each non-employee member of our Board of Directors has been as follows: quarterly cash payment of $12,500 payable mid-quarter in arrears, and 500,000 shares of restricted common stock vesting in three equal installments over three years. We also reimburse directors for all reasonable expenses associated with attendance at meetings of our Board of Directors. During the last quarter of fiscal year 2022, we suspended cash payments to directors indefinitely. However, such payments were accrued for future payment. During fiscal years 2025 and 2024, no cash payments to directors were made, but were accrued for future payment. On June 23, 2023, we granted fully vested options to purchase 1,500,000 shares of our common stock to each of Mr. Beckham and Mr. Price and simultaneously cancelled the 500,000 option grants to each dated May 28, 2022. Since they are executive officers, Messrs. See and Sparks receive no additional compensation for serving on the Board of Directors.
17
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of August 29, 2025, the name and address and the number of shares of the Company’s common stock, with a par value of $0.0001 per share, held of record or beneficially by each person who held of record, or was known by the Company to own beneficially, more than 5% of the issued and outstanding shares of the Company’s common stock, and the name and shareholdings of each executive officer, director and of all officers and directors as a group.
|
Name
and Address
of Beneficial Owner |
Nature
of
Ownership (1) |
Amount
of Beneficial
Ownership (1) |
Percent of Class | |||||||
|
Bedford
Holdings, LLC
44 Polo Drive Big Horn, WY 82833 |
Direct | 12,829,269 | 13.5 | % | ||||||
|
Darlington,
LLC (2)
P.O. Box 723 Big Horn, WY 82833 |
Direct | 5,423,138 | 5.7 | % | ||||||
|
Mark
See (3)
2021 Guadalupe Street, Suite 260 Austin, Texas 78705 |
Direct | 36,021,676 |
38.0 |
% | ||||||
|
Bradley
E. Sparks (4)
2021 Guadalupe Street, Suite 260 Austin, Texas 78705 |
Direct | 9,324,857 | 9.8 | % | ||||||
|
Robert
Adamo
2021 Guadalupe Street, Suite 260 Austin, Texas 78705 |
Direct | 6,662,886 | 7.0 | % | ||||||
|
Donald
Beckham (5)
2021 Guadalupe Street, Suite 260 Austin, Texas 78705 |
Direct | 2,050,000 | 2.2 | % | ||||||
|
Michael
H. Price (6)
2021 Guadalupe Street, Suite 260 Austin, Texas 78705 |
Direct | 2,050,000 | 2.2 | % | ||||||
|
All
Directors and Officers as a Group
(4 persons) |
Direct | 49,446,533 | 52.1 | % | ||||||
| (1) | All shares owned directly are owned beneficially and of record, and such stockholder has sole voting, investment and dispositive power, unless otherwise noted. Amounts of beneficial ownership include all options to purchase common stock expected to be vested within 60 days after the filing date of this Annual Report on Form 10-K. |
| (2) | These shares are owned by the spouse of Mr. See, and Mr. See has a proxy from Mrs. See to vote the shares. |
| (3) | Includes 12,829,269 shares owned by Mr. See through Bedford Holdings, LLC, 5,423,138 shares owned by Mrs. See through Darlington, LLC, and fully vested options to purchase 4,925,000 shares of common stock at $0.066 per share. |
| (4) | Includes fully vested options to purchase 6,500,000 shares of common stock at $0.06 per share. |
| (5) | Includes fully vested options to purchase 1,500,000 shares of common stock at $0.06 per share. |
| (6) | Includes fully vested options to purchase 1,500,000 shares of common stock at $0.06 per share. |
18
Securities authorized for issuance under equity compensation plans
The following table provides information as of May 31, 2025 concerning the issuance of equity securities with respect to compensation plans under which our equity securities are authorized for issuance.
Equity Compensation Plan Information
| Plan category |
Number
of securities to
be issued upon exercise of outstanding options, warrants and rights (a) |
Weighted
–average
exercise price of outstanding options, warrants and rights ($) (b) |
Number
of securities
remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) (c) |
|||||||||
|
Equity
compensation
plans approved by security holders (1) |
20,000,000 | 0.061 | 0 | (2) | ||||||||
| Total | 20,000,000 | 0.061 | 0 | |||||||||
| (1) | Effective May 19, 2023, the holders of a majority of the shares of our common stock took action by written consent to approve our 2023 Equity Incentive Plan, or the “2023 Plan.” Stockholders then owning an aggregate of 31,096,676 shares, or 59.8% of the then issued and outstanding shares of our Common Stock, approved the matter. The 2023 Plan and corresponding agreements are exhibits to our Registration Statement on Form S-8 filed with the Securities and Exchange Commission on June 14, 2023. The 2023 Plan reserved 20,000,000 shares of our common stock for issuance to eligible recipients. |
| (2) | During fiscal year 2024, we granted options to purchase 20,000,000 shares of common stock to employees and contractors. The aforementioned options were issued under the 2023 Equity Incentive Plan, which authorized 20,000,000 shares of our common stock reserved for issuance for directors, employees and contractors. |
Item 13. Certain Relationships and Related Transactions, and Director Independence
Transactions with Management and Others
As Officers and Directors are related parties, see Items 10, 11 and 12 which disclose option grants and executive compensation and beneficial ownership.
On June 22, 2022, we assigned to our Chief Financial Officer, or CFO, the right to purchase up to 356,243 of the 500,000 membership interests in Olfert #11-4 in exchange for our CFO’s payment of $356,243 of our capital commitment to Olfert #11-4. On August 15, 2022, our CFO purchased an additional 109,590 membership interests in Olfert #11-4 in exchange for a payment of $109,590 by our CFO. The Olfert 11-4 well has been shut-in pending economical disposal of salt water encountered.
On October 26, 2022, we borrowed $150,000 from our CFO pursuant to a demand note bearing an annual interest rate of 10%. The note is secured by a pledge of all of the interests in our wholly owned subsidiary Lustre Oil Company LLC. In February 2023, our CFO made several advances to us, totaling $50,000. On March 15, 2023, we received an additional loan of $30,000 from our CFO. During April and May of 2023, our CFO advanced another $62,099. The total amount of these advances aggregate to $292,099. The October 26, 2022 note and the aforementioned advances, totaling $292,099, were incorporated into a $400,000 note dated November 27, 2023. The note is outstanding as of May 31, 2025.
Director Independence .
Both Mr. Price and Mr. Beckham serve as “independent” directors based on the definition of independence in the listing standards of NASDAQ Marketplace Rule 4200(a)(15).
Item 14. Principal Accounting Fees and Services
(1) Audit Fees
The aggregate fees billed by the independent accountants for each of the last two fiscal years for professional services for the audit of the Company’s annual consolidated financial statements and the review of consolidated financial statements included in the Company’s Form 10-Q and services that are normally provided by the accountants in connection with statutory and regulatory filings or engagements for those fiscal years were $216,000 for the fiscal year ended May 31, 2025 and $134,575 for the fiscal year ended May 31, 2024.
19
(2) Audit-Related Fees
The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements and are not reported under paragraph (1) above was $0.
(3) Tax Fees
The aggregate fees billed in each of the last two fiscal years ending May 31, 2025 and 2024 for professional services rendered by the principal accountants for tax compliance, tax advice, and tax planning was $29,785 and $9,476, respectively.
(4) All Other Fees
During the last two fiscal years ending May 31, 2025 and 2024, respectively there were $0 fees charged by the principal accountants other than those disclosed in (1), (2) and (3) above.
(5) Audit Committee’s Pre-approval Policies and Procedures
The Audit Committee pre-approves the engagement with the independent auditor. It meets four times annually and reviews consolidated financial statements with the independent auditor. Additionally, the Audit Committee meets in executive session with the independent auditor at the conclusion of those meetings.
