UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Amendment No. 1
FORM S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
Liberty Star Uranium & Metals Corp.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of
incorporation or organization)
1000
(Primary Standard Industrial
Classification Code Number)
90-0175540
(I.R.S. Employer Identification
Number)
5610 E. Sutler Lane
Tucson, Arizona 85712
Telephone: (520) 731-8786
(Address, including zip code, and
telephone number,
including area code, of registrants principal executive
offices)
Nevada Agency and Transfer Company
50 West Liberty
Street, Suite 880
Reno, Nevada 89501
Telephone: (775) 322-0626
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
From time to time after the effective date of this
registration statement.
(Approximate date of commencement of
proposed sale to the public)
If any of the securities being registered on this Form are to
be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933 check the following box: [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
[ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of large accelerated filer, accelerated
filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
[ ] |
Accelerated filer |
[ ] |
Non-accelerated filer |
[ ] |
Smaller reporting company |
[X] |
(Do not check if a smaller reporting company) |
|
|
|
Calculation of Registration Fee
Title of Each Class of Securities to be
Registered |
Amount to be Registered(1)
|
Proposed Maximum Offering Price Per
Share |
Proposed Maximum Aggregate Offering
Price |
Amount of Registration Fee
|
Common stock to be offered for resale by
selling stockholder
|
350,000,000(2)
|
$0.0034(3),(4)
|
$1,190,000(3),(4)
|
$119.83(4)
|
|
(1) |
An indeterminate number of additional shares of common
stock shall be issuable pursuant to Rule 416 under the Securities Act of
1933 to prevent dilution resulting from stock splits, stock dividends or
similar transactions and in such an event the number of shares registered
shall automatically be increased to cover the additional shares in
accordance with Rule 416. |
|
|
(2) |
Consists of up to 350,000,000 shares of common stock to
be sold to Tangiers Investment Group, LLC under the investment agreement
dated June 20, 2015. |
|
|
(3) |
Estimated solely for the purpose of calculating the
amount of the registration fee in accordance with Rule 457(c) under the
Securities Act of 1933. |
|
|
(4) |
Based on the closing price per share ($0.0034) for Liberty
Star Uranium & Metals Corp.s common stock on November 19, 2015, as reported
by the OTC Markets Groups OTC Pink. |
The registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
ii
The information in this prospectus is not complete and
may be changed. The selling stockholder may not sell these securities
until the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
|
Subject to Completion, Dated November 25, 2015
Prospectus
350,000,000 Shares
Liberty Star Uranium & Metals Corp.
Common Stock
_________________________________
The selling stockholder identified in this prospectus may offer
and sell up 350,000,000 shares of our common stock to be sold to Tangiers
Investment Group, LLC under the investment agreement dated June 20, 2015. The
investment agreement permits us to put up to $8,000,000 in shares of our
common stock to Tangiers Investment Group, LLC over a period of up to 36 months.
The selling stockholder may sell all or a portion of the shares
being offered pursuant to this prospectus at fixed prices, at prevailing market
prices at the time of sale, at varying prices or at negotiated prices.
Tangiers Investment Group, LLC is an underwriter within the
meaning of the Securities Act of 1933 and any broker-dealers or agents that are
involved in selling the shares may be deemed to be underwriters within the
meaning of the Securities Act of 1933 in connection with such sales. In such
event, any commissions received by such broker-dealers or agents and any profit
on the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act of 1933.
Our common stock is quoted on the OTC Markets Groups OTC Pink
under the symbol LBSR. On November 19, 2015, the closing price of our common stock
on the OTC Pink was $0.0034 per share.
We will not receive any proceeds from the sale of shares of our
common stock by the selling stockholder. However, we will receive proceeds from
the sale of shares of our common stock pursuant to our exercise of the put right
offered by Tangiers Investment Group, LLC. We will pay for expenses of this
offering, except that the selling stockholder will pay any broker discounts or
commissions or equivalent expenses and expenses of its legal counsel applicable
to the sale of its shares.
Investing in our common stock involves risks. See Risk
Factors beginning on page 6.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
The date of this prospectus is _____________, 2015.
3
Table of Contents
4
About This Prospectus
You should rely only on the information that we have provided
in this prospectus and any applicable prospectus supplement. We have not
authorized anyone to provide you with different information. No dealer,
salesperson or other person is authorized to give any information or to
represent anything not contained in this prospectus and any applicable
prospectus supplement. You must not rely on any unauthorized information or
representation. This prospectus is an offer to sell only the securities offered
hereby, but only under circumstances and in jurisdictions where it is lawful to
do so. You should assume that the information in this prospectus and any
applicable prospectus supplement is accurate only as of the date on the front of
the document, regardless of the time of delivery of this prospectus, any
applicable prospectus supplement, or any sale of a security.
As used in this prospectus, the terms we, us, the Company
and Liberty Star mean Liberty Star Uranium & Metals Corp. and our
subsidiaries, Big Chunk Corp. and Hay Mountain Super Project LLC, unless
otherwise indicated. All dollar amounts refer to U.S. dollars unless otherwise
indicated.
Prospectus Summary
The Offering
The selling stockholder identified in this prospectus may offer
and sell up to 350,000,000 shares of our common stock to be sold to Tangiers
Investment Group, LLC under the investment agreement dated June 20, 2015. The
investment agreement permits us to put up to $8,000,000 in shares of our
common stock to Tangiers Investment Group, LLC over a period of up to 36 months.
We will not receive any proceeds from the sale of shares of our
common stock by the selling stockholder. However, we will receive proceeds from
the sale of shares of our common stock pursuant to our exercise of the put right
offered by Tangiers Investment Group, LLC. We will pay for expenses of this
offering, except that the selling stockholder will pay any broker discounts or
commissions or equivalent expenses and expenses of its legal counsel applicable
to the sale of its shares.
Our Business
We were formerly Liberty Star Gold Corp. and formerly Titanium
Intelligence, Inc. Titanium Intelligence, Inc. 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. is our wholly owned subsidiary and was incorporated on December
14, 2003 in the State of Alaska. Big Chunk Corp. is engaged in the acquisition
and exploration of mineral properties business in the State of Alaska. Redwall
Drilling Inc. was our wholly owned subsidiary and was incorporated on August 31,
2007 in the State of Arizona. Redwall Drilling Inc. performed drilling services
on the Companys mineral properties. Redwall Drilling Inc. 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. to reflect our
current general exploration for base and precious metals. We are in the
exploration phase of operations and have not generated any revenues from
operations. A more detailed discussion of this technology and its anticipated
benefits is provided under the section Description of Business.
Our common stock is traded over-the-counter on the OTC Pink under
the ticker symbol LBSR.
The principal offices of our company are located at 5610 E
Sutler Lane, Tucson, Arizona 85712. Our telephone number is (520) 731-8786.
Summary of Financial Data
The following information represents selected audited financial
information for our company for the years ended January 31, 2015 and 2014 and
selected unaudited financial information for our company for the six month
periods ended July 31, 2015 and 2014. The summarized financial information
presented below is derived from and should be read in conjunction with our
audited and unaudited financial statements, as applicable, including the notes
to those financial statements which are included elsewhere in
this prospectus along with the section entitled Managements Discussion and
Analysis of Financial Condition and Results of Operations beginning on page 35
of this prospectus.
5
Statements of Operations Data |
Six Month Period
Ended July 31,
2015
|
Six Month Period
Ended July 31,
2014 |
Year Ended January 31, 2015
|
Year Ended January 31, 2014
|
Revenue |
Nil
|
Nil
|
Nil |
Nil
|
Net Operating Expenses |
$373,638 |
$539,826 |
1,046,784 |
$1,763,236 |
Net Income (Loss) |
$(809,788) |
$4,631,342(1) |
4,115,431(1) |
$(2,318,047) |
Basic and Diluted Net Income (Loss) per Share |
$(0.00) |
$0.01 |
$0.00 |
$(0.00) |
(1) During the six month period ended July 31, 2014, we gained $5,322,943 on settlement of debt.
Balance
Sheets Data |
As of July 31, 2015 |
As of January 31, 2015 |
As of January 31, 2014 |
Cash and Cash Equivalents |
$1,897 |
$53,517 |
$55,089 |
Working Capital
(Deficit) |
$(767,611) |
$(1,251,939) |
$(6,202,731) |
Total Assets |
$103,268 |
$175,195 |
$153,042 |
Total Liabilities |
$1,001,048 |
$1,502,054 |
$6,312,691 |
Total Stockholders Equity (Deficit) |
$(897,780) |
$(1,326,859) |
$(6,159,649) |
Accumulated
Deficit |
$(51,888,452) |
$(51,078,664) |
$(55,194,095) |
Risk Factors
An investment in our common stock involves a number of very
significant risks. You should carefully consider the following risks and
uncertainties in addition to other information in this prospectus in evaluating
our company and our business before purchasing our securities. Our business,
operating results and financial condition could be seriously harmed as a result
of the occurrence of any of the following risks. You could lose all or part of
your investment due to any of these risks. You should invest in our common stock
only if you can afford to lose your entire investment.
Risks Related to Our Business
Because of the speculative nature of the exploration of
natural resource properties, there is substantial risk that this business will
fail.
There is no assurance that any of the claims we explore or
acquire will contain commercially exploitable reserves of minerals. Exploration
for natural resources is a speculative venture involving substantial risk.
Hazards such as unusual or unexpected geological formations and other conditions
often result in unsuccessful exploration efforts. We may also become subject to
significant liability for pollution or hazards, which we cannot insure or which
we may elect not to insure. There is substantial risk that our business will
fail.
6
If we cannot compete successfully for financing and for
qualified managerial and technical employees, our exploration program may
suffer.
Our competition in the mining industry includes large
established mining companies with substantial capabilities and with greater
financial and technical resources than we have. As a result of this competition,
we may be unable to acquire additional financing on terms we consider acceptable
because investors may choose to invest in our competitors instead of investing
in us. We also compete with other mining companies in the recruitment and
retention of qualified managerial and technical employees. Our success will be
largely dependent on our ability to hire and retain highly qualified personnel.
These individuals are in high demand and we may not be able to attract the
personnel we need. We may not be able to afford the high salaries and fees
demanded by qualified personnel, or may lose such employees after they are
hired. If we are unable to successfully compete for financing or for qualified
employees, our exploration program may be slowed down or suspended.
Exploration and exploitation activities are subject to
comprehensive regulation which may cause substantial delays or require capital
outlays in excess of those anticipated causing an adverse effect on our company.
Exploration and exploitation activities are subject to federal,
state, and local laws, regulations and policies, including laws regulating the
removal of natural resources from the ground and the discharge of materials into
the environment. Exploration and exploitation activities are also subject to
federal, state, and local laws and regulations which seek to maintain health and
safety standards by regulating the design and use of drilling methods and
equipment.
Various permits from government bodies are required for
drilling operations to be conducted; no assurance can be given that such permits
will be received. Environmental and other legal standards imposed by federal,
state, or local authorities may be changed and any such changes may prevent us
from conducting planned activities or increase our costs of doing so, which
would have material adverse effects on our business. Moreover, compliance with
such laws may cause substantial delays or require capital outlays in excess of
those anticipated, thus causing an adverse effect on us. Additionally, we may be
subject to liability for pollution or other environmental damages which we may
not be able to or elect not to insure against due to prohibitive premium costs
and other reasons. Any laws, regulations or policies of any government body or
regulatory agency may be changed, applied or interpreted in a manner which will
alter and negatively affect our ability to carry on our business.
There are no known reserves of minerals on our mineral
claims and we cannot guarantee that we will find any commercial quantities of
minerals.
We have not found any mineral reserves on our claims and there
can be no assurance that any of our mineral claims contain commercial quantities
of any minerals. Even if we identify commercial quantities of minerals in any of
our claims, there can be no assurance that we will be able to exploit the
reserves or, if we are able to exploit them, that we will do so on a profitable
basis.
Because the probability of an individual prospect ever
having reserves is extremely remote, any funds spent on exploration will
probably be lost.
The probability of an individual prospect ever having reserves
is extremely remote. In all probability our properties do not contain any
reserves. As such, any funds spent on exploration will probably be lost which
would most likely result in a loss of your investment.
Risks Related to Our Company
We have a limited operating history and as a result there
is no assurance we can operate on a profitable basis.
We have a limited operating history and must be considered in
the exploration stage. Our operations will be subject to all the risks inherent
in the establishment of an exploration stage enterprise and the uncertainties
arising from the absence of a significant operating history. Potential investors
should be aware of the difficulties normally encountered by mineral exploration
companies and the high rate of failure of such enterprises, especially those
with a limited operating history. The likelihood of success must be considered
in light of the problems, expenses, difficulties, complications and delays
encountered in connection with the exploration of the mineral properties that
we plan to undertake. These potential problems include, but are
not limited to, unanticipated problems relating to exploration, and additional
costs and expenses that may exceed current estimates. The expenditures to be
made by us in the exploration of the mineral claim may not result in the
discovery of mineral deposits. Problems such as unusual or unexpected formations
of rock or land and other conditions are involved in mineral exploration and
often result in unsuccessful exploration efforts. If the results of our
exploration do not reveal viable commercial mineralization, we may decide to
abandon our claim and acquire new claims for new exploration or cease
operations. The acquisition of additional claims will be dependent upon us
possessing capital resources at the time in order to purchase such claims. If no
funding is available, we may be forced to abandon our operations. No assurance
can be given that we will ever operate on a profitable basis.
7
If we do not obtain additional financing, our business
will fail and our investors could lose their investment.
We had cash and cash equivalents in the amount of $1,897 and negative working capital of $767,611 as of July 31, 2015. We currently do not generate revenues from our operations. Our business plan calls for substantial investment and cost in connection with the acquisition and exploration of our mineral properties currently under lease and option. Any direct acquisition of any of the claims under lease or option is subject to our ability to obtain the financing necessary for us to fund and carry out exploration programs on the subject properties. The requirements are substantial. There is no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on their investment in our common stock. Further, we may continue to be unprofitable. Obtaining additional financing would be subject to a number of factors, including market prices for minerals, investor acceptance of our properties, contractual restrictions on our ability to enter into further financing arrangements, and investor sentiment. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us and our business could fail.
Because there is no assurance that we will generate
revenues, we face a high risk of business failure.
We have not earned any revenues and have never been profitable.
We do not have an interest in any revenue generating properties. We were
incorporated on August 20, 2001 and took over our current business on February
5, 2004. To date we have been involved primarily in organizational and
exploration activities. We will incur substantial operating and exploration
expenditures without realizing any revenues. We therefore expect to incur
significant losses into the foreseeable future. We have limited operating
history upon which an evaluation of our future success or failure can be made.
We recognize that if we are unable to generate significant revenues from our
activities, we will not be able to earn profits or continue operations. Based
upon current plans, we also expect to incur significant operating losses in the
future. We cannot guarantee that we will be successful in raising capital to
fund these operating losses or generate revenues in the future. We can provide
investors with no assurance that we will generate any operating revenues or ever
achieve profitable operations. If we are unsuccessful in addressing these risks,
our business will most likely fail and our investors could lose their
investment.
Our independent registered public accounting firms
report states that there is a substantial doubt about our ability to continue as
a going concern.
Our independent registered public accounting firm,
MaloneBailey, LLP, state in its audit report attached to our audited financial
statements for the fiscal year ended January 31, 2015 that since we have
suffered recurring losses from operations, requires additional funds for further
exploratory activity prior to attaining a revenue generating status, and we may
not find sufficient ore reserves to be commercially mined, there is a
substantial doubt about our ability to continue as a going concern.
The existence of our mining claims depends on our ability
to fund exploratory activity or to pay fees.
Our mining claims, which are the central part of our business,
require that we either pay fees, or incur certain minimum development costs
annually, or the claims will be forfeited. Due to our current financial
situation we may not be able to meet these obligations and we could therefore
lose our claims. This would impair our ability to raise capital and would
negatively impact the value of our company.
8
Risks Related to Our Common Stock
Because we will likely issue additional shares of our
common stock, investment in our company could be subject to substantial
dilution.
Investors’ interests in our company will be diluted and investors may suffer dilution in their net book value per share when we issue additional shares. We are authorized to issue 6,250,000,000 shares of common stock, $0.00001 par value per share. As of November 19, 2015, there were 1,535,843,235 shares of our common stock issued and outstanding. We anticipate that all or at least some of our future funding, if any, will be in the form of equity financing from the sale of our common stock. If we do sell more common stock, investors’ investment in our company will likely be diluted. Dilution is the difference between what you pay for your stock and the net tangible book value per share immediately after the additional shares are sold by us. If dilution occurs, any investment in our company’s common stock could seriously decline in value.
The sale of our stock under the convertible notes and the
common share purchase warrants could encourage short sales by third parties,
which could contribute to the future decline of our stock price.
In many circumstances, the provision of financing based on the
distribution of equity for companies that are traded on the OTC Pink has the
potential to cause a significant downward pressure on the price of common stock.
This is especially the case if the shares being placed into the market exceed
the markets ability to take up the increased stock or if we have not performed
in such a manner to show that the equity funds raised will be used to grow our
business. Such an event could place further downward pressure on the price of
our common stock. Regardless of our activities, the opportunity exists for short
sellers and others to contribute to the future decline of our stock price. If
there are significant short sales of our common stock, the price decline that
would result from this activity will cause the share price to decline more,
which may cause other stockholders of the stock to sell their shares, thereby
contributing to sales of common stock in the market. If there are many more
shares of our common stock on the market for sale than the market will absorb,
the price of our common shares will likely decline.
Trading in our common stock on the OTC Pink is limited and
sporadic making it difficult for our stockholders to sell their shares or
liquidate their investments.
Our common stock is currently quoted for public trading on the
OTC Pink. The trading price of our common stock has been subject to wide
fluctuations. Trading prices of our common stock may fluctuate in response to a
number of factors, many of which will be beyond our control. The stock market
has generally experienced extreme price and volume fluctuations that have often
been unrelated or disproportionate to the operating performance of companies
with no current business operation. There can be no assurance that trading
prices and price earnings ratios previously experienced by our common stock will
be matched or maintained. These broad market and industry factors may adversely
affect the market price of our common stock, regardless of our operating
performance. In the past, following periods of volatility in the market price of
a companys securities, securities class-action litigation has often been
instituted. Such litigation, if instituted, could result in substantial costs
for us and a diversion of managements attention and resources.
Our bylaws contain provisions indemnifying our officers
and directors against all costs, charges and expenses incurred by them.
Our bylaws contain provisions with respect to the
indemnification of our officers and directors against all costs, charges and
expenses, including an amount paid to settle an action or satisfy a judgment,
actually and reasonably incurred by them, including an amount paid to settle an
action or satisfy a judgment in a civil, criminal or administrative action or
proceeding to which they are made parties by reason of their being or having
been our directors or officers.
9
Our bylaws do not contain anti-takeover provisions which
could result in a change of our management and directors if there is a take-over
of our company.
We do not currently have a shareholder rights plan or any
anti-takeover provisions in our bylaws. Without any anti-takeover provisions,
there is no deterrent for a take-over of our company, which may result in a
change in our management and directors. This could result in a disruption to the
activities of our company, which could have a material adverse effect on our
operations.
We do not intend to pay dividends on any investment in
the shares of stock of our company and any gain on an investment in our company
will need to come through an increase in our stocks price, which may never
happen.
We have never paid any cash dividends and currently do not
intend to pay any dividends for the foreseeable future. To the extent that we
require additional funding currently not provided for in our financing plan, our
funding sources may prohibit the payment of a dividend. Because we do not intend
to declare dividends, any gain on an investment in our company will need to come
through an increase in the stocks price. This may never happen and investors
may lose all of their investment in our company.
Because our securities are subject to penny stock rules,
you may have difficulty reselling your shares.
Our shares as penny stocks, are covered by Section 15(g) of the
Securities Exchange Act of 1934 which imposes additional sales practice
requirements on broker/dealers who sell our companys securities including the
delivery of a standardized disclosure document; disclosure and confirmation of
quotation prices; disclosure of compensation the broker/dealer receives; and,
furnishing monthly account statements. These rules apply to companies whose
shares are not traded on a national stock exchange, trade at less than $5.00 per
share, or who do not meet certain other financial requirements specified by the
Securities and Exchange Commission. These rules require brokers who sell penny
stocks to persons other than established customers and accredited investors
to complete certain documentation, make suitability inquiries of investors, and
provide investors with certain information concerning the risks of trading in
such penny stocks. These rules may discourage or restrict the ability of brokers
to sell our shares of common stock and may affect the secondary market for our
shares of common stock. These rules could also hamper our ability to raise funds
in the primary market for our shares of common stock.
FINRA sales practice requirements may also limit a
stockholders ability to buy and sell our stock.
In addition to the penny stock rules described above, the
Financial Industry Regulatory Authority (known as FINRA) has adopted rules
that require that in recommending an investment to a customer, a broker-dealer
must have reasonable grounds for believing that the investment is suitable for
that customer. Prior to recommending speculative low priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to
obtain information about the customers financial status, tax status, investment
objectives and other information. Under interpretations of these rules, FINRA
believes that there is a high probability that speculative low priced securities
will not be suitable for at least some customers. FINRA requirements make it
more difficult for broker-dealers to recommend that their customers buy our
common shares, which may limit your ability to buy and sell our stock and have
an adverse effect on the market for our shares.
Tangiers Investment Group, LLC will pay less than the
then-prevailing market price for our common stock.
Our common stock to be issued to Tangiers Investment Group, LLC
pursuant to the investment agreement dated June 20, 2015 will be purchased at
the 80% of the lowest day of the daily volume weighed average price of our
common stock during the five consecutive trading days immediately prior to the
receipt by Tangiers Investment Group, LLC of the put notice, provided, however,
an additional 5% will be added to the discount of each put if (i) we are not
DWAC eligible and (ii) an additional 5% will be added to the discount of each
put if we are under DTC chill status on the applicable date of the put notice.
Tangiers Investment Group, LLC has a financial incentive to sell our common
stock immediately upon receiving the shares to realize the profit equal to the
difference between the discounted price and the market price. If Tangiers
Investment Group, LLC sells the shares, the price of our common stock could
decrease. If our stock price decreases, Tangiers Investment Group, LLC may have
a further incentive to sell the shares of our common stock that it holds.
These sales may have a further impact on our stock price.
10
Your ownership interest may be diluted and the value of
our common stock may decline by exercising the put right pursuant to the
investment agreement with Tangiers Investment Group, LLC.
Pursuant to the investment agreement with Tangiers Investment
Group, LLC , when we deem it necessary, we may raise capital through the private
sale of our common stock to Tangiers Investment Group, LLC at a discounted
price. Because the put price is lower than the prevailing market price of our
common stock, to the extent that the put right is exercised, your ownership
interest may be diluted.
We may not have access to the full amount available under
the investment agreement with Tangiers Investment Group, LLC.
Our ability to draw down funds and sell shares under the
investment agreement with Tangiers Investment Group, LLC requires that the
registration statement of which this prospectus forms a part to be declared
effective and continue to be effective. The registration statement of which this
prospectus forms a part registers the resale of 350,000,000 shares issuable
under the investment agreement with Tangiers Investment Group, LLC, and our
ability to sell any remaining shares issuable under the investment with Tangiers
Investment Group, LLC is subject to our ability to prepare and file one or more
additional registration statements registering the resale of these shares. These
registration statements may be subject to review and comment by the staff of the
Securities and Exchange Commission, and will require the consent of our
independent registered public accounting firm. Therefore, the timing of
effectiveness of these registration statements cannot be assured. The
effectiveness of these registration statements is a condition precedent to our
ability to sell all of the shares of our common stock to Tangiers Investment
Group, LLC under the investment agreement. Even if we are successful in causing
one or more registration statements registering the resale of some or all of the
shares issuable under the investment agreement with Tangiers Investment Group,
LLC to be declared effective by the Securities and Exchange Commission in a
timely manner, we may not be able to sell the shares unless certain other
conditions are met. For example, we might have to increase the number of our
authorized shares in order to issue the shares to Tangiers Investment Group,
LLC. Increasing the number of our authorized shares will require board and
stockholder approval. Accordingly, because our ability to draw down any amounts
under the investment agreement with Tangiers Investment Group, LLC is subject to
a number of conditions, there is no guarantee that we will be able to draw down
any portion or all of the proceeds of $8,000,000 under the investment with
Tangiers Investment Group, LLC.
Certain restrictions on the extent of puts and the
delivery of advance notices may have little, if any, effect on the adverse
impact of our issuance of shares in connection with the investment agreement
with Tangiers Investment Group, LLC, and as such, Tangiers Investment Group, LLC
may sell a large number of shares, resulting in substantial dilution to the
value of shares held by existing stockholders.
Tangiers Investment Group, LLC has agreed, subject to certain
exceptions listed in the investment agreement with Tangiers Investment Group,
LLC, to refrain from holding an amount of shares which would result in Tangiers
Investment Group, LLC or its affiliates owning more than 4.99% of the
then-outstanding shares of our common stock at any one time. These restrictions,
however, do not prevent Tangiers Investment Group, LLC from selling shares of
our common stock received in connection with a put, and then receiving
additional shares of our common stock in connection with a subsequent put. In
this way, Tangiers Investment Group, LLC could sell more than 4.99% of the
outstanding common stock in a relatively short time frame while never holding
more than 4.99% at one time.
Forward-Looking Statements
This prospectus contains forward-looking statements.
Forward-looking statements are projections in respect of future events or our
future financial performance. In some cases, you can identify forward-looking
statements by terminology such as may, should, intend, expect, plan,
anticipate, believe, estimate, predict, potential, or continue or
the negative of these terms or other comparable terminology. These statements
are only predictions and involve known and unknown risks, including the risks in
the section entitled Risk Factors, uncertainties and other factors, which may
cause our companys or our industrys actual results, levels of activity or performance to be materially different from any future results,
levels of activity or performance expressed or implied by these forward-looking
statements. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity or performance. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.
11
Use of Proceeds
We will not receive any proceeds from the sale of shares of our
common stock by the selling stockholder. However, we will receive proceeds from
the sale of shares of our common stock pursuant to our exercise of the put right
offered by Tangiers Investment Group, LLC. If we receive proceeds upon exercise
of warrants, we will use these proceeds for general corporate and working
capital purposes and acquisitions or assets, businesses or operations or for
other purposes that our board of directors, in its good faith, deems to be in
the best interest of our company.
We will pay for expenses of this offering, except that the
selling stockholder will pay any broker discounts or commissions or equivalent
expenses and expenses of its legal counsel applicable to the sale of its shares.
Dilution
The sale of our common stock to Tangiers Investment Group, LLC
in accordance with the investment agreement dated June 20, 2015 will have a
dilutive impact on our stockholders. As a result, our net loss per share could
increase in future periods and the market price of our common stock could
decline. In addition, the lower our stock price is at the time we exercise our
put option, the more shares of our common stock we will have to issue to
Tangiers Investment Group, LLC in order to drawdown pursuant to the investment
agreement. If our stock price decreases during the pricing period, then our
existing stockholders would experience greater dilution.
The Offering
The selling stockholder identified in this prospectus may offer
and sell up 350,000,000 shares of our common stock to be sold to Tangiers
Investment Group, LLC under the investment agreement dated June 20, 2015. The
investment agreement permits us to put up to $8,000,000 in shares of our
common stock to Tangiers Investment Group, LLC over a period of up to 36 months.
Investment Agreement with Tangiers Investment Group, LLC
On June 20, 2015, we entered into an investment agreement with
Tangiers Investment Group, LLC, a Delaware limited liability company
(Tangiers). Pursuant to the terms of the investment agreement, Tangiers
committed to purchase up to $8,000,000 of our common stock over a period of up
to 36 months. From time to time during the 36 months period commencing from the
effectiveness of the registration statement, we may deliver a put notice to
Tangiers which states the dollar amount that we intend to sell to Tangiers on a
date specified in the put notice. The maximum investment amount per notice must
be no more than 150% of the average daily trading dollar volume of our common
stock for the 10 consecutive trading days immediately prior to date of the
applicable put notice and such amount must not exceed an accumulative amount per
month of $100,000. The minimum put amount is $5,000. The purchase price per
share to be paid by Tangiers will be the 80% of the lowest day of the daily
volume weighed average price of our common stock during the five consecutive
trading days immediately prior to the receipt by Tangiers of the put notice,
provided, however, an additional 5% will be added to the discount of each put if
(i) we are not DWAC eligible and (ii) an additional 5% will be added to the
discount of each put if we are under DTC chill status on the applicable date
of the put notice.
In connection with the investment agreement with Tangiers, we also entered into a registration rights agreement with Tangiers, pursuant to which we agreed to use our best efforts to, within 30 days of June 20, 2015, file with the Securities and Exchange Commission a registration statement, covering the resale of 100,000,000 shares of our common stock underlying the investment agreement with Tangiers. Accordingly, on July 2, 2015 we filed a Registration Statement on Form S-1 with the Securities and Exchange Commission, as was amended on July 29, 2015, which was declared effective on August 5, 2015.
