Liberty Star Uranium & Metals Corp 10-Q for FY2023 Q3
Liberty Star Uranium & Metals Corp. (LBSR)
About this 10-Q
Liberty Star Uranium & Metals Corp filed this 10-Q on December 14, 2022, covering the quarter ended October 31, 2022 (FY2023 Q3).
Headline figures
Quarter ended October 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $129.89K
- compared with a net loss of $112.65K a year earlier
- Diluted EPS
- -$0.01
- compared with -$0.01 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
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by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
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has been subject to such filing requirements for the past 90 days.
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by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
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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” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchanged on Which Registered | ||
| OTCQB |
The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: common shares as of December 14, 2022.
TABLE OF CONTENTS
| Page | ||
| PART I | ||
| Item 1. | Financial Statements | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 20 |
| Item 4. | Controls and Procedures | 20 |
| PART II | ||
| Item 1. | Legal Proceedings | 21 |
| Item 1A. | Risk Factors | 21 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 21 |
| Item 3. | Defaults Upon Senior Securities | 22 |
| Item 4. | Mine Safety Disclosures | 23 |
| Item 5. | Other Information | 23 |
| Item 6. | Exhibits | 23 |
| Signatures | 24 |
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology.
These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our consolidated financial statements are stated in United States Dollars (US$) and are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements. The following discussion should be read in conjunction with our consolidated financial statements and the related notes that appear elsewhere in this quarterly report. As used in this quarterly report, the terms “we”, “us”, “the Company”, and “Liberty Star” mean Liberty Star Uranium & Metals Corp. and our subsidiaries, Hay Mountain Holdings, LLC, Earp Ridge Mines LLC and Red Rock Mines LLC, unless otherwise indicated. All dollar amounts refer to U.S. dollars unless otherwise indicated.
| 2 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Liberty Star Uranium & Metals Corp.
Consolidated Balance Sheets
(Unaudited)
| October 31, | January 31, | |||||||
| 2022 | 2022 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Noncurrent assets: | ||||||||
| Property and equipment, net | ||||||||
| Total noncurrent assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Accounts payable to related parties | ||||||||
| Accrued wages to related parties | ||||||||
| Note payable | ||||||||
| Notes payable to related parties | ||||||||
| Convertible promissory note, net of unamortized debt discount of $ | ||||||||
| Derivative liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term: | ||||||||
| Long-term debt - SBA | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 10) | ||||||||
| Stockholders’ deficit: | ||||||||
| Class A Common stock - $ par value; authorized; shares issued and outstanding | ||||||||
| Common stock - $ par value; authorized; and shares issued and outstanding, respectively | ||||||||
| Common stock, value | ||||||||
| Additional paid-in capital | ||||||||
| Subscription receivable | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited consolidated financial statements
| 3 |
Liberty Star Uranium & Metals Corp.
Consolidated Statements of Operations
(Unaudited)
| For the Three Months Ended | For the Nine Months ended | |||||||||||||||
| October 31 | October 31 | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Expenses: | ||||||||||||||||
| Geological and geophysical costs | ||||||||||||||||
| Salaries and benefits | ||||||||||||||||
| Professional services | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Net operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||||||
| Gain on forgiveness of SBA loan | ||||||||||||||||
| Gain on settlement of debt | ||||||||||||||||
| Gain on disposal of fixed asset | ||||||||||||||||
| Gain on change in fair value of derivative liabilities | ||||||||||||||||
| Total other income (expense) | ||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Net income (loss) per share of common stock - basic | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Net income (loss) per share of common stock - diluted | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Weighted average shares outstanding - basic | ||||||||||||||||
| Weighted average shares outstanding - diluted | ||||||||||||||||
The accompanying notes are an integral part of the unaudited consolidated financial statements
| 4 |
Liberty Star Uranium & Metals Corp.
Consolidated Statements of Changes in Stockholders’ Deficit
For the nine months ended October 31, 2022 and 2021
(Unaudited)
| Shares | Amount | Shares | Amount | Issued | Receivable | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Class A Common stock | Common stock | Common stock to be | Subscription | Additional paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Issued | Receivable | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance, January 31, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||
| Shares issued for conversion of notes | - | |||||||||||||||||||||||||||||||||||
| Options issued related to settlement agreement | - | - | ||||||||||||||||||||||||||||||||||
| Reclass of APIC to derivative liabilities for tainted warrants | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Resolution of derivative liabilities due to debt conversions | - | - | ||||||||||||||||||||||||||||||||||
| Net income for the three months ended April 30, 2022 | - | - | ||||||||||||||||||||||||||||||||||
| Balance, April 30, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of common stock and warrants in private placement and warrant exercises | - | |||||||||||||||||||||||||||||||||||
| Issuance of common shares pursuant to investment agreement | - | |||||||||||||||||||||||||||||||||||
| Shares issued for conversion of notes | - | |||||||||||||||||||||||||||||||||||
| Stock based compensation | - | |||||||||||||||||||||||||||||||||||
| Reclass of APIC to derivative liabilities for tainted warrants | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Resolution of derivative liabilities due to debt conversions | - | - | ||||||||||||||||||||||||||||||||||
| Net loss for the three months ended July 31, 2022 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance, July 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of common stock and warrants in private placement and warrant exercises | - | |||||||||||||||||||||||||||||||||||
| Shares issued for conversion of notes | - | |||||||||||||||||||||||||||||||||||
| Cashless exercise of options | - | ( | ) | |||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||||||
| Reclass of APIC to derivative liabilities for tainted warrants | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Resolution of derivative liabilities due to debt conversions | - | - | ||||||||||||||||||||||||||||||||||
| Net loss for the three months ended October 31, 2022 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance, October 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Balance, January 31, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||
| Issuance of common stock and warrants in private placement and warrant exercises | - | ( | ) | |||||||||||||||||||||||||||||||||
| Shares issued for conversion of notes | - | |||||||||||||||||||||||||||||||||||
| Reclass of APIC to derivative liabilities for tainted warrants | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Resolution of derivative liabilities due to debt conversions and untainted warrants | - | - | ||||||||||||||||||||||||||||||||||
| Net loss for the three months ended April 30, 2021 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance, April 30, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Shares issued for conversion of notes | - | |||||||||||||||||||||||||||||||||||
| Resolution of derivative liabilities due to debt conversions and untainted warrants | - | - | ||||||||||||||||||||||||||||||||||
| Net loss for the three months ended July 31, 2021 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance, July 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of common stock and warrants in private placement and warrant exercises | - | |||||||||||||||||||||||||||||||||||
| Issuance of common shares pursuant to investment agreement | - | ( | ) | |||||||||||||||||||||||||||||||||
| Shares issued for conversion of notes | - | |||||||||||||||||||||||||||||||||||
| Reclass of APIC to derivative liabilities for tainted warrants | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Resolution of derivative liabilities due to debt conversions and untainted warrants | - | - | ||||||||||||||||||||||||||||||||||
| Net loss for the three months ended October 31, 2021 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance, October 31, 2021 | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||
The accompanying notes are an integral part of the unaudited consolidated financial statements
| 5 |
Liberty Star Uranium & Metals Corp.
