UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM S-1

 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

Liberty Star Uranium & Metals Corp.

(Exact name of registrant as specified in its charter)

 

Nevada

(State or other jurisdiction of incorporation or organization)

 

1000

(Primary Standard Industrial Classification Code Number)

 

90-0175540

(I.R.S. Employer Identification Number)

 

2 E Congress St. Ste 900

Tucson, Arizona 85701

Telephone: (520) 561-7033

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

 

Nevada Agency and Transfer Company

50 West Liberty Street, Suite 880

Reno, Nevada 89501

Telephone: (775) 322-0626

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

From time to time after the effective date of this registration statement.

(Approximate date of commencement of proposed sale to the public)

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging Growth Company    
(Do not check if a smaller reporting company)      

 

 

 

Calculation of Registration Fee

Title of Each Class

of Securities to be

Registered

 

Amount to be

Registered(1)

   

Proposed Maximum

Offering Price

Per Share

     

Proposed Maximum

Aggregate Offering

Price

     

Amount of

Registration Fee

 
Common stock to be offered for resale by selling stockholder     1,600,000 (2)   $ 0.71 (3),(4)   $ 1,136,000 (3),(4)   $ 123.94 (4)

 

(1) An indeterminate number of additional shares of common stock shall be issuable pursuant to Rule 416 under the Securities Act of 1933 to prevent dilution resulting from stock splits, stock dividends or similar transactions and in such an event the number of shares registered shall automatically be increased to cover the additional shares in accordance with Rule 416.
   
(2) Consists of up to 1,600,000 shares of common stock to be sold to Triton Funds, LP under the investment agreement dated August 20, 2021.
   
(3) Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(c) under the Securities Act of 1933.
   
(4) Based on the closing price   per share ($0.95) for Liberty Star Uranium & Metals Corp.’s common stock on July 26, 2021, as reported by the OTC Markets Group’s OTCQB.

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 
 

 

The information in this prospectus is not complete and may be changed. The selling stockholder may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

Subject to Completion, Dated August 30, 2021

 

Prospectus

 

1,600,000 Shares

 

Liberty Star Uranium & Metals Corp.

 

Common Stock

 

 

 

The selling stockholder identified in this prospectus may offer and sell up 1,600,000 shares of our common stock to be sold to Triton Funds LP, a Delaware limited partnership (“Triton” or “Selling Security Holder”) under the investment agreement dated August 20, 2021 (the “Investment Agreement”). The Investment Agreement permits us to “put” up to $1,000,000 in shares of our common stock to Triton over a period of up to 12 months.

 

Triton may sell all or a portion of the shares being offered pursuant to this prospectus at fixed prices, at prevailing market prices at the time of sale, at varying prices or at negotiated prices.

 

Triton is an underwriter within the meaning of the Securities Act of 1933 and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act of 1933 in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act of 1933. We will not receive any proceeds from Triton’s sale of any shares being offered under this prospectus, however, we will receive proceeds from the sale of shares of our common stock pursuant to the exercise of our put right offered by Triton. We will pay for expenses of this offering, except that Triton will pay any broker discounts, commissions, or equivalent expenses and expenses of its legal counsel applicable to the sale of the shares.

 

Our common stock is quoted on the OTCQB under the symbol “LBSR”. On August 20, 2021, the closing price of our common stock on the OTCQB was $0.74 per share.

 

Investing in our common stock involves a high degree of risk. You should carefully review the “Risk Factors” beginning on page 3.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful, complete or adequate. Any representation to the contrary is a criminal offense.

 

The date of this prospectus is August 30, 2021.

 

i
 

 

Table of Contents

  Page Number
About This Prospectus 1
Prospectus Summary 1
Risk Factors 3
Risks Related to Our Company and Business 3
Risks Related to Our Common Stock 8
Forward-Looking Statements 11
Use of Proceeds 11
Determination of Offering 12
Dilution 13
Selling Stockholders 13
Plan of Distribution 14
Description of Securities 16
Interest of Named Experts and Counsel 17
Information with Respect to Our Company 18
Description of Business 18
Description of Property 21
Legal Proceedings 28
Market Price of and Dividends on Our Common Equity and Related Stockholder Matters 28
Financial Statements 30
Management’s Discussion and Analysis of Financial Condition and Results of Operations 31
Directors and Executive Officers 37
Executive Compensation 41
Security Ownership of Certain Beneficial Owners and Management 42
Certain Relationships and Related Transactions, and Director Independence 44
Where You Can Find More Information 44

 

ii

 

 

About This Prospectus

 

You should rely only on the information that we have provided in this prospectus and any applicable prospectus supplement. We have not authorized anyone to provide you with different information. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus and any applicable prospectus supplement. You must not rely on any unauthorized information or representation. This prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. You should assume that the information in this prospectus and any applicable prospectus supplement is accurate only as of the date on the front of the document, regardless of the time of delivery of this prospectus, any applicable prospectus supplement, or any sale of a security.

 

As used in this prospectus, the terms “we,” “us,” “our,” the “Company” and “Liberty Star” means Liberty Star Uranium & Metals Corp., a Nevada corporation, and our subsidiaries, Hay Mountain Holdings, LLC, an Arizona limited liability company, Earp Ridge Mines LLC, an Arizona limited liability company, & Red Rock Mines LLC, an Arizona limited liability company, unless otherwise indicated. All dollar amounts refer to U.S. dollars unless otherwise indicated.

 

Item 3: Summary and Risk Factors

Prospectus Summary

 

This summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock and you should carefully read this entire prospectus, including our financial statements and the related notes and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in each case included elsewhere in this prospectus.