12
The 350,000,000 shares being offered pursuant to this prospectus represent 22.79% of the shares issued and outstanding, assuming that the selling stockholder will sell all of the shares offered for sale. The 350,000,000 shares being offered pursuant to this prospectus represent 25.53% of the shares issued and outstanding held by non-affiliates of our company. The investment agreement with Tangiers is not transferable and any benefits attached thereto may not be assigned.
At an assumed purchase price of $0.0034 we will be able to receive up to $1,190,000 in gross proceeds, assuming the sale of the 350,000,000 shares of our common stock pursuant to the investment agreement with Tangiers, being the number of shares being offered pursuant to this prospectus. As of the date hereof, we have received aggregate gross proceeds of $129,751 pursuant to the investment agreement with Tangiers from shares registered under the July 29, 2015 Amended Form S-1 Registration Statement. If we want to obtain the full $8,000,000 under the investment agreement, after the sale of 350,000,000 common shares of our stock pursuant to this Amended Form S-1 registration statement, we will have to register an additional 1,964,779,411 shares of our common stock.
We may be required to further
increase our authorized shares in order to receive the entire purchase price.
Tangiers has agreed to refrain from holding an amount of shares which would
result in Tangiers owning more than 4.99% of the then-outstanding shares of our
common stock at any one time.
There are substantial risks to investors as a result of the
issuance of shares of our common stock under the investment agreement with
Tangiers. These risks include dilution of stockholders percentage ownership,
significant decline in our stock price and our inability to draw sufficient
funds when needed.
We intend to sell Tangiers periodically our common stock under
the investment agreement and Tangiers will, in turn, sell such shares to
investors in the market at the market price. This may cause our stock price to
decline, which will require us to issue increasing numbers of common shares to
Tangiers to raise the same amount of funds, as our stock price declines.
The aggregate investment amount of $8 million was determined
based on numerous factors, including the following: The proceeds received from
any puts tendered to Tangiers under the investment agreement will be used for
general corporate and working capital purposes and acquisitions or assets,
businesses or operations or for other purposes that our board of directors, in
its good faith deem to be in the best interest of our company. We are involved
in the Hay Mountain Super Project for copper, molybdenum, gold and silver in
South East Arizona. These monies will be completely absorbed by technical
activities, drilling and attendant environmental, archeological and permitting
studies. We will need the full amount of $8 million funding under the investment
agreement with Tangiers to fund the preparation and initiation of diamond core
drilling connected to the Hay Mountain Super Project Porphyry
Copper-Gold-Molybdenum-Rare Earth Element Mining Target in the Tombstone Mining
District of Cochise County, Arizona.
We may have to increase the number of our authorized shares in
order to issue the shares to Tangiers if we reach our current amount of
authorized shares of common stock. Increasing the number of our authorized
shares will require board and stockholder approval. Accordingly, because our
ability to draw down any amounts under the investment agreement with Tangiers is subject to a number of conditions,
there is no guarantee that we will be able to draw down any portion or all of
the proceeds of $8,000,000 under the investment agreement with Tangiers.
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Selling Stockholders
The selling stockholder may offer and sell, from time to time,
any or all of shares of our common stock to be sold to Tangiers Investment
Group, LLC under the investment agreement dated June 20, 2015.
The following table sets forth certain information regarding
the beneficial ownership of shares of common stock by the selling stockholder as
of November 19, 2015 and the number of shares of our common stock being offered
pursuant to this prospectus. We believe that the selling stockholder has sole
voting and investment powers over its shares.
Because the selling stockholder
may offer and sell all or only some portion of the 350,000,000 shares of our
common stock being offered pursuant to this prospectus, the numbers in the table
below representing the amount and percentage of these shares of our common stock
that will be held by the selling stockholder upon termination of the offering
are only estimates based on the assumption that the selling stockholder will
sell all of its shares of our common stock being offered in the offering.
The selling stockholder has not had any position or office, or
other material relationship with us or any of our affiliates over the past three
years.
To our knowledge, the selling stockholder is not a
broker-dealer or an affiliate of a broker-dealer. We may require the selling
stockholder to suspend the sales of the shares of our common stock being offered
pursuant to this prospectus upon the occurrence of any event that makes any
statement in this prospectus or the related registration statement untrue in any
material respect or that requires the changing of statements in those documents
in order to make statements in those documents not misleading.
Name of Selling Stockholder
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Shares Owned by the Selling
Stockholder before the
Offering(1)
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Total Shares Offered in the
Offering
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Number of Shares to Be Owned by Selling
Stockholder After the Offering and Percent of Total
Issued and Outstanding Shares(1)
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# of Shares(3)
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% of Class(2),(3)
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Tangiers Investment Group, LLC(4) |
11,067,700(5) |
350,000,000 |
Nil |
* |
Notes |
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Less than 1%. |
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(1) |
Beneficial ownership is determined in accordance with
Securities and Exchange Commission rules and generally includes voting or
investment power with respect to shares of common stock. Shares of common
stock subject to options and warrants currently exercisable, or
exercisable within 60 days, are counted as outstanding for computing the
percentage of the person holding such options or warrants but are not
counted as outstanding for computing the percentage of any other person. |
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(2) |
We have assumed that the selling stockholder will sell
all of the shares being offered in this offering. |
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(3) |
Based on 1,535,843,235 shares of our common stock issued and outstanding as of November 19, 2015. Shares of our common stock being offered pursuant to this prospectus by a selling stockholder are counted as outstanding for computing the percentage of the selling stockholder. |
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(4) |
Robert Papiri has the voting and dispositive power over
the shares owned by Tangiers Investment Group,
LLC. |
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(5) |
As of October 26, 2015, Tangiers held 11,067,700 shares of our common stock pursuant to the puts made under the investment agreement. |
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Plan of Distribution
The selling stockholder may, from time to time, sell any or all
of shares of our common stock covered hereby on the OTC Markets Groups OTC Pink or
any other stock exchange, market or trading facility on which the shares are
traded or in private transactions. A selling stockholder may sell all or a
portion of the shares being offered pursuant to this prospectus at fixed prices,
at prevailing market prices at the time of sale, at varying prices or at
negotiated prices. A selling stockholder may use any one or more of the
following methods when selling securities:
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ordinary brokerage transactions and
transactions in which the broker-dealer solicits purchasers; |
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block trades in which the broker-dealer will
attempt to sell the shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction; |
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purchases by a broker-dealer as principal and
resale by the broker-dealer for its account; |
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an exchange distribution in accordance with the
rules of the applicable exchange; |
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privately negotiated transactions; |
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in transactions through broker-dealers that
agree with the selling stockholder to sell a specified number of such
securities at a stipulated price per security; |
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through the writing or settlement of options or
other hedging transactions, whether through an options exchange or
otherwise; |
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a combination of any such methods of sale; or
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any other method permitted pursuant to
applicable law. |
The selling stockholder may also sell securities under Rule 144
under the Securities Act of 1933, if available, rather than under this
prospectus.
Broker-dealers engaged by the selling stockholder may arrange
for other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholder (or, if any broker-dealer
acts as agent for the purchaser of securities, from the purchaser) in amounts to
be negotiated, but, except as set forth in a supplement to this prospectus, in
the case of an agency transaction not in excess of a customary brokerage
commission in compliance with FINRA Rule 2440; and in the case of a principal
transaction a markup or markdown in compliance with FINRA IM-2440.
In connection with the sale of the securities or interests
therein, the selling stockholder may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn engage in
short sales of the securities in the course of hedging the positions they
assume. The selling stockholder may also sell securities short and deliver these
securities to close out its short positions, or loan or pledge the securities to
broker-dealers that in turn may sell these securities. The selling stockholder
may also enter into option or other transactions with broker-dealers or other
financial institutions or create one or more derivative securities which require
the delivery to such broker-dealer or other financial institution of securities
offered by this prospectus, which securities such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or
amended to reflect such transaction).
Tangiers Investment Group, LLC is an underwriter within the
meaning of the Securities Act of 1933 and any broker-dealers or agents that are
involved in selling the shares may be deemed to be underwriters within the
meaning of the Securities Act of 1933 in connection with such sales. In
such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act of 1933. We are
required to pay certain fees and expenses incurred by us incident to the
registration of the securities.
15
The selling stockholder will be subject to the prospectus
delivery requirements of the Securities Act of 1933 including Rule 172
thereunder.
The resale securities will be sold only through registered or
licensed brokers or dealers if required under applicable state securities laws.
In addition, in certain states, the resale securities covered hereby may not be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
Under applicable rules and regulations under the Securities
Exchange Act of 1934, any person engaged in the distribution of the resale
securities may not simultaneously engage in market making activities with
respect to the common stock for the applicable restricted period, as defined in
Regulation M, prior to the commencement of the distribution. In addition, the
selling stockholder will be subject to applicable provisions of the Securities
Exchange Act of 1934 and the rules and regulations thereunder, including
Regulation M, which may limit the timing of purchases and sales of securities of
the common stock by the selling stockholder or any other person. We will make
copies of this prospectus available to the selling stockholder and will inform
it of the need to deliver a copy of this prospectus to each purchaser at or
prior to the time of the sale (including by compliance with Rule 172 under the
Securities Act of 1933).
Description of Securities
Capital Stock
We are authorized to issue 6,250,000,000 shares of common stock, $0.00001 par value per share.
Common Stock
As of November 19, 2015, 1,535,843,235 shares of common stock are issued and outstanding.
The holders of our common stock have equal ratable rights to
dividends from funds legally available if and when declared by our board of
directors and are entitled to share ratably in all of our assets available for
distribution to holders of common stock upon liquidation, dissolution or winding
up of our affairs. Our common stock does not provide the right to a preemptive,
subscription or conversion rights and there are no redemption or sinking fund
provisions or rights. Our common stock holders are entitled to one
non-cumulative vote per share on all matters on which stockholders may vote.
All shares of common stock now outstanding are fully paid for
and non-assessable. We refer you to our articles of incorporation, bylaws and
the applicable statutes of the state of Nevada for a more complete description
of the rights and liabilities of holders of our securities. All material terms
of our common stock have been addressed in this section.
Holders of shares of our common stock do not have cumulative
voting rights, which means that the holders of more than 50% of the outstanding
shares, voting for the election of directors, can elect all of the directors to
be elected, if they so choose, and, in that event, the holders of the remaining
shares will not be able to elect any of our directors.
Anti-Takeover Provisions
Some features of the Nevada Revised Statutes, which are further
described below, may have the effect of deterring third parties from making
takeover bids for control of our company or may be used to hinder or delay a
takeover bid.
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This would decrease the chance that our stockholders would
realize a premium over market price for their shares of common stock as a result
of a takeover bid.
Acquisition of Controlling Interest
The Nevada Revised Statutes contain provisions governing
acquisition of controlling interest of a Nevada corporation. These provisions
provide generally that any person or entity that acquires certain percentage of
the outstanding voting shares of a Nevada corporation may be denied voting
rights with respect to the acquired shares, unless the holders of a majority of
the voting power of the corporation, excluding shares as to which any of such
acquiring person or entity, an officer or a director of the corporation, and an
employee of the corporation exercises voting rights, elect to restore such
voting rights in whole or in part. These provisions apply whenever a person or
entity acquires shares that, but for the operation of these provisions, would
bring voting power of such person or entity in the election of directors within
any of the following three ranges:
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20% or more but less than 33 1/3%; |
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33 1/3% or more but less than or equal to 50%;
or |
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more than 50%. |
The stockholders or board of directors of a corporation may
elect to exempt the stock of the corporation from these provisions through
adoption of a provision to that effect in the articles of incorporation or
bylaws of the corporation. Our articles of incorporation and bylaws do not
exempt our common stock from these provisions.
These provisions are applicable only to a Nevada corporation,
which:
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has 200 or more stockholders of record, at
least 100 of whom have addresses in Nevada appearing on the stock ledger
of the corporation; and |
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does business in Nevada directly or through an
affiliated corporation. |
At this time, we do not have 200 or more stockholders of record
nor do we believe that we do business in Nevada directly or through an
affiliated corporation. Therefore, we believe that these provisions do not apply
to acquisitions of our shares and will not until such time as these requirements
have been met. At such time as they may apply to us, these provisions may
discourage companies or persons interested in acquiring a significant interest
in or control of our company, regardless of whether such acquisition may be in
the interest of our stockholders.
Combination with Interested Stockholder
The Nevada Revised Statutes contain provisions governing
combination of a Nevada corporation that has 200 or more stockholders of record
with an interested stockholder. As of November 19, 2015, we had approximately 98
stockholders of record. Therefore, we believe that these provisions governing
combination of a Nevada corporation do not apply to us and will not until such
time as these requirements have been met. At such time as they may apply to us,
these provisions may also have effect of delaying or making it more difficult to
effect a change in control of our company.
A corporation affected by these provisions may not engage in a
combination within three years after the interested stockholder acquires his,
her or its shares unless the combination or purchase is approved by the board of
directors before the interested stockholder acquired such shares. Generally, if
approval is not obtained, then after the expiration of the three-year period,
the business combination may be consummated with the approval of the board of
directors before the person became an interested stockholder or a majority of
the voting power held by disinterested stockholders, or if the consideration to
be received per share by disinterested stockholders is at least equal to the
highest of:
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the highest price per share paid by the
interested stockholder within the three years immediately preceding the
date of the announcement of the combination or within three years
immediately before, or in, the transaction in which he, she or it became
an interested stockholder, whichever is higher; |
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the market value per share on the date of
announcement of the combination or the date the person became an
interested stockholder, whichever is higher; or |
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if higher for the holders of preferred stock,
the highest liquidation value of the preferred stock, if any.
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Generally, these provisions define an interested stockholder as
a person who is the beneficial owner, directly or indirectly of 10% or more of
the voting power of the outstanding voting shares of a corporation. Generally,
these provisions define combination to include any merger or consolidation with
an interested stockholder, or any sale, lease, exchange, mortgage, pledge,
transfer or other disposition, in one transaction or a series of transactions
with an interested stockholder of assets of the corporation having:
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an aggregate market value equal to 5% or more
of the aggregate market value of the assets of the corporation; |
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an aggregate market value equal to 5% or more
of the aggregate market value of all outstanding shares of the
corporation; or |
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representing 10% or more of the earning power
or net income of the corporation. |
Articles of Incorporation and Bylaws
There are no provisions in our articles of incorporation or our
bylaws that would delay, defer or prevent a change in control of our company and
that would operate only with respect to an extraordinary corporate transaction
involving our company, such as merger, reorganization, tender offer, sale or
transfer of substantially all of its assets, or liquidation.
Experts and Counsel
The financial statements of our company included in this
prospectus have been audited by MaloneBailey, LLP, to the extent and for the
period set forth in their report (which contains an explanatory paragraph
regarding our ability to continue as a going concern) appearing elsewhere in the
prospectus, and are included in reliance upon such report given upon the
authority of said firm as experts in auditing and accounting.
Lucosky Brookman LLP has provided us with an opinion on the
validity of the shares of our common stock being offered pursuant to this
prospectus.
Interest of Named Experts and Counsel
No expert named in the registration statement of which this
prospectus forms a part as having prepared or certified any part thereof (or is
named as having prepared or certified a report or valuation for use in
connection with such registration statement) or counsel named in this prospectus
as having given an opinion upon the validity of the securities being offered
pursuant to this prospectus or upon other legal matters in connection with the
registration or offering such securities was employed for such purpose on a
contingency basis. Also at the time of such preparation, certification or
opinion or at any time thereafter, through the date of effectiveness of such
registration statement or that part of such registration statement to which such
preparation, certification or opinion relates, no such person had, or is to
receive, in connection with the offering, a substantial interest, direct or
indirect, in our company or any of its parents or subsidiaries. Nor was any such
person connected with our company or any of its parents or subsidiaries as a
promoter, managing or principal underwriter, voting trustee, director, officer
or employee.
18
Information with respect to Our Company
Description of
Business
Business Development
Liberty Star Uranium & Metals Corp. was formerly Liberty
Star Gold Corp. and formerly Titanium Intelligence, Inc. (Titanium). Titanium
was incorporated on August 20, 2001 under the laws of the State of Nevada. On
February 5, 2004 we commenced operations in the acquisition and exploration of
mineral properties business. Big Chunk Corp. (Big Chunk) 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 our mineral properties. Redwall
ceased drilling activities in July 2008 and was dissolved on March 30, 2010. In
April 2007, we changed our name to Liberty Star Uranium & Metals Corp. to
reflect our current general exploration for base and precious metals. We are in
the exploration phase of operations and have not generated any revenues from
operations.
We formed the wholly owned subsidiary, Hay Mountain Super
Project LLC (HMSP LLC) incorporated on October 24, 2014, to serve as the
primary holding company for development of the potential ore bodies encompassed
in the Hay Mountain area of interest in Arizona.
Our Current Business
We are an exploration 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. Our significant projects are
described below.
North Pipes Super Project (North Pipes and NPSP):
Located in Northern Arizona on the Arizona Strip, we plan to ascertain whether
the NPSP claims possess commercially viable deposits of uranium and associated
co-product metals. We have not identified any ore reserves to date.
Big Chunk Super Project (Big Chunk): Located in the
Iliamna region of Southwestern Alaska, we plan to ascertain whether the Big
Chunk claims possess commercially viable deposits of copper, gold, molybdenum,
silver, palladium rhenium and zinc. We have not identified any ore reserves to
date.
Tombstone Super Project (Tombstone) (formerly referred to
as Tombstone Porphyry Precious Metals Project): Tombstone is located in
Cochise County, Arizona and the Super Project covers the Tombstone caldera and
its environs. Within the Tombstone Caldera is the Hay Mountain target where we
are concentrating our work at this time. We plan to ascertain whether the
Tombstone, Hay Mountain claims possess commercially viable deposits of copper,
molybdenum, gold, silver, lead, zinc, manganese and other metals including Rare
Earth Elements. We have not identified any ore reserves to date.
East Silver Bell Porphyry Copper Project (East Silver
Bell): Located northwest of Tucson, Arizona, we plan to ascertain whether
the East Silver Bell claims possess commercially viable deposits of copper. We
have not identified any ore reserves to date.
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 conveyancing history
characteristic of many mineral properties. We have investigated title to all the
Companys mineral properties and, to the best of our knowledge, title to all
properties are in good standing.
The mineral resource business generally consists of three
stages: exploration, development and production. Mineral resource companies that
are in the exploration stage have not yet found mineral resources in
commercially exploitable quantities, and are engaged in exploring land in an
effort to discover them. Mineral resource companies that have located a mineral
resource in commercially exploitable quantities and are preparing to extract
that resource are in the development stage, while those engaged in the
extraction of a known mineral resource are in the production stage. We have not
found any mineral resources in commercially exploitable quantities.
19
There is no assurance that a commercially viable mineral
deposit exists on any of our properties, and further exploration is required
before we can evaluate whether any exist and, if so, whether it would be
economically feasible to develop or exploit those resources. Even if we complete
our current exploration program and we are successful in identifying a mineral
deposit, we would be required to spend substantial funds on further drilling and
engineering studies before we could know whether that mineral deposit will
constitute an ore reserve (an ore reserve is a commercially viable mineral
deposit).
To date, we have not generated any revenues. Our ability to
pursue our business plan and generate revenues is subject to our ability to
obtain additional financing, and we cannot give any assurance that we will be
able to do so.
Competition
We are a mineral resource company engaged in the business of
mineral exploration. We compete with other mineral resource exploration
companies for financing from a limited number of investors that are prepared to
make investments in mineral resource exploration companies. The presence of
competing mineral resource exploration companies may impact our ability to raise
additional capital in order to fund our property acquisitions and exploration
programs if investors are of the view that investments in competitors are more
attractive based on the merit of the mineral properties under investigation and
the price of the investment offered to investors.
We also compete for mineral properties of merit with other
exploration companies. Competition could reduce the availability of properties
of merit or increase the cost of acquiring additional mineral properties.
Many of the resource exploration companies with whom we compete
may have greater financial and technical resources than we do. Accordingly,
these competitors may be able to spend greater amounts on acquisitions of
properties of merit and on exploration of their properties. In addition, they
may be able to afford greater geological expertise in the targeting and
exploration of resource properties. This competition could result in our
competitors having resource properties of greater quality and interest to
prospective investors who may finance additional exploration and to senior
exploration companies that may purchase resource properties or enter into joint
venture agreements with junior exploration companies. This competition could
adversely impact our ability to finance property acquisitions and further
exploration.
Compliance with Government Regulation
We will be required to comply with all regulations, rules and
directives of governmental authorities and agencies applicable to the
exploration of minerals in the States of Arizona and Alaska.
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 we must pay the assessment amount in cash in order to maintain the
claims. Completion of annual assessment work in the amount of $400 per 1/4
section (160 acre) claim or $100 per 1/16 section (40 acre) claim extends the
claims for a one year period. Assessment work performed in excess of the
required amount may be carried forward for up to 4 years to reduce future
obligations for assessment work. Since we have excess of the required amount
remaining from work performed within the four year period, assessment work was
not required, but was and will be carried forward up to 4 years.
The annual state rentals for the Big Chunk Alaska State mining
claims vary from $70 to $680 per mineral claim and escalate with the age of the
mining 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. Annual rent is due in full within 45 days of staking a new claim and
covers the period from staking until the next September 1st. The rentals of
$6,120 to extend the Big Chunk claims through September 1, 2015 were paid in
November 2014. The estimated state rentals due for the Big Chunk claims by
November 30, 2015 for the period from September 1, 2015 through September 1,
2016 are $6,120. 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.
20
Our North Pipes claims are federal lode mining claims located
on U.S. federal lands and administered by the Department of Interior, Bureau of
Land Management. The Bureau of Land Management (BLM) has prepared an
environmental impact statement (EIS) addressing potential for contamination of
significant amounts of uranium leaking into the Colorado River. The EIS
indicated the danger of such contamination insignificant. Regardless, the United
States Secretary of the Interior, Kenneth Salazar, through executive order has
withdrawn federal lands from locatable mineral exploration and mining North of
the Grand Canyon along the Utah border in Arizona, the so-called Arizona
Strip. Nearly 1 million acres of land managed by the BLM and the Forest Service
were segregated in July 2009 by the Secretary of Interior. The executive order
has resulted in the withdrawal of an area of the Arizona Strip from mining in
particular, and the moratorium now is instated for the next 20 years. However,
the moratorium permits existing claims and mines to continue as before,
including our North Pipes lode mining claims.
We are required to pay annual rentals to maintain our North Pipes federal lode mining claims in good standing. The rental period begins at 12:01 PM on September 1st through the following September 1st at 12:00 and rental payments are due by the first day of the rental period starting at 12:01 PM. The annual rental is $155 per claim. Additional fees of $57 per claim are due in the first year of filing a federal lode mining claim along with the first year’s rent. The rentals of $1,705 for the period from September 1, 2015 to September 1, 2016 have been paid. The annual rentals due by September 1, 2016 of $1,705 are required to maintain the North Pipes claims for the period from September 1, 2016 through September 1, 2017. There is no requirement for annual assessment or exploration work on the federal lode mining claims, this having been supplanted by the rental fee. 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 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 $155 per claim. The rentals fees of $4,030 for the period from September 1, 2015 to September 1, 2016 have been paid. The annual rentals due by September 1, 2016 of $4,030 are required to maintain the East Silver Bell claims for the period from September 1, 2016 through September 1, 2017. There is no requirement for annual assessment or exploration work on the federal lode mining claims, this having been supplanted by the rental fee. 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 our 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 rental is $155 per claim. Additional fees of $57 per claim are due in the first year of filing a federal lode mining claim along with the first year’s rent. The rental fees of $14,725 for the period from September 1, 2015 to September 1, 2016 have been paid. The annual rentals due by September 1, 2016 of $ $14,725 are required to maintain the Tombstone claims for the period from September 1, 2016 through September 1, 2017. There is no requirement for annual assessment or exploration work on the federal lode mining claims, this having been supplanted by the rental fee. There are no royalties associated with the federal lode mining claims. Beginning September 1, 2011 at 12:01 PM, Liberty Star started and subsequently completed staking 9 federal lode mining claims along the east edge of old patented mining claims in the main producing part of the old Tombstone mining area. These new claims are adjacent to the south end of the Walnut Creek TS claim block and are also named the TS claims. These claims occupy fractional land areas open to location by federal lode mining claims.
We are required to pay annual rentals for our Arizona State
Land Department (ASLD) Mineral Exploration Permits (AZ MEP) at our Tombstone
Hay Mountain Project in the State of Arizona. A mineral exploration permit is
permission from ASLD to prospect and explore for minerals on State Trust land.
Exploration is any activity conducted for the purpose of determining the
existence of a valuable mineral deposit, such as: geologic mapping, drilling,
geochemical sampling, and geophysical surveys. Prior to exploration, the Plan of
Operations must be approved by ASLD. The permitting process for an exploration
permit takes a minimum of sixty (60) days. If the application is approved, the
initial rent is $2 per acre. If renewed, no additional rents are due for the
second year. Rents are set at $1 per acre for years 3-5. Work expenditure
requirements are: $10 per acre for years 1-2; and $20 per acre for years 3 thru
5. Removal of any minerals or materials from State Trust land without the
appropriate lease or permit is prohibited. The permit is valid for one year from
the due date of the rental and bond. If renewal requirements are met, the permit
can be renewed annually for up to five years. If discovery of a valuable mineral
deposit is made, the permittee must apply for a mineral lease before actual
mining activities can begin. A mineral lease permits the mining of minerals
discovered under the exploration permit. The approval process takes a minimum of
six (6) months. The mineral lease is issued for a term of twenty (20) years.
Leases may be renewed for an additional term. Both rents and royalties are
determined by appraisal. Royalties may be based on: 1) a fixed rate subject to
annual adjustment; or 2) a sliding-scale rate which is linked to a commodity
index price and the operations break-even price. There is a statutory minimum
royalty rate of 2% of gross value. These AZ MEPs require a reclamation bond of
$3,000 which we currently hold. The first years rental has been paid for these
MEPs and the escalating rental is due on the anniversary of the MEP each year.
After the end of the 4th year, the MEPs must transition to a State Mineral Lease
upon satisfaction of the State Mineral Inspector that economic indications of a
minable deposit exist. After commencement of mining, the State of Arizona shall
be paid a minimal net smelter return after taking into consideration any
extenuating mining challenges royalty but not less than a 2% gross royalty. The
rental period begins on September 30th through the following September 29th and
rental payments are due by the first day of the rental period. We hold AZ MEP
permits for 2,366.88 acres at our Tombstone project. Required minimum work
expenditures for the period ended September 29, 2016 are $42,537. The annual
rentals due by September 30, 2016 to maintain the AZ MEP permits are $4,867.
21
With respect to the foregoing properties, additional approvals
and authorizations may be required from other government agencies, depending
upon the nature and scope of the proposed exploration program. The amount of
these costs is not known at this time as we do not know the size, quality of any
resource or reserve at this time, and it is extremely difficult to assess the
impact of any capital expenditures on earnings or our competitive position.
Personnel
Currently we employ one full time geologist who is also our
CEO, CFO, and Chairman of the Board, James Briscoe. We also employ one full time
VP Finance, one as-needed PhD consulting geologist specializing in GIS computer
mapping and database creation, one full time geo-tech, who is also our manager
of field operations, one investor relations representative, and one CPA on an as
needed basis. We hire consultants for investor relations, exploration,
derivative accounting, and administrative functions also on an as needed basis.
Description of Property
Our Offices
We rent the premises for our principal office located at 5610 E
Sutler Lane, Tucson, Arizona 85712. We rent this office space which is located
in the home of our Chief Geologist and CEO for $522 per month including a pro rata
share of taxes and maintenance. Our employees work either from our principal
office or from offices maintained in their homes.
We believe that our existing office facilities are adequate for
our needs. Should we require additional space at that time, or prior thereto, we
believe that such space can be secured on commercially reasonable terms.
Our Warehouse
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 $3,673 per month. The lease expired on May 31, 2015 and is currently month-to-month. Currently we have the option to purchase the warehouse. 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.
22
Our Mineral Claims
All of the Companys claims for mineral properties are in good
standing.
North Pipes Super Project (North Pipes and
NPSP):
We hold a 100% interest in 11 (unpatented) Federal lode mining
claims strategically placed on the Arizona Strip. The 11 unpatented federal
lode mining claims with an area of 227.7 acres include breccia pipe targets
(Pipes). Breccia pipes are cylindrical formations in the earths crust
sometimes identified by a surface depression, or surface bump or no visible
surface expression at all, and contain a high concentration of fragmented rock
breccia sometimes cemented by uranium and other minerals. We plan to ascertain
whether our North Pipes claims possess commercially viable deposits of uranium.
Due to the moratorium of location of lode mining claims on the Arizona Strip and
the low price of U3O8 we have no current exploration plans and will not until
the uranium price increases and the moratorium expires in about 15 years. We
intend to hold a strategic position until such time that it is economically
feasible to mount a new drilling program. We want to take advantage of more than
a million dollars of exploration data which was acquired by Liberty Star when
uranium prices were higher and before the moratorium was instituted.
North Pipes is located on the Arizona Strip, which is located
approximately 10 miles south of the town of Fredonia, AZ. Access is by Hwy 389
and various dirt roads, some of which are maintained and some that are very
primitive. 4WD vehicles are necessary for the primitive dirt roads. Some of the
claims cannot be driven to and require hiking to their location or under an
approved plan of operation it is possible to create an access road.