20
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) (1) Consolidated Financial Statements. See Index to Consolidated Financial Statements on page F-1.
(a) (2) Financial Statement Schedules
The following financial statement schedules are included as part of this report:
None.
(a) (3) Exhibits
The exhibits required to be filed herewith by Item 601 of Regulation S-K, as described in the following index of exhibits, are attached hereto unless otherwise indicated as being incorporated herein by reference, as follows:
21
22
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| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
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| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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23
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| LAREDO OIL, INC. | ||||
| (the “Registrant”) | ||||
| Date: September 15, 2025 | By: | /s/ Mark See | ||
| Mark See | ||||
| Chief Executive Officer and Chairman of the Board | ||||
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Date: September 15, 2025 | By: | /s/ Mark See | |
| Mark See | |||
| Chief Executive Officer and Chairman of the Board | |||
| (Principal Executive Officer) | |||
| Date: September 15, 2025 | By: | /s/ Bradley E. Sparks | |
| Bradley E. Sparks | |||
|
Chief
Financial Officer, Treasurer and Director
(Principal Financial and Accounting Officer) |
|||
| Date: September 15, 2025 | By: | /s/ Donald Beckham | |
| Donald Beckham | |||
| Director | |||
| Date: September 15, 2025 | By: | /s/ Michael H. Price | |
| Michael H. Price | |||
| Director |
24
LAREDO OIL, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F- 1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Laredo Oil, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Laredo Oil, Inc. (the Company) as of May 31, 2025 and 2024, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended May 31, 2025, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended May 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has yet to achieve profitable operations, has negative cash flows from operating activities, and is dependent upon future issuances of equity or other financing to fund ongoing operations, all of which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Oil and gas properties
As discussed in Note 4 to the financial statements, the Company capitalizes certain oil and gas acquisition and drilling costs in unproved and unevaluated properties.
Auditing management’s evaluation of unproved and unevaluated properties can require significant judgement given the fact that the Company uses management’s estimates on future development plans, which are difficult to substantiate.
To evaluate the appropriateness of management’s development plans, we evaluated the key factors and assumptions used to develop the development plans for unproved and unevaluated oil and gas properties, as well as, management’s disclosure in determining that they are reasonable in relation to the financial statements taken as a whole.
/s/
We have served as the Company’s auditor since 2024.
September 15, 2025
F- 2
| Laredo Oil, Inc. |
| Consolidated Balance Sheets |
|
May
31,
2025 |
May
31,
2024 |
|||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents and restricted cash | $ |
|
$ |
|
||||
| Receivables |
|
|||||||
| Prepaid expenses and other current assets |
|
|
||||||
| Total Current Assets |
|
|
||||||
| Property and Equipment | ||||||||
| Oil and gas acquisition and drilling costs |
|
|
||||||
| Property and equipment, net |
|
|
||||||
| Total Property and Equipment, net |
|
|
||||||
| Other assets |
|
|
||||||
| TOTAL ASSETS | $ |
|
$ |
|
||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ |
|
$ |
|
||||
|
Accounts payable – related party |
|
|
||||||
| Accrued payroll liabilities |
|
|
||||||
| Accrued interest |
|
|
||||||
| Deferred well development costs |
|
|
||||||
| Convertible debt contributed for net working interest |
|
|||||||
|
Convertible debt, net of debt discount |
|
|||||||
| Bridge securities, net of debt discount |
|
|
||||||
| Promissory note, net of debt discount |
|
|||||||
| Revolving note |
|
|
||||||
| Note payable – related party |
|
|
||||||
| Note payable – Alleghany, net of debt discount |
|
|
||||||
| Note payable, current portion |
|
|
||||||
| Total Current Liabilities |
|
|
||||||
| Asset retirement obligation |
|
|
||||||
| Long-term note, net of current portion |
|
|
||||||
| Total Noncurrent Liabilities |
|
|
||||||
| TOTAL LIABILITIES |
|
|
||||||
| Commitments and Contingencies (Note 14) | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock: $ par value; shares authorized; issued and outstanding | ||||||||
| Common stock: $ par value; and shares authorized; and issued and outstanding as of May 31, 2025 and 2024, respectively |
|
|
||||||
| Additional paid in capital |
|
|
||||||
| Subscription paid in advance |
|
|||||||
| Accumulated deficit |
(
|
) |
(
|
) | ||||
| Total Stockholders’ Deficit |
(
|
) |
(
|
) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ |
|
$ |
|
||||
The accompanying notes are an integral part of these consolidated financial statements.
F- 3
| Laredo Oil, Inc. |
| Consolidated Statements of Operations |
|
Year
Ended
May 31, 2025 |
Year
Ended
May 31, 2024 |
|||||||
| Revenue | $ |
|
$ |
|
||||
| Gross profit (loss) |
|
|
||||||
| Lease Operating Expense |
|
|
||||||
| General, selling and administrative expenses |
|
|
||||||
| Consulting and professional services |
|
|
||||||
| Impairment expense |
|
|
||||||
| Total Operating Expense |
|
|
||||||
| Operating loss |
(
|
) |
(
|
) | ||||
| Other income/(expense) | ||||||||
| Other non-operating income |
|
|
||||||
| Gain on sale of assets |
|
|||||||
| Interest expense, net |
(
|
) |
(
|
) | ||||
| Net loss | $ |
(
|
) | $ |
(
|
) | ||
| Net loss per share, basic and diluted | $ |
(
|
) | $ |
(
|
) | ||
| Weighted average number of basic and diluted common shares outstanding |
|
|
||||||
The accompanying notes are an integral part of these consolidated financial statements.