 

The Offering

 

We may offer and sell up to 1,600,000 shares of our common stock to be sold to Triton under the investment agreement dated August 20, 2021. The Investment Agreement permits us to “put” up to $1,000,000 in shares of our common stock to Triton until December 31, 2022, when the Investment Agreement expires.

 

We will not receive any proceeds from the sale of shares of our common stock by Triton, however, we will receive proceeds from the sale of shares of our common stock pursuant to the exercise of our put right offered by Triton. We will pay for expenses of this offering, except that Triton will pay any broker discounts, commissions, or equivalent expenses and expenses of its legal counsel applicable to the sale of its shares.

 

Our Business

 

We were formerly Liberty Star Gold Corp. and formerly Titanium Intelligence, Inc. Titanium Intelligence, Inc. was incorporated on August 20, 2001, under the laws of the State of Nevada, as a mineral properties acquisition and exploration company. Big Chunk Corp. was our wholly owned subsidiary and was incorporated on December 14, 2003 in the State of Alaska. Big Chunk Corp. was engaged in the acquisition and exploration of mineral properties business in the State of Alaska. Redwall Drilling Inc. was our wholly owned subsidiary and was incorporated on August 31, 2007 in the State of Arizona. Redwall Drilling Inc. performed drilling services on the Company’s mineral properties. Redwall Drilling Inc. ceased drilling activities in July 2008 and was dissolved on March 30, 2010. In April 2007, we changed our name to Liberty Star Uranium & Metals Corp. to reflect our current general exploration for base and precious metals. We are currently in the exploration phase of operations and have not generated any revenues from operations. A more detailed discussion of this technology and its anticipated benefits is provided under the section “Description of Business.”

 

1

 

 

Our common stock is traded over-the-counter on the OTCQB under the ticker symbol “LBSR.”

 

The principal offices of our company are located at 2 E. Congress St. Ste. 900, Tucson, Arizona 85701. Our telephone number is (520) 561-7033.

 

Summary of Financial Data

 

The following information represents selected audited financial information for the Company for the years ended January 31, 2021 and 2020 and selected unaudited financial information for the Company for the three-month periods ended April 30, 2021 and 2020. The summarized financial information presented below is derived from and should be read in conjunction with our audited and unaudited financial statements, as applicable, including the notes to those financial statements which are included elsewhere in this prospectus along with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 31 of this prospectus.

 

 

Statements of

Operations Data

 

Three Month Period

Ended
April 30,

2021

   

Three Month Period

Ended
April 30, 2020,
 

   

Year Ended
January 31, 2021

   

Year Ended
January 31, 2020

 
Revenue   Nil     Nil     Nil     Nil  
Net Operating Expenses   $ 94,092     $ 133,274     $ 594,892     $ 467,796  
Net Income (Loss)   $ (81,624 )   $ (183,741 )   $ (749,745 )   $ (337,469 )
Basic and Diluted Net Income (Loss) per Share   $ (0.01 )   $ (0.02 )   $ (0.08 )   $ (0.04 )

 

Balance Sheets Data   As of
April 30, 2021
    As of
January 31, 2021
    As of
January 31, 2020
 
Cash and Cash Equivalents   $ 126,882     $ 6,718     $ 25,024  
Working Capital (Deficit)   $ (2,187,400 )   $ (1,991,571 )   $ (1,708,540 )
Total Assets   $ 165,157     $ 45,089     $ 73,227  
Total Liabilities   $ 2,400,280     $ 2,056,566     $ 1,779,275  
Total Stockholders’ Equity (Deficit)   $ (2,235,123 )   $ (2,011,477 )   $ (1,706,048 )
Accumulated Deficit   $ (57,611,765 )   $ (57,530,141 )   $ (56,780,396 )

 

2

 

 

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.

 

3

 

 

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.

 

4

 

 

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.

 

5

 

 

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.

 

6

 

 

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.

 

7

 

 

 

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.

 

8

 

 

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.

 

9

 

 

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.

 

10

 

 

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.

 

Forward-Looking Statements

 

This prospectus contains forward-looking statements. Forward-looking statements are projections in respect of future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “intend,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, including the risks in the section entitled “Risk Factors,” uncertainties and other factors, which may cause our company’s or our industry’s actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Item 4: Use of Proceeds

 

We will not receive any proceeds from the sale of shares of our common stock by the Selling Security Holder, however, we will receive proceeds from the sale of shares of our common stock pursuant to our exercise of the put right offered by Triton. If we receive proceeds upon exercise of warrants, we will use these proceeds for general corporate and working capital purposes and acquisitions or assets, businesses or operations or for other purposes that our board of directors, in its good faith, deems to be in the best interest of the Company.

 

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We will pay for expenses of this offering, except that the Selling Security Holder will pay any broker discounts or commissions or equivalent expenses and expenses of its legal counsel applicable to the sale of its shares.

 

Item 5: Determination of Offering

 

We may offer and sell up 1,600,000 shares, inclusive of all possible Warrant Shares, of our common stock to be sold to Triton under the Investment Agreement. The Investment Agreement permits us to “put” up to $1,000,000 in shares of our common stock to Triton until December 31, 2022. Triton committed to purchase up to $1,000,000 of our common stock, and will sell the shares offered by this prospectus at prevailing market prices or privately negotiated prices.

 

The 1,600,000 shares being offered pursuant to this prospectus represent 15.8% of the shares issued and outstanding, assuming that the selling stockholder will sell all of the shares offered for sale. The 1,600,000 shares being offered pursuant to this prospectus represent 16.8% of the shares issued and outstanding held by non-affiliates of our company. Under the Investment Agreement, we may deliver a put notice to Triton which states the dollar amount that we intend to sell to Triton on a date specified in the put notice. The maximum investment amount per notice is limited to no more than $250,000 per month unless otherwise agreed upon. The minimum put amount is $25,000. The purchase price per share to be paid by Triton will be 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. The Investment Agreement shall expire upon the earlier of: (1) Triton purchasing One Million Dollars ($1,000,000) of Securities pursuant to the Investment Agreement; or (ii) on December 31, 2022.