North Pipes-AZ Claims |
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11 LA Claims |
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11
Claims -
227.7 Acres |
23
Our NPSP claims are undeveloped. There are neither open-pit nor
underground mines, nor is there any mining plant or equipment located on the
properties. There is no power supply to the properties. We have not found any
mineral resources on any of our claims. The Arizona Strip was an active
exploration district in the 1970s and 1980s with multiple producing uranium
mines. No evidence of actual development work has been found on any of our
properties and no significant exploration activities have been performed on our
NPSP claims since 2008 due to many factors including the lowered uranium prices
and the moratorium on locating claims. Below is a summary of prior exploration
activities performed on our NPSP claims:
Geophysics: We have completed PEM (Pulse
Electro-magnetic) geophysical surveys on some of our NPSP claims. Two types of
PEM surveys were conducted in 2007: (i) Downhole PEM and (ii) In-Loop PEM. We
have also used CSAMT and NSAMT (Controlled and Natural Source Audio-range
Magneto Tellurics), run on the ground and executed by Zonge Engineering of
Tucson AZ. A survey was also completed on an approximately six square mile area
by VTEM helicopter borne electromagnetic survey along right angle crossing grid
lines spaced 100 meters apart, which was performed by Geotech of Aurora,
Ontario, Canada. Significant anomalies resulted from this survey. Preliminary
drilling on one of Liberty Stars anomalies intersected strong breccia,
alteration and pyrite mineralization. The holes did not penetrate down to the
elevation where uranium mineralization would be expected, but are targets for
future work. As of this date we have not developed any uranium resources on the
Arizona Strip.
Stereoscopic geologic color air photo interpretation
(photo-geology): Stereoscopic geologic interpretation of 1:24,000 (1 inch =
2,000 feet) high resolution color air photographs were contracted for and
completed by Dr. Karen Wenrich and Edward Ulmer, a Registered Professional
Geologist. Dr. Wenrich worked on the Arizona Strip uranium bearing breccia pipes
almost exclusively during her twenty three year tenure with the United States
Geological Survey from which she is now retired. During this period of study she
authored many professional papers on breccia pipes of the Grant Canyon area, and
is considered a foremost expert on them. Mr. Ulmer worked on the Arizona Strip
in the mid to late 1970s working on both imagery interpretation and surface
geology.
Geologic field mapping on the surface: Geological field
mapping was conducted in the fall of 2005 through 2007 by our staff geologists
as well as contracted geologists. Approximately 180 of the breccia pipe target
areas have been mapped in detail 1:5,000 (1 inch = 417 feet). Several detailed
measured stratigraphic sections have also been completed.
Geochemical sampling: A comprehensive soil geochemical
survey was completed in 2007. We have collected approximately 14,000 soil
samples over all identifiable breccia pipes, both those with known ore and those
that are yet to be proven by drilling. A strict chain of custody
procedures were followed and quality assurance/quality control (QA/QC) samples
were inserted regularly into the sample stream. The samples were assayed for 63
elements. Assay analyses were conducted by a Certified Assay Lab, Acme
Analytical Laboratories of Vancouver, British Columbia, Canada. We believe that
these samples allow us to identify potential uranium bearing breccia pipes
versus barren or non-uranium bearing breccia pipes.
24
Drilling: In 2007 a drilling program was undertaken
using both rotary drilling and core drilling. Rotary drilling was contracted by
Boart Longyear. Diamond core drilling was completed by Redwall Drilling Inc., a
former wholly owned subsidiary of Liberty Star. A total of 22 holes were drilled
for a total of 16,226 feet of drilling. Important intersections of rock
generally associated with producing breccia pipes were made. We did not
intersect any ore mineralization during the drilling program.
Total costs including claim staking (initially in 2005), claim
maintenance (see PART I ITEM1. Business. Compliance with Government Regulation
in each Form 10K for the years ended January 31, 2006 through January 31, 2015)
and a drilling program (exploratory) in calendar years 2007 and 2008, are
$5,220,794.
Beginning in 2006, Certified Professional Geologist Dr Karen Wenrich
and a dozen other well regarded geoscientists engaged in an exploratory program
centering on the regions breccia pipes. By the time Dr. Wenrich came to work on
the North Pipes project, she had 27 years with the USGS working on breccia pipe
research and was a member of a Nobel Peace Prize winning team of UN atomic
science specialists. The Liberty Star team worked with high resolution color
aerial photographs and other reconnaissance covering approximately 2,000 square
miles to format geological maps of the terrain. In addition to geology,
geophysics gamma ray spectroscopy, approximately 14,000 soil samples were
collected and analyzed by a certified lab for 63 elements. These were located
precisely as they were collected using GPS. The results were compiled and
plotted using GIS software, and various contouring and interpretation
techniques. Expenses included food and lodging and a daily commute of
approximately 100 miles. Road conditions were extreme and resulted in vehicle
expenses of approximately $2.00 per mile. Various contractors were used in claim
staking, and other contract work in sample collection. Helicopters and light
planes were used for various transportation tasks. Home office support also
involved permanent and contract support.
Exploratory drilling includes costs of
travel, food and lodging, payments on the drill rig, drill bits, fuel, drilling
permits, and maintenance costs of the drill rig and of support vehicles. Also
included are the costs of reclamation bonds and reclamation costs of lands
disturbed by drilling, as well as the costs of conducting archaeological surveys
to identify prehistoric remains of human habitation or human activity.
Currently there are no planned costs for the North Pipes Super
Project unless commodity prices, specifically for uranium, increase sufficiently
to make exploration financially tenable. The Moratorium on acquiring any
additional land has also negatively affected the current investment climate for
such work. However we have a letter agreement with Mr. Andrew Mueller to option
our existing claims North Pipes claims to him for mining using his vertical bore
technology. He believes this will make the Pipes exploitable.
Big Chunk Super Project (Big Chunk) Location, claims,
geology and technical studies:
We hold a 100% interest in 9 State mining claims in the Iliamna
region of Southwestern Alaska with an area of 1,440 acres, located on the north
side of the Cook Inlet, approximately 265 miles southwest of the city of
Anchorage, Alaska. We plan to ascertain whether the Big Chunk claims possess
commercially viable deposits of copper, gold, molybdenum, silver, palladium,
rhenium and zinc. Due to decisions made by the EPA regarding the nearby Pebble
Deposit we have no immediate exploration plans, however, we intend to hold our
land position until such a time we determine it is clear that exploration is
economically viable again.
Big
Chunk-AK Claims |
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BC 817 |
BC 1114 |
BC 818 |
BC 1115 |
BC 841 |
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BC 842 |
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BC 1104 |
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BC 1105 |
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BC 1113 |
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9 BC Claims- 1,440 acres |
25
Our Big Chunk claims are undeveloped. Big Chunk is in the
Iliamna region of Southwestern Alaska, located on the north side of the Cook
Inlet, approximately 265 miles southwest of the city of Anchorage Alaska. The
claims are located in a remote area of Southwestern Alaska near Lake Iliamna,
Alaskas largest lake. The claims are immediately adjacent and contiguous to the
Pebble mine property and about 3 miles north east from the Pebble Porphyry
copper, gold, molybdenum, silver, palladium, rhenium and zinc mineral deposit
which is reportedly one of the largest of its type in the world. Two or more Air
Taxi services connect to the village of Iliamna roughly 240 miles distant from
Anchorage. At Iliamna, approximately 27 miles southeast of Big Chunk, there is a
major regional airport, Fixed Base Operator (FBO), fuel, bush planes and,
periodically, helicopters for rent with pilot. Air is the only practical way to
the property either by float plane, ski plane in the winter, or helicopter.
Ground travel is unsafe and impractical in the summer due to the dense
population of black bears, grizzly bears, bogs and small lakes. Winter access by
snow machine could be possible, although difficult.
In 2011, the Company engaged the international firm of SRK
Consulting, Engineering and Scientist of Tucson (SRK) through its Tucson,
Arizona office to prepare a Technical Report in the same format of the
internationally accepted Canadian National Instrument NI 43-101. Because the
Companys stock does not trade on any Canadian stock exchanges, this Technical
Report was not submitted to SEDAR, the electronic system for the official filing
of documents by public companies and investment funds across Canada. In their
report which encompasses some 194 pages of technical data, they compared the
Northern Dynasty NI 43-101 geologic and drill data, published on the Northern
Dynasty web site in its entirety, to results of Liberty Stars technical work on
the Big Chunk ground. They concluded amongst other things: (1) Twenty seven
scout diamond drill holes drilled by Liberty Star in 2004 2005 intersected the
same rock types as were intersected in the exploration drilling on the Pebble
deposit (2) All drill holes, which were spaced over some 500 square miles,
intersected the outer shell or propylitic halo of multiple porphyry copper
systems, which is the model co-developed by our director, Dr. John Guilbert; and
(3) Copper and molybdenum sulfides along with low grade gold were intersected in
two drill holes in the White Sox target area. This mineralization and
associated alteration may indicate a porphyry Cu-Mo system (SRK Big Chunk
Technical Report- page 109, 11.2 Results of Drilling). After publication of the
report in August of 2012 during a review of core logs it was discovered that
diamond core hole 1003 showed characteristic copper and molybdenum chalcopyrite
and molybdenite, as well as lead, zinc and silver. The hole was stopped
prematurely in increasing values of these metals at a depth of 206.4 meters. The
area of the Big Chunk Claims is largely covered by glacial debris, soil, and
tundra. There are no open-pit or underground mines, nor is there any mining
plant or equipment located on the properties. There is no power supply to the
properties. There is no road access to the properties, but such public road access is planned for the Pebble mine, and as currently
planned, that road will cross the Companys land, and be accessible for the
Companys use. Extensive geotechnical data on the Big Chunk claims has been
acquired between startup of 2004 and the current time. Extensive geophysical
data has been acquired by the Company of several types, which includes the
following:
26
(1) an extensive air borne magnetic
survey flown by McPhar Geosurveys Ltd., Newmarket, Ontario Canada over 18,243
line kilometers covering 3,646 square kilometers using: (a) a draped survey with
a mean elevation of the instrument above the terrain of 200 meters (600 feet)
feet; (b) a line spacing of 250 meters (800 feet); (c) and a sample interval of
8 meters (26.4 feet). State of the art magnetometer, GPS, radar altimeter, and
computer recording of data were used and in our opinion no other survey of this
quality and precision is available in the area.
(2) one hundred twenty seven linear
miles of Induced Polarization (IP) was run by Zonge Engineering of Tucson AZ. Of
necessity lines were brushed of all trees and undergrowth and all access was by
helicopter, however, the lines themselves were done on the ground by foot. All
data was recorded on appropriate computers, downloaded each evening and sent to
the Zonge Office in Tucson and to our consulting geophysicist Mr. Jan Klein in
Vancouver, BC, Canada. Mr. Klein supervised all IP and other geophysical surveys
over the Pebble for Cominco who sold the Pebble Project to Northern Dynasty.
Thus, we believe Mr, Klein has had more experience in the geophysics of the area,
which includes over 2,000 square miles, than any other geophysicist. The results
were interpreted and sent back to the Alaska headquarters every night.
(3) Liberty Star contracted with
Geotech Limited of London, Ontario, Canada to run their ZTEM Electro Magnetic
(EM) airborne survey equipment over the Big Chunk project. This thoroughly
tested system can look down 2,000 meters (6,000 feet) in to the crust of the
earth and detect sulfide mineralization associated with porphyry copper-gold
systems, as well as other geologic features. This survey was completed in August
2009. The survey covered 315.2 sq kilometers (121.7 sq miles) and consisted of
north-south lines spaced 250 meters apart on our Big Chunk Super Project mineral
claims. In May 2010, Liberty Star received feedback from Geotech Ltd. that its
interpretation showed at least 4 to 7 signatures that are consistent with
porphyry copper responses. The 2D computer model shows typical low responsive
areas, which could correspond to an ore mineral core zones with a surrounding
responsive cylinders representing a pyrite halos typical of Porphyry copper
systems. For control, Geotech flew a survey the day after completing the Big
Chunk survey, over the Pebble mineral deposit. The anomalies on Big Chunk show
strong similarities to the Pebble.
During the field seasons of 2004 and 2005 Liberty collected
approximately eleven thousand geochemical samples. The sampling program was
designed by both consulting geochemist, Shea Clark Smith, of MEG Laboratories in
the Reno area of Nevada, and Liberty Chief Geologist, James Briscoe. The
sampling program was based on many years of geochemical studies and sampling
throughout the world by Mr. Smith and his Masters Degree thesis on sampling
tundra plants and detecting metals in their woody stems reflecting metals at
depth. Further, Mr. Smith and Mr. Briscoe used this technique to locate buried
porphyry copper deposits in the Silver Bell district (see discussion of the East
Silver Bell Project in this report) near Tucson, Arizona in 1996 -1998. The
methodology was conceived, discovered and proven in a well-known porphyry
district south of Tucson, Arizona between the periods 1950 to 1955. At Big Chunk
the samples collected included: (1) stream sediment; (2) stream water; (3) pond
and small-lake water; (4) soil samples; and (5) vegetation sampling new growth
of woody plants. These samples were analyzed by Acme Labs, a Certified Assayer
in Canada for 64 elements for each sample. For the eleven thousand samples, this
resulted in approximately seven hundred thousand separate analyses including
blanks, repeat and control samples part of the QA/QC (Quality Assurance Quality
Control) procedures. Because of the overload worldwide in all assay labs at the
time, turnaround time for the assays was up to three or more months. After
receipt of the samples, they were processed using computer techniques and the
results analyzed and interpreted. Known indicator elements, including porphyry
copper-gold mineral center elements, formed typical porphyry copper center
anomaly zones. Additionally, samples taken by Liberty Star over the Pebble
deposit, with the permission of Northern Dynasty, indicated that mineral body to
be detectable by these methods. The geochemical methodology was used by the US
Geological Survey, under contract for the Pebble partnership over the Pebble
mineral zone, and data was published in 2010. It was again shown to be effective
in indicating the Pebble deposit mineralization at depth. The anomalies
generated by both deep looking ZTEM and geochemistry by Liberty Star have been
tested by published results from drilling in the Pebble mineral body. The same types of targets
in the Liberty Star Big Chunk have yet to be tested by drilling in a significant
way.
27
We are unaware of any previous claim ownership anywhere on our
Big Chunk claims in Alaska. No historical drilling resulting in mineral
resources or reserves appears in the published literature concerning the
property. Minor exploration was conducted by Teck Cominco Alaska, and Anaconda
Mining Inc. The United States Geological Survey does not do exploration but they
had done minor geological mapping in the north part of the Big Chunk caldera,
along with widely spaced aeromag surveys in the same area. We are not aware of
any prior exploration that was conducted on our Big Chunk claims in Alaska prior
to January 10, 2004, when our aerial magnetic survey began.
We have not defined mineral resources on any of our claims at
Big Chunk.
Letter Agreement and Secured Convertible Note with Northern
Dynasty Minerals Ltd. With Respect to Big Chunk
On July 15, 2010, we issued a secured convertible promissory
note bearing interest at a rate of 10% per annum compounded monthly (the 2010
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 were 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.
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. No such notice by Northern Dynasty was 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 $1,592,769 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, MBGS, LLC filed liens against the
claims before the transfer could be completed. 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
settlement agreement with MBGS, LLC, 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. A gain of $5,322,943 for the settlement of the Northern Dynasty
debt and accrued interest was recorded in other income during the six months
ended July 31, 2014.
Tombstone Super Project (Tombstone):
Our CEO and Chief Geologist, James Briscoe, has long experience
in the Tombstone district, southeast Arizona, where he first worked in 1972. In
the mid-1980s, he concluded that much earlier regional geologic work had reached
erroneous conclusions and that Tombstone was a large and ancient (72 million
years before the present or Laramide in age) volcanic structure a caldera.
He brought this to the attention of the US Geological Survey caldera experts,
who after study concluded that Briscoe was correct. Subsequently, more than
seventeen calderas of various ages have been identified in Arizona, by the US
Geological survey, the Arizona Geological Survey and others. Such calderas of
Laramide age are all associated with porphyry alteration and copper and
associated mineralization; many of these have become very large copper mines.
Studies by Mr. Briscoe and more recently using advanced technology, have
indicated that alteration associated mineralization at Tombstone is much more
extensive than originally thought. This alteration lies largely under cover
and is indicated by geochemistry, geophysics and projection of known geology
into covered areas.
28
We hold 95 unpatented standard federal lode mining claims with
an area of 1,798.68 acres located due east and southeast of the town of
Tombstone, Arizona. The Walnut Creek Project is located immediately east of the
town of Tombstone. The Hay Mountain Project is located 6.5 miles southeast of
Tombstone; access is by Hwy 89 and Davis Rd. We also hold Arizona State Mineral
Exploration Permits (MEPs) covering 2,366.88 acres or 3.7 square miles in the
same area. We also hold an option to explore 29 unpatented standard federal lode
mining claims (604 acres out of the total 1,798.68 acres) located in the same
region. On April 29, 2008 Liberty Star announced that it had leased, with an
option to purchase, three properties from JABA US Inc. in Arizona and Nevada,
USA. Liberty Star President James A. Briscoe controls JABA US INC and Dr. J. M.
Guilbert, Director of the Company, holds a small stock position as well. The
properties in Arizona are part of the Tombstone and the 26 claims East Silver
Bell projects. The option covering the property in Nevada was sold in October,
2008 to NPX Metals. Proceeds from that sale were loaned immediately back to
Liberty Star by Mr. Briscoe. For the remaining claims, according to the option
agreement, Liberty Star could earn up to 100% interest by keeping up annual
assessment work and spending $175,000 in exploration expenditures on the
properties between April 2008 and January 1, 2011. This provision payment of
assessment and related expenses has been met and option agreement has been
maintained over the Tombstone and East Silver Bell Claims.
LIBERTY STAR |
|
TOMBSTONE-AZ |
JABA Optioned Claims |
Federal Unpatented Claims |
Claim Names |
HM 87-143 |
TS 129- 152 |
TS 168-176 |
TS 163- 167 |
Claim Acreage |
57 HM Claims- 1095.18 acres |
29 TS Claims- 604
acres |
9 TS Claims- 99.5 acres |
|
State Exploration Permits |
5 State MEP's- 2,366.88 acres |
|
29
At Hay Mountain (HM), we plan to ascertain whether the HM lode
mining claims and AZ MEPs possess commercially viable deposits of copper, gold,
molybdenum, silver, zinc, rare earth metals and other valuable metals. We have a
phased exploration plan that involves diamond core drilling of multiple holes
over targets determined by analysis of geochemical sampling and ZTEM
electromagnetic and magnetic survey. Initial phase 1 drilling is planned to take
approximately one year. Should results indicate the viability of the project,
additional phased work, both exploration and development, is planned over the
course of seven total years to define the nature and size of an ore body(s) and
move toward mining. Any exploration plans are dependent on acquiring suitable
funding. No part of the phased program is currently funded.
The Tombstone claims are undeveloped. However significant
amounts of aeromagnetic surveys, IP (Induced Polarization Surveys), geologic
mapping by the USGS and others, and geochemical surveys including soil, rock and
vegetation sampling have been conducted at various times by various parties,
over the last 60 years. When compiled and analyzed these various data suggest a
compelling series of anomalies that are typical of buried, dirt and rock covered
porphyry copper system(s). Below is a summary of prior exploration activities
performed on our Tombstone claims: Technical Report: In mid-March 2011,
Liberty Star contracted SRK to prepare three (3) Technical studies and Reports
in a form similar to mineral reports prescribed under NI 43-101. Members of
SRKs engineering/scientific staff supervised by a Qualified Person as defined
under NI 43-101 and SRKs Tucson Office Principal Geologist, Corolla Hoag, and
geologist Dr. Jan Rasmussen have visited the Tombstone property. This
information was combined with historic technical reports going back to 1878 and
more recent data up to August 2011 (the date of their reports). The three
Technical Reports are entitled: (1) Walnut Creek Exploration Report, Tombstone
District, Arizona August 31, 2011, 147 pages; (2) The Tombstone Caldera South
Exploration Report, Tombstone District, Arizona August 31, 2011, 144 pages; and
(3) Hay Mountain Exploration Report, Tombstone District, Arizona August 31
2011, 155 pages. Because the Companys stock does not trade on any Canadian
stock exchanges, these three Technical Reports were not submitted to SEDAR, the
electronic system for the official filing of documents by public companies and
investment funds across Canada. We had also requested that SRK prepare a report
on the Tombstone Consolidated Mines patented claims. These claims covered the
entirety of historic productive area of the Tombstone mines which date to their
discovery in 1877. However, before that report could be completed a competitor
acquired a lease on those lands. These Technical Reports thoroughly summarize
and illustrate the salient geotechnical data of the Tombstone Mining District
covering about 250 square miles and present much data in computer map format. In
such context, they analyze Liberty Stars exploration programs as related to the
entire area, make estimates and recommend execution of proposed Company
exploration programs. Because of competitive pressure and the unique nature of
the data which includes 40+ years of private report compilation by James
Briscoe, our CEO, these reports are considered confidential and will not be
released for the foreseeable future. Geochemical sampling at the Hay Mountain
Project: In 2011 and early 2012 we collected nearly 1,800 rock, soil and
vegetation samples over 621 sample sites over approximately 14 square miles
centered on the Hay Mountain property. These samples have been assayed for 63
elements generating about 113,000 analyses. The samples were prepared by MEG
Inc. and have been shipped to ALS Minerals (ALS-Chemex) a Certified (under NI
43-101 criteria and approved by regulatory processes) geochemical analysis lab
in Vancouver, British Columbia. Assay results are being sent to our Tucson
office and when all assays are received our geology team will be able to
generate computer analyses that allow interpretation of the data.
ZTEM EM Survey: We have requested and have received a
cost estimate from Geotech of Aurora (Toronto area) Ontario, Canada, which is
the only purveyor of this helicopter borne electromagnetic (EM) geophysical
method. This geophysical method has the ability to look down into the crust of
the earth about 2,000 meters (6,000 feet) and detect sulfides which may be
associated with porphyry copper systems. Test work over known Safford, Arizona
porphyry copper deposits along with thousands of verifying drill holes show the
geometry of such mineral systems can be determined, thus identifying whether it
is a porphyry copper system or some other mineral system,. When combined with
our geochemical data, we can determine the position of the copper-moly center of
the system and design our drill program to efficiently test and define
mineralization. We flew ZTEM in July 2013 and the analysis report was received
in February 2014.
Geologic Mapping: Small scale geologic mapping was performed in the Hay Mountain area by two different U.S. Geological Survey Senior Geologists. The first was by James Gilully starting in the late 1930s and published in the early 1950’s, as a Professional Paper 281, 1956, and the second by Harold Drewes, published USGS Professional Paper 1144 1981. The Drewes map was a simplified version of the Gilully map with faults adjusted to Drewes’s interpretation. Unfortunately, little or no refinement of the rock types or actual outcropping rocks was accomplished. Gilully, while apparently generally correct in outcrop identification, disturbingly on close examination it appears he missed important outcropping rocks and at least in the Hay Mountain area of the major geochemical anomaly he misinterpreted stratigraphic rock types. In the area we have termed the Chrysocolla Block he failed to note the outcrop completely and our thorough examination revealed it to be Earp formation, whereas all the surrounding mapped area was mapped as the younger Colina limestone. This would put the Chrysocolla Block more than 1,000 feet above the Earp and 1,700 feet or more above the receptive-to- mineralization Horquilla formation where most of the production from Bisbee has been found and high grade which is now being drilled out at Rosemont Camp about 50 miles to the west. This critical error we have corrected on our maps to show this area as the lower Earp and believe that the recently discovered gossan outcrops are lying perhaps 200 to 400 feet above the Earp- Horquilla contact. Furthermore, neither Gilully nor Drewes noticed pervasively fluidized and rounded limestone breccia which covers square miles and is typical feature of porphyry copper deposits. We believe perhaps massive copper (chalcopyrite) mineralization will be located in the Horquilla formation 200 to 400 feet below the gossan outcrops in the Earp formation. This analysis plus all of our geochemistry and geophysics is the justification for our currently planned drillhole program.
30
East Silver Bell Porphyry Copper Project (East Silver Bell
or ESB):
Located northwest of Tucson, Arizona, these claims currently
are within the Ironwood National Monument, which was established after the
claims were staked and validated by numerous drill holes in addition to
extensive technical studies. We plan to ascertain whether the East Silver Bell
claims possess commercially viable deposits of copper. We hold an option to
explore 26 unpatented standard federal lode mining claims with an area of 536.03
acres located in the same region. The optioned mineral claims are owned by JABA
US Inc., a corporation in which two of our directors are owners. On April 29,
2008 Liberty Star announced that it had leased, with an option to purchase,
three properties from JABA US Inc. in Arizona and Nevada, USA. The properties in
Arizona, are part of the Tombstone (and the 26 claims) East Silverbell projects.
The option covering the property in Nevada was sold in October, 2008 to NPX
Metals, and the proceeds were paid by JABA US Inc. as a loan to Liberty Star.
According to the option agreement, Liberty Star can earn up to 100% interest by
keeping up annual assessment work and spending $175,000 in exploration
expenditures on the properties between April 2008 and January 1, 2011. This
provision has been met for the assessment work and other related expense
payments, and even though the work commitment is now in arrears, the option
agreement has been maintained over the Tombstone and East Silver Bell
Claims.
JABA Optioned Properties
East Silver Bell-AZ Claims |
ESB 180-191 |
ESB 193 |
ESB 195 |
ESB 238 |
ESB 240 |
ESB 242-245 |
ESB 247-251 |
ESB 301 |
26 ESB Claims- 536.03
acres |
Located approximately 30 miles northwest of Tucson, Arizona, 18
miles from the Avra Valley road off ramp and then 18 miles west, just north of
that road on dirt roads (accessible with a 2 wheel drive vehicle), the claims
currently are within the Ironwood Forest National Monument, which was created
after the claims were staked, underwent detailed geochem and geophysical studies
and drilled with numerous drill holes revealing a mineralized body. We plan to ascertain whether the East Silverbell claims
possess commercially viable deposits of copper. Due to difficulty of doing work
on the Ironwood Forest National Monument, which was created after drill
definition of a mineral body on our claims, we are negotiating with an adjacent
fee-simple, land-owner on which half of the mineral zone lies, to explore in
detail to develop a viable ore body.
31
The East Silver Bell claims are undeveloped. The ESB block of
claims were staked circa 1994 about five miles east of the ASARCO
Solvent-Extraction-Electro-Winning (SXEW) plant. The East Silver Bell claims are
directly adjacent and contiguous to the ASARCO Patented (fee simple) lands.
Circa 1994 JABA (US) Inc. compiled geophysics consisting of existing, widely
spaced airborne magnetics, collected soil and vegetation geochemical samples,
performed detailed photo interpretation from high resolution color aerial
photography, mapped surface geology, breccia pipes and performed detailed
mapping and interpretation of leached capping and performed very closely spaced
man borne magnetic surveys over alteration and projection of the edge of the
Silver Bell caldera and associated mineral belt that includes the Silver Bell
porphyry copper mines that could be seen on the color air photos. The surface
magnetic survey was interpreted by geophysicist Edward DeRidder, who pointed out
a magnetic low that he interpreted as a porphyry copper magnetic low.
Subsequently, north-south Induced Polarization (IP) lines were run and
interpreted by Zonge engineering, to show a sulfide response at 900 to 1,000
feet below the surface. All of this data was plotted in 3D images showing
overlapping and mutually reinforcing geochemical, ground magnetic and IP
geophysics, and geologic- alteration mapped anomalies. Half of this responsive
area lies on the adjacent ASARCO ground and half lies on JABA (US) ground.
Subsequent to these studies, the ground was lease-optioned to Valarie Gold
Exploration Inc., (Valarie) a Canadian exploration company. They drilled 6 holes
to a predetermined depth of 600 feet, using a rotary drill and recovered drill
chips, sampled at 5 foot intervals. The drilling penetrated and recovered
classic chalcocite leached capping typical of that material occurring over ore
bodies in the Silver Bell mines of North Silver Bell, El Tiro and Oxide open pit
mines. Geochemical assays of the cuttings showed three to four relict ghost
copper enriched zones to the final arbitrary depth of six hundred feet. These
holes did not penetrate the leached chalcocite capping rock and did not enter
sulfides. Valarie relinquished their lease. Latter Kennecott Copper Corp.
optioned the claims and drilled three rotary drill holes. Of these holes two
twisted off the drill bits at shallow depth and had to be abandoned while in the
leached chalcocite capping. One hole penetrated to a depth of 1,000 feet but
poor sampling procedures negated any meaningful data from this hole, when
primary samples were irretrievably lost. These two drill attempts were
predictably not successful but geochemistry from the Valarie drill holes did
show shadow geochemical copper enrichment indicating chalcocite enrichment in
the sulfide blanket below and the Kennecott effort did recover some chalcocite
(enriched copper sulfide) circa 1998 the Ironwood National Monument was created
over JABAs valid mining claims. The surface of these claims cannot be used to
extract the copper mineral body below by the open pit mining method. Since half
of the geophysically, geochemically, geologically, alteration indicated mineral
body is located on ASARCO patented land and because the ASARCO SXEW plant is
only five miles to the west, it is believed that this mineral body can be
extracted from the ASARCO property by underground in situ leach technology at
some point in the future. To date we have not identified any ore reserves on the
East Silver Bell Project.
