RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

3 Months Ended

Aug. 31, 2024

Restatement Of Previously Issued Financial Statements

RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

NOTE 2 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

Subsequent to the initial issuance of the Company’s 2023 financial statements on September 23, 2023, management reconsidered the estimate previously applied in its valuation of the Olfert 11-4 exploratory well drilled in the spring and summer of 2022. The well encountered salt-water in amounts making it uneconomical to operate due to the lack of a proximate salt-water disposal well and was shut-in during September 2022 pending gaining access to a closer disposal well. Two years later, the well remains shut-in as the Company has yet to economically solve the water disposal issue. Until a solution is found, the well is unevaluated and written down, although the Company continues to plan on developing the well if feasible. After experiencing continued losses in its equity method investment in Cat Creek Holdings, LLC, the Company has reconsidered its valuation of the entity and written it down to zero.

The following table summarizes the impacts of the changes in estimates on the Company’s financial statements for the period ended August 31, 2023:

Condensed Consolidated Balance Sheet

	Impact of change of estimates
	As previously reported			Adjustments			As Restated August 31, 2023

Cash and cash equivalents and restricted cash	$	2,951		$	-		$	2,951
Receivables		175,000			-			175,000
Prepaid expenses and other current assets		35,359			-			35,359
Total Current Assets		213,310			-			213,310

Property and Equipment
Oil and gas acquisition and drilling costs		4,434,055			(4,089,201	)		344,854
Property and equipment, net		204,700			(55,754	)		148,946
Total Property and Equipment, net		4,638,755			(4,144,955	)		493,800

Other assets		30,000			-			30,000
Equity method investment – Olfert		37,630			(37,630	)		-
Equity method investment – Cat Creek		228,832			(228,832	)		-

TOTAL ASSETS	$	5,148,527		$	4,411,417		$	737,110

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable	$	2,180,468		$	241,545		$	2,422,013
Accrued payroll liabilities		2,491,328			-			2,491,328
Accrued interest		278,576			-			278,576
Deferred well development costs		1,799,260			-			1,799,260
Convertible debt, net of debt discount and debt issuance costs		878,388			-			878,388
Revolving note		1,035,061			-			1,035,061
Note payable – related party		292,099			-			292,099
Note payable – Alleghany, net of debt discount		617,934			-			617,934
Note payable, current portion		528,568			-			528,568
Total Current Liabilities		10,101,682			241,545			10,343,227

Asset retirement obligation		69,482			51,590			121,072
Long-term note, net of current portion		456,382			-			456,382
Total Noncurrent Liabilities		525,864			51,590			577,454

TOTAL LIABILITIES		10,627,546			293,135			10,920,681

Commitments and Contingencies

Stockholders’ Deficit
Preferred stock: $0.0001 par value; 10,000,000 shares authorized; none issued and outstanding		-			-			-
Common stock: $0.0001 par value; 120,000,000 shares authorized; 66,220,206 issued and outstanding as of August 31 and May 31, 2023	$	6,622			-		$	6,622
Additional paid in capital		10,711,488			74,225			10,785,713
Accumulated deficit		(16,197,129	)		(4,778,777	)		(20,975,906	)

Total Stockholders’ Deficit		(5,479,019	)		(4,704,552	)		(10,183,571	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	5,148,527		$	(4,411,417	)	$	737,110

Condensed Consolidated Statements of Operations

	As previously reported			Adjustments			Quarter ended August 31, 2023 (Restated)
Revenue	$	-		$	-		$	-

Direct costs		-			-			-

Gross profit (loss)		-			-			-

General, selling and administrative expenses		1,177,124			(2,163	)		1,174,961
Consulting and professional services		174,618			-			174,618

Total Operating Expense		1,351,742			(2,163	)		1,349,579

Operating loss		(1,351,742	)		2,163			(1,349,579	)

Other income/(expense)
Other non-operating income		175,000			-			175,000
Gain on sale of assets		175,000			-			175,000
Equity method loss/impairment		(20,662	)		20,662			-
Interest expense, net		(96,386	)		(23,745	)		(120,131	)

Net loss	$	(1,118,790	)		(920	)	$	(1,119,710	)

Net loss per share, basic and diluted	$	(0.02	)				$	(0.02	)

Weighted average number of basic and diluted common shares outstanding		66,220,306						66,220,306

Condensed Consolidated Statement of Cash Flows

							Quarter ended
	As previously reported			Adjustment			August 31, 2023 (Restated)

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,118,790	)		(920	)	$	(1,119,710	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Stock based compensation expense		721,110			-			721,110
Amortization of debt discount		13,578			-			13,578
Equity method investment loss/impairment		20,662			(20,662	)		-
Depreciation		5,100			(618	)		4,482
Accretion expense		1,544			(1,544	)		-
Gain on sale of assets		(175,000	)		-			(175,000	)
Changes in operating assets and liabilities:
Accounts receivable – related party		1,779			-			1,779
Prepaid expenses and other current assets		1,190			-			1,190
Accounts payable and accrued liabilities		158,405			(938	)		157,467
Accrued payroll liabilities		228,878			-			228,878
Accrued interest		68,162			-			68,162

NET CASH USED IN OPERATING ACTIVITIES		(73,382	)		(24,682	)		(98,064	)

CASH FLOWS FROM INVESTING ACTIVITIES
Investment in oil and gas field acquisition and drilling costs		(62,846	)		24,682			(38,164	)
NET CASH USED IN INVESTING ACTIVITIES		(62,846	)		24,682			(38,164	)

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of convertible debt		(59,988	)		-			(59,988	)
Proceeds from notes payable and revolving note		187,061			-			187,061
PPP loan repayments		(1,648	)		-			(1,648	)

NET CASH PROVIDED BY FINANCING ACTIVITIES		125,425			-			125,425

Net change in cash and cash equivalents		(10,803	)		-			(10,803	)

Cash and cash equivalents at beginning of period		13,754			-			13,754

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	2,951			-		$	2,951

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest expense	$	14,642			-		$	14,642
Cash paid for income taxes	$	-			-		$	-

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Oil and gas acquisition costs in accounts payable	$	175,913		$	(175,913	)	$	-
Cash to be received for sale of fixed assets	$	-		$	175,000		$	175,000


Condensed Consolidated Statement of Stockholders’ Deficit

														Total
	Common Stock				Preferred Stock				Additional		Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Paid In Capital		Deficit			Deficit

Balance at August 31, 2023 -as previously reported		66,220,306		6,622		-		-		10,711,488		(16,197,129	)		(5,479,019	)

Gain on sale of related party asset		-		-		-		-		74,225		-			74,225

Net Loss adjustments		-		-		-		-		-		(4,778,777	)		(4,778,777	)

Balance at August 31, 2023 (Restated)		66,220,306	$	6,622		-	$	-	$	10,785,713	$	(20,975,906	)	$	(10,183,571	)

Laredo Oil, Inc. 10-Q