Attached files

file filename
EX-32.1 - SECTION 906 CERTIFICATION - LIBERTY STAR URANIUM & METALS CORP.exhibit32-1.htm
EXCEL - IDEA: XBRL DOCUMENT - LIBERTY STAR URANIUM & METALS CORP.Financial_Report.xls
EX-31.1 - SECTION 302 CERTIFICATION - LIBERTY STAR URANIUM & METALS CORP.exhibit31-1.htm

1

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2011

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 000-50071

LIBERTY STAR URANIUM & METALS CORP.
(Exact name of registrant as specified in its charter)

Nevada 90-0175540
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)

5610 E Sutler Lane, Tucson, Arizona 85712
(Address of principal executive offices)

520.731.8786
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]     No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)
Yes [X]     No [   ]

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 the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [   ] Accelerated filer                   [   ]
Non-accelerated filer   [   ] Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [   ]     No [X]

The number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
630,099,389 as of December 12, 2011.


2

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

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.

Our condensed consolidated financial statements are stated in United States Dollars (US$) and are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements. The following discussion should be read in conjunction with our condensed consolidated financial statements and the related notes that appear elsewhere in this quarterly report.

As used in this quarterly report, the terms "we", "us", "Company", and "Liberty Star" mean Liberty Star Uranium & Metals Corp. and our subsidiary Big Chunk Corp., unless otherwise indicated. All dollar amounts refer to U.S. dollars unless otherwise indicated.


3

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

LIBERTY STAR URANIUM & METALS CORP.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS  
             
    October 31, 2011        
    (Unaudited)     January 31, 2011  
Current:            
   Cash and cash equivalents $  182,392   $  1,100,315  
   Prepaid expenses and supplies   5,613     8,060  
     Total current assets   188,005     1,108,375  
             
Property and equipment, net   144,062     163,151  
Certificates of deposit   3,000     3,000  
             
Total assets $  335,067   $  1,274,526  
             
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)  
             
Current:            
   Current portion of long-term debt $  3,763   $  3,763  
   Convertible promissory note   3,561,816     3,000,000  
   Accounts payable and accrued liabilities   26,307     40,315  
   Accrued wages to related party   120,700     93,700  
   Accrued interest   422,034     164,383  
       Total current liabilities   4,134,620     3,302,161  
             
Long-term debt, net of current portion   19,353     22,024  
             
Total liabilities   4,153,973     3,324,185  
             
Stockholders’ equity (deficit)            
  Common stock - $.00001 par value; 1,250,000,000 shares authorized; 
           630,099,389 and 602,411,882 shares issued and outstanding
  6,301     6,024  
 Additional paid-in capital   45,813,842     45,714,119  
 Deficit accumulated during the exploration stage   ( 49,639,049 )   ( 47,769,802 )
     Total stockholders’ equity (deficit)   (3,818,906 )   ( 2,049,659 )
             
Total liabilities and stockholders’ equity (deficit) $  335,067   $  1,274,526  

The Accompanying Notes are an Integral Part of the Condensed Consolidated Financial Statements


4

LIBERTY STAR URANIUM & METALS CORP.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

                            Cumulative from  
                            date of inception  
    For the three     For the three     For the nine     For the nine     (August 20, 2001)
    months ended     months ended     months ended     months ended     to  
    October 31, 2011     October 31, 2010     October 31, 2011     October 31, 2010     October 31, 2011  
Revenues $  -   $  -   $  -   $  -   $  -  
                               
Expenses:                              
   Geological and geophysical costs   703,150     1,406,081     910,262     1,483,873     14,062,282  
   Salaries and benefits   84,536     1,170,642     225,777     1,234,102     3,707,984  
   Public relations   5,299     27,486     46,442     31,382     770,484  
   Depreciation   15,758     14,633     47,902     45,610     864,135  
   Legal   25,058     117,218     50,380     160,402     879,572  
   Professional services   12,655     15,381     68,207     70,532     1,255,007  
   General and administrative   50,224     32,481     213,604     72,759     1,925,725  
   Travel   8,941     22,957     48,150     27,794     239,639  
   Settlement expense   -     13,241,020     -     13,241,020     13,241,020  
   Impairment loss   -     -     -     -     16,092,870  
Net operating expenses   905,621     16,047,899     1,610,724     16,367,474     53,038,718  
                               