Consolidated Statements of Cash Flows
(Unaudited)
| For the Nine Months Ended | ||||||||
| October 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Expenses paid by related parties | ||||||||
| Stock based compensation | ||||||||
| Amortization of debt discounts | ||||||||
| Gain on change in fair value of derivative liabilities | ( | ) | ( | ) | ||||
| Gain on forgiveness of SBA loan | ( | ) | ||||||
| Gain on settlement of debt | ( | ) | ||||||
| Gain on disposal of fixed asset | ( | ) | ||||||
| Changes in assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Accrued interest | ||||||||
| Cash flows used in operating activities: | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Proceeds from sale of equipment | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from advances related party | ||||||||
| Repayment of advances related party | ( | ) | ||||||
| Proceeds from notes payable | ||||||||
| Payments on notes payable | ( | ) | ||||||
| Proceeds from convertible promissory notes | ||||||||
| Proceeds from the issuance of common stock and warrants | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Net cash provided by financing activities | ||||||||
| Increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Income tax paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
| Supplemental disclosure of non-cash items: | ||||||||
| Resolution of derivative liabilities due to debt conversions and untainted warrants | $ | $ | ||||||
| Reclass of APIC to derivative liabilities for tainted warrants | $ | $ | ||||||
| Debt discounts due to derivative liabilities | $ | $ | ||||||
| Common stock issued for conversion of debt and interest | $ | $ | ||||||
| Expenses paid by related party on behalf of the Company | $ | $ | ||||||
| Prepaid insurance financed with note payable | $ | $ | ||||||
| Shares issued for settlement of liability | $ | $ | ||||||
| Cashless exercise of options | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited consolidated financial statements
| 6 |
LIBERTY STAR URANIUM & METALS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – Basis of Presentation
The consolidated financial statements included herein have been prepared by Liberty Star Uranium & Metals Corp. (the “Company”, “we”, “our”) without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and should be read in conjunction with our annual report on Form 10-K for the year ended January 31, 2022 as filed with the SEC under the Securities and Exchange Act of 1934 (the “Exchange Act”) on May 17, 2022. 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 omitted, as permitted by the SEC, although we believe the disclosures which are made are adequate to make the information presented not misleading. The consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to present fairly our financial position at October 31, 2022, and the results of our operations and cash flows for the periods presented.
Interim results are subject to significant seasonal variations and the results of operations for the three and nine months ended October 31, 2022, are not necessarily indicative of the results to be expected for the full year.
NOTE 2 – Going Concern
The Company has incurred losses from operations and requires additional funds for further exploratory activity and to maintain its claims prior to attaining a revenue generating status. There are no assurances that a commercially viable mineral deposit exists on any of our properties. In addition, the Company may not find sufficient ore reserves to be commercially mined. As such, there is substantial doubt about the Company’s ability to continue as a going concern.
Management is working to secure additional funds through the exercise of stock warrants already outstanding, equity financings, debt financings or joint venture agreements. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
NOTE 3 – Summary of Significant Accounting Policies
Fair Value
ASC 820 Fair Value Measurements and Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements. It defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; and model-driven valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be obtained from, or corroborated by, third-party pricing services.
Level 3: Unobservable inputs to measure fair value of assets and liabilities for which there is little, if any market activity at the measurement date, using reasonable inputs and assumptions based upon the best information at the time, to the extent that inputs are available without undue cost and effort.
| 7 |
Schedule of Fair Value of Financial Instruments
| Fair value measurements at reporting date using: | ||||||||||||||||
| Description | Fair Value | Quoted prices in active markets for identical liabilities (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||||
| Warrant and convertible note derivative liabilities at October 31, 2022 | $ | $ | ||||||||||||||
| Warrant and convertible note derivative liabilities at January 31, 2022 | $ | $ | ||||||||||||||
Our financial instruments consist of cash and cash equivalents, prepaid expenses, accounts payable, accrued liabilities, notes payable, convertible notes payable, and derivative liabilities. It is management’s opinion that we are not exposed to significant interest, currency or credit risks arising from these financial instruments. With the exception of the derivative liabilities, the fair value of these financial instruments approximates their carrying values based on their short maturities or for long-term debt based on borrowing rates currently available to us for loans with similar terms and maturities. Gains and losses recognized on changes in estimated fair value of the derivative liabilities are reported in other income (expense) as gain (loss) on change in fair value of derivative liabilities.
Income Taxes
Income
taxes are recorded using the asset and liability method. Under the asset and liability method, tax assets and liabilities are recognized
for the tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Future tax assets and liabilities are measured using the enacted tax rates expected to apply when the
asset is realized or the liability settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in
income in the period that enactment occurs. To the extent that the Company does not consider it more likely than not that a future tax
asset will be recovered, it provides a valuation allowance against the excess. Interest and penalties associated with unrecognized tax
benefits, if any, are classified as additional income taxes in the statement of operations. The current period net income will be offset
against the prior periods net operating losses which were approximately $
Basic net income (loss) per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Potential common stock equivalents are determined using the treasury stock method. For diluted net loss per share purposes, the Company excludes stock options and other stock-based awards, including shares issued as a result of option exercises that are subject to repurchase by the Company, whose effect would be anti-dilutive from the calculation.
Schedule of Earnings Per Share Basic and Diluted
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| October 31, | October 31, | |||||||||||||||
| Basic income (loss) per common share | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Net income (loss) available to common shareholders | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Derivative (gain) loss | ||||||||||||||||
| Interest expense associated with convertible debt | ||||||||||||||||
| Net income (loss) for dilutive calculation | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Weighted average common shares outstanding | ||||||||||||||||
| Dilutive effect of convertible debt | ||||||||||||||||
| Dilutive effect of common stock warrants | ||||||||||||||||
| Dilutive effect of common stock options | ||||||||||||||||
| Weighted average shares outstanding for diluted net income (loss) per share | ||||||||||||||||
During the three and nine months ended October 31, 2022, the impact of of stock options and of warrants were excluded from the calculation above as their impact would be anti-dilutive. During the three months ended October 31, 2022, the impact of shares issuable from convertible notes were included in the calculation above as their impact would be anti-dilutive. During the three and nine months ended October 31, 2021, the impact of of stock options, of warrants, and shares issuable from convertible notes were excluded from the calculation as their impact would be anti-dilutive.