 

We may be required to further increase our registered shares in order to receive the entire purchase price if the price drops and to cover warrants. Triton has agreed to refrain from holding an amount of shares which would result in Triton owning more than 9.99% of the then-outstanding shares of our common stock at any one time.

 

If, at any time prior to January 31, 2022, there is no effective registration statement of the Company covering the shares being offered in this prospectus, Triton may elect to receive warrant shares pursuant to a cashless exercise, in lieu of a cash exercise (the “Warrant Shares”), according the following formula:

 

X = Y (A-B)

     A

 

Where X is the number of shares to be issued to Triton, Y is the number of Warrant Shares that Triton elects to purchase, A is the Market Price (defined below), and B is the Exercise Price (defined below). “Market Price” means the highest traded price of our common stock on the date of calculation for the Warrant Shares. Exercise Price means $20,000,000 divided by our then current outstanding common stock share count on the prior business day. In any Warrant Exercise, the amount to be received by us is the number of Warrant Shares sold by Triton multiplied by the Exercise Price. Triton’s beneficial ownership (as calculated and determined in Section 13(d) of the Securities Exchange Act of 1934) of the Warrant Shares shall not exceed 4.99% of the total number of outstanding shares of the Company’s common stock immediately after giving effect to the issuance of the Warrant Shares.

 

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Item 6: Dilution

 

The shares registered under this registration statement are not being offered by us, but are instead being registered for resale by Triton.

 

Item 7: Selling Stockholders

 

We may offer and sell, from time to time, any or all of these shares of our common stock to be sold to Triton under the Investment Agreement.

 

The following table sets forth certain information regarding the beneficial ownership of shares of common stock by the Company as of August 20, 2021, and the number of shares of our common stock being offered pursuant to this prospectus.

 

Because we may offer and sell all or only some portion of the 1,600,000 shares of our common stock being offered pursuant to this prospectus, the numbers in the table below representing the amount and percentage of these shares of our common stock that will be held by the selling stockholder upon termination of the offering are only estimates based on the assumption that we will sell all of the shares being offered in this offering.

 

Triton has not had any position, office, or other material relationship with us or any of our affiliates over the past three (3) years and does not currently own any shares of our common stock.

 

To our knowledge, Triton is not a broker-dealer or an affiliate of a broker-dealer. We may require Triton to suspend the sales of the shares of our common stock being offered pursuant to this prospectus upon the occurrence of any event that makes any statement in this prospectus or the related registration statement untrue in any material respect or that requires amendment of said documents in order to make any untrue or misleading statements accurate.

 

13

 

 

 

 

 

Shares Owned

by the Selling

Stockholder

before the

   

 

Total Shares

Offered in the

   

Number of Shares to Be Owned

by Selling Stockholder After the

Offering and Percent of Total Issued and Outstanding Shares(1)

 
Name of Selling Stockholder    Offering(1)      Offering     

# of Shares(3)

   

% of Class(2),(3)

 
Triton(4)     *0.00     1,600,000 (5)     Nil       *  

 

Notes
   
* Less than 1%.
   
(1) Beneficial ownership is determined in accordance with Securities and Exchange Commission rules and generally includes voting or investment power with respect to shares of common stock. Shares of common stock subject to options and warrants currently exercisable, or exercisable within 60 days, are counted as outstanding for computing the percentage of the person holding such options or warrants but are not counted as outstanding for computing the percentage of any other person.
   
(2) We have assumed that the selling stockholder will sell all of the shares being offered in this offering.
   
(3) Based on 10,150,635shares of our common stock issued and outstanding as of August 20, 2021. Shares of our common stock being offered pursuant to this prospectus by a selling stockholder are counted as outstanding for computing the percentage of the selling stockholder.
   
(4) Alan Ochoa has the voting and dispositive power over the shares owned by Triton.
   
(5) The 1,600,000 shares assumes that all warrants will be exercised by Triton.

 

Item 8: Plan of Distribution

 

The Selling Security Holder may, from time to time, sell any or all of shares of our common stock covered hereby on the OTC Markets Group’s OTCQB or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. A selling stockholder may sell all or a portion of the shares being offered pursuant to this prospectus at fixed prices, at prevailing market prices at the time of sale, at varying prices or at negotiated prices. A selling stockholder may use any one or more of the following methods when selling securities:

 

  ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
     
  block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
     
  purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
     
  an exchange distribution in accordance with the rules of the applicable exchange;
     
  privately negotiated transactions;
     
  in transactions through broker-dealers that agree with the selling stockholder to sell a specified number of such securities at a stipulated price per security;
     
  through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
     
  a combination of any such methods of sale; or
     
  any other method permitted pursuant to applicable law.

 

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The Selling Security Holder is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act. Because the Selling Security Holder is deemed to be an “underwriter” within the meaning of the Securities Act, it will be subject to the prospectus delivery requirements of the Securities Act, including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. The Selling Security Holder has advised us that there is no underwriter or coordinating broker acting in connection with the proposed sale of the Shares by the Selling Security Holder.

 

Triton has informed us that it intends to use an unaffiliated broker-dealer to effectuate all sales, if any, of the common stock that it may purchase from us pursuant to the Investment Agreement. Such sales will be made at prices and at terms then prevailing or at prices related to the then current market price. Each such unaffiliated broker-dealer will be an underwriter within the meaning of Section 2(a)(11) of the Securities Act. Triton has informed us that each such broker-dealer will receive commissions from Triton that will not exceed customary brokerage commissions.