Loss from operations   (905,621 )   ( 16,047,899 )   (1,610,724 )   ( 16,367,474 )   (53,038,718 )
                               
Other income (expense):                              
   Interest income   114     88     805     201     198,560  
   Interest expense   (93,731 )   ( 89,026 )   (259,328 )   ( 597,790 )   (5,818,800 )
   Debt conversion expense   -     -     -     -     ( 103,437 )
   Loss on sale of assets   -     -     -     ( 3,042 )   ( 42,453 )
   Loss on change in fair value of
       warrant liability
  -     ( 3,386,834 )   -     ( 3,700,389 )   ( 3,692,462 )
   Other income   -     1,000,000     -     1,125,000     1,350,390  
   Income from Elle Venture   -     -     -     -     300,000  
   Foreign exchange gain   -     -     -     -     505  
   Gain on settlement of debt to
       related party
  -     -     -     -     7,366  
Total other income (expense)   (93,617 )   ( 2,475,772 )   (258,523 )   ( 3,176,020 )   (7,800,331 )
                               
Loss before income taxes   (999,238 )   ( 18,523,671 )   (1,869,247 )   ( 19,543,494 )   (60,839,049 )
                               
Income tax expense   -     -     -     -     -  
                               
Net loss $  (999,238 ) $  ( 18,523,671 ) $  (1,869,247 ) $  ( 19,543,494 ) $  (60,839,049 )
                               
Basic and diluted net loss per
   share of common stock
$  ( 0.00 ) $  ( 0.04 ) $  ( 0.00 ) $  ( 0.05 ) $  (0.59 )
                               
Basic and diluted weighted
   average number of shares of
   common stock outstanding
  625,158,491     461,500,867     613,735,561     399,286,472     103,936,173  

The Accompanying Notes are an Integral Part of the Condensed Consolidated Financial Statements


5

LIBERTY STAR URANIUM & METALS CORP.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)