Reclassification
Certain reclassifications have been made to our prior year’s financial statements to conform to our current year presentation. These reclassifications had no effect on our previously reported results of operations or accumulated deficit.
NOTE 4 – Related Party Transactions
Our CEO, Brett Gross, was elected as President and Chief Executive Officer on December 7, 2018 and received no compensation for these services during the nine months ended October 31, 2022 and 2021.
| 8 |
Accrued Wages
As
of October 31, 2022, and January 31, 2022, we had a balance of accrued unpaid wages of $
Advances
During
the nine months ended October 31, 2022, the CEO advanced the Company $
Other
On April 22, 2022, the Company reached terms of settlement of the litigation Case No. C20194139, involving our former CEO, James Briscoe, previously filed in the Superior Court of Arizona. Effective April 22, 2022, the Company’s board of directors voted on, accepted and the settlement is now hereby approved, ratified, and confirmed (See Note 10).
Schedule of Stock Option Activity
| Number of options | Weighted average exercise price per share | |||||||
| Outstanding, January 31, 2022 | $ | |||||||
| Granted | ||||||||
| Expired | ( | ) | ||||||
| Exercised | ( | ) | ||||||
| Outstanding, October 31, 2022 | $ | |||||||
| Exercisable, October 31, 2022 | $ | |||||||
These options had a weighted average remaining life of years and an aggregate intrinsic value of $ as of October 31, 2022.
On April 22, 2022, the Company reached terms of settlement of the litigation Case No. C20194139, involving our former CEO, James Briscoe (see Note 10). As part of the terms of settlement, the Company will reinstate Mr. Briscoe’s stock options that expired following his resignation from the Board. This reinstatement will be on the same terms as originally issued, as evidenced in the August 10, 2010, Stock Option Agreement and October 11, 2016, Stock Option Agreement, each as adjusted for the February 25, 2021, reverse stock split, and pursuant to the Company’s 2010 Stock Option Plan, except for the option exercise window, which will be expanded to 30 years. A total of stock options were reinstated for Mr. Briscoe, which is comprised of options with an exercise price of $ and options with an exercise price of $. The total fair value of these option grants at issuance was $.
On
June 21, 2022, the Company entered into an agreement with an advisor to advise its executive management on strategic partnerships, investments,
and other undertakings of material value to the Company. As compensation, the Company will grant the advisor monthly stock options of
for a term of three months. The options have a strike price equal to the closing price per share on the day the options are issued
and expire in one year. During the nine months ended October 31, 2022, the Company granted of options to consultants. The exercise
price of the options ranges from $ to $. The total fair value of these option grants at issuance was $
| 9 |
On
September 29, 2022, the Company granted options
to employees. The options expire ten-years following issuance and have an exercise price of $.
The options vested upon issuance and have a total fair value of $
NOTE 6 – Warrants
As
of October 31, 2022, there were
Stock warrants outstanding at October 31, 2022 are as follows:
Schedule of Stock Warrants Outstanding
| Number of warrants | Weighted average exercise price per share | |||||||
| Outstanding, January 31, 2022 | $ | |||||||
| Issued | ||||||||
| Expired | ||||||||
| Exercised | ||||||||
| Outstanding, October 31, 2022 | $ | |||||||
| Exercisable, October 31, 2022 | $ | |||||||
As
of May 18, 2022,
NOTE 7 – Derivative Liabilities
The embedded conversion feature in the convertible debt instruments that the Company issued (See Note 8), that became convertible during the nine months ended October 31, 2022, qualified it as a derivative instrument since the number of shares issuable under the note is indeterminate based on guidance in FASB ASC 815, Derivatives and Hedging. These convertible notes tainted all other equity linked instruments including outstanding warrants and fixed rate convertible debt on the date that the instrument became convertible.
The valuation of the derivative liabilities of the warrants was determined through the use of a Monte Carlo options model that values the liability of the warrants based on a risk-neutral valuation where the price of the warrant is its discounted expected value. The technique applied generates a large number of possible (but random) price paths for the underlying common stock via simulation, and then calculates the associated exercise value (i.e. “payoff”) of the warrant for each path. These payoffs are then averaged and discounted to a current valuation date resulting in the fair value of the warrant.
| 10 |
The valuation of the derivative liabilities attached to the convertible debt was arrived at through the use of a Monte Carlo model that values the derivative liability within the notes. The technique applied generates a large number of possible (but random) price paths for the underlying (or underlyings) via simulation, and then calculates the associated payment value (cash, stock, or warrants) of the derivative features. The price of the underlying common stock is modeled such that it follows a geometric Brownian motion with constant drift, and elastic volatility (increasing as stock price decreases). The stock price is determined by a random sampling from a normal distribution. Since the underlying random process is the same, for enough price paths, the value of the derivative is derived from path dependent scenarios and outcomes. The features in the notes that were analyzed and incorporated into the model included the conversion features with the reset provisions, the call/redemption/prepayment options, and the default provisions. Based on these features, there are six primary events that can occur; payments are made in cash; payments are made with stock; the note holder converts upon receiving a redemption notice; the note holder converts the note; the issuer redeems the note; or the Company defaults on the note. The model simulates the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms that would be in effect at the time (i.e. stock price, conversion price, etc.). Probabilities were assigned to each variable such as redemption likelihood, default likelihood, and timing and pricing of reset events over the remaining term of the notes based on management projections. This led to a cash flow simulation over the life of the note. A discounted cash flow for each simulation was completed, and it was compared to the discounted cash flow of the note without the embedded features, thus determining a value for the derivative liabilities.