F- 4
| Laredo Oil, Inc. |
| Consolidated Statement of Stockholders’ Deficit |
| For the Years Ended May 31, 2025 and 2024 |
| Common Stock | Preferred Stock | Additional Paid | Subscription | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | In Capital | Paid in Advance | Deficit | Deficit | |||||||||||||||||||||||||
| Balance at May 31, 2023 (Restated) |
|
$ |
|
$ | $ |
|
$ | $ |
(
|
) | $ |
(
|
) | |||||||||||||||||||
| Share based compensation | - | - |
|
|
||||||||||||||||||||||||||||
| Issuance of shares upon debt conversion |
|
|
- |
|
|
|||||||||||||||||||||||||||
| Net Loss | - | - |
(
|
) |
(
|
) | ||||||||||||||||||||||||||
| Balance at May 31, 2024 |
|
$ |
|
$ | $ |
|
$ | $ |
(
|
) | $ |
(
|
) | |||||||||||||||||||
| Common Stock | Preferred Stock | Additional Paid | Subscription | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | In Capital | Paid in Advance | Deficit | Deficit | |||||||||||||||||||||||||
| Balance at May 31, 2024 |
|
$ |
|
$ | $ |
|
$ | $ |
(
|
) | $ |
(
|
) | |||||||||||||||||||
| Sale of shares |
|
|
- |
|
|
|
||||||||||||||||||||||||||
| Issuance of common stock in exchange for note payable |
|
|
- |
|
|
|||||||||||||||||||||||||||
| Gain on investment in oil and gas properties – related party | - | - |
|
|
||||||||||||||||||||||||||||
| Issuance of warrants | - | - |
|
|
||||||||||||||||||||||||||||
| Net Loss | - | - |
(
|
) |
(
|
) | ||||||||||||||||||||||||||
| Balance at May 31, 2025 |
|
$ |
|
$ | $ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | ||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F- 5
| Laredo Oil, Inc. |
| Consolidated Statements of Cash Flows |
| Year Ended | Year Ended | |||||||
| May 31, 2025 | May 31, 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ |
(
|
) | $ |
(
|
) | ||
| Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | ||||||||
| Stock based compensation expense |
|
|||||||
| Amortization of debt discount |
|
|
||||||
| Impairment of long-term assets |
|
|
||||||
| Depreciation |
|
|
||||||
| Accretion expense |
|
|||||||
| Gain on sale of assets |
(
|
) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables |
|
(
|
) | |||||
| Receivables from related party |
|
|||||||
| Prepaid expenses and other current assets |
(
|
) |
|
|||||
| Accounts payable and accrued liabilities |
(
|
) |
(
|
) | ||||
| Accrued payroll liabilities |
|
|
||||||
| Accrued interest |
|
|
||||||
| NET CASH USED IN OPERATING ACTIVITIES |
(
|
) |
(
|
) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Proceeds from sale of assets |
|
|||||||
| Investment in property, plant and equipment | ||||||||
| Investment in oil and gas field acquisition and drilling costs |
(
|
) |
(
|
) | ||||
| - | - | |||||||
| NET CASH USED IN INVESTING ACTIVITIES |
(
|
) |
|
|||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from convertible debt |
|
|||||||
| Repayment of convertible debt |
(
|
) |
(
|
) | ||||
| Proceeds from bridge notes |
|
|||||||
| Proceeds from revolving note |
|
|||||||
| Proceeds from Promissory note |
|
|||||||
| Repayment of bridge notes |
(
|
) | ||||||
| Proceeds from prefunded drilling costs |
|
|
||||||
| Repayment of prefunded drilling costs |
(
|
) | ||||||
| PPP loan repayments |
(
|
) |
(
|
) | ||||
| Proceeds from sale of common stock |
|
|||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES |
|
|
||||||
| Net change in cash and cash equivalents and restricted cash |
(
|
) |
|
|||||
| Cash and cash equivalents at beginning of period |
|
|
||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $ |
|
$ |
|
||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid for interest expense | $ |
|
$ |
|
||||
| Cash paid for income taxes | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Oil and gas acquisition costs in accounts payable | $ |
|
$ |
|
||||
| Relative fair value of warrants granted with debt | $ |
|
$ | |||||
| Gain on investment in oil and gas properties – related party | $ |
|
$ | |||||
| Initial asset retirement obligation and related liability | $ |
|
$ |
|
||||
| Reclassification of contingent liability to convertible debt | $ |
|
$ | |||||
| Reclassification of convertible debt to contingent liability | $ | $ |
|
|||||
| Issuance of common stock in exchange for note payable | $ |
|
$ |
|
||||
The accompanying notes are an integral part of these consolidated financial statements.
F- 6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.” As of that date, the Company had authorized shares of common stock at $ par value and authorized shares of preferred stock at $ par value. On October 21, 2009 the name of the Company was changed to “Laredo Oil, Inc.” During May of 2023, the Company’s board of directors voted to increase the authorized shares of common stock to shares at $ par value, which increase was approved by the holders of a majority of the shares of common stock then outstanding.
We are an oil exploration and production company, primarily engaged in acquisition and exploration efforts to find mineral reserves on various properties. From our inception in March 2008 through October 2009, we were primarily engaged in acquisition and exploration efforts for mineral properties. Beginning in October 2009, we shifted our focus to locating mature oil fields with the intention of acquiring those oil fields and recovering stranded oil reserves using proprietary enhanced recovery methods known as underground gravity drainage, or UGD.
The original UGD method uses conventional mining processes to establish a drilling chamber underneath an existing oil field from where closely spaced wellbores are intended to be drilled directionally up into the reservoir, using residual radial pressure and gravity to then drain the targeted reservoir through the wellbores. As experience was gained through practical application of the processes involved in oil recovery, variants of the UGD concept have been developed and evaluated. The UGD method is applicable to mature oil fields that have very specific geological characteristics. The Company has done extensive research and has identified oil fields within the United States and globally that it believes are qualified for UGD recovery methods. The Company primary business and focus is to pursue and recover stranded oil from selected mature fields chosen from this group as funds become available.
We believe the costs of implementing the UGD method are radically lower than those presently experienced by commonly used EOR methods. We also estimate that we can materially increase the field oil production rate from prior periods and recover amounts of oil equal to or greater than amounts previously recovered from the mature fields selected. The Company intends to seek oil fields with a minimum of 25 million barrels of estimated recoverable oil.
When the Company acquires a targeted oil field, we will continue to operate the producing field and expect to generate revenue and profit from doing so. Once the development of the underground chamber and the UGD method is prepared for operation, the conventional wells will be capped and UGD production begun. The effect of such operations should result in minimal disruption of oil production from our field investments.
On June 14, 2011, we entered into several exclusive licensing and management agreements with Stranded Oil Resources Corporation, or SORC, a wholly owned subsidiary of Alleghany Corporation, or Alleghany. to manage the acquisition and operation of mature oil fields in Kansas, Wyoming and Louisiana, focused on the recovery of “stranded” oil from those mature fields primarily using UGD. We performed those services in exchange for a carried interest in SORC, a quarterly management fee and reimbursement from SORC of our employee-related expenses. Such fees and reimbursements were effectively all of our revenues prior to our acquisition of SORC via the closing of the Securities Purchase Agreement with Alleghany described below.
On December 31, 2020, we entered into a Securities Purchase Agreement with Alleghany. Under that agreement, we purchased all of the issued and outstanding shares of SORC. As consideration for the SORC shares, we paid Alleghany $72,678 in cash and agreed to pay Alleghany a seven-year royalty of 5.0% of our future revenues and net profits from our oil, gas, gas liquids and all other hydrocarbon operations, subject to certain adjustments. Currently, SORC is a wholly owned subsidiary of Laredo and is not conducting any ongoing operations.
Prior to purchasing the shares of SORC, while implementing underground gravity drainage, or UGD, projects for Allegheny, we gained specialized know-how and operational experience in evaluating, acquiring, operating and developing oil and gas properties, as well as expertise in designing, drilling and producing conventional oil wells. Based upon that know-how, we identified and acquired 45,246 gross acres, and 37,932 net acres, of mineral property interests in the State of Montana in the Lustre and Midfork fields and the West Fork area. To develop our acquired mineral property acreage, we established relationships with several organization and investment groups, including the following entities: (1) Olfert 11-4 Holdings, LLC, (2) Texakoma Exploration and Production, LLC, or Texakoma, (3) Erehwon Oil & Gas, LLC, or Erehwon, (4) an independent investor group in its subsidiary, Hell Creek Crude LLC, or HCC, and (5) raised monies from accredited investors in its subsidiary, West Fork Resources, LLC, or WFR. As of May 31, 2025, five wells have been drilled in the Lustre and Midfork fields. None have been economically successful due primarily to encountering excess water. Exploratory drilling in the project located in the West Fork area with WFR is ongoing. We are continually attempting to raise additional funds to develop our other mineral property interests we have purchased in the area. Our ability to secure additional funding will determine whether we can achieve any future production for the acreage, and if we can secure such financing, the pace of field development.
We also have a 50% interest in the Cat Creek oil field, located west of our mineral rights described above.
F- 7
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 was dependent on one customer for its revenue. There is no assurance that in the future any financing will be available to meet the Company’s needs. This situation raises substantial doubt about the Company’s ability to continue as a going concern within one year of the issuance date of these consolidated financial statements.
The Company’s 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 (c) 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 manage the Company’s headcount. There can be no assurance that the Company can successfully accomplish these steps and it is uncertain that the Company will achieve a profitable level of operations and obtain additional financing. There can be no assurance that any additional financing will be available to the Company on satisfactory terms and conditions, if at all.
The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates - Management uses estimates and assumptions in preparing these consolidated financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.
Principles of Consolidation - The accompanying consolidated financial statements include the accounts of Laredo Oil and its subsidiaries after elimination of intercompany balances and transactions.
