ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with our
consolidated audited financial statements and the related notes that appear
elsewhere in this annual report. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. We
refer you to the cautionary statement regarding forward-looking statements
included at the beginning of this annual report. Our actual results could differ
materially from those discussed in the forward-looking statements. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed below and elsewhere in this annual report, particularly in the
section entitled "Risk Factors" included in this annual report.
Our consolidated audited financial statements are stated in
United States Dollars and are prepared in accordance with accounting principles
generally accepted in the United States of America.
Overview
We are an exploration stage company engaged in the acquisition
and exploration of mineral properties in the States of Arizona and Alaska.
Claims in the State of Alaska are held in the name of our wholly-owned
subsidiary, Big Chunk Corp. 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 within a mineral province such as
the Arizona Strip or a large structural feature such as calderas which occur at Big Chunk, East Silver Bell, and Tombstone, any one or more of which could potentially contain commercially viable quantities of minerals.
18
Liquidity and Capital Resources
We had cash and cash equivalents in the amount of $55,089 as of January 31, 2014. We had negative working capital of $6,202,731 as of January 31, 2014. We had cash inflows from financing activities of $1,161,453 for the year ended
January 31, 2014. We will need additional funds in order to proceed with our planned exploration program.
Letter Agreement and Secured Convertible Notes with Northern Dynasty Minerals Ltd.
On July 15, 2010, we issued a secured convertible promissory note (the “2010 Convertible Note”) to Northern Dynasty Minerals Ltd (“Northern Dynasty”). The original advanced amount was $4,000,000 and bore interest at a
rate of 10% per annum compounded monthly (the “Loan”). On August 17, 2010, we transferred 95 of our Alaska State mineral claims from the Big Chunk Super Project to Northern Dynasty for consideration of $1,000,000 of the original
advanced amount under the Convertible Note, leaving $3,000,000 of the Loan amount outstanding. No interest accrued on the $1,000,000 of the original advanced amount. Effective September 1, 2011 the agreement with Northern Dynasty was amended
to increase the 2010 Convertible Note by $561,816 to reimburse Northern Dynasty for assessment work, rental fees, cash in lieu of assessment work and filing fees on the mineral claims that was paid in fiscal 2011 and fiscal 2012 because we could
not come to an agreement on an earn-in option and joint venture agreement with Northern Dynasty. On February 29, 2012, with effect from November 30, 2011, we executed an additional convertible promissory note (the “2011 Convertible Note”
and together with the 2010 Convertible Note, the “Convertible Notes”) in the amount of $168,358 in reimbursement to Northern Dynasty of assessment work, rental fees and filing fees on our mineral claims. Principal balance of the
Convertible Notes at January 31, 2014 and 2013 was $3,730,174. Accrued interest on the Convertible Notes at January 31, 2014 and 2013 was $1,465,059 and $972,617, respectively.
As part of the transactions noted above, we entered into a letter agreement with Northern Dynasty whereby, subject to negotiating and signing a definitive earn-in option and joint venture agreement, Northern Dynasty can earn a 60% interest in our
Big Chunk and Bonanza Hills projects in Alaska (the “Joint Venture Claims”) by spending $10,000,000 on those properties over six years. The outstanding loan amounts from Northern Dynasty may be applied as part of Northern
Dynasty’s earn-in requirements. Northern Dynasty’s minimum annual expenditures under the earn-in would be the minimum level necessary to keep the Joint Venture Claims in good standing. Northern Dynasty may elect to abandon the earn-in at
any time on 30 days’ notice, so long as sufficient annual labor is performed, or a cash payment in lieu of labor is made, in order to fulfill the annual labor requirements for the Joint Venture Claims for a minimum of 12 months after
termination of the earn-in. To date, no joint venture agreement has been agreed upon and as such, Northern Dynasty may demand payment of the funds due under the Convertible Notes at any time upon 45 days notice.
The Convertible Notes are secured against our Big Chunk and Bonanza Hills property. The Convertible Notes are due for repayment 45 days after the earlier to occur of: (i) Northern Dynasty’s completion of its earn-in to the Joint Venture Claims
unless it has elected to deem the entire outstanding balance of the Convertible Note (including interest thereon) to be part of the earn-in expenditure requirements and (ii) termination of Northern Dynasty’s earn-in right by voluntary
abandonment provided that $1,000,000 in expenditures has been made; or (iii) termination of Northern Dynasty’s earn-in right on account of a superior third party joint venture offer.
Provided a minimum of $1,000,000 has been expended by Northern Dynasty on earn in expenses, the Convertible Notes will be convertible until repaid or deemed repaid, into common shares of our company at the 5 day volume weighted average trading
price immediately prior to Northern Dynasty giving a notice of conversion less the maximum allowable discount applicable as if our shares were listed on the TSX Venture Exchange.
19
On November 14, 2012, we signed a loan settlement agreement with Northern Dynasty which would have discharged the $3,730,174 principal balance and $972,617 of accrued interest for the 2010 Convertible Note and would have terminated Northern Dynasty’s earn-in rights. In exchange for the settlement, we initiated transfer of 199 Alaska mining claims to Northern Dynasty’s subsidiary, U5 Resources. However, since a third party filed liens against
the claims and there is a dispute with Northern Dynasty regarding the effect of the liens, we have not recorded the settlement transaction as of January 31, 2014, pending resolution of the lien claims. Northern Dynasty takes the position that the
settlement is not complete while the lien claims are outstanding. In March 2014 Liberty Star and Big Chunk entered into a settlement agreement with MBGS, LLC, following a resolution conference conducted in Anchorage, Alaska whereby all lien claims for the Northern Dynasty transfer were released. As a result of those claims released by MBGS, LLC, in May 2014 the company completed its loan settlement agreement with Northern Dynasty and discharged the principal balance and accrued interest for the 2010 Convertible Note which also terminated Northern Dynasty’s earn-in-rights.
Financing Agreement with Fairhills Capital Offshore Ltd.
On January 19, 2012, we entered into a financing agreement (the “Fairhills Agreement”) with Fairhills Capital Offshore Ltd. (“Fairhills Capital”), whereby Fairhills Capital will provide for a non-brokered financing
arrangement of up to $10,000,000. The financing allows but does not require us to issue and sell up to the number of shares of common stock having an aggregate purchase price of $10,000,000 to Fairhills Capital. Subject to the terms and
conditions of the Fairhills Agreement and a registration rights agreement entered into concurrently (the “Registration Rights Agreement”), we may, in our sole discretion, deliver a notice to Fairhills Capital which states the dollar
amount which we intend to sell to Fairhills Capital on a certain date. The amount that we shall be entitled to sell to Fairhills Capital shall be equal to two hundred percent (200%) of the average daily volume (U.S. market only) of our shares of
common stock for the ten (10) trading days prior to the applicable notice date. Such shares of common stock will be valued at a 27.5% discount from the weighted average trading price of our stock for the five (5) trading days before Fairhills
Capital receives our notice of sale. The shares of common stock that we sell to Fairhills Capital must be registered stock, among other conditions of investment.
In connection with the Investment Agreement, we also entered into a registration rights agreement with Fairhills. Pursuant to this registration rights agreement, we registered with the Securities and Exchange Commission 185,000,000 shares of the
common stock underlying the Investment Agreement.
On November 13, 2012, we signed a loan settlement agreement with Northern Dynasty which would have discharged the $3,730,174 principal balance and $972,617 of accrued interest for the 2010 Convertible Note and would have terminated Northern Dynasty’s earn-in rights. In exchange for the settlement, we initiated transfer of 199 Alaska mining claims to Northern Dynasty’s subsidiary, U5 Resources. However, since a third party filed liens against the claims and there was a dispute with Northern Dynasty regarding the effect of the liens, we had not recorded the settlement transaction as of January 31, 2014, pending resolution of the lien claims. Northern Dynasty took the position that the settlement was not complete while the lien claims were outstanding.
In March 2014 Liberty Star and Big Chunk entered into a settlement agreement with MBGS, LLC, following a resolution conference conducted in Anchorage, Alaska whereby all lien claims for the Northern Dynasty transfer were released. As a result of those claims released by MBGS, LLC, in May 2014 the company completed its loan settlement agreement with Northern Dynasty and discharged the principal balance and accrued interest for the 2010 Convertible Note which also terminated Northern Dynasty’s earn-in-rights.
In February, March and April, 2013, we issued 22,874,405 shares for gross proceeds of $200,000 related to the investment agreement with Deer Valley Management, LLC.
In May, June and July, 2013, we issued 31,270,958 shares for gross proceeds of $255,000 related to the investment agreement with Deer Valley Management, LLC. As of July 31, 2013, we had not yet received payment for one transaction valued at
$25,000. As of October 31, 2013, we received the final payment for this transaction, plus $5,000 from Deer Valley Management, LLC for the inconvenience of paying late. In August 2013, we decided to terminate the investment agreement with
Deer Valley Management, LLC due to their violation of the payment terms pursuant to the investment agreement. As of the time of the termination of the investment agreement, we had issued a total of 113,815,732 and had received gross proceeds of
$1,635,000. No further shares issuances to Deer Valley Management, LLC are expected to occur.
20
In August, 2013, we entered into a promissory note (the “August 2013 Note”) for a principal sum of $555,000 plus accrued and unpaid interest and any other fees. The consideration is up to $500,000, which would produce an original
issue discount of $55,000 if all the consideration is received. The lender paid $150,000 upon closing pursuant to the terms of the August 2013 Note. The August 2013 Note has a maturity of one year from the delivery of each payment. The
August 2013 Note may be convertible into shares of common stock of our company at any time from 180 days after the date of each payment of consideration, at a conversion price which is 70% of the average of the three lowest closing prices in the 20 trading days previous to the conversion. We may repay the August 2013 Note at any time
on or before 90 days from the effective date of the August 2013 Note with an interest rate of 0%, after which we may not make any further payments on the August 2013 Note prior to the maturity date without written approval from the lender. If we
elect not to repay the August 2013 Note on or before 90 days from the effective date of the August 2013 Note, a one-time interest charge of 12% will be applied to the principal sum. On December 9, 2013, we received additional consideration of
$75,000 pursuant to the terms of the August 2013 Note. As of January 31, 2014 we did not repay any portion of the note before 90 days from the effective date, and since the 180 days hadn’t lapsed since the initial payment occurred, the
note wasn’t convertible by the holder. As of April 21, 2014, $186,480 had been converted into shares of the our Common stock pursuant to the conversion terms of the agreement.