We have not found any mineral resources on any of our claims.
Sampling Protocols for all projects
Liberty Star trains all employees/contractors conducting sample
collection to use a handheld digital mobile device to record all aspects of each
individual sample. The handheld mobile device leads the sampler through a series
of dropdown menu windows with various description capabilities and the ability
to record a GPS coordinate. Data from the device is uploaded to our database
daily. Liberty Star also uses professionally created video training to teach
samplers the proper techniques of obtaining a proper sample whether it is soil,
rock or vegetation and instruction on avoiding contamination. After samples are
collected they are stored in a secure location under lock and key until they are
shipped via FedEx or UPS using chain of custody guidelines to a professional
sample prep lab in Washoe Valley, Nevada run by Shea Clark Smith, MSc/
Geochemist. Mr. Smith prepares the samples by crushing, mixing, pulverizing and
homogenizing. Then a 200 gram sample is scientifically split for shipment to a
Certified Assay Laboratory of each original sample. Standards, blanks and
duplicates are added to the sample stream, including such Quality Assurance
Quality Control (QA/QC) every 10th assay sample. Before being sent to a
certified assay lab using ICP-MS analysis the samples are randomized. Once
Liberty Star gets the analysis data back from the laboratory, checks for quality
assurance and control are made using data from the blanks, standards and
duplicates. The results are sent to Liberty Star by email and a paper copy
mailed for verification and as a permanent record. The data are then de- randomized and processed for interpretation
by various software programs designed for the purpose.
32
Legal Proceedings
We know of no material pending legal proceedings to which our
company or any of our subsidiaries is a party or of which any of our properties,
or the properties of any of our subsidiaries, is the subject. In addition, we do
not know of any such proceedings contemplated by any governmental authorities.
We know of no material proceedings in which any of our
directors, officers or affiliates, or any registered or beneficial stockholder
is a party adverse to our company or any of our subsidiaries or has a material
interest adverse to our company or any of our subsidiaries.
Market Price of and Dividends on Our Common Equity
and
Related Stockholder Matters
Market information
Our common stock is quoted on the OTC Markets Groups OTC Pink
under the trading symbol LBSR. Trading in stocks quoted on the OTC Pink is often
thin and is characterized by wide fluctuations in trading prices due to many
factors that may be unrelated or have little to do with a companys operations
or business prospects.
The following table sets forth, for the periods indicated, the
high and low bid prices for our common stock on the OTCQB(1)(2):
Quarter Ended |
High Bid |
|
Low Bid |
|
July 31, 2015 |
$0.0035 |
|
$0.0015 |
|
|
|
|
|
|
April 30, 2015 |
$ 0.0087 |
|
$ 0.0024 |
|
|
|
|
|
|
January 31, 2015 |
$ 0.0199 |
|
$ 0.0084 |
|
|
|
|
|
|
October 31, 2014 |
$ 0.0146 |
|
$ 0.0114 |
|
|
|
|
|
|
July 31, 2014 |
$ 0.0210 |
|
$ 0.0115 |
|
|
|
|
|
|
April 30, 2014 |
$ 0.0235 |
|
$ 0.0120 |
|
|
|
|
|
|
January 31, 2014 |
$ 0.0290 |
|
$ 0.0145 |
|
|
|
|
|
|
October 31, 2013 |
$ 0.0366 |
|
$ 0.0185 |
|
|
|
|
|
|
July 31, 2013 |
$ 0.0233 |
|
$ 0.0080 |
|
|
|
|
|
|
April 30, 2013 |
$ 0.0165 |
|
$ 0.0093 |
|
(1) |
These bid prices were taken from OTC Markets quarterly
trade and quote summary report. Such over-the- counter market quotations
reflect inter-dealer prices, without retail mark-up, mark down or
commission and may not necessarily represent actual
transactions. |
|
|
(2) |
These bid prices were taken while we were traded on the OTCQB. As of November 2015 we are traded on the OTC Pink. |
On November 19, 2015, the closing price of our common stock as
reported by the OTC Pink was $0.0034 per share.
33
Transfer Agent
Our common stock is issued in registered form. The Nevada
Agency and Transfer Company, of Suite 880 Bank of America, 50 West Liberty
Street, Reno, Nevada 89501 USA (telephone: 775.322.0626; facsimile 775.322.5632)
is the registrar and transfer agent for our common stock.
Holders of Common Stock
As of November 19, 2015, there were approximately 98 holders of record of our common stock. As of such date, 1,535,843,235 shares of our common stock were issued and outstanding.
Dividends
We have never declared or paid any cash dividends on our common
stock. We currently intend to retain future earnings, if any, to increase our
working capital and do not anticipate paying any cash dividends in the
foreseeable future.
There are no restrictions in our articles of incorporation or
bylaws that prevent us from declaring dividends. The Nevada Revised Statutes,
however, do prohibit us from declaring dividends where, after giving effect to
the distribution of the dividend:
|
1. |
We would not be able to pay our debts as they become due
in the usual course of business; or |
|
|
|
|
2. |
Our total assets would be less than the sum of our total
liabilities plus the amount that would be needed to satisfy the rights of
stockholders who have preferential rights superior to those receiving the
distribution. |
Financial Statements
Financial Statements for the Years Ended January 31, 2015
and 2014
Report of Independent Registered Public Accounting firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Financial Statements for the Six Month Periods Ended July 31, 2015 and 2014
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Operations
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
34
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders of
Liberty Star Uranium
& Metals Corp.
Tucson, Arizona
We have audited the accompanying consolidated balance sheets of
Liberty Star Uranium & Metals Corp. and its subsidiaries (collectively, the
Company) as of January 31, 2015 and 2014, 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, 2015 and 2014,
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 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 1, 2015
F-1
LIBERTY STAR URANIUM & METALS CORP. |
CONSOLIDATED BALANCE SHEETS |
|
|
January 31, |
|
|
January 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
Cash and cash
equivalents |
$ |
53,517 |
|
$ |
55,089 |
|
Advances |
|
1,052 |
|
|
1,000 |
|
Deferred financing
costs |
|
- |
|
|
38,052 |
|
Prepaid expenses |
|
88,288 |
|
|
9,109 |
|
Total current
assets |
|
142,857 |
|
|
103,250 |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
32,338 |
|
|
49,792 |
|
Total assets |
$ |
175,195 |
|
$ |
153,042 |
|
|
|
|
|
|
|
|
Liabilities and Stockholders'
Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
Current portion of
long-term debt |
$ |
6,149 |
|
$ |
5,594 |
|
Convertible notes payable and accrued interest, net of debt discount
of $41,928 and $34,584 |
|
516,018 |
|
|
4,193,090 |
|
Accounts payable
and accrued liabilities |
|
250,932 |
|
|
254,261 |
|
Accrued wages to related parties |
|
404,992 |
|
|
340,992 |
|
Accrued interest |
|
- |
|
|
1,465,059 |
|
Derivative liability |
|
216,705 |
|
|
46,985 |
|
Total current
liabilities |
|
1,394,796 |
|
|
6,305,981 |
|
|
|
|
|
|
|
|
Long-term: |
|
|
|
|
|
|
Long-term debt, net of current portion |
|
561 |
|
|
6,710 |
|
Long-term
convertible note payable |
|
106,697 |
|
|
- |
|
Total long-term liabilities |
|
107,258 |
|
|
6,710 |
|
|
|
|
|
|
|
|
Total liabilities |
|
1,502,054 |
|
|
6,312,691 |
|
|
|
|
|
|
|
|
Stockholders' deficit |
|
|
|
|
|
|
Common
stock - $.00001 par value; 1,250,000,000 shares authorized;
920,001,430 and 830,236,231 shares issued and outstanding |
|
9,200 |
|
|
8,302 |
|
Stock
subscription receivable |
|
(55,673 |
) |
|
- |
|
Additional paid-in
capital |
|
49,798,278 |
|
|
49,026,144 |
|
Accumulated deficit |
|
(51,078,664 |
) |
|
(55,194,095 |
) |
Total
stockholders' deficit |
|
(1,326,859 |
) |
|
(6,159,649 |
) |
|
|
|
|
|
|
|
Total liabilities
and shareholders' deficit |
$ |
175,195 |
|
$ |
153,042 |
|
The Accompanying Notes are an Integral Part of the Consolidated
Financial Statements
F-2
LIBERTY STAR URANIUM & METALS CORP. |
CONSOLIDATED STATEMENTS OF OPERATIONS |
|
|
For the Twelve Months Ended |
|
|
|
January 31, |
|
|
|
2015 |
|
|
2014 |
|
Revenues |
$ |
- |
|
$ |
- |
|
Expenses: |
|
|
|
|
|
|
Geological and geophysical costs |
|
173,057 |
|
|
463,124 |
|
Salaries and
benefits |
|
293,096 |
|
|
513,418 |
|
Public relations |
|
136,453 |
|
|
210,776 |
|
Depreciation |
|
27,324 |
|
|
32,827 |
|
Legal |
|
79,117 |
|
|
177,472 |
|
Professional
services |
|
89,785 |
|
|
51,115 |
|
General and administrative |
|
223,128 |
|
|
268,236 |
|
Travel |
|
24,824 |
|
|
46,268 |
|
Net operating expenses |
|
1,046,784 |
|
|
1,763,236 |
|
Loss from operations |
|
(1,046,784 |
) |
|
(1,763,236 |
) |
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
Interest income |
|
5 |
|
|
15 |
|
Interest expense |
|
(643,430 |
) |
|
(522,953 |
) |
Gain (loss) on change in fair value of derivative liability |
|
482,697 |
|
|
(31,873 |
) |
Gain on settlement
of debt |
|
5,322,943 |
|
|
- |
|
Total other income (expense) |
|
5,162,215 |
|
|
(554,811 |
) |
Net income (loss) |
$ |
4,115,431 |
|
$ |
(2,318,047 |
) |
|
|
|
|
|
|
|
Basic net income (loss) per share of common stock |
$ |
0.00 |
|
$ |
(0.00 |
) |
|
|
|
|
|
|
|
Diluted net income (loss) per share of common stock |
$ |
0.00 |
|
$ |
(0.00 |
) |
|
|
|
|
|
|
|
Basic weighted average number of shares of common stock
outstanding |
|
884,138,341 |
|
|
803,439,114 |
|
|
|
|
|
|
|
|
Diluted weighted average number of shares of common stock
outstanding |
|
1,004,926,936 |
|
|
803,439,114 |
|
The Accompanying Notes are an Integral Part of the Consolidated
Financial Statements
F-3
LIBERTY STAR URANIUM & METALS CORP. |
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(DEFICIT) |
|
|
|
|
|
|
|
|
Stock |
|
|
Additional |
|
|
|
|
|
Total |
|
|
|
Common stock |
|
|
subscription |
|
|
paid-in |
|
|
Accumulated |
|
|
stockholders |
|
|
|
Shares |
|
|
Amount |
|
|
receivable |
|
|
capital |
|
|
deficit |
|
|
equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
- |
|
|
- |
|
|
- |
|
|
7,682 |
|
|
- |
|
|
7,682 |
|
Warrants issued for settlement of accounts payable |
|
|
|
|
|
|
|
|
|
|
22,141 |
|
|
|
|
|
22,141 |
|
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, 2014 |
|
830,236,231 |
|
|
8,302 |
|
|
- |
|
|
49,026,144 |
|
|
(55,194,095 |
) |
|
(6,159,649 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock and warrants
private placement, net |
|
6,424,979 |
|
|
64 |
|
|
- |
|
|
72,936 |
|
|
- |
|
|
73,000 |
|
Issuance of common shares for cash pursuant to investment
agreement |
|
34,214,226 |
|
|
343 |
|
|
(55,673 |
) |
|
456,581 |
|
|
- |
|
|
401,251 |
|
Stock issued pursuant to legal settlement |
|
1,000,000 |
|
|
10 |
|
|
- |
|
|
17,490 |
|
|
- |
|
|
17,500 |
|
Stock issued in exchange for services |
|
2,511,628 |
|
|
25 |
|
|
- |
|
|
53,975 |
|
|
- |
|
|
54,000 |
|
Shares issued for conversion of notes |
|
45,614,366 |
|
|
456 |
|
|
- |
|
|
423,724 |
|
|
- |
|
|
424,180 |
|
Resolution of derivative liabilities due to debt
conversions |
|
- |
|
|
- |
|
|
- |
|
|
256,748 |
|
|
- |
|
|
256,748 |
|
Warrants reclassified to derivative
liabilities |
|
|
|
|
|
|
|
|
|
|
(520,552 |
) |
|
- |
|
|
(520,552 |
) |
Stock based compensation |
|
|
|
|
|
|
|
|
|
|
11,232 |
|
|
- |
|
|
11,232 |
|
Net income for the year ended January 31,
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4,115,431 |
|
|
4,115,431 |
|
Balance, January 31, 2015 |
|
920,001,430 |
|
$ |
9,200 |
|
|
(55,673 |
) |
$ |
49,798,278 |
|
$ |
(51,078,664 |
) |
$ |
(1,326,859 |
) |
The Accompanying Notes are an Integral Part of the Consolidated
Financial Statements
F-4
LIBERTY STAR URANIUM & METALS CORP. |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
|
For the Year Ended January 31, |
|
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
Net income (loss) |
$ |
4,115,431 |
|
$ |
(2,318,047 |
) |
Adjustments to reconcile net income (loss) to net cash used
in operating |
|
|
|
|
|
|
activities: |
|
|
|
|
|
|
Depreciation |
|
27,324 |
|
|
32,827 |
|
Amortization of deferred
financing charges |
|
38,052 |
|
|
7,611 |
|
Amortization of debt discount |
|
403,579 |
|
|
12,916 |
|
Gain on settlement of debt |
|
(5,322,943 |
) |
|
- |
|
(Gain) loss on change in fair value of
derivatives |
|
(482,697 |
) |
|
31,873 |
|
Share based compensation |
|
11,232 |
|
|
240,622 |
|
Common shares issued for third party services |
|
54,000 |
|
|
61,938 |
|
Common shares issued pursuant
to legal settlement |
|
17,500 |
|
|
- |
|
Warrants issued for third party services |
|
- |
|
|
29,823 |
|
Warrants issued pursuant to
legal settlement |
|
6,440 |
|
|
- |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
Prepaid expenses |
|
(79,179 |
) |
|
(447 |
) |
Other current assets |
|
(52 |
) |
|
(1,000 |
) |
Accounts payable and
accrued expenses |
|
(3,329 |
) |
|
122,780 |
|
Accrued wages related parties |
|
64,000 |
|
|
64,000 |
|
Accrued interest |
|
190,283 |
|
|
492,442 |
|
Cash flows used in operating activities: |
|
(960,359 |
) |
|
(1,222,662 |
) |
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
Purchase of equipment |
|
(9,870 |
) |
|
(1,418 |
) |
Net cash used in investing activities |
|
(9,870 |
) |
|
(1,418 |
) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
Payments on long-term debt |
|
(5,594 |
) |
|
(5,090 |
) |
Cash paid on deferred financing costs |
|
- |
|
|
(15,500 |
) |
Principal activity on
convertible promissory notes |
|
500,000 |
|
|
450,000 |
|
Proceeds from the issuance of common stock,
net of expenses |
|
474,251 |
|
|
732,043 |
|
Net cash provided by financing activities |
|
968,657 |
|
|
1,161,453 |
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash
equivalents |
|
(1,572 |
) |
|
(62,627 |
) |
Cash and cash equivalents, beginning of period |
|
55,089 |
|
|
117,716 |
|
Cash and cash equivalents, end of period |
$ |
53,517 |
|
$ |
55,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
Income tax paid |
$ |
- |
|
$ |
- |
|
Interest paid during the period |
$ |
10,587 |
|
$ |
17,595 |
|
Supplemental disclosure of non-cash items: |
|
|
|
|
|
|
Cashless exercise of common stock purchase
warrants |
$ |
- |
|
$ |
61 |
|
Settlement of accounts payable
through issuance of common stock |
$ |
- |
|
$ |
20,000 |
|
Shares issued for deferred financing cost |
$ |
- |
|
$ |
30,163 |
|
Stock subscription receivable |
$ |
55,673 |
|
$ |
- |
|
Resolutions of derivative liabilities due to
debt conversions |
$ |
256,748 |
|
$ |
- |
|
Warrants reclassified to
derivative liabilities |
$ |
520,552 |
|
$ |
- |
|
Debt discounts due to derivative liabilities |
$ |
382,173 |
|
$ |
- |
|
Common stock issued for
conversion of debt and interest |
$ |
424,180 |
|
$ |
- |
|
Original issue discounts |
$ |
28,750 |
|
$ |
47,500 |
|
The Accompanying Notes are an Integral Part of the Consolidated
Financial Statements
F-5
LIBERTY STAR URANIUM & METALS CORP. |
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. We formed the
wholly owned subsidiary, Hay Mountain Super Project LLC (HMSP) incorporated on
October 24, 2014, to serve as the primary holding company for development of the
potential ore bodies encompassed in the Hay Mountain area of interest in
Arizona. In April 2007, we changed our name to Liberty Star Uranium & Metals
Corp. 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 HMSP. 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.
F-6
Principles of consolidation
The consolidated
financial statements include the accounts of the Company and its wholly-owned
subsidiaries, Big Chunk and HMSP. 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, 2015 and 2014, 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 and impairment of 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.
Derivative liabilities
The valuation of the derivative liability of our warrants is determined through the use of a Monte Carlo options model that values the liability of the warrants based on a risk-neutral valuation where the price of the option is its discounted expected value. The technique applied generates a large number of possible (but random) price paths for the underlying common stock via simulation, and then calculates the associated exercise value (i.e. “payoff”) of the option for each path. These payoffs are then averaged and discounted to a current valuation date resulting in the fair value of the option.
The valuation of the derivative liability attached to the convertible debt is arrived at through the use of a Monte Carlo model that values the derivative liability within the notes. The technique applied generates a large number of possible (but random) price paths for the underlying (or underlyings) via simulation, and then calculates the associated payment value (cash, stock, or warrants) of the derivative features. The price of the underlying common stock is modeled such that it follows a geometric Brownian motion with constant drift, and elastic volatility (increasing as stock price decreases). The stock price is determined by a random sampling from a normal distribution. Since the underlying random process is the same, for enough price paths, the value of the derivative is derived from path dependent scenarios and outcomes. The features in the notes are analyzed and incorporated into the model included the conversion features with the reset provisions, the call/redemption/prepayment options, and the default provisions. Based on these features, there are six primary events that can occur; payments are made in cash; payments are made with stock; the note holder converts upon receiving a redemption notice; the note holder converts the note; the issuer redeems the note; or the Company defaults on the note. The model simulates the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms that would be in effect at the time (i.e. stock price, conversion price, etc.). Probabilities are assigned to each variable such as redemption likelihood, default likelihood, and timing and pricing of reset events over the remaining term of the notes based on management projections. This leads to a cash flow simulation over the life of the note. A discounted cash flow for each simulation is completed, and is compared to the discounted cash flow of the note without the embedded features, thus determining a value for the derivative liability.
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.
Stock based compensation
The Company recognizes stock-based compensation for all share-based payment awards made to employees based on the estimated fair values, using the Black-Scholes option pricing model.
Non-employee stock-based compensation is accounted for based on the fair value of the related stock or options or the fair value of the services on the grant date, whichever is more readily determinable. The fair value of options to be granted are estimated on the date of each grant using the Black-Scholes option pricing model and amortized ratably over the option's vesting periods, which approximates the service period.
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, 2015 and 2014.
F-7
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 2010.
Net income (loss) per share
Basic net income (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 income (loss) per share takes into consideration shares of common stock outstanding (computed under basic income or loss per share) and potentially dilutive shares of common stock that are not anti-dilutive. For the year ended January 31, 2015, potentially dilutive shares included in the calculation of diluted net income per share included 1,345,666 shares related to warrants and 119,442,929 shares related to convertible promissory notes. For the year ended January 31, 2014, 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
During the
fiscal year 2015, the Company elected to early adopt Accounting Standards Update
No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain
Financial Reporting Requirements. The adoption of this ASU allows the Company to
remove the inception to date information and all references to exploration
stage.
NOTE 3 Going concern
The Company has incurred losses from operations and requires additional funds for further exploratory activity and to maintain its claims prior to attaining a revenue generating status. There are no assurances that a commercially viable mineral deposit exists on any of our properties. In addition, the Company may not find sufficient ore reserves to be commercially mined. As such, there is substantial doubt about the Company’s ability to continue as a going concern.
Management is working to secure additional funds through the
exercise of stock warrants already outstanding, equity financings, debt
financings or joint venture agreements. The consolidated financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
F-8
NOTE 4 Mineral claims
At January 31, 2015 we held a 100% interest in 211 standard
federal lode mining claims on the Colorado Plateau Province of Northern Arizona
(the North Pipes Claims).
At January 31, 2015 we held a 100% interest in 95 standard
federal lode mining claims located in the Tombstone region of Arizona. 29
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, 2015 we held Arizona
State Land Department Mineral Exploration Permits covering 2,367 acres in the
Tombstone region of Arizona.
At January 31, 2015 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, 2015 we held a 100% interest in 9 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 Companys claims for mineral properties are in good
standing as of January 31, 2015.
NOTE 5 – Prepaid expenses
At January 31, 2015, the company had prepaid approximately $70,000 relating to a private investor event scheduled for a future date. This amount is included in prepaid expenses as of January 31, 2015.
NOTE 6 Property and equipment
The balances of our major classes of depreciable assets and
useful lives are:
|
|
|
January 31, 2015 |
|
|
January 31, 2014 |
|
|
Geology Equipment (3 to 7 years) |
$ |
264,734 |
|
$ |
260,521 |
|
|
Vehicles and transportation equipment (5 years) |
|
44,284 |
|
|
50,180 |
|
|
Office furniture and equipment (3 to 7
years) |
|
81,061 |
|
|
75,404 |
|
|
|
|
390,079 |
|
|
386,105 |
|
|
Less: accumulated depreciation and
amortization |
|
(357,741 |
) |
|
(336,313 |
) |
|
|
$ |
32,338 |
|
$ |
49,792 |
|
Depreciation expense was $27,324 and $32,827 for the years
ended January 31, 2015 and January 31, 2014, respectively.
NOTE 7 – Long-term debt and convertible promissory notes
Note payable to Ford Credit is payable in monthly installments
of $544 including interest at a fixed rate of 9.49% through maturity in February
2016. The principal balance at January 31, 2015 and 2014 is $6,710 and $12,304,
respectively. The carrying amount of the vehicle that serves as collateral is
$6,891and $14,410 at January 31, 2015 and 2014, respectively.
The following is a summary of the principal maturities of
long-term debt during the next five years:
Minimum future debt payments |
|
|
|
|
|
|
|
For the year ending January 31, |
|
|
|
2016 |
$ |
6,149 |
|
2017 |
|
561 |
|
2018 and thereafter |
|
- |
|
|
$ |
6,710 |
|
Less: current maturities |
|
6,149 |
|
|
$ |
561 |
|
F-9
Following is a summary of convertible promissory notes:
|
|
January 31, |
|
|
January 31, |
|
|
|
2015 |
|
|
2014 |
|
10% convertible note payable with Northern
Dynasty Minerals Ltd (Northern Dynasty) issued July 15, 2010 |
$ |
- |
|
$ |
3,730,174 |
|
12% convertible note payable issued August 2013, $51,279
due in June 2015 and $93,240 due in September 2015 |
|
144,519 |
|
|
247,500 |
|
Convertible note payable issued November
2013, due November 2015 |
|
147,500 |
|
|
250,000 |
|
12% convertible note payable issued August 2014, due August
2015 |
|
157,791 |
|
|
- |
|
10% convertible note payable issued October
2014, due October 2015 |
|
108,136 |
|
|
- |
|
10% convertible note payable issued December 2014, due
December 2016 |
|
106,697 |
|
|
- |
|
|
|
664,643 |
|
|
4,227,674 |
|
Less debt discount |
|
(41,928 |
) |
|
(34,584 |
) |
Less current portion of convertible notes |
|
(516,018 |
) |
|
(4,193,090 |
) |
Long-term convertible notes payable |
$ |
106,697 |
|
$ |
- |
|
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 2010
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.
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. No such notice by Northern Dynasty was 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 $1,592,769 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, MBGS, LLC filed liens against the
claims before the transfer could be completed. 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
settlement agreement with MBGS, LLC, 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. A gain of $5,322,943 for the settlement of the Northern Dynasty
debt and accrued interest was recorded in other income in April 2014. As of
January 31, 2015, we had no principal or interest outstanding for the 2010
Convertible Note.
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. We
elected not to pay the $150,000 portion of the August 2013 Note within 90 days
from the effective date. After the $150,000 portion of the August 2013 Note
became convertible, the note holder elected to convert the principal and
interest totaling $186,480 into 17,937,915 shares of the companys common stock
during the months of February through May of 2014. On December 9, 2013, we received additional
consideration of $75,000 pursuant to the terms of the August 2013 Note. We
elected not to pay the $75,000 portion of the August 2013 Note within 90 days
from the effective date. In June, July and August 2014, the note holder
converted principal and interest totaling $93,240 into 9,983,507 shares of the
Companys common stock. On June 24, 2014 and September 3, 2014, we received
additional consideration of $75,000 and $75,000, respectively, pursuant to the
terms of the August 2013 Note. In December 2014 and January 2015, the note
holder converted principal and interest totaling $41,961of the $75,000 of
consideration received on June 24, 2014 into 5,900,000 shares of the Companys
common stock. As of January 31, 2015, we had $144,519 outstanding for the August
2013 Note.
F-10
On November 18, 2013, we entered into a securities purchase
agreement (the November 2013 Note), whereby we agreed to issue a convertible
note to one lender in the principal amount of $250,000. The proceeds from the
note were $225,000, which created an original issue discount of $25,000. The
note was 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 (after May
20, 2014) 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. On November 13, 2014, we entered into an Assignment of Promissory
Note & Acknowledgment, whereby we consented to an assignment of the note to
another lender, pursuant to which $250,000 remains owing by the Company. The
maturity date of the November 2013 Note was extended to November 18, 2015. From
November 2014 through January 2015, the new noteholder converted principal of
$102,500 into 11,792,944 shares of the Companys common stock. As of January 31,
2015, we had $147,500 principal outstanding for the November 2013 Note.
In August 2014, we received $150,000 pursuant to the terms of a
convertible promissory note (the August 2014 Note) dated August 26, 2014. The
Note bears interest at 12%, is due on August 26, 2015, and is convertible after
180 days at a 45% discount to the average of the daily VWAP prices for the
previous 10 trading days before the date of conversion. As of January 31, 2015,
we had $157,791 principal and interest outstanding for this Note.
On October 14, 2014, we entered into a securities purchase
agreement, whereby we agreed to issue a convertible note (the October 2014
Note) to one lender in the principal amount of $105,000. The Note is payable in
full on October 14, 2015 and bears interest at the rate of 10% per annum. There
is a $5,000 original issuance discount on the Note. The Note may be convertible
into shares of common stock of our company at any time from 180 days after the
execution date of the Note at a price per share of 40% discount to the average
of the daily VWAP for the previous five trading days before the date of
conversion. As of January 31, 2015, we had $108,136 principal and interest
outstanding for this Note.
On December 3, 2014, we entered into a note purchase agreement, whereby we agreed to issue a convertible note (the “December 2014 Note”) to lender in the principal amount of $210,000. There is a $10,000 original issuance discount on the Note. The initial purchase price was $105,000 of consideration of which $100,000 was received our company and $5,000 was retained through the original issue discount.. The Note bears interest at 10%, is due on December 3, 2016, and is convertible after six month at a 37.5% discount to the average of the daily VWAP prices for the previous 5 trading days before the date of conversion. As of January 31, 2015, we had $106,697 principal and interest outstanding for this Note.
During the years ended January 31, 2015 and 2014, the Company recorded debt discounts of $382,173 and $0, respectively, due to the derivative liabilities, and original issue debt discounts of $28,750 and $47,500, respectively, due to the convertible notes. The Company recorded amortization of these discounts of $403,579 and $12,916 for the years ended January 31, 2015 and 2014, respectively.
In November of 2013, the Company recorded $45,663 of deferred financing costs, of which $15,500 was paid in cash and $30,163 paid with common stock, related to the November 18, 2013 convertible note. The Company recorded amortization of these deferred financing costs of $38,052 and $7,611 for the years ended January 31, 2015 and 2014, respectively.
F-11
NOTE 8 Derivative Liabilities
The embedded conversion feature in the convertible debt
instruments that the Company issued in August 2013 and November 2013 (See Note
7), that became convertible during the year ended January 31, 2015, qualified it
as a derivative instrument since the number of shares issuable under the note is
indeterminate based on guidance in FASB ASC 815, Derivatives and Hedging. This
convertible note tainted all other equity linked instruments including
outstanding warrants and fixed rate convertible debt on the date that the
instrument became convertible.