Equity Method Investment - Investments classified as equity method consist of investments in companies in which the Company can exercise significant influence but not control. Under the equity method of accounting, the investment is initially recorded at cost, then the Company’s proportional share of investee’s underlying net income or loss is recorded as a component of “other income” with a corresponding increase or decrease to the carrying value of the investment. Distributions received from the investee reduce the Company’s carrying value of the investment. These investments are evaluated for impairment if events or circumstances arise that indicate that the carrying amount of such assets may not be recoverable.
Revenue recognition - The Company recognized revenue in accordance with ASC 606, Revenue from Contracts with Customers. Crude oil revenue is recognized when we have transferred control of crude oil production to the purchaser. We consider the transfer of control to have occurred when the purchaser has the ability to direct the use of, and obtain substantially all of the remaining benefits from the crude oil production. We record revenues based on an estimate of the volumes delivered at estimated prices as determined by the applicable sales agreement. We estimate our sales volumes based on company-measured volume readings. We then adjust our crude oil sales in subsequent periods based on the data received from our purchasers that reflects actual volumes delivered and prices received. We receive payment for sales one to two months after actual delivery has occurred. The differences in sales estimates and actual sales are recorded one to two months later. Where the Company is not the operator, revenue from oil and gas production is recognized based on sales date as reported to the Company by the operators of oil production facilities in which the company has an interest.
Cash and cash equivalents and restricted cash - 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, 2025 and 2024. At times, the Company maintains cash balances deposited at its financial institution that exceed FDIC insured limits.
F- 8
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Laredo entered a Participation Agreement in exchange for funding for well development costs. The contract requires that participants pay Hell Creek Crude LLC the contract price upon execution of the agreement. The participants participate prorata in the ownership of the net working interest in any wells drilled. The funds received in advance of the drilling of a well from a working interest participant are held for the expressed purpose of drilling, completing and equipping a well. Laredo classifies these funds prior to commencement of well development as restricted cash based on guidance codified as under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 230-10-50-8. When payments are made from these funds, they are recorded as Oil and Gas Acquisition Costs.
Also included in Restricted cash is $186,115 of investments from accredited investors in our wholly-owned subsidiary West Fork Resources, LLC (“West Fork”) which was formed to develop and find oil reserves in portions of our over 30,000 acres of mineral rights located north of the Fort Peck Reservation at the western edge of the Williston Basin. The Company is in the process of raising $7.5 million to drill three exploratory wells by selling units of West Fork. Due to the length of time experienced raising the funds, investors withdrew $1.1 million from the project receiving a refund invested amounts. The remaining invested funds of $1 million have been used to initiate the West Fork well development project. When payments are made from these funds, they are recorded as Oil and Gas Acquisition Costs.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheet that sum to the total of the same amounts shown in the statement of cash flows.
| May 31, 2025 | May 31, 2024 | |||||||
| Cash and cash equivalents | $ |
|
$ |
|
||||
| Restricted cash |
|
|
||||||
| $ |
|
$ |
|
|||||
Prepaid expenses and other current assets - Prepaid expenses and other current assets are primarily comprised of prepaid legal fees which are recorded as expense upon work performance and prepaid directors’ and officers’ insurance which is recorded and amortized to expense over the 12-month contract life.
Oil and gas acquisition and drilling costs - Oil and gas acquisition and drilling costs include expenditures representing investments in unproved and unevaluated properties and include non-producing leasehold, leasehold or drilling interest costs, and costs to drill one exploratory well. Exploratory drilling costs are deferred until the outcome of the well is known. If an exploratory well finds proved reserves, the deferred costs are transferred to the company’s Wells and Related Equipment and Facilities accounts. Costs are reviewed annually to determine if impairment has occurred. As a result of the uncertainty surrounding successful well completion and the availability of future funding to develop our acquired mineral rights, we are not providing disclosures until we have proved reserves requiring such disclosures. In conjunction with the Texakoma agreement, three wells have been drilled but are unevaluated pending successful and economical disposal of water encroachment encountered. As they currently are not producing economical volumes of crude oil and in the absence of a reserve report identifying proved reserves, the Company has impaired those investments as of May 31, 2024. Similarly, the Midfork Well has not produced economical volumes and has been shut-in prior to May 31, 2025. Under the Participation Agreement, the Midfork oil and gas acquisition and drilling costs incurred have been offset against the deferred well development costs. In the year ending May 31, 2025, an impairment totaling $653,874 has been recorded primarily in connection with costs associated with the Midfork Well. The remaining intangible and tangible drilling costs primarily relate to the expenditures in West Fork. Unevaluated properties lease and bonus costs are capitalized while landman and legal cost of acquiring properties are expensed as incurred.
Subsequent
to the impairment, the Company has recorded oil and gas acquisition and drilling costs totaling $
| May 31, | May 31, | |||||||
| 2025 | 2024 | |||||||
| Intangible and tangible drilling costs | $ |
|
$ |
|
||||
| Lease acquisition costs |
|
|
||||||
| Oil and gas acquisition and drilling costs | $ |
|
$ |
|
||||
F- 9
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Property and equipment - The carrying value of the Company’s property and equipment represents the cost incurred to acquire the property and equipment, net of any impairments. For business combinations, property and equipment cost is based on the fair values at the acquisition date. Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives of five to seven years are used for vehicles and machinery. Realization of the carrying value of property and equipment is reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets are determined to be impaired if a forecast of undiscounted estimated future net operating cash flows directly related to the asset, including disposal value, if any, is less than the carrying amount of the asset. If any asset is determined to be impaired, the loss is measured as the amount by which the carrying amount of the asset exceeds its fair value. Repairs and maintenance costs are expensed in the period incurred. During fiscal year 2024, the Company disposed drilling equipment for $175,000 which had been previously impaired to $0. There were no similar asset disposals during fiscal year 2025.
The
depreciation recorded for the year ended May 31, 2025 and 2024 was $
| May 31, | May 31, | |||||||
| 2025 | 2024 | |||||||
| Vehicles and equipment | $ |
|
$ |
|
||||
| Less: Accumulated depreciation |
|
|
||||||
| Property and equipment, net | $ |
|
$ |
|
||||
Asset retirement obligations - The Company records a liability for Asset Retirement Obligations (“AROs”) associated with its oil and gas wells when the legal obligation arises. The corresponding cost is capitalized as an asset and included in the carrying amount of oil and gas properties and is depleted over the useful life of the properties. Subsequently, the ARO liability is accreted to its then-present value.
Inherent in the fair value calculation of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental, and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property balance. Settlements greater than or less than amounts accrued as ARO are recorded as a gain or loss upon settlement.
Debt issue costs - Costs incurred in connection with the issuance of long-term debt are presented as a direct deduction from the carrying value of the related debt and amortized over the term of the related debt.
Fair value of financial instruments - Fair value is defined as the amount that would be received from the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are classified and disclosed in one of the following categories:
| ● | Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities in active markets and have the highest priority. |
| ● | Level 2 – Inputs other than quoted prices included within Level I that are observable for the asset or liability, either directly or indirectly. |
| ● | Level 3 – Unobservable inputs for the financial asset or liability and have the lowest priority. |
The carrying value of cash, accounts receivable, other current assets, accounts payable, accrued liabilities, as reflected in the consolidated balance sheets, approximate fair value, due to the short-term maturity of these instruments. The carrying value of notes payable approximates their fair value due to immaterial changes in market interest rates and the Company’s credit risk since issuance of the instruments or due to their short-term nature.
F- 10
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
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. Measurement of share-based payment transactions with non-employees shall be based on the fair value of whichever is more reliably measurable: ( a ) the goods or services received; or ( b ) the equity instruments issued. The fair value of the share-based payment transaction should be determined at the earlier of performance commitment date or performance completion date.