Key inputs and assumptions used to value the convertible note when it became convertible and upon settlement, and warrants upon tainting, were as follows:
| ● | The
stock projections are based on the historical volatilities for each date. These volatilities were in the | |
| ● | An event of default would not occur during the remaining term of the note; | |
| ● | ||
| ● | The effective discount was determined based on the historical trading history of the Company based on the specific pricing mechanism in each note; |
| ● | The Company would not have funds available to redeem the notes during the remaining term of the convertible notes; | |
| ● | Discount rates were based on risk free rates in effect based on the remaining term and date of each valuation and instrument. | |
| ● | The Holder would exercise the warrant at maturity if the stock price was above the exercise price; | |
| ● |
Using
the results from the model, the Company recorded a derivative liability during the nine months ended October 31, 2022 of $
During
the nine months ended October 31, 2022, the Company recorded a reclassification from derivative liabilities to equity of $
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During
the nine months ended October 31,2021, the Company recorded a reclassification from derivative liabilities to equity of $
The following table sets forth a reconciliation of changes in the fair value of the Company’s derivative liabilities:
Schedule of Changes in Fair Value of Derivative Liabilities
| Nine months ended October 31, | ||||||||
| 2022 | 2021 | |||||||
| Beginning balance | $ | $ | ||||||
| Total gain | ( | ) | ( | ) | ||||
| Settlements | ( | ) | ( | ) | ||||
| Additions recognized as debt discount | ||||||||
| Additions due to tainted warrants | ||||||||
| Ending balance | $ | $ | ||||||
| Change in gain on fair value of derivative liabilities included in earnings relating to derivatives | $ | ( | ) | $ | ( | ) | ||
NOTE 8 – Long-term debt and convertible promissory notes
Following is a summary of convertible promissory notes:
Summary of Convertible Promissory Notes
| October 31, 2022 | January 31, 2022 | |||||||
| 8% convertible note payable issued | $ | $ | ||||||
| 8% convertible note payable issued | ||||||||
| 8% convertible note payable issued | ||||||||
| 8% convertible note payable issued | ||||||||
| 8% convertible note payable issued | ||||||||
| 8% convertible note payable issued | ||||||||
| 8% convertible note payable issued | ||||||||
| Convertible note payable | ||||||||
| Less debt discount | ( | ) | ( | ) | ||||
| Less current portion of convertible notes | ( | ) | ( | ) | ||||
| Long-term convertible notes payable | $ | $ | ||||||
On
February 7, 2022, the Company entered into a convertible promissory note with 1800 Diagonal Lending (formerly known as Sixth Street Lending
LLC) in the aggregate principal amount of $
On
April 25, 2022, the Company entered into a convertible promissory note with 1800 Diagonal Lending (formerly known as Sixth Street Lending
LLC) in the aggregate principal amount of $
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On
July 14, 2022, the Company entered into a convertible promissory note with 1800 Diagonal Lending LLC in the aggregate principal amount
of $
On
October 3, 2022, the Company entered into a convertible promissory note with 1800 Diagonal Lending LLC in the aggregate principal amount
of $
During
the nine months ended October 31, 2022 and 2021, the Company recorded debt discounts of $
Notes Payable
On
June 22, 2020, the Company received loan proceeds of $
On
February 16, 2021, the Company received loan proceeds of $
In
April 2022, the Company entered into a Premium Finance Agreement related to an insurance policy. The policy premiums total $
As
of October 31, 2022, the notes payable, net balance was $
NOTE 9 – Stockholders’ deficit
Common Stock
Our undesignated common shares are all of the same class, are voting and entitle stockholders to receive dividends as defined. Upon liquidation or wind-up, stockholders are entitled to participate equally with respect to any distribution of net assets or any dividends that may be declared.
On October 27, 2022, the registrant amended its articles of incorporation. The articles of incorporation were amended for the purposes of increasing the authorized shares of the registrant from shares to shares consisting of shares of $ par value Common Stock and shares of $ par value Class A Common Stock.
During
the nine months ended October 31, 2022, the Company issued a total of shares of our common stock for conversions of $
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On
May 19, 2022, the Company sold units at a price of $ per unit to an accredited investor for proceeds of $
On
July 31, 2022, the Company issued shares of its common stock to an accredited investor for gross proceeds of $
On
August 20, 2021, the Company executed a financing agreement for the purpose of drilling for the Red Rock Canyon Gold Project, in Cochise
County, Arizona. The agreement allows for a $ common stock purchase agreement (the “Purchase Agreement”) and a $
warrant agreement (the “Warrant Agreement,” together “the Agreements”) with Triton Funds LP (“Triton”)
of San Diego, California under an S1 registration now effective. On July 7, 2022, the Company issued shares of its common stock
and recorded a subscription receivable of $
On
July 1, 2022, the Company entered into a stock compensation and subscription agreement with Dutchess Group LLC. Per the agreement, Dutchess
Group will provide services to the Company and will be issued shares of the Company’s common stock. During the nine months
ended October 31, 2022, the Company issued shares of common stock valued at $
On
August 12, 2022, the Company settled a $
NOTE 10 – Commitments and contingencies
We
currently rent a storage space for $
We
are required to pay annual rentals for Liberty Star’s federal lode mining claims for the Tombstone project in the State of Arizona.
The rental period begins at noon on September 1st through the following September 1st and rental payments are due by the first day of
the rental period. The annual rentals are $
We
are required to pay annual rentals for our Arizona State Land Department Mineral Exploration Permits (“AZ MEP”) at our Tombstone
Hay Mountain project in the State of Arizona.
Legal Matter
On
August 22, 2019 (and amended on December 23, 2019), the Company filed a complaint with the Superior Court of Arizona (Case No. C20194139),
demanding the titles and possession of certain vehicles and equipment of the Company from our former CEO, as well as seeking recovery
of damages from the former CEO in an amount of not less than $
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On February 18, 2020, our former CEO and his spouse (the “Counterclaimants”) filed a First Amended Answer: First Amended Complaint and Counterclaim with the Superior Court of Arizona seeking dismissal of the Company’s complaint and reimbursement of Counterclaimants’ attorney fees incurred related to the matter. Additionally, the counterclaim alleges breach of contract by the Company and requests reimbursement of amounts loaned to the Company by our former CEO and his spouse, along with reimbursement of attorney fees. The Company believes these counterclaims are without merit and will aggressively defend them and believes no unfavorable outcome or material effect on our consolidated financial statements will result.
On April 22, 2022, the Company reached terms of settlement of the litigation Case No. C20194139, involving our former CEO, James Briscoe, previously filed in the Superior Court of Arizona. Effective April 22, 2022, the Company’s board of directors voted on, accepted and the settlement is now hereby approved, ratified, and confirmed.