The valuation of the derivative liability of the warrants was
determined through the use of a Monte Carlo options model that values the
liability of the warrants based on a risk-neutral valuation where the price of
the option is its discounted expected value. The technique applied generates a
large number of possible (but random) price paths for the underlying common
stock via simulation, and then calculates the associated exercise value (i.e.
payoff) of the option for each path. These payoffs are then averaged and
discounted to a current valuation date resulting in the fair value of the
option.
The valuation of the derivative liability attached to the
convertible debt was arrived at through the use of a Monte Carlo model that
values the derivative liability within the notes. The technique applied
generates a large number of possible (but random) price paths for the underlying
(or underlyings) via simulation, and then calculates the associated payment
value (cash, stock, or warrants) of the derivative features. The price of the
underlying common stock is modeled such that it follows a geometric Brownian
motion with constant drift, and elastic volatility (increasing as stock price
decreases). The stock price is determined by a random sampling from a normal
distribution. Since the underlying random process is the same, for enough price
paths, the value of the derivative is derived from path dependent scenarios and
outcomes. The features in the notes that were analyzed and incorporated into the
model included the conversion features with the reset provisions, the
call/redemption/prepayment options, and the default provisions. Based on these
features, there are six primary events that can occur; payments are made in
cash; payments are made with stock; the note holder converts upon receiving a
redemption notice; the note holder converts the note; the issuer redeems the
note; or the Company defaults on the note. The model simulates the underlying
economic factors that influenced which of these events would occur, when they
were likely to occur, and the specific terms that would be in effect at the time
(i.e. stock price, conversion price, etc.). Probabilities were assigned to each
variable such as redemption likelihood, default likelihood, and timing and
pricing of reset events over the remaining term of the notes based on management
projections. This led to a cash flow simulation over the life of the note. A
discounted cash flow for each simulation was completed, and it was compared to
the discounted cash flow of the note without the embedded features, thus
determining a value for the derivative liability.
Key inputs and assumptions used to value the convertible notes
and warrants upon issuance or tainting and also as of January 31, 2015:
- The stock projections are based on the historical volatilities for each
date. These ranged in the 112-124% range. The stock price projection was
modeled such that it follows a geometric Brownian motion with constant drift
and a constant volatility, starting with the market stock price at each
valuation date;
- An event of default would not occur during the remaining term of the note;
- Conversion of the notes to stock would be completed monthly after any
holding period and would be limited based on: 25% of the last 6 months average
trading volume and the ownership limit identified in the contract assuming the
underlying number of common shares increases at 1% per month. The effective
discount was determined based on the historical trading history of the Company
based on the specific pricing mechanism in each note;
- The Company would not have funds available to redeem the notes during the
remaining term of the convertible notes;
- Discount rates were based on risk free rates in effect based on the
remaining term and date of each valuation and instrument.
- The holder would exercise the warrant at maturity if the stock price was
above the exercise price;
- The Holder would exercise the warrant after any holding period prior to
maturity at target prices starting at 2 times the exercise price for the
Warrants or higher subject to monthly limits of: 25% of the last 6 months
average trading volume increasing by 1% per month and the ownership limit
identified in the contract assuming the underlying number of common shares
increases at 1% per month.
- For the warrants with reset features, the Company assumed it would issue
equity linked instruments in the quarters ended 1/31/15 through 7/31/15 at 70%
of market.
Using the results from the model, the Company recorded a derivative liability of $520,552 for the fair value of the tainted warrants previously classified in equity, a derivative liability of $6,440 for newly granted warrants (see note 11) and a derivative liability of $382,173 for the fair value of the convertible feature included in the Company’s convertible debt instruments. The derivative liability recorded for the convertible feature created a debt discount of $382,173 which is being amortized over the remaining term of the note using the effective interest rate method, and is classified as convertible debt on the balance sheet. Interest expense related to the amortization of this debt discount for the year ended January 31, 2015, was $172,968. Additionally, $182,348 of debt discount was charged to interest expense as a result of the conversion of a portion of the underlying debt instrument (See Note 7). The remaining unamortized debt discount related to the derivative liability was $26,859 as of January 31, 2015. The Company recorded the change in the fair value of the derivative liability as a gain of $482,697 to reflect the value of the derivative liability for warrants and convertible notes as $216,705 as of January 31, 2015. The Company also recorded a reclassification from derivative liability to equity of $256,748 for the conversions of a portion of the Company’s convertible notes.
At January 31, 2014, we estimated the fair value of the
derivative liability related to the warrants using level 3 inputs and the
Black-Scholes valuation model. We used historical volatility as a method to
estimate expected volatility. At January 31, 2014 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 were
not considered indexed to our common stock and were classified as liabilities under ASC 815. We used the following
assumptions to estimate the fair value of the derivative liability related to
the warrants at January 31, 2014:
F-12
|
Expected |
Expected dividend |
Expected |
Risk-free interest |
Description |
volatility |
yield |
term |
rate |
Derivative liability at January 31, 2014 |
209.37% |
0% |
2.5 |
0.69% |
The following table sets forth a reconciliation of changes in
the fair value of the Companys derivative liability:
|
|
|
Year Ended January 31, |
|
|
|
|
2015 |
|
|
2014 |
|
Beginning balance |
|
$ |
46,985 |
|
$ |
15,112 |
|
Total (gains) losses |
|
|
(482,697 |
) |
|
31,873 |
|
Settlements |
|
|
(256,748 |
) |
|
- |
|
Additions |
|
|
909,165 |
|
|
- |
|
Ending balance |
|
$ |
216,705 |
|
$ |
46,985 |
|
|
|
|
|
|
|
|
|
Change in unrealized (gains) losses
included in earnings relating to derivatives still held as of January 31,
2015 and 2014 |
|
$ |
(482,697 |
) |
$ |
31,873 |
|
F-13
NOTE 9 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.
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.
F-14
In May, June and July, 2013, we sold 18,001,166 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 2013, the company entered into an agreement with an
investor relations firm to issue 5,023,256 common shares in exchange for
investor relations services, with 50% (2,511,628) issued in October 2013 at a
fair value of $54,000, and the remaining 2,511,628 shares to be held by the
Company until the Company chose to continue with additional services. These
additional services were accepted by the Company during the year ended January
31, 2015, and the 2,511,628 common shares held by the Company were released and
classified as issued and outstanding effective July 31, 2014, with an expense of
$54,000 recorded for their fair value.
In August 2013, we issued 423,135 shares to an individual in
exchange for services valued at $7,938. Additionally, warrants with a fair value
of $7,682 were also issued to this individual. The warrants entitle the investor
to purchase 423,135 shares of the Companys common stock and have an exercise
price 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. Between February 2014 and July 2014, pursuant to the KVM investment agreement, KVM purchased 34,214,226 shares for $456,924, of which $55,673 is still owed to the Company and is reflected as a stock subscription receivable as of January 31, 2015. On November 14, 2014, we filed a Post-Effective Amendment to deregister the remaining unsold securities, which became effective on December 2, 2014.
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.
In March 2014, the Company issued 1,000,000 units of common
stock to a designee of MBGS, LLC, pursuant to a settlement agreement with
Northern Dynasty which discharged the $3,730,174 principal balance and
$1,592,769 of accrued interest for the 2010 Convertible Note (See Note 7). Each
unit consists of one share of the Companys common stock and a warrant to
purchase one-half share of the Companys common stock. The fair value of the
common stock issued was $17,500, which was recorded as an expense upon issuance
of the units. The 500,000 warrants, which have an exercise price of $0.028 and
have a three year term with a fair value of $6,440. The fair value was expensed
and a derivative liability was recorded for the fair value of the warrant on the
date of issuance of the units. The change in the fair value of the derivative
liability between the date of issuance and the year ended January 31, 2015 was
recorded in other income and expense.
On December 15, 2014, we entered into an investment agreement
with Tangiers Investment Group, LLC (TIG), whereby TIG has agreed to invest up
to $8,000,000 to purchase shares of our common stock. Subject to the terms and
conditions of the agreement and a registration rights agreement, we may, in our
sole discretion, deliver a notice to TIG which states the dollar amount which we
intend to sell to TIG on a certain date. The amount that we shall be entitled to
sell to TIG shall be equal to one hundred and fifty percent (150%) of the
average daily volume of the common stock for the ten trading days prior to the
applicable notice date so long as such amount does not exceed an accumulative
amount per month of $100,000 unless a prior approval of TIG is obtained by our
company from TIG. The minimum amount shall be equal to $5,000. In connection
with the agreement, we also entered into a registration rights agreement dated
December 15, 2014, whereby we agreed to file a Registration Statement on Form
S-1 with the Securities and Exchange Commission within thirty (30) days of the
date of the registration rights agreement and to have the Registration Statement
declared effective by the Securities and Exchange Commission within ninety (90)
days after we have filed the Registration Statement. We filed the Form S-1 with
the Securities and Exchange Commission on January 16, 2015.
F-15
During the year ended January 31, 2015, $321,680 of the August
2013 Note was converted into 33,821,422 shares of the Companys common stock.
The conversions occurred on multiple dates with conversion prices ranging from
$0.006 to $0.012.
From November 2014 through January 2015, the holder of the
November 2013 Note converted principal of $102,500 into 11,792,944 shares of the
Companys common stock. The conversions occurred on multiple dates with
conversion prices ranging from $0.006 to $0.011.
During the year ended January 31, 2015, the Company issued
6,424,979 units to three investors for total proceeds of $73,000. Each unit
consists of one share of the Companys common stock and a warrant to purchase
one share of the Companys common stock. The warrants have exercise prices
ranging from $0.015 to $0.021 and have a three year term.
At January 31, 2015 there were 863,500 non-qualified stock options outstanding with a weighted average exercise price of $0.316 per option; of those options 863,500 are exercisable. At January 31, 2015 there were 85,421,374 incentive stock options outstanding with a weighted average exercise price of $0.042 per option; of those options 84,010,886 are exercisable with a weighted average exercise price of $0.042.
During the year ended January 31, 2015 we recognized $11,232 of
compensation expense related to incentive and non-qualified stock options
previously granted to officers, employees and consultants.
NOTE 10 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,
2015 and 2014 are 12,500,000 and 12,500,000. Options remaining available for
grant under the 2007 Stock Option Plan at January 31, 2015 and 2014 are 50,000
and 50,000, respectively. Options remaining available for grant under the 2004
Stock Option Plan at January 31, 2015and 2014 are 127,626 and 32,876,
respectively.
F-16
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
$29,455.
The following tables summarize the Companys stock option
activity during the years ended January 31, 2015 and 2014. Incentive stock
options to employees and directors outstanding at January 31, 2015 are as
follows:
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
Weighted |
|
|
average |
|
|
|
|
|
Number of |
|
|
|
average |
|
|
remaining life |
|
|
Aggregate |
|
|
options |
|
|
|
exercise price |
|
|
(years) |
|
|
intrinsic value |
|
Outstanding, January 31, 2013 |
90,635,375 |
|
|
$ |
0.047 |
|
|
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
7,423,624 |
|
|
|
0.026 |
|
|
|
|
|
|
|
Cancelled |
(12,582,875 |
) |
|
|
0.041 |
|
|
|
|
|
|
|
Exercised |
- |
|
|
|
- |
|
|
|
|
|
|
|
Outstanding, January 31, 2014 |
85,476,124 |
|
|
$ |
0.047 |
|
|
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
- |
|
|
|
- |
|
|
|
|
|
|
|
Cancelled |
(54,750 |
) |
|
|
6.710 |
|
|
|
|
|
|
|
Exercised |
- |
|
|
|
- |
|
|
|
|
|
|
|
Outstanding, January 31, 2015 |
85,421,374 |
|
|
$ |
0.042 |
|
|
1.27 |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, January 31, 2015 |
84,010,886 |
|
|
$ |
0.042 |
|
|
1.14 |
|
$ |
- |
|
The options cancelled during the year ended January 31, 2015 were a result of the options expiring. The options cancelled during the year ended January 31, 2014 were a result of employee terminations. The aggregate intrinsic value is calculated based on the stock price of $0.0086 and $0.0195 per share as of January 31, 2015 and 2014, respectively.
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% |
F-17
Share-based compensation expense is reported in our statement
of operations as follows:
|
|
January 31, 2015 |
|
|
January 31, 2014 |
|
Geological and geophysical costs |
$ |
4,728 |
|
$ |
2,610 |
|
Salaries and benefits |
|
4,728 |
|
|
236,509 |
|
Investor relations |
|
1,776 |
|
|
1,503 |
|
General and administrative |
|
- |
|
|
- |
|
|
$ |
11,232 |
|
$ |
240,622 |
|
At January 31, 2015 there is $29,455 unrecognized share-based
compensation for all share-based awards outstanding with a weighted average
remaining period for amortization of 2.8 years.
Non-qualified stock options to non-employee consultants and
vendors outstanding as of January 31, 2015 are as follows:
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
Weighted |
|
|
average |
|
|
|
|
|
Number of |
|
|
|
average |
|
|
remaining life |
|
|
Aggregate |
|
|
options |
|
|
|
exercise price |
|
|
(years) |
|
|
intrinsic value |
|
Outstanding, January 31, 2013 |
903,500 |
|
|
$ |
0.376 |
|
|
|
|
$ |
- |
|
Granted |
- |
|
|
|
- |
|
|
|
|
|
|
|
Expired |
- |
|
|
|
- |
|
|
|
|
|
|
|
Outstanding, January 31, 2014 |
903,500 |
|
|
$ |
0.376 |
|
|
|
|
$ |
- |
|
Granted |
- |
|
|
|
- |
|
|
|
|
|
|
|
Expired |
(40,000 |
) |
|
|
1.678 |
|
|
|
|
|
|
|
Outstanding, January 31, 2015 |
863,500 |
|
|
$ |
0.316 |
|
|
1.67 |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, January 31, 2015 |
863,500 |
|
|
$ |
0.316 |
|
|
1.67 |
|
$ |
- |
|
The aggregate intrinsic value is calculated based on the stock price of $.0086 and $0.0195 per share for the years ended January 31, 2015 and 2014, respectively.
NOTE 11 Warrants
As of January 31, 2015, there were 59,566,708 whole share
purchase warrants outstanding and exercisable. The warrants have a weighted
average remaining life of 1.1 years and a weighted average exercise price of
$0.024 per whole warrant for one common share. Whole share purchase warrants
outstanding at January 31, 2015 and 2014 are as follows:
|
|
Number of |
|
|
Weighted average |
|
|
|
whole share |
|
|
exercise |
|
|
|
purchase warrants |
|
|
price per share |
|
Outstanding, January 31, 2013 |
|
94,059,629 |
|
$ |
0.055 |
|
Issued |
|
25,556,792 |
|
|
0.016 |
|
Expired |
|
(46,579,478 |
) |
|
0.071 |
|
Exercised |
|
(14,595,214 |
) |
|
0.051 |
|
|
|
|
|
|
|
|
Outstanding, January 31, 2014 |
|
58,441,729 |
|
$ |
0.026 |
|
Issued |
|
6,924,979 |
|
|
0.017 |
|
Expired |
|
(5,800,000 |
) |
|
0.037 |
|
Exercised |
|
- |
|
|
- |
|
Outstanding, January 31, 2015 |
|
59,566,708 |
|
$ |
0.024 |
|
|
|
|
|
|
|
|
Exercisable, January 31, 2015 |
|
59,566,708 |
|
$ |
0.024 |
|
The weighted average intrinsic value for warrants outstanding was $0 and $109,275 as of January 31, 2015 and 2014, respectively.
F-18
NOTE 12 Income taxes
As of January 31 our deferred tax asset is as follows:
|
|
|
January 31, 2015 |
|
|
January 31, 2014 |
|
|
Deferred Tax Assets |
$ |
8,853,000 |
|
$ |
10,243,000 |
|
|
Less Valuation Allowance |
|
(8,853,000 |
) |
|
(10,243,000 |
) |
|
|
$ |
- |
|
$ |
- |
|
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 future taxable income, management will
re-evaluate the allowance. The decrease in the valuation allowance of $1,390,000
during the year ended January 31, 2015 primarily represents the utilization of
net operating loss carry-forwards during the period to offset taxable income for
the year. The change in the valuation allowance of $730,000 in the year ended
January 31, 2014 primarily represents the benefit of the change in net operating
loss carry-forwards during the period. As of January 31, 2015, our estimated net
operating loss carry-forward is approximately $26,000,000 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 13 Related party transactions
We entered into the following transactions with related
parties during the year ended January 31, 2015:
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, 2015 we had a balance of accrued unpaid wages of
$389,367 to Jim Briscoe, our Chairman of the Board, CEO and CFO and President.
At January 31, 2015, we had a balance of accrued unpaid wages
of $15,625 to Larry Liang, our former President.
We have an option to explore 26 standard federal lode mining
claims at the East Silver Bell project and 29 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, 2015 we
paid $8,525 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, 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.
F-19
NOTE 14 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 2015 forward will be $3,600. 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 $6,120, to extend the Big
Chunk claims through September 1, 2015 were paid in November 2014. The estimated
state rentals due by November 30, 2015 for the period from September 1, 2015
through September 1, 2016 are $6,120. 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. The rentals due by September 1, 2015 for the period from
September 1, 2015 through September 1, 2015 of have not been paid.
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 $155 per claim. The rentals of $32,705 for the period from September
1, 2014 to September 1, 2015 have been paid. The rentals due by September 1,
2015 for the period from September 1, 2015 through September 1, 2016 of $32,705
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 $155 per claim. The rentals of $4,030 for the period from
September 1, 2014 to September 1, 2015 have been paid. The annual rentals due by
September 1, 2015 of $4,030 are required to maintain the East Silver Bell claims
are for the period from September 1, 2015 through September 1, 2016 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 $155 per claim. The rentals and initial filing fees of $14,725 for the period from September 1, 2014 to September 1, 2015 have been paid. The rentals due by September 1, 2015 for the period from September 1, 2015 through September 1, 2016 of $14,725 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 2,366.88 acres at our Tombstone project. We will need to pay rental fees for our Phase 1 AZ MEP’s before September 29, 2014 in the amount of $3,346.88. Required minimum work expenditures for the period ended September 29, 2014 is $36,937.60. The annual rental due by September 13, 2014 to maintain the Phase 2 AZ MEP permits was $540. We also included $800 to cover minimum work expenditure requirements which were due September 13, 2014 to maintain our Phase 2 AZ MEP permits.
F-20
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 Dynastys 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 was in effect until May 31, 2014 with an option to
extend for two additional years. The lease was not renewed and is currently on a
month to month basis. 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 15 Fair value of financial instruments
|
|
|
|
|
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 and convertible note derivative
liability at January 31, 2015 |
$ |
216,705 |
|
|
- |
|
|
- |
|
$ |
216,705 |
|
Warrant and convertible note derivative liability at
January 31, 2014 |
$ |
46,985 |
|
|
- |
|
|
- |
|
$ |
46,985 |
|
Our financial instruments consist of cash and cash equivalents,
accounts payable, accrued liabilities, convertible notes payable, notes payable,
and derivative 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 derivative 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.
F-21
NOTE 16 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. On October 20, 2014, we appointed Brett Gross as a
director of our company.
NOTE 17 Subsequent events
Between February and April 2015, $125,000 of the December 2014
Note was converted into 29,248,823 shares of the Companys common stock.
Between February and April 2015, $105,734 of the August 2013 Note was converted into 30,800,000 shares of the Company’s common stock.
In March and April 2015, $160,833 of the August 2014 Note was converted into 56,676,739 shares of the Company’s common stock.
In April 2015, $52,320 of the October 2014 Note was converted into 26,000,000 shares of the Company’s common stock.
F-22
LIBERTY STAR URANIUM & METALS CORP. |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(Unaudited) |
|
|
July 31, |
|
|
January 31, |
|
|
|
2015 |
|
|
2015 |
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
Cash and cash
equivalents |
$ |
1,897 |
|
$ |
53,517 |
|
Advances |
|
1,152 |
|
|
1,052 |
|
Prepaid expenses
|
|
80,477 |
|
|
88,288 |
|
Total current assets |
|
83,526 |
|
|
142,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
19,742 |
|
|
32,338 |
|
Total assets |
$ |
103,268 |
|
$ |
175,195 |
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
Current portion of
long-term debt |
$ |
3,708 |
|
$ |
6,149 |
|
Convertible
promissory note, net of debt discount of $36,891 and $41,928 |
|
25,270 |
|
|
516,018 |
|
Accounts payable
and accrued liabilities |
|
313,828 |
|
|
250,932 |
|
Accrued wages to related parties |
|
447,492 |
|
|
404,992 |
|
Accrued interest
|
|
- |
|
|
- |
|
Derivative liability |
|
60,839 |
|
|
216,705 |
|
Total current
liabilities |
|
851,137 |
|
|
1,394,796 |
|
|
|
|
|
|
|
|
Long-term: |
|
|
|
|
|
|
Long-term debt, net of current portion |
|
- |
|
|
561 |
|
Long-term
convertible note payable |
|
149,911 |
|
|
106,697 |
|
Total long-term liabilities |
|
149,911 |
|
|
107,258 |
|
|
|
|
|
|
|
|
Total liabilities |
|
1,001,048 |
|
|
1,502,054 |
|
|
|
|
|
|
|
|
Stockholders' deficit |
|
|
|
|
|
|
Common stock -
$.00001 par value; 6,250,000,000
and
1,250,000,000
shares authorized; 1,247,761,119
and
920,001,430 shares
issued and outstanding |
|
12,478 |
|
|
9,200 |
|
Stock subscription receivable |
|
(55,673 |
) |
|
(55,673 |
) |
Additional paid-in
capital |
|
51,033,867 |
|
|
49,798,278 |
|
Accumulated deficit |
|
(51,888,452 |
) |
|
(51,078,664 |
) |
Total
stockholders' deficit |
|
(897,780 |
) |
|
(1,326,859 |
) |
|
|
|
|
|
|
|
Total liabilities
and shareholders' deficit |
$ |
103,268 |
|
$ |
175,195 |
|
The Accompanying Notes are an Integral Part of the Unaudited
Condensed Consolidated Financial Statements
F-23
LIBERTY STAR URANIUM & METALS CORP. |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
(Unaudited) |
|
|
Three
Months Ended |
|
|
Six Months
Ended |
|
|
|
July 31, |
|
|
July 31, |
|
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
Revenues |
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Geological and geophysical costs |
|
15,515 |
|
|
49,858 |
|
|
35,629 |
|
|
94,626 |
|
Salaries
and benefits |
|
71,871 |
|
|
70,437 |
|
|
146,027 |
|
|
142,217 |
|
Public relations |
|
2,233 |
|
|
15,017 |
|
|
7,837 |
|
|
55,603 |
|
Depreciation |
|
6,298 |
|
|
6,203 |
|
|
12,596 |
|
|
14,489 |
|
Legal |
|
25,075 |
|
|
7,124 |
|
|
46,501 |
|
|
48,937 |
|
Professional services |
|
12,511 |
|
|
31,495 |
|
|
30,694 |
|
|
55,645 |
|
General and administrative |
|
57,995 |
|
|
64,453 |
|
|
90,805 |
|
|
111,112 |
|
Travel |
|
2,077 |
|
|
7,016 |
|
|
3,549 |
|
|
17,197 |
|
Net operating expenses |
|
193,575 |
|
|
251,603 |
|
|
373,638 |
|
|
539,826 |
|
Loss from operations |
|
(193,575 |
) |
|
(251,603 |
) |
|
(373,638 |
) |
|
(539,826 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
- |
|
|
1 |
|
|
1 |
|
|
3 |
|
Interest
expense |
|
(158,362 |
) |
|
(129,472 |
) |
|
(592,458 |
) |
|
(414,690 |
) |
Gain (loss) on settlement of debt |
|
72,308 |
|
|
- |
|
|
72,308 |
|
|
5,322,943 |
|
Gain (loss)
on change in fair value of derivative liability |
|
10,489 |
|
|
(11,719 |
) |
|
83,999 |
|
|
262,912 |
|
Total other income (expense)
|
|
(75,565 |
) |
|
(141,190 |
) |
|
(436,150 |
) |
|
5,171,168 |
|
Net income (loss) |
$ |
(269,140 |
) |
$ |
(392,793 |
) |
$ |
(809,788 |
) |
$ |
4,631,342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share of common
stock |
$ |
(0.00 |
) |
$ |
(0.00 |
) |
$ |
(0.00 |
) |
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share of common
stock |
$ |
(0.00 |
) |
$ |
(0.00 |
) |
$ |
(0.00 |
) |
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of shares of
common stock outstanding |
|
1,154,233,598 |
|
|
879,594,977 |
|
|
1,058,515,905 |
|
|
863,351,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average number of shares of
common stock outstanding |
|
1,154,233,598 |
|
|
879,594,977 |
|
|
1,058,515,905 |
|
|
906,509,670 |
|
The Accompanying Notes are an Integral Part of the Unaudited
Condensed Consolidated Financial Statements
F-24
LIBERTY STAR URANIUM & METALS CORP. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Unaudited) |
|
|
Six Months Ended July 31, |
|
|
|
2015 |
|
|
2014 |
|
Cash flows from operating
activities: |
|
|
|
|
|
|
Net income (loss) |
$ |
(809,788 |
) |
$ |
4,631,342 |
|
Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
|
|
|
|
Depreciation |
|
12,596 |
|
|
14,489 |
|
Amortization of
deferred financing charges |
|
- |
|
|
22,831 |
|
Amortization of debt discount
|
|
563,152 |
|
|
225,953 |
|
(Gain) loss on
settlement of debt |
|
(72,308 |
) |
|
(5,322,943 |
) |
(Gain) loss on change in fair
value of warrant liability |
|
(83,999 |
) |
|
(262,912 |
) |
Share based
compensation |
|
5,616 |
|
|
5,616 |
|
Common shares issued for third
party services |
|
- |
|
|
17,500 |
|
Warrants issued
for third party services |
|
- |
|
|
6,440 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
Prepaid expenses |
|
7,811 |
|
|
1,256 |
|
Other current assets |
|
(100 |
) |
|
- |
|
Accounts payable and accrued expenses
|
|
61,227 |
|
|
44,834 |
|
Accrued wages related parties |
|
44,169 |
|
|
32,000 |
|
Accrued interest |
|
25,705 |
|
|
157,680 |
|
Cash flows used in operating activities: |
|
(245,919 |
) |
|
(425,914 |
) |
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
Purchase of
equipment |
|
- |
|
|
(6,369 |
) |
Net cash used in investing activities |
|
- |
|
|
(6,369 |
) |
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
Payments on
long-term debt |
|
(3,001 |
) |
|
(2,731 |
) |
Cash paid on deferred financing
costs |
|
- |
|
|
- |
|
Principal
activity on convertible promissory notes |
|
150,000 |
|
|
75,000 |
|
Proceeds from the issuance of
common stock, net of expenses |
|
47,300 |
|
|
474,250 |
|
Proceeds from
long-term debt |
|
- |
|
|
- |
|
Net cash provided by financing activities |
|
194,299 |
|
|
546,519 |
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash
equivalents |
|
(51,620 |
) |
|
114,236 |
|
Cash and cash equivalents,
beginning of period |
|
53,517 |
|
|
55,089 |
|
Cash and cash equivalents, end of period |
$ |
1,897 |
|
$ |
169,325 |
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information: |
|
|
|
|
|
|
Income tax paid |
$ |
- |
|
$ |
- |
|
Interest paid |
|
3,602 |
|
$ |
6,916 |
|
Supplemental disclosure of
non-cash items: |
|
|
|
|
|
|
Stock subscription receivable |
$ |
- |
|
$ |
55,673 |
|
Resolutions of
derivative liabilities due to debt conversions |
$ |
656,034 |
|
$ |
146,524 |
|
Warrants reclassed to derivative
liabilities |
$ |
36,552 |
|
$ |
520,552 |
|
Debt discounts due to
derivative liabilities |
$ |
411,247 |
|
$ |
325,031 |
|
Common stock issued for conversion of
debt and interest |
$ |
638,656 |
|
$ |
242,918 |
|
Original issue discount
|
$ |
10,500 |
|
$ |
10,500 |
|
The Accompanying Notes are an Integral Part of the Unaudited
Condensed Consolidated Financial Statements
F-25
LIBERTY STAR URANIUM & METALS CORP. |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS |
(Unaudited) |
NOTE 1 Interim financial statement disclosure
The condensed consolidated financial statements included herein
have been prepared by Liberty Star Uranium & Metals Corp. without audit,
pursuant to the rules and regulations of the United States Securities and
Exchange Commission (SEC) and should be read in conjunction with our annual
report on Form 10-K for the year ended January 31, 2015 as filed with the SEC
under the Securities and Exchange Act of 1934 (the Exchange Act). Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted, as permitted by the
SEC, although we believe the disclosures which are made are adequate to make the
information presented not misleading. The condensed consolidated financial
statements reflect, in the opinion of management, all normal recurring
adjustments necessary to present fairly our financial position at July 31, 2015
and the results of our operations and cash flows for the periods presented.