On October 30, 2013, the Company entered into an investment agreement in which with KVM Capital Partners LLC, a New York limited liability company (“KVM”). Pursuant to the agreement, KVM has agreed to purchase up to $8,000,000 of our
common stock over a period of up to thirty-six (36) months. The purchase price per share to be paid by KVM shall be calculated at a twenty percent (20%) discount to the lowest volume weighted average price of the common stock as reported by
Bloomberg, L.P. during the five (5) consecutive trading days immediately prior to the receipt by KVM of the put notice. We initially reserved 244,500,000 shares of our common stock for issuance under the KVM Investment Agreement. In connection with
the KVM Investment Agreement, we also entered into a registration rights agreement with KVM, pursuant to which we are obligated to file a registration statement with the SEC covering 244,500,000 shares of our common stock underlying the KVM
Investment Agreement within 21 days after the closing of the transaction. In addition, we are obligated to use all commercially reasonable efforts to have the registration statement declared effective by the SEC and maintain the effectiveness of
such registration statement until termination of the KVM Investment Agreement. On November 6, 2013, we filed form S-1 related to the KVM investment agreement. As of January 31, 2014, no shares were purchased by the investor. Between February 2014 and April 2014, pursuant to the investment agreement, KVM
purchased 15,593,934 shares for proceeds of $220,250.
On November 18, 2013, we entered into a securities purchase agreement, whereby we agreed to issue a convertible note to one lender in the principal amount of $250,000, discounted at issuance to the face value of $225,000. The Note is payable
in full on November 18, 2014 and bears no interest except in an event of default. The lender may, at its option, after the 183rd day following the closing date, convert the principal amount or any portion of such principal amount of the Note into
shares of common stock of our company at the price equal to the lesser of (a) 100% of the volume weighted average price (VWAP), as reported on the closing date (November 18, 2013), and (b) 70% of the average of the 5 day VWAP immediately prior to
the day of conversion. As of January 31, 2014, we have not made any repayments on this convertible note and the note has not been converted.
We also entered into certain private investment agreements where we received a total of $732,043 in proceeds.
Results of Operations for the year ended January 31, 2014
We had a net loss of $2,318,047 for the twelve-month period ended January 31, 2014 compared to a net loss of $2,644,787 for the twelve-month period ended January 31, 2013. The two periods were comparable, and there were no significant
changes in the level of expenditures by category.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures
or capital resources that are material to stockholders.
21
Presentation of Financial Information
Our consolidated financial statements for the period ended January 31, 2014 reflect financial information for the twelve month period ending January 31, 2014, as well as from inception through January 31, 2014 and for the twelve-month period ended
January 31, 2013.
Since we have not generated any revenue, we have included a reference to our ability to continue as a going concern in connection with our consolidated financial statements for the years ended January 31, 2014 and 2013. Our accumulated
stockholders’ equity (deficit) at January 31, 2014, was $(6,159,649) and the net loss for the year ended January 31, 2014 was $2,318,047. All of our exploration costs are expensed as incurred.
These consolidated financial statements have been prepared on the going concern basis, which assumes that adequate sources of financing will be obtained as required and that our assets will be realized, and liabilities settled in the ordinary course
of business. Accordingly, these consolidated financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going
concern.
In order to continue as a going concern, we require additional financing. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are
not able to continue as a going concern, we would likely be unable to realize the carrying value of our assets reflected in the balances set out in the preparation of the consolidated financial statements.
Critical Accounting Policies
Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. Our significant accounting policies are described in Note 2 to the consolidated financial
statements included in Item 8 in this Form 10-K. The critical accounting policies adopted by our company are as follows:
Going Concern
Since we have not generated any revenue, we have negative cash flows from operations, and negative working capital we have included a reference to the substantial doubt about our ability to continue as a going concern in connection with our
consolidated financial statements for the period ended January 31, 2014. Our total stockholders’ equity (deficit) at January 31, 2014 was $(6,159,649).
These consolidated financial statements have been prepared on the going concern basis, which assumes that adequate sources of financing will be obtained as required and that our assets will be realized, and liabilities settled in the ordinary course
of business. Accordingly, these consolidated financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going
concern.
Mineral claims
We account for costs incurred to acquire, maintain and explore mineral properties as charged to expense in the period incurred until the time that a proven mineral resource is established at which point development of the mineral property would be
capitalized. Currently, we do not have any proven mineral resources on any of our mineral properties.
Convertible promissory notes
We reviewed the convertible promissory notes and the related subscription agreements to determine the appropriate reporting within the financial statements. We report convertible promissory notes as liabilities at their carrying value less
unamortized discounts in accordance with the applicable accounting guidance. We bifurcate conversion options and detachable common stock purchase warrants and report them as liabilities at fair value at each reporting period when required in accordance with the applicable accounting guidance. No gain or loss is reported when the notes are converted into shares of our common stock in accordance with the note’s terms.
22
Common stock purchase warrants
We report common stock purchase warrants as equity unless a condition exists which requires reporting as a derivative liability at fair market value. For common stock purchase warrants reported as a derivative liability, as well as new and modified
warrants reported as equity, we utilize the Black-Scholes valuation method in order to determine fair value.
Changes in officers and directors
On August 28, 2013, Larry Liang, resigned as the president and a director of our company. On the same date, we reappointed James Briscoe as president of our company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
23
LIBERTY STAR URANIUM & METALS CORP.
TABLE OF CONTENTS
|
Page
|
|
|
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
|
24
|
|
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
25
|
|
|
Consolidated Balance Sheets as of January 31, 2014 and
2013
|
25
|
|
|
Consolidated Statements of Operations for the twelve
months ended January 31, 2014, the twelve months ended January 31, 2013
and the period from inception (August 20, 2001) to January 31, 2014
|
26
|
|
|
Consolidated Statements of Stockholders Equity (Deficit)
for the period from inception (August 20, 2001) to January 31, 2014
|
27
|
|
|
Consolidated Statements of Cash Flows for the twelve
months ended January 31, 2014, the twelve months ended January 31, 2013
and for the period from inception (August 20, 2001) to January 31, 2014
|
28
|
|
|
NOTES TO CONSOLIDATED
FINANCIALS STATEMENTS
|
29
|
24
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders of
Liberty Star Uranium
& Metals Corp.
We have audited the accompanying consolidated balance sheets of
Liberty Star Uranium & Metals Corp. and its subsidiaries (an exploration
stage company) (collectively, the Company) as of January 31, 2014 and 2013,
and the related consolidated statements of operations, stockholders equity
(deficit), and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of internal
control over financial reporting. Our audits include consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position Star
Uranium & Metals Corp. and its subsidiaries as of January 31, 2014 and 2013,
and the results of their operations, changes in stockholders equity (deficit),
and their cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 3 to the consolidated financial statements, the Company is in
the exploration stage, has suffered recurring losses from operations, and
requires additional funds for further exploratory activity prior to attaining a
revenue generating status. In addition, the Company may not find sufficient ore
reserves to be commercially mined. These conditions raise substantial doubt
about the Companys ability to continue as a going concern. Managements plans
in regard to these matters are also described in Note 3. The consolidated
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
/s/ MaloneBailey, LLP
Houston, Texas
May 16, 2014
25
LIBERTY STAR URANIUM & METALS CORP.
(AN
EXPLORATION STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
|
|
January 31,
|
|
|
January 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
55,089
|
|
$
|
117,716
|
|
Advances
|
|
1,000
|
|
|
-
|
|
Deferred Financing Costs
|
|
38,052
|
|
|
-
|
|
Prepaid expenses
and supplies
|
|
9,109
|
|
|
8,662
|
|
Total current assets
|
|
103,250
|
|
|
126,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
49,792
|
|
|
81,200
|
|
Total assets
|
$
|
153,042
|
|
$
|
207,578
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
Current portion
of long-term debt
|
$
|
5,594
|
|
$
|
5,089
|
|
Convertible promissory note, net
of debt discount of $34,584
|
|
4,193,090
|
|
|
3,730,174
|
|
Accounts payable
and accrued liabilities
|
|
254,261
|
|
|
151,480
|
|
Accrued wages to related parties
|
|
340,992
|
|
|
276,992
|
|
Accrued interest
|
|
1,465,059
|
|
|
972,617
|
|
Warrant liability
|
|
46,985
|
|
|
15,112
|
|
Total current
liabilities
|
|
6,305,981
|
|
|
5,151,464
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion
|
|
6,710
|
|
|
12,305
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
6,312,691
|
|
|
5,163,769
|
|
|
|
|
|
|
|
|
Stockholders' deficit
|
|
|
|
|
|
|
Common stock - $.00001
par value; 1,250,000,000 shares authorized;
830,236,231 and 740,710,265
shares issued and outstanding
|
|
8,302
|
|
|
7,408
|
|
Additional
paid-in capital
|
|
49,026,144
|
|
|
47,912,449
|
|
Deficit accumulated during the
exploration stage
|
|
(55,194,095
|
)
|
|
(52,876,048
|
)
|
Total
stockholders' deficit
|
|
(6,159,649
|
)
|
|
(4,956,191
|
)
|
|
|
|
|
|
|
|
Total
liabilities and shareholders' deficit
|
$
|
153,042
|
|
$
|
207,578
|
|
The Accompanying Notes are an Integral Part of the Consolidated
Financial Statements
26
LIBERTY STAR URANIUM & METALS CORP.