Income taxes - The Company accounts for income taxes by the asset and liability method in accordance with FASB ASC 740, Income Taxes. Under this method, current income taxes are recognized for the estimated income taxes payable for the current year. Deferred income tax assets and liabilities are recognized in the current year for temporary differences between the tax and accounting bases of assets and liabilities as well as for the benefit of losses available to be carried forward to future years for tax purposes that are likely to be realized. In addition, a valuation allowance is established to reduce any deferred tax asset for which it is determined that it is more likely than not that some portion of the deferred tax asset will not be realized.
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.
Reclassifications - Certain amounts previously presented for prior periods have been reclassified to conform to the current presentation. The reclassifications had no effect on net loss, working capital or equity previously reported.
Recently issued accounting pronouncements - The Company has implemented all new accounting pronouncements that are in effect.
On November 27, 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . This amendment expands a public entity's segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker, clarifying when an entity may report one or more additional measures to assess segment performance, requiring enhanced interim disclosures, providing new disclosure requirements for entities with a single reportable segment, and requiring other new disclosures. The amendments became effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024 and is effective for Laredo for fiscal year ending May 31, 2025. As this ASU only requires additional disclosures about the Company's operating segments, there was no material impact to the consolidated financial statements.
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.
NOTE 4 – 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 our 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 Company’s estimated liability could change significantly if actual costs vary from assumptions or if governmental regulations change significantly.
As of May 31, 2024 the Company’s asset retirement obligations were recorded in connection with the Olfert 11-4 well as well as the working interest in the Texacoma wells. The Company established an additional asset retirement obligation in July 2024, when it commenced drilling the Reddig well in the Hell Creek Crude oil field. At that time, the initial asset retirement obligation asset and related liability were recorded at the net present value totaling $88,883 utilizing the Company’s cash flow estimate based on the assumption a 25-year expected life of the well discounted using a credit-adjusted risk-free interest rate of 4%. When the Reddig well was shut-in, the Company revalued the estimated asset retirement obligation. The revalued asset retirement obligation asset totaling $121,358, net of depreciation was written off to impairment expense. The revised asset retirement was calculated utilizing the Company’s updated cash flow estimate assumption of a 2-year expected life of the well, inflation rate of 2.7%, discounted using a credit-adjusted risk-free interest rate of 4%.
The asset retirement obligation for all wells totaled $285,092 and $157,394 as of May 31, 2025 and 2024, respectively.
| May 31, 2025 | May 31, 2024 | |||||||
| Olfert 11-4 well |
|
|
||||||
| Reddig 11-21 well |
|
|||||||
| Texakoma wells (15% net working interest) |
|
|
||||||
| Total | $ |
|
$ |
|
||||
NOTE 5 – PAYROLL LIABILITIES
The Company has accrued payroll liabilities to record amounts owed under employee contracts but not paid when due. The Company has been cash constrained for most of its existence and has asked key officers to defer portions of salary until Company cash flows improve or there is a liquidity event. Cash amounts paid are subtracted from contractual obligations and the remaining amounts due are recorded as payroll liabilities. Both the Company’s CEO and CFO have agreed to defer salaries owed under their contracts and are recorded as payroll liabilities.
F- 11
NOTE 6 – DEFERRED WELL DEVELOPMENT COSTS
The Company records investor investments in individual oil wells as a liability totaling $2,799,260 and $4,551,577 as of May 31, 2025 and 2024, respectively. Several agreements involving net working interests stipulate that a high percentage of oil revenue is distributed to investors until the original investment is recovered. As well related cash is distributed to investors, the liability balance declines proportionally until the original investment is recovered. Thereafter, most contracts specify that the distribution ratio reverts to a 50/50 split. The balance recorded as of May 31, 2025 shows $1,799,260 invested in the Olfert 11-4 well. The Reddig well commenced production during fiscal 2025. Due to uneconomical production, the well was shut in prior to May 31, 2025. As the operator under the participation agreement, the $2,835,500 investment received from investors for the Reddig 11-21 well is offset with related oil and gas assets. In connection with the Reddig well shut in, $648,317 has been reclassified from deferred well development costs to convertible debt contributed for net working interest and the related accrued interest. Both Olfert 11-4 and Reddig 11-21 are located in Valley County, Montana.
The Company has recorded $2,250,000 advanced by accredited investors to West Fork as a Deposit for Well Development. Prior to May 31, 2025, certain West Fork investors requested funds to be refunded and were repaid $1,250,000 since the project had not yet been funded in its entirety.
NOTE 7 – FAIR VALUE MEASUREMENTS
Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, restricted cash, 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.
Laredo 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 Laredo’s 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 4, 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.
Basic and diluted earnings/(loss) per share is computed by dividing net income/(loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings/(loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive earnings/(loss) per share excludes all potential common shares if their effect is anti-dilutive. For the years ended May 31, 2025 and 2024, respectively, options to purchase and shares of common stock, and shares underlying convertible debt outstanding, and and warrants to purchase shares of common stock were not included in the computation of diluted earnings/(loss) per share because they were anti-dilutive.
| For the Year Ended | ||||||||
| May 31, | ||||||||
| 2025 | 2024 | |||||||
| Numerator - net loss attributable to common stockholders | $ |
(
|
) | $ |
(
|
) | ||
| Denominator - weighted average number of common shares outstanding |
|
|
||||||
| Basic and diluted loss per common share | $ |
(
|
) | $ |
(
|
) | ||
F- 12
NOTE 9 – 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 (“FASB ASC 850”) requires that transactions with related parties that would make a difference in decision making shall be disclosed so that users of the consolidated financial statements can evaluate their significance. Related party transactions typically occur within the context of the following relationships:
| ● | 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 November 27, 2023, the Company entered into an Amended and Restated Demand Promissory Note, (the “Demand Note”), and an Amended and Restated Membership Interest Pledge Agreement, (the “Lustre Pledge Agreement”) with the Company’s Chief Financial Officer. Under the Demand Note, the Company promises to pay on demand the principal sum of all disbursements made to the Company up to $400,000 plus interest accrued at an annual rate of 10%. As of May 31, 2025, the aggregate amount of advances, excluding accrued interest, was $292,099. The Demand Note is secured by all of the Company’s interests in Lustre, pursuant to the terms of the Lustre Pledge Agreement.
As disclosed in Note 10, in May 2023 the Company received funds pursuant to a Stock Purchase Agreement with Mr. Adamo, an accredited investor to purchase 6,062,886 restricted shares of the Company’s common stock at a purchase price of $0.0441 per share, totaling $267,320. As a result of this investment, he holds greater than 5% of the Company’s outstanding shares. Prior to becoming a shareholder, in November 2022, Mr. Adamo also invested $100,000 pursuant to the Secured Convertible Debt under the terms as disclosed in Note 12 and is an investor in the Reddig 11-21 well. Including his original investment and capital calls, Mr. Adamo has invested $510,800 into the Reddig 11-21 well.
As of May 31, 2025, Mr. Robert Adamo, owns approximately 6.7 million shares of Laredo Oil, Inc. common stock comprised of the 6.0 million shares purchase in May 2023 as well as 600,000 shares previously purchased and holds greater than 5% of the Company’s outstanding shares. On July 22, 2024 he advanced $50,000 to Lustre which is recorded in accounts payable as of May 31, 2025. The advance transaction is undocumented, but the funds were to ensure that Lustre had monies available to secure a SWD well to support drilling activity in the Lustre oil field. The repayment terms are subject to negotiation. Mr. Adamo agreed to using $10,000 of the advance to fund a portion of the Cranston SWD purchase. The remaining funds have been used to satisfy general corporate purposes as of May 31, 2025.
In addition, B&B Oil LLC, for which Mr Adamo is a principal owner, reimbursed Hell Creek Crude LLC $71,680.88 for a sonic log which only benefits B&B Oil and their 3D seismic studies. HCC acquired the information while purchasing seismic data for the Midfork field.
