Laredo Oil, Inc. - FORM 10-Q - January 14, 2011

Attached files

file	filename
EX-32.1 - CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350 SIGNED BY THE CHIEF EXECUTIVE OFFICER - Laredo Oil, Inc.	exhibit_32-1.htm
EX-32.2 - CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350 SIGNED BY THE CHIEF FINANCIAL OFFICER - Laredo Oil, Inc.	exhibit_32-2.htm
EX-31.2 - CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - Laredo Oil, Inc.	exhibit_31-2.htm
EX-31.1 - CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - Laredo Oil, Inc.	exhibit_31-1.htm

U.S. SECURITIES AND EXCHANGE

COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2010

Commission File Number 333-153168

Laredo Oil, Inc.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

2203 Townes Lane

Austin, Texas 78703

(Address of principal executive offices) (Zip code)

(512) 961-3801

(Registrant's telephone number, including area code)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 last 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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). Yes o No o Not Applicable x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," "non-accelerated filer," and "smaller reporting company" in Rule 12b-2 of the

Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 or the Exchange Act). Yes o No x

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:

51,000,013 shares of common stock issued and outstanding as of January 14, 2010.

PART I FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Balance Sheets as of November 30, 2010 (unaudited) and May 31, 2010	4
	Statements of Operations (unaudited)	5
	Statements of Stockholders’ (Deficit) Equity (unaudited)	6
	Statements of Cash Flows (unaudited)	7
	Notes to Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	13

Item 4.	Controls and Procedures	13


PART II OTHER INFORMATION

Item 1.	Legal Proceedings	14

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14

Item 3.	Defaults Upon Senior Securities	14

Item 4.	Submission of Matters to a Vote of Security Holders	14

Item 5.	Other Information	14

Item 6.	Exhibits	14

Signatures		15

ITEM 1. FINANCIAL STATEMENTS

The following unaudited financial statements have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such SEC rules and regulations; nevertheless, the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements and the notes attached hereto should be read in conjunction with the financial statements and notes included in the Company's Form 10-K, which was filed with the SEC on September 14, 2010. In the opinion of the Company, all adjustments, including normal recurring adjustments necessary to present fairly the financial position of Laredo Oil, Inc., as of November 30, 2010 and the results of its operations for the three and six month periods and cash flows for the six month period then ended, have been included. The results of operations for the three and six month periods ended November 30, 2010 are not necessarily indicative of the results for the full year.

Laredo Oil, Inc.

(An Exploration Stage Enterprise)

Balance Sheets

	November 30,			May 31,
	2010			2010
	(unaudited)
ASSETS
Current Assets
Cash	$	186,749		$	157,005
Prepaid Expenses		13,338			33,350
Debt Financing Fees, net of accumulated amortization of $34,471 and 6,085		34,444			62,665

TOTAL ASSETS	$	234,531		$	253,020

LIABILITIES & (DEFICIT) EQUITY
Current Liabilities
Accounts Payable	$	28,179			13,626
Accrued Liabilities		85,568			252,754
Notes Payable		225,000			75,000
Convertible Debt, net of unamortized debt discount of $209,489 and $215,552		165,511			128,198

Total Liabilities		504,258			469,498

Equity
Common Stock Subscribed		-			-
Preferred Stock: $0.0001 par value; 10,000,000 shares authorized; no shares issued or outstanding		-			-
Common Stock: $0.0001 par value; 90,000,000 shares authorized; 51,000,013 and 50,000,013 issued and outstanding		5,100			5,000
Additional Paid in Capital		1,449,023			720,842
Accumulated Deficit during Exploration Stage		(1,723,850	)		(942,320	)
Total (Deficit) Equity		(269,727	)		(216,478	)

TOTAL LIABILITIES & (DEFICIT) EQUITY	$	234,531		$	253,020

The accompanying notes are an integral part of these financial statements.

Laredo Oil, Inc.

