Much of the information included in this quarterly report includes or is based
upon estimates, projections or other "forward-looking statements". Such
forward-looking statements include any projections or estimates made by us and
our management in connection with our business operations. While these
forward-looking statements, and any assumptions upon which they are based, are
made in good faith and reflect our current judgment regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any estimates, predictions, projections, assumptions or other future performance
suggested herein. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.
Such estimates, projections or other "forward-looking statements" involve
various risks and uncertainties as outlined below. We caution the reader that
important factors in some cases have affected and, in the future, could
materially affect actual results and cause actual results to differ materially
from the results expressed in any such estimates, projections or other
"forward-looking statements".
Business Development
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations is intended to help the reader understand the results of
operations and financial condition of our company. Management's Discussion and
Analysis of Financial Condition and Results of Operations is provided as a
supplement to, and should be read in conjunction with, our condensed
consolidated financial statements and the accompanying notes to the condensed
consolidated financial statements.
Liberty Star Uranium & Metals Corp. was formerly Liberty Star Gold Corp. and
formerly Titanium Intelligence, Inc. ("Titanium"). Titanium was incorporated on
August 20, 2001, under the laws of the State of Nevada. On February 5, 2004, we
commenced operations in the acquisition and exploration of mineral properties
business. Big Chunk Corp. ("Big Chunk") was our wholly owned subsidiary and was
incorporated on December 14, 2003, in the State of Alaska. Big Chunk is engaged
in the acquisition and exploration of mineral properties business in the State
of Alaska. Big Chunk was dissolved on June 3, 2019. Redwall Drilling Inc.
("Redwall") was our wholly owned subsidiary and was incorporated on August 31,
2007, in the State of Arizona. Redwall performed drilling services on our
mineral properties. Redwall ceased drilling activities in July 2008 and was
dissolved on March 30, 2010. In April 2007, we changed our name to Liberty Star
Uranium & Metals Corp ("Liberty Star") to reflect our current general
exploration for base and precious metals. We are in the exploration phase of
operations and have not generated any revenues from operations.
In October 2014, we formed our wholly owned subsidiary, Hay Mountain Holdings
LLC ("HMH") (formerly known as Hay Mountain Super Project LLC), to serve as the
primary holding company for development of the potential ore bodies encompassed
in the Hay Mountain area of interest in Arizona. On April 11, 2019, we formed a
new subsidiary named Earp Ridge Mines LLC, wholly owned by Hay Mountain Holdings
LLC, intended for engagement with future venture partners.
On August 13, 2020, the Company formed Red Rock Mines, LLC, an Arizona
corporation, as a wholly-owned subsidiary of Hay Mountain Holdings, LLC.
Our Current Business
We are engaged in the acquisition and exploration of mineral properties in the
state of Arizona and the Southwest USA. Claims in the state of Arizona are held
in the name of Liberty Star. We use the term "Super Project" to indicate a
project in which numerous mineral targets have been identified, any one or more
of which could potentially contain commercially viable quantities of minerals.
Our significant projects are described below.
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Tombstone Super Project ("Tombstone"): Tombstone is located in Cochise County,
Arizona and covers the Tombstone caldera and its environs. Within the Tombstone
caldera is the Hay Mountain target where we are concentrating our work at this
time. We plan to ascertain whether the Tombstone, Hay Mountain claims possess
commercially viable deposits of copper, molybdenum, gold, silver, lead, zinc,
manganese and other metals including Rare Earth Elements (REE's). We have not
identified any ore reserves to date.
On June 16, 2020, the company acquired 2 Mineral Exploration Permits (MEP)
covering 240 acres at Robbers Roost. Which is located 5.89 miles west of the Hay
Mountain Project. While the Robbers Roost MEP area is new to the Company, it has
been explored previously by several exploration companies, in the 1970's and
1990's, and recently has received significant interest by others operating in
the area. Drilling by ASARCO indicates "the presence of a granodioritic porphyry
intrusive at depth below the alteration zone. The intrusive is characterized by
porphyry copper style alteration and mineralization." (JB Nelson, "Robbers'
Roost Summary Report," 1995, p. 2
http://docs.azgs.az.gov/SpecColl/2008-01/2008-01-0103.pdf)
From July 14th to August 5th, 2020, field mapping was conducted in the Hay
Mountain Project area, located 7 km southeast of Tombstone, in Cochise County,
Arizona. The purpose of mapping was to identify alteration and veining
associated with an inferred porphyry copper system at depth, determine the
extent of hydrothermal alteration, and comment on the possible the timing of
mineralization. Mapping was conducted at 1:10,000 scale and a total of 183
carbonate vein samples were taken for XRF analysis and UV fluorescence response.