A summary of the terms of that settlement is as follows:
| ● | Mr. Briscoe dropped his demand for “accrued wages” (see Note 4). | |
| ● | Mr. Briscoe dropped his claim for payment of his credit card debt (see Note 4). These balances were included in accounts payable and accrued liabilities on the consolidated balance sheet in prior period. | |
| ● | Mr. Briscoe dropped all other claims and waives and releases all claims, known or unknown. | |
| ● | Mr. Briscoe returned title and possession of all the vehicles that he previously transferred to his name. Mr. Briscoe to also return to the Company all Company property identified in our First Amended Complaint. | |
| ● | The Company reinstated Mr. Briscoe’s stock options that expired following his resignation from the Board. This reinstatement was on the same terms as originally issued, as evidenced in the August 10, 2010, Stock Option Agreement and October 11, 2016, Stock Option Agreement, each as adjusted for the February 25, 2021, reverse stock split, and pursuant to the Company’s 2010 Stock Option Plan, except for the option exercise window, which was expanded to 30 years (see Note 5). | |
| ● | The
Company is paying Mr. Briscoe a sum of $ | |
| ● | Both parties agreed to a non-disparagement clause that expressly establishes prior consent to the Pima County Court’s jurisdiction for issuance of mandatory injunctive relief if an aggrieved Party reasonably believes this clause has been violated by the other Party whether such violation is done directly by the violating Party or via proxy. |
In
connection with the settlement, we wrote off $
NOTE 11 – Income taxes
As of October 31, 2022 and January 31, 2022, our deferred tax asset is as follows:
Schedule of deferred tax asset
| October 31, 2022 | January 31, 2022 | |||||||
| Deferred Tax Assets | $ | $ | ||||||
| Less Valuation Allowance | ( |
) | ( |
) | ||||
| Deferred Tax Assets, Net | $ | $ | ||||||
During the nine months ended October 31, 2022, the
Company recognized tax expense of approximately $
Management has elected to provide a deferred tax asset
valuation allowance equal to the potential benefit due to our history of losses. If we demonstrate the ability to generate future taxable
income, management will re-evaluate the allowance. As of October 31, 2022, our estimated net operating loss carry-forward is approximately
$
Deferred tax assets were calculated using the Company’s
effective tax rate, which it estimated to be
NOTE 12 – Subsequent events
On
November 4, 2022, the Company issued a total of shares of our common stock for conversions of $
On
November 8, 2022, the Company issued a total of shares of our common stock for conversions of $
On
November 22, 2022, the Company issued a total of shares of our common stock for conversions of $
On
November 23, 2022, the Company entered into a convertible promissory note with 1800 Diagonal Lending LLC in the aggregate principal amount
of $
On
November 30, 2022, the Company received a $
On
December 5, 2022, the Company issued a total of shares of our common stock for conversions of $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Much of the information included in this quarterly report includes or is based upon estimates, projections or other “forward-looking statements”. Such forward-looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Such estimates, projections or other “forward-looking statements” involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other “forward-looking statements”.
Business Development
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of our Company. Management’s Discussion and Analysis of Financial Condition and Results of Operations is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes to the consolidated financial statements.
Liberty Star Uranium & Metals Corp. was formerly Liberty Star Gold Corp. and formerly Titanium Intelligence, Inc. (“Titanium”). Titanium was incorporated on August 20, 2001, under the laws of the State of Nevada. On February 5, 2004, we commenced operations in the acquisition and exploration of mineral properties business. Big Chunk Corp. (“Big Chunk”) was our wholly owned subsidiary and was incorporated on December 14, 2003, in the State of Alaska. Big Chunk is engaged in the acquisition and exploration of mineral properties business in the State of Alaska. Big Chunk was dissolved on June 3, 2019. Redwall Drilling Inc. (“Redwall”) was our wholly owned subsidiary and was incorporated on August 31, 2007, in the State of Arizona. Redwall performed drilling services on our mineral properties. Redwall ceased drilling activities in July 2008 and was dissolved on March 30, 2010. In April 2007, we changed our name to Liberty Star Uranium & Metals Corp (“Liberty Star”) to reflect our current general exploration for base and precious metals. We are in the exploration phase of operations and have not generated any revenues from operations.
In October 2014, we formed our wholly owned subsidiary, Hay Mountain Holdings LLC (“HMH”) (formerly known as Hay Mountain Super Project LLC), to serve as the primary holding company for development of the potential ore bodies encompassed in the Hay Mountain area of interest in Arizona. On April 11, 2019, we formed a new subsidiary named Earp Ridge Mines LLC, wholly owned by Hay Mountain Holdings LLC, intended for engagement with future venture partners.
On August 13, 2020, the Company formed Red Rock Mines, LLC, an Arizona corporation, as a wholly-owned subsidiary of Hay Mountain Holdings, LLC.
Our Current Business
We are engaged in the acquisition and exploration of mineral properties in the state of Arizona and the Southwest USA. Claims in the state of Arizona are held in the name of Liberty Star. We use the term “Super Project” to indicate a project in which numerous mineral targets have been identified, any one or more of which could potentially contain commercially viable quantities of minerals. Our significant projects are described below.
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Tombstone Super Project (“Tombstone”): Tombstone is located in Cochise County, Arizona and covers the Tombstone caldera and its environs. Within the Tombstone caldera is the Hay Mountain target where we are concentrating our work at this time. We plan to ascertain whether the Tombstone, Hay Mountain claims possess commercially viable deposits of copper, molybdenum, gold, silver, lead, zinc, manganese and other metals including Rare Earth Elements (REE’s). We have not identified any ore reserves to date.
On June 16, 2020, the Company acquired 2 Mineral Exploration Permits (MEP) covering 240 acres at Robbers Roost. Which is located 5.89 miles west of the Hay Mountain Project. While the Robbers Roost MEP area is new to the Company, it has been explored previously by several exploration companies, in the 1970’s and 1990’s, and recently has received significant interest by others operating in the area. Drilling by ASARCO indicates “the presence of a granodioritic porphyry intrusive at depth below the alteration zone. The intrusive is characterized by porphyry copper style alteration and mineralization.” (JB Nelson, “Robbers’ Roost Summary Report,” 1995, p. 2 http://docs.azgs.az.gov/SpecColl/2008-01/2008-01-0103.pdf)
From July 14th to August 5th, 2020, field mapping was conducted in the Hay Mountain Project area, located 7 km southeast of Tombstone, in Cochise County, Arizona. The purpose of mapping was to identify alteration and veining associated with an inferred porphyry copper system at depth, determine the extent of hydrothermal alteration, and comment on the possible timing of emplaced mineralization. Mapping was conducted at 1:10,000 scale and a total of 183 carbonate vein samples were taken for XRF analysis and UV fluorescence response.