(An Exploration Stage Enterprise)

Statements of Operations

(Unaudited)

	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended			Date of Inception (March 31, 2008) Thru
	November 30, 2010			November 30, 2009			November 30, 2010			November 30, 2009			November 30, 2010

Revenue	$	-		$	-		$	-		$	-		$	-

Cost of revenue		-			-			-			-			-

Gross profit		-			-			-			-			-

General, selling and administrative expenses		155,802			95,173			329,690			99,482			1,124,023
Consulting and professional services		23,250			-			371,982			-			482,315
Mineral expenditures		-			-			-			-			16,500

Operating loss		(179,052	)		(95,173	)		(701,672	)		(99,482	)		(1,622,838	)

Non-operating income
Interest expense		(42,767	)		(122	)		(79,858	)		(122	)		(101,012	)

Net loss	$	(221,819	)	$	(95,295	)	$	(781,530	)	$	(99,604	)	$	(1,723,850	)

Net loss per share, basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.02	)	$	(0.00	)
Weighted average number of common shares outstanding		51,000,013			40,138,889			50,699,467			35,439,560

The accompanying notes are an integral part of these financial statements.

Laredo Oil, Inc.

(An Exploration Stage Enterprise)

Statement of Stockholders' (Deficit) Equity

From Inception March 31, 2008 to November 30, 2010

(Unaudited)

																	Deficit accumulated
	Common Stock						Preferred Stock				Additional Paid			Common Stock			During Exploration			Total
	Shares			Amount			Shares		Amount		in Capital			Subscribed			Stage			Equity

Common shares issued to founders		18,750,000		$	1,875			-	$	-	$	7,125		$	-		$	-		$	9,000
Net loss		-			-			-		-		-			-			(36	)		(36	)
Balance at May 31, 2008		18,750,000			1,875			-		-		7,125			-			(36	)		8,964
Common stock subscribed		-			-			-		-		-			23,625			-			23,625
Net loss		-			-			-		-		-			-			(21,330	)		(21,330	)

Balance at May 31, 2009		18,750,000			1,875			-		-		7,125			23,625			(21,366	)		11,259

Issuance of common stock		12,500,000			1,250			-		-		28,750			(23,625	)		-			6,375
Cancellation of common stock		(18,750,000	)		(1,875	)		-		-		(1,875	)		-			-			-
Loan converted to equity		-			-			-		-		12,400			-			-			12,400
Issuance of common stock		37,500,013			3,750			-		-		446,250			-			-			450,000
Issuance of warrants		-			-			-		-		224,442			-			-			224,442
Net loss		-			-			-		-		-			-			(920,954	)		(920,954	)

Balance at May 31, 2010		50,000,013		$	5,000			-	$	-	$	720,842		$	-		$	(942,320	)	$	(216,478	)

Issuance of common stock		1,000,000			100			-		-		449,900			-			-			500,000
Issuance of warrants		-			-			-		-		228,281			-			-			228,281
Net loss		-			-			-		-		-			-			(781,530	)		(781,530	)

Balance at November 30, 2010		51,000,013		$	5,100			-	$	-	$	1,449,023		$	-		$	(1,723,850	)	$	(269,727	)

The accompanying notes are an integral part of these financial statements.

Laredo Oil, Inc.

(An Exploration Stage Enterprise)

Statements of Cash Flows

(Unaudited)

							March 31, 2008
	Six Months Ended			Six Months Ended			(Date of Inception) through
	November 30, 2010			November 30, 2009			November 30, 2010

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(781,530	)	$	(99,604	)	$	(1,723,850	)
Adjustments to reconcile net loss to net cash used in operating activities
Common stock issued for services		207,067			-			657,067
Amortization of debt discount		27,277				-		36,167
Amortization of debt financing fees		34,471				-		40,556
Changes in operating assets and liabilities
Decrease in prepaid expenses		20,012			-			(13,338	)
Increase in accounts payable and accrued liabilities		(152,553	)		65,265			113,747

NET CASH USED IN OPERATING ACTIVITIES		(645,256	)		(34,339	)		(889,651	)