 

Brokers, dealers, underwriters or agents participating in the distribution of the shares as agents may receive compensation in the form of commissions, discounts, or concessions from the Selling Security Holder and/or purchasers of our common stock for whom the broker-dealers may act as agent. The compensation paid to a particular broker-dealer may be less than or in excess of customary commissions. Neither we nor Triton can presently estimate the amount of compensation that any agent will receive.

 

Broker-dealers engaged by the selling stockholder may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholder (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

 

We know of no existing arrangements between Triton or any other stockholder, broker, dealer, underwriter or agent relating to the sale or distribution of the shares offered by this prospectus. At the time a particular offer of shares is made, a prospectus supplement, if required, will be distributed that will set forth the names of any agents, underwriters or dealers and any compensation from the Selling Security Holder and any other required information.

 

We will pay the expenses incident to the registration, offering, and sale of the shares to Triton. We have agreed to indemnify Triton and certain other persons against certain liabilities in connection with the offering of Shares, including liabilities arising under the Securities Act or, if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities. Triton has agreed to indemnify us against liabilities under the Securities Act that may arise from certain written information furnished to us by Triton specifically for use in this prospectus or, if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities.

 

This offering will terminate on the date that all shares offered by this prospectus have been sold by Triton Funds or December 31, 2022, whichever occurs sooner.

 

15

 

 

In connection with the sale of the securities or interests herein, the selling stockholder may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling Security Holder may also sell securities short and deliver these securities to close out its short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Security Holder may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

 

Under applicable rules and regulations under the Securities Exchange Act of 1934 (the “Exchange Act”), any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling stockholder will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of securities of the common stock by the selling stockholder or any other person. We will make copies of this prospectus available to the selling stockholder and will inform it of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act). All of the foregoing may affect the marketability of the securities offered by this prospectus.

 

Item 9: Description of Securities

 

Capital Stock

 

We are authorized to issue 12,500,000 shares of common stock, $0.00001 par value per share, 200,000 of the common shares are designated Class A Common also $0.00001 par value per share. We have obtained the appropriate consents from our board of directors and a majority of stockholders to amend our Articles of Incorporation to authorize an additional 12,500,000 shares of common stock at $0.00001 par value.

 

Common Stock

 

As of August 11, 2021, 10,150,635 shares of common stock are issued and outstanding.

 

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The holders of our common stock are entitled to one vote for each share held of record on all matters to be acted upon by the stockholders and have equal ratable rights to dividends from funds legally available if and when declared by our board of directors and are entitled to share ratably in all of our assets available for distribution to holders of common stock upon liquidation, dissolution or winding up of our affairs. Our common stock does not provide the right to a preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights.

 

All shares of common stock now outstanding are fully paid for and non-assessable. We refer you to our articles of incorporation, bylaws and the applicable statutes of the state of Nevada for a more complete description of the rights and liabilities of holders of our securities.

 

102,000 shares of our Class A common stock are equally held by our Chief Executive Officer, Brett Gross, and our Chairman of the Board, Peter O’Heeron. Each Class A share is entitled to 200 votes on all matters to be acted upon by the stockholders. All other Class A common stock rights are equal to that of our common stock. The holders of our Class A common stock are entitled to a majority of the total votes entitled to vote on all matters to be acted upon by the stockholders.

 

Item 10: Interest of Named Experts and Counsel

 

The financial statements of our company included in this prospectus have been audited by MaloneBailey, LLP, to the extent and for the period set forth in their report (which contains an explanatory paragraph regarding our ability to continue as a going concern) appearing elsewhere in the prospectus, and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.

 

Frascona, Joiner, Goodman & Greenstein, P.C. has provided us with an opinion on the validity of the shares of our common stock being offered pursuant to this prospectus.

 

No expert named in the registration statement of which this prospectus forms a part as having prepared or certified any part thereof (or is named as having prepared or certified a report or valuation for use in connection with such registration statement) or counsel named in this prospectus as having given an opinion upon the validity of the securities being offered pursuant to this prospectus or upon other legal matters in connection with the registration or offering such securities was employed for such purpose on a contingency basis. Also, at the time of such preparation, certification or opinion or at any time thereafter, through the date of effectiveness of such registration statement or that part of such registration statement to which such preparation, certification or opinion relates, no such person had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in our company or any of its parents or subsidiaries. Nor was any such person connected with our company or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.

 

17

 

 

Item 11: Information with Respect to Our Company

 

Description of Business

 

Business Development

 

Liberty Star Uranium & Metals Corp. was formerly Liberty Star Gold Corp. and formerly Titanium Intelligence, Inc. (“Titanium”). Titanium was incorporated on August 20, 2001 under the laws of the State of Nevada. On February 5, 2004 we commenced operations in the acquisition and exploration of mineral properties business. Big Chunk Corp. (“Big Chunk”) is our wholly owned subsidiary and was incorporated on December 14, 2003 in the State of Alaska. Big Chunk is engaged in the acquisition and exploration of mineral properties business in the State of Alaska. Redwall Drilling Inc. (“Redwall”) was our wholly owned subsidiary and was incorporated on August 31, 2007 in the State of Arizona. Redwall performed drilling services on our mineral properties. Redwall ceased drilling activities in July 2008 and was dissolved on March 30, 2010. In April 2007, we changed our name to Liberty Star Uranium & Metals Corp. to reflect our current general exploration for base and precious metals. We are in the exploration phase of operations and have not generated any revenues from operations.

 

We formed the wholly owned subsidiary, Hay Mountain Holdings, LLC f/k/a Hay Mountain Super Project LLC (“HMH”) incorporated in Arizona on October 24, 2014, to serve as the primary holding company for development of the potential ore bodies encompassed in the Hay Mountain area of interest in Arizona.