On November 11, 2020, the Company announced the identification of potentially exploitable gold mineralization on its recently acquired Arizona State Land Department Mineral Exploration Permits. Preliminary surface exploration on the Red Rock MEPs advances the Company’s knowledge of the porphyry system signature associated with magnetic highs at, and adjacent to the north of, Target 1, and represent the expansion of biogeochemical, surface rock sampling, and x-ray fluorescence (XRF) work continuing at Target 1 and on the anticipated gold halo likely associated with the indicated porphyry center. The Company discovered multiple outcrops of intensely silicified rock in the initial observational field work. These outcrops generally occur in linear features several feet in thickness with multiple features oriented en-echelon with interstitial host country rock of varying horizontal dimension. These outcrops contain densely distributed jasperoids, which, when sampled yield what the Company believes are potentially economically exploitable concentrations of gold. There was a total of 23 representative (1 to 2 kg) rock sample assays. These assays demonstrate gold concentrations ranging from below detection limits of 0.05 ppm in country rock surrounding certain outcrops to a high of 13.55 ppm in direct outcrop samples. Of the 23 assayed samples, nine (9) show gold concentrations of 0.95 ppm or more.
On November 25, 2020, the Company received approval from the Arizona State Land Department for 5 additional MEP’s covering 2,369.15 acres for a total of 16,662.10 acres or 26.03 sq miles at our Hay Mountain Project.
On March 15, 2021, the Company announced the release of more rock chip assay results from the Red Rock Canyon area located within the Hay Mountain Project. 28 samples were submitted to the ALS/USA Inc. Tucson location with results returned to the Company February 6th. This set of samples are within and outside of the original study area and expand on the October 2020 geochemical sampling undertaken on MEP land within the Company’s Red Rock Canyon holdings.
On May 21, 2021, the Company announced the public release of its latest technical report. The Technical Report on the Red Rock Canyon Gold Property Cochise County, Arizona (“RRC Technical Report” “The Report”). The Report was prepared by Broadlands Mineral Advisory Services Ltd., owned and operated by Liberty Star’s independent director Bernard J. Guarnera, P.ENG., QP, CMA. Mr. Guarnera authored The Report. His findings include that the Red Rock Canyon tract contains “gold at grades that are now considered economic” (p.1). Further, the compilation of previous drilling results, by others as noted in The Report, (p.30) indicates that 12 of 17 intercepts reported gold at grades above what is considered current cut off grades, 0.022 oz per ton (0.68 gpt). These historical intercepts range from five (5) to forty-five (45) feet in vertical extent and reveal multiple mineralized zones. Grades in the larger intercepts are reported up to 0.182 ounces per ton (5.66 gpt). Additionally, Liberty Star collected fifteen (15) more rock samples on a recent field visit near and at the locations of past drilling. The new field assays to confirm similar grades in the corresponding outcrops. These assay results have been posted to the Liberty Star website.
On May 26, 2021, the Company announced the public release of geochemical assay results prepared by ALS/USA Inc. The Company noted in its news release issued May 21st that the results were forthcoming on the heels of its latest technical report focused on the gold prospect at Red Rock Canyon. Previously released geochemical assay results from October 2020 and February 2021 can be viewed on the Liberty Star Minerals website. This set of results strongly aligns with previous assay results indicating that the Red Rock portion of the Hay Mountain Project is a potential gold property.
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On August 20, 2021, the Company executed a financing agreement for the purpose of drilling for the Red Rock Canyon Gold Project, in Cochise County, Arizona. The agreement allows for a $1,000,000 common stock purchase agreement (the “Purchase Agreement”) and a $1,000,000 warrant agreement (the “Warrant Agreement,” together “the Agreements”) with Triton Funds LP (“Triton”) of San Diego, California under an S1 registration now effective.
Title to mineral claims involves certain inherent risks due to difficulties in determining the validity of certain claims, as well as potential for problems arising from the frequently ambiguous conveyancing history characteristic of many mineral properties. We have investigated title to all the Company’s mineral properties and, to the best of its knowledge, title to all properties retained are in good standing.
The mineral resource business generally consists of three stages: exploration, development and production. Mineral resource companies that are in the exploration stage have not yet found mineral resources in commercially exploitable quantities and are engaged in exploring land in an effort to discover them. Mineral resource companies that have located a mineral resource in commercially exploitable quantities and are preparing to extract that resource are in the development stage, while those engaged in the extraction of a known mineral resource are in the production stage. We have not found any mineral resources in commercially exploitable quantities.
There is no assurance that a commercially viable mineral deposit exists on any of our properties, and further exploration is required before we can evaluate whether any exist and, if so, whether it would be economically feasible to develop or exploit those resources. Even if we complete our current exploration program and we are successful in identifying a mineral deposit, we would be required to spend substantial funds on further drilling and engineering studies before we could know whether that mineral deposit will constitute a commercially viable mineral deposit, known as an “ore reserve.”
To date, we have not generated any revenues. Our ability to pursue our business plan and generate revenues is subject to our ability to obtain additional financing, and we cannot give any assurance that we will be able to do so.
The extent to which the coronavirus disease (“COVID-19”) impacts our businesses will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, our operations may be materially adversely affected. Currently, the Company has not experienced a significant impact on its businesses related to COVID-19. However, COVID-19 did, and continues to, impact us significantly with delays in acquiring a JV to begin our primary drilling project.
Results of Operations
Material Changes in Financial Condition for the Nine-Month Period Ended October 31, 2022
We had cash and cash equivalents in the amount of $50,732 as of October 31, 2022, compared to $102,741 as of January 31, 2022. We had negative working capital of $635,385 as of October 31, 2022, compared to $1,427,895 as of January 31, 2022. We used $430,247 of net cash in operating activities during the nine months ended October 31, 2022, which was utilized primarily for working capital. We also utilized our cash funds to continue exploration activities at our Hay Mountain mineral lands by working on geochemical interpretation of the soil, rock chip and vegetation sampling and ZTEM (aeromagnetics and aero electromagnetics). We have been raising capital primarily by issuing convertible promissory notes, related party notes and the sale of common stock. We intend to continue to raise capital from such sources. In addition to seeking sources of funding through the sale of equity, we may seek to enter into joint venture agreements, or other types of agreements with other companies to finance our projects for the long term. In addition, we may choose to sell a portion of our assets to finance our projects. Should our properties prove to be commercially viable, we may be in a position to seek debt financing to help build infrastructure, and eventually we may obtain revenues from commercial mining of our properties.
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Material Changes in Results of Operations for the Three -Month Periods Ended October 31, 2022 and 2021
We had a net loss of $129,885 for the three months ended October 31, 2022, compared to a net loss of $112,652 for the three months ended October 31, 2021
During the three months ended October 31, 2022, we had a decrease of $20,269 in geological and geophysical expense compared to the three months ended October 31, 2021, due primarily to a decrease in geochemical analysis for the three month period. During the three months ended October 31, 2022, we had an increase of $16,655 in salaries and benefit expense compared to the three months ended October 31, 2021, due to a cost of living increase, and reimbursements. During the three months ended October 31, 2022, we had an increase of $10,332 in professional services compared to the three months ended October 31, 2021, due primarily to an increase in the contractor fees. We had an increase in general and administrative expenses of $67,523 during the three months ended October 31, 2022, as compared to the three months ended October 31,2021 which was due to an increase in stock-based compensation. We had an increase in interest expense of $48,800 during the three months ended October 31, 2022 as compared to the three months ended October 31, 2021, due primarily to an increase in convertible notes payable. We had a gain of $190,152 and $89,627 on change in fair value of derivative liability for the three months ended October 31, 2022 and 2021, respectively, due primarily to the changes in derivative liability activity during the periods.