(AN
EXPLORATION STAGECOMPANY)
CONSOLIDATED STATEMENTS OF
OPERATIONS
|
|
|
|
|
|
|
|
Period from Inception
|
|
|
|
For the Twelve Months Ended
|
|
|
(August 20, 2001)
|
|
|
|
January 31,
|
|
|
to January 31, 2014)
|
|
|
|
2014
|
|
|
2013
|
|
|
(unaudited)
|
|
Revenues
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
Geological and geophysical costs
|
|
463,124
|
|
|
1,105,960
|
|
|
15,828,664
|
|
Salaries and
benefits
|
|
513,418
|
|
|
352,159
|
|
|
4,781,933
|
|
Public relations
|
|
210,776
|
|
|
78,729
|
|
|
1,065,987
|
|
Depreciation
|
|
32,827
|
|
|
41,610
|
|
|
953,968
|
|
Legal
|
|
177,472
|
|
|
72,754
|
|
|
1,144,803
|
|
Professional
services
|
|
51,115
|
|
|
107,540
|
|
|
1,427,243
|
|
General and administrative
|
|
268,236
|
|
|
430,877
|
|
|
2,671,549
|
|
Travel
|
|
46,268
|
|
|
31,129
|
|
|
319,904
|
|
Settlement expense
|
|
-
|
|
|
-
|
|
|
13,241,020
|
|
Loss on sale of
assets
|
|
-
|
|
|
12,119
|
|
|
54,572
|
|
Impairment loss
|
|
-
|
|
|
-
|
|
|
16,092,870
|
|
Net operating expenses
|
|
1,763,236
|
|
|
2,232,877
|
|
|
57,582,513
|
|
Loss from operations
|
|
(1,763,236
|
)
|
|
(2,232,877
|
)
|
|
(57,582,513
|
)
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
15
|
|
|
134
|
|
|
198,773
|
|
Interest expense
|
|
(522,953
|
)
|
|
(450,880
|
)
|
|
(6,898,109
|
)
|
Debt conversion
expense
|
|
-
|
|
|
-
|
|
|
(103,437
|
)
|
Gain (loss) on change in fair value of warrant liability
|
|
(31,873
|
)
|
|
38,836
|
|
|
(3,667,071
|
)
|
Other income
|
|
-
|
|
|
-
|
|
|
1,350,390
|
|
Income from Elle Venture
|
|
-
|
|
|
-
|
|
|
300,000
|
|
Foreign exchange
gain
|
|
-
|
|
|
-
|
|
|
505
|
|
Gain on settlement of debt to related party
|
|
-
|
|
|
-
|
|
|
7,366
|
|
Total other income (expense)
|
|
(554,811
|
)
|
|
(411,910
|
)
|
|
(8,811,583
|
)
|
Net loss
|
|
(2,318,047
|
)
|
|
(2,644,787
|
)
|
|
(66,394,096
|
)
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss
per share of common stock
|
|
(0.00
|
)
|
|
(0.00
|
)
|
|
N/A
|
|
Basic and diluted weighted average number of
shares
|
|
|
|
|
|
|
|
|
|
of
common stock outstanding
|
|
803,439,114
|
|
|
677,767,166
|
|
|
N/A
|
|
The Accompanying Notes are an Integral Part of the Consolidated
Financial Statements
27
LIBERTY STAR URANIUM & METALS CORP.
(AN
EXPLORATION STAGECOMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
Additional
|
|
|
Deficit accumulated
|
|
|
Total
|
|
|
|
Common stock
|
|
|
paid-in
|
|
|
during the
|
|
|
stockholders
|
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
exploration stage
|
|
|
equity (deficit)
|
|
Balance, August 20, 2001 (Date of
inception)(unaudited)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Common stock issued for cash
|
|
5,000,000
|
|
|
50
|
|
|
99,950
|
|
|
-
|
|
|
100,000
|
|
Net loss for the period from
inception, August 20, 2001, to January 31, 2004
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(132,602
|
)
|
|
(132,602
|
)
|
Balance, January 31, 2004 (unaudited)
|
|
5,000,000
|
|
|
50
|
|
|
99,950
|
|
|
(132,602
|
)
|
|
(32,602
|
)
|
Acquisition, February 3, 2004
|
|
4,375,000
|
|
|
44
|
|
|
15,924,956
|
|
|
-
|
|
|
15,925,000
|
|
Issuance of common stock and warrants private
placement
|
|
650,000
|
|
|
7
|
|
|
2,999,993
|
|
|
-
|
|
|
3,000,000
|
|
Options issued for services
|
|
-
|
|
|
-
|
|
|
94,350
|
|
|
-
|
|
|
94,350
|
|
Return of shares
|
|
(1,750,000
|
)
|
|
(18
|
)
|
|
(11,199,982
|
)
|
|
11,200,000
|
|
|
-
|
|
Net loss for the year ended January
31, 2005
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(18,392,024
|
)
|
|
(18,392,024
|
)
|
Balance, January 31, 2005 (unaudited)
|
|
8,275,000
|
|
|
83
|
|
|
7,919,267
|
|
|
(7,324,626
|
)
|
|
594,724
|
|
Issuance of common stock and warrants
private placement
|
|
972,172
|
|
|
10
|
|
|
5,052,722
|
|
|
-
|
|
|
5,052,732
|
|
Net loss for the year ended January 31, 2006
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(4,627,965
|
)
|
|
(4,627,965
|
)
|
Balance, January 31, 2006
(unaudited)
|
|
9,247,172
|
|
|
93
|
|
|
12,971,989
|
|
|
(11,952,591
|
)
|
|
1,019,491
|
|
Issuance of common stock private placement
|
|
990,596
|
|
|
10
|
|
|
2,545,985
|
|
|
-
|
|
|
2,545,995
|
|
Issuance of common stock for services
|
|
37,500
|
|
|
-
|
|
|
93,000
|
|
|
-
|
|
|
93,000
|
|
Expenses of common stock issuance
|
|
-
|
|
|
-
|
|
|
(320,000
|
)
|
|
-
|
|
|
(320,000
|
)
|
Options granted to consultants and
employees
|
|
-
|
|
|
-
|
|
|
832,343
|
|
|
-
|
|
|
832,343
|
|
Net loss for the year ended January 31, 2007
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(3,267,948
|
)
|
|
(3,267,948
|
)
|
Balance, January 31, 2007
(unaudited)
|
|
10,275,268
|
|
|
103
|
|
|
16,123,317
|
|
|
(15,220,539
|
)
|
|
902,881
|
|
Issuance of common stock private placement
|
|
429,700
|
|
|
4
|
|
|
1,074,413
|
|
|
-
|
|
|
1,074,417
|
|
Issuance of common stock for services
|
|
28,000
|
|
|
-
|
|
|
54,540
|
|
|
-
|
|
|
54,540
|
|
Issuance of common stock for conversion of promissory
note
|
|
99,884
|
|
|
1
|
|
|
259,698
|
|
|
-
|
|
|
259,699
|
|
Options granted to employees and
consultants
|
|
-
|
|
|
-
|
|
|
358,646
|
|
|
-
|
|
|
358,646
|
|
Issuance of common stock purchase warrants
|
|
-
|
|
|
-
|
|
|
1,421,538
|
|
|
-
|
|
|
1,421,538
|
|
Beneficial conversion feature of
convertible promissory notes
|
|
-
|
|
|
-
|
|
|
1,842,734
|
|
|
-
|
|
|
1,842,734
|
|
Net loss for the year ended January 31, 2008
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(5,697,935
|
)
|
|
(5,697,935
|
)
|
Balance, January 31, 2008
(unaudited)
|
|
10,832,852
|
|
|
108
|
|
|
21,134,886
|
|
|
(20,918,474
|
)
|
|
216,520
|
|
note
|
|
37,646,325
|
|
|
376
|
|
|
1,839,135
|
|
|
-
|
|
|
1,839,511
|
|
Issuance of common stock for
inducement to convert promissory note
|
|
7,500
|
|
|
-
|
|
|
9,000
|
|
|
-
|
|
|
9,000
|
|
note
|
|
-
|
|
|
-
|
|
|
94,437
|
|
|
-
|
|
|
94,437
|
|
Stock based compensation
|
|
-
|
|
|
-
|
|
|
576,244
|
|
|
-
|
|
|
576,244
|
|
Common stock purchase warrants exercise price
reduction
|
|
-
|
|
|
-
|
|
|
67,700
|
|
|
-
|
|
|
67,700
|
|
Net loss for the year ended January
31, 2009
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(4,176,066
|
)
|
|
(4,176,066
|
)
|
Balance, January 31, 2009 (unaudited)
|
|
48,486,677
|
|
|
484
|
|
|
23,721,402
|
|
|
(25,094,540
|
)
|
|
(1,372,654
|
)
|
note
|
|
199,170,302
|
|
|
1,992
|
|
|
603,661
|
|
|
-
|
|
|
605,653
|
|
Beneficial conversion feature of convertible
promissory notes
|
|
-
|
|
|
-
|
|
|
330,366
|
|
|
-
|
|
|
330,366
|
|
Net loss for the year ended January
31, 2010
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,809,843
|
)
|
|
(2,809,843
|
)
|
Balance, January 31, 2010 (unaudited)
|
|
247,656,979
|
|
|
2,476
|
|
|
24,655,429
|
|
|
(27,904,383
|
)
|
|
(3,246,478
|
)
|
note
|
|
187,127,678
|
|
|
1,872
|
|
|
273,105
|
|
|
-
|
|
|
274,977
|
|
Issuance of common stock and warrants private
placement, net
|
|
31,778,484
|
|
|
318
|
|
|
1,284,363
|
|
|
-
|
|
|
1,284,681
|
|
Exercise of common stock purchase
warrants
|
|
135,848,741
|
|
|
1,358
|
|
|
1,880,588
|
|
|
-
|
|
|
1,881,946
|
|
Issuance and modification of common stock purchase
warrants
|
|
-
|
|
|
-
|
|
|
15,089,884
|
|
|
-
|
|
|
15,089,884
|
|
Stock based compensation
|
|
-
|
|
|
-
|
|
|
2,530,750
|
|
|
-
|
|
|
2,530,750
|
|
Net loss for the year ended January 31, 2011
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(19,865,419
|
)
|
|
(19,865,419
|
)
|
Balance, January 31, 2011
(unaudited)
|
|
602,411,882
|
|
|
6,024
|
|
|
45,714,119
|
|
|
(47,769,802
|
)
|
|
(2,049,659
|
)
|
Cashless exercise of common stock purchase warrants
|
|
22,687,507
|
|
|
227
|
|
|
(227
|
)
|
|
-
|
|
|
-
|
|
Issuance of common stock and warrants
private placement, net
|
|
10,800,000
|
|
|
108
|
|
|
253,012
|
|
|
-
|
|
|
253,120
|
|
Stock based compensation
|
|
-
|
|
|
-
|
|
|
103,950
|
|
|
-
|
|
|
103,950
|
|
Recognition of derivative liabilities
into Additional Paid-In Capital
|
|
|
|
|
|
|
|
(72,376
|
)
|
|
|
|
|
(72,376
|
)
|
Net loss for the year ended January 31, 2012
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,461,459
|
)
|
|
(2,461,459
|
)
|
Balance, January 31, 2012
|
|
635,899,389
|
|
|
6,359
|
|
|
45,998,478
|
|
|
(50,231,261
|
)
|
|
(4,226,424
|
)
|
Cashless exercise of common stock purchase warrants
|
|
20,555,571
|
|
|
205
|
|
|
(205
|
)
|
|
-
|
|
|
-
|
|
Issuance of common stock and warrants
private placement, net
|
|
17,225,537
|
|
|
173
|
|
|
512,711
|
|
|
-
|
|
|
512,884
|
|
Issuance of common shares for cash pursuant to
investment agreement
|
|
59,670,369
|
|
|
597
|
|
|
1,174,403
|
|
|
-
|
|
|
1,175,000
|
|
Issuance of common stock for third
party service
|
|
7,359,399
|
|
|
74
|
|
|
91,066
|
|
|
|
|
|
91,140
|
|
Stock based compensation
|
|
-
|
|
|
-
|
|
|
135,996
|
|
|
-
|
|
|
135,996
|
|
Net loss for the year ended January
31, 2013
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,644,787
|
)
|
|
(2,644,787
|
)
|
Balance, January 31, 2013
|
|
740,710,265
|
|
|
7,408
|
|
|
47,912,449
|
|
|
(52,876,048
|
)
|
|
(4,956,191
|
)
|
Cashless exercise of common stock
purchase warrants
|
|
6,087,165
|
|
|
61
|
|
|
(61
|
)
|
|
-
|
|
|
-
|
|
Issuance of common stock and warrants private
placement, net
|
|
23,606,957
|
|
|
236
|
|
|
271,807
|
|
|
-
|
|
|
272,043
|
|
Issuance of common shares for cash
pursuant to investment agreement
|
|
54,145,363
|
|
|
541
|
|
|
459,459
|
|
|
-
|
|
|
460,000
|
|
Stock issued in exchange for services
|
|
2,934,763
|
|
|
29
|
|
|
61,909
|
|
|
-
|
|
|
61,938
|
|
Shares issued for deferred financing
cost
|
|
1,225,000
|
|
|
12
|
|
|
30,151
|
|
|
-
|
|
|
30,163
|
|
Shares issued for settlement of accounts payable
|
|
1,526,718
|
|
|
15
|
|
|
19,985
|
|
|
-
|
|
|
20,000
|
|
Warrants issued for services
|
|
-
|
|
|
-
|
|
|
29,823
|
|
|
-
|
|
|
29,823
|
|
Stock based compensation
|
|
|
|
|
|
|
|
240,622
|
|
|
-
|
|
|
240,622
|
|
Net loss for the year ended January
31, 2014
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2,318,047
|
)
|
|
(2,318,047
|
)
|
Balance, January 31, 2013
|
|
830,236,231
|
|
|
8,302
|
|
|
49,026,144
|
|
|
(55,194,095
|
)
|
|
(6,159,649
|
)
|
The accompanying notes are an integral part of the consolidated
financial statements.