Accounts payables contain $162,500 for each of our two outside board members who have not been receiving current board stipends. In addition, as of May 31, 2025 Laredo has recorded accounts payable to the CFO, CEO and Cat Creek Holdings for expense reports totaling $5,063, $7,375, and $14,906, respectively.
F- 13
NOTE 10 – STOCKHOLDERS’ DEFICIT
Share Based Compensation
There were no option grants in fiscal year 2025. Option grants totaling 1,100,000 shares issued under the Laredo Oil, Inc. 2011 Equity Incentive Plan expired and were cancelled, leaving 20,000,000 shares underlying option grants as of May 31, 2025 at a weighted average exercise price of $0.061 per share.
In fiscal year 2024, the Company made two option grants to the Chief Executive Officer. One grant for the purchase of 1,000,000 shares of Company’s common stock at a price of $0.066 per share was made on December 13, 2023 and the second option grant for the purchase of 3,925,000 shares of Company’s common stock at a price of $0.06 per share was made on November 27, 2023. The options vested completely at time of grant.
The Company made grants of options for the purchase of 15,075,000 shares of the Company’s 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, the 4,825,000 options previously granted under the Laredo Oil, Inc. 2011 Equity Incentive Plan 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.
| 2024 | |||
| Risk-free interest rate |
|
||
| Expected dividend yield |
|
||
| Expected volatility |
|
||
| Expected life of options | 5.0 years |
The risk-free interest rate is based upon the U.S. Treasury interest rate 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 stock options. The Company uses the simplified method for determining the expected term of its stock options.
The Company recorded share-based compensation for stock option grants totaling $0 and $1,006,156 in general, selling and administrative expense during the year ended May 31, 2025 and 2024, respectively.
Stock Options
As of May 31, 2025 and 2024, there were no unvested and unrecognized shares.
| Number of Shares |
Weighted Average
Exercise Price |
|||||||
| Balance, May 31, 2023 |
|
$ |
|
|||||
| Options granted and assumed |
|
|
||||||
| Options expired | ||||||||
| Options cancelled, forfeited |
(
|
) |
|
|||||
| Options exercised | - | - | ||||||
| Balance, May 31, 2024 |
|
$ |
|
|||||
| Options granted and assumed | ||||||||
| Options expired |
(
|
) |
|
|||||
| Options cancelled, forfeited | ||||||||
| Options exercised | - | - | ||||||
| Balance, May 31, 2025 |
|
$ |
|
|||||
F- 14
NOTE 10 – STOCKHOLDERS’ DEFICIT - continued
All stock options are exercisable upon vesting. As of May 31, 2025 and 2024, respectively there were 20,000,000 and 21,100,000 vested options outstanding at a weighted average exercise price of $0.06 and $0.08, respectively.
Restricted Stock
During fiscal year 2025, the Company sold 2,894,490 shares of common stock to accredited investors at an average price of $0.437 per share for gross proceeds of $1,265,200. As of May 31, 2025, proceeds totaling $50,000 were recorded as stock payable as the 116,279 related shares of common stock have not been issued. There were no finder’s fees related to the sales of the shares. The Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements under the Securities Act.
Warrants
Warrants to purchase 200,000 shares of common stock at a strike price of $0.43 per share were issued with the placement of a $200,000 short-term demand note bearing interest at 12% per annum. The grant date fair value of the stock warrants during the year ending May 31, 2025 totaled $21,835. The Black-Scholes option pricing model is used to estimate the fair value of warrants granted. The weighted average assumptions used in calculating the estimated fair value included a 4.0% risk free interest rate, a 0% expected dividend yield, a 95.6% expected volatility and a 2 year expected life. See Note 13.
During fiscal year ending May 31, 2024, the Company issued 1,000,000 warrants to purchase common stock at a strike price of $0.06 per share and 260,870 warrants to purchase common stock at a strike price of $0.23 per share. The grant date fair value of the stock warrants during the year ending May 31, 2024 totaled $96,768. The Black-Scholes option pricing model is used to estimate the fair value of warrants granted. The weighted average assumptions used in calculating these values included a 3.98% risk free interest rate, a 0% expected dividend yield, a 278.1% expected volatility and a 5 year expected life.
NOTE 11 – NET PROFITS INTEREST AGREEMENT
In January 2022, the Company and Lustre executed the NPI Agreement with Erehwon and Olfert Holdings, to be effective as of November 24, 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 fiscal year ending May 31, 2022, 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 Company’s Chief Financial Officer invested $356,243 in Olfert Holdings pursuant to the NPI Agreement. These three contributions fulfilled the Company’s initial capital contribution commitment under the Olfert Holdings Operating Agreement. During fiscal year ending May 31, 2023, 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 May 31, 2024, the investors had paid $358,747 of that capital call. As of May 31, 2024, Lustre had incurred approximately $3,300,000 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. Four 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.
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 Company’s 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 as of May 31, 2024. As the operator of Olfert Holdings, the Company exercises significant influence; however, pending adequate funding further development of the well has been suspended.
In conjunction with our annual fiscal year 2023 financial audit, we took an accounting impairment charge to reduce the asset value of the Olfert #11-4 well to salvage value, if any. Although we still are working to put the well into production, the well was shut-in in September 2022. Although the Company has access to a proximate salt-water disposal well, additional funding is necessary to complete the required work. Although the asset carrying value has been reduced, we will continue to investigate options to complete the well and bring it into production.
F- 15
NOTE 12 – NOTES PAYABLE
Secured Convertible Debt Contributed as Consideration for Participation Agreement
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. The promissory notes accrued interest on the outstanding principal sum at the rate of 12.0% per annum, payable quarterly starting September 30, 2023, and were convertible into the Company’s 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. Effective January 19, 2024, $575,000 of notes and accrued interest were outstanding and were contributed as part of a Participation Agreement funding the Reddig 11-21 oil well located in the Midfork field in Valley County, Montana. The notes were exchanged for a net working interest in the well, with the caveat that they would be deemed to be reinstated in full in the event the well was completed as a dry hole. In early 2025, the well was completed, became operational, and produced limited amounts of oil. Although the well was not a dry hole, it was uneconomical to operate and was shut in at the end of May 2025. Until final disposition of the well and notes is determined, the Company is reclassifying the notes and accrued interest as debt and accrued interest on the May 31, 2025 Consolidated Balance Sheet.
Convertible Debt Repaid or Converted to Common Stock as of May 31, 2025
On December 29, 2023, the Company entered into
a Securities Purchase Agreements with an accredited investor, pursuant to which the Company issued a convertible promissory note in the
principal amount of $
On
November 27, 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 $
On
September 6, 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 $
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 $
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 day following the issuance date unless the applicable note holders agree to such repayment and such terms.
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.
F- 16
NOTE 12 – NOTES PAYABLE - continued
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 Company’s 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 Company’s common stock.
The proceeds from the Convertible Notes could be used by the Company for general corporate purposes.
Short Term Demand Note
The Company issued a short term note with a principal sum of $200,000 to an accredited investor on May 20, 2025. The note bears simple interest on the unpaid principal balance at a rate equal to 12% per annum, computed on the basis of the actual number of days elapsed and a year of 365 days from the date of this Note until the principal amount and all interest accrued thereon and all other amounts owed hereunder are paid. The unpaid Principal Amount, together with any then unpaid accrued interest and all other amounts owed hereunder, shall be due and payable upon written demand by the Majority Holders at any time after November 21, 2025. In connection with this note, the Company issued warrants to purchase 200,000 shares of common stock at an exercise price of $0.43. The relative fair value of the warrants totaling $19,685 was recorded as deferred debt discount and additional paid in capital which is amortized over the term of the loan.