                Additional     Deficit accumulated     Total  
    Common stock     paid-in     during     stockholders’  
    Shares     Amount     capital     the exploration stage     equity (deficit)  
Balance, August 20, 2001 (Date of inception)   -   $  -   $  -   $ -   $ -  
   Common stock issued for cash   5,000,000     50     99,950     -     100,000  
   Net loss for the period from inception, August 20, 2001, to January 31,
     2004
  -     -     -     ( 132,602 )   ( 132,602 )
Balance, January 31, 2004   5,000,000     50     99,950     ( 132,602 )   ( 32,602 )
   Acquisition, February 3, 2004   4,375,000     44     15,924,956     -     15,925,000  
   Issuance of common stock and warrants private placement   650,000     7     2,999,993     -     3,000,000  
   Options issued for services   -     -     94,350     -     94,350  
   Return of shares   ( 1,750,000 )   ( 18 )   ( 11,199,982 )   11,200,000     -  
   Net loss for the year ended January 31, 2005   -     -     -     ( 18,392,024 )   ( 18,392,024 )
Balance, January 31, 2005   8,275,000     83     7,919,267     ( 7,324,626 )   594,724  
   Issuance of common stock and warrants private placement   972,172     10     5,052,722     -     5,052,732  
   Net loss for the year ended January 31, 2006   -     -     -     ( 4,627,965 )   ( 4,627,965 )
Balance, January 31, 2006   9,247,172     93     12,971,989     ( 11,952,591 )   1,019,491  
   Issuance of common stock private placement   990,596     10     2,545,985     -     2,545,995  
   Issuance of common stock for services   37,500     -     93,000     -     93,000  
   Expenses of common stock issuance   -     -     ( 320,000 )   -     ( 320,000 )
   Options granted to consultants and employees   -     -     832,343     -     832,343  
   Net loss for the year ended January 31, 2007   -     -     -     ( 3,267,948 )   ( 3,267,948 )
Balance, January 31, 2007   10,275,268     103     16,123,317     ( 15,220,539 )   902,881  
   Issuance of common stock private placement   429,700     4     1,074,413     -     1,074,417  
   Issuance of common stock for services   28,000     -     54,540     -     54,540  
   Issuance of common stock for conversion of promissory note   99,884     1     259,698     -     259,699  
   Options granted to employees and consultants   -     -     358,646     -     358,646  
   Issuance of common stock purchase warrants   -     -     1,421,538     -     1,421,538  
   Beneficial conversion feature of convertible promissory notes   -     -     1,842,734     -     1,842,734  
   Net loss for the year ended January 31, 2008   -     -     -     ( 5,697,935 )   ( 5,697,935 )
Balance, January 31, 2008   10,832,852     108     21,134,886     ( 20,918,474 )   216,520  
   Issuance of common stock for conversion or payment of promissory note   37,646,325     376     1,839,135     -     1,839,511  
   Issuance of common stock for inducement to convert promissory note   7,500     -     9,000     -     9,000  
   Reduction of conversion price for inducement to convert promissory note   -     -     94,437     -     94,437  
   Stock based compensation   -     -     576,244     -     576,244  
   Common stock purchase warrants exercise price reduction   -     -     67,700     -     67,700  
   Net loss for the year ended January 31, 2009   -     -     -     ( 4,176,066 )   ( 4,176,066 )
Balance, January 31, 2009   48,486,677     484     23,721,402     ( 25,094,540 )   ( 1,372,654 )
   Issuance of common stock for conversion or payment of promissory note   199,170,302     1,992     603,661     -     605,653  
   Beneficial conversion feature of convertible promissory notes   -     -     330,366     -     330,366  
   Net loss for the year ended January 31, 2010   -     -     -     ( 2,809,843 )   ( 2,809,843 )
Balance, January 31, 2010   247,656,979     2,476     24,655,429     ( 27,904,383 )   ( 3,246,478 )
   Issuance of common stock for conversion or payment of promissory note   187,127,678     1,872     273,105     -     274,977  
   Issuance of common stock and warrants private placement, net   31,778,484     318     1,284,363     -     1,284,681  
   Exercise of common stock purchase warrants   135,848,741     1,358     1,880,588     -     1,881,946  
   Issuance and modification of common stock purchase warrants   -     -     15,089,884     -     15,089,884  
   Stock based compensation   -     -     2,530,750     -     2,530,750  
   Net loss for the year ended January 31, 2011   -     -     -     ( 19,865,419 )   ( 19,865,419 )
Balance, January 31, 2011   602,411,882     6,024     45,714,119     ( 47,769,802 )   (2,049,659 )
   Exercise of common stock purchase warrants   22,687,507     227     (227 )   -     -  
   Issuance of common stock and warrants private placement, net   5,000,000     50     99,950     -     100,000  
   Net loss for the nine months ended October 31, 2011   -     -     -     (1,869,247 )   (1,869,247 )
Balance, October 31, 2011   630,099,389   $  6,301   $  45,813,842   $ (49,639,049 ) $ (3,818,906 )

The Accompanying Notes are an Integral Part of the Condensed Consolidated Financial Statements