Material Changes in Results of Operations for the Nine -Month Periods Ended October 31, 2022 and 2021
We had a net income of $626,913 for the nine months ended October 31, 2022, compared to a net loss of $327,269 for the nine months ended October 31, 2021.
During the nine months ended October 31, 2022, we had an increase of $10,676 in geological and geophysical expense compared to the nine months ended October 31, 2021, due primarily to an increase in geochemical analysis for the nine month period. During the nine months ended October 31, 2022, we had an increase of $27,649 in salaries and benefit expense compared to the nine months ended October 31, 2021, due primarily to a cost of living increase. During the nine months ended October 31, 2022, we had an increase of $64,221 in professional services compared to the nine months ended October 31, 2021, due primarily to an increase in the contractor fees, audit and filing fees. We had an increase in general and administrative expenses of $217,704 during the nine months ended October 31, 2022, as compared to the nine months ended October 31, 2021, which was due to an increase in stock-based compensation. We had an increase in interest expense of $86,218 during the nine months ended October 31, 2022 as compared to the nine months ended October 31, 2021, due primarily to an increase in convertible notes payable. We had a gain of $490,849 and $166,617 on change in fair value of derivative liability for the nine months ended October 31, 2022 and 2021, respectively, due primarily to the changes in derivative liability activity during the periods. During the nine months ended October 31, 2022, we had a gain on forgiveness of SBA loan of $32,851 and a gain on settlement of debt of $998,284 related to the settlement with James Briscoe.
Liquidity and Capital Resources
We had cash and cash equivalents in the amount of $50,732 as of October 31, 2022. We had negative working capital of $635,385 as of October 31, 2022. We used cash in operating activities of $430,247 for the nine months ended October 31, 2022. We will need additional funds in order to proceed with our planned exploration program.
Convertible promissory notes
We have issued the following convertible promissory notes in private placements of our securities to institutional investors pursuant to exemptions from registration set out in Rule 506 of Regulation D under the Securities Act of 1933.
On February 7, 2022, the Company entered into a convertible promissory note with 1800 Diagonal Lending (formerly known as Sixth Street) in the aggregate principal amount of $74,800 (the “February 2022 Note”). The note bears interest at 8%, with an Original Issue Discount of $9,800, matures on February 7, 2023, and is convertible after 180 days into shares of the Company’s common stock at a price of 75% of the average of the lowest 5 weighted average market prices of the Company’s common stock during the 10 trading days prior to conversion.
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On April 25, 2022, the Company entered into a convertible promissory note with 1800 Diagonal Lending (formerly known as Sixth Street) in the aggregate principal amount of $71,500 (the “April 2022 Note”). The note bears interest at 8%, with an Original Issue Discount of $8,000, matures on April 25, 2023, and is convertible after 180 days into shares of the Company’s common stock at a price of 75% of the average of the lowest 5 weighted average market prices of the Company’s common stock during the 10 trading days prior to conversion.
On July 14, 2022, the Company entered into a convertible promissory note with 1800 Diagonal Lending in the aggregate principal amount of $45,138 (the “July 2022 Note”). The note bears interest at 8%, with an Original Issue Discount of $10,138, matures on July 14, 2023, and is convertible after 180 days into shares of the Company’s common stock at a price of 75% of the average of the lowest 5 weighted average market prices of the Company’s common stock during the 10 trading days prior to conversion.
On October 3, 2022, the Company entered into a convertible promissory note with 1800 Diagonal Lending LLC in the aggregate principal amount of $45,138 (the “October 2022 Note”). The note bears interest at 8%, with an Original Issue Discount of $10,138, matures on October 3, 2023, and is convertible after 180 days into shares of the Company’s common stock at a price of 75% of the average of the lowest 5 weighted average market prices of the Company’s common stock during the 10 trading days prior to conversion.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements, including the notes thereto. We consider critical accounting policies to be those that require more significant judgments and estimates in the preparation of our financial statements, including the following: long lived assets; intangible assets valuations; and income tax valuations. Management relies on historical experience and other assumptions believed to be reasonable in making its judgment and estimates. Actual results could differ materially from those estimates.
Management believes its application of accounting policies, and the estimates inherently required therein, are reasonable. These accounting policies and estimates are periodically reevaluated, and adjustments are made when facts and circumstances dictate a change.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
Item 4. Controls and Procedures.
As required by Rule 13a-15 under the Exchange Act, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures at October 31, 2022, which is the end of the fiscal quarter covered by this report. This evaluation was carried out by Mr. Brett Gross, our principal executive officer and Ms. Patricia Madaris, our principal financial officer. Based on this evaluation, Mr. Brett Gross and Ms. Patricia Madaris have concluded that our disclosure controls and procedures were not effective as at the end of the period covered by this report. Given the size of our current operation and existing personnel, the opportunity to implement internal control procedures that segregate accounting duties and responsibilities is limited. Until the organization can increase in size to warrant an increase in personnel, formal internal control procedures will not be implemented until they can be effectively executed and monitored. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by our company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
Management believes that despite our material weaknesses set forth above, our financial statements for the quarter ended October 31, 2022, are fairly stated, in all material respects, in accordance with U.S. GAAP.
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Changes in Internal Control over Financial Reporting
During the quarter ended October 31, 2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Legal Matter
On April 22, 2022, the Company reached terms of settlement of the litigation Case No. C20194139, involving our former CEO, James Briscoe, previously filed in the Superior Court of Arizona. Effective April 22, 2022, the Company’s board of directors voted on, accepted and the settlement is now hereby approved, ratified, and confirmed.