CASH FLOWS FROM INVESTING ACTIVITIES		-			-			-

CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from loans		-			-			12,400
Proceeds from notes payable		150,000			25,000			225,000
Proceeds from issuance of convertible notes payable		25,000			-			300,000
Issuance of common stock		500,000			30,000			539,000

NET CASH PROVIDED BY FINANCING ACTIVITIES		675,000			55,000			1,076,400

Net increase in cash		29,744			20,661			186,749

Cash at beginning of period		157,005			114			-

CASH AT END OF PERIOD	$	186,749		$	20,775		$	186,749

Supplemental Disclosures
Interest paid	$	-		$	-		$	-
Taxes Paid	$	-		$	-		$	-
Debt financing expenses on convertible debt	$	6,250		$			$	75,000
Officer advances converted to equity	$	-		$	12,400		$	12,400
Issuance of warrants in connection with bridge financing	$	21,214		$	-		$	245,656

The accompanying notes are an integral part of these financial statements.

Laredo Oil, Inc.

(An Exploration Stage Enterprise)

Notes to Financial Statements

November 30, 2010

(Unaudited)

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows as of and for the period ended November 30, 2010 and for all periods presented have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's May 31, 2010 audited financial statements as reported in Form 10-K. The results of operations for the period ended November 30, 2010 are not necessarily indicative of the operating results for the full year ended May 31, 2011.

Laredo Oil, Inc. (the Company) was incorporated under the laws of the State of Delaware on March 31, 2008 under the name of “Laredo Mining, Inc.” with authorized common stock of 90,000,000 shares at $0.0001 par value and authorized preferred stock of 10,000,000 shares at $0.0001 par value. October 21, 2009 the name was changed to “Laredo Oil, Inc.” Effective October 21, 2009, all shares of the Company’s common stock issued and outstanding were combined and reclassified on a 1-to-6.25 basis. In connection with this change, the Certificate of Incorporation was amended to retain the par value at $0.0001 per share.

The Company currently is in the early stage of executing its business plan and, in accordance with ASC 915 “Development Stage Entities,” is considered an Exploration Stage Enterprise. The Company has been in the exploration stage since its formation and has not yet realized any revenues from its planned operations.

NOTE 2 - GOING CONCERN

Future issuances of the Company's equity or debt securities will be required in order for the Company to continue to finance its operations and continue as a going concern. The Company's present revenues are insufficient to meet operating expenses.

The financial statements of the Company have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred cumulative net losses of $1,723,850 since its inception and requires capital to implement its strategic plan. The Company's ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company's contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raises substantial doubt about the Company's ability to continue as a going concern.

The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments as defined by FASB ASC 825-10-50 include cash, trade accounts receivable, and accounts payable and accrued expenses. All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at November 30, 2010.

FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Laredo Oil, Inc.

(An Exploration Stage Enterprise)

Notes to Financial Statements

November 30, 2010

(Unaudited)

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Level 1. Observable inputs such as quoted prices in active markets;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

The Company does not have any assets or liabilities measured at fair value on a recurring basis at November 30, 2010 and May 31, 2010. The Company did not have any fair value adjustments for assets and liabilities measured at fair value on a nonrecurring basis during the periods ended November 30, 2010 and May 31, 2010.

SHARE BASED EXPENSES

ASC 718 "Compensation - Stock Compensation" codified SFAS No. 123 prescribes accounting and reporting standards for all stock-based payment awards to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights. Stock based payment awards may be classified as either equity or liabilities. The Company determines if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity's past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50 "Equity - Based Payments to Non-Employees" which codified SFAS 123 and the Emerging Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services". 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.

We account for share-based compensation using the Black-Scholes option pricing model to estimate the fair value of share-based awards at the date of grant. The Black-Scholes model requires the use of highly subjective assumptions, including expected life, expected volatility and expected risk-free rate of return. Other reasonable assumptions could provide differing results.