6

LIBERTY STAR URANIUM & METALS CORP.
(AN EXPLORATION STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

                Cumulative from  
                date of inception  
    For the nine     For the nine     (August 20, 2001)  
    months ended     months ended     to  
    October 31, 2011     October 31, 2010     October 31, 2011  
Net change in cash and cash equivalents                  
Cash flows from operating activities:                  
   Net loss $  (1,869,247 ) $  ( 19,543,494 ) $  (60,839,049 )
  Adjustments to reconcile net loss to net cash from operating activities:            
       Depreciation   47,902     45,610     864,135  
       Amortization of deferred financing charges   -     19,690     542,716  
       Amortization of discount on convertible promissory notes   -     205,185     3,632,995  
       Impairment loss   -     -     16,092,870  
       Loss on sale of fixed assets   -     3,042     42,453  
       Loss on change in fair value of warrant liability   -     3,700,389     3,692,462  
       Share based compensation   -     2,530,750     4,297,983  
       Share and warrant based payments   -     13,523,589     14,421,627  
       Non-cash other income from sale of mineral claims   -     (1,000,000 )   (1,000,000 )
       Non-cash geological costs paid from the issuance of convertible 
              promissory note
  561,816     -     561,816  
       Changes in assets and liabilities:                  
             Prepaid expenses and supplies   2,447     117,973     36,834  
             Other current assets   -     -     (7,875 )
             Certificates of deposit   -     -     (11,435 )
             Other assets   -     -     (25,000 )
             Accounts payable and accrued expenses   (14,008 )   (192,342 )   20,292  
             Accrued wages related party   27,000     (5,441 )   120,700  
             Accrued interest   257,651     88,767     830,235  
Net cash used in operating activities   (986,439 )   ( 506,282 )   (16,726,241 )
                   
Cash flows from investing activities:                  
   Proceeds from the sale of fixed assets   -     252,368     407,327  
   Proceeds from redemption of certificate of deposit   -     -     213,232  
   Purchase of certificate of deposit   -     -     (204,797 )
   Purchase of equipment   (28,813 )   (1,147 )   (1,178,431 )
Net cash provided by (used in) investing activities   (28,813 )   251,221     (762,669 )
                   
Cash flows from financing activities:                  
   Principal activity on long-term debt   (2,671 )   ( 118,631 )   (499,224 )
   Principal activity on capital lease obligation   -     -     (39,298 )
   Principal activity on convertible promissory notes   -     -     (286,227 )
   Proceeds from the issuance of common stock, net of expenses   100,000     999,980     12,524,755  
   Proceeds from the sale of convertible promissory notes   -     466,217     5,772,371  
   Proceeds from long-term debt   -     -     198,925  
Net cash provided by financing activities   97,329     1,347,566     17,671,302  
                   
Net increase (decrease) in cash and cash equivalents for period   (917,923 )   1,092,505     182,392  
                   
Cash and cash equivalents, beginning of period   1,100,315     20,522     -  
                   
Cash and cash equivalents, end of period $  182,392   $  1,113,027   $  182,392  
                   
Interest paid during the period $  1,677   $  1,579   $  202,311  

The Accompanying Notes are an Integral Part of the Condensed Consolidated Financial Statements


7

LIBERTY STAR URANIUM & METALS CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1 – Organization

Liberty Star Uranium & Metals Corp. (the “Company”, “we” or “Liberty Star”) was formerly Liberty Star Gold Corp. and formerly Titanium Intelligence, Inc. (“Titanium”). Titanium was incorporated on August 20, 2001 under the laws of the State of Nevada. On February 5, 2004 we commenced operations in the acquisition and exploration of mineral properties business. Big Chunk Corp. (“Big Chunk”) is our wholly owned subsidiary and was incorporated on December 14, 2003 in the State of Alaska. Big Chunk is engaged in the acquisition and exploration of mineral properties business in the State of Alaska. Redwall Drilling Inc. (“Redwall”) was our wholly owned subsidiary and was incorporated on August 31, 2007 in the State of Arizona. Redwall performed drilling services on the Company’s 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 concentrated efforts on uranium exploration. We are considered to be an exploration stage company, as we have not generated any revenues from operations.

These condensed consolidated financial statements include the results of operations and cash flows of Liberty Star Uranium & Metals Corp. and its wholly owned subsidiaries, Big Chunk and Redwall, from the dates of acquisition. All significant intercompany accounts and transactions were eliminated upon consolidation.

These condensed 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 condensed 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, debt financings, joint venture agreements 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.

NOTE 2 – Interim financial statement disclosure

The condensed consolidated financial statements included herein have been prepared by Liberty Star Uranium & Metals Corp. without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and should be read in conjunction with our annual report on Form 10-K for the year ended January 31, 2011 as filed with the SEC under the Securities and Exchange Act of 1934 (the “Exchange Act”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, as permitted by the SEC, although we believe the disclosures which are made are adequate to make the information presented not misleading. The condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to present fairly our financial position at October 31, 2011 and the results of our operations and cash flows for the periods presented.

