Risk
Factors
Investing
in Our common stock involves a high degree of risk. You should not invest in our stock unless you are able to bear the complete loss
of your investment. You should carefully consider the risks described below, as well as other information provided to you in this prospectus,
including information in the section of this annual report on Form 10-K entitled “Forward-Looking Statements” before making
an investment decision. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertainties
not presently known to Us or that we currently believe are immaterial may also impair our business operations. If any of the following
risks actually occur, our business, financial condition or results of operations could be materially adversely affected, the value of
our common stock could decline, and you may lose all or part of your investment.
Risks
Related to Our Company and Our Business
Our
businesses may be materially adversely affected by the recent coronavirus (COVID-19) outbreak or the related market decline and volatility.
On
January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency
of International Concern.” On March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic.”
The significant outbreak of COVID-19 has resulted in a widespread health crisis that is adversely affecting the economies and financial
markets worldwide, including the business which we operate and own. The recent market decline and volatility in connection with the COVID-19
pandemic could also materially and adversely affect any future potential acquisitions. Furthermore, with restrictions on travel, the
limited ability to have meetings with personnel, vendors and services providers are expected to have an adverse effect on our businesses.
The extent to which COVID-19 impacts our businesses will depend on future developments, which are highly uncertain and cannot be predicted,
including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact,
among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, our operations
may be materially adversely affected.
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.
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 the 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 business operations and our financial stability. 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. Any such efforts will require
financing, which we may not be able to arrange.
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.
We
face risks related to mining, exploration and mine construction, if warranted, on our properties.
Our
level of profitability, if any, in future years will depend to a great degree on prices of minerals set by global markets and whether
our exploration-stage properties can be brought into production. It is impossible to ensure that the current and future exploration programs
and/or feasibility studies on our existing properties will establish reserves. Whether it will be economically feasible to extract a
mineral depends on a number of factors, including, but not limited to: the particular attributes of the deposit, such as size, grade
and proximity to infrastructure; mineral prices; mining, processing and transportation costs; the willingness of lenders and investors
to provide project financing; labor costs and possible labor strikes; and governmental regulations, including, without limitation, regulations
relating to prices, taxes, royalties, land tenure, land use, importing and exporting materials, foreign exchange, environmental protection,
employment, worker safety, transportation, and reclamation and closure obligations. The exact effect of these factors cannot be accurately
predicted, but the combination of these factors may result in us receiving an inadequate return on invested capital.
Our
long-term success will depend ultimately on our ability to achieve and maintain profitability and to develop positive cash flow from
our mining activities.
Our
long-term success will depend ultimately on our ability to achieve and maintain profitability and to develop positive cash flow from
our operations by exploring and exploiting properties with commercially recoverable minerals and to develop these into profitable mining
activities. We cannot assure you that we can or will extract mineralized materials from any property or that any such exploitation will
result in achieving and maintaining profitability and developing positive cash flow.
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.
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 $6,718 and negative working capital of $1,991,571 as of January 31, 2021. 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 ownership interest in any revenue generating properties.
We were incorporated in 2001 and took over our current business in 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 firm’s 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 , stated
in its audit report attached to our audited financial statements for the fiscal year ended January 31, 2021 that since we have
suffered recurring losses from operations, require 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.
Compliance
with environmental regulations and litigation based on environmental regulations could require significant expenditures.
Environmental
regulations mandate, among other things, the maintenance of air and water quality standards, and the rules on land development and reclamation.
They also set forth limitations on the generation, transportation, storage, and disposal of solid and hazardous waste. Environmental
legislation is evolving in a manner that may require stricter standards and enforcement, increased fines and penalties for non-compliance,
more stringent environmental assessments of proposed projects, and a heightened degree of responsibility for mining companies and their
officers, directors and employees. In connection with our current exploration activities or with our prior mining operations, we may
incur environmental costs that could have a material adverse effect on our financial condition and results of operations. Any failure
to remedy an environmental problem could require us to suspend operations or enter into interim compliance measures pending completion
of the required remedy.
Moreover,
governmental authorities and private parties may bring lawsuits based upon damage to property and injury to persons resulting from the
environmental, health and safety impacts of prior and current operations, including operations conducted by other mining companies many
years ago at sites located on properties that we currently own or formerly owned. These lawsuits could lead to the imposition of substantial
fines, remediation costs, penalties and other civil and criminal sanctions. We cannot assure you that any such law, regulation, enforcement
or private claim would not have a material adverse effect on our financial condition, results of operations or cash flows.
Our
future operations may face substantial regulation of health and safety.
Mining
operations are subject to extensive and complex laws and regulations governing worker health and safety across our operating regions
and our failure to comply with applicable legal requirements can result in substantial penalties. Future changes in applicable laws,
regulations, permits and approvals or changes in their enforcement or regulatory interpretation could substantially increase costs to
achieve compliance, lead to the revocation of existing or future exploration or mining rights or otherwise have an adverse impact on
our results of operations and financial position.
Mines
are inspected on a regular basis by government regulators who may issue citations and orders when they believe a violation has occurred
under local mining regulations. If inspections result in an alleged violation, we may be subject to fines, penalties or sanctions and
our mining operations could be subject to temporary or extended closures.
In
addition to potential government restrictions and regulatory fines, penalties or sanctions, our ability to operate (including the effect
of any impact on our workforce) and thus, our potential results of future operations and our financial position (including because of
potential related fines and sanctions), could be adversely affected by accidents, injuries, fatalities or events detrimental (or perceived
to be detrimental) to the health and safety of our employees, the environment or the communities in which we operate.
Mining
operations are subject to extensive environmental laws and regulations.
Our
exploration, development, mining and processing operations are subject to extensive laws and regulations governing land use and the protection
of the environment, which generally apply to air and water quality, protection of endangered, protected or other specified species, hazardous
waste management and reclamation. We have made, and expect to make in the future, significant expenditures to comply with such laws and
regulations. Compliance with these laws and regulations imposes substantial costs and burdens, and can cause delays in obtaining, or
failure to obtain, government permits and approvals which may adversely impact our closure processes and operations.
Increased
global attention or regulation of consumption of water by industrial activities, as well as water quality discharge, and on restricting
or prohibiting the use of cyanide and other hazardous substances in processing activities could similarly have an adverse impact on our
results of operations and financial position due to increased compliance and input costs.
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 the 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 12,300,000 shares of common stock, $0.00001 par value per share. As of July 31, 2021, there were 10,150,635
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.
Our
common stock price may be volatile.
The
market price of our Common Stock has been and is likely to continue to be volatile and could fluctuate in price in response to various
factors, many of which are beyond our control, including the following:
|
-
|
our
ability to grow revenues;
|
|
-
|
our
ability to achieve profitability;
|
|
-
|
our
ability to raise capital when needed;
|
|
-
|
our
ability to execute our business plan;
|
|
-
|
legislative,
regulatory, and competitive developments; and
|
|
-
|
economic
and external factors.
|
In
addition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the
operating performance of any company. These market fluctuations may also materially and adversely affect the market price of our common
stock regardless of our actual operations and the results from those operations.
Because
our common stock trades on the over the counter (OTC) market, you may not be able to buy and sell our common stock at optimum prices
and you may face liquidity issues.
The
trading and quotation of our common stock on otcmarkets.com imposes, among others, the following risks:
|
-
|
lesser
availability of quotes and order information;
|
|
-
|
lack
of liquidity; and
|
|
-
|
wide
dealer spread.
|
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.
Our
Articles of Incorporation were amended on June 22, 2020 to add Class A Shares to deter a take-over of our company.
We
amended our Articles of Incorporation on June 22, 2020 to add Class A shares which have an increased voting power of 200 votes per share
to deter a hostile take-over of the Company. The Company filed a Certificate of Designation with the Secretary of State of Nevada to
establish the terms of the Company’s Class A Common Stock (the “Class A Shares”), par value $0.00001 per share, 200,000
shares authorized. The terms of the Class A Shares include 200-1 voting rights in addition to the rights held by common stockholders.
Only persons who are current members of the Company’s Board of Directors may own or hold Class A Shares.
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 stock’s 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
stock’s 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, as amended (the “Exchange Act”),
which imposes additional sales practice requirements on broker/dealers who sell our company’s 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 (the “SEC”). 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 stockholder’s ability to buy and sell our stock.
In
addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (“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 customer’s 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.
Triton
will pay less than the then-prevailing market price for our common stock.
Our
common stock to be issued to Triton pursuant to the Investment Agreement will be purchased at 75% of the lowest day of the daily volume
weighted average price of our common stock during the five consecutive trading days immediately prior to the Closing by Triton. Closing
occurs up to 5 days from the purchase notice provided by the Company. Triton 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 Triton sells the shares, the price of our common stock could decrease. If our stock price decreases, Triton 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.
Your
ownership interest may be diluted and the value of our common stock may decline by exercising the purchase notice right pursuant to the
Investment Agreement with Triton.
Pursuant
to the Investment Agreement with Triton, when we deem it necessary, we may raise capital through the private sale of our common stock
to Triton at a discounted price. Because the purchase notice 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.
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, and as such, Triton may sell a large number of shares, resulting in substantial
dilution to the value of shares held by existing stockholders.
Triton
has agreed, subject to certain exceptions listed in the Investment Agreement to refrain from holding an amount of shares that would result
in Triton or its affiliates owning more than 9.99% of the then-outstanding shares of our common stock at any one time. These restrictions,
however, do not prevent Triton 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, Triton 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.
Market
Price of and Dividends on Our Common Equity
and
Related Stockholder Matters
Market
information
Our
common stock is quoted on the OTC Markets Group’s OTCQB under the trading symbol “LBSR”. Trading in stocks quoted on
the OTCQB 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 company’s operations or business prospects.
The
following table sets forth the range of high and low closing bid quotations for our common stock for each of the periods indicated as
reported by the OTC Markets. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions.
Quarter
Ended
|
|
|
High
|
|
|
Low
|
|
January
31, 2021
|
|
|
$
|
1.600
|
|
|
$
|
1.450
|
|
October
31, 2020
|
|
|
$
|
0.500
|
|
|
$
|
0.450
|
|
July
31, 2020
|
|
|
$
|
0.600
|
|
|
$
|
0.550
|
|
April
30, 2020
|
|
|
$
|
0.350
|
|
|
$
|
0.300
|
|
January
31, 2020
|
|
|
$
|
0.550
|
|
|
$
|
0.450
|
|
October
31, 2019
|
|
|
$
|
0.400
|
|
|
$
|
0.350
|
|
July
31, 2019
|
|
|
$
|
0.750
|
|
|
$
|
0.650
|
|
April
30, 2019
|
|
|
$
|
0.650
|
|
|
$
|
0.550
|
|
Our
transfer agent, The Nevada Agency and Transfer Company, of Suite 880 Bank of America, 50 West Liberty Street, Reno, Nevada 89501 (telephone:
775.322.0626; facsimile 775.322.5632) is the registrar and transfer agent for our common stock.
All
references to common shares and common share data in the accompanying consolidated financial statements and elsewhere in this Form 10-K
as of January 31, 2021 and 2020, and for the years then ended, reflect the 1-for-500 Reverse Stock Split.
On
August 20, 2021, the closing price of our common stock as reported by the OTCQB was $0.74 per share.
Holders
of Common Stock
As
of July 31, 2021, there were approximately 144 holders of record of our common stock. As of such date, 10,150,635 shares of our common
stock were issued and outstanding. We had 2 holders of Class A common stock with 102,000 shares 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
Report
of Independent Registered Public Accounting Firm
To
the Shareholders and Board of Directors of
Liberty
Star Uranium & Metals Corp.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of Liberty Star Uranium & Metals Corp. and its subsidiaries (collectively,
the “Company”) as of January 31, 2021 and 2020, and the related consolidated statements of operations, changes in stockholders’
deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January
31, 2021 and 2020, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
Going
Concern Matter
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note
3 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises
substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described
in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical
Audit Matters
Critical
audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be
communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and
(2) involved our especially challenging, subjective, or complex judgements. We determined that there are no critical audit matters.
www.malonebailey.com
We
have served as the Company’s auditor since 2013.
Houston,
Texas
May
3, 2021
LIBERTY
STAR URANIUM & METALS CORP.
CONSOLIDATED
BALANCE SHEETS
|
|
January 31, 2021
|
|
|
January 31, 2020
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
6,718
|
|
|
$
|
25,024
|
|
Prepaid expenses
|
|
|
4,815
|
|
|
|
8,311
|
|
Total current assets
|
|
|
11,533
|
|
|
|
33,335
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
33,556
|
|
|
|
39,892
|
|
Total assets
|
|
$
|
45,089
|
|
|
$
|
73,227
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
467,957
|
|
|
$
|
458,350
|
|
Accounts payable to related parties
|
|
|
51,119
|
|
|
|
51,119
|
|
Accrued wages to related parties
|
|
|
811,711
|
|
|
|
811,711
|
|
Advances from related party
|
|
|
301,077
|
|
|
|
101,631
|
|
Notes payable to related parties
|
|
|
283,271
|
|
|
|
166,560
|
|
Convertible promissory note, net of debt discount of $7,642 and $15,364
|
|
|
87,969
|
|
|
|
152,504
|
|
Total current liabilities
|
|
|
2,003,104
|
|
|
|
1,741,875
|
|
|
|
|
|
|
|
|
|
|
Long-term:
|
|
|
|
|
|
|
|
|
Long-term accounts payable, net of current portion
|
|
|
20,300
|
|
|
|
37,400
|
|
Long-term debt - SBA
|
|
|
33,162
|
|
|
|
-
|
|
Total long-term liabilities
|
|
|
53,462
|
|
|
|
37,400
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,056,566
|
|
|
|
1,779,275
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit
|
|
|
|
|
|
|
|
|
Class A Common stock - $.00001 par value; 200,000 and 0 authorized; 102,000 and 0 shares issued and outstanding, respectively
|
|
|
1
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Common stock - $.00001 par value; 12,300,000 and 12,500,000 authorized; 9,902,052 and 9,116,725 shares issued and outstanding, respectively
|
|
|
99
|
|
|
|
91
|
|
Common stock to be issued
|
|
|
15,000
|
|
|
|
-
|
|
Additional paid-in capital
|
|
|
55,503,564
|
|
|
|
55,074,257
|
|
Accumulated deficit
|
|
|
(57,530,141
|
)
|
|
|
(56,780,396
|
)
|
Total stockholders’ deficit
|
|
|
(2,011,477
|
)
|
|
|
(1,706,048
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ deficit
|
|
$
|
45,089
|
|
|
$
|
73,227
|
|
The
accompanying notes are an integral part of the consolidated financial statements
LIBERTY
STAR URANIUM & METALS CORP.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
For the Years Ended
|
|
|
|
January 31,
|
|
|
|
2021
|
|
|
2020
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Geological and geophysical costs
|
|
|
118,955
|
|
|
|
70,332
|
|
Salaries and benefits
|
|
|
144,513
|
|
|
|
219,188
|
|
Depreciation
|
|
|
6,336
|
|
|
|
2,684
|
|
Legal
|
|
|
167,800
|
|
|
|
37,706
|
|
Professional services
|
|
|
75,419
|
|
|
|
79,069
|
|
General and administrative
|
|
|
72,930
|
|
|
|
56,158
|
|
Travel
|
|
|
8,939
|
|
|
|
2,659
|
|
Net operating expenses
|
|
|
594,892
|
|
|
|
467,796
|
|
Loss from operations
|
|
|
(594,892
|
)
|
|
|
(467,796
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(185,636
|
)
|
|
|
(155,216
|
)
|
Gain on forgiveness of SBA loan
|
|
|
30,578
|
|
|
|
-
|
|
Gain on settlement of accounts payable
|
|
|
-
|
|
|
|
177,000
|
|
Gain on change in fair value of derivative liability
|
|
|
205
|
|
|
|
108,543
|
|
Total other income (expense)
|
|
|
(154,853
|
)
|
|
|
130,327
|
|
Net loss
|
|
|
(749,745
|
)
|
|
$
|
(337,469
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share of common stock - basic and diluted
|
|
$
|
(0.08
|
)
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock outstanding - basic and diluted
|
|
|
9,746,433
|
|
|
|
8,721,447
|
|
The
accompanying notes are an integral part of the consolidated financial statements
LIBERTY
STAR URANIUM & METALS CORP.