NOTE 4 - LOSS PER SHARE

Basic earnings per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. As of November 30, 2010, warrants to purchase 1,745,000 shares of common stock were not included in the computation of diluted net loss per share because they were anti-dilutive. In addition, shares of common stock issuable on conversion of notes payable were not included in the computation of diluted net loss per share because they were anti-dilutive. As of November 30, 2010 and since inception, the Company had no dilutive potential common shares.

Effective October 21, 2009, all shares of the Company’s common stock issued and outstanding were combined and reclassified on a 1-to-6.25 basis. The effect of this stock split has been retroactively applied to all periods presented.

	For the three months ended						For the six months ended
	November 30,						November 30,
	2010			2009			2010			2009
Numerator - net loss attributable to
common stockholders	$	(221,819	)	$	(95,295	)		(781,530	)	$	(99,604	)

Denominator - weighted average
number of common shares outstanding		51,000,013			40,138,889			50,699,467			33,439,560

Basic and diluted loss
per common share	$	0.00		$	0.00			(0.02	)	$	0.00

NOTE 5 - COMMITMENTS AND CONTINGENCIES

The Company is not presently involved in any litigation.

Laredo Oil, Inc.

(An Exploration Stage Enterprise)

Notes to Financial Statements

November 30, 2010

(Unaudited)

NOTE 6 - RELATED PARTY TRANSACTIONS

On October 16, 2009, Nancy L. Farrell, formerly the Company’s President, Secretary, Treasurer, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer and sole director, entered into a purchase agreement with Mark See, pursuant to which Mr. See acquired 18,750,000 shares of common stock of the Company for aggregate consideration of $225,000. Upon the closing of the purchase, Mr. See acquired 60% of the Company’s issued and outstanding common stock and attained voting control of the Company. Ms. Farrell resigned from all of her positions with the Company. Immediately prior to her resignation on October 16, 2009, she appointed Mark See to serve as the Company’s Chief Executive Officer, Secretary and sole director. On October 19, 2009, Mr. See entered into a cancellation agreement with the Company, pursuant to which he agreed to return an aggregate of 18,750,000 shares of the Company’s common stock to the Company for cancellation. Such shares were returned to the authorized capital of the Company.

In October, the sole director, Ms. Farrell, forgave debt to the Company in the amount of $12,400 as part of the change of control transaction. This amount has been recorded as an addition to paid in capital.

During 2010, David Morris who is a shareholder owning over 5% of the Company’s stock was reimbursed $3,279.69 for expenses incurred for activities benefitting the Company.

In both November and December, the Company issued a note payable (see Note 8) to Mr. Kenneth Lipson who is a shareholder owning over 5% of the Company’s common stock.

NOTE 7 - STOCKHOLDERS' EQUITY

The stockholders' equity section of the Company contains the following classes of capital stock as of November 30, 2010

● Preferred Shares, $ 0.0001 par value: 10,000,000 shares authorized.

● Common Stock, $ 0.0001 par value: 90,000,000 shares authorized; 50,000,013 shares issued and outstanding.

On March 31, 2008 the Company issued a total of 18,750,000 shares of common stock to one director for total cash of $9,000.

On June 4, 2009 the Company issued a total of 12,500,000 shares of common stock to various individuals for cash in the amount of $0.0024 per share for a total of $30,000 to complete the Company’s S-1 offering.

On October 19, 2009, the board of directors of the Company approved the issuance of an aggregate of 37,500,013 shares of the Company’s common stock as consideration for services rendered to the Company for a total fair market value of $450,000.