Interim results are subject to significant seasonal variations and the results of operations for the three and nine months ended October 31, 2011 are not necessarily indicative of the results to be expected for the full year.

NOTE 3 - Summary of significant accounting policies

The summary of significant accounting policies presented below is designed to assist in understanding our condensed consolidated financial statements. Such condensed consolidated financial statements and accompanying notes are the representations of our management, who is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP") in all material respects, and have been consistently applied in preparing the accompanying condensed consolidated financial statements.

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, valuation of common stock purchase warrants, 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.


8

LIBERTY STAR URANIUM & METALS CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - continued

NOTE 3 - Summary of significant accounting policies - continued

Principles of consolidation
The condensed consolidated financial statements include our accounts and our wholly-owned subsidiary, Big Chunk, from the date of acquisition, February 5, 2004. 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 October 31, 2011 and January 31, 2011, we had cash in bank deposit accounts that exceeded federally insured limits of $0 and $751,000, respectively.

Mineral claim costs
We account for costs incurred to acquire, maintain and explore mineral properties as a charge to expense in the period incurred until the time that a proven mineral resource is established, at which point development of the mineral property would be capitalized. Currently, we do not have any proven mineral resources on any of our mineral properties.

Property and equipment
Property and equipment is stated at cost. We capitalize all purchased equipment over $500 with a useful life of more than one year. Depreciation is calculated using the straight line method over the estimated useful lives of the assets. Leasehold improvements are stated at cost and are amortized over their estimated useful lives or the lease term, whichever is shorter. Maintenance and repairs are expensed as incurred while betterments or renewals are capitalized. Property and equipment is reviewed periodically for impairment. The estimated useful lives range from 2 to 7 years.

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 material and 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.

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 when material. For common stock purchase warrants reported as a derivative liability, as well as new and modified warrants reported as equity, we utilize the Black-Scholes valuation method in order to estimate fair market value.

Fair Value of Financial Assets and Liabilities
The Company measures and discloses certain financial assets and liabilities at fair value. Authoritative guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Authoritative guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 -

Quoted prices in active markets for identical assets or liabilities.

Level 2 -

Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 -

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Net loss per share
Basic net 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. The calculation of basic loss per share gives retroactive effect to an eight for one forward stock split on January 6, 2004 which resulted in 20,000,000 common shares outstanding. The calculation of basic loss per share gives retroactive effect to a one for four reverse stock split on September 1, 2009 which resulted in 67,261,764 common shares outstanding. Diluted net loss per share takes into consideration shares of common stock outstanding (computed under basic loss per share) and potentially dilutive shares of common stock that are not anti-dilutive. At October 31, 2011 and January 31, 2011, there were 170,786,566 and 204,639,535 potentially dilutive instruments outstanding, respectively. Additionally, at October 31, 2011 and January 31, 2011 if settlement of the Convertible Promissory Notes were completed by the issuance of common shares there would be 127,483,191 and 83,846,926 additional shares, respectively. These instruments were not included in the determination of diluted loss per share as their effect was anti-dilutive.


9

LIBERTY STAR URANIUM & METALS CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - continued

NOTE 3 - Summary of significant accounting policies - continued

Recently issued accounting standards
There have been no recent accounting pronouncements or changes in accounting pronouncements during the nine months ended October 31, 2011, that are of significance, or potential significance, to us.

NOTE 4 – Property and equipment

The balances of our major classes of depreciable assets are:

    October 31, 2011     January 31, 2011  
Geology equipment $  346,977   $  327,105  
Vehicles and transportation equipment   50,180     50,180  
Office furniture and equipment   83,513     74,572  
    480,670     451,857  
Less: Accumulated depreciation   (336,608 )   (288,706 )
             
  $  144,062   $  163,151  

NOTE 5 – Convertible promissory notes

We issue convertible promissory notes in private placements of our securities to institutional investors pursuant to exemptions from registration set out in Rule 506 of Regulation D under the Securities Act of 1933.