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
For the Years Ended January 31, 2021
and 2020
|
|
Class
A Common stock
|
|
|
Common
stock
|
|
|
Common
stock to
|
|
|
Additional
paid-in
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
be Issued
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
8,194,915
|
|
|
|
82
|
|
|
|
-
|
|
|
|
54,749,079
|
|
|
|
(56,442,927
|
)
|
|
|
(1,693,766
|
)
|
Issuance
of common stock and warrants in private placement
|
|
|
-
|
|
|
|
-
|
|
|
|
128,673
|
|
|
|
1
|
|
|
|
-
|
|
|
|
70,698
|
|
|
|
-
|
|
|
|
70,699
|
|
Shares
issued for conversion of notes
|
|
|
-
|
|
|
|
-
|
|
|
|
781,622
|
|
|
|
8
|
|
|
|
-
|
|
|
|
131,946
|
|
|
|
-
|
|
|
|
131,954
|
|
Settlement
of accounts payable through issuance of common stock
|
|
|
-
|
|
|
|
-
|
|
|
|
60,000
|
|
|
|
1
|
|
|
|
-
|
|
|
|
35,999
|
|
|
|
-
|
|
|
|
36,000
|
|
Reclass
of APIC to derivative liabilities for tainted warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(322,006
|
)
|
|
|
-
|
|
|
|
(322,006
|
)
|
Resolution
of derivative liabilities due to debt conversions and untainted warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
372,119
|
|
|
|
-
|
|
|
|
372,119
|
|
Return
of common stock for services
|
|
|
-
|
|
|
|
-
|
|
|
|
(48,485
|
)
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(43,999
|
)
|
|
|
-
|
|
|
|
(44,000
|
)
|
Stock
based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
80,421
|
|
|
|
-
|
|
|
|
80,421
|
|
Net
loss for the year ended January 31, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(337,469
|
)
|
|
|
(337,469
|
)
|
Balance,
January 31, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
9,116,725
|
|
|
$
|
91
|
|
|
$
|
-
|
|
|
$
|
55,074,257
|
|
|
$
|
(56,780,396
|
)
|
|
$
|
(1,706,048
|
)
|
Issuance
of common stock and warrants in private placement
|
|
|
-
|
|
|
|
-
|
|
|
|
54,000
|
|
|
|
1
|
|
|
|
15,000
|
|
|
|
20,598
|
|
|
|
-
|
|
|
|
35,599
|
|
Class
A Shares issued to settle related party advances and notes payable
|
|
|
102,000
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
49,061
|
|
|
|
-
|
|
|
|
49,062
|
|
Shares
issued for conversion of notes
|
|
|
-
|
|
|
|
-
|
|
|
|
586,062
|
|
|
|
6
|
|
|
|
-
|
|
|
|
169,854
|
|
|
|
-
|
|
|
|
169,860
|
|
Shares
issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
142,857
|
|
|
|
1
|
|
|
|
-
|
|
|
|
49,999
|
|
|
|
-
|
|
|
|
50,000
|
|
Reclass
of APIC to derivative liabilities for tainted warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(189,472
|
)
|
|
|
-
|
|
|
|
(189,472
|
)
|
Resolution
of derivative liabilities due to debt conversions and untainted warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
329,267
|
|
|
|
-
|
|
|
|
329,267
|
|
Share
issued for rounding from reverse stock split
|
|
|
-
|
|
|
|
-
|
|
|
|
2,408
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
loss for the year ended January 31, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(749,745
|
)
|
|
|
(749,745
|
)
|
Balance,
January 31, 2021
|
|
|
102,000
|
|
|
$
|
1
|
|
|
|
9,902,052
|
|
|
$
|
99
|
|
|
$
|
15,000
|
|
|
$
|
55,503,564
|
|
|
$
|
(57,530,141
|
)
|
|
$
|
(2,011,477
|
)
|
The
accompanying notes are an integral part of the consolidated financial statements
LIBERTY
STAR URANIUM & METALS CORP.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
For
the Years Ended
|
|
|
|
January
31
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(749,745
|
)
|
|
$
|
(337,469
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
6,336
|
|
|
|
2,684
|
|
Amortization
of debt discounts
|
|
|
159,222
|
|
|
|
134,821
|
|
(Gain)
on settlement of accounts payable
|
|
|
-
|
|
|
|
(177,000
|
)
|
(Gain)
on change in fair value of derivative liabilities
|
|
|
(205
|
)
|
|
|
(108,543
|
)
|
(Gain)
on forgiveness of SBA loan
|
|
|
(30,578
|
)
|
|
|
-
|
|
Stock-based
compensation
|
|
|
-
|
|
|
|
80,421
|
|
Common
shares issued for third party services
|
|
|
50,000
|
|
|
|
-
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid
expenses
|
|
|
3,496
|
|
|
|
(1,267
|
)
|
Accounts
payable and accrued expenses
|
|
|
154,484
|
|
|
|
(44,127
|
)
|
Accounts
payable to related parties
|
|
|
-
|
|
|
|
(1,213
|
)
|
Accrued
wages related parties
|
|
|
-
|
|
|
|
36,137
|
|
Changes
in advances from related party
|
|
|
-
|
|
|
|
60,794
|
|
Accrued
interest
|
|
|
26,111
|
|
|
|
20,396
|
|
Cash
flows used in operating activities:
|
|
|
(380,879
|
)
|
|
|
(334,366
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from notes payable
|
|
|
62,974
|
|
|
|
10,000
|
|
Cash
advance from related party
|
|
|
62,000
|
|
|
|
-
|
|
Proceeds
from notes payable, related parties
|
|
|
120,000
|
|
|
|
48,500
|
|
Proceeds
from convertible promissory notes
|
|
|
82,000
|
|
|
|
240,000
|
|
Proceeds
from the issuance of common stock and warrants
|
|
|
35,599
|
|
|
|
60,000
|
|
Net
cash provided by financing activities
|
|
|
362,573
|
|
|
|
358,500
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents
|
|
|
(18,306
|
)
|
|
|
24,134
|
|
Cash
and cash equivalents, beginning of period
|
|
|
25,024
|
|
|
|
890
|
|
Cash
and cash equivalents, end of period
|
|
$
|
6,718
|
|
|
$
|
25,024
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Income
tax paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest
paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Supplemental
disclosure of non-cash items:
|
|
|
|
|
|
|
|
|
Settlement
of accounts payable through issuance of common stock
|
|
$
|
-
|
|
|
$
|
36,000
|
|
Resolution
of derivative liabilities due to debt conversions and untainted warrants
|
|
$
|
329,267
|
|
|
$
|
372,119
|
|
Reclass
of APIC to derivative liabilities for tainted warrants
|
|
$
|
189,472
|
|
|
$
|
322,006
|
|
Debt
discounts due to derivative liabilities
|
|
$
|
140,000
|
|
|
$
|
100,000
|
|
Common
stock issued for conversion of debt and interest
|
|
$
|
169,860
|
|
|
$
|
131,954
|
|
Class
A Common Stock issued for conversion of related party advances and notes payable
|
|
$
|
49,062
|
|
|
$
|
-
|
|
Expenses
paid by related party on behalf of the Company
|
|
$
|
161,977
|
|
|
$
|
40,837
|
|
Return
of common shares issued for settlement of accounts payable
|
|
$
|
-
|
|
|
$
|
44,000
|
|
Debt
extinguishment through issuance of common stock
|
|
$
|
-
|
|
|
$
|
10,699
|
|
The
accompanying notes are an integral part of the consolidated financial statements
LIBERTY
STAR URANIUM & METALS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – Organization
Liberty
Star Uranium & Metals Corp. (the “Company”, “we”, “our”, 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”) was our wholly owned subsidiary and was
incorporated on December 14, 2003 in the State of Alaska. Until 2016 Big Chunk was engaged in the acquisition and exploration
of mineral properties business in the State of Alaska. until its dissolution on July 26, 2019. Redwall Drilling Inc. (“Redwall”)
was our wholly owned subsidiary and was incorporated on August 31, 2007 in the State of Arizona. Redwall performed drilling services
on the Company’s 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. We renamed HMSP to Hay Mountain Holdings LLC (“HMH”) on March 5, 2019. In April 2007, we changed our name
to Liberty Star Uranium & Metals Corp. On February 22, 2019, the Company registered the tradename ‘Liberty Star Minerals’
with the state of Arizona to be recognized as ‘doing business as’, or ‘d/b/a’ Liberty Star Minerals. We
have not generated any revenues from operations. On April 11, 2019 we formed a new subsidiary named Earp Ridge Mines LLC (“Earp
Ridge”) wholly owned by HMH. On August 13, 2020, the Company formed Red Rock Mines, LLC (“Red Rock”), an Arizona
corporation, as a wholly-owned subsidiary of Hay Mountain Holdings, LLC.
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 Company’s
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:
Reverse
Stock Split
On
November 24, 2020, the Company filed a Certificate of Change with the Secretary of the State of Nevada to affect a 1-for-500 reverse
stock split (the “Reverse Stock Split”). The Reverse Stock Split was formally processed by FINRA effective on February
25, 2021 and the Company’s common stock began trading on a split-adjusted basis on February 25, 2021.
Prior
to the effective date of the Certificate of Change, the Company was authorized to issue 6,150,000,000 shares of common stock.
As a result of the Reverse Stock Split, the Company is authorized to issue 12,300,000 shares of common stock. The Reverse Stock
Split did not have any effect on the stated par value of the common stock.
Prior
to the effective date of the Certificate of Change, the Company was authorized to issue 100,000,000 shares of Class A common stock.
As a result of the Reverse Stock Split, the Company is authorized to issue 200,000 shares of Class A common stock, with 102,000
shares of Class A common stock outstanding. As a result of the Reverse Stock Split, there was an adjustment of approximately 2,408
common shares due to the effect of rounding fractional shares into whole shares. The Reverse Stock Split did not have any effect
on the stated par value of the Class A common stock.
All
references to common shares and common share data in these consolidated financial statements and elsewhere in this Form 10-K as
of January 31, 2021 and 2020, and for the years then ended, reflect the Reverse Stock Split.
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.
Principles
of consolidation
The
consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary HMH and the HMH wholly-owned
subsidiaries Earp Ridge and Red Rock. 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, 2021 and 2020, we had no cash balances in bank deposit accounts that exceeded federally insured limits.
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 are 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 are 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 debt’s 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 and non-employees based on the estimated fair values of the stock
or options. 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 management’s 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, 2021 or 2020.
Fair
value of financial instruments
Our financial
instruments consist of cash and cash equivalents, prepaid expenses, 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.
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.
|
|
|
|
|
Fair
value measurements at reporting date using:
|
|
Description
|
|
Fair
Value
|
|
|
Quoted
prices in
active markets
for identical
liabilities
(Level 1)
|
|
|
Significant
other
observable
inputs
(Level 2)
|
|
|
Significant
unobservable inputs
(Level 3)
|
|
Warrant
and convertible note derivative liability at January 31, 2021
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Warrant
and convertible note derivative liability at January 31, 2020
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
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 the tax year ended
January 31, 2017 and prior.
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 years ended January 31, 2021 and 2020, the following number of potentially dilutive shares have
been excluded from diluted net income (loss) since such inclusion would be anti-dilutive:
|
|
Year
Ended January 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Stock
options outstanding
|
|
|
146,000
|
|
|
|
177,000
|
|
Warrants
|
|
|
400,166
|
|
|
|
363,416
|
|
Shares
to be issued upon conversion of notes payable
|
|
|
113,034
|
|
|
|
603,810
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
659,200
|
|
|
|
1,144,226
|
|
Newly
Issued Accounting Pronouncements
There were various accounting standards
and interpretations issued recently, none of which are expected to have a material impact on the Company’s financial position,
operations or cash flows. Management has evaluated these new pronouncements through January 31, 2021.
All other accounting standards updates
that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material
impact on the consolidated financial statements upon adoption.
NOTE
3 – Going concern
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. Management’s 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.
The
Company has incurred losses from operations, has a working capital deficit and requires additional funds for further exploratory
activity and to maintain its claims prior to attaining a revenue generating status. There are no assurances that a commercially
viable mineral deposit exists on any of our properties. In addition, the Company may not find sufficient ore reserves to be commercially
mined. As such, there is substantial doubt about the Company’s ability to continue as a going concern.
Management
is working to secure additional funds through the exercise of stock warrants already outstanding, equity financings, debt financings
or joint venture agreements. The consolidated financial statements do not include any adjustments that might result from the outcome
of these uncertainties.
NOTE
4 – Mineral claims
At
January 31, 2021, we held a 100% interest in 93 standard federal lode mining claims located in the Tombstone region of Arizona.
At
January 31, 2021, we held 35 Arizona State Land Department Mineral Exploration Permits covering 15,793.24 acres in the Tombstone
region of Arizona.
Title
to mineral claims involves certain inherent risks due to difficulties of determining the validity of certain claims as well as
potential for problems arising from the frequently ambiguous conveyance history characteristic of many mineral properties.
All
of the Company’s claims for mineral properties are in good standing as of January 31, 2021.
