NOTE 7 – DEFERRED WELL DEVELOPMENT COSTS AND DEPOSIT FOR WELL DEVELOPMENT

The Company records investor investments in individual oil wells as a liability, totaling $2,549,260 as of both August 31, 2026, and May 31, 2026. 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 between the investors and the Company. The balance recorded as of August 31, 2026, 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. Both Olfert 11-4 and Reddig 11-21 are located in Valley County, Montana. On November 15, 2025, Hell Creek Crude LLC, the operator of Reddig 11-21, was purchased by B&B Oil, LLC and recorded as discontinued operations.

The Company recorded $2,250,000 advanced by accredited investors to West Fork as a Deposit for Well Development. Prior to May 31, 2026, certain West Fork investors requested funds to be refunded and were repaid $1,500,000 since the project had not yet been funded in its entirety. The remaining $750,000 West Fork Deposit for Well Development is recorded and the related asset totaling $643,225 was reclassified to investment in entity – related party in exchange for the purchase of 5 membership units in Hell Creek Crude, LLC as of January 1, 2026. The remaining West Fork oil and gas assets totaling $110,525 have been impaired as of May 31, 2026.