 

Our Current Business

 

We are engaged in the acquisition and exploration of mineral properties in the state of Arizona and the Southwestern United States. 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”) (formerly referred to as “Tombstone Porphyry Precious Metals Project”): Tombstone is located in Cochise County, Arizona and the Super Project covers the Tombstone caldera and its environs. Within the Tombstone Caldera is the Hay Mountain target where we are concentrating our work at this time. We plan to ascertain whether the Tombstone, Hay Mountain claims possess commercially viable deposits of copper, molybdenum, gold, silver, lead, zinc, manganese and other metals including Rare Earth Elements. We have not identified any ore reserves to date.

 

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 and confusing title and history of conveyance of many mineral properties and rights thereto. We have investigated title to all the Company’s mineral properties and, to the best of our knowledge, title to all properties and minerals are in good standing.

 

There is no assurance that a commercially viable mineral deposit exists on any of our properties, and further exploration is required before we can evaluate whether any exist and, if so, whether it would be economically feasible to develop or exploit those resources. Even if we complete our current exploration program and we are successful in identifying a mineral deposit, we would be required to spend substantial funds on further drilling and engineering studies before we could know whether that mineral deposit will constitute an ore reserve (an ore reserve is a commercially viable mineral deposit).

 

18

 

 

To date, we have not generated any revenues. Our ability to pursue our business plan and generate revenues is subject to our ability to obtain additional financing, and we cannot give any assurance that we will be able to do so.

 

Competition

 

We are a mineral resource company engaged in the business of mineral exploration. We compete with other mineral resource exploration companies for financing from a limited number of investors that are prepared to make investments in mineral resource exploration companies. The presence of competing mineral resource exploration companies may impact our ability to raise additional capital in order to fund our property acquisitions and exploration programs if investors are of the view that investments in competitors are more attractive based on the merit of the mineral properties under investigation and the price of the investment offered to investors.

 

We also compete for mineral properties of merit with other exploration companies. Competition could reduce the availability of properties of merit or increase the cost of acquiring additional mineral properties.

 

Many of the resource exploration companies with whom we compete may have greater financial and technical resources than we do. Accordingly, these competitors may be able to spend greater amounts on acquisitions of properties of merit and on exploration of their properties. In addition, they may be able to afford greater geological expertise in the targeting and exploration of resource properties. This competition could result in our competitors having resource properties of greater quality and interest to prospective investors who may finance additional exploration and to senior exploration companies that may purchase resource properties or enter into joint venture agreements with junior exploration companies. This competition could adversely impact our ability to finance property acquisitions and further exploration.

 

Raw Materials

 

We do not have any material dependence on any raw materials or raw material supplier. All of the raw materials that we need are available from numerous suppliers and at market-driven prices.

 

Compliance with Government and Environmental Regulations

 

We will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in the State of Arizona, any other States in which we plan to operate, and all applicable federal statutes and regulations regarding permits and environmental standards and remediation. 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.

 

19

 

 

We are required to pay annual rentals for our federal lode mining claims for the Tombstone project in the State of Arizona. The rental period begins at noon on September 1st through the following September 1st and rental payments are due by the first day of the rental period. As listed on the Bureau of Land Management (BLM) web site, new claims located on or after September 1, 2019 cost $255 each which includes processing, location, and maintenance fees. On March 6, 2020 we sent three Notice Of Intent To Locate (NOITL) forms to the BLM. The NOITL’s cost $30.00 each payable to the BLM. We paid new claim fees of $10,530 on September 9, 2020 for 27 new lode claims which included rental years 2019 and 2020. On October 29, 2020 we paid $830.25 to the Cochise County Recorder to add the 27 new claims to the county record. We have completed filings for 21 of the new claims, and we are refiling six claims. We are currently waiting on the BLM so we may complete the filing for the six claims which we expect completion shortly. The annual rentals are $165 per claim after the first year. 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, however, we plan to pay these fees prior to the due date. All rentals during the year ended January 31, 2021 have been paid.

 

We are required to pay annual rentals for our Arizona State Land Department Mineral Exploration Permits (“AZ MEP”) at our Tombstone Hay Mountain project in the State of Arizona. AZ MEP permits 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 plan to pay filing and rental fees for our AZ MEPs before their respective due dates in the amount of $33,293. Required minimum work expenditures (labor assessment) of $153,247 was due for the year ended January 31, 2021. Labor assessment of $175,297 was submitted during the year ended January 31, 2021, all fees and work expenditures due during the year ended January 31, 2021 have been paid.

 

With respect to the foregoing properties, additional approvals and authorizations may be required from other government agencies, depending upon the nature and scope of the proposed exploration program. The amount of these costs is not known at this time as we do not know the size, quality of any resource or reserve at this time, and it is extremely difficult to assess the impact of any capital expenditures on earnings or our competitive position.

 

Mining Regulation and Compliance

 

The operation of our mine(s) that may be developed in the future would be subject to regulation by the federal Mine Safety and Health Administration (MSHA) under the Federal Mine Safety and Health Act of 1977. We do not own any mines in the United States and as a result, this information is not required.

 

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Personnel

 

Our CEO & President, Brett Gross was elected by the Board on December 7, 2018. The Board also elected Pete O’Heeron as Chairman of the Board. We also employ one full-time CFO who is also our VP of Finance, one full-time Geo-tech, who is also our Manager of Field Operations, one Investor Relations Representative and one consultant CPA on an as needed basis. We hire consultants for investor relations, exploration, derivative accounting, and administrative functions also on an as needed basis.

 

Description of Property

 

Our Offices

 

Our employees work either from our principal office or from offices maintained in their homes. Our corporate office address is 2 East Congress St. Ste. 900, Tucson, AZ 85701.

 

We currently rent a storage space for $45 per month in Tombstone, AZ on a month-to-month basis.