NOTE
5 – Property and equipment
The
balances of our major classes of depreciable assets and useful lives are:
|
|
January
31, 2021
|
|
|
January
31, 2020
|
|
Geology
Equipment (3 to 7 years)
|
|
$
|
315,052
|
|
|
$
|
315,052
|
|
Vehicles
and transportation equipment (5 years)
|
|
|
48,592
|
|
|
|
48,592
|
|
Office
furniture and equipment (3 to 7 years)
|
|
|
71,584
|
|
|
|
71,584
|
|
|
|
|
435,228
|
|
|
|
435,228
|
|
Less:
accumulated depreciation
|
|
|
(401,672
|
)
|
|
|
(395,336
|
)
|
|
|
$
|
33,556
|
|
|
$
|
39,892
|
|
Depreciation
expense was $6,336 and $2,684 for the years ended January 31, 2021 and 2020, respectively.
NOTE
6 – Long-term debt and convertible promissory notes
Following
is a summary of convertible promissory notes:
|
|
January
31, 2021
|
|
|
January
31, 2020
|
|
|
|
|
|
|
|
|
8%
convertible note payable issued August 2019, due May 2020
|
|
$
|
-
|
|
|
$
|
79,886
|
|
8%
convertible note payable issued October 2019, due August 2020
|
|
|
-
|
|
|
|
48,347
|
|
8%
convertible note payable issued January 2020, due November 2020
|
|
|
-
|
|
|
|
39,635
|
|
8%
convertible note payable issued October 2020, due September 2021
|
|
|
95,611
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,611
|
|
|
|
167,868
|
|
Less
debt discount
|
|
|
(7,642
|
)
|
|
|
(15,364
|
)
|
Less
current portion of convertible notes
|
|
|
(87,969
|
)
|
|
|
(152,504
|
)
|
Long-term
convertible notes payable
|
|
$
|
-
|
|
|
$
|
-
|
|
On
July 23, 2018, we received net proceeds of $48,000 under a convertible note dated July 19, 2018 (the “July 2018 Note”).
The total principal under the note is $50,000, bears interest at 12% per annum, includes OID of $2,000, is due on July 19, 2019,
and is convertible in shares of the Company’s common stock after 180 days at a conversion price with a 45% discount to the
lowest weighted average market price during the previous 20 trading days to the date of conversion. During the year ended January
31, 2020, the noteholder converted an aggregate of $21,714 of the remaining balance of this note for 394,801 shares of the Company’s
common stock, leaving a balance of $0 as of January 31, 2020.
On
April 12, 2019, we received net proceeds of $50,000 from the issuance of a convertible note dated April 10, 2019 (the “April
2019 Note”). The note bears interest at 8%, includes OID of $3,000, matures on February 28, 2020, and is convertible after
180 days into shares of the Company’s common stock at a price of 65% of the average of the lowest 5 weighted average market
price of the Company’s common stock during the 10 trading days prior to conversion. During the year ended January 31, 2020,
the noteholder converted the note in full (an aggregate of $55,120) for 147,341 shares of the Company’s common stock, leaving
a balance of $0 as of January 31, 2020.
On
May 21, 2019, we received net proceeds of $50,000 from the issuance of a convertible note dated May 17, 2019 (the “May 2019
Note”). The note bears interest at 8%, includes OID of $3,000, matures on March 17, 2020, and is convertible after 180 days
into shares of the Company’s common stock at a price of 65% of the average of the lowest 5 weighted average market price
of the Company’s common stock during the 10 trading days prior to conversion. During the year ended January 31, 2020, the
noteholder converted a total of $55,120 of the note in for 239,480 shares of the Company’s common stock, leaving a balance
of $0 as of January 31, 2020.
On
August 15, 2019, we received net proceeds of $67,000 from the issuance of a convertible note dated August 13, 2019 (the “August
2019 Note”). The note bears interest at 8%, includes OID of $10,000, matures on May 30, 2020, and is convertible after 180
days into shares of the Company’s common stock at a price of 75% of the average of the lowest 5 weighted average market
price of the Company’s common stock during the 10 trading days prior to conversion. During the year ended January 31, 2021,
the noteholder converted a total of $79,800 of the note in for 272,750 shares of the Company’s common stock, leaving a balance
of $0 as of January 31, 2021.
On
October 25, 2019, we received net proceeds of $40,000 from the issuance of a convertible note dated October 22, 2019 (the “October
2019 Note”). The note bears interest at 8%, includes OID of $7,300, matures on August 15, 2020, and is convertible after
180 days into shares of the Company’s common stock at a price of 75% of the average of the lowest 5 weighted average market
price of the Company’s common stock during the 10 trading days prior to conversion. During the year ended January 31, 2021,
the noteholder converted a total of $49,020 of the note in for 215,597 shares of the Company’s common stock, leaving a balance
of $0 as of January 31, 2021.
On
January 30, 2020, we received net proceeds of $33,000 from the issuance of a convertible note dated January 27, 2020 (the “January
2020 Note”). The note bears interest at 8%, includes OID of $3,600 and legal fees of $3,000, matures on November 15, 2020,
and is convertible after 180 days into shares of the Company’s common stock at a price of 75% of the average of the lowest
5 weighted average market price of the Company’s common stock during the 10 trading days prior to conversion. During the
year ended January 31, 2021, the noteholder converted a total of $41,040 of the note in for 97,714 shares of the Company’s
common stock, leaving a balance of $0 as of January 31, 2021.
On
October 28, 2020, we received net proceeds of $82,000 from the issuance of a convertible note dated October 20, 2020 (the “October
2020 Note”). The note bears interest at 8%, includes OID of $8,500 and legal and due diligence fees of $3,000, matures on
September 1, 2021, and is convertible after 180 days into shares of the Company’s common stock at a price of 75% of the
average of the lowest 5 weighted average market price of the Company’s common stock during the 10 trading days prior to
conversion. The net balance of this convertible note was $87,969 as of January 31, 2021.
During
the year ended January 31, 2021 and 2020, the Company recorded debt discounts of $140,000 and $100,000 respectively, due to the
derivative liabilities, and original issue debt discounts of $11,500 and $29,900, respectively, due to the convertible notes.
The Company recorded amortization of these discounts of $159,222 and $134,821 for the years ended January 31, 2021 and
2020, respectively.
Note
payable
In
March 2019, the Company received proceeds of $10,000 from a third-party under a promissory note due in March 2020, with interest
at 10%. On November 19, 2019, the Company sold 42,243 shares of the Company’s common
stock to this noteholder for $20,699, or $0.49 per unit, in a private placement. The consideration received included $10,000 in
cash plus the settlement of this note payable of $10,000 and accrued interest of $699, leaving a balance of $0 as of January 31,
2020.
Notes
Payable - SBA
On
May 5, 2020, the Company received loan proceeds of $30,387 under the SBA’s Paycheck Protection Program (“PPP”). The
PPP loan dated May 5, 2020 bears interest at 1% and is due in 18 monthly installments of $1,710 beginning December 1, 2020. On May 5,
2020, the Company also received grant proceeds of $3,000 under the EIDL program which is reflected as a credit to salaries and benefits
expense for the year ended January 31, 2021. In November 2020, the Company was approved for forgiveness in full for the entire amount
including principal and interest under the PPP loan, The grant proceeds of $3,000 was factored in the amount forgiven thus $3,000
remained payable to our bank related to the PPP until its repayment in February 2021.
On
June 22, 2020, the Company received loan proceeds of $32,300 (net of $100 loan fee) under the SBA’s Economic Injury Disaster
Loan program (“EIDL”). The EIDL loan, dated June 16, 2020, bears interest at 3.75%, has a 30-year term, is secured
by substantially all assets of the Company, and is due in monthly installments of $158 beginning June 16, 2021. The balance of
$33,162, including interest of $762, is included in long-term debt as of January 31, 2021.
NOTE
7 – Derivative Liabilities
The
embedded conversion feature in the convertible debt instruments that the Company issued (See Note 6), that became convertible
during the years ended January 31, 2021 and 2020, 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 note when it became convertible and upon settlement, and warrants upon tainting,
were as follows:
|
●
|
The
stock projections are based on the historical volatilities for each date. These volatilities were in the 193.9% to 257.8%
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.
|
Using
the results from the model, the Company recorded a derivative liability during the year ended January 31, 2021 of $189,472 for newly
granted and existing warrants that were tainted and a derivative liability of $159,375 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 “day 1” derivative loss of $19,375 and a debt discount of $140,000 that was amortized over the remaining
term of the note using the effective interest rate method. Interest expense related to the amortization of this debt discount for the
year ended January 31, 2021 was $140,000. The remaining unamortized debt discount related to the derivative liability was $0 as the notes
were fully converted by January 31, 2021.
The
Company recorded a derivative liability during the year ended January 31, 2020 of $322,006 for newly granted and existing warrants
that were tainted and a derivative liability of $123,057 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 “day 1” derivative
loss of $23,057 and a debt discount of $100,000 that was amortized over the remaining term of the note using the effective interest
rate method. Interest expense related to the amortization of this debt discount for the year ended January 31, 2021 was $100,000.
The remaining unamortized debt discount related to the derivative liability was $0 as the notes were fully converted by January
31, 2020.
During
the year ended January 31, 2021, the Company recorded a reclassification from derivative liability to equity of $189,518 for warrants
becoming untainted and $139,749 due to conversions of the Company’s convertible notes. During
the year ended January 31, 2020, the Company recorded a reclassification from derivative liability to equity of $234,650 for warrants
becoming untainted and $137,469 due to the conversions of a portion of the Company’s convertible notes. The Company also
recorded the change in the fair value of the derivative liability as a gain of $205 and $108,543, respectively, to reflect
the value of the derivative liability for warrants and convertible notes as of January 31, 2021 and 2020, respectively.
The Company did not have a derivative liability as of January 31, 2021 and 2020 since none of the outstanding notes remained
convertible at the end of the periods and consequently the outstanding warrants were no longer tainted.
The
following table sets forth a reconciliation of changes in the fair value of the Company’s derivative liability:
|
|
Year
Ended January 31,
|
|
|
|
2021
|
|
|
2020
|
|
Beginning
balance
|
|
$
|
-
|
|
|
$
|
58,656
|
|
Total
gains
|
|
|
(205
|
)
|
|
|
(108,543
|
)
|
Settlements
|
|
|
(329,267
|
)
|
|
|
(372,119
|
)
|
Additions
recognized as debt discount
|
|
|
140,000
|
|
|
|
100,000
|
|
Additions
due to tainted warrants
|
|
|
189,472
|
|
|
|
322,006
|
|
Ending
balance
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Change
in unrealized gains included in earnings relating to derivatives as of January 31, 2021 and 2020
|
|
$
|
(205
|
)
|
|
$
|
(108,543
|
)
|
NOTE
8 – Common stock
Class
A Common Stock
On June 22,
2020, the Company filed a Certificate of Designation with the Secretary of State of Nevada to establish the terms of the Company’s
Class A Common Stock (the “Class A Shares”), par value $0.00001 per share, 200,000 shares authorized. The terms of
the Class A Shares include 200-1 voting rights in addition to the rights held by common stockholders. Only persons who are current
members of the Company’s Board of Directors may own or hold Class A Shares.
On June 30,
2020, the Company entered into an agreement to issue a total of 102,000
shares of its Class A Shares to two directors of the Company. The aggregate consideration paid for
the Class A Shares was $49,062 ($0.481 per share). The consideration was paid by offsetting the purchase price against Company
advances and notes held by the two directors (see Note 12).
Common
Stock
Our
undesignated common shares are all of the same class, and are voting shares Upon liquidation or wind-up, stockholders
are entitled to participate equitably with respect to any distribution of net assets that may be declared.
Reverse
Stock Split
On
November 24, 2020, the Company filed a Certificate of Change with the Secretary of the State of Nevada to affect a 1-for-500 reverse
stock split (the “Reverse Stock Split”). The Reverse Stock Split was formally processed by FINRA effective on February
25, 2021 and the Company’s common stock began trading on a split-adjusted basis on February 25, 2021.
Prior
to the effective date of the Certificate of Change, the Company was authorized to issue 6,150,000,000 shares of common stock.
As a result of the Reverse Stock Split, the Company is authorized to issue 12,300,000 shares of common stock. The Reverse Stock
Split did not have any effect on the stated par value of the common stock.
Prior
to the effective date of the Certificate of Change, the Company was authorized to issue 100,000,000 shares of Class A common stock.
As a result of the Reverse Stock Split, the Company is authorized to issue 200,000 shares of Class A common stock, with 102,000
shares of Class A common stock outstanding. As a result of the Reverse Stock Split, there was an adjustment of approximately 2,408
common shares due to the effect of rounding fractional shares into whole shares. The Reverse Stock Split did not have any effect
on the stated par value of the Class A common stock.
All
references to common shares and common share data in these consolidated financial statements and elsewhere in this Form 10-K as
of January 31, 2021 and 2020, and for the years then ended, reflect the Reverse Stock Split.
Common
Stock Issued During the Year Ended January 31, 2021
During
the year ended January 31, 2021, the Company issued a total of 586,062 shares of our common stock for conversions of $169,860
of convertible notes payable and accrued interest at exercise prices ranging from $0.225 to $0.420.
During
the year ended January 31, 2021, the Company issued a total of 54,000 shares of its common stock and 27,000 warrants to two investors
for proceeds of $20,599, or $0.300 to $0.400 per share. The warrants have a three-year term and are exercisable at any time at
an exercise price of $0.400 to $0.550 per share.
During
the year ended January 31, 2021, the Company issued 142,857 shares of its common stock to a consultant for services at an aggregate
price of $50,000, or $0.350 per share.
In January
2021, the Company received proceeds of $15,000 from our chairman of the board for the purchase of 14,726 shares of the Company’s
common stock, at a price of $1.019 per share, and 7,363 warrants. The warrants have a three-year term and are exercisable at any time
at an exercise price of $1.426 per share. The shares were subsequently issued in April 2021, thus the proceeds of $15,000 were classified
as common stock to be issued as of January 31, 2021.
Common
Stock Issued During the Year Ended January 31, 2020
During
the year ended January 31, 2020, the Company issued a total of 781,622 shares of our common stock for conversions of $131,954
of convertible notes payable at an exercise prices ranging from of $0.055 to $0.390.
In
July 2019, the Company issued 60,000 shares of its common stock to satisfy $213,000 owed for services due an investor relations
consultant for services provided in prior years which was previously included in accounts payable and accrued liabilities, resulting
in a gain on settlement of accounts payable of $177,000.
In
July 2019, the Company issued 86,430 shares of its common stock and 43,215 warrants to an investor, who also subsequently became
a director, for proceeds of $50,000, or $0.579 per unit. The warrants have a three-year term and are exercisable at any time at
an exercise price of $0.810.
On
November 19, 2019, the Company sold 42,243 shares of the Company’s common stock to a noteholder for $20,699, or $0.490 per
unit, in a private placement. The consideration received included $10,000 cash plus the settlement of a note payable of $10,000
and accrued interest of $699.
