10-Q: Laredo Oil Reports Q3 2026 Results, Focus on UGD

Laredo Oil, Inc. filed its Form 10-Q for the quarter ended February 28, 2026, detailing operational results, financial condition, and ongoing strategic initiatives, including its focus on Underground Gravity Drainage (UGD) technology.

Summary

• Laredo Oil, Inc. reported its financial results for the third quarter of fiscal year 2026, ending February 28, 2026.
• The company continues to focus on its Underground Gravity Drainage (UGD) business model, which requires substantial investment.
• Revenue for the nine months ended February 28, 2026, was $3,141, a decrease from $9,423 in the prior year period.
• Operating expenses from continuing operations increased significantly to $5,430,629 for the nine months ended February 28, 2026, compared to $1,700,723 in the prior year period, largely due to stock option grants and increased professional fees.
• The company has a substantial accumulated deficit and has incurred losses since inception, raising substantial doubt about its ability to continue as a going concern.
• Management is undertaking steps to improve operations, including raising equity funds and managing expenses.
• The company is exploring international UGD opportunities in Argentina, Mexico, the Middle East, North Africa, Romania, Albania, and Azerbaijan.
• Domestically, Laredo Oil is seeking funds to develop oil fields in Texas compatible with the UGD method.
• The company has ongoing legal proceedings related to services provided for the Olfert 11-4 well.
• The company sold 1,000,000 shares of common stock in March 2026 for $500,000 and issued warrants for services.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this filing as negative due to significant increases in operating expenses, widening net losses, and continued going concern doubts, despite ongoing efforts to secure funding and explore new opportunities.

Positives

• Continued exploration of international UGD opportunities in various regions.
• Active pursuit of domestic UGD projects in Texas.
• Successful sale of 1,000,000 shares of common stock in March 2026, raising $500,000.
• Issuance of warrants for services rendered, potentially supporting future operations.
• Management is actively seeking to improve operations and secure funding.

Negatives

• Significant increase in operating expenses for the nine months ended February 28, 2026, to $5,430,629 from $1,700,723 in the prior year, driven by stock option grants and increased professional fees.
• Revenue for the nine months ended February 28, 2026, was minimal at $3,141.
• Substantial accumulated deficit and ongoing losses since inception, leading to substantial doubt about the company's ability to continue as a going concern.
• Several wells (Olfert #11-4, Texakoma wells) are shut-in due to uneconomical production or water encroachment.
• The company has ongoing legal proceedings with multiple entities related to services for the Olfert 11-4 well, resulting in judgments and payment plans.
• Material weakness in internal controls over financial reporting due to a lack of qualified personnel and proper segregation of duties.

Risks

• The company's ability to continue as a going concern is subject to substantial doubt due to recurring losses and accumulated deficit.
• The success of the UGD business model is dependent on substantial investment and is not guaranteed.
• Future funding is uncertain, and there is no assurance that additional financing will be available on satisfactory terms.
• Operational challenges with wells encountering excessive water or uneconomical production levels.
• Ongoing legal proceedings could result in significant financial liabilities.
• The company's ability to achieve profitable operations and secure additional financing is uncertain.
• The company's limited resources and small size have led to a material weakness in internal controls.

Future Outlook

The company is actively seeking to raise additional funds through equity and debt to maintain operations and fund its well development program. Management believes that increased interest in U.S. energy projects will facilitate future equity fundraising. International UGD opportunities are being pursued, and domestic development in Texas is planned, contingent on securing necessary funding.

Management Comments

• Management believes that the costs of implementing the UGD method are significantly lower than those presently experienced by other commonly used Enhanced Oil Recovery (EOR) methods.
• Management estimates that the UGD method can materially increase field oil production rates and recover amounts of oil equal to or greater than previously recovered.
• Management believes that the 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.
• Additional funds will need to be raised either from investors or operations in order to maintain current operations for the next twelve months.
• Management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the periods presented.

Industry Context

StockSavvy.ai notes that Laredo Oil's focus on Underground Gravity Drainage (UGD) technology positions it within a niche segment of the oil and gas industry seeking to maximize recovery from mature fields. The company's pursuit of international opportunities aligns with a broader industry trend of seeking new reserves and production methods amidst fluctuating global energy demands and geopolitical factors.