28
LIBERTY STAR URANIUM & METALS CORP.
(AN
EXPLORATION STAGECOMPANY)
CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
|
|
|
|
|
|
|
Period from Inception
|
|
|
|
|
|
|
|
|
|
(August 20, 2001)
|
|
|
|
For the Year Ended January 31,
|
|
|
to January 31, 2014
|
|
|
|
2014
|
|
|
2013
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(2,318,047
|
)
|
$
|
(2,644,787
|
)
|
$
|
(66,394,096
|
)
|
Adjustments to
reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
32,827
|
|
|
41,610
|
|
|
953,968
|
|
Amortization of
deferred financing charges
|
|
7,611
|
|
|
-
|
|
|
550,327
|
|
Amortization of original
issuance discount
|
|
12,916
|
|
|
-
|
|
|
3,645,911
|
|
Mineral claim costs
|
|
-
|
|
|
-
|
|
|
343,085
|
|
Impairment loss
|
|
-
|
|
|
-
|
|
|
16,092,870
|
|
Expenses capitalized to debt
|
|
-
|
|
|
-
|
|
|
730,174
|
|
(Gain) loss on
sale of fixed assets
|
|
-
|
|
|
12,119
|
|
|
54,572
|
|
(Gain) loss on change in fair value of warrant liability
|
|
31,873
|
|
|
(38,836
|
)
|
|
3,667,071
|
|
Share based
compensation
|
|
240,622
|
|
|
135,996
|
|
|
4,778,551
|
|
Fair value of the warrants issued for services
|
|
29,823
|
|
|
-
|
|
|
29,823
|
|
Share and warrant
based payments
|
|
-
|
|
|
-
|
|
|
13,795,973
|
|
Common shares issued for third party services
|
|
61,938
|
|
|
91,140
|
|
|
153,078
|
|
Non-cash other
incom from sale of mineral claims
|
|
-
|
|
|
-
|
|
|
(1,000,000
|
)
|
Interest paid through issuance of debt
|
|
-
|
|
|
-
|
|
|
282,569
|
|
Changes in assets
and liabilities:
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and supplies
|
|
(447
|
)
|
|
5,489
|
|
|
33,338
|
|
Other current assets
|
|
(1,000
|
)
|
|
-
|
|
|
(8,875
|
)
|
Other assets
|
|
-
|
|
|
-
|
|
|
(25,000
|
)
|
Certificate of deposit
|
|
-
|
|
|
-
|
|
|
(11,435
|
)
|
Accounts payable and accrued expenses
|
|
122,780
|
|
|
139,010
|
|
|
268,245
|
|
Accrued wages related parties
|
|
64,000
|
|
|
93,625
|
|
|
340,992
|
|
Accrued interest
|
|
492,442
|
|
|
445,646
|
|
|
1,873,260
|
|
Cash flows from operating activities:
|
|
(1,222,662
|
)
|
|
(1,718,988
|
)
|
|
(19,845,599
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from
the sale of fixed assets
|
|
-
|
|
|
-
|
|
|
407,327
|
|
Proceeds from redemption of
certificate of deposit
|
|
-
|
|
|
3,000
|
|
|
216,232
|
|
Purchase of
certificate of deposit
|
|
-
|
|
|
-
|
|
|
(204,797
|
)
|
Purchase of equipment
|
|
(1,418
|
)
|
|
(5,419
|
)
|
|
(1,186,111
|
)
|
Net cash used in investing activities
|
|
(1,418
|
)
|
|
(2,419
|
)
|
|
(767,349
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
Payments on long-term debt
|
|
(5,090
|
)
|
|
(4,630
|
)
|
|
(510,036
|
)
|
Cash paid on
deferred financing costs
|
|
(15,500
|
)
|
|
|
|
|
(15,500
|
)
|
Principal activity on capital
lease obligation
|
|
-
|
|
|
-
|
|
|
(39,298
|
)
|
Principal
activity on convertible promissory notes
|
|
450,000
|
|
|
-
|
|
|
163,773
|
|
Proceeds from the issuance of
common stock, net of expenses
|
|
732,043
|
|
|
1,687,884
|
|
|
15,097,802
|
|
Proceeds from
the sale of convertible promissory notes
|
|
-
|
|
|
-
|
|
|
5,772,371
|
|
Proceeds from long-term debt
|
|
-
|
|
|
-
|
|
|
198,925
|
|
Net cash provided by financing activities
|
|
1,161,453
|
|
|
1,683,254
|
|
|
20,668,037
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash
and cash equivalents
|
|
(62,627
|
)
|
|
(38,153
|
)
|
|
55,089
|
|
Cash and cash equivalents, beginning of
period
|
|
117,716
|
|
|
155,869
|
|
|
-
|
|
Cash and cash equivalents,
end of period
|
$
|
55,089
|
|
$
|
117,716
|
|
$
|
55,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax paid
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Interest paid during the
period
|
$
|
17,595
|
|
$
|
5,234
|
|
$
|
209,518
|
|
Original issue discounts
|
$
|
47,500
|
|
$
|
-
|
|
$
|
-
|
|
Exercise of common stock
purchase warrants
|
$
|
61
|
|
$
|
206
|
|
$
|
61
|
|
Settlement of accounts payable through
issuance of common stock
|
$
|
20,000
|
|
$
|
-
|
|
$
|
20,000
|
|
Shares issued for deferred
financing cost
|
$
|
30,163
|
|
$
|
-
|
|
$
|
30,163
|
|
The Accompanying Notes are an Integral Part of the Condensed
Consolidated Unaudited Financial Statements
29
LIBERTY STAR URANIUM & METALS CORP.
(AN
EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
NOTE 1 Organization
Liberty Star Uranium & Metals Corp. (the Company, we or
Liberty Star) 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) is 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. 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 the Companys 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. We are considered to
be an exploration stage company, as we have not generated any revenues from
operations.
These consolidated financial statements include the results of
operations and cash flows of Liberty Star Uranium & Metals Corp. and its
wholly owned subsidiaries, Big Chunk and Redwall, from the dates of acquisition.
All significant intercompany accounts and transactions were eliminated upon
consolidation.
These consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America (GAAP) with the on-going assumption that we will be able to realize
our assets and discharge our liabilities in the normal course of business.
However, certain conditions noted below currently exist which raise substantial
doubt about our ability to continue as a going concern. These consolidated
financial statements do not include any adjustments to the amounts and
classifications of assets and liabilities that might be necessary should we be
unable to continue as a going concern. Our operations have primarily been funded
by the issuance of common stock and debt. Continued operations are dependent on
our ability to complete equity financings or generate profitable operations in
the future. Managements plan in this regard is to secure additional funds
through future equity financings, joint venture agreements or debt. Such
financings may not be available, or may not be available on reasonable terms.
NOTE 2 Summary of significant accounting policies
The summary of significant accounting policies presented below
is designed to assist in understanding the Company's consolidated financial
statements. Such consolidated financial statements and accompanying notes are
the representations of the Companys management, who is responsible for their
integrity and objectivity. These accounting policies conform to accounting
principles generally accepted in the United States of America in all material
respects, and have been consistently applied in preparing the accompanying
consolidated financial statements. The significant accounting policies adopted
by the Company are as follows:
Use of estimates
The preparation of financial
statements in conformity with generally accepted accounting principles in the
United States of America requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
The valuation of stock-based compensation, classification and
valuation of common stock purchase warrants, classification and value of
embedded conversion options, value of beneficial conversion features, valuation
allowance on deferred tax assets, the determination of useful lives and
recoverability of depreciable assets, accruals, and contingencies are
significant estimates made by management. It is at least reasonably possible
that a change in these estimates may occur in the near term.
30
Principles of consolidation
The consolidated
financial statements include the accounts of the Company and its wholly-owned
subsidiaries, Big Chunk and Redwall, from the dates of acquisition, February 5,
2004 and August 31, 2007, respectively. All significant intercompany accounts
and transactions have been eliminated upon consolidation.