 

We believe that our existing office facilities are adequate for our needs. Should we require additional space at that time, or prior thereto, we believe that such space can be secured on commercially reasonable terms.

 

Our Mineral Claims

 

All of the Company’s claims for mineral properties are in good standing as of July 31, 2021.

 

Demand for Potential Products

 

We expect the demand for any commercially viable quantities of minerals found, once in production, to be in worldwide demand with many sources of buyers. We intend on utilizing intermediaries for sales as to focus on our core competencies of exploration and extraction.

 

Intellectual Property

 

We do not own or license any intellectual property which we consider to be material.

 

Tombstone Property

 

Tombstone is a large and ancient (72 million years before the present – or Laramide in age) volcanic structure – a caldera. The US Geological Survey caldera experts, conclude this is correct. Subsequently, more than seventeen calderas of various ages have been identified in Arizona by the US Geological survey, the Arizona Geological Survey and others. Such calderas of Laramide age are all associated with porphyry alteration and copper and associated mineralization; many of these have become very large copper mines. Advanced technology has indicated that alteration associated mineralization at Tombstone is much more extensive than originally thought. This alteration lies largely under cover and is indicated by geochemistry, geophysics and projection of known geology into covered areas.

 

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The Hay Mountain Project is located 6.5 miles southeast of Tombstone where we hold 35 Arizona State Mineral Exploration Permits (MEPs) covering (15,793.24 acres) or 24.68 square miles, and 93 federal lode mining claims covering (1,594.68 acres) or 2.49 square miles and is accessible by Hwy 80, Davis Rd. and Wild West Road.

 

LIBERTY STAR

TOMBSTONE-AZ

Federal Unpatented Claims

Claim Names

HM 87-143

TS 168-176

Marco1A-Marco5E

Davis1A-DavisC

Claim Acreage

57 HM Claims- 1095.18 acres

21 Marco Claims- 320 acres

6 Davis Claims- 80 acres

9 TS Claims- 99.5 acres

 

State Exploration Permits

 

MEP #   Acres   Renewal & Rental Due Date
08-119053   738.4   9/29/2021
08-119054   375.64   9/29/2021
08-119055   732.84   9/29/2021
08-119716   480   1/18/2022
08-119717   520   1/18/2022
08-119752   40   7/11/2022
08-120017   160   6/15/2022
08-120018   80   6/15/2022
08-120172   440   10/4/2021
08-120173   640   10/4/2021
08-120174   440   10/4/2021
08-120175   480   10/4/2021
08-120176   480   10/4/2021
08-120177   582.83   10/4/2021
08-120178   240   10/4/2021
08-120179   370.24   10/4/2021
08-121131   520   11/18/2021
08-121132   368.76   11/18/2021
08-121133   139.9   11/18/2021
08-121134   280   11/18/2021
08-121135   639.56   11/18/2021
08-121136   600   11/18/2021
08-121137   440   11/18/2021
08-121138   358.85   11/18/2021
08-121139   571.25   11/18/2021
08-121140   439.5   11/18/2021
08-121141   280   11/18/2021
08-121142   640   11/18/2021
08-121143   640   11/18/2021
08-121654   80   9/22/2021
08-121767   639.71   11/21/2021
08-121768   449.44   11/21/2021
08-121769   640   11/21/2021
08-121770   626.32   11/21/2021
08-121771   640   11/21/2021

 

22

 

 

35State MEP’s totaling

15,793.24 acres

 

 

 

23

 

 

At Hay Mountain, we plan to ascertain whether the Hay Mountain lode mining claims and AZ MEPs possess commercially viable deposits of copper, gold, molybdenum, silver, zinc, rare earth metals and other valuable metals. We have a phased exploration plan that involves diamond core drilling of multiple holes over targets determined by analysis of geochemical sampling and ZTEM electromagnetic and magnetic survey. Initial phase 1 drilling is planned to take approximately one year. Should results indicate the viability of the project, additional phased work, both exploration and development, is planned over the course of seven total years to define the nature and size of an ore body(s) and move toward mining. Any exploration plans are dependent on acquiring suitable funding. No part of the phased program is currently funded.

 

The Tombstone claims are undeveloped. However significant amounts of aeromagnetic surveys, IP (Induced Polarization Surveys), geologic mapping by the USGS and others, and geochemical surveys including soil, rock and vegetation sampling have been conducted at various times by various parties, over the last 60 years. When compiled and analyzed these various data suggest a compelling series of anomalies that are typical of buried, dirt and rock covered porphyry copper system(s). Below is a summary of prior exploration activities performed on our Tombstone claims: Technical Report: In mid-March 2011, Liberty Star contracted SRK to prepare three (3) Technical studies and Reports in a form similar to mineral reports prescribed under NI 43-101. Members of SRK’s engineering/scientific staff supervised by a Qualified Person as defined under NI 43-101 and SRK’s Tucson Office Principal Geologist, Corolla Hoag, and geologist Dr. Jan Rasmussen have visited the Tombstone property. This information was combined with historic technical reports going back to 1878 and more recent data up to August 2011 (the date of their reports). The three Technical Reports are entitled: (1) Walnut Creek Exploration Report, Tombstone District, Arizona –August 31, 2011, 147 pages; (2) The Tombstone Caldera South Exploration Report, Tombstone District, Arizona –August 31, 2011, 144 pages; and (3) Hay Mountain Exploration Report, Tombstone District, Arizona – August 31, 2011, 155 pages. These reports covered the entirety of historic productive area of the Tombstone mines which date to their discovery in 1877. However, before that report could be completed a competitor acquired a lease on those lands. These Technical Reports thoroughly summarize and illustrate the salient geotechnical data of the Tombstone Mining District covering about 250 square miles and present much data in computer map format. In such context, they analyze Liberty Star’s exploration programs as related to the entire area, make estimates and recommend execution of proposed Company exploration programs.