Interim results are subject to significant seasonal variations
and the results of operations for the three and six months ended July 31, 2015
are not necessarily indicative of the results to be expected for the full
year.
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
NOTE 2 Going concern
The Company has incurred losses from operations, and requires
additional funds for further exploratory activity and to maintain its claims
prior to attaining a revenue generating status. There are no assurances that a
commercially viable mineral deposit exists on any of our properties. In
addition, the Company may not find sufficient ore reserves to be commercially
mined. As such, there is substantial doubt about the 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 condensed consolidated financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.
NOTE 3 Summary of Significant Accounting Policies
Fair Value
ASC 820 Fair Value Measurements and Disclosures (ASC 820),
defines fair value, establishes a framework for measuring fair value and
enhances disclosures about fair value measurements. It defines fair value as the
exchange price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the
measurement date. ASC 820 also establishes a fair value hierarchy which requires
an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. The standard describes three
levels of inputs that may be used to measure fair value:
Level 1: Observable inputs such as quoted prices (unadjusted)
in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices that are observable
for the asset or liability, either directly or indirectly. These include quoted
prices for similar assets or liabilities in active markets; quoted prices for
identical or similar assets or liabilities that are not active; and model-driven
valuations whose inputs are observable or whose significant value drivers are
observable. Valuations may be obtained from, or corroborated by, third-party
pricing services.
Level 3: Unobservable inputs to measure fair value of assets
and liabilities for which there is little, if any market activity at the
measurement date, using reasonable inputs and assumptions based upon the best
information at the time, to the extent that inputs are available without undue
cost and effort.
As of July 31, 2015 the significant inputs to the Companys
derivative liability calculation were Level 3 inputs.
F-26
The following schedule summarizes the valuation of financial
instruments at fair value in the balance sheets as of July 31, 2015 and January
31, 2015:
|
|
|
|
|
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 and convertible note
derivative liability at July 31, 2015 |
$ |
60,839 |
|
|
- |
|
|
- |
|
$ |
60,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant and convertible note
derivative liability at January 31, 2015 |
$ |
216,705 |
|
|
- |
|
|
- |
|
$ |
216,705 |
|
Our financial instruments consist of cash and cash equivalents,
accounts payable, accrued liabilities, convertible notes payable, notes payable,
and warrant liability. It is managements 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 derivative liability are
reported in other income (expense) as gain (loss) on change in fair value.
NOTE 4 Related party transactions
We entered into the following transactions with related
parties during the six months ended July 31, 2015: 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. The total rent payments were $3,132 for the six months ended
July 31, 2015. No amount was due as of July 31, 2015.
At July 31, 2015 we had a balance of accrued unpaid wages of
$431,867 to Jim Briscoe, our Chairman of the Board, CEO, CFO and President.
Additionally, we had a balance of accrued unpaid wages of $15,625 to a former
President.
NOTE 5 Warrants
As of July 31, 2015, there were 92,662,187 whole share purchase
warrants outstanding and exercisable. The warrants have a weighted average
remaining life of 1.79 years and a weighted average exercise price of $0.012 per
whole warrant for one common share. The warrants had an aggregate intrinsic
value of $0 as of July 31, 2015.
Warrants issued in private placement outstanding at July 31,
2015 is as follows:
|
|
|
|
|
Weighted |
|
|
|
Number of whole share |
|
|
average exercise |
|
|
|
purchase warrants |
|
|
price per share |
|
Outstanding, January 31, 2015
|
|
59,566,708 |
|
$ |
0.024 |
|
Issued |
|
44,164,863 |
|
|
0.003 |
|
Expired |
|
(11,069,384 |
) |
|
0.040 |
|
Exercised |
|
- |
|
|
- |
|
Outstanding, July 31, 2015
|
|
92,662,187 |
|
$ |
0.020 |
|
Exercisable, July 31, 2015 |
|
92,662,187 |
|
$ |
0.012 |
|
During the six months ended July 31, 2015, the Company issued
5,882,352 warrants to an investor at an exercise price of $0.0048 with a three
year term. The warrants were issued with common stock (one warrant for each
common share purchased) and there is no additional accounting for these investor
warrants.
During the six months ended July 31, 2015, the Company issued
33,613,445 warrants to an investor at an exercise price of $0.0025 with a three
year term. The warrants were issued with common stock (two warrants for each
common share purchased) and there is no additional accounting for these investor
warrants.
During the six months ended July 31, 2015, the Company issued
1,846,154 warrants to an investor at an exercise price of $0.0023 with a three
year term. The warrants were issued with common stock (one warrant for each
common share purchased) and there is no additional accounting for these investor
warrants.
During the six months ended July 31, 2015, the Company issued
2,822,912 warrants to an investor, the Companys CEO, at an exercise price of
$0.0021 with a three year term. The warrants were issued with common stock (one
warrant for each common share purchased) and there is no additional accounting
for these investor warrants.
F-27
NOTE 6 Derivative Liabilities
The embedded conversion feature in the convertible debt
instruments that the Company issued beginning in August 2013 (See Note 7), and
became convertible beginning in February 2014, qualified it as a derivative
instrument since the number of shares issuable under the note is indeterminate
based on guidance in FASB ASC 815, Derivatives and Hedging. This convertible
note tainted all other equity linked instruments including outstanding warrants
and fixed rate convertible debt on the date that the instrument became
convertible.
The valuation of the derivative liability of the warrants was
determined through the use of a Monte Carlo options model that values the
liability of the warrants based on a risk-neutral valuation where the price of
the option is its discounted expected value. The technique applied generates a
large number of possible (but random) price paths for the underlying common
stock via simulation, and then calculates the associated exercise value (i.e.
payoff) of the option for each path. These payoffs are then averaged and
discounted to a current valuation date resulting in the fair value of the
option.
The valuation of the derivative liability attached to the
convertible debt was arrived at through the use of a Monte Carlo model that
values the derivative liability within the notes. The technique applied
generates a large number of possible (but random) price paths for the underlying
(or underlyings) via simulation, and then calculates the associated payment
value (cash, stock, or warrants) of the derivative features. The price of the
underlying common stock is modeled such that it follows a geometric Brownian
motion with constant drift, and elastic volatility (increasing as stock price
decreases). The stock price is determined by a random sampling from a normal
distribution. Since the underlying random process is the same, for enough price
paths, the value of the derivative is derived from path dependent scenarios and
outcomes. The features in the notes that were analyzed and incorporated into the
model included the conversion features with the reset provisions, the
call/redemption/prepayment options, and the default provisions. Based on these
features, there are six primary events that can occur; payments are made in
cash; payments are made with stock; the note holder converts upon receiving a
redemption notice; the note holder converts the note; the issuer redeems the
note; or the Company defaults on the note. The model simulates the underlying
economic factors that influenced which of these events would occur, when they
were likely to occur, and the specific terms that would be in effect at the time
(i.e. stock price, conversion price, etc.). Probabilities were assigned to each
variable such as redemption likelihood, default likelihood, and timing and
pricing of reset events over the remaining term of the notes based on management
projections. This led to a cash flow simulation over the life of the note. A
discounted cash flow for each simulation was completed, and it was compared to
the discounted cash flow of the note without the embedded features, thus
determining a value for the derivative liability.
Key inputs and assumptions used to value the convertible notes
and warrants upon issuance or tainting and also as of July 31, 2015:
|
|
The stock projections are based on the historical
volatilities for each date. These ranged in the 117-131% range. The stock
price projection was modeled such that it follows a geometric Brownian
motion with constant drift and a constant volatility, starting with the
market stock price at each valuation date; |
|
|
An event of default would not occur during the remaining
term of the note; |
|
|
Conversion of the notes to stock would be completed
monthly after any holding period and would be limited based on: 5% of the
last 6 months average trading volume and the ownership limit identified in
the contract assuming the underlying number of common shares increases at
1% per month. The effective discount was determined based on the
historical trading history of the Company based on the specific pricing
mechanism in each note; |
|
|
The Company would not have funds available to redeem the
notes during the remaining term of the convertible notes; |
|
|
Discount rates were based on risk free rates in effect
based on the remaining term and date of each valuation and instrument. |
|
|
The holder would exercise the warrant at maturity if the
stock price was above the exercise price; |
|
|
The Holder would exercise the warrant after any holding
period prior to maturity at target prices starting at 2 times the exercise
price for the Warrants or higher subject to monthly limits of: 5% of the
last 6 months average trading volume increasing by 1% per month and the
ownership limit identified in the contract assuming the underlying number
of common shares increases at 1% per month. |
|
|
For the warrants with reset features, the
Company assumed it would issue equity linked instruments in the quarters
ended 7/31/15 through 1/31/16 at 70% of market. |
F-28
Using the results from the model, the Company recorded a
derivative liability of $36,552 for newly granted warrants and a derivative
liability of $547,615 for the fair value of the convertible feature included in
the Companys convertible debt instruments for the six months ended July 31,
2015. The derivative liability recorded for the convertible feature created a
debt discount of $411,247 which is being amortized over the remaining term of
the note using the effective interest rate method and is classified as
convertible debt on the balance sheet. Interest expense related to the
amortization of this debt discount for the six months ended July 31, 2015, was
$15,276. Additionally, $394,872 of debt discount was charged to interest expense
as a result of the conversion of a portion of the underlying debt instrument.
The remaining unamortized debt discount related to the derivative liability was
$27,958 as of July 31, 2015. The Company recorded the change in the fair value
of the derivative liability as a gain of $83,999 to reflect the value of the
derivative liability for warrants and convertible notes as $60,839 as of July
31, 2015. The Company also recorded a reclassification from derivative liability
to equity of $656,034 for the conversions of a portion of the Companys
convertible notes.
The following table sets forth a reconciliation of changes in
the fair value of the Companys derivative liability:
|
|
Six months ended July 31, |
|
|
|
2015 |
|
|
2014 |
|
Beginning balance |
$ |
216,705 |
|
$ |
46,985 |
|
Total (gains) losses |
|
(83,999 |
) |
|
(262,912 |
) |
Settlements |
|
(656,034 |
) |
|
(146,524 |
) |
Additions |
|
584,167 |
|
|
852,023 |
|
Ending balance |
$ |
60,839 |
|
$ |
489,572 |
|
|
|
|
|
|
|
|
Change in unrealized gains
(losses) included in earnings relating to derivatives still held as of
July 31, 2015 and 2014 |
$ |
(83,999 |
) |
$ |
(262,912 |
) |
F-29
NOTE 7 Convertible promissory notes
Following is a summary of convertible promissory notes:
|
|
July 31, |
|
|
January 31, |
|
|
|
2015 |
|
|
2015 |
|
|
|
|
|
|
|
|
12% convertible note payable
issued August 2013, $38,784 due September 2015 and $55,500 due February
2016 |
$ |
62,161 |
|
$ |
144,519 |
|
|
|
|
|
|
|
|
Convertible note payable
issued November 2013, due November 2015 |
|
- |
|
|
147,500 |
|
|
|
|
|
|
|
|
12% convertible note payable
issued August 2014, due August 2015 |
|
- |
|
|
157,792 |
|
|
|
|
|
|
|
|
10% convertible note payable
issued October 2014, due October 2015 |
|
- |
|
|
108,136 |
|
|
|
|
|
|
|
|
10% convertible note payable
issued December 2014, due December 2016 |
|
149,911 |
|
|
106,697 |
|
|
|
|
|
|
|
|
|
|
212,072 |
|
|
664,644 |
|
|
|
|
|
|
|
|
Less debt discount |
|
(36,891 |
) |
|
(41,928 |
) |
|
|
|
|
|
|
|
Less current portion of
convertible notes |
|
(25,270 |
) |
|
(516,019 |
) |
|
|
|
|
|
|
|
Long-term convertible notes
payable |
$ |
149,911 |
|
$ |
106,697 |
|
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 2010
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.
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. No such notice by Northern Dynasty was 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 $1,592,769 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, MBGS, LLC filed liens against the
claims before the transfer could be completed. 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
settlement agreement with MBGS, LLC, 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. A gain of $5,322,943 for the settlement of the Northern Dynasty
debt and accrued interest was recorded in other income in April 2014. As of
April 30, 2014, we had no principal or interest outstanding for the 2010
Convertible Note.
F-30
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. We
elected not to pay the $150,000 portion of the August 2013 Note within 90 days
from the effective date. After the $150,000 portion of the August 2013 Note
became convertible, the note holder elected to convert the principal and
interest totaling $186,480 into 17,937,915 shares of the companys common stock
during the months of February through May of 2014. On December 9, 2013, we
received additional consideration of $75,000 pursuant to the terms of the August
2013 Note. We elected not to pay the $75,000 portion of the August 2013 Note
within 90 days from the effective date. In June, July and August 2014, the note
holder converted principal and interest totaling $93,240 into 9,983,507 shares
of the Companys common stock. On June 24, 2014 and September 3, 2014, we
received additional consideration of $75,000 and $75,000, respectively, pursuant
to the terms of the August 2013 Note. In December 2014 and January 2015, the
note holder converted principal and interest totaling $41,961 into 5,900,000
shares of the Companys common stock. On February 25, 2015, we received
additional consideration of $50,000 pursuant to the terms of the August 2013
Note. During the three months ended April 30, 2015, the note holder converted
principal and interest totaling $105,733 into 30,800,000 shares of the Companys
common stock. During the three months ended July 31, 2015, the note holder
converted principal and interest totaling $38,784 into 31,715,187 shares of the
Companys common stock. As of July 31, 2015, we had $62,161 of principal and
interest outstanding for the August 2013 Note.
On November 18, 2013, we entered into a securities purchase
agreement (the November 2013 Note), whereby we agreed to issue a convertible
note to one lender in the principal amount of $250,000. The proceeds from the
note were $225,000, which created an original issue discount of $25,000. The note was
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 (after May 20, 2014)
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. On
November 13, 2014, we entered into an Assignment of Promissory Note &
Acknowledgment, whereby we consented to an assignment of the note to another
lender, pursuant to which $250,000 remains owing by the Company. The maturity
date of the November 2013 Note was extended to November 18, 2015. From November
2014 through January 2015, the new noteholder converted principal of $102,500
into 11,792,944 shares of the Companys common stock. During the three months
ended April 30, 2015, the new noteholder converted principal of $125,001 into
29,248,823 shares of the Companys common stock. During the three months ended
July 31, 2015, the new noteholder converted principal and interest of $28,046 into 18,995,113
shares of the Companys common stock. As of July 31, 2015, we had $0 of
principal and interest outstanding for the November 2013 Note.
In August 2014, we received $150,000 pursuant to the terms of a
convertible promissory note (the August 2014 Note) dated August 26, 2014. The
Note bears interest at 12%, is due on August 26, 2015, and is convertible after
180 days at a 45% discount to the average of the daily VWAP prices for the
previous 10 trading days before the date of conversion During the three months
ended April 30, 2015, the new noteholder converted principal of $160,834 into
56,676,739 shares of the Companys common stock. As of July 31, 2015, we had $0
of principal and interest outstanding for this Note.
On October 14, 2014, we entered into a securities purchase
agreement, whereby we agreed to issue a convertible note (the October 2014
Note) to one lender in the principal amount of $105,000. The Note is payable in
full on October 14, 2015, bears interest at the rate of 10% per annum, and
includes a $5,000 original issuance discount. The Note may be convertible into
shares of common stock of our company at any time from 180 days after the
execution date of the Note at a price per share of 40% discount to the average
of the daily VWAP for the previous five trading days before the date of
conversion. During the three months ended April 30, 2015, the note holder
converted principal and interest totaling $57,000 into 26,000,000 shares of the
Companys common stock. During the three months ended July 31, 2015, the note
holder converted principal and interest totaling $53,901 into 48,878,264 shares
of the Companys common stock. As of July 31, 2015, we had $0 of principal and
interest outstanding for this Note.
On December 3, 2014, we entered into a note purchase agreement,
whereby we agreed to issue a convertible note (the December 2014 Note) to
lender in the principal amount of $210,000, with a $10,000 original issuance
discount. The initial purchase price was $105,000 of consideration of which
$100,000 was received our company and $5,000 was retained through the original
issue discount. An additional $50,000 was received on February 27, 2015 with a
$2,500 original issue discount. An additional $30,000 was received on June 11,
2015 with a $1,500 original issue discount. An additional $20,000 was received
on July 9, 2015 with a $1,000 original issue discount. The Note bears interest
at 10%, is due on December 3, 2016, and is convertible after six months of
advance of funds at a 37.5% discount to the average of the daily VWAP prices for
the previous 5 trading days before the date of conversion. During the three
months ended July 31, 2015, the note holder converted principal and interest
totaling $69,357 into 61,028,598 shares of the Companys common stock. As of
July 31, 2015, we had of $149,911 of principal and interest outstanding for this
Note.
F-31
During the six months ended July 31, 2015 and 2014, the Company
recorded debt discounts of $411,247 and $325,031, respectively, due to the
derivative liabilities, and original issue debt discounts of $10,500 and
$10,500, respectively, due to the convertible notes. The Company recorded
amortization of these discounts of $563,152 and $225,953 for the six months
ended July 31, 2015 and 2014, respectively.
In November of 2013, the Company recorded $45,663 of deferred
financing costs, of which $15,500 was paid in cash and $30,163 paid with common
stock, related to the November 18, 2013 convertible note. The Company recorded
amortization of these deferred financing costs of $0 and $22,831 for the six
months ended July 31, 2015 and 2014, respectively.
The Company recognized a gain on settlement of debt of
$72,308 during the three and six month ended July 31, 2015 as a result of
convertible note conversions during the three months ended July 31, 2015.
NOTE 8 Stockholders deficit
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.
On July 15, 2015 the Companys shareholders approved an
amendment to the Companys articles of incorporation to increase the number of
authorized common shares from 1,250,000,000 to 6,250,000,000.
Between February 2014 and July 2014, pursuant to the investment
agreement with KVM, KVM purchased 34,214,226 shares for $456,923, of which
$55,673 is still owed to the Company and is reflected as a stock subscription
receivable as of July 31, 2015.
During the three months ending April 30, 2015, $105,733 of the
August 2013 Note were converted into 30,800,000 shares of the Companys common
stock. The conversions occurred on multiple dates with conversion prices ranging
from $0.00194 to $0.00574.
During the three months ending April 30, 2015, $125,001 of the
November 2013 Note were converted into 29,248,823 shares of the Companys common
stock. The conversions occurred on multiple dates with conversion prices ranging
from 0.00274 to $0.00609
During the three months ending April 30, 2015, $160,834 of the
August 2014 Note were converted into 56,676,739 shares of the Companys common
stock. The conversions occurred on multiple dates with conversion prices ranging
from $0.00193 to $0.00416.
During the three months ending April 30, 2015, $57,000 of the
October 2014 Note were converted into 26,000,000 shares of the Companys common
stock. The conversions occurred on multiple dates with conversion prices ranging
from $0.00192 to $0.00216.
During the three months ended April 30, 2015, the Company
issued 2,941,176 units to an investor for total proceeds of $10,000. Each unit
consists of one share of the Companys common stock and two warrants to purchase
one share each of the Companys common stock. The warrants have an exercise
price of $0.0048 and have a three year term (see note 5).
During the three months ending July 31, 2015, $38,784 of the
August 2013 Note were converted into 31,715,187 shares of the Companys common
stock. The conversions occurred on multiple dates with conversion prices ranging
from $0.00112 to $0.00135.
During the three months ending July 31, 2015, $28,046 of the
November 2013 Note were converted into 18,995,113 shares of the Companys common
stock. The conversions occurred on multiple dates with conversion prices ranging
from 0.00147 to $0.00148
During the three months ending July 31, 2015, $53,901 of the
October 2014 Note were converted into 48,878,264 shares of the Companys common
stock. The conversions occurred on multiple dates with conversion prices ranging
from $0.00101 to $0.00127.
During the three months ending July 31, 2015, $69,357 of the
December 2014 Note were converted into 61,028,598 shares of the Companys common
stock. The conversions occurred on multiple dates with conversion prices ranging
from $0.00104 to $0.00121.
During the three months ended July 31, 2015, the Company issued
1,846,154 units to an investor for proceeds of $3,000. Each unit consists of one
share of the Companys common stock and one warrant to purchase one share each
of the Companys common stock. The warrants have an exercise price of $0.002275
and have a three year term (see note 5).
During the three months ended July 31, 2015, the Company issued
16,806,723 units to an investor for proceeds of $30,000. Each unit consists of
one share of the Companys common stock and two warrants to purchase one share
each of the Companys common stock. The warrants have an exercise price of
$0.002499 and have a three year term (see note 5).
During the three months ended July 31, 2015, the Company issued
2,822,912 units to an investor, the Companys CEO, for proceeds of $4,300. Each
unit consists of one share of the Companys common stock and one warrant to
purchase one share each of the Companys common stock. The warrants have an
exercise price of $0.002130 and have a three year term (see note 5).
On June 20, 2015, we entered into an investment agreement (the
Agreement) with Tangiers Investment Group, LLC (the Investor), whereby the
Investor has agreed to invest up to $8,000,000 to purchase shares of our common
stock.
Subject to the terms and conditions of the Agreement and a
registration rights agreement, we may, in our sole discretion, deliver a notice
to the Investor which states the dollar amount which we intend to sell to the
Investor on a certain date. The amount that we shall be entitled to sell to
Investor shall be equal to one hundred and fifty percent (150%) 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 so long as such amount does not exceed
an accumulative amount per month of $100,000. The minimum amount shall be equal
to $5,000. In connection with the Agreement, we also entered into a registration
rights agreement dated June 20, 2015, whereby we agreed to file a Registration
Statement on Form S-1 with the Securities and Exchange Commission within thirty
(30) days of the date of the registration rights agreement and to have the
Registration Statement declared effective by the Securities and Exchange
Commission within ninety (90) days after we have filed the Registration
Statement. We filed Form S-1 on July 2, 2015 and Form S-1 Amendment No. 1 on
July 29, 2015, which was declared effective by the Securities and Exchange
Commission on August 5, 2015.
At July 31, 2015 there were 863,500 non-qualified stock options
outstanding with a weighted average exercise price of $0.316 per option; of
those options 863,500 are exercisable. At July 31, 2015 there were 85,421,374
incentive stock options outstanding with a weighted average exercise price of
$0.042 per option; of those options, 84,481,049 are exercisable with a weighted
average exercise price of $0.042.
During the six months ended July 31, 2015 we recognized $5,616
of compensation expense related to incentive and non-qualified stock options
previously granted to officers, employees and consultants.
NOTE 9 Subsequent events
In August, September and October of 2015, $77,643 of the December 2014 Note was converted into 77,194,959 shares of the Company’s common stock.
In August and September 2015, the company issued an aggregate of 89,209,703 shares of common stock for total proceeds of $108,826 to Tangiers Investment Group, LLC under the investment agreement dated June 20, 2015.
In August 2015, the Company issued 16,077,170 units to an
investor for total proceeds of $25,000. Each unit consists of one share of the
Companys common stock and one warrant to purchase one share of the Companys
common stock. The warrants have an exercise price of $0.00218 and have a three
year term.
In August 2015, the Company issued 5,733,000 shares to a former
service provider for accrued services totaling $10,320.
In August and September 2015, an aggregate of $62,160 of the
August 2013 Note was converted into an aggregate of 60,642,857 shares of the
Companys common stock.
In August 2015, we received additional consideration of $50,000
with $5,500 of original issue discount under the terms of the August 2013 Note.
An Amendment to this Note was executed in August 2015 to include this additional
consideration under the Note.
In September 2015, the Company issued 1,851,852 common shares to an investor for proceeds of $3,000.
F-32
Managements Discussion and Analysis of Financial Condition
and Results of Operations
Our managements discussion and analysis provides a narrative
about our financial performance and condition that should be read in conjunction
with the audited and unaudited consolidated financial statements and related
notes thereto included in this prospectus. This discussion contains forward
looking statements reflecting our current expectations and estimates and
assumptions about events and trends that may affect our future operating results
or financial position. Our actual results and the timing of certain events could
differ materially from those discussed in these forward-looking statements due
to a number of factors, including, but not limited to, those set forth in the
sections of this prospectus titled Risk Factors beginning at page 6 above and
Forward-Looking Statements beginning at page 11 above.
Overview
Business Development
Liberty Star Uranium & Metals Corp. was formerly Liberty
Star Gold Corp. and formerly Titanium Intelligence, Inc. (Titanium). Titanium
was incorporated on August 20, 2001 under the laws of the State of Nevada. On
February 5, 2004 we commenced operations in the acquisition and exploration of
mineral properties business. Big Chunk Corp. (Big Chunk) 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 our mineral properties. Redwall
ceased drilling activities in July 2008 and was dissolved on March 30, 2010. In
April 2007, we changed our name to Liberty Star Uranium & Metals Corp
(Liberty Star) to reflect our current general exploration for base and
precious metals. We are in the exploration phase of operations and have not
generated any revenues from operations.
We formed the wholly owned subsidiary, Hay Mountain Super
Project LLC (HMSP LLC) incorporated on October 24, 2014, to serve as the
primary holding company for development of the potential ore bodies encompassed
in the Hay Mountain area of interest in Arizona.
Our Current Business
We are an exploration 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. Our significant projects are
described below.
North Pipes Super Project (North Pipes and NPSP):
Located in Northern Arizona on the Arizona Strip, we plan to ascertain whether
the NPSP claims possess commercially viable deposits of uranium and associated
co-product metals. We have not identified any ore reserves to date.
Big Chunk Super Project (Big Chunk): Located in the
Iliamna region of Southwestern Alaska, we plan to ascertain whether the Big
Chunk claims possess commercially viable deposits of copper, gold, molybdenum,
silver, palladium rhenium and zinc. We have not identified any ore reserves to
date.
Tombstone Super Project (Tombstone) (formerly referred to
as Tombstone Porphyry Precious Metals Project): Tombstone is located in
Cochise County, Arizona and the Super Project covers the Tombstone caldera and
its environs. Within the Tombstone Caldera is the Hay Mountain target where we
are concentrating our work at this time. We plan to ascertain whether the
Tombstone, Hay Mountain claims possess commercially viable deposits of copper,
molybdenum, gold, silver, lead, zinc, manganese and other metals including Rare
Earth Elements. We have not identified any ore reserves to date.
35
East Silver Bell Porphyry Copper Project (East Silver
Bell): Located northwest of Tucson, Arizona, we plan to ascertain whether
the East Silver Bell claims possess commercially viable deposits of copper. We
have not identified any ore reserves to date.
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 conveyancing history
characteristic of many mineral properties. We have investigated title to all the
Companys mineral properties and, to the best of our knowledge, title to all
properties are in good standing.
The mineral resource business generally consists of three
stages: exploration, development and production. Mineral resource companies that
are in the exploration stage have not yet found mineral resources in
commercially exploitable quantities, and are engaged in exploring land in an
effort to discover them. Mineral resource companies that have located a mineral
resource in commercially exploitable quantities and are preparing to extract
that resource are in the development stage, while those engaged in the
extraction of a known mineral resource are in the production stage. We have not
found any mineral resources in commercially exploitable quantities.
There is no assurance that a commercially viable mineral
deposit exists on any of our properties, and further exploration is required
before we can evaluate whether any exist and, if so, whether it would be
economically feasible to develop or exploit those resources. Even if we complete
our current exploration program and we are successful in identifying a mineral
deposit, we would be required to spend substantial funds on further drilling and
engineering studies before we could know whether that mineral deposit will
constitute an ore reserve (an ore reserve is a commercially viable mineral
deposit).
To date, we have not generated any revenues. Our ability to
pursue our business plan and generate revenues is subject to our ability to
obtain additional financing, and we cannot give any assurance that we will be
able to do so.
Letter Agreement and Secured Convertible Notes with Northern
Dynasty Minerals Ltd.
On July 15, 2010, we issued a secured convertible promissory
note bearing interest at a rate of 10% per annum compounded monthly (the 2010
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 were 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.
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. No such notice by Northern Dynasty was 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 $1,592,769 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, MBGS, LLC filed liens against the
claims before the transfer could be completed. 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
settlement agreement with MBGS, LLC, 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. A gain of $5,322,943 for the settlement of the Northern Dynasty
debt and accrued interest was recorded in other income during the six months
ended July 31, 2014.
36
Results of Operations
Years Ended January 31, 2015 and 2014
We had net income of $4,115,431 for the year ended January 31,
2015 compared to a net loss of $2,318,047 for the year ended January 31, 2014.
Net income increased by $6,433,478 due to the $5,322,943 gain on the debt
settlement of debt with Northern Dynasty, a decrease in salaries and benefits of
$220,322 due to a decrease in stock option grants, and a decrease in geological
and geophysical costs of $290,067 due to decreased survey and land research.