Cash and cash equivalents
We consider cash held at
banks and all highly liquid investments with original maturities of three months
or less to be cash and cash equivalents. We maintain our cash in bank deposit
accounts which, for periods of time, may exceed federally insured limits. At
January 31, 2014 and 2013, we had cash in bank deposit accounts that exceeded
federally insured limits of $0 and $0, respectively.
Mineral claim costs
We account for costs incurred to
acquire, maintain and explore mineral properties as a charge to expense in the
period incurred until the time that a proven mineral resource is established, at
which point development of the mineral property would be capitalized. Currently,
we do not have any proven mineral resources on any of our mineral
properties.
Long-lived Assets
Property and equipment is stated at
cost. We capitalize all purchased equipment over $500 with a useful life of more
than one year. Depreciation is calculated using the straight line method over
the estimated useful lives of the assets. Leasehold improvements are stated at
cost and are amortized over their estimated useful lives or the lease term,
whichever is shorter. Maintenance and repairs are expensed as incurred while
betterments or renewals are capitalized. Property and equipment is reviewed
periodically for impairment. The estimated useful lives range from 3 to 7 years.
We review long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. Recoverability of a long-lived asset group to be held and used in
operations is measured by a comparison of the carrying amount to the sum of the
undiscounted cash flows expected to result from the use and eventual disposition
of the asset group. If such asset group is considered to be impaired, the
impairment loss is measured as the amount by which the carrying amount of the
asset group exceeds its fair value. Long-lived assets to be disposed of are
carried at the lower of cost or fair value less the costs of disposal.
Convertible promissory notes
We report convertible
promissory notes as liabilities at their carrying value less unamortized
discounts, which approximates fair value. We bifurcate conversion options and
detachable common stock purchase warrants and report them as liabilities at fair
value at each reporting period when required in accordance with the applicable
accounting guidance. When convertible promissory notes are converted into shares
of our common stock in accordance with the debts terms, no gain or loss is
recognized. We account for inducements to convert as an expense in the period
incurred, included in debt conversion expense.
Common stock purchase warrants
We report common
stock purchase warrants as equity unless a condition exists which requires
reporting as a derivative liability at fair market value. For common stock
purchase warrants reported as a derivative liability, as well as new and
modified warrants reported as equity, we utilize the Black-Scholes valuation
method in order to estimate fair value.
Environmental expenditures
Our operations have been
and may in the future be affected from time to time in varying degree by changes
in environmental regulations, including those for future removal and site
restoration costs. The likelihood of new regulations and their overall effect
upon us are not predictable. We provide for any reclamation costs in accordance
with the accounting standards codification section 410-30. It is managements
opinion that we are not currently exposed to significant environmental and
reclamation liabilities and have recorded no reserve for environmental and
reclamation expenditures as of January 31, 2014 and 2013.
31
Fair Value of Financial Assets and Liabilities
The
Company measures and discloses certain financial assets and liabilities at fair
value. Authoritative guidance 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.
Authoritative guidance 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
- Quoted prices in active markets for identical
assets or liabilities.
Level 2
- Observable inputs other than Level 1 prices
such as quoted prices for similar assets or liabilities; quoted prices in
markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the
assets or liabilities.
Level 3
- Unobservable inputs that are supported by
little or no market activity and that are significant to the fair value of the
assets or 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.
With few exceptions, we are no longer subject to U.S. federal, state and local
examinations by tax authorities for years before 2009.
Net loss per share
Basic net loss per share is
computed by dividing net loss attributable to common shareholders by the
weighted average number of shares of common stock outstanding during the period.
Diluted net loss per share takes into consideration shares of common stock
outstanding (computed under basic loss per share) and potentially dilutive
shares of common stock that are not anti-dilutive. At January 31, 2014 and 2013,
potentially dilutive instruments were not included in the determination of
diluted loss per share as their effect was anti-dilutive.
Statement Presentation
Certain amounts in the
prior-year financial statements have been reclassified for comparative purposes
to conform with the presentation in the current-year financial statements.
Recently issued accounting standards
There are no
recent pronouncements that are expected to have a material impact on our
financial position and results of operations.
NOTE 3 Going concern
The Company is in the exploration stage, has incurred losses
from operations, 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 Companys
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.
32
NOTE 4 Mineral claims
At January 31, 2014 we held a 100% interest in 376 standard
Federal lode mining claims on the Colorado Plateau Province of Northern Arizona
(the North Pipes Claims).
At January 31, 2014 we held a 100% interest in 99 standard
Federal lode mining claims located in the Tombstone region of Arizona. 33
Federal lode mining claims are owned by JABA US Inc, an Arizona Corporation in
which two of our directors are owners and 66 Federal lode mining claims belong
to Liberty Star Uranium & Metals Corp. At January 31, 2014 we held Arizona
State Land Department Mineral Exploration Permits covering 4,126.9 acres in the
Tombstone region of Arizona.
At January 31, 2014 we held an option to explore 26 standard
Federal Lode mining claims located in the East Silver Bell region of northwest
Tucson, Arizona. The mineral claims are owned by JABA US Inc., an Arizona
Corporation in which two of our directors are owners.
At January 31, 2014 we held a 100% interest in 54 Alaska State
mining claims in the Iliamna region of Southwestern Alaska, located on the north
side of the Cook Inlet, approximately 200 miles southwest of the city of
Anchorage, Alaska (the Big Chunk Claims). The transaction for 199 claims transferred to Northern Dynasty in conjunction with our loan settlement agreement has now closed, and is no longer pending.
Title to mineral claims involves certain inherent risks due to
difficulties of determining the validity of certain claims as well as potential
for problems arising from the frequently ambiguous conveyance history
characteristic of many mineral properties.
All of the Company’s claims for mineral properties are in good standing as of January 31, 2014.
NOTE 5 Property and equipment
The balances of our major classes of depreciable assets and
useful lives are:
|
|
|
January 31, 2014
|
|
|
January 31, 2013
|
|
|
Geology Equipment (3 to 7
years)
|
$
|
260,521
|
|
$
|
260,521
|
|
|
Vehicles and transportation equipment (5
years)
|
|
50,180
|
|
|
50,180
|
|
|
Office furniture and
equipment (3 to 7 years)
|
|
75,404
|
|
|
73,985
|
|
|
|
|
386,105
|
|
|
384,686
|
|
|
Less: accumulated
depreciation and amortization
|
|
(336,313
|
)
|
|
(303,486
|
)
|
|
|
$
|
49,792
|
|
$
|
81,200
|
|
Depreciation expense was $32,827 and $41,610 for the years
ended January 31, 2014 and January 31, 2013, respectively.
NOTE 6 Long-term debt
Note payable to Ford Credit payable in monthly installments of
$544 including interest at a fixed rate of 9.49% through maturity in February
2016. Principal balance at January 31, 2014 and 2013 is $12,304 and $17,394,
respectively. Carrying amount of a vehicle that serves as collateral is $14,410
and $21,928 at January 31, 2014 and 2013, respectively.
The following is a summary of the principal maturities of
long-term debt during the next five years:
33
Minimum future debt payments
For the twelve months ending January 31,:
|
|
|
|
2014
|
$
|
5,594
|
|
2015
|
|
6,149
|
|
2016
|
|
561
|
|
2017
|
|
-
|
|
2018 and thereafter
|
|
-
|
|
|
$
|
12,304
|
|
Less: current maturities
|
|
5,594
|
|
|
$
|
6,710
|
|
NOTE 7 Convertible promissory notes
We issued 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 July 15, 2010 we issued a secured convertible promissory
note bearing interest at a rate of 10% per annum compounded monthly (the
Convertible Note) to Northern Dynasty Minerals Ltd (Northern Dynasty).
During the year ended January 31, 2012 the agreement with Northern Dynasty was
amended to issue additional secured convertible promissory notes totaling
$730,174 to reimburse Northern Dynasty for assessment work, rental fees, cash in
lieu of assessment work and filing fees on the mineral claims that was paid in
fiscal 2011 and fiscal 2012 because we could not come to an agreement on the
earn-in option and joint venture agreement with Northern Dynasty. Principal
balance of the Convertible Notes at January 31, 2014 and 2013 was $3,730,174.
Accrued interest on the Convertible Notes at January 31, 2014 and 2013 was
$1,465,059 and $972,617, respectively.
As part of the transaction noted above, Northern Dynasty could
earn a 60% interest in our Big Chunk project in Alaska (the Joint Venture
Claims) by spending $10,000,000 on those properties over six years. The
borrowings from Northern Dynasty could be applied as part of Northern Dynastys
earn-in requirements. Northern Dynastys minimum annual expenditures under the
earn-in would be the minimum level necessary to keep the Joint Venture Claims in
good standing. Northern Dynasty could elect to abandon the earn-in at any time
on 30 days notice, so long as sufficient annual labor was performed, or a cash
payment in lieu of labor was made, in order to fulfill the annual labor
requirements for the Joint Venture Claims for a minimum of 12 months after
termination of the earn-in. As of January 31, 2014, no such notice by Northern
Dynasty has been received.
On November 14, 2012, we signed a loan settlement agreement
with Northern Dynasty which would have discharged the $3,730,174 principal
balance and $972,617 of accrued interest for the 2010 Convertible Note and would
have terminated Northern Dynastys earn-in rights. In exchange for the
settlement, we initiated the transfer of 199 Alaska mining claims to Northern
Dynastys subsidiary, U5 Resources. However, since a third party filed liens
against the claims before the transfer could be completed, we have not recorded
the settlement transaction as of January 31, 2014, pending resolution of the
lien claims. In March 2014 Liberty Star and Big Chunk entered into a settlement
agreement with MBGS, LLC, following a resolution conference conducted in
Anchorage, Alaska whereby all Northern Dynasty claims recorded by MBGS, LLC were released. As a
result of the claims release by MBGS, LLC, in May 2014 the company completed its
loan settlement agreement with Northern Dynasty and discharged the principal
balance and accrued interest for the 2010 Convertible Note and terminated
Northern Dynastys earn-in-rights.
In August, 2013, we entered into a promissory note (the August
2013 Note) for a principal sum of $555,000 plus accrued and unpaid interest and
any other fees. The consideration is up to $500,000, which would produce an
original issue discount of $55,000 if all the consideration is received. The
lender paid $150,000 upon closing pursuant to the terms of the August 2013 Note.