On July 15, 2010 we issued a secured convertible promissory note bearing interest at a rate of 10% per annum compounded monthly (the “Convertible Note”) to Northern Dynasty Minerals Ltd (“Northern Dynasty”). Effective September 1, 2011 the agreement with Northern Dynasty was amended to increase the secured convertible promissory note by $561,816 to reimburse Northern Dynasty for assessment work, rental fees, cash in lieu of assessment work and filing fees on the mineral claims that was paid in 2010 and 2011 because we could not come to an agreement on the earn-in option and joint venture agreement with Northern Dynasty. Principal balance of the Convertible Note at October 31, 2011 and January 31, 2011 was $3,561,816 and $3,000,000 respectively. Accrued interest on the Convertible Note at October 31, 2011 and January 31, 2011 was $422,034 and $164,383, respectively.

As part of the transaction noted above, Northern Dynasty can earn a 60% interest in our Big Chunk project in Alaska (the “Joint Venture Claims”) by spending $10,000,000 on those properties over six years. The borrowings from Northern Dynasty may be applied as part of Northern Dynasty’s earn-in requirements. Northern Dynasty’s minimum annual expenditures under the earn-in would be the minimum level necessary to keep the Joint Venture Claims in good standing. Northern Dynasty may elect to abandon the earn-in at any time on 30 days’ notice, so long as sufficient annual labor is performed, or a cash payment in lieu of labor is made, in order to fulfill the annual labor requirements for the Joint Venture Claims for a minimum of 12 months after termination of the earn-in.

The Convertible Note is secured against substantially all of the Company’s assets. The Convertible Note is due for repayment 45 days after the earlier to occur of: (i) Northern Dynasty’s completion of its earn-in to the Joint Venture Claims unless it has elected to deem the entire outstanding balance of the Convertible Note (including interest thereon) to be part of the earn-in expenditure requirements and (ii) termination of Northern Dynasty’s earn-in right by voluntary abandonment provided that $1,000,000 in expenditures has been made; or (iii) termination of Northern Dynasty’s earn-in right on account of a superior third party joint venture offer.

Provided a minimum of $1,000,000 has been expended by Northern Dynasty on earn in expenses, the Convertible Note will be convertible until repaid or deemed repaid, into common shares of our company at the 5 day volume weighted average trading price immediately prior to Northern Dynasty giving a notice of conversion less the maximum allowable discount applicable as if our shares were listed on the TSX Venture Exchange. At October 31, 2011, Northern Dynasty has expended $546,016 of the $1,000,000 earn in expenses. The Convertible Note may be pre-paid by our company without penalty at any time on 10 days prior notice during which time Northern Dynasty’s conversion rights are unaffected.

If settlement of the Convertible Note occurred on October 31, 2011, we would have been obligated to pay $3,561,816 in principal and $422,034 of accrued interest. If the settlement were completed by the issuance of common shares the conversion price at October 31, 2011 would have been $0.03125 per share for a total of 127,483,191 shares required to convert the Convertible Note.

We have classified the entire amount as a current liability as we were not able to come to terms of an agreement regarding the joint venture agreement at October 31, 2011 and as a result the Convertible Note can be called by Northern Dynasty.


10

LIBERTY STAR URANIUM & METALS CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - continued

NOTE 6 – Common stock

Our common shares are all of the same class, are voting and entitle stockholders to receive dividends as defined. Upon liquidation or wind-up, stockholders are entitled to participate equally with respect to any distribution of net assets or any dividends that may be declared.

In June 2011 one investor exercised 21,061,763 of the August 2009 common stock purchase warrants using the cashless exercise provision. The cashless exercise provision allows the investor, if the fair market value of one share of common stock is greater than the exercise price, to elect to receive shares equal to the value of the warrant less a portion of the warrant that is cancelled using a specific formula. We issued 20,000,000 shares of common stock and cancelled 1,061,763 common stock purchase warrants pursuant to the cashless exercise provision. No cash proceeds were received. We issued these shares pursuant to an exemption from registration set out in Section 4(2) of the Securities Act of 1933.