A summary of the terms of that settlement is as follows:
| ● | Mr. Briscoe drops his demand for “accrued wages” (see Note 4). | |
| ● | Mr. Briscoe drops his claim for payment of his credit card debt (see Note 4). | |
| ● | Mr. Briscoe drops all other claims and waives and releases all claims, known or unknown. | |
| ● | Mr. Briscoe will return title and possession of all the vehicles that he previously transferred to his name. Mr. Briscoe will also return to the Company all Company property identified in our First Amended Complaint. | |
| ● | The Company will reinstate Mr. Briscoe’s stock options that expired following his resignation from the Board. This reinstatement will be on the same terms as originally issued, as evidenced in the August 10, 2010, Stock Option Agreement and October 11, 2016, Stock Option Agreement, each as adjusted for the February 25, 2021, reverse stock split, and pursuant to the Company’s 2010 Stock Option Plan, except for the option exercise window, which will be expanded to 30 years (see Note 5). | |
| ● | The Company will pay Mr. Briscoe a sum of $29,677 in 15 equal monthly installments reflected in accounts payable and accrued liabilities on the accompanying consolidated balance sheets. | |
| ● | Both parties will agree to a non-disparagement clause that expressly establishes prior consent to the Pima County Court’s jurisdiction for issuance of mandatory injunctive relief if an aggrieved Party reasonably believes this clause has been violated by the other Party whether such violation is done directly by the violating Party or via proxy. |
In connection with the settlement, we wrote off $1,072,667 of liabilities in exchange for $29,677 of new debt and the issuance of options with a fair value of $44,706, resulting in a gain of $998,284.
Item 1A. Risk Factors
Not applicable
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On May 19, 2022, the Company sold 13,298 units at a price of $0.376 per unit to an accredited investor for proceeds of $5,000. Each unit consists of 1 share of our common stock and 0.50 warrants.
On May 23, 2022, the Company issued a total of 98,386 shares of our common stock for conversions of $24,300 in principal and $2,520 of accrued interest for the October 2021 Note at the exercise price $0.2726.
On May 31, 2022, the Company issued a total of 77,519 shares of our common stock for conversions of $28,500 in principal for the November 2021 Note at the exercise price of $0.2580.
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On June 9, 2022, the Company issued a total of 80,518 shares of our common stock for conversions of $20,500 in principal for the November 2021 Note at the exercise price of $0.2546.
On June 28, 2022, the Company issued a total of 103,400 shares of our common stock for conversions of $20,000 in principal and $2,200 of accrued interest for the November 2021 Note at the exercise price of $0.2147.
On July 1, 2022, the Company entered into a stock compensation and subscription agreement with Dutchess Group LLC. Per the agreement, Dutchess Group will provide services to the Company and will be issued 500,000 shares of the Company’s common stock. During the nine months ended October 31, 2022, the Company issued 500,000 shares of common stock valued at $160,000.
On July 7, 2022, the Company issued 1,109,804 shares of its common stock for gross proceeds of $187,030, or $0.1685 per share.
On July 11, 2022, the Company issued a total of 94,161 shares of our common stock for conversions of $28,000 in principal for the December 2021 Note at the exercise price of $0.2124.
On July 28, 2022, the Company issued a total of 85,911 shares of our common stock for conversions of $15,000 in principal for the December 2021 Note at the exercise price of $0.1746.
On August 5, 2022, the Company issued a total of 91,855 shares of our common stock for conversions of $15,000 in principal for the December 2021 Note at the exercise price $0.1633.
On August 10, 2022, the Company issued a total of 45,603 shares of our common stock for conversions of $5,000 in principal and $2,000 of accrued interest for the December 2021 Note at the exercise price $0.1535.
On August 12, 2022, the Company settled a $5,000 advance from a related party for the issuance of 26,738 units at a price of $0.187 per unit. Each unit consists of 1 share of our common stock and 0.50 warrants. Each warrant allows the holder to purchase one share of our common stock at a price of $0.262 per share at any time on or before August 12, 2025.
On August 19, 2022, the Company issued a total of 111,276 shares of our common stock for conversions of $15,000 in principal for the February 2022 Note at the exercise price $0.1348.
On August 26, 2022, the Company issued a total of 159,109 shares of our common stock for conversions of $20,000 in principal for the February 2022 Note at the exercise price $0.1257.
On September 8, 2022, the Company issued a total of 168,776 shares of our common stock for conversions of $20,000 in principal for the February 2022 Note at the exercise price $0.1185.
On September 19, 2022, the Company issued a total of 200,356 shares of our common stock for conversions of $19,800 in principal and $2,720 of interest for the February 2022 Note at the exercise price $0.1124.
On October 30, 2022, the Company issued a total of 127,986 shares of our common stock for conversions of $15,000 in principal for the April 2022 Note at the exercise price $0.1172.
On November 4, 2022, the Company issued a total of 145,503 shares of our common stock for conversions of $16,500 in principal for the April 2022 Note at the exercise price $0.1134.
On November 8, 2022, the Company issued a total of 153,488 shares of our common stock for conversions of $16,500 in principal for the April 2022 Note at the exercise price $0.1075.
On November 22, 2022, the Company issued a total of 197,842 shares of our common stock for conversions of $16,500 in principal for the April 2022 Note at the exercise price $0.0834
On December 5, 2022, the Company issued a total of 133,705 shares of our common stock for conversions of $7,000 in principal and $2,600 of accrued interest for the April 2022 Note at the exercise price $0.0718.
In issuing the securities set forth above, we relied on the registration exemption provided for in Rule 506 of Regulation D and/or Section 4(a)(2) of the Securities Act of 1933, as amended.
Item 3. Defaults Upon Senior Securities.
None.
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Item 4. Mine Safety Disclosures.
Under Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and under Item 104 of Regulation S-K, each operator of a coal or other mine is required to include disclosures regarding certain mine safety results in its periodic reports filed with the SEC. The operation of our mine(s) that may be developed in the future would be subject to regulation by the federal Mine Safety and Health Administration (MSHA) under the Federal Mine Safety and Health Act of 1977. We do not own any mines in the United States and as a result, this information is not required.
Item 5. Other Information.
None.
Item 6. Exhibits
* Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| LIBERTY STAR URANIUM & METALS CORP. | ||
| By: | /s/ Brett Gross | |
| Brett Gross, | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ Patricia Madaris | |
| Patricia Madaris, | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) | ||
Date: December 14, 2022
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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Brett Gross, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Liberty Star Uranium & Metals Corp. |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
Date: December 14, 2022
| By: | /s/ Brett Gross | |
| Brett Gross, | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Patricia Madaris, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Liberty Star Uranium & Metals Corp. |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
Date: December 14, 2022
| By: | /s/ Patricia Madaris | |
| Patricia Madaris, | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Brett Gross and Patricia Madaris, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | the quarterly report on Form 10-Q of Liberty Star Uranium & Metals Corp. for the period ended October 31, 2022 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Liberty Star Uranium & Metals Corp. |
Dated: December 14, 2022
| By: | /s/ Brett Gross | |
| Brett Gross, | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| By: | /s/ Patricia Madaris | |
| Patricia Madaris, | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) |