The August 2013 Note has a maturity of one year from the delivery of each
payment. The August 2013 Note may be convertible into shares of common stock of
our company at any time from 180 days after the date of each payment of
consideration, at a conversion price which is 70% of the average of the three
lowest closing prices in the 20 trading days previous to the conversion. We may
repay the August 2013 Note at any time on or before 90 days from the effective
date of the August 2013 Note with an interest rate of 0%, after which we may not make any further payments on the August 2013 Note prior to the maturity date without written approval from the lender. If we elect not to repay the August 2013 Note on or before 90 days from the effective date of
the August 2013 Note, a one-time interest charge of 12% will be applied to the principal sum. On December 9, 2013, we received additional consideration of $75,000 pursuant to the terms of the August 2013 Note. As of January 31, 2014 we did not
repay any portion of the note before 90 days from the effective date, and since the 180 days hadn’t lapsed since the initial payment occurred, the note wasn’t convertible by the holder. As of April 21, 2014, $186,480 had been
converted into shares of our Common stock pursuant to the conversion terms of the agreement.
34
On November 18, 2013, we entered into a securities purchase agreement, whereby we agreed to issue a convertible note to one lender in the principal amount of $250,000, discounted at issuance to the face value of $225,000. The Note is payable
in full on November 18, 2014 and bears no interest except in an event of default. The lender may, at its option, after the 183rd day following the closing date, convert the principal amount or any portion of such principal amount of the Note into
shares of common stock of our company at the price equal to the lesser of (a) 100% of the volume weighted average price (VWAP), as reported on the closing date (November 18, 2013), and (b) 70% of the average of the 5 day VWAP immediately prior to
the day of conversion. As of January 31, 2014, we have not made any repayments on this convertible note and the note has not been converted.
NOTE 8 – Common stock
Our 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.
In December 2012 and January 2013, we issued 7,359,399 units, at prices ranging from $0.0116 to $0.0156 per unit, to contractors who had provided services, directly or indirectly, on our Alaska properties. These units were issued in lieu of
cash payments and in satisfaction of claims for services provided. Each unit consisted of one common share of our company and one non-transferable common stock purchase warrant. Each common stock purchase warrant entitles the investors to purchase
one additional common share of our company at prices ranging from $0.0162 to $0.0218 until January 17, 2016. The fair value of the shares and warrants issued were $91,140 and $84,156, respectively.
In August and September 2012, we sold 6,156,153 units, at prices ranging from $0.027 to $0.031 per unit, to investors for gross proceeds of $180,000. Each unit consisted of one common share of our company and one non-transferable common
stock purchase warrant. Each common stock purchase warrant entitles the investors to purchase one additional common share of our company at prices ranging from $0.038 to $0.044 until August 29, 2015. In May and July 2012, we sold 4,859,073
units, at prices ranging from $0.027 to $0.033 per unit, to investors for gross proceeds of $150,004. Each unit consisted of one common share of our company and one non-transferable common stock purchase warrant. Each common stock
purchase warrant entitles the investors to purchase one additional common share of our company at prices ranging from $0.027 to $0.047 until July 23, 2015. In May and July 2012, investors exercised 19,861,870 of the May 2007 common stock
purchase warrants using the cashless exercise provision. We issued 18,033,814 shares of common stock and cancelled 1,828,056 common stock purchase warrants pursuant to the cashless exercise provision. No cash proceeds were received. We issued these
shares pursuant to an exemption from registration set out in Section 4(2) of the Securities Act of 1933. The remaining 855,314 common stock purchase warrants from May 2007 expired on May 11, 2012 without exercise.
In March 2012, we sold 2,000,000 units at a price of $0.02844 per unit to one investor for gross proceeds of $56,880. Each unit consisted of one common share of our company and one non-transferable common stock purchase warrant. Each common
stock purchase warrant entitles the investor to purchase one additional common share of our company at a price of $0.03982 until March 14, 2015. In March 2012, one investor exercised 84,615 of the May 2007 common stock purchase warrants using
the cashless exercise provision. The cashless exercise provision allows the investor, if the fair market value of one share of common stock is greater than the exercise price, to elect to receive shares equal to the value of the warrant less a
portion of the warrant that is cancelled using a specific formula. We issued 21,757 shares of common stock and cancelled 62,858 common stock purchase warrants pursuant to the cashless exercise provision. No cash proceeds were received. In February
2012, we sold 2,209,596 units at a price of $0.03168 per unit to one investor for gross proceeds of $70,000. Each unit consisted of one common share of our company and one non-transferable share purchase warrant. Each share purchase warrant entitles the investor to
purchase one additional common share of our company at a price of $0.04435 until February 23, 2015. In February 2012 we sold 2,000,715 units at a price of $0.02799 per unit to one investor for gross proceeds of $56,000. Each unit
consisted of one common share of our company and one non-transferable share purchase warrant. Each share purchase warrant entitles the investor to purchase one additional common share of our company at a price of $0.03919 until February 3, 2015.
In February 2012 one investor exercised 2,646,199 of the August 2009 common stock purchase warrants using the cashless exercise provision. The cashless exercise provision allows the investor, if the fair market value of one share of common stock is
greater than the exercise price, to elect to receive shares equal to the value of the warrant less a portion of the warrant that is cancelled using a specific formula. We issued 2,500,000 shares of common stock and cancelled 146,199 common stock
purchase warrants pursuant to the cashless exercise provision. No cash proceeds were received.
35
On January 19, 2012, we entered into a financing agreement with Fairhills Capital Offshore Ltd., whereby Fairhills Capital will provide for a non-brokered financing arrangement of up to $10,000,000. The financing allows but does not require us
to issue and sell up to the number of shares of common stock having an aggregate purchase price of $10,000,000 to Fairhills Capital. Subject to the terms and conditions of the financing agreement and a registration rights agreement, we may, in
our sole discretion, deliver a notice to Fairhills Capital which states the dollar amount which we intend to sell to Fairhills Capital on a certain date. The amount that we shall be entitled to sell to Fairhills Capital shall be equal to two hundred
percent (200%) of the average daily volume (U.S. market only) of the common stock for the ten (10) trading days prior to the applicable notice date. Our common stock will be valued at a 27.5% discount from the weighted average trading price of our
stock for the five (5) trading days before Fairhills Capital receives our notice of sale. The shares that we sell to Fairhills Capital must be registered stock, among other conditions of investment.
In connection with the Investment Agreement, we also entered into a registration rights agreement with Fairhills. Pursuant to this registration rights agreement, we registered with the Securities and Exchange Commission 185,000,000 shares of the
common stock underlying the Investment Agreement.
On November 13, 2012, we filed a 424B prospectus with the Securities Exchange Commission, acknowledging the assignment of all the rights under our investment agreement with Fairhills Capital Offshore Ltd. (Fairhills) to Deer Valley Management, LLC
(Deer Valley). The Investment Agreement and other associated agreements were assigned by Fairhills to Deer Valley on November 6, 2012, and Liberty Star consented to the assignment. Fairhills and Deer Valley share the same ownership and management
and there has not been any substantial change to our arrangement under the Investment Agreement as a result of the Assignment.
In February, March and April, 2013, we issued 22,874,405 shares for gross proceeds of $200,000 related to the investment agreement with Deer Valley Management, LLC.
In February, 2013, we sold 3,448,276 units to one investor for gross proceeds of $40,000. Each unit consisted of one common share of our company and one non-transferable share purchase warrant. Each share purchase warrant entitles the investor
to purchase one additional common share of our company at a price of $0.0162 until February 7, 2016.
In February, 2013, we issued 1,526,718 units to one vendor in exchange for the settlement of accounts payable of $20,000. Each unit consisted of one common share of our company and one non-transferable share purchase warrant. Each share purchase
warrant entitles the investor to purchase one additional common share of our company at a price of $0.0183 until February 15, 2016. The fair value of the warrants issue was $22,141.
In April, 2013, one investor exercised 3,033,618 of the May 2007 common stock purchase warrants using the cashless exercise provision. We issued 2,500,000 shares of common stock and cancelled 533,618 common stock purchase warrants pursuant to the
cashless exercise provision. No cash proceeds were received.
In May, June and July, 2013, we issued 31,270,958 shares for gross proceeds of $255,000 related to the investment agreement with Deer Valley Management, LLC. As of July 31, 2013, we had not yet received payment for one transaction valued at $25,000. As of October 31, 2013, we received the final payment for this transaction, plus $5,000 from Deer Valley Management, LLC for the inconvenience of paying late. In August 2013, we decided to terminate the
investment agreement with Deer Valley Management, LLC due to their violation of the payment terms pursuant to the investment agreement. As of the time of the termination of the investment agreement, we had issued a total of 113,815,732 and had
received gross proceeds of $1,635,000. No further shares issuances to Deer Valley Management, LLC are expected to occur.
36
In May, June and July, 2013, we sold 18,001,184 units to six investors for gross proceeds of $182,043. Each unit consisted of one common share of our company and one non-transferable share purchase warrant. The share purchase warrants entitle
the investors to purchase one additional common share of our company at prices ranging between of $0.0116 and $0.0173 until July 30, 2016.
In June, 2013, one investor exercised 4,263,989 of the May 2007 common stock purchase warrants using the cashless exercise provision. We issued 3,587,165 shares of common stock and cancelled 678,824 common stock purchase warrants pursuant to the
cashless exercise provision. No cash proceeds were received.
In August and September, 2013, we issued 2,934,763 shares to two individuals in exchange for services valued at $61,938. Additionally, warrants with a fair value of $7,682 were also issued to one of these individuals. The warrant were to
purchase 423,135 shares of the Company’s common stock and have an exercise prices of $0.0263. The warrants have a term of three years and expire August 2, 2016.
In September, 2013, we sold 2,157,497 units to one investor for gross proceeds of $50,000. Each unit consisted of one common share of our company and one non-transferable share purchase warrant. Each share purchase warrant entitles the investor
to purchase one additional common share of our company at a price of $0.0324 until September 5, 2016.
On October 30, 2013, the Company entered into an investment agreement with KVM Capital Partners LLC, a New York limited liability company (“KVM”). Pursuant to the agreement, KVM has agreed to purchase up to $8,000,000 of our common
stock over a period of up to thirty-six (36) months. The purchase price per share to be paid by KVM shall be calculated at a twenty percent (20%) discount to the lowest volume weighted average price of the common stock as reported by Bloomberg, L.P.
during the five (5) consecutive trading days immediately prior to the receipt by KVM of the put notice. We initially reserved 244,500,000 shares of our common stock for issuance under the KVM Investment Agreement. In connection with the KVM
Investment Agreement, we also entered into a registration rights agreement with KVM, pursuant to which we are obligated to file a registration statement with the SEC covering 244,500,000 shares of our common stock underlying the KVM Investment
Agreement within 21 days after the closing of the transaction. In addition, we are obligated to use all commercially reasonable efforts to have the registration statement declared effective by the SEC and maintain the effectiveness of such
registration statement until termination of the KVM Investment Agreement. On November 6, 2013, we filed form S-1 related to the KVM investment agreement. As of January 31, 2014, no shares were purchased by the investor.
