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 consolidated
financial statements and the accompanying notes to the consolidated financial
statements.
Liberty Star Uranium & Metals Corp. was formerly Liberty Star Gold Corp. and
formerly Titanium Intelligence, Inc. ("Titanium"). Titanium was incorporated on
August 20, 2001, under the laws of the State of Nevada. On February 5, 2004, we
commenced operations in the acquisition and exploration of mineral properties
business. Big Chunk Corp. ("Big Chunk") was our wholly owned subsidiary and was
incorporated on December 14, 2003, in the State of Alaska. Big Chunk is engaged
in the acquisition and exploration of mineral properties business in the State
of Alaska. Big Chunk was dissolved on June 3, 2019. Redwall Drilling Inc.
("Redwall") was our wholly owned subsidiary and was incorporated on August 31,
2007, in the State of Arizona. Redwall performed drilling services on our
mineral properties. Redwall ceased drilling activities in July 2008 and was
dissolved on March 30, 2010. In April 2007, we changed our name to Liberty Star
Uranium & Metals Corp ("Liberty Star") to reflect our current general
exploration for base and precious metals. We are in the exploration phase of
operations and have not generated any revenues from operations.
In October 2014, we formed our wholly owned subsidiary, Hay Mountain Holdings
LLC ("HMH") (formerly known as Hay Mountain Super Project LLC), to serve as the
primary holding company for development of the potential ore bodies encompassed
in the Hay Mountain area of interest in Arizona. On April 11, 2019, we formed a
new subsidiary named Earp Ridge Mines LLC, wholly owned by Hay Mountain Holdings
LLC, intended for engagement with future venture partners.
On August 13, 2020, the Company formed Red Rock Mines, LLC, an Arizona
corporation, as a wholly-owned subsidiary of Hay Mountain Holdings, LLC.
Our Current Business
We are engaged in the acquisition and exploration of mineral properties in the
state of Arizona and the Southwest USA. Claims in the state of Arizona are held
in the name of Liberty Star. We use the term "Super Project" to indicate a
project in which numerous mineral targets have been identified, any one or more
of which could potentially contain commercially viable quantities of minerals.
Our significant projects are described below.
Tombstone Super Project ("Tombstone"): Tombstone is located in Cochise County,
Arizona and covers the Tombstone caldera and its environs. Within the Tombstone
caldera is the Hay Mountain target where we are concentrating our work at this
time. We plan to ascertain whether the Tombstone, Hay Mountain claims possess
commercially viable deposits of copper, molybdenum, gold, silver, lead, zinc,
manganese and other metals including Rare Earth Elements (REE's). We have not
identified any ore reserves to date.
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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 timing of
emplaced 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.
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.
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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.
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 Six-Month Period Ended July 31,
2022
We had cash and cash equivalents in the amount of $2,445 as of July 31, 2022,
compared to $102,741 as of January 31, 2022. We had negative working capital of
$769,351 as of July 31, 2022, compared to $1,427,895 as of January 31, 2022. We
used $273,404 of net cash in operating activities during the six months ended
July 31, 2022, 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
have been raising capital primarily by issuing convertible promissory notes,
related party notes and the sale of common stock. We intend to continue to raise
capital from such sources. In addition to seeking sources of funding through the
sale of equity, we may seek to enter into joint venture agreements, or other
types of agreements with other companies to finance our projects for the long
term. In addition, we may choose to sell a portion of our assets to finance our
projects. Should our properties prove to be commercially viable, we may be in a
position to seek debt financing to help build infrastructure, and eventually we
may obtain revenues from commercial mining of our properties.
Material Changes in Results of Operations for the Three -Month Periods Ended
July 31, 2022 and 2021
We had a net loss of $55,040 for the three months ended July 31, 2022, compared
to a net loss of $132,993 for the three months ended July 31, 2021.