 

Geochemical sampling at the Hay Mountain Project: In 2011 and early 2012 we collected nearly 1,800 rock, soil and vegetation samples over 621 sample sites over approximately 14 square miles centered on the Hay Mountain property. These samples have been assayed for multiple elements generating many volumes of analyses. The samples were prepared by MEG Inc. and have been shipped to ALS Global (f/k/a ALS-Chemex), geochemical analysis lab in Vancouver, British Columbia. Assay results were sent to our Tucson office and all assays were received. Our geology team has generated computer analyses that allow interpretation of the data. Liberty Star continues to collect XRF readings and biogeochemical samples to further define the anomalies at Hay Mountain.

 

On June 15, 2020 we received 2 Mineral Exploration Permits (MEPs) issued by the Arizona State Land Department (ASLD) covering the 240-acre Robbers Roost exploration area approximately 4.5 miles southwest of Tombstone, Arizona with access via paved road (Charleston Road). The new MEPs are 5.89 miles west of Liberty Star’s Hay Mountain Project for porphyry copper, gold, and molybdenum. 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)

 

24

 

 

On June 24, 2020 we completed staking an additional 400 acres of Federal Lode Claims at Hay Mountain. This addition to Liberty Star’s mineral claims effectively closes all potential competitors’ opportunity to take a State or Federal mineral interest inside the Company’s contiguous State and Federal mineral estate.

 

On November 11, 2020 we announced the identification of potentially exploitable gold mineralization in its recently acquired State of Arizona Mineral Exploration Permits (MEPs) land located in the area locally recognized as Red Rock Canyon, contiguous with and immediately north of drill Target 1, within the Company’s principal porphyry copper, gold, moly exploration target at the Hay Mountain Project (the “Project”) previously disclosed. The relevant MEPs are in Township 20, Range 23 East, specifically eight sections 27 through 34 and two additional MEPs, in sections 20 and 21. 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.

 

On November 21, 2020 we acquired 5 new Mineral Exploration Permits for a total of 2,995.47 acres. Liberty Star’s CEO Brett Gross notes the new applications complement last year’s land acquisition announced October 21, 2019 (Update 910); “In 2019 we moved to secure surface access to support future development and operations. With the addition of these lands, the Company secures three additional access routes from public roadways. While over the past twenty-two months we have enjoyed increasingly good, collaborative and cooperative relations with the private property owners contiguous to the Hay Mountain Project with no interruptions to project access, securing multiple alternative routes places us in an even more secure and well-defined position for the future.”

 

On October 21, 2019 we acquired 13 new Mineral Exploration Permits (MEP’s) for a total of 5,917.82 acres, or 9.25 sq miles bringing our total MEPs at Hay Mountain to 28 and 12,557.77 acres or 19.62 sq miles. This new acquisition represents a nearly 89% increase in Liberty Star lands under permit for mineral exploration activities. These acquisitions not only substantially expand Liberty Star’s continued exploration potential, but also provide resistance to existing competitive pressures that permits us to be more forthcoming with our technical data sharing with potential venture partners. Liberty Star geochemical and geophysical surface studies indicate anomalies consistent with a large, buried porphyry copper body at the primary target, and potentially extensive associated porphyry cluster, with attendant metals including gold, moly, nickel, silver, zinc, lead,and cobalt. See news release: https://www.libertystaruranium.com/2019/10/21/liberty-star-adds-over-9-square-miles-to-the-hay-mountain-project/.

 

25

 

 

In 2019 Liberty Star contracted Pim van Geffen, PhD, PGeo of Vancouver Geochemistry to provide services in the form of validation and interpretation of our biogeochemical data from the Hay Mountain Project, Tombstone District, Arizona. In particular, the quality of the biogeochemical data was assessed regarding its capacity to support the recognition of buried porphyry-copper and related mineralization in the Project area and inform exploration decisions. A written report on the data assessment, including statements on data quality and utility, interpreted maps, and recommendations for the use of the data and data products in furthering exploration efforts on the Hay Mountain Project have been received.

 

Geologic Mapping: Small scale geologic mapping was performed in the Hay Mountain area by two different U.S. Geological Survey Senior Geologists. The first was by James Gilluly starting in the late 1930s and published in the early 1950’s, as a Professional Paper 281, 1956, and the second by Harold Drewes, published USGS Professional Paper 1144 1981. The Drewes map was a simplified version of the Gilluly map with faults adjusted to Drewes’s interpretation. Unfortunately, little or no refinement of the rock types or actual outcropping rocks was accomplished. Gilluly, while apparently generally correct in outcrop identification, disturbingly on close examination it appears he missed important outcropping rocks and at least in the Hay Mountain area of the major geochemical anomaly he misinterpreted stratigraphic rock types. In the area we have termed the Chrysocolla Block he failed to note the outcrop completely and our thorough examination revealed it to be Earp formation, whereas all the surrounding mapped area was mapped as the younger Colina limestone. This would put the Chrysocolla Block more than 1,000 feet above the Earp and 1,700 feet or more above the receptive-to- mineralization Horquilla formation where most of the production from Bisbee has been found and high grade which is now being drilled out at Rosemont Camp about 50 miles to the west. This critical error we have corrected on our maps to show this area as the lower Earp and believe that the recently discovered gossan outcrops are lying perhaps 200 to 400 feet above the Earp- Horquilla contact. Furthermore, neither Gilluly nor Drewes noticed pervasively fluidized and rounded limestone breccia which covers square miles and is typical feature of porphyry copper deposits. We believe perhaps massive copper (chalcopyrite) mineralization will be located in the Horquilla formation 200 to 400 feet below the gossan outcrops in the Earp formation. This analysis plus all of our geochemistry and geophysics is the justification for our currently planned drill hole program.