On July 26, 2010, Laredo Oil, Inc. “the Company” entered into a Stock Purchase Agreement with Seaside 88, LP and Sutter Securities Incorporated (the “Purchase Agreement”) for the private placement of 1,000,000 shares of its common stock and warrants to purchase 750,000 shares of its common stock to Seaside 88, LP for an aggregate purchase price of $500,000, or $0.50 per share. The transactions contemplated by the agreement closed on July 27, 2010. Sutter Securities Incorporated received 225,000 warrants, with substantially the same terms as those warrants received by Seaside 88, LP, as compensation for its services as the placement agent in connection with this transaction. The warrants are immediately exercisable following issuance, have a term of exercise of 5 years and an exercise price of $0.50 per share. The shares of common stock offered in the private placement and the shares issuable upon exercise of the warrants have piggy-back registration rights if the Company elects to file a registration statement in the future, subject to customary underwriter cut-backs. The shares are price protected in the event the Company issues common stock to another investor at a price below $0.50 per share, until the Company raises additional financing of at least $500,000. Moreover, should the Company fail to raise $5,000,000 in equity within six months from the closing date, another one million shares will be issued to the investor and the warrant exercise price will be adjusted to $0.25 per share for all warrants issued in connection with this financing.

As of November 30, 2010, the Company has not granted any stock options.

The following table summarizes information about options/warrants granted during the three month period ended July 31, 2010:

	Number of Shares		Weighted Average Exercise Price
Balance, May 31, 2010		707,500	$	2.00
Warrants granted and assumed		1,037,500		0.59
Warrants expired		—		—
Warrants cancelled, forfeited		—		—
Warrants exercised		—		—

Balance, November 30, 2010		1,745,000	$	1.16

Laredo Oil, Inc.

(An Exploration Stage Enterprise)

Notes to Financial Statements

November 30, 2010

(Unaudited)

NOTE 7 - STOCKHOLDERS' EQUITY - continued

During the six months ended November 30, 2010, the Company issued warrants for 62,500 shares of common stock with an exercise price of $2.00 as part of convertible debt offered totaling $25,000, see Note 8 for further discussions. In addition, the Company issued warrants for 750,000 shares of common stock with an exercise price of $0.50 in connection with the issuance of 1,000,000 shares of common stock for $500,000. Further warrants for 225,000 shares of common stock were issued with an exercise price of $0.50 per share to the placement agent for this investment. All warrants as of November 30, 2010 are exercisable.

NOTE 8 - NOTES PAYABLE

On November 22, 2010, the Company entered into a Loan Agreement with Alleghany Capital Corporation ("Alleghany") for up to $250,000. The first loan installment of $150,000 contemplated by the agreement closed on November 22, 2010 and the second loan installment of $100,000 was funded December 22, 2010. The note accrues on the outstanding principal sum at the rate of 6% per annum, the interest of which will be payable in either cash or in kind semi-annually, and the note is due the earlier of either the date on which the Company raises capital of at least $500,000 or December 31, 2011.

During the year ended May 31, 2010, Laredo Oil, Inc. offered debts in the amount of $300,000 pursuant to a convertible Note and Warrant Purchase Agreement (the “Purchase Agreement”). .

Pursuant to the Purchase Agreement, the Subordinated Convertible Promissory Notes (“Notes”), at the option of the holder, are either redeemable at par or convertible at a 20% discount to securities sold in a future financing greater than $7.5 million (the “New Financing”). The Company cannot prepay the Notes prior to the New Financing. Notes elected for redemption will be repaid with accrued interest at the close of the New Financing. The Notes bear interest at a rate of ten percent per annum and if not redeemed, are automatically converted to the securities issued under the New Financing. The Purchase Agreement gives the Note holders five year Warrants to Purchase Stock of Laredo Oil, Inc. to purchase 750,000 shares of the same security, at the same price, as that issued in the New Financing.

As of November 30, 2010, the Company had issued nine convertible notes totaling $300,000 related to the $300,000 Purchase Agreement. One convertible note for $25,000 was issued during the quarter ended November 30, 2010. In addition, the Company issued warrants to purchase 770,000 aggregate shares of capital stock as of November 30, 2010, of which 62,500 were issued during the quarter ended November 30, 2010. These warrants are exercisable for five years from the date of the Notes and warrants. The exercise price of each warrant will be equal to the lesser of the conversion price of the corresponding New Financing or $2.00. Total proceeds from the issuance of the Notes were allocated between the notes and warrants on a relative fair value basis. The total value was allocated to the warrants based on the date of each grant. The fair value of the warrants was determined using the Black-Scholes option pricing model based on the following weighted average assumptions:

	2010

Risk-free interest rates		2.34	%
Contractual life	2.5 years
Expected volatility		117.59-150.66	%
Dividend yield		0	%

The value of the warrants was recorded as a deferred debt discount against the proceeds of the Notes received and is being amortized over an expected 30-month expected life of each warrant.