12% Ten Month Bridge Notes
On April 10, 2025, the Company entered into a Securities Purchase Agreement with an accredited investor pursuant to which the Company issued a 12% bridge note in the principal amount of $40,250 receiving $35,000 in net cash proceeds. The promissory note had an original issue discount of $5,250. The bridge note is due February 15, 2026 and is repaid with the first installment of $22,540 due October 15, 2025 and four equal monthly installments of $5,635 starting November 15, 2025. In the event of default (including a missed payment), the note is convertible at the option of the investor into shares of the Company’s common stock at a discount of 35% from the lowest closing bid price during the ten trading days immediately preceding the conversion date. As of May 31, 2025, the Company recorded accrued interest totaling $714 and payments of principal and interest are current.
On February 10, 2025, the Company entered into a Securities Purchase Agreement with an accredited investor pursuant to which the Company issued a 12% bridge note in the principal amount of $146,160 receiving $120,000 in net cash proceeds. The promissory note had an original issue discount of $20,160. In addition, $6,000 of debt issue costs were deducted from the gross proceeds to the Company. The bridge note is due December 15, 2025 and is repaid with the first installment of $81,849 due August 15, 2025 and four equal monthly installments of $20,462 starting September 15, 2025. In the event of default (including a missed payment), the note is convertible at the option of the investor into shares of the Company’s common stock at a discount of 35% from the lowest closing bid price during the ten trading days immediately preceding the conversion date. As of May 31, 2025, the Company recorded accrued interest totaling $8,441 and payments of principal and interest are current.
On December 17, 2024, the Company entered into a Securities Purchase Agreement with an accredited investor pursuant to which the Company issued a 12% bridge note in the principal amount of $64,960 receiving $50,000 in net cash proceeds. The bridge note had an original issue discount of $8,960. In addition, $6,000 of debt issue costs were deducted from the gross proceeds to the Company. The bridge note is due October 15, 2025 and is repaid with the first installment of $36,377 due June 15, 2025 and four equal monthly installments of $9,094 starting July 15, 2025. In the event of default (including a missed payment), the note is convertible at the option of the investor into shares of the Company’s common stock at a discount of 35% from the lowest closing bid price during the ten trading days immediately preceding the conversion date. As of May 31, 2025, the Company recorded accrued interest totaling $5,238 and payments of principal and interest are current.
F- 17
NOTE 12 – NOTES PAYABLE - continued
12% Ten Month Promissory Note
On April 10, 2025, the Company entered into a Securities Purchase Agreement with an accredited investor, pursuant to which the Company issued a 12% promissory note in the principal amount of $82,800, receiving $65,000 in net cash proceeds. The promissory note had an original issue discount of $10,800. In addition, $7,000 of debt issue costs were deducted from the gross proceeds to the Company. The note is due on February 15, 2026 and is repaid in 10 equal monthly payments of $9,273.60 commencing on May 15, 2025. In the event of default (including a missed payment), the note is convertible at the option of the investor into shares of the Company’s common stock at a discount of 35% from the lowest closing bid price during the ten trading days immediately preceding the conversion date. As of May 31, 2025, the Company recorded accrued interest totaling $791 and payments of principal and interest are current.
On December 2, 2024, the Company entered into a Securities Purchase Agreement with an accredited investor, pursuant to which the Company issued a 12% promissory note in the principal amount of $138,000, receiving $114,000 in net cash proceeds. The promissory note had an original issue discount of $18,000. In addition, $6,000 of debt issue costs were deducted from the gross proceeds to the Company. The note is due on October 15, 2025 and is repaid in 10 equal monthly payments of $15,456 commencing on January 15, 2025. In the event of default (including a missed payment), the note is convertible at the option of the investor into shares of the Company’s common stock at a discount of 35% from the lowest closing bid price during the ten trading days immediately preceding the conversion date. As of May 31, 2025, the Company recorded accrued interest totaling $742 and payments of principal and interest are current.
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, July and August, 2023, the investor contributed an additional $102,061 under the Note, bringing the aggregate principal amount to $285,061. On November 24, 2023, the investor added another $25,000 to the Note bringing the total principal outstanding to $310,061. The note remains outstanding and interest of $3,101 is being paid monthly and is current as of May 31, 2025.
12% Nine Month Promissory Notes Repaid
On May 22, 2024, the Company entered into a Securities Purchase Agreement with an accredited investor pursuant to which the Company issued a 12% promissory note in the principal amount of $94,580 receiving $75,000 in net cash proceeds. The promissory note had an original issue discount of $14,580. In addition, $5,000 of debt issue costs were deducted from the gross proceeds to the Company. The promissory note is due February 28, 2025 and is repaid with the first installment of $52,964.50 due November 30, 2024 and three equal installments of $17,655 starting December 30, 2024. In the event of default (including a missed payment), the note is convertible at the option of the investor into shares of the Company’s common stock at a discount of 39% from the lowest closing bid price during the ten trading days immediately preceding the conversion date. The note was repaid when due on February 28, 2025.
On February 22, 2024, the Company entered into a Securities Purchase Agreement with an accredited investor pursuant to which the Company issued a 12% promissory note in the principal amount of $66,000 receiving $50,000 in net cash proceeds. The promissory note had an original issue discount of $11,000. In addition, $5,000 of debt issue costs were deducted from the gross proceeds to the Company. The promissory note is due November 30, 2024 and is repaid with the first installment of $36,960 due August 30, 2024 and three equal installments of $12,320 starting August 29, 2025. In the event of default (including a missed payment), the note is convertible at the option of the investor into shares of the Company’s common stock at a discount of 39% from the lowest closing bid price during the ten trading days immediately preceding the conversion date. The note was repaid when due on November 30, 2024.
13% Nine Month Promissory Note Repaid
On December 11, 2023, the Company entered into a Securities Purchase Agreement with an accredited investor pursuant to which the Company issued a 13% promissory note in the principal amount of $74,750 receiving $60,000 in net cash proceeds. The promissory note had an original issue discount of $9,750. In addition, $5,000 of debt issue costs were deducted from the gross proceeds to the Company. The promissory note is due September 15, 2024 and is repaid in nine equal installments of $9,385.23 with the first payment due January 15, 2024. In the event of default (including a missed payment), the note is convertible at the option of the investor into shares of the Company’s common stock at a discount of 35% from the lowest closing bid price during the ten trading days immediately preceding the conversion date. The note was repaid when due on September 15, 2024.
F- 18
NOTE 12 – NOTES PAYABLE - continued
15% Nine Month Promissory Note Repaid
On October 26, 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 $97,750 and received $80,000 in net cash proceeds. The promissory note had an original issue discount of $12,750 and $5,000 in debt issue costs were deducted from the gross proceeds. The Company is amortizing the total of $17,750 recorded as debt discount using the effective interest method through the maturity dates of the convertible promissory note. The note is due nine months following the date of issuance and accrues interest at 15% per annum (22% upon the occurrence of an event of default). Accrued, unpaid interest and outstanding principal is due in nine equal monthly payments of $12,490, starting on November 30, 2023. In the event of default (including a missed payment), the note is convertible at the option of the investor into shares of the Company’s common stock at a discount of 35% from the lowest closing bid price during the ten trading days immediately preceding the conversion date. The note was repaid with the last payment due July 30, 2024.
12% One Year Promissory Notes Repaid
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) and upon event of default are convertible at 75% of the lowest closing bid price during the 10 trading days immediately preceding the conversion. Accrued, unpaid interest and outstanding principal is due in ten equal monthly payments of $22,099.10, starting on February 15, 2023. The note and accrued interest were repaid in full and the note canceled with the last and final payment made November 2023.
Secured 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 of May 31, 2025 the note is recorded as current and outstanding. Starting on January 1, 2024, the Company is accruing interest at the rate of 18.0% per annum. The accrued interest balance amounted to $361,397 as of May 31, 2025.
As partial consideration for the Lender’s 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 Company’s fifty percent (50%) interest in Cat Creek.