Six Month Periods Ended July 30, 2015 and 2014
We had a net loss of $809,788 and for the six months ended July 31, 2015 compared to net income of $4,631,342 for the six months ended July 31, 2014. We incurred a one-time non-recurring gain of $5,322,943 during the six months ended July 31, 2014 due to our settlement of the Northern Dynasty Note. Under the terms of the settlement agreement, signed in November,
2012, our Alaska incorporated subsidiary Big Chunk Corp. transferred to a
subsidiary of Northern Dynasty a number of Alaska State mineral claims in
exchange for the forgiveness of the $3,730,174 principal balance and $1,592,769
of accrued interest that our company owed Northern Dynasty under the 2010
Convertible Note. The settlement agreement also terminated other contractual
rights of Northern Dynasty. The settlement agreement was considered completed by
our company in 2012 but Northern Dynasty did not acknowledge its completion
until March 2014. During the period of over one year that the dispute continued
as to whether the settlement agreement had been completed, our company continued
to accrue the principal and interest that was claimed by Northern Dynasty and
reported that amount as a liability in our financial statements. The gain in
the first quarter of fiscal 2015 of our company recognizes that the debt and
interest under the 2010 Convertible Note are now settled and no longer claimed
by Northern Dynasty.
During the six months ended July 31, 2015, we had a decrease of approximately $58,997 in geological and geophysical costs compared to the six months ended July 31, 2014, due to a decrease in geochemical reports ordered by the Company. We had a decrease in public relations expenses of approximately $47,766 during the six months ended July 31, 2015, as compared to the six months ended July 31, 2014, due to decreased seminar and conference activity. We had a decrease in legal expenses of approximately $2,436 during the six months ended July 31, 2015, as compared to the six months ended July 31, 2014, due primarily to the costs associated with defending a lien claim by a former associate during the six months ended July 31, 2014. We incurred a non-cash gain on the change in fair value of our derivative liabilities of $83,999 during the six months ended July 31, 2015, as compared to a gain of $262,912 during the six months ended July 31, 2014, due to the embedded conversion features in our debt instruments that require us to record our equity linked instruments including outstanding warrants and fixed rate convertible debt at fair value during the six months ended July 31, 2015 and 2014.
Liquidity and Capital Resources
We had cash and cash equivalents in the amount of $1,897 as of July 31, 2015 compared to $53,517 as of January 31, 2015. We had negative working capital of $767,511 as of July 31, 2015 compared to $1,251,989 as of January 31, 2015. We used net $245,919 cash in operating activities during the six months ended July 31, 2015 which was utilized for working capital. We also utilized our cash funds to continue exploration activities at our Hay Mountain mineral lands by working on geochemical interpretation of the soil, rock chip and vegetation sampling and ztem (aeormagnetics and aero electromagnetics). We purchased no new equipment during the six months ended July 31, 2015. We have been raising capital by issuing convertible promissory notes and selling equity by way of private placements. We intend to continue to raise capital from such sources. In addition to seeking sources of funding through the sale of equity, we may seek to enter into joint venture agreements, or other types of agreements with other companies to finance our projects for the long term. In addition, we may choose to sell a portion of our assets to finance our projects. Should our properties prove to be commercially viable, we may be in a position to seek debt financing to help build infrastructure, and eventually we may obtain revenues from commercial mining of our properties.
37
Convertible promissory notes
We have issued the following convertible promissory notes in
private placements of our securities to institutional investors pursuant to
exemptions from registration set out in Rule 506 of Regulation D under the
Securities Act of 1933.
On July 15, 2010, we issued a secured convertible promissory
note bearing interest at a rate of 10% per annum compounded monthly (the 2010
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 were 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.
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. No such notice by Northern Dynasty was 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 $1,592,769 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, MBGS, LLC filed liens against the
claims before the transfer could be completed. 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
settlement agreement with MBGS, LLC, 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. A gain of $5,322,943 for the settlement of the Northern Dynasty
debt and accrued interest was recorded in other income during the six months
ended July 31, 2014.
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. We elected not to pay the $150,000 portion of the August 2013 Note within 90 days from the effective date. After the $150,000 portion of the August 2013 Note became convertible, the note holder elected to convert the principal and interest totaling $186,480 into 17,937,915 shares of the company’s common stock during the months of February through May of 2014. On December 9, 2013, we received additional consideration of $75,000 pursuant to the terms of the August 2013 Note. We elected not to pay the $75,000 portion of the August 2013 Note within 90 days from the effective date. In June, July and August 2014, the note holder converted principal and interest totaling $93,240 into 9,983,507 shares of the Company’s common stock. On June 24, 2014 and September 3, 2014, we received additional consideration of $75,000 and $75,000, respectively, pursuant to the terms of the August 2013 Note. In December 2014 and January 2015, the note holder converted principal and interest totaling $41,961 into 5,900,000 shares of the Company’s common stock. On February 25, 2015, we received additional consideration of $50,000 pursuant to the terms of the August 2013 Note During the three months ended April 30, 2015, the note holder converted principal and interest totaling $105,733 into 30,800,000 shares of the Company’s common stock. During the three months ended July 31, 2015, the note holder converted principal and interest totaling $38,784 into 31,715,187 shares of the Company’s common stock. As of July 31, 2015, we had $62,161 of principal and interest outstanding for the August 2013 Note.
38
On November 18, 2013, we entered into a securities purchase agreement (the “November 2013 Note”), whereby we agreed to issue a convertible note to one lender in the principal amount of $250,000. The proceeds from the note were $225,000, which created an original issue discount of $25,000. The note was 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 (after May 20, 2014) 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. On November 13, 2014, we entered into an Assignment of Promissory Note & Acknowledgment, whereby we consented to an assignment of the note to another lender, pursuant to which $250,000 remains owing by the Company. The maturity date of the November 2013 Note was extended to November 18, 2015. From November 2014 through January 2015, the new noteholder converted principal of $102,500 into 11,792,944 shares of the Company’s common stock. During the six months ended July 31, 2015, the new noteholder converted principal of $153,046 into 48,243936 shares of the Company’s common stock. As of July 31, 2015, we had $0 of principal and interest outstanding for the November 2013 Note.
In August 2014, we received $150,000 pursuant to the terms of a convertible promissory note (the “August 2014 Note”) dated August 26, 2014. The Note bears interest at 12%, is due on August 26, 2015, and is convertible after 180 days at a 45% discount to the average of the daily VWAP prices for the previous 10 trading days before the date of conversion. During the six months ended July 31, 2015, the new noteholder converted principal of $160,833 into 56,676,739 shares of the Company’s common stock. As of July 31, 2015, we had $0 of principal and interest outstanding for this Note.
On October 14, 2014, we entered into a securities purchase agreement, whereby we agreed to issue a convertible note (the “October 2014 Note”) to one lender in the principal amount of $105,000. The Note is payable in full on October 14, 2015, bears interest at the rate of 10% per annum and includes a $5,000 original issuance discount. The Note may be convertible into shares of common stock of our company at any time from 180 days after the execution date of the Note at a price per share of 40% discount to the average of the daily VWAP for the previous five trading days before the date of conversion. During the six months ended July 31, 2015, the note holder converted principal and interest totaling $110,901 into 74,878,264shares of the Company’s common stock. As of July 31, 2015, we had $0 of principal and interest outstanding for this Note.
On December 3, 2014, we entered into a note purchase agreement, whereby we agreed to issue a convertible note (the “December 2014 Note”) to lender in the principal amount of $210,000, with a $10,000 original issuance discount. The initial purchase price was $105,000 of consideration of which $100,000 was received our company and $5,000 was retained through the original issue discount. An additional $50,000 was received on February 27, 2015 with a $2,500 original issue discount. The Note bears interest at 10%, is due on December 3, 2016, and is convertible after six months of advance of funds at a 37.5% discount to the average of the daily VWAP prices for the previous5 trading days before the date of conversion. As of July 31, 2015, we had of $149,911 principal and interest outstanding for this Note.
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.
39
Presentation of Financial Information
Our consolidated financial statements for the year ended
January 31, 2015 reflect financial information for the years ended January 31,
2015 and 2014.
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, 2015 and 2014.
Our accumulated stockholders equity (deficit) at January 31, 2015, was
$(1,326,859) and the net loss from operations for the year ended January 31,
2015 was $1,046,784. 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 financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America. 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 condensed consolidated financial statements as of July 31, 2015. Our total stockholders’ deficit at July 31, 2015 was $897,780.
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
consolidated financial statements. We report convertible promissory notes as
liabilities at their carrying value less unamortized discounts in accordance
with the applicable accounting guidance. We record 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 notes terms.
40
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 a
Monte Carlo options model in order to determine fair value.
Changes in and Disagreements with Accountants
on
Accounting and Financial Disclosure
None.
Directors and Executive Officers
Directors and Executive Officers
All directors of our company hold office until the next annual
meeting of our stockholders or until their successors have been elected and
qualified, or until their death, resignation or removal. The executive officers
of our company are appointed by our board of directors and hold office until
their death, resignation or removal from office.
Our directors and executive officers, their ages, positions
held, and duration of such are as follows:
Name |
Position Held with Our Company |
Age |
Date First Elected or Appointed
|
James Briscoe |
President, Chief Executive Officer, Chief
|
74 |
February 3, 2004 |
|
Financial Officer, Chairman of the Board
and |
|
|
|
Director |
|
|
Gary Musil |
Secretary and Director |
65 |
October 23, 2003 |
John Guilbert |
Director |
84 |
February 5, 2004 |
Keith Brill |
Director |
37 |
December 23, 2009 |
Peter OHeeron |
Director |
52 |
September 6, 2012 |
Brett Gross |
Director |
56 |
October 20, 2014 |
Patricia Madaris |
VP Finance |
64 |
May 8, 2015 |
Business Experience
The following is a brief account of the education and business
experience of directors and executive officers during at least the past five
years, indicating their principal occupation during the period, and the name and
principal business of the organization by which they were employed.
James Briscoe
Mr. Briscoe was appointed as our Chief Executive Officer,
President, Chairman and a director on February 3, 2004. Mr. Briscoe became the
interim Chief Financial Officer on July 31, 2008. Mr. Briscoe is a Registered
Professional Geologist in the states of Arizona and California. From 1996 to
April 2005, Mr. Briscoe was the Vice President of Exploration, and Chairman of
the Board of JABA Exploration Inc., a TSX Venture Exchange Canadian public
company. Mr. Briscoe was also the President, Chief Executive Officer and a
Geologist of JABA (US) Inc. and President of Compania Minera JABA, S.A. de C.V.
in Mexico. Compania Minera JABA, S.A. de C.V. is no longer active and is in the
process of dissolution. During the periods of time indicated below, Mr. Briscoe
served in the positions listed for the following two Canadian public companies:
Company |
Title |
From |
To |
|
|
|
|
1. Excellon |
VP Exploration |
April 1994 |
January 1996 |
2. JABA Inc. |
CEO |
January 1980 |
April 2005 |
41
We believe Mr. Briscoe is qualified to serve on our board of
directors because of his knowledge of our companys history and current
operations, which he gained from working for our company as described above, in
addition to his business experience as described above.
Gary Musil
Mr. Gary Musil was appointed as one of our directors on October
23, 2003 and is presently our corporate Secretary. Mr. Musil was our Chief
Executive Officer and Chief Financial Officer from October 23, 2003 to February
3, 2004. Mr. Musil has more than 30 years of management and financial consulting
experience. Mr. Musil has served as an officer and director on numerous public
mining companies since 1988. This experience has resulted in his overseeing
exploration projects in Peru, Chile, Eastern Europe (Slovak Republic), British
Columbia, Ontario, Quebec and New Brunswick (Canada). Prior to this, he was
employed for 15 years with Dickenson Mines Ltd. and Kam-Kotia Mines Ltd. as a
controller for the producing silver/lead/zinc mine in the interior of British
Columbia, Canada. Mr. Musil currently serves as an officer/director of four TSX
Venture Exchange public companies in Canada. Mr. Musil has been the President,
Chief Executive Officer, Chief Financial Officer and a director of International
Montoro Resources Inc., a TSX Venture company and a reporting issuer in Canada,
since February 1999. Mr. Musil has been the chief financial officer and
secretary and a director of Belmont Resources Inc., a TSX Venture company and a
reporting issuer in Canada, since August 1992. Mr. Musil has been the chief
financial officer and a director of Megastar Development Corp, a TSX Venture
company and a reporting issuer in Canada, since July 2006. Mr. Musil has been
the Chief Financial Officer and secretary of Highbank Resources Ltd., a TSX
Venture company and a reporting issuer in Canada, since December 1988.
We believe Mr. Musil is qualified to serve on our board of
directors because of his knowledge of our companys history and current
operations, which he gained from working for our company as described above, in
addition to his education and business experience as described above.
John Guilbert
Dr. Guilbert was appointed as one of our directors on February
5, 2004. Dr. Guilbert is a Professor Emeritus at the University of Arizona and
is a world-renowned geologist and author of the book The Geology of Ore
Deposits, a popular 900 page text used throughout the world and a co-developer
of the Lowell-Guilbert porphyry copper model and recipient of two mining awards,
the R.A.F. Penrose Medal and the D.C. Jackling Award. These gold medal awards,
the most coveted in American Mining, were awarded back-to-back in successive
years. Dr. Guilbert has served as a director of Excellon Inc. a Vancouver Stock
Exchange listed company from 1992 1996. Dr. Guilbert has served as a Board
Chairman and director for JABA Inc., an Alberta Stock Exchange (later CDNX then
TSX) listed company from 1996 2002.
We believe Dr. Guilbert is qualified to serve on our board of
directors because of his knowledge of our companys history and current
operations, which he gained from working for our company as described above, in
addition to his education and business experience as described above.
Keith Brill
Mr. Brill was appointed as one of our directors on December 23,
2009. Mr. Brill received an International Master of Business Administration
(IMBA) from the Moore School of Business, University of South Carolina in May
2005. He graduated from the South Carolina Honors College, University of South
Carolina in May 2003 with a Bachelor of Science, magna cum laude, major in
Economics and Finance, minor in Spanish. Mr. Brill has been a management
consultant with PA Consulting Group, Inc., a leading global consulting firm,
since 2004. He has provided multinational Fortune 500 companies with consulting
advice on topics including cost reduction, operational efficiency, and IT
strategy. Mr. Brill has extensive experience in conducting ROI analysis,
developing business cases, and providing strategic financial advice on major
business transformation programs.
We believe Mr. Brill is qualified to serve on our board of
directors because of his knowledge of our companys history and current
operations, which he gained from working for our company as described above, in
addition to his education and business experience as described above.
42
Pete OHeeron
Mr. OHeeron joined the board in September, 2012. Mr. OHeeron
leads an operational investment group which identifies early stage opportunities
in the medical field with strong intellectual property positions. Through his
20+ years of medical product development experience, Mr. OHeeron brings
together the resources from strategic disciplines necessary to commercialize
unique technologies. Prior to founding Advanced Medical Technologies LLC, Mr.
OHeeron founded NeoSurg Technologies, Inc. to develop a minimally invasive
access system. As a result of his efforts, NeoSurg Technologies was successful
in developing the T2000 Minimally Invasive Access System, the world leader in
reposable surgical instrumentation. Mr. OHeeron completed the sale of NeoSurg
Technologies to CooperSurgical in 2005. Mr. OHeeron graduated from Texas State
University with a BS in Healthcare Administration and a minor in Business
Administration. He received his Masters in Healthcare Administration from the
University of Houston. Mr. OHeeron currently holds 5 patents and has 4 patents
pending.
We believe Mr. OHeeron is qualified to serve on our board of
directors because of his knowledge of our companys history and current
operations, which he gained from working with our company as described above, in
addition to his education and business experience as described above. He also
catalyzed a negotiation with Northern Dynasty which benefited the company by
millions of dollars.
Brett Gross
Mr. Gross was appointed as one of our directors on October 20,
2014. Mr. Gross is a mining engineer (BS, Ohio State University, 1982; MS,
Virginia Polytechnic Institute, 1988; PE, Colorado and Alabama) and attorney
(JD, University of Denver, 2001) with over 30 years of experience, both domestic
and international. His work experience includes surface and underground mining
operations, engineering, and delivery of construction mega-projects across
multiple industrial and commercial markets, and the practice of law related to
each of these sectors. Mr. Gross brings a combination of professional skills
that benefits every aspect of our business. Mr. Gross engineering career began
at Virginia Tech, with research focused on rock mechanics and the stability of
underground openings, particularly the phenomenon of coal bumps and rock
bursts, and studying methods to monitor stress changes in the longwall barrier
pillar during the onset of the active longwall face. The ensuing years of his
career have been intimately involved with a broad spectrum of engineering,
operations, management and project delivery. Since 2002, Mr. Gross has practiced
law both in private practice and as in-house counsel, negotiating and closing
complex deals with what today is among the largest engineering and construction
firms in the United States.
We believe Mr Gross is qualified to serve on our board of
directors because of his education and business experience as described
above.
Patricia Madaris
Ms. Madaris has served our company in the position of Executive
Assistant to the CEO and Board of Directors since March 2011 and in May 2015 she
was appointed to the position of VP Finance of our company upon the
recommendation of our CEO, and voted into office unanimously by the Board of
Directors. Since beginning her work at our company, she has proven to be
beneficial in facilitating many areas of our public company, working to engage,
negotiate, and close financings, and overseeing and working actively in
financial reporting, and projected budgeting for ongoing operations. She has
also worked as an accountant/ manager for corporations in Arizona, Florida, and
California, since 2005. Ms. Madaris has a Bachelors of Science Degree with
Indiana Wesleyan University, graduating Summa Cum Laude. Ms. Madaris is
currently pursuing her MBA with expected date of graduation, 2016.
Family Relationships
There are no family relationships between any director or
executive officer.
43
Involvement in Certain Legal Proceedings
None of our directors and executive officers has been involved
in any of the following events during the past ten years:
|
(a) |
any petition under the federal bankruptcy laws or any
state insolvency laws filed by or against, or an appointment of a
receiver, fiscal agent or similar officer by a court for the business or
property of such person, or any partnership in which such person was a
general partner at or within two years before the time of such filing, or
any corporation or business association of which such person was an
executive officer at or within two years before the time of such
filing; |
|
|
|
|
(b) |
any conviction in a criminal proceeding or being subject
to a pending criminal proceeding (excluding traffic violations and other
minor offences); |
|
|
|
|
(c) |
being subject to any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining such person from, or
otherwise limiting, the following activities: (i) acting as a futures
commission merchant, introducing broker, commodity trading advisor,
commodity pool operator, floor broker, leverage transaction merchant, any
other person regulated by the Commodity Futures Trading Commission, or an
associated person of any of the foregoing, or as an investment adviser,
underwriter, broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and loan
association or insurance company, or engaging in or continuing any conduct
or practice in connection with such activity; engaging in any type of
business practice; or (iii) engaging in any activity in connection with
the purchase or sale of any security or commodity or in connection with
any violation of federal or state securities laws or federal commodities
laws; |
|
|
|
|
(d) |
being the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any federal or state
authority barring, suspending or otherwise limiting for more than 60 days
the right of such person to engage in any activity described in paragraph
(c)(i) above, or to be associated with persons engaged in any such
activity; |
|
|
|
|
(e) |
being found by a court of competent jurisdiction (in a
civil action), the Securities and Exchange Commission to have violated a
federal or state securities or commodities law, and the judgment in such
civil action or finding by the Securities and Exchange Commission has not
been reversed, suspended, or vacated; |
|
|
|
|
(f) |
Being found by a court of competent jurisdiction in a
civil action or by the Commodity Futures Trading Commission to have
violated any federal commodities law, and the judgment in such civil
action or finding by the Commodity Futures Trading Commission has not been
subsequently reversed, suspended or vacated; |
|
|
|
|
(g) |
being the subject of, or a party to, any federal or state
judicial or administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged
violation of: (i) any federal or state securities or commodities law or
regulation; or (ii) any law or regulation respecting financial
institutions or insurance companies including, but not limited to, a
temporary or permanent injunction, order of disgorgement or restitution,
civil money penalty or temporary or permanent cease- and-desist order, or
removal or prohibition order; or (iii) any law or regulation prohibiting
mail or wire fraud or fraud in connection with any business entity;
or |
|
|
|
|
(h) |
being the subject of, or a party to, any sanction or
order, not subsequently reversed, suspended or vacated, of any
self-regulatory organization (as defined in Section 3(a)(26) of the
Securities Exchange Act of 1934), any registered entity (as defined in
Section 1(a)(29) of the Commodity Exchange Act), or any equivalent
exchange, association, entity or organization that has disciplinary
authority over its members or persons associated with a
member. |
44
Executive Compensation
Summary Compensation
The particulars of compensation paid to the following persons:
|
(a) |
all individuals serving as our principal executive
officer during the year ended January 31, 2015; |
|
|
|
|
(b) |
each of our two most highly compensated executive
officers who were serving as executive officers at the end of the year
ended January 31, 2015; and |
|
|
|
|
(c) |
up to two additional individuals for whom disclosure
would have been provided under (b) but for the fact that the individual
was not serving as our executive officer at January 31,
2015, |
who we will collectively refer to as the named executive
officers, for all services rendered in all capacities to our company and
subsidiaries for the years ended January 31, 2015 and 2014 are set out in the
following summary compensation table:
Summary Compensation Table Years ended January 31, 2015 and
2014
Name and Principal
Position |
Year |
Salary
(US$) |
Bonus (US$) |
Stock
Awards (US$) |
Option
Awards (US$) |
Non-Equity
Incentive Plan Compensation (US$) |
Nonqualified
Deferred Compensation Earnings
(US$) |
All Other
Compensation (US$)(1) |
Total
(US$) |
James Briscoe, Principal
Executive Officer, CEO, CFO,
Chairman, President and
Director |
2015 2014
|
84,000 84,000
|
Nil Nil
|
Nil Nil
|
Nil Nil
|
Nil Nil
|
Nil Nil
|
64,000(2)
64,000(2)
|
148,000 148,000
|
|
Notes
(1) |
The value of perquisites and other personal benefits,
securities and property for the officers that do not exceed the lesser of
$10,000 or 10% of the total of the annual salary and bonus and is not
reported herein. |
|
|
(2) |
Mr. Briscoes other compensation represents accrued and
unpaid wages during the twelve months ended January 31, 2015 and 2014 of
$64,000, and $64,000 respectively. |
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth for each named executive officer
certain information concerning the outstanding equity awards as of January 31,
2015:
45
Name |
Option
Awards |
Stock
Awards |
Number of
securities underlying unexercised
options (#) exercisable |
Number of
securities underlying
unexercised options (#)
unexercisable |
Equity incentive
plan awards: Number of
securities underlying
unexercised unearned options
(#) |
Option
exercise price ($) |
Option
expiration date |
Number of
shares or units of stock that
have not vested (#)
|
Market value
of shares or units of
stock that have not
vested ($) |
Equity incentive plan
awards: Number of
unearned shares, units or
other rights that have
not vested (#) |
Equity
incentive plan
awards: Market or
payout value of
unearned shares, units or
other rights that have not
vested ($) |
James Briscoe |
52,500,000
|
Nil
|
Nil
|
0.038
|
8/10/2015
|
Nil
|
Nil
|
Nil
|
Nil
|
James Briscoe |
75,000
|
Nil
|
Nil
|
0.88
|
5/21/2018
|
Nil
|
Nil
|
Nil
|
Nil
|
|
Compensation Plans
As of January 31, 2015, we had three compensation plans in
place, entitled 2004 Stock Option Plan, 2007 Stock Option Plan and 2010
Stock Option Plan. These plans have been approved by our security holders.
These plans have been given retroactive effect of the 1 for 4 reverse stock
split on September 1, 2009.
Plan category
|
Total number
of securities authorized
|
Number of
securities to be issued upon exercise of
outstanding options as at January 31, 2015
(a)
|
Weighted-average
exercise price of outstanding options as
at January 31, 2015 (b)
|
Number of securities
remaining available for further issuance as
at January 31, 2015 (excluding securities
reflected in column (a)) (c) |
2004 Stock Option Plan |
962,500 |
834,874 |
$0.671 |
127,626 |
2007 Stock Option Plan |
2,500,000 |
2,450,000 |
$0.860 |
50,000 |
2010 Stock Option Plan |
95,500,000 |
83,000,000 |
$0.038 |
12,500,000 |
On September 5, 2013, we granted incentive stock options and
non-qualified stock options to certain of our directors, officers, employees and
consultants to purchase an aggregate of 7,423,624 shares of our common stock at
an exercise price of $0.03 per share, with a ten year term expiring on September
5, 2023. The options have various vesting terms. No options were granted during
the year ended January 31, 2015.
Long-Term Incentive Plans
There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers, except that
our directors and executive officers receive stock options at the discretion of
our Board. We do not have any material bonus or profit sharing plans pursuant to
which cash or non-cash compensation is or may be paid to our directors or
executive officers, except that stock options may be granted at the discretion
of our Board.
46
We have no plans or arrangements in respect of remuneration
received or that may be received by our executive officers to compensate such
officers in the event of termination of employment (as a result of resignation,
retirement, change of control) or a change of responsibilities following a
change of control, where the value of such compensation exceeds $60,000 per
executive officer.
Employment Contracts
We have not entered into any written employment agreements or
compensation arrangements with any of our named executive officers. We have
entered into a verbal agreement with James Briscoe, CEO, CFO and Director for
annual salary of $148,000.
Compensation of Directors
We have no formal plan for compensating our directors for their
service in their capacity as directors, although such directors are expected in
the future to receive stock options to purchase common stock as awarded by our
board of directors or (as to future stock options) a compensation committee
which may be established. Directors are entitled to reimbursement for reasonable
travel and other out-of-pocket expenses incurred in connection with attendance
at meetings of our board of directors. Our board of directors may award special
remuneration to any director undertaking any special services on our behalf
other than services ordinarily required of a director. No director received
and/or accrued any compensation for their services as a director, including
committee participation and/or special assignments.
Warrants were granted to a director during the fiscal year
ended January 31, 2015. There was no other compensation paid or accruing to any
director, unless such director is also a named executive officer, during the
fiscal year ended January 31, 2015.
Name |
Year
|
Fees earned
or paid in cash (US$) |
Stock
awards (US$) |
Option
awards (US$) |
Non-equity
incentive plan compensation
(US$) |
Nonqualified
deferred compensation earnings
(US$) |
All other
compensation (US$)(1) |
Total
(US$) |
John Guilbert |
2015 |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
$0 |
Gary Musil |
2015 |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
$0 |
Keith Brill |
2015 |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
$0 |
Pete OHeeron |
2015 |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil(2) |
$0 |
Brett Gross |
2015 |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
$0 |
Notes
(1) |
The value of perquisites and other personal benefits,
securities and property for the officers that do not exceed the lesser of
$10,000 or 10% of the total of the annual salary and bonus and is not
reported herein. |
|
|
(2) |
677,507 warrants with an exercise price of $0.207 were
granted to this director on July 11, 2014. |
Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth, as of November 19, 2015, certain
information with respect to the beneficial ownership of our common stock by each
stockholder known by us to be the beneficial owner of more than 5% of our common
stock and by each of our directors and executive officers and
by our directors and executive officers as a group.
47
Name and Address of Beneficial Owner |
Title of Class |
Amount and Nature of
Beneficial Ownership(1) |
Percentage of
Class(2) |
James Briscoe 5610 E. Sutler Lane Tucson, AZ 85712
USA |
Common Stock |
54,762,500(2)(3) |
Direct/ Indirect |
3.56% |
Gary Musil 3577 Marshall Street Vancouver, BC V5N 4S2
Canada |
Common Stock |
7,542,750(3) |
Direct |
* |
John Guilbert 961 E. Linda Vista Blvd. Tucson, AZ 85727
USA |
Common Stock |
15,032,500(3) |
Direct |
1.00% |
Keith Brill 250 Central Ave., Apt. B204 New York, NY
11559 USA |
Common Stock |
2,500,000(3) |
Direct |
* |
Peter OHeeron 17300 El Camino Real #110 Houston, TX
77058 USA |
Common Stock |
9,122,987(3) |
Direct |
* |
Brett Gross 15290 E. Powers Place Centennial, CO 80015
USA |
Common Stock |
74,858,600(4) |
Direct |
4.91% |
Patricia Madaris 5610 E. Sutler Lane Tucson, AZ 85629
USA |
Common Stock |
875,000(3) |
Direct |
* |
All executive officers and directors as a group
(7 persons) |
Common Stock |
164,694,337 |
|
10.24% |
Notes
(1) |
Percentage of ownership is based on 1,677,051,430 shares of our common stock issued and outstanding as of November 19, 2015, as well as options and warrants currently exercisable within 60 days. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares of our common stock, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of our common stock subject to stock options or warrants currently exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such stock option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person. |
|
|
(2) |
There are 2,187,500 shares that are held by Alaska Star
Minerals LLC. James Briscoe beneficially owns 100% of the membership
interest in Alaska Star Minerals LLC. There are 52,575,000 incentive stock
options granted to James Briscoe under the 2004, 2007 and 2010 stock
option plans that are exercisable within 60 days of November 19, 2015. |
48
(3) |
Includes incentive stock options granted under the 2004,
2007 and 2010 stock option plans that are exercisable within 60 days of
November 19, 2015. |
|
|
(4) |
Brett Gross also holds a non-interest bearing promissory
note with the principal amount of $30,000 issued by our company. The
promissory note is convertible into 16,806,723 units at a price of
$0.001785 per unit upon the increase of the authorized capital of our
company. Each unit is comprised of one share of common stock and two
warrants. Each warrant will be exercisable for a period of three years at
a price of $0.002499. The promissory note was converted and Mr. Gross was issued 16,806,723 shares of common stock effective July 31, 2015. |
Changes in Control
We are unaware of any contract or other arrangement the
operation of which may at a subsequent date result in a change in control of our
company.