The notes are convertible at a 20% discount to the share price of the offering in the New Financing. A debt financing premium has been recorded as an asset in conjunction with this issuance. The financing premium is being amortized over the expected 12-month term of each note.

In November and December, 2009, the Company respectively entered into a $25,000 and $50,000 bridge note with a related party (see Note 6). Interest expense accrues on both notes at a rate of 7% per annum. The term of the notes are that both outstanding principal and accrued interest are to be repaid within one week of the Company’s receiving permanent financing of at least $2.5 million. On November 30, 2010 the principal amount outstanding was $75,000 and interest accrued was $3,787.

During fiscal year 2010, a $12,400 note payable was forgiven by the former director as part of the change of control which occurred on October 16, 2009 (see Note. 6).

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains forward-looking statements that involve risk and uncertainties. We use words such as "anticipate", "believe", "plan", "expect", "future", "intend", and similar expressions to identify such forward-looking statements. Investors should be aware that all forward-looking statements contained within this filing are good faith estimates of management as of the date of this filing. Our actual results could differ materially from those anticipated in these forward-looking statements.

RESULTS OF OPERATIONS

Laredo Oil, Inc. is an Exploration Stage Enterprise engaged in the acquisition of mature oil fields and the recovery of stranded oil from those fields using enhanced oil recovery methods.

From its inception through October 2009, the Company was primarily engaged in acquisition and exploration efforts for mineral properties. In October 2009, the Company shifted its focus to acquiring mature oil fields with the intention of recovering stranded oil using enhanced oil recovery methods.

The Company plans to use an Enhanced Oil Recovery (“EOR”) method entitled Underground Gravity Drainage (‘UGD”). This method uses conventional mining processes to establish a chamber underneath an existing oil field from where closely spaced wellbores can be drilled up into the reservoir, using gravity to then drain the targeted reservoir through the wellbores. This method is applicable to mature oil fields that have very specific geological characteristics. The Company has done extensive research and has identified approximately 100 oil fields within the United States qualified for UGD recovery methods. The Company intends 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 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.

We have not earned any revenues to date. We do not anticipate earning revenues until such time as we acquire our first targeted oil field. We are presently pursuing negotiations for targeted fields but can provide no assurance that we will be successful in our acquisition efforts.

Our shares are currently listed for trading on the Over-the-Counter Bulletin Board under the symbol LRDC. As of the date of this report, there has been light trading for our common stock and we cannot provide assurance that an active trading market for our securities will ever develop.

LIQUIDITY & CAPITAL RESOURCES

We incurred operating expenses of $221,819 and $95,295 for the three months and $781,530 and $99,604 for the six months ended November 30, 2010 and 2009, respectively. These expenses consisted of general operating expenses incurred in connection with the day to day operation of our business, the preparation and filing of our registration statement and required reports, and costs associated with fund raising activities. The increase in expenses for the three and six months ended November 30, 2010 as compared to the same period in 2009 is primarily attributable to payroll expenses for the newly appointed CEO and CFO of the Company and fund raising costs.

The Company has no revenue to date from its operations and its ability to implement its plans for the future will depend on the future availability of financing. We estimate that we will require up to $50 million to enable the Company to acquire two targeted mature oil fields and implement its UGD enhanced oil recovery technique in the smaller of the two fields. The Company intends to raise funds through private placements of the Company’s stock and through borrowing. The financing activities of the Company are current and ongoing, and it will implement its strategy as the timing and amount of financing allow. However, there can be no assurance that we will be successful in obtaining additional capital for such activities from the sale of its capital stock, or in otherwise raising substantial capital.