In January, 2014, we issued 1,225,000 shares to an individual in exchange for services valued at $30,163. The company recorded the value as deferred financing cost.
NOTE 9 – Share-based compensation
The 2010 Stock Option Plan was approved and adopted by the Board of Directors on August 10, 2010. The plan allows for up to 95,500,000 shares to be granted to key employees and non-employee consultants after specific objectives are met. The 2007
Stock Option Plan was approved and adopted by the Board of Directors on December 10, 2007. The plan allows for up to 2,500,000 shares to be granted to key employees and non-employee consultants after specific objectives are met. The 2004 Stock
Option Plan was approved and adopted by the Board of Directors on December 27, 2004. The plan allows for up to 962,500 shares to be granted to key employees and non-employee consultants after specific objectives are met. Employees can receive
incentive stock options and non-qualified stock options while non-employee consultants can receive only non-qualified stock options. The options granted vest under various provisions using graded vesting, not to exceed four years. The options
granted have a term not to exceed ten years from the date of grant or five years for
options granted to more than 10% stockholders. The option price set by the Plan
Administration shall not be less than the fair market value per share of the
common stock on the grant date or 110% of the fair market value per share of the
common stock on the grant date for options granted to greater than 10%
stockholders. Options remaining available for grant under the 2010 Stock Option
Plan at January 31, 2014 and 2013 are 12,500,000 and 4,625,000. Options remaining
available for grant under the 2007 Stock Option Plan at January 31, 2014 and
2013 are 50,000 and 2,287,500, respectively. Options remaining available for
grant under the 2004 Stock Option Plan at January 31, 2014 and 2013 are 32,876
and 511,125, respectively.
37
In December 2012 and January 2013, we issued 7,359,399 units,
at prices ranging from $0.0116 to $0.0156 per unit, to contractors who had
provided services, directly or indirectly, on our Alaska properties. Each unit
consisted of one common share of our company and one non-transferable common
stock purchase warrant. Each common stock purchase warrant entitles the
investors to purchase one additional common share of our company at prices
ranging from $0.0162 to $0.0218 until January 17, 2016. The fair value of the
warrants issued was $84,156 and was expensed immediately.
In September 2013, there were 7,423,624 stock options granted
at an exercise price of $0.0257 per share, exercisable until September 5, 2023
with a fair value net of forfeitures, at grant date of $210,300. The options granted were 100%
vested for directors and shall vest in 25% immediately and 25% over four years increments on a yearly basis over the
next four years for employees. In order to calculate the fair value of stock
options at the date of grant, we use the Black-Scholes option pricing model. The
volatility used was based on our historical volatility. The expected term was
determined based on the simplified method outlined in Staff Accounting Bulletin
No. 110. The risk-free interest rate for periods within the contractual life of
the option is based on the U.S. Treasury yield curve in effect at the time of
grant. Remaining stock option expense to be recognized in future periods related
to the award is $40,688.
The following tables summarize the Companys stock option
activity during the years ended January 31, 2014 and 2013.
Incentive stock options to employees outstanding at January 31,
2014 are as follows:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
|
|
Weighted average
|
|
|
remaining life
|
|
|
Aggregate
|
|
|
|
Number of options
|
|
|
exercise price
|
|
|
(years)
|
|
|
intrinsic value
|
|
Outstanding, January 31, 2012
|
|
93,260,375
|
|
$
|
0.047
|
|
|
|
|
$
|
-
|
|
Granted
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Cancelled
|
|
(2,625,000
|
)
|
|
0.037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, January 31, 2013
|
|
90,635,375
|
|
$
|
0.047
|
|
|
|
|
$
|
-
|
|
Granted
|
|
7,423,624
|
|
|
0.026
|
|
|
|
|
|
|
|
Cancelled
|
|
(12,582,875
|
)
|
|
0.041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, January 31, 2014
|
|
85,476,124
|
|
$
|
0.047
|
|
|
2.26
|
|
$
|
-
|
|
Exercisable, January 31, 2014
|
|
83,595,473
|
|
$
|
0.047
|
|
|
2.69
|
|
$
|
-
|
|
The aggregate intrinsic value is calculated based on the
January 31, 2014 stock price of $0.0195 per share.
We estimate the fair value of option awards on the grant date
using the Black-Scholes valuation model. The Company uses historical volatility,
disregarding identifiable periods of time in which share price was
extraordinarily volatile due to certain events that are not expected to recur
during the expected term, as its method to estimate expected volatility. The
Company used the following assumptions to estimate the fair value of stock
option grants to employees and non-employees:
|
|
|
|
Expected
|
|
|
|
|
|
|
Expected
|
|
dividend
|
|
|
|
Risk-free interest
|
|
|
Grant date
|
|
volatility
|
|
yield
|
|
Expected term
|
|
rate
|
|
Forfeiture rate
|
January 10, 2012
|
|
128%
|
|
0%
|
|
10 years
|
|
2%
|
|
10%
|
December 13, 2012
|
|
174%
|
|
0%
|
|
3 years
|
|
0.34%
|
|
0%
|
January 1, 2013
|
|
173%
|
|
0%
|
|
3 years
|
|
0.36%
|
|
0%
|
January 1, 2013
|
|
171%
|
|
0%
|
|
3 years
|
|
0.41%
|
|
0%
|
September 5, 2013
|
|
221%
|
|
0%
|
|
6.25 years
|
|
2.15%
|
|
20%
|
38
Share-based compensation expense is reported in our statement
of operations as follows:
|
|
January 31, 2014
|
|
|
January 31, 2013
|
|
Geological and geophysical
costs
|
$
|
2,610
|
|
$
|
624
|
|
Salaries and benefits
|
|
236,509
|
|
|
50,592
|
|
Investor relations
|
|
1,503
|
|
|
624
|
|
General and administrative
|
|
-
|
|
|
84,156
|
|
|
$
|
240,622
|
|
$
|
135,996
|
|
At January 31, 2014 there is $40,688 unrecognized share-based
compensation for all share-based awards outstanding with a weighted average
remaining period for amortization of 3.6 years.
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
|
|
Weighted average
|
|
|
remaining life
|
|
|
Aggregate
|
|
|
|
Number of options
|
|
|
exercise price
|
|
|
(years)
|
|
|
intrinsic value
|
|
Outstanding, January 31, 2012
|
|
903,500
|
|
$
|
0.376
|
|
|
|
|
$
|
-
|
|
Granted
|
|
7,359,399
|
|
|
0.017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, January 31, 2013
|
|
8,262,899
|
|
$
|
0.057
|
|
|
|
|
$
|
-
|
|
Granted
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, January 31, 2014
|
|
8,262,899
|
|
$
|
0.057
|
|
|
1.99
|
|
$
|
-
|
|
Exercisable, January 31, 2014
|
|
8,262,899
|
|
$
|
0.057
|
|
|
1.99
|
|
$
|
19,413
|
|
The aggregate instrinsic value is calculated based on the
January 31, 2014 stock price of $.0195 per share.
NOTE 10 Warrants
As of January 31, 2014, there were 51,082,330 whole share
purchase warrants outstanding and exercisable. The warrants have a weighted
average remaining life of 1.8 years and a weighted average exercise price of
$0.027 per whole warrant for one common share. Whole share purchase warrants
outstanding at January 31, 2014 and 2013 are as follows:
|
|
Number of whole share
|
|
|
Weighted average exercise
|
|
|
|
purchase warrants
|
|
|
price per share
|
|
Outstanding, January 31, 2012
|
|
92,922,691
|
|
$
|
0.053
|
|
Issued
|
|
17,225,537
|
|
|
0.041
|
|
Expired
|
|
(855,314
|
)
|
|
0.020
|
|
Exercised
|
|
(22,592,684
|
)
|
|
0.026
|
|
|
|
|
|
|
|
|
Outstanding, January 31, 2013
|
|
86,700,230
|
|
$
|
0.058
|
|
Issued
|
|
25,556,792
|
|
|
0.016
|
|
Expired
|
|
(46,579,478
|
)
|
|
0.071
|
|
Exercised
|
|
(14,595,214
|
)
|
|
0.051
|
|
Outstanding, January 31, 2014
|
|
51,082,330
|
|
$
|
0.027
|
|
Exercisable, January 31, 2014
|
|
51,082,330
|
|
$
|
0.027
|
|
The weighted average intrinsic value for warrants outstanding
was $109,275 as of January 31, 2014.
39
NOTE 11 Income taxes
As of January 31 our deferred tax asset is as follows:
|
|
|
January 31, 2014
|
|
|
January 31, 2013
|
|
|
Deferred Tax Assets
|
$
|
10,243,000
|
|
$
|
9,513,000
|
|
|
Less Valuation Allowance
|
|
(10,243,000
|
)
|
|
(9,513,000
|
)
|
|
|
$
|
-
|
|
$
|
-
|
|
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 taxable income, management will
re-evaluate the allowance. The change in the valuation allowance of $730,000 and
$832,000 in the years ended January 31, 2014 and 2013, respectively, primarily
represents the benefit of the change in net operating loss carry-forwards during
the period. As of January 31, 2014, our estimated net operating loss
carry-forward is approximately $30,127,508 and will expire beginning in 2025
through 2034.
Internal Revenue Code Section 382 limits the ability to utilize
net operating losses if a 50% change in ownership occurs over a three year
period. Such limitation of the net operating losses may have occurred but we
have not analyzed it at this time as the deferred tax asset is fully reserved.
We have federal and state net operating loss carry-forwards that are available
to offset future taxable income.
NOTE 12 Related party transactions
We entered into the following transactions with related
parties during the year ended January 31, 2014:
Paid or accrued $6,263 in rent. We rented an office from Jim
Briscoe, our Chairman of the Board, CEO and CFO, and President on a month-to-month basis for
$522 per month.
At January 31, 2014 we had a balance of accrued unpaid wages of
$325,367 to Jim Briscoe, our Chairman of the Board, CEO and CFO and President.
At January 31, 2014, we had a balance of accrued unpaid wages
of $15,625 to Larry Liang, our former President.
We recognized compensation expense of $67,500 for stock options
granted to an officer.