Transactions with Related Persons, Promoters and Certain
Control Persons and Corporate Governance
Other than as disclosed below, there has been no transaction,
since February 1, 2012, or currently proposed transaction, in which our company
was or is to be a participant and the amount involved exceeds, $1,641.18, being
the lesser of $120,000 or one percent of the average of our total assets at year
end for the last two completed fiscal years, and in which any of the following
persons had or will have a direct or indirect material interest:
|
(a) |
Any director or executive officer of our
company; |
|
|
|
|
(b) |
Any person who beneficially owns, directly or indirectly,
more than 5% of any class of our voting securities; and |
|
|
|
|
(c) |
Any member of the immediate family (including spouse,
parents, children, siblings and in- laws) of any of the foregoing
persons. |
We entered into the following transactions with related parties during the six months ended July 31, 2015:
On May 29, 2015, we issued a non-interest bearing promissory note with the principal amount of $30,000 to Brett Gross, a director of our company. The promissory note is convertible into 16,806,723 units at a price of $0.001785 per unit upon the increase of the authorized capital of our company, each unit is comprised of one share of common stock and two warrants. Each warrant will be exercisable for a period of three years at a price of $0.002499. The note was issued as a private placement on August 10, 2015 according to the terms of the promissory note dated May 29, 2015. The promissory note was converted and Mr. Gross was issued 16,806,723 shares of common stock effective July 31, 2015.
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. The total rent payments were $3,132 for the six months ended July 31, 2015. No amount was due as of July 31, 2015.
At July 31, 2015 we had a balance of accrued unpaid wages of $431,867 to Jim Briscoe, our Chairman of the Board, CEO, CFO and President. Additionally, we had a balance of accrued unpaid wages of $15,65 to Larry Liang, our former President.
During the six months ended July 31, 2015, we paid Patricia Madaris, who became our VP Finance in May 2015, wages of $14,897 for her services as Executive Assistant to the CEO and Board of Directors. From May 2015 until July 31, 2015 we paid Patricia Madaris $14,970 for her services as VP Finance.
During the six months ended July 31, 2015, the Company issued 2,822,912 units to an investor, the Company’s CEO, for proceeds of $4,300. Each unit consists of one share of the Company’s common stock and one warrant to purchase one share each of the Company’s common stock. The warrants have an exercise price of $0.002130 and have a three year term.
We entered into the following transactions with related
parties during the year ended January 31, 2015:
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, 2015 we had a balance of accrued unpaid wages of
$389,367 to Jim Briscoe, our Chairman of the Board, CEO and CFO and
President.
At January 31, 2015, we had a balance of accrued unpaid wages
of $15,625 to Larry Liang, our former President.
49
During the year ended January 31, 2015, we paid Patricia
Madaris, who became our VP Finance in May 2015, wages of $61,409 for her
services as Executive Assistant to the CEO and Board of Directors.
We have an option to explore 26 standard federal lode mining
claims at the East Silver Bell project and 29 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, 2015 we
paid $8,525 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, 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.
During the year ended January
31, 2014, we paid Patricia Madaris, who became our VP Finance in May 2015, wages
of $48,258 for her services as Executive Assistant to the CEO and Board of
Directors.
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.
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.
During the year ended January 31, 2013, we paid Patricia
Madaris, who became our VP Finance in May 2015, wages of $52,013 for her
services as Executive Assistant to the CEO and Board of Directors.
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.
Compensation for Executive Officers and Directors
For information regarding compensation for our executive
officers and directors, see Executive Compensation.
50
Director Independence
We currently act with six directors consisting of James
Briscoe, Gary Musil, John Guilbert, Keith Brill, Peter OHeeron and Brett Gross.
Our common stock is quoted on the OTC Pink operated by the OTC Markets Group, which
does not impose any director independence requirements. Under NASDAQ rule
5605(a)(2), a director is not independent if he or she is also an executive
officer or employee of the corporation or was, at any time during the past three
years, employed by the corporation. Using this definition of independent
director, we have five independent directors consisting of Gary Musil, John
Guilbert, Keith Brill, Peter OHeeron and Brett Gross.
Where You Can Find More Information
We are not required to deliver an annual report to our
stockholders unless our directors are elected at a meeting of our stockholders
or by written consents of our stockholders. If our directors are not elected in
such manner, we are not required to deliver an annual report to our stockholders
and will not voluntarily send an annual report.
We file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission. Such filings
are available to the public over the Internet at the Securities and Exchange
Commissions website at http://www.sec.gov.
We have filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act of 1933 with respect
to the securities offered under this prospectus. This prospectus, which forms a
part of that registration statement, does not contain all information included
in the registration statement. Certain information is omitted and you should
refer to the registration statement and its exhibits.
You may review a copy of the registration statement at the
Securities and Exchange Commissions public reference room at 100 F Street, N.E.
Washington, D.C. 20549 on official business days during the hours of 10 a.m. to
3 p.m. You may obtain information on the operation of the public reference room
by calling the Securities and Exchange Commission at 1-800-SEC-0330. You may
also read and copy any materials we file with the Securities and Exchange
Commission at the Securities and Exchange Commissions public reference room.
Our filings and the registration statement can also be reviewed by accessing the
Securities and Exchange Commissions website at http://www.sec.gov.
51
The information in this prospectus is not complete and may be changed. The selling stockholder may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. |
|
350,000,000 Shares |
|
Liberty Star Uranium & Metals Corp. |
|
Common Stock |
|
Prospectus |
|
_____________, 2015 |
|
52
Information Not Required in Prospectus
Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable
by us in connection with the issuance and distribution of the securities being
registered hereunder. The selling stockholder will bear no expenses associated
with this offering except for any broker discounts and commissions or equivalent
expenses and expenses of the selling stockholders legal counsel applicable to
the sale of its shares. All of the amounts shown are estimates, except for the
Securities and Exchange Commission registration fees.
Securities and
Exchange Commission registration fees |
$ |
119.83 |
|
|
|
|
|
Accounting fees and expenses |
$ |
2,000 |
|
|
|
|
|
Legal fees and expenses |
$ |
10,000 |
|
|
|
|
|
Miscellaneous fees and
expenses |
$ |
0 |
|
|
|
|
|
Total |
$ |
12,119.83 |
|
Indemnification of Directors and Officers
The Nevada Revised Statutes provide that:
|
|
a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, except an action by or in the right of
the corporation, by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
him or her in connection with the action, suit or proceeding if he or she
acted in good faith and in a manner which he or she reasonably believed to
be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful; |
|
|
|
|
|
a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure
a judgment in its favor by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses, including amounts paid in settlement
and attorneys fees actually and reasonably incurred by him or her in
connection with the defense or settlement of the action or suit if he or
she acted in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to which
such a person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable to the corporation
or for amounts paid in settlement to the corporation, unless and only to
the extent that the court in which the action or suit was brought or other
court of competent jurisdiction determines upon application that in view
of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper; and
|
|
|
|
|
|
to the extent that a director, officer, employee or agent
of a corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding, or in defense of any claim, issue or
matter therein, the corporation must indemnify him or her against
expenses, including attorneys fees, actually and reasonably incurred by
him or her in connection with the defense. |
53
The Nevada Revised Statutes provide that we may make any
discretionary indemnification only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances. The determination must be made:
|
|
by our stockholders; |
|
|
|
|
|
by our board of directors by majority vote of a
quorum consisting of directors who were not parties to the action, suit or
proceeding; |
|
|
|
|
|
if a majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding so
orders, by independent legal counsel in a written opinion; |
|
|
|
|
|
if a quorum consisting of directors who were
not parties to the action, suit or proceeding cannot be obtained, by
independent legal counsel in a written opinion; or |
|
|
|
|
|
by court order. |
Our bylaws provide that every person who was or is a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or a person of whom he is the legal representative is or was
a director or officer of our company or is or was serving at the request of our
company or for its benefit as a director or officer of another corporation, or
as its representative in a partnership, joint venture, trust or other
enterprise, must be indemnified and held harmless to the fullest extent legally
permissible under the corporate law of the State of Nevada from time to time
against all expenses, liability and loss (including attorneys' fees, judgments,
fines and amounts paid or to be paid in settlement) reasonably incurred or
suffered by him in connection therewith. The expenses of officers and directors
incurred in defending a civil or criminal action, suit or proceeding must be
paid by our company as they are incurred and in advance of the final disposition
of the action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director or officer to repay the amount if it is ultimately determined by
a court of competent jurisdiction that he is not entitled to be indemnified by
our company. Such right of indemnification is a contract right which may be
enforced in any manner desired by such person. Such right of indemnification is
not exclusive of any other right which such directors, officers or
representatives may have or acquire and they are entitled to their respective
rights of indemnification under any bylaw, agreement, vote of stockholders,
provision of law or otherwise, as well as their rights under our bylaws.
Our bylaws provide that our board of directors may cause our
company to purchase and maintain insurance on behalf of any person who is or was
a director or officer of our company, or is or was serving at the request of our
company as a director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred in any such
capacity or arising out of such status, whether or not our company would have
the power to indemnify such person.
Recent Sales of Unregistered Securities
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. The
investors are U.S. Persons and are accredited investors and in issuing
securities to the investors we relied on the exemption from the registration
requirements of the Securities Act of 1933 provided by Rule 506 of Regulation D
promulgated thereunder.
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 investors are U.S. Persons
and are accredited investors and in issuing securities to the investors we
relied on the exemption from the registration requirements of the Securities Act
of 1933 provided by Rule 506 of Regulation D promulgated thereunder.
54
In April 2013, one investor exercised 3,033,618 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 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. We issued these shares
pursuant to an exemption from registration set out in Section 4(a)(2) of the
Securities Act of 1933.
In June 2013, one investor exercised 4,263,989 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 3,587,165 shares of common stock
and cancelled 676,824 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(a)(2) of the
Securities Act of 1933.
In May, June and July, 2013, we sold 18,001,184 units to five
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 August, 2013, we sold 423,135 units to one investor for
gross proceeds of $7,938. 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 $0.0263 until August 2, 2016.
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. We
elected not to pay the $150,000 portion of the August 2013 Note within 90 days
from the effective date. After the $150,000 portion of the August 2013 Note
became convertible, the note holder elected to convert the principal and
interest totaling $186,480 into 17,937,915 shares of the companys common stock
during the months of February through May of 2014. On December 9, 2013, we
received additional consideration of $75,000 pursuant to the terms of the August
2013 Note. We elected not to pay the $75,000 portion of the August 2013 Note
within 90 days from the effective date. In June, July and August 2014, the note
holder converted principal and interest totaling $93,240 into 9,983,507 shares
of the Companys common stock. On June 24, 2014 and September 3, 2014, we
received additional consideration of $75,000 and $75,000, respectively, pursuant
to the terms of the August 2013 Note. In December 2014 and January 2015, the
note holder converted principal and interest totaling $41,961 into 5,900,000
shares of the Companys common stock. On February 25, 2015, we received
additional consideration of $50,000 pursuant to the terms of the August 2013
Note. During the six months ended July 31, 2015, the note holder converted principal and interest totaling $144,517 into 62,515,187 shares of the Company’s common stock. The conversions happened on multiple dates with conversion prices ranging from $0.00112 to $0.00574 As of July 31, 2015, we had $62,161 of principal and interest outstanding for the August 2013 Note. In issuing these securities we relied on the registration exemption provided for in Rule 506 of Regulation D and/or Section 4(a)(2) of the Securities Act of 1933, as amended.
55
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 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 36 months. The purchase
price per share to be paid by KVM is calculated at a 20% discount to the lowest
volume weighted average price of the common stock as reported by Bloomberg, L.P.
during the five 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 filed a registration statement with the SEC covering
244,500,000 shares of our common stock underlying the KVM Investment Agreement.
The registration statement was declared effective by the SEC on January 27,
2014. On November 14, 2014, we filed a post-effective amendment to this
registration statement to deregister all of our unsold securities under the
registration statement. Of the 244,500,000 shares of our common stock
registered, 210,285,774 have not been sold. This post-effective amendment was
declared effective by the SEC on December 2, 2014.
On November 18, 2013, we entered into a securities purchase agreement (the “November 2013 Note”), whereby we agreed to issue a convertible note to one lender in the principal amount of $250,000. The proceeds from the note were $225,000, which created an original issue discount of $25,000. The note was 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 (after May 20, 2014) 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. On November 13, 2014, we entered into an Assignment of Promissory Note & Acknowledgment, whereby we consented to an assignment of the note to another lender, pursuant to which $250,000 remains owing by the Company. The maturity date of the November 2013 Note was extended to November 18, 2015. From November 2014 through January 2015, the new noteholder converted principal of $102,500 into 11,792,944 shares of the Company’s common stock. During the six months ended July 31, 2015, the new noteholder converted principal of $153,047 into 48,243,936 shares of the Company’s common stock. The conversions happened on multiple dates with conversion prices ranging from $0.00147 to $0.00609 In May 2015, the remaining principal and interest of $28,046 on the November 2013 Note was converted into 18,995,113 shares of the Company’s common stock. There is currently no principal and interest outstanding for the November 2013 Note. In issuing these securities we relied on the registration exemption provided for in Rule 506 of Regulation D and/or Section 4(a)(2) of the Securities Act of 1933, as amended.
In March 2014, the Company issued 1,000,000 units of common
stock to a designee of MBGS, LLC, pursuant to a settlement agreement. Each unit
consists of one share of the Companys common stock and a warrant to purchase
one-half share of the Companys common stock. The value of the shares issued is
$17,500. The 500,000 warrants have an exercise price of $0.028 and have a two
year term. In issuing these securities we relied on the registration exemption
provided for in Section 4(a)(2) of the Securities Act of 1933, as amended.
In August 2014, we received $150,000 pursuant to the terms of a
convertible promissory note (the August 2014 Note) dated August 26, 2014. The
Note bears interest at 12%, is due on August 26, 2015, and is convertible after
180 days at a 45% discount to the average of the daily VWAP prices for the
previous 10 trading days before the date of conversion. During the six months
ended July 31, 2015, the new noteholder converted principal of $160,834 into
56,676,739 shares of the Companys common stock. The conversions happened on
multiple dates with conversion prices ranging from $0.00193 to $0.00416. As of
July 31, 2015, we had $0 of principal and interest outstanding for this Note. We issued the security to one U.S. person who is an accredited investor (as that
term is defined in Rule 501 of Regulation D, promulgated by the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended, and in
issuing these securities to this investor we relied on the registration
exemption provided for in Rule 506 of Regulation D and/or Section 4(a)(2) of the
Securities Act of 1933, as amended.
56
On October 14, 2014, we entered into a securities purchase agreement, whereby we agreed to issue a convertible note (the “October 2014 Note”) to one lender in the principal amount of $105,000. The Note is payable in full on October 14, 2015, bears interest at the rate of 10% per annum, and includes a $5,000 original issuance discount. The Note may be convertible into shares of common stock of our company at any time from 180 days after the execution date of the Note at a price per share of 40% discount to the average of the daily VWAP for the previous five trading days before the date of conversion. During the six months ended July 31, 2015, the note holder converted principal and interest totaling $110,901 into 74,878,264 shares of the Company’s common stock. The conversions happened on multiple dates with conversion prices ranging from $0.00101 to $0.00216. As of July 31, 2015, we had $0 of principal and interest outstanding for the October 2014 Note. We issued the security to one U.S. person who is an accredited investor (as that term is defined in Rule 501 of Regulation D, promulgated by the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, and in issuing these securities to this investor we relied on the registration exemption provided for in Rule 506 of Regulation D and/or Section 4(a)(2) of the Securities Act of 1933, as amended.
During the year ended January 31, 2015, the Company
issued 6,424,979 units to three investors for total proceeds of $73,000. Each
unit consists of one share of the Companys common stock and a warrant to
purchase one share of the Companys common stock. The warrants have exercise
prices ranging from $0.015 to $0.021 and have a three year term. In issuing
these securities we relied on the registration exemption provided for in Section
4(a)(2) of the Securities Act of 1933, as amended.
On December 3, 2014, we entered into a note purchase agreement,
whereby we agreed to issue a convertible note (the December 2014 Note) to
Tangiers Capital, LLC (the Lender) in the principal amount of $210,000 and to
pay interest on the principal balance hereof (which principal balance shall be
increased by the Lenders payment of additional consideration as set forth in
the December 2014 Note and which increase shall also include the prorated amount
of the original issue discount in connection with Lenders payment of additional
consideration) at the rate of 10%, all of which interest shall be deemed earned
as of the date of each such payment of additional consideration by the Lender on
December 3, 2016 (the Maturity Date), to the extent such principal amount and
interest have been repaid or converted into our companys common stock, in
accordance with the terms of the December 2014 Note. The December 2014 Note is
payable in full on the Maturity Date and bears interest at the rate of 10% per
annum. There is a $10,000 original issuance discount on the December 2014 Note.
The initial purchase price was $105,000 of consideration of which $100,000 was
received by our company and $5,000 was retained through the original issue
discount. The December 2014 Note may be prepaid according to the following
schedule: between 1 and 90 days from the date of execution, the December 2014
Note may be prepaid for 110% of face value plus accrued interest; between 91 and
180 days from the date of execution, the December 2014 Note may be prepaid for
130% of face value plus accrued interest; after 180 days from the date of
execution until the Maturity Date, the December 2014 Note may not be prepaid
without written consent from the Lender. The December 2014 Note may be
convertible into shares of common stock of our company at a price per share of
62.5% discount to the average of the daily volume weighted average price
(VWAP) for the previous five trading days before the date of conversion. In June and July 2015, $49,357 of the December 2014 Note was converted into 43,051,070 shares of the Company’s common stock. We
issued the securities to one U.S. person who is an accredited investor (as that
term is defined in Rule 501 of Regulation D, promulgated by the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended, and in
issuing these securities to this investor we relied on the registration
exemption provided for in Rule 506 of Regulation D and/or Section 4(a)(2) of the
Securities Act of 1933, as amended.
In June 2015, we received additional consideration of $30,000 with $1,500 of original issue discount under the terms of the December 2014 Note. An amendment to the December 2014 Note was executed on June 9, 2015 to include this additional $31,500 of consideration under the December 2014 Note. In July 2015, we received additional consideration of $20,000 with $1,000 of original issue discount under the terms of the December 2014 Note. An amendment to the December 2014 Note was executed on July 7, 2015 to include this additional $21,000 of consideration under the December 2014 Note. As of July 31, 2015, we had a balance of $149,911 of principal and interest outstanding for this Note. In August, September and October of 2015, $77,643 of the December 2014 Note was converted into 77,194,959 shares of the Company’s common stock. The material terms of the December 2014 Note can be reviewed on Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on December 15, 2015.
Currently, the December 2014 Note is the sole security the Company has with Tangiers Capital, LLC. Additionally, the Company entered into an Investment Agreement and Registration Rights Agreement with Tangiers Capital, LLC for an equity line of credit. The Company has the ability to repay the indebtedness to Tangiers Capital, LLC without recourse to the monies received or to be received under the equity line. Additionally, the amount of indebtedness may not be reduced or relieved by the issuance of shares under the equity line.
57
During the six months ended July 31, 2015, we issued
2,941,176 units to an investor for total proceeds of $10,000. Each unit consists
of one share of our common stock and two warrants to purchase one share each of
the Companys common stock. The warrants have an exercise price of $0.0048 and
have a three year term. In issuing these securities we relied on the
registration exemption provided for in Section 4(a)(2) of the Securities Act of
1933, as amended.
In May of 2015, $38,784 of the August 2013 Note was converted
into 31,715,187 shares of the Companys common stock.
In June, 2015, we issued 1,846,154 units to an investor for
total proceeds of $3,000. Each unit consists of one share of our common stock
and one warrant to purchase one share of our common stock. The warrants have an
exercise price of $0.002275 and have a three year term. In issuing these
securities we relied on the registration exemption provided for in Section
4(a)(2) of the Securities Act of 1933, as amended.
On May 29, 2015, we issued a non-interest bearing promissory
note with the principal amount of $30,000 to Brett Gross, a director of our
company. The promissory note is convertible into 16,806,723 units at a price of
$0.001785 per unit upon the increase of the authorized capital of our company.
Each unit is comprised of one share of common stock and two warrants. Each
warrant will be exercisable for a period of three years at a price of $0.002499.
In issuing this security we relied on the registration exemption provided for in
Section 4(a)(2) of the Securities Act of 1933, as amended.
Exhibits
Exhibit Number |
Description |
|
|
(3) |
Articles of Incorporation
and Bylaws |
3.1 |
Articles of Incorporation (incorporated by
reference from our Registration Statement on Form SB-2, filed on May 14,
2002) |
3.2 |
Bylaws (incorporated by
reference from our Quarterly Report on Form 10-QSB, filed on December 14,
2007) |
3.3 |
Certificate of Change to Authorized Capital
(incorporated by reference from our Current Report on Form 8-K, filed on
September 1, 2009) |
3.4 |
Articles of Merger
(incorporated by reference from our Current Report on Form 8-K, filed on
September 1, 2009) |
3.5 |
Certificate of Amendment to Articles of
Incorporation (incorporated by reference to the Amended Registration Statement on Form S-1, filed on July 29, 2015) |
(5) |
Opinion regarding
Legality |
5.1* |
Opinion of Lucosky Brookman LLP regarding the legality of the securities being registered |
(10) |
Material Contracts |
10.1 |
Letter Agreement dated November 14, 2011 with
Northern Dynasty (incorporated by reference from our Current Report on
Form 8-K, filed on November 25, 2011) |
10.2 |
Form of Stock Option Agreement
(incorporated by reference from our Current Report on Form 8-K, filed on
January 24, 2012) |
10.3 |
Form of Warrant Certificate (incorporated by
reference from our Current Report on Form 8-K, filed on July 30, 2012) |
10.4 |
Settlement Agreement dated
November 13, 2012 with Northern Dynasty Minerals Ltd. (incorporated by
reference from our Current Report on Form 8-K, filed on November 15, 2012) |
10.5 |
Convertible Note issued to JSJ Investments Inc.
(incorporated by reference from our Current Report on Form 8-K, filed on
September 2, 2014) |
10.6 |
Securities Purchase Agreement
dated October 15, 2014 (incorporated by reference from our Current Report
on Form 8-K, filed on October 20, 2014) |
10.7 |
Convertible Note dated October 15, 2014
(incorporated by reference from our Current Report on Form 8-K, filed on
October 20, 2014) |
10.8 |
Investment Agreement dated
December 15, 2014 with Tangiers Capital, LLC (incorporated by reference
from our Current Report on Form 8-K, filed on December 19, 2014) |
10.9 |
Registration Rights Agreement dated December
15, 2014 with Tangiers Capital, LLC (incorporated by reference from our
Current Report on Form 8-K, filed on December 19, 2014) |
58
10.10 |
Investment Agreement dated June
20, 2015 with Tangiers Capital, LLC (incorporated by reference from our
Current Report on Form 8-K, filed on June 30, 2015) |
10.11 |
Registration Rights Agreement dated June 20,
2015 with Tangiers Capital, LLC (incorporated by reference from our
Current Report on Form 8-K, filed on June 30, 2015) |
(14) |
Code of Ethics |
14.1 |
Code of Ethics (incorporated by reference from
our Current Report on Form 8-K, filed on September 1, 2009) |
(21) |
Subsidiaries |
21.1 |
Subsidiaries of Liberty Star Uranium &
Metals Corp. Big Chunk Corp., incorporated in Alaska Hay Mountain Super
Project LLC, organized in Arizona |
(23) |
Consents of Experts and
Counsel |
23.1* |
Consent of MaloneBailey, LLP |
23.2* |
Consent of Lucosky Brookman LLP (included in Exhibit 5.1) |
(101) |
Interactive Data File |
101.INS* |
XBRL Instance Document |
101.SCH* |
XBRL Taxonomy Extension Schema |
101.CAL* |
XBRL Taxonomy Extension
Calculation Linkbase |
101.DEF* |
XBRL Taxonomy Extension Definition Linkbase |
101.LAB* |
XBRL Taxonomy Extension Label
Linkbase |
101.PRE* |
XBRL Taxonomy Extension Presentation Linkbase |
*Filed herewith.
Undertakings
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
i. To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
ii. To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than 20% change
in the maximum aggregate offering price set forth in the Calculation of
Registration Fee table in the effective registration statement; and
iii. To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering; and
4. That, for the purpose of determining liability under the
Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule
424(b) as part of a registration statement relating to an offering, other than
registration statements relying on 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and
included in the registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a
document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such first use, supersede or
modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document
immediately prior to such date of first use.
59
5. That, for the purpose of determining liability of the
registrant under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities, the undersigned registrant undertakes that in a
primary offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to sell the
securities to the purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the undersigned
registrant will be a seller to the purchaser and will be considered to offer or
sell such securities to such purchaser:
i. Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed pursuant to Rule
424;
ii. Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used or referred to by
the undersigned registrant;
iii. The portion of any other free writing prospectus relating
to the offering containing material information about the undersigned registrant
or its securities provided by or on behalf of the undersigned registrant; and
iv. Any other communication that is an offer in the offering
made by the undersigned registrant to the purchaser;
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
60
Signatures
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Tucson,
State of Arizona, on
November 25, 2015.
Liberty Star Uranium & Metals Corp.
By:
/s/ James Briscoe
James Briscoe
President, Chief
Executive Officer, Chief Financial Officer, Chairman of the Board and Director
(Principal Executive Officer, Principal Financial Officer and Principal
Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ James Briscoe
James Briscoe
President, Chief
Executive Officer, Chief Financial Officer, Chairman of the Board and Director
(Principal Executive Officer, Principal Financial Officer and Principal
Accounting Officer)
Date: November 25, 2015.
/s/ Gary Musil
Gary Musil
Secretary and Director
Date: November 25, 2015.
/s/ John Guilbert
John Guilbert
Director
Date: November 25, 2015.
/s/ Peter O’Heeron
Peter O’Heeron
Director
Date: November 25, 2015.
/s/ Keith Brill
Keith Brill
Director
Date: November 25, 2015.
/s/ Brett Gross
Brett Gross
Director
Date: November 25, 2015.
61
November 25, 2015
Liberty Star Uranium & Metals Corp.
5610 E Sutler Lane
Tucson, AZ 85712
Re: Amended Registration Statement on Form S-1
Ladies and Gentlemen: |
|
We have acted as counsel to Liberty Star Uranium & Metals Corp., a Nevada corporation (the “Company”), in connection with the preparation and filing by the Company of the amended registration statement on Form S-1 (the “Registration Statement”) with the U.S. Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”), with respect to the registration of 350,000,000 shares of the Company’s common stock, par value $0.00001 per share (the “Registered Shares”) that are issuable pursuant to the terms and conditions of the following agreements (collectively, the “Agreements”): (i) that certain investment agreement between Tangiers Capital, LLC (“Tangiers”) and the Company entered into on June 20, 2015; and (ii) that certain registration rights agreement between Tangiers and the Company entered into on June 20, 2015.
This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act.
In connection with this opinion, we have examined and relied upon the originals or copies of such documents, corporate records, and other instruments as we have deemed necessary or appropriate for the purpose of this opinion, including, without limitation, the following: (a) the articles of incorporation of the Company, as amended; (b) the bylaws of the Company; (c) the Agreements; and (d) the Registration Statement, including all exhibits thereto.
In our examination, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such documents, and the accuracy and completeness of the corporate records made available to us by the Company. As to any facts material to the opinions expressed below, with your permission we have relied solely upon, without independent verification or investigation of the accuracy or completeness thereof, any certificates and oral or written statements and other information of or from public officials, officers or other representatives of the Company and others.
Based upon the foregoing, and in reliance thereon, we are of the opinion that the Registered Shares have been duly authorized, and when sold pursuant to the terms described in the Registration Statement, will be legally issued, fully paid and non-assessable.
The opinion expressed herein is limited to the laws of the State of Nevada, including the Nevada Constitution, all applicable provisions of the statutory provisions, and reported judicial decisions interpreting those laws. This opinion is limited to the laws in effect as of the date the Registration Statement is declared effective by the Commission and is provided exclusively in connection with the public offering contemplated by the Registration Statement.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference of this firm under the caption “Legal Matters” in the prospectus which is made part of the Registration Statement. In giving this consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission thereunder.
Very Truly Yours,
/s/ Lucosky Brookman LLP
Lucosky Brookman LLP
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation in this Registration Statement
on Form S-1 of our report dated May 1, 2015 with respect to the audited
consolidated financial statements of Liberty Star Uranium & Metal Corp. for
the years ended January 31, 2015 and 2014.
We also consent to the references to us under the heading
Experts in such Registration Statement.
/s/ MaloneBailey, LLP
www.malonebailey.com
Houston, Texas
November 4, 2015
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