On November 11, 2020, the company announced the identification of potentially
exploitable gold mineralization on its recently acquired Arizona State Land
Department Mineral Exploration Permits. Preliminary surface exploration on the
Red Rock MEPs advances the Company's knowledge of the porphyry system signature
associated with magnetic highs at, and adjacent to the north of, Target 1, and
represent the expansion of biogeochemical, surface rock sampling, and x-ray
fluorescence (XRF) work continuing at Target 1 and on the anticipated gold halo
likely associated with the indicated porphyry center. The Company discovered
multiple outcrops of intensely silicified rock in the initial observational
field work. These outcrops generally occur in linear features several feet in
thickness with multiple features oriented en-echelon with interstitial host
country rock of varying horizontal dimension. These outcrops contain densely
distributed jasperoids, which, when sampled yield what the Company believes are
potentially economically exploitable concentrations of gold. There was a total
of 23 representative (1 to 2 kg) rock sample assays. These assays demonstrate
gold concentrations ranging from below detection limits of 0.05 ppm in country
rock surrounding certain outcrops to a high of 13.55 ppm in direct outcrop
samples. Of the 23 assayed samples, nine (9) show gold concentrations of 0.95
ppm or more.
On November 25, 2020, the company received approval from the Arizona State Land
Department for 5 additional MEP's covering 2,369.15 acres for a total of
16,662.10 acres or 26.03 sq miles at our Hay Mountain Project.
On March 15, 2021, the company announced the release of more rock chip assay
results from the Red Rock Canyon area located within the Hay Mountain Project.
28 samples were submitted to the ALS/USA Inc. Tucson location with results
returned to the Company February 6th. This set of samples are within and outside
of the original study area and expand on the October 2020 geochemical sampling
undertaken on MEP land within the Company's Red Rock Canyon holdings.
On May 21, 2021, the company announced the public release of its latest
technical report. The Technical Report on the Red Rock Canyon Gold Property
Cochise County, Arizona ("RRC Technical Report" "The Report"). The Report was
prepared by Broadlands Mineral Advisory Services Ltd., owned and operated by
Liberty Star's independent director Bernard J. Guarnera, P.ENG., QP, CMA. Mr.
Guarnera authored The Report. His findings include that the Red Rock Canyon
tract contains "gold at grades that are now considered economic" (p.1). Further,
the compilation of previous drilling results, by others as noted in The Report,
(p.30) indicates that 12 of 17 intercepts reported gold at grades above what is
considered current cut off grades, 0.022 oz per ton (0.68 gpt). These historical
intercepts range from five (5) to forty-five (45) feet in vertical extent and
reveal multiple mineralized zones. Grades in the larger intercepts are reported
up to 0.182 ounces per ton (5.66 gpt). Additionally, Liberty Star collected
fifteen (15) more rock samples on a recent field visit near and at the locations
of past drilling. The new field assays to confirm similar grades in the
corresponding outcrops. These assay results have been posted to the Liberty Star
website.
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On May 26, 2021, the company announced the public release of geochemical assay
results prepared by ALS/USA Inc. The Company noted in its news release issued
May 21st that the results were forthcoming on the heels of its latest technical
report focused on the gold prospect at Red Rock Canyon. Previously released
geochemical assay results from October 2020 and Feb 2021 can be viewed on the
Liberty Star Minerals website. This set of results strongly aligns with previous
assay results indicating that the Red Rock portion of the Hay Mountain Project
is a potential gold property.
On August 20, 2021, the company executed a financing agreement for the purpose
of drilling for the Red Rock Canyon Gold Project, in Cochise County, Arizona.
The agreement allows for a $1,000,000 common stock purchase agreement (the
"Purchase Agreement") and a $1,000,000 warrant agreement (the "Warrant
Agreement," together "the Agreements") with Triton Funds LP ("Triton") of San
Diego, California under an S1 registration now effective. Drilling mobilization
will begin immediately upon completing prerequisite State of Arizona
archeological and vegetation surveys and obtaining approval by the Arizona State
Land Department, which the Company expects to be completed by early 2022. A
diamond core drill rig is expected to be active shortly after approval.