On
January 8, 2020, a consultant returned to the Company a total of 48,485 shares of common stock issued for accounts payable for
services totaling $44,000. The exchange resulted in an increase in accounts payable of $44,000 which the Company has agreed to
repay in installments of $600 for twelve months, $1,500 for the following 12 months, and $2,500 per month thereafter until paid
in full. The consultant has agreed to waive the final $4,000 if all payments are made timely. A total of $36,400 remains outstanding
as of January 31, 2021, of which $20,300 is classified as long-term accounts payable.
NOTE
9 – Share-based compensation
The
2010 Stock Option Plan was approved and adopted by the Board of Directors on August 10, 2010. The plan allows for up to 191,000 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 5,000 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 1,925 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, 2021 and 2020 are 51,417
and 20,417, respectively. Options remaining available for grant under the 2007 Stock Option Plan at January 31, 2021 and 2020
are 425 and 425, respectively. Options remaining available for grant under the 2004 Stock Option Plan at January 31, 2021 and 2020 are
83 and 83, respectively.
The
Company granted 30,000 stock options each to four directors (120,000 total) during the year ended January 31, 2020 and recognized
$80,421 of compensation expense using the Black-Scholes valuation method with the following assumptions: stock prices of $0.70
to $0.75, exercise price of $1.50, expected term of 5 years, volatility of 180.7% to 181.3%, annual rate of dividends of 0%, and
discount rates of 1.59% to 1.85%.
No
stock options were granted during the year ended January 31, 2021.
The
following tables summarize the Company’s stock option activity during the years ended January 31, 2021 and 2020:
|
|
Number
of
options
|
|
|
Weighted
average
exercise
price
|
|
|
Weighted
average
remaining life
(years)
|
|
|
Aggregate
intrinsic value
|
|
Outstanding,
January 31, 2019
|
|
|
180,760
|
|
|
$
|
16.378
|
|
|
|
2.56
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
120,000
|
|
|
|
1.500
|
|
|
|
|
|
|
|
|
|
Cancelled
and/or forfeited
|
|
|
(123,760
|
)
|
|
|
17.054
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding,
January 31, 2020
|
|
|
177,000
|
|
|
$
|
5.818
|
|
|
|
7.20
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Cancelled
and/or forfeited
|
|
|
(31,000
|
)
|
|
|
19.000
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding,
January 31, 2021
|
|
|
146,000
|
|
|
$
|
3.019
|
|
|
|
7.61
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
January 31, 2021
|
|
|
146,000
|
|
|
$
|
3.019
|
|
|
|
7.61
|
|
|
$
|
-
|
|
The
aggregate intrinsic value is calculated based on the stock price of $1.473 and $0.550 per share as of January 31, 2021 and 2020,
respectively.
During
the years ended January 31, 2021 and 2020, we recognized $0 and $80,421 of compensation expense related to incentive and non-qualified
stock options previously granted to officers, employees and consultants.
Share-based
compensation expense is reported in our consolidated statements of operations as follows:
|
|
January
31, 2021
|
|
|
January
31, 2020
|
|
Geological
and geophysical costs
|
|
$
|
-
|
|
|
$
|
-
|
|
Salaries
and benefits
|
|
|
-
|
|
|
|
80,421
|
|
Investor
relations
|
|
|
-
|
|
|
|
-
|
|
General
and administrative
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
$
|
80,421
|
|
At
January 31, 2021, there was $0 of unrecognized share-based compensation for all share-based awards outstanding.
NOTE
10 – Warrants
As of January
31, 2021, there were 400,166 warrants outstanding and exercisable. The warrants have a three-year term, a weighted average remaining
life of 1.23 years and a weighted average exercise price of $2.155 per warrant for one common share. Warrants outstanding
at January 31, 2021 and 2020 are as follows:
|
|
Number
of warrants
|
|
|
Weighted
average
exercise price
per share
|
|
|
|
|
|
|
|
|
Outstanding,
January 31, 2019
|
|
|
308,829
|
|
|
|
2.586
|
|
Issued
|
|
|
64,337
|
|
|
|
0.769
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Outstanding,
January 31, 2020
|
|
|
373,166
|
|
|
|
2.273
|
|
Issued
|
|
|
27,000
|
|
|
|
0.522
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Outstanding,
January 31, 2021
|
|
|
400,166
|
|
|
|
2.155
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
January 31, 2021
|
|
|
400,166
|
|
|
|
2.155
|
|
The
weighted average intrinsic value for warrants outstanding was $136,217 and $5,200 as of January 31, 2021 and 2020, respectively.
On
July 12, 2019, the Company issued 43,215 warrants to an investor, who also subsequently became a director of the Company, as part
of their purchase of common stock during the year ended January 31, 2020. The warrants have a three-year term and are exercisable
at any time at an exercise price of $0.810.
On
November 19, 2019, the Company issued 21,122 warrants to an investor, as part of their purchase of common stock during
the year ended January 31, 2020. The warrants have a three-year term and are exercisable at any time at an exercise price of $0.6850.
During
the year ended January 31, 2021, the Company issued 27,000 warrants to investors as part of their purchase of common stock. The
warrants have a three-year term and are exercisable at any time at exercise prices ranging from $0.400 to $0.550.
Extension
of Expiration Date
Effective
May 1, 2019, the Company extended the due date of all warrants expiring during the three months ended July 31, 2019, totaling
66,002 warrants, for an additional three years. There was no expense related to the extension of these warrants since these were
held by investors.
Effective
December 5, 2019, the Company extended the due date of all warrants expiring during the five months ending December 31, 2019,
totaling 39,000 warrants, for an additional three years. There was no expense related to the extension of these warrants since
these were held by investors.
Effective
May 27, 2020, the Company extended the due date of all warrants expiring during the 12 months ending December 31, 2020, totaling
45,065 warrants, for an additional three years, including 9,750 warrants previously set to expire in January 2020. There was no
expense related to the extension of these warrants since these were held by investors.
NOTE
11 – Income taxes
As
of January 31, our deferred tax asset is as follows:
|
|
January
31, 2021
|
|
|
January
31, 2020
|
|
Deferred
Tax Assets
|
|
$
|
6,783,000
|
|
|
$
|
6,641,000
|
|
Less
Valuation Allowance
|
|
|
(6,783,000
|
)
|
|
|
(6,641,000
|
)
|
|
|
$
|
-
|
|
|
$
|
-
|
|
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 increase of $142,000
during the year ended January 31, 2021 primarily represents the increase in net operating loss carry-forwards during the period
offset against the valuation allowance. As of January 31, 2021, our estimated net operating loss carry-forward is approximately
$32 million and expires beginning in 2026 through 2038, with no expiration date for our 2019 through 2021 net operating
losses under the Tax Cuts and Jobs Act.
Deferred tax assets were
calculated using the Company’s effective tax rate, which it estimated to be 21%. The effective rate is reduced to 0%
for 2021 and 2020 due to the full valuation allowance on its net deferred tax assets.
We
have identified our federal and Arizona state tax returns as “major” tax jurisdictions. The periods our income tax
returns are subject to examination for these jurisdictions are the tax years ended January 31, 2018 through January 31,
2021. We believe our income tax filing positions and deductions will be sustained on audit, and we do not anticipate any adjustments
that would result in a material change to our financial position. Therefore, no liabilities for uncertain income tax positions
have been recorded.
Internal
Revenue Code Section 382 limits the ability to utilize net operating losses if a 50% change in ownership occurs over a three-year
period. Such limitation of the net operating losses may have occurred but we have not analyzed it at this time as the deferred
tax asset is fully reserved. We have federal and state net operating loss carry-forwards that are available to offset future taxable
income.
NOTE
12 – Related party transactions
We
were a party to the following transactions with related parties during the year ended January 31, 2021:
Our
CEO, Brett Gross, was elected as President and Chief Executive Officer on December 7, 2018 and received no compensation for these
services during the years ended January 31, 2021 and 2020.
During
the year ended January 31, 2021, our CEO, Brett Gross, made various payments on behalf of the Company totaling $161,977, and advanced
the Company $62,000 in cash, all of which are reflected as advances from related party on the accompanying consolidated balance sheets.
The total advances were $301,077 and $101,631 as of January 31, 2021 and 2020, respectively, bear no interest and have no specified repayment
date. On June 30, 2020, the Company issued 51,000 shares of its Class A Common Stock to our CEO for repayment of $24,531 of advances
($0.481 per share).
During
the year ended January 31, 2021, the Company received aggregate proceeds of $120,000 from a director under a promissory note extended
with interest at 10%. Total maturities of principal and accrued interest under all notes to two directors are $270,898 due October
31, 2020 (extended to July 31, 2021). On June 30, 2020, the Company issued 51,000 shares of its Class A Common Stock to the director
for repayment of $24,531 of their promissory note ($0.481 per share).
The
Company has a note payable of $10,000 from James Briscoe, under a promissory note dated September 17, 2018, which matured and
became past due at September 17, 2019 with interest at 10%.
As
of January 31, 2021 and 2020, the total balance of all related party notes was $283,271 and $166,560, respectively, which includes
accrued interest of $36,070 and $14,828, respectively.
At
January 31, 2021 and 2020, we had a balance of accrued unpaid wages of $759,949 to James Briscoe, our former Chairman of the Board,
CEO, Chief Geologist, Secretary, Treasurer, and President. Additionally, we had a balance of accrued unpaid wages of $15,625 to
a former President and $36,137 to Patricia Madaris, VP Finance & CFO.
At
January 31, 2021 and 2020, we had an aggregate balance due of approximately $167,000 on credit cards guaranteed by James Briscoe
reflected in accounts payable and accrued liabilities on the accompanying consolidated balance sheets.
At
January 31, 2021 and 2020, we had accounts payable to JABA (controlled by James Briscoe) of $34,798, which is reflected as accounts
payable to related party on the accompanying consolidated balance sheets.
At
January 31, 2021 and 2020, we had a balance of $16,321 due to the spouse of James Briscoe.
We
were a party to the following transactions with related parties during the year ended January 31, 2020:
During
the year ended January 31, 2020, the Company received advances of $48,500 from two directors under two promissory notes with interest
at 10%. Total principal maturities under these two notes are $106,302 due October 31, 2020 (extended from October 31, 2019) and
$35,430 due October 31, 2020 (extended from January 31, 2020). Additionally, the Company has a note payable of $10,000 from James
Briscoe, under a promissory note dated September 17, 2018, due September 17, 2019 with interest at 10% and is currently past due.
As of January 31, 2020, the total balance of all related party notes was $166,560, which includes accrued interest of $14,828.
During
the year ended January 31, 2020, our CEO, Brett Gross, made various payments on behalf of the Company totaling $101,631, reflected
as advances from related party on the accompanying consolidated balance sheet. The advances bear no interest and have no specified
repayment date.
In
July 2019, the Company issued 86,430 shares of its common stock and 43,215 warrants to an investor, who also subsequently became
a director, for proceeds of $50,000, or $0.579 per unit. The warrants have a three-year term and are exercisable at any
time at an exercise price of $0.810.
In
July and October 2019, the Company issued an aggregate of 120,000 non-qualified stock options to four new directors for services.
The options vest immediately, have a 10-year term, an exercise price of $1.500, and resulted in share-based compensation expense
of $80,421 during the year ended January 31, 2020.
We
had an option to explore 1 standard federal lode mining claim at the East Silverbell project and 29 standard federal lode mining
claims at the Walnut Creek project from JABA. We were required to pay annual rentals to maintain the claims in good standing.
We paid $4,650 in rental fees to maintain these mineral claims during the year ended January 31, 2019 until September 1, 2019.
The original option agreement was for the period from April 11, 2008 through January 1, 2011 and was extended through June 1,
2013, June 1, 2015 and then to June 1, 2021, The Company did not renew this option and it expired on September 1, 2019.
On
January 11, 2019, we discontinued renting an office month-to-month from James Briscoe, a director who resigned on September 23,
2019. An amount of $2,610 of rent was unpaid as of January 31, 2021 and 2020.
NOTE
13 – Commitments and Contingencies
We
currently rent a storage space for $45 per month in Tombstone, Arizona on a month-to-month basis.
We
are required to pay annual rentals for Liberty Star’s federal lode mining claims for the Tombstone project in the State
of Arizona. The rental period begins at noon on September 1st through the following September 1st and rental payments are due
by the first day of the rental period. The annual rentals are $165 per claim. The rentals due by September 1, 2021 for the period
from September 1, 2021 through September 1, 2022 of $15,345 have not been paid yet, but we plan to pay when due.
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 cost $500 per permit per year in non-refundable filing
fees and 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 the date of acceptance for each permit. Rental payments are due by the first day of the rental period.
We hold AZ MEP permits for 15,793.24 acres at our Tombstone project. We paid filing and rental fees for our AZ MEP’s before
their respective due dates in the amount of $29,724.
Legal
Matter
On
August 22, 2019 (and amended on December 23, 2019), the Company filed a complaint with the Superior Court of Arizona (Case No.
C20194139), demanding the titles and possession of certain vehicles and equipment of the Company from our former CEO, as well
as seeking recovery of damages from the former CEO in an amount of not less than $50,000. None of the vehicles and equipment,
individually or in total, have any material net book value (being fully depreciated) as of January 31, 2021 and 2020. The matter
is ongoing as of the date of this filing.
On
February 18, 2020, our former CEO and his spouse (the “Counterclaimants”) filed a First
Amended Answer: First Amended Complaint and Counterclaim with the Superior Court of Arizona seeking dismissal of the Company’s
complaint and reimbursement of Counterclaimants’ attorney fees incurred related
to the matter. Additionally, the counterclaim alleges breach of contract by the Company and requests reimbursement of amounts
loaned to the Company by our former CEO and his spouse, along with reimbursement of attorney fees. The Company believes
these counterclaims are without merit and will aggressively defend them and believes no unfavorable outcome or material effect
on our consolidated financial statements will result.
NOTE
14 – Subsequent events
On
February 16, 2021, the Company received loan proceeds of $32,497 under the Payroll Protection Program (“PPP”).
The PPP loan bears interest at 1%, has a 5-year term, and is due in equal monthly installments
beginning December 16, 2021.
In
March 2021, the Company issued 6,000 shares of its common stock to an accredited investor for the exercise of warrants
for proceeds of $2,100, or $0.35 per common share.
In
March 2021, the Company issued 17,006 shares of its common stock and 8,503 warrants to our CEO for gross proceeds of $20,000,
for $1.176 per unit. The warrants have a three-year term and are exercisable at any time at an exercise price of $1.646.
In
March 2021, the Company issued 49,412 shares of its common stock and 24,706 warrants to our CEO for gross proceeds of $55,000
for $1.113 per unit. The warrants have a three-year term and are exercisable at any time at an exercise price of $1.558.
In
April 2021, the Company issued 9,818 shares of its common stock and 4,909 warrants to an accredited investor for gross proceeds
of $10,000, or $1.019 per unit. The warrants have a three-year term and are exercisable at any time at an exercise price of $1.426.
In
April 2021, we received net proceeds of $60,000 from the issuance of a convertible note dated April 23, 2021 (the “April 2021 Note”).
