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10-Q - LAREDO OIL, INC. 11/30/2012 10-Q - Laredo Oil, Inc.laredo_10q-113012.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
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-32.1 - CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350 SIGNED BY THE CHIEF EXECUTIVE OFFICER - Laredo Oil, Inc.exhibit_32-1.htm
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EX-32.1 - CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350 SIGNED BY THE CHIEF FINANCIAL OFFICER - Laredo Oil, Inc.exhibit_32-2.htm
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4. FAIR VALUE OF FINANCIAL INSTRUMENTS
6 Months Ended
Nov. 30, 2012
Fair Value Disclosures [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The Company's financial instruments as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 825-10-50, Financial Instruments, include cash, trade accounts receivable, accounts payable, accrued liabilities, warrant liabilities and notes payable.  All instruments, with the exception of the warrant liabilities which are measured at fair value, are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at November 30, 2012.  Based on the borrowing rates currently available to the Company for loans with similar terms and maturities, the fair value of long term notes payable approximates the carrying value.

 

FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. FASB ASC 820 provides a framework for measuring fair value, establishes a three level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and requires consideration of the counterparty’s creditworthiness when valuing certain assets.

 

The three level fair value hierarchies for disclosure of fair value measurements defined by FASB ASC 820 are as follows:

 

Level 1 – Unadjusted, quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. An active market is defined as a market where transactions for the financial instrument occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

 

Level 2 – Inputs, other than quoted prices in active markets, that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

 

Level 3 – Prices or valuations that require unobservable inputs that are both significant to the fair value measurement and unobservable. Valuation under level 3 generally involves a significant degree of judgment from management.

 

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

 

The Company has warrant liabilities which are measured at fair value on a recurring basis at November 30, 2012 and 2011. The Company recorded a gain on revaluation of warrant liability of $7,551 and $39,837 for the three months ended November 30, 2012 and 2011, and of $28,620 and $481,864, for the six months ended November 30, 2012 and 2011, respectively.  For the year ended May 31, 2012, the Company reclassified $651,153 in warrant liabilities to equity due to amendments of related warrant agreements.  The Company measures the fair value of the warrant liabilities using the Black Scholes method.  Inputs used to determine fair value under this method include the Company’s stock, volatility and expected remaining life as disclosed in Note 6.

 

The following table presents the fair value hierarchy for those assets measured at fair value on a recurring basis as of November 30, 2012 and 2011:

 

Fair Value Measurements on a Recurring Basis

 

Current Liability   Level 1     Level 2     Level 3     Total  
Warrant Liabilities – November 30, 2012   $ -     $ 44,736     $ -     $ 44,736  
Warrant Liabilities –November 30, 2011   $ -     $ 149,491     $ -     $ 149,491