Comparison to Industry Standards

• The company's stated belief that UGD method costs are significantly lower than other Enhanced Oil Recovery (EOR) methods needs to be benchmarked against industry-standard EOR cost metrics, which typically range from $10-$30 per barrel depending on the method and field.
• Laredo Oil aims to acquire fields with a minimum of 25 million barrels of estimated recoverable oil. This target is ambitious and requires significant geological assessment compared to typical acquisition targets for smaller E&P companies.
• The company's operational challenges, such as encountering excessive water in wells, are not uncommon in the oil and gas industry, but the ability to overcome these efficiently is a key differentiator.
• The company's reliance on external funding for operations and development is a common characteristic of many junior exploration and production companies, contrasting with larger, more established players who may rely more on operating cash flows.

Corporate Governance

Legal Proceedings

• Lawsuit filed by Capex Oilfield Services, Inc. against Lustre for $377,190 plus interest for services on Olfert 11-4 well; Stipulated Judgment and Order for $354,267.29 plus interest and costs issued.
• Lawsuit filed by Capstar Drilling, Inc. against Lustre for $298,050 plus interest for services on Olfert 11-4 well; Judgment for $326,650 plus interest issued.
• Lawsuit filed by Warren Well Service, Inc. against Lustre for $164,235 plus interest for services on Olfert 11-4 well; settled for balance plus interest, with monthly payments.
• Nine Downhole Technologies, LLC filed a complaint against Lustre for an unspecified amount plus interest; summary disposition granted for $41,842 plus costs and post-judgment interest.

Related Party Transactions

• Amended and Restated Demand Promissory Note with CFO for up to $400,000 at 10% interest; $292,099 advanced as of February 28, 2026.
• Amalfi Investment Services LLLP (owned by Robert Adamo) purchased 1,500,000 restricted shares at $0.43 per share for $645,000 in October 2025.
• Mr. Adamo invested $267,320 for 6,062,886 restricted shares in May 2023.
• Mr. Adamo invested $100,000 in Secured Convertible Debt and $510,800 in the Reddig 11-21 well.
• Sale of Hell Creek Crude, LLC (HCC) to B&B Oil, LLC for 50% of future distributions; net liabilities of $272,892 eliminated.
• HCC entered into a consulting agreement with Laredo, invoicing HCC $569,000 for expenses related to well development.
• B&B Oil LLC reimbursed HCC $71,681 for a sonic log.
• HCC received reimbursements from B&B Oil for establishing an office and purchasing a transformer.
• HCC owes Laredo $37,500 related to cash advances.
• Mr. Adamo advanced $50,000 to Lustre, undocumented but expected to be repaid.
• Accounts payables include $137,500 for each of two outside board members for quarterly stipends.
• In March 2026, sold 1,000,000 shares of common stock to Amalfi Investment Services LLLP for $500,000.
• In March 2026, issued 250,000 warrants to The Brand Consortium PR, LLC for services rendered.

Stakeholder Impact

• Shareholders: Continued dilution from stock sales and potential future capital raises. Significant accumulated deficit and going concern issues may impact share value.
• Creditors: The company has substantial debt obligations, including notes payable and PPP loans, with ongoing repayment schedules.
• Employees: Management is controlling overhead and expenses, with some personnel covering wider responsibilities. A material weakness in internal controls due to lack of qualified personnel may impact operational efficiency.
• Suppliers: Ongoing legal proceedings with service providers (Capex, Capstar, Warren Well, Nine Downhole) indicate potential payment disputes and financial strain.

Next Steps

• Continue efforts to raise equity funds for general corporate purposes, property acquisitions, exploration, and development.
• Pursue international UGD opportunities in Argentina, Mexico, the Middle East, Northern Africa, Romania, Albania, and Azerbaijan.
• Seek funding to develop oil fields in Texas compatible with the UGD method.
• Evaluate alternatives for developing over 21,000 acres of mineral rights north of the Fort Peck Reservation.
• Continue to manage overhead and expenses.
• Hire qualified personnel to address material weaknesses in internal controls.

Key Dates

Recommendation

Laredo Oil's financial situation remains precarious with significant accumulated deficits and ongoing losses, raising substantial doubt about its going concern status. While the company is actively pursuing UGD technology and exploring new funding avenues, the increased operating expenses, minimal revenue, and unresolved legal issues present considerable risks. The potential for future capital raises offers some upside, but the current financial health and operational challenges warrant a cautious 'hold' stance until a clearer path to profitability and sustainable operations emerges.

Keywords

Laredo Oil, Form 10-Q, Oil and Gas, Exploration, Production, UGD, Underground Gravity Drainage, Financial Statements, SEC Filing, Going Concern