We have an option to explore 26 standard Federal lode mining
claims at the East Silver Bell project and 33 standard Federal lode mining
claims at the Walnut Creek project from JABA US Inc., an Arizona Corporation in
which two of our directors are owners. We are required to pay annual rentals to
maintain the claims in good standing. During the year ended January 31, 2014 we
paid $8,260 in rental fees to maintain the mineral claims in good standing. The
original option agreement was for the period from April 11, 2008 through January
1, 2011 and has been extended through June 1, 2013 and now to June 1, 2015. This
may additionally be extended in five year periods or increments in the future by
any JABA director.
We entered into the following transactions with related
parties during the year ended January 31, 2013:
Paid or accrued $6,785 in rent. We rented an office from Jim
Briscoe, our Chairman of the Board, CEO and CFO, on a month-to-month basis for
$522 per month.
At January 31, 2013 we had a balance of accrued unpaid wages of
$261,367 to Jim Briscoe, our Chairman of the Board, CEO and CFO.
At January 31, 2013, we had a balance of accrued unpaid wages
of $15,625 to Larry Liang, our President.
40
We recognized compensation expense of $49,500 for stock options granted to an officer.
We have an option to explore 26 standard Federal lode mining claims at the East Silver Bell project and 33 standard Federal lode mining claims at the Walnut Creek project from JABA US Inc., an Arizona Corporation in which two of our directors are
owners. We are required to pay annual rentals to maintain the claims in good standing. During the year ended January 31, 2013 we paid $8,254 in rental fees to maintain the mineral claims in good standing.
NOTE 13 – Commitments and Contingencies
We are required to perform annual assessment work in order to maintain the Big Chunk Alaska State mining claims. If annual assessment work is not performed the Company must pay the assessment amount in cash in order to maintain the claims.
Completion of annual assessment work in the amount of $400 per ¼ section (160 acre) claim or $100 per ¼ -¼ section (40 acre) claim extends the claims for a one-year period from the staking of claims. Assessment work
performed in excess of the required amount may be carried forward for up to four years to satisfy future obligations. The Company estimates that the required annual assessments per year to maintain the claims from 2013 forward will be approximately
$19,200. Sufficient assessment work has been performed for Big Chunk to maintain the claims beyond the next labor year.
The annual state rentals for the Big Chunk Alaska State mining claims vary from $70 to $280 per mineral claim. The rental period begins at noon September 1st through the following September 1st and annual rental payments are due on November
30th of each year. The rentals of $30,640.00, to extend the Big Chunk claims through September 1, 2014 were paid in November 2013. The estimated state rentals due by November 30, 2014 for the period from September 1, 2014 through September 1,
2015 are $30,640.00. Alaska State production royalty is three percent of net income. State law prescribes that after a 3.5 -year exemption from state taxes a metal mine is liable for a 15% state licensing tax on net income from the mine.
We are required to pay annual rentals for our Federal lode mining claims for the North Pipes 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 $140 per claim. The rentals of $60,340 for the period from September 1, 2013 to September 1, 2014 have been paid. The rentals due by September 1, 2014 for the period from September 1,
2014 through September 1, 2015 of $52,640 have not been paid.
We are required to pay annual rentals for our Federal lode mining claims for our East Silver Bell 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 rental is $140 per claim. The rentals of $3,640 for the period from September 1, 2013 to September 1, 2014 have been paid. The annual rentals due by September 1, 2014 of $3,640 are required
to maintain the East Silver Bell claims are for the period from September 1, 2014 through September 1, 2015 have not been paid. There is no requirement for annual assessment or exploration work on the Federal lode mining claims. There are no
royalties associated with the Federal lode mining claims.
We are required to pay annual rentals for our 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 $140 per claim. The rentals and initial filing fees of $13,860 for the period from September 1, 2013 to September 1, 2014 have been paid. The rentals due by September 1, 2014 for the
period from September 1, 2014 through September 1, 2015 of $13,860 have not been paid.
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. AZ MEP permits are valid for 1 year and renewable for up to
5 years. The rental fee is $2.00 per acre for the first year, which includes the second year, and $1.00 per acre per year for years three through five. The minimum work expenditure requirements are $10 per acre per year for years one and
two and $20 per acre per year for years three through five. If the minimum work expenditure requirement is not met the applicant can pay the equal amount in fees to the Arizona State Land Department to keep the AZ MEP permits current. The rental
period begins on September 30th through the following September 29th for our Phase 1 permits, and September 14th through September 13th for our Phase 2 permits. On February 7, 2014 we added a new AZ MEP with 480 acres and an
initial rental payment of $960.00 with estimated work expenditures of $4,800 due
by February 6, 2015 Rental payments are due by the first day of the rental
period. We hold AZ MEP permits for 7,995 acres at our Tombstone project. We will
need to pay rental fees for our Phase 1 AZ MEPs before September 29, 2014 in
the amount of $8,254. Required minimum work expenditures for the period ended
September 29, 2014 is $82,538. The annual rental due by September 30, 2014 to
maintain the Phase 2 AZ MEP permits is $7,627. We will need $75,040 to cover
minimum work expenditure requirements before September 30, 2014 to maintain our
Phase 2 AZ MEP permits.
41
A civil action was pending in the Alaska Superior Court in Anchorage, Alaska, that concerned title to some Alaska state mining claims owned by Big Chunk Corp., a subsidiary of Liberty Star. In that action Big Chunk and Liberty Star requested a judicial determination that certain lien claim notices recorded by a party named MBGS, LLC, against the mining claims were void; and MBGS sought an order enforcing the lien claims. Liberty Star and Big Chunk filed a motion for summary judgment to invalidate the lien claims. As was anticipated, MBGS opposed this motion. The lien claims were based on a debt alleged by MBGS to be due from Liberty Star. The existence of this alleged debt was disputed.
In March 2014 Liberty Star and Big Chunk entered into a settlement agreement with MBGS, LLC, following a resolution conference conducted in Anchorage, Alaska whereby all lien claims for the Northern Dynasty transfer were released. As a result of those claims released by MBGS, LLC, in May 2014 the company completed its loan settlement agreement with Northern Dynasty and discharged the principal balance and accrued interest for the 2010 Convertible Note which also terminated Northern Dynasty’s earn-in-rights.
On June 1, 2011 we rented a warehouse located at Building No.
1, 7900 South Kolb Road, Tucson, Arizona 85706. We rent this warehouse space for
$3,645 per month. The lease is in effect until May 31, 2014 with an option to
extend for two additional years. In addition to using the warehouse for standard
purposes, such as storage of our exploration equipment, supplies and samples,
the warehouse space also includes office facilities for the use of field
geologists and geotechs.
NOTE 14 Fair value of financial instruments
Our financial instruments consist of cash and cash equivalents,
accounts payable, accrued liabilities, convertible notes payable, notes payable,
and warrant liability. 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 warrant liability, 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 warrant liability are
reported in other income (expense) as gain (loss) on change in fair value.
We estimate the fair value of the warrant liability using level
3 inputs and the Black-Scholes valuation model. We use historical volatility as
a method to estimate expected volatility. At January 31, 2014 and 2013 we had
2,500,000 whole share purchase warrants outstanding that contain a full ratchet
down anti-dilution provision which is triggered if we enter into any lower
priced issuance than $0.0264 per common share. As a result of these provisions,
these warrants are not considered indexed to our common stock and are classified
as liabilities under ASC 815. We used the following assumptions to estimate the
fair value of the warranty liability at January 31, 2014 and 2013:
|
Expected
|
Expected dividend
|
Expected
|
Risk-free interest
|
Description
|
volatility
|
yield
|
term
|
rate
|
Warrant liability at January 31, 2014
|
209.37%
|
0%
|
2.5
|
0.69%
|
Warrant liability at January 31, 2013
|
99.80%
|
0%
|
3.59 years
|
0.65%
|
42
|
|
|
|
|
Fair
value measurements at reporting date using:
|
|
|
|
|
|
|
Quoted prices in
|
|
|
|
|
|
Significant
|
|
|
|
|
|
|
active markets for
|
|
|
Significant other
|
|
|
unobservable
|
|
|
|
|
|
|
identical liabilities
|
|
|
observable inputs
|
|
|
inputs
|
|
Description
|
|
Fair
Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Warrant liability at January 31, 2014
|
$
|
46,985
|
|
|
-
|
|
|
-
|
|
$
|
46,985
|
|
Warrant liability at January 31, 2013
|
$
|
15,112
|
|
|
-
|
|
|
-
|
|
$
|
15,112
|
|
|
|
Fair value measurements using
|
|
|
|
unobservable inputs (Level 3):
|
|
Description
|
|
Warrant liability
|
|
Balance, January 31, 2012
|
$
|
53,948
|
|
Total (gains) or losses
|
|
(38,836
|
)
|
Purchases,
issuances and settlements
|
|
-
|
|
Transfers in or out of Level 3
|
|
-
|
|
Balance, January 31, 2013
|
$
|
15,112
|
|
Total (gains) or losses
|
|
31,873
|
|
Purchases,
issuances and settlements
|
|
-
|
|
Transfers in or out of Level 3
|
|
-
|
|
Balance, January 31, 2014
|
$
|
46,985
|
|
NOTE 15 Changes in officers and directors
On August 28, 2013, Larry Liang, resigned as the president and a director of our company. On the same date, we appointed James Briscoe as president of our company until are placement is named.
NOTE 16 Subsequent events
In March 2014 Liberty Star and Big Chunk entered into a
settlement agreement with MBGS, LLC, following a resolution conference
conducted in Anchorage, Alaska whereby all claims recorded by MBGS, LLC will be
released. As a result of the claims release by MBGS, LLC, in May 2014 the
company completed its loan settlement agreement with Northern Dynasty (See Note
8) and discharged the principal balance and accrued interest for the 2010
Convertible Note and terminated Northern Dynastys earn-in-rights.
In May 2014, we sold 1,203,704 shares to one investor for gross
proceeds of $13,000.
Between February 2014 and May 2014, $186,480 of the August 2013
Note were converted into 17,937,915 shares of the Companys common stock.
Between February 2014 and April 2014, pursuant to the investment agreement with KVM, KVM purchased 15,593,934 shares for proceeds of $220,250.
In March 2014, the company issued 1,000,000 units of common stock to a designee of MBGS, LLC, pursuant to the settlement agreement. Each unit consists of one share of the Company’s common stock and a warrant to purchase one-half share of the Company’s common stock. The value of the shares issued is $20,000. The 500,000 warrants have an exercise price of $0.028 and have a two year term.