Title to mineral claims involves certain inherent risks due to difficulties in
determining the validity of certain claims, as well as potential for problems
arising from the frequently ambiguous conveyancing history characteristic of
many mineral properties. We have investigated title to all the Company's mineral
properties and, to the best of its knowledge, title to all properties retained
are in good standing.
The mineral resource business generally consists of three stages: exploration,
development and production. Mineral resource companies that are in the
exploration stage have not yet found mineral resources in commercially
exploitable quantities and are engaged in exploring land in an effort to
discover them. Mineral resource companies that have located a mineral resource
in commercially exploitable quantities and are preparing to extract that
resource are in the development stage, while those engaged in the extraction of
a known mineral resource are in the production stage. We have not found any
mineral resources in commercially exploitable quantities.
There is no assurance that a commercially viable mineral deposit exists on any
of our properties, and further exploration is required before we can evaluate
whether any exist and, if so, whether it would be economically feasible to
develop or exploit those resources. Even if we complete our current exploration
program and we are successful in identifying a mineral deposit, we would be
required to spend substantial funds on further drilling and engineering studies
before we could know whether that mineral deposit will constitute a commercially
viable mineral deposit, known as an "ore reserve."
To date, we have not generated any revenues. Our ability to pursue our business
plan and generate revenues is subject to our ability to obtain additional
financing, and we cannot give any assurance that we will be able to do so.
The extent to which the coronavirus disease ("COVID-19") impacts our businesses
will depend on future developments, which are highly uncertain and cannot be
predicted, including new information which may emerge concerning the severity of
COVID-19 and the actions to contain COVID-19 or treat its impact, among others.
If the disruptions posed by COVID-19 or other matters of global concern continue
for an extensive period of time, our operations may be materially adversely
affected. Currently, the Company has not experienced a significant impact on its
businesses related to COVID-19. However, COVID-19 did, and continues to, impact
us significantly with delays in acquiring a JV to begin our primary drilling
project.
Results of Operations
Material Changes in Financial Condition for the Nine-Month Period Ended October
31, 2021
We had cash and cash equivalents in the amount of $25,144 as of October 31,
2021, compared to $6,718 as of January 31, 2021. We had negative working capital
of $2,110,583 as of October 31, 2021, compared to $1,991,571 as of January 31,
2021. We used $341,171 of net cash in operating activities during the nine
months ended October 31,2021 which was utilized primarily for working capital.
We also utilized our cash funds to continue exploration activities at our Hay
Mountain mineral lands by working on geochemical interpretation of the soil,
rock chip and vegetation sampling and ZTEM (aeromagnetics and aero
electromagnetics). We purchased no new equipment during the nine months ended
October 31,2021. We have been raising capital primarily by issuing convertible
promissory notes, related party notes and the sale of common stock. We intend to
continue to raise capital from such sources. In addition to seeking sources of
funding through the sale of equity, we may seek to enter into joint venture
agreements, or other types of agreements with other companies to finance our
projects for the long term. In addition, we may choose to sell a portion of our
assets to finance our projects. Should our properties prove to be commercially
viable, we may be in a position to seek debt financing to help build
infrastructure, and eventually we may obtain revenues from commercial mining of
our properties.
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Material Changes in Results of Operations for the Three- and Nine-Month Periods
Ended October 31, 2021 and 2020
We had a net loss of $188,938 and $403,555 for the three and nine months ended
October 31, 2021, compared to a net loss of $185,462 and $694,423 for the three
and nine months ended October 31,2020, respectively.
During the three and nine months ended October 31,2021, we had an increase of
$3,144 and a decrease of $44,846 in geological and geophysical expense compared
to the three and nine months ended October 31,2020, due primarily to a decrease
in land rental fees for mineral claims for the nine month period. During the
three and nine months ended October 31,2021, we had a decrease of $10,357 and
$8,322, respectively, in salaries and benefit expense compared to the three and
nine months ended October 31,2020, due primarily to the $13,000 of SBA grant
proceeds received in August 2021. During the three and nine months ended October
31,2021, we had a decrease of $23,737 and $92,758, respectively, in legal
expense compared to the three and nine months ended October 31,2020, due
primarily to a decrease in the use of outside legal services for operations,
finance and litigation matters. We had an increase in professional services of
$13,221 and $13,870, respectively, during the three and nine months ended
October 31, 2021, as compared to the three and nine months ended October 31,2020
which was due primarily to an increase in the cost of audit, accounting and
related services. We had an increase in general and administrative expenses of
$7,319 and $11,948, respectively, during the three and nine months ended October
31, 2021, as compared to the three and nine months ended October 31,2020 which
was due to a slight increase in occupancy and technology expense. We had a
decrease in interest expense of $4,651 and in increase in interest expense of
$72,329, respectively, during the three and nine months ended October 31,2020,
as compared to the three and nine months ended October 31,2020, due primarily to
a decrease in convertible notes payable. We had a gain of $76,990 and a loss of
$39,631 on change in fair value of derivative liability for the nine months
ended October 31, 2021 and 2020, respectively, due primarily to the changes in
derivative liability activity during the periods.