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. The notes are secured by the membership interest in Hell Creek Crude, LLC, a wholly owned subsidiary of the Company. Pursuant to this Note Purchase Agreement, during fiscal year 2023, the Company issued seven promissory notes in the aggregate principal amount of $540,000 and accrued interest at 12% per annum. 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 Company’s 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. In January 2024, noteholders contributed $575,000 of their notes plus accrued interest of $73,317 to the Participation Agreement pertaining to the three well drilling program in the Midfork Field in Montana (See Footnote 1). The notes were exchanged for a net working interest in the well and will participate in cash flows produced by the first well drilled. In the event of a dry hole, the notes will be reinstated at $648,317 and accrue interest on that amount thereafter. The well was in production, but is shut in as of May 31, 2025.
F- 19
NOTE 12 – NOTES PAYABLE - continued
Alleghany Notes
Schedule of Notes Payable – Related Party
| May 31, | May 31, | |||||||
| 2025 | 2024 | |||||||
| Total note payable – Alleghany | $ |
|
$ |
|
||||
| Less amounts classified as current |
|
|
||||||
| 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 bore no interest until January 1, 2022 whereupon the interest rate increased 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 May 31, 2025 and May 31, 2024, the Senior Consolidated Note is recorded as current and remains outstanding.
Paycheck Protection Program Loan
Schedule of Paycheck Protection Program
| May 31, | May 31, | |||||||
| 2025 | 2024 | |||||||
| Total PPP Loan | $ |
|
$ |
|
||||
| Less amounts classified as current |
|
|
||||||
| PPP loan, excluding current portion | $ |
|
$ |
|
||||
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 must begin paying principal and interest. In addition, the Flexibility Act extended the length of the covered period from eight weeks to 24 weeks from receipt of proceeds, while allowing borrowers that received PPP loans before June 5, 2020 to determine, at their sole discretion, a covered period of either 8 weeks or 24 weeks.
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.
F- 20
NOTE 12 – NOTES PAYABLE - continued
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 May 31, 2025, the Company has repaid all principal and interest 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 commenced on June 3, 2022. The Company was in arrears on payments on the second PPP Note and on December 5, 2023 entered into a Payment Plan arrangement for the PPP Second Draw Loan. Under the terms of the Plan, the Company agreed to pay the SBA the principal amount of $979,178 and 180 monthly payments of $5,860 which includes interest. The Company made the first payment under the Plan in December 2023. If the Company does not make the payments described in the Plan pursuant to the terms of the Plan, the entire remaining amount will be subject to collection activities by the Department of Treasury. The Company may also be subject to additional accrued interest and collection fees of 30% or more if it does not make the payments pursuant to the Plan. As of May 31, 2025, the Company is current and compliant with the restructured payment plan. As of May 31, 2025, the Company owes $887,430 with respect to the remaining balance on the Second Note.
NOTE 13 – PROVISION FOR INCOME TAXES
We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. Per the authoritative literature when it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carryforwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carryforward period.
The Company has not taken any tax positions that, if challenged, would have a material effect on the consolidated financial statements for the twelve-months ended May 31, 2025 and 2024. The Company’s tax returns for the fiscal years ended May 31, 2017 through 2024 remain subject to examination by the tax authorities.
The components of the Company’s deferred tax asset as of May 31, 2025 and 2024 are as follows:
| 2025 | 2024 | |||||||
| Net operating loss | $ |
|
$ |
|
||||
| Stock compensation |
|
|
||||||
| Impairment loss |
|
|
||||||
| Deferred compensation |
|
|
||||||
| Other |
|
|
||||||
| Valuation allowance |
(
|
) |
(
|
) | ||||
| Net deferred tax asset | $ | $ | ||||||
A reconciliation of income taxes computed at the statutory rate to the income tax amount recorded is as follows:
| 2025 | 2024 | |||||||
| Tax at statutory rate (21%) | $ |
(
|
) | $ |
(
|
) | ||
| Effect of non-taxable and non-deductible permanent differences |
|
|||||||
| Effect of change in statutory tax rate | ||||||||
| Other |
|
|
||||||
| Increase/(decrease) in valuation allowance |
|
|
||||||
| Net deferred tax asset | $ | $ | ||||||
The net federal operating loss carry forward will expire between 2030 and 2044. This carry forward may be limited upon the consummation of a business combination under IRC Section 381.
F- 21
NOTE 14 – COMMITMENTS AND CONTINGENCIES
Leases
No
office leases currently extend beyond one year. Rent expense amounted to $
Litigation
On March 20, 2023, Capex Oilfield Services, Inc. (“Capex”) filed a lawsuit against Lustre in the Montana Tenth Judicial District Court, Petroleum County, demanding payment of $377,190 plus interest and collection costs for services provided by Capex to drill the Olfert 11-4 well. On January 29, 2024, the court issued a Stipulated Judgment and Order in favor of Capex for $354,267.29 plus interest in the amount of $79,225 plus future accruing costs and interest of 18% per annum. The same day, Lustre entered into a Payment Arrangement Plan to pay $5,000 per month until the judgement is satisfied. As of May 31, 2025 and 2024, respectively, the estimated amounts due to Capex totaling $418,569 and $428,379 have been recorded in accounts payable.
On May 18, 2023, Capstar Drilling, Inc.(“Capstar”) filed a lawsuit against Lustre in the Montana Seventeenth Judicial District Court, Valley County, demanding payment of $298,050 plus interest and collection costs for services provided by Capstar to drill the Olfert 11-4 well. On July 18, 2024, the court issued a Order to Adopt Stipulation to Judgment in favor of Capstar in the sum of $276,815 principal balance, plus interest in the amount of $49,675, plus court costs for a total judgment of $326,650 with post judgment interest of 10% per annum. As of May 31, 2025 and 2024, respectively, the estimated amounts due to Capstar totaling $365,489 and $333,354 have been recorded in accounts payable.
On August 29, 2023, Warren Well Service, Inc. (“Warren Well”) 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 Olfert 11-4 well. As of May 31, 2025, the case was settled for the $164,235 balance plus accrued interest of 10% per year and the Company agreed to pay Warren Well $750 per month. As of May 31, 2025 and 2024, respectively, the estimated amounts due to Warren Well totaling $213,114 and $196,679 have been recorded in accounts payable.
On January 14, 2024 Nine Downhole Technologies, LLC aka Nine Energy Service (“Nine Downhole”) filed a complaint against Lustre in the Montana Tenth Judicial District Court, Petroleum County, demanding payment plus accrued interest until the debt is paid in full. On June 1, 2025, Nine Downhole’s Motion for a summary disposition was granted in the amount of $41,842 together with costs and any post judgment interest until amount is paid in full. As of May 31, 2025, $38,447 has been recorded in accounts payable.
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 the Lender 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.
NOTE 15 – SEGMENT INFORMATION
The Company operates as a single reporting segment engaged in acquisition and exploration efforts to find and develop oil reserves. The Chief Operating Decision Makers are the Company’s Chief Executive Officer and its Chief Financial Officer, who together (the “CODM”) evaluate company performance based on the consolidated financial statements prepared in accordance with GAAP included herein.
The CODM conducts quarterly financial reviews focusing on the Consolidated Statement of Operations, Balance Sheets and Statements of Cash Flows beginning on page F-3 of this report. Investment decisions, including the selection of leased mineral rights acreage and development, are made based on expected return on investment.
NOTE 16 – SUBSEQUENT EVENTS
Subsequent to May 31, 2025,
the Company issued
shares to an accredited investor who deposited $
On
July 2, 2025, the Company paid $
During the first fiscal quarter of 2026, the Company sold Subordinated Promissory Notes in the total principal amount of $1,189,300 and warrants to purchase 1,189,300 shares of Laredo Oil, Inc. common stock at $0.43 per share.
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