Our cash in the bank at November 30, 2010 was $186,749. In November 2010, the Company issued a note for $150,000 to Alleghany Capital Corporation, and in June 2010, the Company issued the remaining $25,000 convertible note related to the $300,000 Purchase Agreement for $25,000 with 62,500 warrants to purchase stock pursuant to the terms of the Purchase Agreement.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued

LIQUIDITY & CAPITAL RESOURCES - continued

On July 26, 2010, Laredo Oil, Inc. “the Company” entered into a Stock Purchase Agreement with Seaside 88, LP and Sutter Securities Incorporated (the “Purchase Agreement”) for the private placement of 1,000,000 shares of its common stock and warrants to purchase 750,000 shares of its common stock to Seaside 88, LP for an aggregate purchase price of $500,000, or $0.50 per share. The transactions contemplated by the agreement closed on July 27, 2010. Sutter Securities Incorporated received 225,000 warrants, with substantially the same terms as those warrants received by Seaside 88, LP, as compensation for its services as the placement agent in connection with this transaction. The warrants are immediately exercisable following issuance, have a term of exercise of 5 years and an exercise price of $0.50 per share. The shares of common stock offered in the private placement and the shares issuable upon exercise of the warrants have piggy-back registration rights if the Company elects to file a registration statement in the future, subject to customary underwriter cut-backs. The shares are price protected in the event the Company issues common stock to another investor at a price below $0.50 per share until the Company raises additional financing of at least $500,000. Moreover, should the Company fail to raise $5,000,000 in equity within six months from the closing date, another one million shares will be issued to the investor and the warrant exercise price will be adjusted to $0.25 per share for all warrants issued in connection with this financing.

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk is confined to our cash equivalents. We invest in high-quality financial instruments and we believe we are subject to limited credit risk. Due to the short-term nature of our cash, we do not believe that we have any material exposure to interest rate risk arising from our investments.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

The Company’s Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company’s controls and procedures (as defined in the Securities Act of 1934 Rule 13a-15(e) or Rule 15d-15(e)) as of the end of the period covered by this report, have concluded that the Company’s disclosure controls and procedures are not effective to give reasonable assurance that the information required to be disclosed in reports that the Company files under the Exchange Act is recorded, processed, summarized and reported as and when required.

Our size has prevented us from being able to employ sufficient resources to enable us to have an adequate level of supervision and segregation of duties within our internal control system. There is one person involved in processing transactions. Therefore, it is difficult to effectively segregate accounting duties. While we strive to segregate duties as much as practicable, there are insufficient financial resources to justify additional staff. As a result, this significant internal control deficiency is not expected to be remediated until the Company secures customers and additional financial resources. This lack of segregation of duties leads management to conclude that the Company’s disclosure controls and procedures are not effective to give reasonable assurance that the information required to be disclosed in reports that the Company files under the Exchange Act is recorded, processed, summarized and reported as and when required.

(b) Changes in Internal Control Over Financial Reporting

None.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. 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:

3.1	Certificate of Incorporation, included as Exhibit 3.1 in our Form S-1 filed August 25, 2008, File No. 333-153168 and incorporated herein by reference.

3.2	Certificate of Amendment of Certificate of Incorporation, included as Exhibit 10.1 to our Form 8-K filed October 22, 2009 and incorporated herein by reference.

3.3	Bylaws, included as Exhibit 3.2 in our S-1 filed August 25, 2008, File No. 333-153168 and incorporated herein by reference.

31.1	Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

31.2	Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.1	Certificate Pursuant to 18 U.S.C. Section 1350 signed by the Chief Executive Officer

32.2	Certificate Pursuant to 18 U.S.C. Section 1350 signed by the Chief Financial Officer

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

LAREDO OIL, INC.

(Registrant)


Date: January 14, 2011	By:	/s/ Mark See
		Mark See
		Chief Executive Officer and sole Director


Date: January 14, 2011	By:	/s/ Bradley E. Sparks
		Bradley E. Sparks
		Chief Financial Officer and Treasurer

Attached files

Laredo Oil, Inc. Reports

Also read