Liquidity and Capital Resources
We had cash and cash equivalents in the amount of $25,144 as of October 31,
2021. We had negative working capital of $2,110,583 as of October 31, 2021. We
used cash in operating activities of $341,171 for the nine months ended October
31, 2021. We will need additional funds in order to proceed with our planned
exploration program.
Convertible promissory notes
We have issued the following convertible promissory notes in private placements
of our securities to institutional investors pursuant to exemptions from
registration set out in Rule 506 of Regulation D under the Securities Act of
1933.
On October 28, 2020, we received net proceeds of $82,000 from the issuance of a
convertible note dated October 20, 2020 (the "October 2020 Note"). The note
bears interest at 8%, includes OID of $8,500 and legal and due diligence fees of
$3,000, matures on September 1, 2021, and is convertible after 180 days into
shares of the Company's common stock at a price of 75% of the average of the
lowest 5 weighted average market price of the Company's common stock during the
10 trading days prior to conversion. During the nine months ended October 31,
2021, the noteholder converted a total of $96,900 of the note for 132,353 shares
of the Company's common stock, leaving a balance of $0 as of October 31, 2021.
On April 26, 2021, we received net proceeds of $60,000 from the issuance of a
convertible note dated April 23, 2021 (the "April 2021 Note"). The note bears
interest at 8%, includes legal and due diligence fees of $3,000, matures on
April 23, 2022, and is convertible after 180 days into shares of the Company's
common stock at a price of 75% of the average of the lowest 5 weighted average
market price of the Company's common stock during the 10 trading days prior to
conversion.
On May 11, 2021, we issued a convertible note in the aggregate principal amount
of $53,000 (the "May 2021 Note"). The note bears interest at 8%, includes legal
and due diligence fees of $3,000, matures on May 11, 2022, and is convertible
after 180 days into shares of the Company's common stock at a price of 75% of
the average of the lowest 5 weighted average market price of the Company's
common stock during the 10 trading days prior to conversion.
On October 8, 2021, we issued a convertible promissory note in the aggregate
principal amount of $69,300 (the "October 2021 Note"). The Note bears interest
at 8%, with a 10% Original Issue Discount, matures on October 8, 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.
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On November 15, 2021, the Company entered into a convertible promissory note
(the "Note") with Sixth Street Lending LLC. ("Sixth Street") in the aggregate
principal amount of $60,500. The Note bears interest at 8%, with a 10% Original
Issue Discount, matures on November 15, 2022, and is convertible after 180 days
into shares of the Company's common stock at a price of 75% of the average of
the lowest 5 weighted average market price of the Company's common stock during
the 10 trading days prior to conversion.
Proceeds from issuance of common stock
On March 5, 2021, the Company issued 6,000 shares of its common stock to an
accredited investor for the exercise of warrants for proceeds of $2,100, or
$0.35 per common share.
On March 26, 2021, the Company issued 17,006 shares of its common stock and
8,503 warrants to our CEO for gross proceeds of $20,000, for $1.176 per unit.
The warrants have a three-year term and are exercisable at any time at an
exercise price of $1.646.
In March 2021, the Company issued 49,412 shares of its common stock and 24,706
warrants to our CEO for gross proceeds of $55,000 for $1.113 per unit. The
warrants have a three-year term and are exercisable at any time at an exercise
price of $1.558.
On April 2, 2021, the Company issued 9,818 shares of its common stock and 4,909
warrants to an accredited investor for gross proceeds of $10,000, or $1.019 per
unit. The warrants have a three-year term and are exercisable at any time at an
exercise price of $1.426.
On April 23, 2021, the Company issued 15,049 of its common stock to a noteholder
for the conversion of $12,000 of principal under the October 2020 Note, or
$0.797 per share.