The note bears interest at 8%, includes legal and due diligence fees of $3,000, matures on April 23, 2022, and is convertible after 180
days into shares of the Company’s common stock at a price of 75% of the average of the lowest 5 weighted average market price of
the Company’s common stock during the 10 trading days prior to conversion.
On April 23, 2021, the Company issued 15,049
of its common stock to a noteholder for the conversion of $12,000 of principal under the October 2020 Note, or $0.797 per share.
On April 27, 2021, the Company issued 18,832
of its common stock to a noteholder for the conversion of $15,000 of principal under the October 2020 Note, or $0.797 per share.
On April
30, 2021, the Company received proceeds of $20,000 from an investor for the purchase of 19,268 shares
of its common stock and 9,634 warrants, at a price of $1.038 per unit. The warrants have a three-year term and are exercisable
at any time at an exercise price of $1.453. These shares have not yet been issued as of the date of this filing.
Item
1. Financial Statements.
LIBERTY
STAR URANIUM & METALS CORP.
CONSOLIDATED
BALANCE SHEETS
|
|
April 30,
|
|
|
January 31,
|
|
|
|
2021
|
|
|
2021
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
126,882
|
|
|
$
|
6,718
|
|
Prepaid expenses
|
|
|
6,178
|
|
|
|
4,815
|
|
Total current assets
|
|
|
133,060
|
|
|
|
11,533
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
32,097
|
|
|
|
33,556
|
|
Total assets
|
|
$
|
165,157
|
|
|
$
|
45,089
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
470,355
|
|
|
$
|
467,957
|
|
Accounts payable to related parties
|
|
|
51,119
|
|
|
|
51,119
|
|
Accrued wages to related parties
|
|
|
811,711
|
|
|
|
811,711
|
|
Advances from related party
|
|
|
314,742
|
|
|
|
301,077
|
|
Notes payable to related parties
|
|
|
298,064
|
|
|
|
283,271
|
|
Convertible promissory note, net of debt discount of $51,425 and $7,642
|
|
|
84,176
|
|
|
|
87,969
|
|
Derivative liability
|
|
|
290,293
|
|
|
|
-
|
|
Total current liabilities
|
|
|
2,320,460
|
|
|
|
2,003,104
|
|
|
|
|
|
|
|
|
|
|
Long-term:
|
|
|
|
|
|
|
|
|
Long-term accounts payable, net of current portion
|
|
|
13,800
|
|
|
|
20,300
|
|
Long-term debt - SBA
|
|
|
66,020
|
|
|
|
33,162
|
|
Total long-term liabilities
|
|
|
79,820
|
|
|
|
53,462
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,400,280
|
|
|
|
2,056,566
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit
|
|
|
|
|
|
|
|
|
Class A Common stock - $.00001 par value; 200,000 and 0 authorized; 102,000 and 0
shares issued and outstanding, respectively
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Common stock - $.00001 par value; 12,300,000 authorized; 10,052,163 and 9,902,052
shares issued and outstanding, respectively
|
|
|
101
|
|
|
|
99
|
|
Common stock to be issued
|
|
|
-
|
|
|
|
15,000
|
|
Additional paid-in capital
|
|
|
55,376,540
|
|
|
|
55,503,564
|
|
Accumulated deficit
|
|
|
(57,611,765
|
)
|
|
|
(57,530,141
|
)
|
Total stockholders’ deficit
|
|
|
(2,235,123
|
)
|
|
|
(2,011,477
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ deficit
|
|
$
|
165,157
|
|
|
$
|
45,089
|
|
The
accompanying notes are an integral part of the unaudited consolidated financial statements
LIBERTY
STAR URANIUM & METALS CORP.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For the Three Months Ended
|
|
|
|
April 30,
|
|
|
|
2021
|
|
|
2020
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Geological and geophysical costs
|
|
|
1,759
|
|
|
|
2,958
|
|
Salaries and benefits
|
|
|
36,559
|
|
|
|
37,750
|
|
Depreciation
|
|
|
1,458
|
|
|
|
1,674
|
|
Legal
|
|
|
19,947
|
|
|
|
50,536
|
|
Professional services
|
|
|
20,337
|
|
|
|
19,956
|
|
General and administrative
|
|
|
13,392
|
|
|
|
19,961
|
|
Travel
|
|
|
640
|
|
|
|
439
|
|
Net operating expenses
|
|
|
94,092
|
|
|
|
133,274
|
|
Loss from operations
|
|
|
(94,092
|
)
|
|
|
(133,274
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(38,184
|
)
|
|
|
(105,503
|
)
|
Gain on change in fair value of derivative liability
|
|
|
50,652
|
|
|
|
55,036
|
|
Total other income (expense)
|
|
|
12,468
|
|
|
|
(50,467
|
)
|
Net loss
|
|
|
(81,624
|
)
|
|
$
|
(183,741
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per share of common stock - basic and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock
outstanding - basic and diluted
|
|
|
10,041,420
|
|
|
|
9,256,178
|
|
The
accompanying notes are an integral part of the unaudited consolidated financial statements
LIBERTY
STAR URANIUM & METALS CORP.
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
For
the Three Months Ended April 30, 2021 and 2020
(Unaudited)
|
|
Class
A Common stock
|
|
|
Common
stock
|
|
|
Common stock
to be
|
|
|
Additional
paid-in
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Issued
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 31, 2021
|
|
|
102,000
|
|
|
|
1
|
|
|
|
9,902,052
|
|
|
$
|
99
|
|
|
$
|
15,000
|
|
|
$
|
55,503,564
|
|
|
$
|
(57,530,141
|
)
|
|
$
|
(2,011,477
|
)
|
Issuance
of common stock and warrants in private placement and warrant exercises
|
|
|
-
|
|
|
|
-
|
|
|
|
116,230
|
|
|
|
1
|
|
|
|
(15,000
|
)
|
|
|
122,099
|
|
|
|
-
|
|
|
|
107,100
|
|
Shares
issued for conversion of notes
|
|
|
-
|
|
|
|
-
|
|
|
|
33,881
|
|
|
|
1
|
|
|
|
-
|
|
|
|
26,999
|
|
|
|
-
|
|
|
|
27,000
|
|
Reclass
of APIC to derivative liabilities for tainted warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(293,528
|
)
|
|
|
-
|
|
|
|
(293,528
|
)
|
Resolution
of derivative liabilities due to debt conversions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,406
|
|
|
|
-
|
|
|
|
17,406
|
|
Net
loss for the three months ended April 30, 2021
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(81,624
|
)
|
|
|
(81,624
|
)
|
Balance,
April 30, 2021
|
|
|
102,000
|
|
|
$
|
1
|
|
|
|
10,052,163
|
|
|
$
|
101
|
|
|
$
|
-
|
|
|
$
|
55,376,540
|
|
|
$
|
(57,611,765
|
)
|
|
$
|
(2,235,123
|
)
|
The
accompanying notes are an integral part of the unaudited consolidated financial statements
|
|
Class
A
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Common
stock
|
|
|
Common
stock
|
|
|
Subscription
|
|
|
paid-in
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Receivable
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
January 31, 2020
|
|
|
-
|
|
|
$
|
-
|
|
|
|
9,116,725
|
|
|
$
|
91
|
|
|
$
|
-
|
|
|
$
|
55,074,257
|
|
|
$
|
(56,780,396
|
)
|
|
$
|
(1,706,048
|
)
|
Issuance
of common stock and warrants in private placement
|
|
|
-
|
|
|
|
-
|
|
|
|
54,000
|
|
|
|
1
|
|
|
|
-
|
|
|
|
20,598
|
|
|
|
-
|
|
|
|
20,599
|
|
Shares
issued for conversion of notes
|
|
|
-
|
|
|
|
-
|
|
|
|
390,481
|
|
|
|
4
|
|
|
|
-
|
|
|
|
106,796
|
|
|
|
-
|
|
|
|
106,800
|
|
Reclass
of APIC to derivative liabilities for tainted warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(189,472
|
)
|
|
|
-
|
|
|
|
(189,472
|
)
|
Resolution
of derivative liabilities due to debt conversions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
106,514
|
|
|
|
-
|
|
|
|
106,514
|
|
Net
loss for the three months ended April 30, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
(183,741
|
)
|
|
|
(183,741
|
)
|
Balance,
April 30, 2020
|
|
|
-
|
|
|
|
-
|
|
|
|
9,561,206
|
|
|
$
|
96
|
|
|
$
|
-
|
|
|
$
|
55,118,693
|
|
|
$
|
(56,964,137
|
)
|
|
$
|
(1,845,348
|
)
|
The
accompanying notes are an integral part of the unaudited consolidated financial statements
LIBERTY
STAR URANIUM & METALS CORP.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For the Three Months Ended
|
|
|
|
April 30
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(81,624
|
)
|
|
$
|
(183,741
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1,459
|
|
|
|
1,674
|
|
Amortization of debt discounts
|
|
|
23,306
|
|
|
|
98,568
|
|
Gain on change in fair value of derivative liabilities
|
|
|
(50,652
|
)
|
|
|
(55,036
|
)
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(1,363
|
)
|
|
|
(3,899
|
)
|
Accounts payable and accrued expenses
|
|
|
18,274
|
|
|
|
31,526
|
|
Accrued interest
|
|
|
11,167
|
|
|
|
6,936
|
|
Cash flows used in operating activities:
|
|
|
(79,433
|
)
|
|
|
(103,972
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from notes payable
|
|
|
32,497
|
|
|
|
-
|
|
Cash advance from related party
|
|
|
-
|
|
|
|
10,000
|
|
Proceeds from notes payable, related parties
|
|
|
-
|
|
|
|
55,000
|
|
Proceeds from convertible promissory notes
|
|
|
60,000
|
|
|
|
-
|
|
Proceeds from the issuance of common stock and warrants
|
|
|
105,000
|
|
|
|
20,599
|
|
Proceeds from exercise of warrants
|
|
|
2,100
|
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
199,597
|
|
|
|
85,599
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
120,164
|
|
|
|
(18,373
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
6,718
|
|
|
|
25,024
|
|
Cash and cash equivalents, end of period
|
|
$
|
126,882
|
|
|
$
|
6,651
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Income tax paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Supplemental disclosure of non-cash items:
|
|
|
|
|
|
|
|
|
Resolution of derivative liabilities due to debt conversions and untainted warrants
|
|
$
|
17,406
|
|
|
$
|
106,514
|
|
Reclass of APIC to derivative liabilities for tainted warrants
|
|
$
|
293,528
|
|
|
$
|
189,472
|
|
Debt discounts due to derivative liabilities
|
|
$
|
64,823
|
|
|
$
|
107,000
|
|
Common stock issued for conversion of debt and interest
|
|
$
|
27,000
|
|
|
$
|
106,800
|
|
Expenses paid by related party on behalf of the Company
|
|
$
|
22,376
|
|
|
$
|
30,690
|
|
The
accompanying notes are an integral part of the unaudited consolidated financial statements
LIBERTY
STAR URANIUM & METALS CORP.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 – Basis of Presentation
The
consolidated financial statements included herein have been prepared by Liberty Star Uranium & Metals Corp. (the “Company”,
“we”, “our”) without audit, pursuant to the rules and regulations of the United States Securities and Exchange
Commission (“SEC”) and should be read in conjunction with our annual report on Form 10-K for the year ended January 31, 2021
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 consolidated financial statements reflect, in the opinion of management, all normal
recurring adjustments necessary to present fairly our financial position at April 30, 2021 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 months ended April 30,2021 are not
necessarily indicative of the results to be expected for the full year.
Reverse
Stock Split
On
November 24, 2020, the Company filed a Certificate of Change with the Secretary of the State of Nevada to affect a 1-for-500 reverse
stock split (the “Reverse Stock Split”). The Reverse Stock Split was formally processed by FINRA effective on February 25,
2021 and the Company’s common stock began trading on a split-adjusted basis on February 25, 2021.
Prior
to the effective date of the Certificate of Change, the Company was authorized to issue 6,150,000,000 shares of common stock. As a result
of the Reverse Stock Split, the Company is authorized to issue 12,300,000 shares of common stock. The Reverse Stock Split did not have
any effect on the stated par value of the common stock.
Prior
to the effective date of the Certificate of Change, the Company was authorized to issue 100,000,000 shares of Class A common stock. As
a result of the Reverse Stock Split, the Company is authorized to issue 200,000 shares of Class A common stock. As of February 24, 2021
(immediately prior to the effective date of the Reverse Stock Split), there were 51,000,000 shares of Class A common stock outstanding.
As a result of the Reverse Stock Split, there are approximately adjustment due to the effect of rounding fractional shares into whole
shares). The Reverse Stock Split did not have any effect on the stated par value of the Class A common stock.
All
references to common shares and common share data in these consolidated financial statements and elsewhere in this Form 10-Q reflect
the Reverse Stock Split.
NOTE
2 – Going concern
The
Company has incurred losses from operations and requires additional funds for further exploratory activity and to maintain its claims
prior to attaining a revenue generating status. There are no assurances that a commercially viable mineral deposit exists on any of our
properties. In addition, the Company may not find sufficient ore reserves to be commercially mined. As such, there is substantial doubt
about the Company’s ability to continue as a going concern.
Management
is working to secure additional funds through the exercise of stock warrants already outstanding, equity financings, debt financings
or joint venture agreements. The consolidated financial statements do not include any adjustments that might result from the outcome
of these uncertainties.
NOTE
3 – Summary of Significant Accounting Policies
Fair
Value
ASC
820 Fair Value Measurements and Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value
and enhances disclosures about fair value measurements. It defines fair value as the exchange price that would be received for an asset
or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity
to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes
three levels of inputs that may be used to measure fair value:
Level
1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level
2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted
prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not
active; and model-driven valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be
obtained from, or corroborated by, third-party pricing services.
Level
3: Unobservable inputs to measure fair value of assets and liabilities for which there is little, if any market activity at the measurement
date, using reasonable inputs and assumptions based upon the best information at the time, to the extent that inputs are available without
undue cost and effort.
Description
|
|
|
Fair
Value
|
|
|
|
Quoted
prices in
active markets
for identical
liabilities
(Level 1)
|
|
|
|
Significant
other
observable
inputs
(Level 2)
|
|
|
|
Significant
unobservable inputs
(Level 3)
|
|
Warrant and convertible note derivative liability at April 30, 2021
|
|
$
|
290,293
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
290,293
|
|
Warrant and convertible note derivative liability at January 31, 2021
|
|
$
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Our
financial instruments consist of cash and cash equivalents, prepaid expenses, accounts payable, accrued liabilities, notes payable, convertible
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 derivative
liability are reported in other income (expense) as gain (loss) on change in fair value of derivative liability.
NOTE
4 – Related party transactions
Our
CEO, Brett Gross, was elected as President and Chief Executive Officer on December 7, 2018 and received no compensation for these services
during the three months ended April 30,2021 and 2020.