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During the three months ended July 31, 2022, we had an increase of $32,028 in
geological and geophysical expense compared to the three months ended July 31,
2021, due primarily to an increase in geochemical analysis for the three month
period. During the three months ended July 31, 2022, we had an increase of
$3,783 in salaries and benefit expense compared to the three months ended July
31, 2021, due primarily a cost of living increase. During the three months ended
July 31, 2022, we had an increase of $65,389 in professional services compared
to the three months ended July 31, 2021, due primarily to an increase in the
audit and filing fees. We had an increase in general and administrative expenses
of $129,686 during the three months ended July 31, 2022, as compared to the
three months ended July 31,2021 which was due to an increase stock-based
compensation to Dutchess Group. We had an increase in interest expense of
$35,568 during the three months ended July 31, 2022 as compared to the three
months ended July 31, 2021, due primarily to an increase in convertible notes
payable. We had a gain of $370,745 and $26,338 on change in fair value of
derivative liability for the three months ended July 31, 2022 and 2021,
respectively, due primarily to the changes in derivative liability activity
during the periods.
Material Changes in Results of Operations for the Six -Month Periods Ended July
31, 2022 and 2021
We had a net income of $756,798 for the six months ended July 31, 2022, compared
to a net loss of $214,617 for the six months ended July 31, 2021.
During the six months ended July 31, 2022, we had a increase of $30,945 in
geological and geophysical expense compared to the six months ended July 31,
2021, due primarily to an increase in geochemical analysis for the three month
period. During the six months ended July 31, 2022, we had an increase of $10,994
in salaries and benefit expense compared to the six months ended July 31, 2021,
due primarily a cost of living increase. During the six months ended July 31,
2022, we had an increase of $53,889 in professional services compared to the six
months ended July 31, 2021, due primarily to an increase in the audit and filing
fees. We had an increase in general and administrative expenses of $150,181
during the six months ended July 31, 2022, as compared to the six months ended
July 31, 2021, which was due to an increase stock-based compensation to Dutchess
Group. We had an increase in interest expense of $37,418 during the six months
ended July 31, 2022 as compared to the six months ended July 31, 2021, due
primarily to an increase in convertible notes payable. We had a gain of $300,697
and $76,990 on change in fair value of derivative liability for the six months
ended July 31, 2022 and 2021, respectively, due primarily to the changes in
derivative liability activity during the periods. During the six months ended
July 31, 2022, we had a gain on forgiveness of SBA loan of $32,851 and a gain on
settlement of debt of $998,284 related to the settlement with James Briscoe.
Liquidity and Capital Resources
We had cash and cash equivalents in the amount of $2,445 as of July 31, 2022. We
had negative working capital of $769,351 as of July 31, 2022. We used cash in
operating activities of $273,404 for the six months ended July 31, 2022. 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 February 7, 2022, the Company entered into a convertible promissory note with
1800 Diagonal Lending (formerly known as Sixth Street) in the aggregate
principal amount of $74,800 (the "February 2022 Note"). The note bears interest
at 8%, with an Original Issue Discount of $9,800, matures on February 7, 2023,
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 25, 2022, the Company entered into a convertible promissory note with
1800 Diagonal Lending (formerly known as Sixth Street) in the aggregate
principal amount of $71,500 (the "April 2022 Note"). The note bears interest at
8%, with an Original Issue Discount of $8,000, matures on April 25, 2023, 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 July 14, 2022, the Company entered into a convertible promissory note with
1800 Diagonal Lending in the aggregate principal amount of $45,138 (the "July
2022 Note"). The note bears interest at 8%, with an Original Issue Discount of
$10,138, matures on July 14, 2023, 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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Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates, assumptions and judgments that affect the amounts reported in the
financial statements, including the notes thereto. We consider critical
accounting policies to be those that require more significant judgments and
estimates in the preparation of our financial statements, including the
following: long lived assets; intangible assets valuations; and income tax
valuations. Management relies on historical experience and other assumptions
believed to be reasonable in making its judgment and estimates. Actual results
could differ materially from those estimates.
Management believes its application of accounting policies, and the estimates
inherently required therein, are reasonable. These accounting policies and
estimates are periodically reevaluated, and adjustments are made when facts and
circumstances dictate a change.
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