On April 27, 2021, the Company issued 18,832 of its common stock to a noteholder
for the conversion of $15,000 of principal under the October 2020 Note, or
$0.797 per share.
On April 30, 2021, the Company received proceeds of $20,000 from an investor for
the purchase of 19,268 shares of its common stock and 9,634 warrants, at a price
of $1.038 per unit. The warrants have a three-year term and are exercisable at
any time at an exercise price of $1.453.
In May 2021, the Company issued a total of 98,472 shares of its common stock to
a noteholder for the conversion of an aggregate of $69,900 of principal and
accrued interest under the October 2020 Note, at prices ranging from $0.699 to
$0.743 per share.
In October 2021, the Company issued a total of 57,498 shares of its common stock
to a noteholder for the conversion of $25,000 of principal under the October
2020 Note, at a price of $0.435 per share.
In October 2021, the Company issued 60,887 shares of its common stock and 30,444
warrants to a director for gross proceeds of $35,000, for $0.575 per unit. The
warrants have a three-year term and are exercisable at any time at an exercise
price of $0.805.
In October 2021, the Company issued 25,986 shares of its common stock and 12,993
warrants to a director for gross proceeds of $15,000, for $0.577 per unit. The
warrants have a three-year term and are exercisable at any time at an exercise
price of $0.808.
Proceeds from long-term notes payable
On June 22, 2020, the Company received loan proceeds of $32,300 (net of $100
loan fee) under the SBA's Economic Injury Disaster Loan program ("EIDL"). The
EIDL loan, dated June 16, 2020, bears interest at 3.75%, has a 30-year term, is
secured by substantially all assets of the Company, and is due in monthly
installments of $158 beginning June 18, 2021 (extended to June 18, 2023).
On February 16, 2021, the Company received loan proceeds of $32,497 under the
Payroll Protection Program ("PPP"). The PPP loan bears interest at 1%, has a
5-year term, and is due in equal monthly installments beginning July 19, 2022.
The company is seeking full forgiveness of this loan..
In August 2021, the Company received an aggregate of $13,000 of advances under
the SBA's Supplemental Targeted Advance and Targeted EIDL Advance programs.
These advances do not require repayment.
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Critical Accounting Policies
The unaudited condensed consolidated financial statements of Liberty Star have
been prepared in conformity with accounting principles generally accepted in the
United States of America. Our significant accounting policies are described in
Note 2 to the unaudited condensed consolidated financial statements included in
Item 8 in our Form 10-K for the year ended January 31, 2021. The critical
accounting policies adopted by our company are as follows:
Going Concern
Since we have not generated any revenue, we have negative cash flows from
operations and negative working capital, and we have included a reference to the
substantial doubt about our ability to continue as a going concern in connection
with our unaudited condensed consolidated financial statements as of October 31,
2021. Our total stockholders' deficit at October 31, 2021 was approximately $2.1
million.
These unaudited condensed consolidated financial statements have been prepared
on the going concern basis, which assumes that adequate sources of financing
will be obtained as required and that our assets will be realized, and
liabilities settled in the ordinary course of business. Accordingly, these
condensed consolidated financial statements do not include any adjustments
related to the recoverability of assets and classification of assets and
liabilities that might be necessary should we be unable to continue as a going
concern.
Mineral claims
We account for costs incurred to acquire, maintain and explore mineral
properties as charged to expense in the period incurred until the time that a
proven mineral resource is established at which point development of the mineral
property would be capitalized. Currently, we do not have any proven mineral
resources on any of our mineral properties.
Convertible promissory notes
We reviewed the convertible promissory notes and the related subscription
agreements to determine the appropriate reporting within the unaudited condensed
consolidated financial statements. We report convertible promissory notes as
liabilities at their carrying value less unamortized discounts in accordance
with the applicable accounting guidance. We record conversion options and
detachable common stock purchase warrants and report them as derivative
liabilities at fair value at each reporting period when required in accordance
with the applicable accounting guidance. No gain or loss is reported when the
notes are converted into shares of our common stock in accordance with the
note's terms.
Common stock purchase warrants
We report common stock purchase warrants as equity unless a condition exists
which requires reporting as a derivative liability at fair market value. For
common stock purchase warrants reported as a derivative liability, as well as
new and modified warrants reported as equity, we utilize a Monte Carlo options
model in order to determine fair value.
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