From
October 2019 through April 30, 2021, our CEO, Brett Gross, made various payments on behalf of the Company totaling $161,977, and advanced
the Company $62,000 in cash, all of which are reflected as advances from related party on the accompanying consolidated balance sheets.
The total advances were $314,742 and $301,077 as of April 30, 2021 and January 31, 2021, respectively, bear no interest and have no specified
repayment date.
During the three months ended April 30, 2021, the note principal increased $5,000 for a payment by the director
to a consultant on behalf of the Company. Total maturities of principal and accrued interest under all notes to two directors as of April
30, 2021 are $285,448 due July 31, 2021.
The
Company has a note payable of $10,000 from James Briscoe, under a promissory note dated September 17, 2018, which matured and became
past due on September 17, 2019 with interest at 10%.
As
of April 30 and January 31, 2021, the total balance of all related party notes was $298,064 and $283,271, respectively, which includes
accrued interest of $42,152 and $36,070, respectively.
As
of April 30 and January 31, 2021, we had a balance of accrued unpaid wages of $759,949 to James Briscoe, our former Chairman of the Board,
CEO, Chief Geologist, Secretary, Treasurer, and President. Additionally, we had a balance of accrued unpaid wages of $15,625 to a former
President and $36,137 to Patricia Madaris, VP Finance & CFO.
As
of April 30 and January 31, 2021, we had an aggregate balance due of approximately $167,000 on credit cards guaranteed by James Briscoe
reflected in accounts payable and accrued liabilities on the accompanying consolidated balance sheets.
As
of April 30 and January 31, 2021, we had accounts payable to JABA (controlled by James Briscoe) of $34,798, which is reflected as accounts
payable to related party on the accompanying consolidated balance sheets.
As
of April 30 and January 31, 2021, we had a balance of $16,321 due to the spouse of James Briscoe.
NOTE
5 – Stock options
Qualified
and Non-qualified incentive stock options outstanding at April 30, 2021 are as follows:
|
|
|
|
|
Weighted
Average
|
|
|
|
Number of
|
|
|
exercise
|
|
|
|
Options
|
|
|
price per share
|
|
Outstanding, January 31, 2021
|
|
|
146,000
|
|
|
$
|
3.019
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Outstanding, April 30, 2021
|
|
|
146,000
|
|
|
$
|
3.019
|
|
|
|
|
|
|
|
|
|
|
Exercisable, April 30, 2021
|
|
|
146,000
|
|
|
$
|
3.019
|
|
These
options had a weighted average remaining life of 7.37 years and an aggregate intrinsic value of $0 as of April 30, 2021.
During
the three months ended April 30, 2021 and 2020, we recognized $0 and $0, respectively, of compensation expense related to stock options.
NOTE
6 – Warrants
As
of April 30, 2021, there were 449,281 purchase warrants outstanding and exercisable. The warrants
have a weighted average remaining life of 2.1 years and a weighted average exercise price of $2.101 per warrant
for one common share. The warrants had an aggregate intrinsic value of $40,764 as of April 30, 2021.
Stock
warrants outstanding at April 30, 2021 are as follows:
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
average
|
|
|
|
Number of
warrants
|
|
|
exercise
price per share
|
|
Outstanding, January 31, 2021
|
|
|
400,166
|
|
|
$
|
2.155
|
|
Issued
|
|
|
55,115
|
|
|
|
1.524
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(6,000
|
)
|
|
|
0.350
|
|
Outstanding, April 30, 2021
|
|
|
449,281
|
|
|
$
|
2.101
|
|
|
|
|
|
|
|
|
|
|
Exercisable, April 30, 2021
|
|
|
449,281
|
|
|
$
|
2.101
|
|
During
the three months ended April 30, 2021, the Company issued 55,115 warrants to investors as part of their purchase of common
stock. The warrants have a three-year term and are exercisable at any time at exercise prices ranging from $1.426 to
$1.646.
As of June 17, 2021, the Company extended
all warrants issued by the Company which expired or will expire during the year 2021. These warrants are extended for an additional
three years. All other terms of the warrants remain unchanged, including application of the reverse split effective on February
25, 2021.
NOTE
7 – Derivative Liabilities
The
embedded conversion feature in the convertible debt instruments that the Company issued (See Note 8), that became convertible during
the three months ended April 30,2021, qualified it as a derivative instrument since the number of shares issuable under the note is indeterminate
based on guidance in FASB ASC 815, Derivatives and Hedging. These convertible notes tainted all other equity linked instruments including
outstanding warrants and fixed rate convertible debt on the date that the instrument became convertible.
The
valuation of the derivative 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 note when it became convertible and upon settlement, and warrants upon tainting,
were as follows:
|
●
|
The
stock projections are based on the historical volatilities for each date. These volatilities were in the 197.3% to 211.4% 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.
|
Using
the results from the model, the Company recorded a derivative liability during the three months ended April 30,2021 of $293,528
for newly granted and existing warrants (see Note 6) that were tainted and a derivative liability of $64,823 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 “day 1” derivative loss of $0 and a debt discount of $64,823 that was amortized over the remaining term
of the note using the effective interest rate method. Interest expense related to the amortization of this debt discount for the three
months ended April 30,2021, was $21,725. The remaining unamortized debt discount related to the derivative liability was $43,098 as of
April 30, 2021.
During
the three months ended April 30,2021, the Company recorded a reclassification from derivative liability to equity of $0 for warrants
becoming untainted and $17,406 due to the conversions of a portion of the Company’s convertible notes. The Company also recorded
the change in the fair value of the derivative liability as a gain of $50,652 to reflect the value of the derivative liability for warrants
and convertible notes as of April 30, 2021.
During
the three months ended April 30, 2020, the Company recorded a reclassification from derivative liability to equity of $0 for warrants
becoming untainted and $106,514 due to the conversions of a portion of the Company’s convertible notes. The Company also recorded
the change in the fair value of the derivative liability as a gain of $55,036 to reflect the value of the derivative liability for warrants
and convertible notes as of April 30, 2020.
The
Company did not have a derivative liability as of January 31, 2021 since outstanding convertible notes were not convertible
at period end or were fully converted during the period and consequently, the outstanding warrants were no longer tainted.
The
following table sets forth a reconciliation of changes in the fair value of the Company’s derivative liability:
|
|
Three months ended April 30,
|
|
|
|
2021
|
|
|
2020
|
|
Beginning balance
|
|
$
|
-
|
|
|
$
|
-
|
|
Total gains
|
|
|
(50,652
|
)
|
|
|
(55,036
|
)
|
Settlements
|
|
|
(17,406
|
)
|
|
|
(106,514
|
)
|
Additions recognized as debt discount
|
|
|
64,823
|
|
|
|
107,000
|
|
Additions due to tainted warrants
|
|
|
293,528
|
|
|
|
189,472
|
|
Ending balance
|
|
$
|
290,293
|
|
|
$
|
134,922
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain included in earnings relating to derivatives
|
|
$
|
(50,652
|
)
|
|
$
|
(55,036
|
)
|
NOTE
8 – Long-term debt and convertible promissory notes
Following
is a summary of convertible promissory notes:
|
|
April 30, 2021
|
|
|
January 31, 2021
|
|
|
|
|
|
|
|
|
8% convertible note payable issued October 2020, due September 2021
|
|
$
|
72,546
|
|
|
$
|
95,611
|
|
8% convertible note payable issued April 2021, due April 2022
|
|
|
63,055
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135,601
|
|
|
|
95,611
|
|
Less debt discount
|
|
|
(51,425
|
)
|
|
|
(7,642
|
)
|
Less current portion of convertible notes
|
|
|
(84,176
|
)
|
|
|
(87,969
|
)
|
Long-term convertible notes payable
|
|
$
|
-
|
|
|
$
|
-
|
|
On
October 28, 2020, we received net proceeds of $82,000 from the issuance of a convertible note dated October 20, 2020 (the “October
2020 Note”). The note bears interest at 8%, includes OID of $8,500 and legal and due diligence fees of $3,000, matures on
September 1, 2021, and is convertible after 180 days into shares of the Company’s common stock at a price of 75% of the average
of the lowest 5 weighted average market price of the Company’s common stock during the 10 trading days prior to conversion. During
the three months ended April 30, 2021, the noteholder converted a total of $27,000 of the note for 33,881 shares of the Company’s
common stock, leaving a balance of $72,546 as of April 30, 2021.
On
April 26, 2021, we received net proceeds of $60,000 from the issuance of a convertible note dated April 23, 2021 (the “April 2021
Note”). The note bears interest at 8%, includes legal and due diligence fees of $3,000, matures on April 23, 2022, and is convertible
after 180 days into shares of the Company’s common stock at a price of 75% of the average of the lowest 5 weighted average market
price of the Company’s common stock during the 10 trading days prior to conversion.
During
the three months ended April 30, 2021 and 2020, the Company recorded debt discounts of $64,823 and 107,000, respectively, due to the
derivative liabilities, and original issue debt discounts of $3,000 and $0, respectively, due to the convertible notes. The Company recorded
amortization of these discounts of $23,306 and $98,568 for the three months ended April 30, 2021 and 2020, respectively.
Notes
Payable
On
June 22, 2020, the Company received loan proceeds of $32,300 (net of $100 loan fee) under the SBA’s Economic Injury Disaster Loan
program (“EIDL”). The EIDL loan, dated June 16, 2020, bears interest at 3.75%, has a 30-year term, is secured by substantially
all assets of the Company, and is due in monthly installments of $158 beginning June 18, 2021 (extended to June 18, 2023).
On
February 16, 2021, the Company received loan proceeds of $32,497 under the Payroll Protection Program (“PPP”). The PPP loan
bears interest at 1%, has a 5-year term, and is due in equal monthly installments beginning December 16, 2021.
The
balance of these two notes total $66,020, including accrued interest of $1,123, and is included in long-term debt as of April 30, 2021.
NOTE
9 – Stockholders’ deficit
Common
Stock
Our
undesignated common shares are all of the same class, are voting and entitle stockholders to receive dividends as defined. Upon liquidation
or wind-up, stockholders are entitled to participate equally with respect to any distribution of net assets or any dividends that may
be declared.
On
March 5, 2021, the Company issued 6,000 shares of its common stock to an accredited investor for the exercise of warrants for proceeds
of $2,100, or $0.35 per common share.
On
March 26, 2021, the Company issued 17,006 shares of its common stock and 8,503 warrants to our CEO for gross proceeds of $20,000,
for $1.176 per unit. The warrants have a three-year term and are exercisable at any time at an exercise price of $1.646.
In
March 2021, the Company issued 49,412 shares of its common stock and 24,706 warrants to our CEO for gross proceeds of $55,000 for $1.113
per unit. The warrants have a three-year term and are exercisable at any time at an exercise price of $1.558.
On
April 2, 2021, the Company issued 9,818 shares of its common stock and 4,909 warrants to an accredited investor for gross proceeds of
$10,000, or $1.019 per unit. The warrants have a three-year term and are exercisable at any time at an exercise price of $1.426.
On
April 23, 2021, the Company issued 15,049 of its common stock to a noteholder for the conversion of $12,000 of principal under the October
2020 Note, or $0.797 per share.
On
April 27, 2021, the Company issued 18,832 of its common stock to a noteholder for the conversion of $15,000 of principal under the October
2020 Note, or $0.797 per share.
On
April 30, 2021, the Company received proceeds of $20,000 from an investor for the purchase of 19,268 shares of its common stock and 9,634
warrants, at a price of $1.038 per unit. The warrants have a three-year term and are exercisable at any time at an exercise price of
$1.453.
Reverse
Stock Split
On
November 24, 2020, the Company filed a Certificate of Change with the Secretary of the State of Nevada to affect a 1-for-500 reverse
stock split (the “Reverse Stock Split”). The Reverse Stock Split was formally processed by FINRA effective on February 25,
2021 and the Company’s common stock began trading on a split-adjusted basis on February 25, 2021.
Prior
to the effective date of the Certificate of Change, the Company was authorized to issue 6,150,000,000 shares of common stock. As a result
of the Reverse Stock Split, the Company is authorized to issue 12,300,000 shares of common stock. The Reverse Stock Split did not have
any effect on the stated par value of the common stock.
Prior
to the effective date of the Certificate of Change, the Company was authorized to issue 100,000,000 shares of Class A common stock. As
a result of the Reverse Stock Split, the Company is authorized to issue 200,000 shares of Class A common stock, with 102,000 shares of
Class A common stock outstanding. As a result of the Reverse Stock Split, there was an adjustment of approximately 2,408 common shares
due to the effect of rounding fractional shares into whole shares. The Reverse Stock Split did not have any effect on the stated par
value of the Class A common stock.
All references to common shares and common share data in these unaudited
consolidated financial statements and elsewhere in this Form 10-Q as of April 30, 2021, and for the three months ended April 30, 2021
and 2020, reflect the Reverse Stock Split.
NOTE
10 – Commitments and contingencies
Legal
Matter
On
August 22, 2019 (and amended on December 23, 2019), the Company filed a complaint with the Superior Court of Arizona (Case No. C20194139),
demanding the titles and possession of certain vehicles and equipment of the Company from our former CEO, as well as seeking recovery
of damages from the former CEO in an amount of not less than $50,000. None of the vehicles and equipment, individually or in total, have
any material net book value (being fully depreciated) as of April 30, 2021 or January 31, 2021. The matter is ongoing as of the date
of this filing.
On
February 18, 2020, our former CEO and his spouse (the “Counterclaimants”) filed a First Amended Answer: First Amended Complaint
and Counterclaim with the Superior Court of Arizona seeking dismissal of the Company’s complaint and reimbursement of Counterclaimants’
attorney fees incurred related to the matter. Additionally, the counterclaim alleges breach of contract by the Company and requests reimbursement
of amounts loaned to the Company by our former CEO and his spouse, along with reimbursement of attorney fees. The Company believes these
counterclaims are without merit and is aggressively defending them, and believes no unfavorable outcome or material effect on our consolidated
financial statements will result.
NOTE
11 – Subsequent events
In
May 2021, the Company issued a total of 98,472 shares of its comm stock to a noteholder for the conversion of an aggregate of $69,900
of principal and accrued interest under the October 2020 Note, at prices ranging from $0.699 to $0.743 per share.
On May 11, 2021, we issued a convertible note
in the aggregate principal amount of $53,000 (the “May 2021 Note”). The note bears interest at 8%, matures on May 11, 2022,
and is convertible after 180 days into shares of the Company’s common stock at a price of 75% of the average of the lowest 5 weighted
average market price of the Company’s common stock during the 10 trading days prior to conversion.
As of June 17, 2021, the Company extended all
warrants issued by the Company which expired or will expire during the year 2021. These warrants are extended for an additional three
years. All other terms of the warrants remain unchanged, including application of the reverse split effective on February 25, 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Much
of the information included in this prospectus includes or is based upon estimates, projections or other “forward-looking statements”.