 

On August 16, 2020 we received our July 2020 Field Mapping Report prepared by Geologist Daniel Koning. The new field mapping report was commissioned by Liberty Star to “identify alteration and veining associated with an inferred porphyry copper system at depth, determine the extent of hydrothermal alteration, and comment on the possible timing of mineralization.” Geologist Koning conducted the mapping from July 14th to August 5th, accompanied by Liberty Star Field Ops Manager Jay Crawford and for 3 days, CEO/President Brett Gross. The 50-page report contains over 50 new maps and sample images. In his Hay Mountain Project July 2020 Field Mapping Report, Koning concludes “Type 1 and type 2 veins are…interpreted as fluid escape structures representing the distal and possibly upper expression of a porphyry system at depth. The overall extent of type 1 and type 2 veining across the property could indicate significant skarn and CRD development at depth.” [page 48] He further finds that his work “correlates with the Cu, Mo, and Au biogeochemical anomalies identified by Dr. Pim van Geffen, and the magnetic and ZTEM anomalies identified by Alan King’s 3D model. Because of this, the center of the inferred porphyry system at Hay Mountain is interpreted to be southwest of the Zebra Hills under post-mineral cover.”

 

26

 

 

ZTEM EM Survey: We requested and received a cost estimate from Geotech of Aurora (Toronto area) Ontario, Canada, which is the only purveyor of this helicopter borne electromagnetic (EM) geophysical method. This geophysical method has the ability to “look down” into the crust of the earth about 2,000 meters (6,600 feet) and detect sulfides and other rock types and structures which may be associated with porphyry copper systems. Test work over known Safford, Arizona porphyry copper deposits along with thousands of verifying drill holes show the geometry of such mineral systems can be determined, thus identifying whether it is a porphyry copper system or some other mineral system. When combined with our geochemical data, we can determine the position of the copper-moly center of the system and design our drill program to efficiently test and define mineralization. We flew ZTEM in July 2013 and the analysis report was received in February 2014. In 2019, a re-interpretation of the ZTEM and the magnetic data with focus on porphyry targets was performed on the basis of more rigorous 3D inversion tools. Based on the 3D ZTEM and the 3D MVI inversion results, Geotech has recommended the following: Integrate the newly obtained results with all available geological, geochemical and drilling info (if available) to better define and prioritize exploration targets; Follow-up with deep-penetrating ground IP and ground TDEM detailed surveys on the 1st priority potential porphyry target Zd1and then the 2nd priority targets Zs1and Zs2 for better definition of their depth and shape; Follow-up with detailed ground MT survey the Zd1target for its investigation at depth; Drill testing of the Zd1target with deep holes should be performed after ground verification with ground geophysics. See news release: https://www.libertystaruranium.com/2019/09/30/liberty-star-hires-geotech-ltd-to-update-hay-mountain-project-ztem-data/

 

Also, in 2019 Liberty Star contracted Alan King, P.Geo., M.Sc.at Geoscience North to prepare a geophysical review of all the geochemical and geophysical data. Their conclusions and recommendations are- The full 3D Geoscience Analyst (GA) integrated model, which was provided as part of the review, should be used for targeting as there is much more detail and dynamic viewing available in the live 3D model than in the 2D screen captures of the model shown in the report. The new 3D models based on the ZTEM data should be reviewed with respect to the previous ground IP/Res, CSAMT etc. data, which were mentioned in the SRK report. The core anomalous area has complex Magnetic and EM signatures in an area of structural complexity, with associated well defined geochem anomalies. Drill testing is recommended to test this area. Physical properties such as mag susceptibility, electrical conductivity, density and IP effect would be helpful for further interpretation. These could be acquired on existing rock samples from the area or on core samples from any new drilling or with in-situ borehole geophysical surveys in any new Drill holes. Targeting: the main target remains the core geochem anomaly area and drill testing of this target is recommended. The combined EM and magnetic models show a thicker tabular conductive feature together with an area of high magnetic/structural complexity in the core of a large magnetic depletion zone, coincident with the core of the geochem anomalies. See news release: https://www.libertystaruranium.com/2021/01/31/liberty-star-minerals-lbsrtechnical-data-studies-available/.

 

27

 

 

Legal Proceedings

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.

 

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.

 

28

 

 

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.

 

29

 

 

Financial Statements

 

Financial Statements for the Years Ended January 31, 2021 and 2020  
   
Report of Independent Registered Public Accounting Firm F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Stockholders’ Equity (Deficit) F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6
   
Financial Statements for the Three-Month Periods Ended April 30, 2021 and 2020 (unaudited)  
   
Consolidated Balance Sheets (unaudited) F-17
Consolidated Statements of Operations (unaudited) F-18
Consolidated Statements of Stockholders’ Equity (Deficit) (unaudited) F-19
Consolidated Statements of Cash Flows (unaudited) F-20
Notes to Consolidated Financial Statements (unaudited) F-21

 

30

 

 

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.

 

/s/ MaloneBailey, LLP  

www.malonebailey.com

We have served as the Company’s auditor since 2013.

Houston, Texas

May 3, 2021

 

F- 1

 

 

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

 

F- 2

 

 

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

 

F- 3

 

 

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

 

F- 4

 

 

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

 

F- 5

 

 

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.

 

F- 6

 

 

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.

 

F- 7

 

 

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.

 

F- 8

 

 

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   $ -     $ -  

 

F- 9

 

 

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.

 

F- 10

 

 

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 )

 

F- 11

 

 

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.

 

F- 12

 

 

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.

 

F- 13

 

 

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.

 

F- 14

 

 

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.

 

F- 15

 

 

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.

 

F- 16

 

 

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

 

F- 17

 

 

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

 

F- 18

 

 

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