Such forward-looking statements include any projections or estimates made by us and our management in connection with our business operations.
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current
judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions,
projections, assumptions or other future performance suggested herein. Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements
to conform these statements to actual results.
Such
estimates, projections or other “forward-looking statements” involve various risks and uncertainties as outlined below. We
caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and
cause actual results to differ materially from the results expressed in any such estimates, projections or other “forward-looking
statements”.
Business
Development
The
following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader
understand the results of operations and financial condition of our company. Management’s Discussion and Analysis of Financial
Condition and Results of Operations is provided as a supplement to, and should be read in conjunction with, our consolidated financial
statements and the accompanying notes to the consolidated financial statements.
Liberty
Star Uranium & Metals Corp. was formerly Liberty Star Gold Corp. and formerly Titanium Intelligence, Inc. (“Titanium”).
Titanium was incorporated on August 20, 2001 under the laws of the State of Nevada. On February 5, 2004, we commenced operations in the
acquisition and exploration of mineral properties business. Big Chunk Corp. (“Big Chunk”) was our wholly owned subsidiary
and was incorporated on December 14, 2003 in the State of Alaska. Big Chunk is engaged in the acquisition and exploration of mineral
properties business in the State of Alaska. Big Chunk was dissolved on June 3, 2019. Redwall Drilling Inc. (“Redwall”) was
our wholly owned subsidiary and was incorporated on August 31, 2007 in the State of Arizona. Redwall performed drilling services on our
mineral properties. Redwall ceased drilling activities in July 2008 and was dissolved on March 30, 2010. In April 2007, we changed our
name to Liberty Star Uranium & Metals Corp (“Liberty Star”) to reflect our current general exploration for base and precious
metals. We are in the exploration phase of operations and have not generated any revenues from operations.
In
October 2014, we formed our wholly owned subsidiary, Hay Mountain Holdings LLC (“HMH”)(formerly known as Hay Mountain Super
Project LLC), to serve as the primary holding company for development of the potential ore bodies encompassed in the Hay Mountain area
of interest in Arizona. On April 11, 2019 we formed a new subsidiary named Earp Ridge Mines LLC, wholly owned by Hay Mountain Holdings
LLC, intended for engagement with future venture partners.
On
August 13, 2020, the Company formed Red Rock Mines, LLC, an Arizona corporation, as a wholly-owned subsidiary of Hay Mountain Holdings,
LLC.
Our
Current Business
We
are engaged in the acquisition and exploration of mineral properties in the state of Arizona and the Southwest USA. Claims in the state
of Arizona are held in the name of Liberty Star. We use the term “Super Project” to indicate a project in which numerous
mineral targets have been identified, any one or more of which could potentially contain commercially viable quantities of minerals.
Our significant projects are described below.
Tombstone
Super Project (“Tombstone”): Tombstone is located in Cochise County, Arizona and covers the Tombstone caldera and its
environs. Within the Tombstone caldera is the Hay Mountain target where we are concentrating our work at this time. We plan to ascertain
whether the Tombstone, Hay Mountain claims possess commercially viable deposits of copper, molybdenum, gold, silver, lead, zinc, manganese
and other metals including Rare Earth Elements (REE’s). We have not identified any ore reserves to date.
On
June 16, 2020, the Company acquired 2 Mineral Exploration Permits (MEP) covering 240 acres at Robbers Roost. Which is located
5.89 miles west of the Hay Mountain Project. While the Robbers Roost MEP area is new to the Company, it has been explored previously
by several exploration companies, in the 1970’s and 1990’s, and recently has received significant interest by others operating
in the area. Drilling by ASARCO indicates “the presence of a granodioritic porphyry intrusive at depth below the alteration zone.
The intrusive is characterized by porphyry copper style alteration and mineralization.” (JB Nelson, “Robbers’ Roost
Summary Report,” 1995, p. 2 http://docs.azgs.az.gov/SpecColl/2008-01/2008-01-0103.pdf)
From
July 14th to August 5th 2020, field mapping was conducted in the Hay Mountain Project area, located 7 km southeast of Tombstone,
in Cochise County, Arizona. The purpose of mapping was to identify alteration and veining associated with an inferred porphyry copper
system at depth, determine the extent of hydrothermal alteration, and comment on the possible the timing of mineralization. Mapping was
conducted at 1:10,000 scale and a total of 183 carbonate vein samples were taken for pXRF analysis and UV fluorescence response.
On
November 11, 2020, the Company announced the identification of potentially exploitable gold mineralization on its recently acquired
Arizona State Land Department Mineral Exploration Permits. Preliminary surface exploration on the Red Rock MEPs advances the Company’s
knowledge of the porphyry system signature associated with magnetic highs at, and adjacent to the north of, Target 1, and represent the
expansion of biogeochemical, surface rock sampling, and x-ray fluorescence (XRF) work continuing at Target 1 and on the anticipated gold
halo likely associated with the indicated porphyry center. The Company discovered multiple outcrops of intensely silicified rock in the
initial observational field work. These outcrops generally occur in linear features several feet in thickness with multiple features
oriented en echelon with interstitial host country rock of varying horizontal dimension. These outcrops contain densely distributed jasperoids,
which, when sampled yield what the Company believes are potentially economically exploitable concentrations of gold. There was a total
of 23 representative (1 to 2 kg) rock sample assays. These assays demonstrate gold concentrations ranging from below detection limits
of 0.05 ppm in country rock surrounding certain outcrops to a high of 13.55 ppm in direct outcrop samples. Of the 23 assayed samples,
nine (9) show gold concentrations of 0.95 ppm or more.
On
November 25, 2020, the Company received approval from the Arizona State Land Department for 5 additional MEP’s covering
2,369.15 acres for a total of 16,662.10 acres or 26.03 sq miles at our Hay Mountain Project.
On
March 15, 2021, the Company announced the release of more rock chip assay results from the Red Rock Canyon area located within
the Hay Mountain Project. 28 samples were submitted to the ALS/USA Inc. Tucson location with results returned to the Company February
6th. This set of samples are within and outside of the original study area and expand on the October 2020 geochemical sampling
undertaken on MEP land within the Company’s Red Rock Canyon holdings.
On
May 21, 2021, the Company announced the public release of its latest technical report. The Technical Report on the Red Rock
Canyon Gold Property Cochise County, Arizona (“RRC Technical Report” “The Report”). The Report was prepared
by Broadlands Mineral Advisory Services Ltd., owned and operated by Liberty Star’s independent director Bernard J. Guarnera,
P.ENG., QP, CMA. Mr. Guarnera authored The Report. His findings include that the Red Rock Canyon tract contains “gold at grades
that are now considered economic” (p.1). Further, the compilation of previous drilling results, by others as noted in The Report,
(p.30) indicates that 12 of 17 intercepts reported gold at grades above what is considered current cut off grades, 0.022 oz per ton (0.68
gpt). These historical intercepts range from five (5) to forty-five (45) feet in vertical extent and reveal multiple mineralized zones.
Grades in the larger intercepts are reported up to 0.182 ounces per ton (5.66 gpt). Additionally, Liberty Star collected fifteen (15)
more rock samples on a recent field visit near and at the locations of past drilling. We expect the new field assays to confirm similar
grades in the corresponding outcrops. These assay results are forthcoming and will be posted to the Liberty Star website.
On
May 26, 2021, the Company announced the public release of geochemical assay results prepared by ALS/USA Inc. The Company noted
in its news release issued May 21st that the results were forthcoming on the heels of its latest technical report focused
on the gold prospect at Red Rock Canyon. Previously released geochemical assay results from October 2020 and Feb 2021 can be viewed on
the Liberty Star Minerals website. This set of results strongly aligns with previous assay results indicating that the Red Rock
portion of the Hay Mountain Project is a potential gold property.
Title
to mineral claims involves certain inherent risks due to difficulties in determining the validity of certain claims, as well as potential
for problems arising from the frequently ambiguous conveyancing history characteristic of many mineral properties. We have investigated
title to all the Company’s mineral properties and, to the best of its knowledge, title to all properties retained are in good standing.
The
mineral resource business generally consists of three stages: exploration, development and production. Mineral resource companies that
are in the exploration stage have not yet found mineral resources in commercially exploitable quantities and are engaged in exploring
land in an effort to discover them. Mineral resource companies that have located a mineral resource in commercially exploitable quantities
and are preparing to extract that resource are in the development stage, while those engaged in the extraction of a known mineral resource
are in the production stage. We have not found any mineral resources in commercially exploitable quantities.
There
is no assurance that a commercially viable mineral deposit exists on any of our properties, and further exploration is required before
we can evaluate whether any exist and, if so, whether it would be economically feasible to develop or exploit those resources. Even if
we complete our current exploration program and we are successful in identifying a mineral deposit, we would be required to spend substantial
funds on further drilling and engineering studies before we could know whether that mineral deposit will constitute a commercially viable
mineral deposit, known as an “ore reserve.”
To
date, we have not generated any revenues. Our ability to pursue our business plan and generate revenues is subject to our ability to
obtain additional financing, and we cannot give any assurance that we will be able to do so.
The
extent to which the coronavirus disease (“COVID-19”) impacts our businesses will depend on future developments, which are
highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions
to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue
for an extensive period of time, our operations may be materially adversely affected. Currently, the Company has not experienced a significant
impact on its businesses related to COVID-19. However, COVID-19 did, and continues to, impact us significantly with delays in acquiring
a JV to begin our primary drilling project.
Results
of Operations
Material
Changes in Financial Condition for the Three-Month Period Ended April 30, 2021
We
had cash and cash equivalents in the amount of $126,882 as of April 30, 2021 compared to $6,718 as of January 31, 2021. We had
negative working capital of $2,187,400 as of April 30, 2021 compared to $1,991,571 as of January 31, 2021. We used $79,433 of
net cash in operating activities during the three months ended April 30,2021 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 (aeromagnetics and aero electromagnetics). We purchased no new equipment during the three
months ended April 30,2021. We have been raising capital primarily by issuing convertible promissory notes, related party notes and the
sale of common stock. We intend to continue to raise capital from such sources. In addition to seeking sources of funding through the
sale of equity, we may seek to enter into joint venture agreements, or other types of agreements with other companies to finance our
projects for the long term. In addition, we may choose to sell a portion of our assets to finance our projects. Should our properties
prove to be commercially viable, we may be in a position to seek debt financing to help build infrastructure, and eventually we may obtain
revenues from commercial mining of our properties.
Material
Changes in Results of Operations for the Three-Month Periods Ended April 30, 2021 and 2020
We
had a net loss of $81,624 and for the three months ended April 30, 2021, compared to net loss of $183,741 for the three months ended
April 30,2020,
During
the three-months ended April 30,2021, we had a decrease of $1,199 in geological and geophysical expense compared to the three months
ended April 30,2020, due primarily to an decrease in land rental fees for mineral claims. During the three months ended April 30,2021,
we had a decrease of $1,191 in salaries and benefit expense compared to the three months ended April 30,2020, due primarily to a reduction
in hours worked. During the three months ended April 30,2021, we had a decrease of $30,589 in legal expense compared to the three months
ended April 30,2020, due primarily to a decrease in the use of outside legal services for operations and litigation matters. We had a
decrease in general and administrative expenses of $6,569 during the three months ended April 30, 2021, as compared to the three months
ended April 30,2020 which was due to a slight reduction in occupancy expense. We had a decrease in interest expense of $67,319 during
the three months ended April 30,2020, as compared to the three months ended April 30,2020, due primarily to a decrease in convertible
notes payable.
Liquidity
and Capital Resources
We
had cash and cash equivalents in the amount of $126,882 as of April 30, 2021. We had negative working capital of $2,187,400 as of April
30, 2021. We used cash in operating activities of $79,433 for the three months ended April 30, 2021. We will need additional funds in
order to proceed with our planned exploration program.
Convertible
promissory notes
We
have issued the following convertible promissory notes in private placements of our securities to institutional investors pursuant to
exemptions from registration set out in Rule 506 of Regulation D under the Securities Act of 1933.
On
October 28, 2020, we received net proceeds of $82,000 from the issuance of a convertible note dated October 20, 2020 (the “October
2020 Note”). The note bears interest at 8%, includes OID of $8,500, and legal and due diligence fees of $3,000, matures
on September 1, 2021, and is convertible after 180 days into shares of the Company’s common stock at a price of 75% of the average
of the lowest 5 weighted average market price of the Company’s common stock during the 10 trading days prior to conversion. During
the three months ended April 30, 2021, the noteholder converted a total of $27,000 of the note for 33,881 shares of the Company’s
common stock, leaving a balance of $72,546 as of April 30, 2021.
On
April 26, 2021, we received net proceeds of $60,000 from the issuance of a convertible note dated April 23, 2021 (the “April 2021
Note”). The note bears interest at 8%, includes legal and due diligence fees of $3,000, and matures on April 23, 2022, and
is convertible after 180 days into shares of the Company’s common stock at a price of 75% of the average of the lowest 5 weighted
average market price of the Company’s common stock during the 10 trading days prior to conversion.
Proceeds
from issuance of common stock
On
March 5, 2021, the Company issued 6,000 shares of its common stock to an accredited investor for the exercise of warrants for proceeds
of $2,100, or $0.35 per common share.
On
March 26, 2021, the Company issued 17,006 shares of its common stock and 8,503 warrants to our CEO for gross proceeds of $20,000,
for $1.176 per unit. The warrants have a three-year term and are exercisable at any time at an exercise price of $1.646.
In
March 2021, the Company issued 49,412 shares of its common stock and 24,706 warrants to our CEO for gross proceeds of $55,000 for $1.113
per unit. The warrants have a three-year term and are exercisable at any time at an exercise price of $1.558.
On
April 2, 2021, the Company issued 9,818 shares of its common stock and 4,909 warrants to an accredited investor for gross proceeds of
$10,000, or $1.019 per unit. The warrants have a three-year term and are exercisable at any time at an exercise price of $1.426.
On
April 23, 2021, the Company issued 15,049 of its common stock to a noteholder for the conversion of $12,000 of principal under the October
2020 Note, or $0.797 per share.
On
April 27, 2021, the Company issued 18,832 of its common stock to a noteholder for the conversion of $15,000 of principal under the October
2020 Note, or $0.797 per share.
On
April 30, 2021, the Company received proceeds of $20,000 from an investor for the purchase of 19,268 shares of its common stock and 9,634
warrants, at a price of $1.038 per unit. The warrants have a three-year term and are exercisable at any time at an exercise price of
$1.453.
Proceeds
from long-term notes payable
On June 22, 2020, the Company received loan
proceeds of $32,300 (net of $100 loan fee) under the SBA’s Economic Injury Disaster Loan program (“EIDL”). The EIDL
loan, dated June 16, 2020, bears interest at 3.75%, has a 30-year term, is secured by substantially all assets of the Company, and is
due in monthly installments of $158 beginning June 18, 2021 (extended to June 18, 2023).
On
February 16, 2021, the Company received loan proceeds of $32,497 under the Payroll Protection Program (“PPP”). The PPP loan
bears interest at 1%, has a 5-year term, and is due in equal monthly installments beginning December 16, 2021.
Critical
Accounting Policies
The
unaudited consolidated financial statements of Liberty Star have been prepared in conformity with accounting principles generally accepted
in the United States of America. Our significant accounting policies are described in Note 2 to the consolidated financial statements
included in Item 8 in our Form 10-K for the year ended January 31, 2021. 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 and we have included a reference
to the substantial doubt about our ability to continue as a going concern in connection with our unaudited consolidated financial statements
as of April 30, 2021. Our total stockholders’ deficit at April 30, 2021 was approximately $2 million.
These
unaudited 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
derivative liabilities at fair value at each reporting period when required in accordance with the applicable accounting guidance. No
gain or loss is reported when the notes are converted into shares of our common stock in accordance with the note’s terms.
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.
Quantitative
and Qualitative Disclosures about Market Risk
Not
applicable.
Controls and Procedures
As
required by Rule 13a-15 under the Exchange Act, our management has evaluated the effectiveness of the design and operation of our disclosure
controls and procedures at April 30, 2021, which is the end of the fiscal quarter covered by this report. This evaluation was carried
out by Mr. Brett Gross, our principal executive officer and Ms. Patricia Madaris, our principal financial officer. Based on this evaluation,
Mr. Brett Gross and Ms. Patricia Madaris have concluded that our disclosure controls and procedures were not effective as at the end
of the period covered by this report. Given the size of our current operation and existing personnel, the opportunity to implement internal
control procedures that segregate accounting duties and responsibilities is limited. Until the organization can increase in size to warrant
an increase in personnel, formal internal control procedures will not be implemented until they can be effectively executed and monitored.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed
by our company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by our company in the reports that we file or submit under the
Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer,
to allow timely decisions regarding required disclosure.
Management
believes that despite our material weaknesses set forth above, our financial statements for the quarter ended April 30, 2021 are fairly
stated, in all material respects, in accordance with U.S. GAAP.
Changes
in Internal Control over Financial Reporting
On
August 19, 2021 the Company dismissed MaloneBailey, LLP as its independent auditor and appointed Turner, Stone & Company, LLP as
its independent auditor. The reports of MaloneBailey, LLP for the past two fiscal years did not contain any adverse opinion or disclaimer
of opinion, and were not qualified or modified as to any uncertainty, audit scope or accounting principle except with respect to an explanatory
paragraph indicating that there was substantial doubt about the Company’s ability to continue as a going concern. During the Company’s
two most recent fiscal years and any subsequent interim period up to and including the date of the Company’s dismissal of MaloneBailey,
LLP, there have been no (i) disagreements with MaloneBailey, LLP on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of MaloneBailey, LLP, would have
caused them to make reference thereto in their reports on the financial statements for such periods; or (ii) reportable events within
the meaning of Item 304(a)(1)(v) of Regulation S-K and the related instructions thereto, except for the material weaknesses described
in Item 9A of the Company’s Annual Report on Form 10-K for the year ended January 31, 2021.
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:
All
directors of our company hold office until the next annual meeting of the stockholders or until their successors have been elected and
qualified. The 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 as such, are as follows:
Name
|
|
Position(s)
Held with the Company
|
|
Age
|
|
Date
First Elected or Appointed
|
Brett
Gross
|
|
President,
Chief Executive Officer and Director
|
|
61
|
|
October
20, 2014
|
Peter
O’Heeron
|
|
Chairman
of the Board, Secretary and Treasurer.
|
|
57
|
|
September
6, 2012
|
Patricia
Madaris
|
|
Chief
Financial Officer, VP Finance
|
|
70
|
|
May
8, 2015
|
V.E.
“Gene” Streety
|
|
Director
|
|
91
|
|
August
27, 2018
|
Bradley
Munroe
|
|
Director
|
|
79
|
|
August
27, 2018
|
Boyd
Gordon
|
|
Director
|
|
71
|
|
July
19, 2019
|
Bernard
Guarnera
|
|
Director
|
|
77
|
|
October
14, 2019
|
Business
Experience
Brett
Gross. Mr. Gross joined the board in 2014. Mr. Gross has served as Arbitrator with the American Arbitration Association, Chief
Legal Counsel with MasTec Power Corp., Vice President and Regional Managing Attorney for URS Energy & Construction, Inc.,
an AECOM company, fka Washington Group International, Inc. since August 2005. 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. Mr. Gross was elected as President and
Chief Executive Officer on December 7, 2018.
We
believe Mr. Gross is qualified to serve on our board of directors because of his education and business experience as described
above.
Peter
O’Heeron. Mr. O’Heeron joined the board in 2012. Mr. O’Heeron 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. O’Heeron brings together the resources from strategic disciplines necessary to commercialize unique
technologies. Prior to founding Advanced Medical Technologies LLC, Mr. O’Heeron 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. O’Heeron completed the sale of NeoSurg Technologies
to CooperSurgical in 2005. Mr. O’Heeron 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. O’Heeron currently
holds 5 patents and has 4 patents pending. Mr. O’Heeron was elected Chairman of the Board on December 7, 2018, and Secretary and
Treasurer on January 11, 2019.
We
believe Mr. O’Heeron is qualified to serve on our board of directors because of his knowledge of our company’s 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.
Patricia
Madaris. Ms. Madaris has served as our VP Finance since May 2015. Prior to that time, Ms. Madaris served as the Executive
Assistant to our CEO and Board of Directors since 2011. 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 previously worked as an accountant/manager
for corporations in Arizona, Florida, and California from 2005. Ms. Madaris has a Bachelor of Science Degree from Indiana Wesleyan
University, graduating Summa Cum Laude. Ms. Madaris also holds an MBA graduating with highest honors in February 2017. Ms. Madaris
was elected Chief Financial Officer on January 11, 2019.
V.E.
(Gene) Streety. Mr. Streety graduated in January 1954 from Florida State University with a BS in political science, and immediately
started work as an assistant to the campaign manager in a successful governor’s campaign in the State of Florida. Later,
he received an appointment on the staff of US congressman Bob Sikes in Washington D.C., returning to Tallahassee after 14 months.
Mr. Streety is currently a Licensed Real Estate Broker working as such for over 50 years. At one time, he was a Florida Licensed
Securities agent working on Private Placement for small businesses involving real estate. He worked as a Land Developer and investment
real estate broker for the preponderance of his career. He also spent 14 years with the City of Tallahassee retiring there in
1998 as Real Estate Administrator managing the Division of Real Estate. He has additionally worked on mineral rights leases having
been partners with a petroleum geologist working together securing mineral rights leases. Mr. Streety was one of the Founders/directors
of a local bank, which was later sold to a regional bank. He has belonged to several boards throughout the years; was a member
of the Chamber of Commerce and Civic boards. Throughout his career he has served in several Tallahassee area Presbyterian churches
in such roles as church treasurer, church school teacher, deacon, and elder.
We
believe Mr. Streety is qualified to serve on our board of directors because of his extensive business experience and education
as described above.
W.
Bradley Munroe. Mr. Munroe holds a B.S., Economics and Political Science from Florida State University, Tallahassee, Florida
(1964), and is an attorney, (J.D., 1967, University of Florida, Gainesville, Florida) and AV Rated Lawyer by Martindale Hubbell.
Mr. Munroe is a licensed Florida attorney admitted to practice before state and federal courts. Mr. Munroe’s experience
as an attorney is extensive with a private law practice from 1970 to present. Emphasis on trial practice related to personal injury,
wrongful death, products liability, workers’ compensation, commercial and construction law; and representation of building
trades industries, and commercial real estate transactions and community bank. He has served as a Municipal Judge, a Staff Attorney
for Florida Department of Commerce, a Staff Attorney, Governor Claude Kirk, an Assistant City Attorney, Tallahassee, Florida,
Certified Civil and Family Law Mediator, and miscellaneous former lobbyist for numerous state associations. Mr. Munroe also is
a Licensed Florida Real Estate Broker. Other Professional Experience includes Owner and operator of various business operations,
including: Banking, Construction Company, Real Property Title Abstract Company – RV Park, and Marina. Mr. Munroe has also
worked as a real estate investor. He has also served as receiver and trustee in bankruptcy in federal court. Mr. Munroe holds
Memberships in all state and (Legal) local bar associations, the Florida Justice Association (Trial Lawyers), and is a member
of the Episcopal Church, Exchange Club, Tallahassee Builders Association, Cotillion Club, and Colonels Club in Florida.
We
believe Mr. Munroe is qualified to serve on our board of directors because of his extensive education and business experience
as described above.
Boyd
Gordon. Mr. Gordon is a financial transaction professional with over 30 years of broad experience in corporate and international
finance, capital market transactions and project development and finance. Currently, Mr. Gordon is a principal in a financial
consultancy firm. At URS, a major engineering and construction company, Mr. Gordon served as the Senior Director of Project Development
and Finance. In this position, Mr. Gordon structured large institutional financings for public sector infrastructure projects
and assisted clients of the power and mining groups. His expertise is in structuring creative financing plans, finding funding
sources and closing complex financial transactions. In a long career with Westinghouse Electric, Mr. Gordon served as European
Treasurer, Director of Corporate Finance, Vice President of Asset Review, Vice President of the Leasing Group, and Director of
Treasury Strategic Programs. He was a member of Westinghouse Electric’s team of corporate finance executives that guided
the company through a severe financial crisis. Mr. Gordon received a master’s degree in International Management from the
American Graduate School of International Management (Thunderbird) in 1976, a Master of Business Administration in Finance from
Southern Methodist University in 1975, and a Bachelor of Science degree in Marketing from Missouri State University in 1972.
We
believe Mr. Gordon is qualified to serve on our board of directors because of his extensive education and business experience
as described above.
Bernard
(Barney) Guarnera. Mr. Guarnera is well known and respected throughout the mining industry. He has over 50 years of experience
encompassing six continents and precious metals, ferrous, non-ferrous, base metal, industrial and energy minerals. From 1991 through
2011 he was the president and CEO of the Behre Dolbear Group, taking the company from a single office in New York City to a highly
respected international mineral industry advisory firm with offices in North and South America, Europe, Australia, and Asia. Barney
remains affiliated with Behre Dolbear as a Director. Mr. Guarnera is a Certified Mineral Appraiser with the IIMA, Chartered Professional
(geology) with AusIMM, Qualified Professional (mineral property valuations, geology and ore reserves) with MMSA, a Registered
Professional Engineer (Texas) and a Registered Professional Geologist (Oregon). Barney specializes in assessing the technical
and economic viability of mineral projects and properties and the valuation of mineral properties and mining companies. He has
participated in billions of dollars of transactions related to the mining industry and acted as principal advisor to the Stock
Exchange of Hong Kong regarding the development of its listing rules for mining companies and later an advisor regarding its acquisition
of the London Metal Exchange.
We
believe Mr. Guarnera is qualified to serve on our board of directors because of his extensive education and business experience
as described above.
Family
Relationships
There
are no family relationships among our directors or officers.
Board
and Committee Meetings
The
board of directors of our company held 9 formal meetings during the fiscal year ended January 31, 2021.
There
have been no material changes to the procedures by which our shareholders may recommend nominees to our board of directors during
the fiscal year ended January 31, 2021. Shareholders may contact our current President, Brett Gross, to recommend nominees to
our board of directors.
For
the fiscal year ended January 31, 2021 our only standing committee of the board of directors was our audit committee. We do not
have a nominating committee or a compensation committee.
Audit
Committee
Currently
our audit committee consists of our entire board of directors. We do not have a separately-designated standing audit committee
established in accordance with section 3(a)(58)(A) of the Exchange Act.
During
the fiscal year ended January 31, 2021, the audit committee did not hold any meetings. Rather, the business of the audit committee
was conducted by resolutions consented to in writing by all the members of the board and filed with the minutes of the proceedings
of the board.
Audit
Committee Financial Expert
Our
board of directors has determined that it does not have a member of its board of directors or audit committee that qualifies as
an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K.
We
believe that the members of our board of directors are collectively capable of analyzing and evaluating our consolidated financial
statements and understanding internal controls and procedures for financial reporting. In addition, we believe that retaining
an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome
and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated any
material revenues to date.
Involvement
in Certain Legal Proceedings
Our
directors and executive officers have not been involved in any of the following events during the past 10 years:
1.
|
any
bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that time;
|
|
|
2.
|
any
conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other
minor offences);
|
|
|
3.
|
being
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities
or banking activities;
|
|
|
4.
|
being
found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission
to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
|
|
|
5.
|
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,
|
|
|
6.
|
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.
|
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than 10%
of our common stock, to file reports regarding ownership of, and transactions in, our securities with the SEC and to provide us
with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations
from certain reporting persons, we believe that during the fiscal year ended January 31, 2021, all filing requirements applicable
to its officers, directors and greater than 10% percent beneficial owners were complied with.
Code
of Ethics
Effective
March 15, 2004, our company’s board of directors adopted a Code of Business Conduct and Ethics that applies to all employees,
including our company’s Chief Executive Officer, Chief Financial Officer and VP Finance. As adopted, our Code of Business
Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote:
1.
|
honest
and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional
relationships;
|
|
|
2.
|
full,
fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the SEC and
in other public communications made by us;
|
|
|
3.
|
compliance
with applicable governmental laws, rules and regulations;
|
|
|
4.
|
the
prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified
in the Code of Business Conduct and Ethics; and
|
|
|
5.
|
accountability
for adherence to the Code of Business Conduct and Ethics. Our Code of Business Conduct and Ethics requires, among other things,
that all of our company’s Senior Officers commit to timely, accurate and consistent disclosure of information; that
they maintain confidential information; and that they act with honesty and integrity.
|
In
addition, our Code of Business Conduct and Ethics emphasizes that all employees, and particularly senior officers, have a responsibility
for maintaining financial integrity within our company, consistent with generally accepted accounting principles, and federal
and state securities laws. Any senior officer that becomes aware of any incidents involving financial or accounting manipulation
or other irregularities, whether by witnessing the incident or being told of it, must report it to our company. Any failure to
report such inappropriate or irregular conduct of others is to be treated as a severe disciplinary matter. It is against our company
policy to retaliate against any individual who reports in good faith the violation or potential violation of our company’s
Code of Business Conduct and Ethics by another.
Our
Code of Business Conduct and Ethics was filed with the SEC on March 13, 2004 as Exhibit 14.1 to our annual report on Form 10-KSB
for the fiscal year ended December 31, 2003. We will provide a copy of the Code of Business Conduct and Ethics to any person without
charge, upon request. Requests can be sent to: Liberty Star Uranium & Metals Corp., 2 E. Congress St. Ste. 900, Tucson, AZ
85701.