In August 2011 one investor exercised 2,598,898 of the August 2009 common stock purchase warrants using the cashless exercise provision. The cashless exercise provision allows the investor, if the fair market value of one share of common stock is greater than the exercise price, to elect to receive shares equal to the value of the warrant less a portion of the warrant that is cancelled using a specific formula. We issued 2,500,000 shares of common stock and cancelled 98,898 common stock purchase warrants pursuant to the cashless exercise provision. No cash proceeds were received. We issued these shares pursuant to an exemption from registration set out in Section 4(2) of the Securities Act of 1933.

In August 2011 one investor exercised 192,308 of the May 2007 common stock purchase warrants using the cashless exercise provision. The cashless exercise provision allows the investor, if the fair market value of one share of common stock is greater than the exercise price, to elect to receive shares equal to the value of the warrant less a portion of the warrant that is cancelled using a specific formula. We issued 187,507 shares of common stock and cancelled 4,801 common stock purchase warrants pursuant to the cashless exercise provision. No cash proceeds were received. We issued these shares pursuant to an exemption from registration set out in Section 4(2) of the Securities Act of 1933.

In August 2011, we sold 5,000,000 units at a price of $0.02 per unit to one investor for net proceeds of $100,000. The financing consisted of 5,000,000 common shares of our company and 2,500,000 whole share non-transferable common stock purchase warrants. Each common stock purchase warrant entitles the investor to purchase one additional common share of our company at a price of $0.04 until August 31, 2016. The common stock purchase warrants contain a cashless exercise provision allowing the investor, if the fair market value of one share of common stock is greater than the exercise price, to elect to receive shares equal to the value of the warrant less a portion of the warrant that is cancelled using a specific formula. The common stock purchase warrants also contain an exercise price adjustment whereby if we issue common stock, convertible debt instruments, warrants or stock options prior to the expiration of the warrants or complete exercise of the warrants at a price less $0.04 per common share, then the exercise price of these warrants shall be reduced to such lower price. The securities were issued to an accredited investor pursuant to an exemption from the registration requirements of the Securities Act of 1933 provided by Rule 506 of Regulation D.

As of October 31, 2011, there were 87,122,691 whole share purchase warrants outstanding and exercisable. The warrants have a weighted average remaining life of 2.6 years and a weighted average exercise price of $0.05 per whole warrant for one common share. Whole share purchase warrants outstanding at October 31, 2011 are as follows:

    Number of whole share     Weighted average exercise  
    purchase warrants     price per share  
             
Outstanding, January 31, 2011   108,475,660     0.04  
Issued   2,500,000     0.04  
Exercised   (23,852,969 )   0.002  
             
Outstanding, October 31, 2011   87,122,691   $  0.05  
Exercisable, October 31, 2011   87,122,691   $  0.05  

During the nine months ended October 31, 2011 there were 12,500,000 vested incentive stock options that expired and no stock options granted. The expired options had a weighted average exercise price of $0.038 per option. At October 31, 2011 there were 778,500 non-qualified stock options outstanding and exercisable with a weighted average exercise price of $1.654 per option. At October 31, 2011 there were 82,885,375 incentive stock options outstanding and exercisable with a weighted average exercise price of $0.049 per option.

NOTE 7 – Related party transactions

We entered into the following transactions with related parties during the period ended October 31, 2011:

Paid or accrued $4,697 in rent. We rented an office from Jim Briscoe, our Chairman of the Board, CEO and CFO, on a month-to-month basis for $522 per month.


11

LIBERTY STAR URANIUM & METALS CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - continued

NOTE 7 – Related party transactions – continued

At October 31, 2011 we had a balance of accrued unpaid wages of $120,700 to Jim Briscoe, our Chairman of the Board, CEO and CFO.

We entered into the following transactions with related parties during the period ended October 31, 2010:

Paid or accrued $4,322 in rent. We rented an office from Jim Briscoe, our Chairman of the Board, President, CEO and CFO, on a month-to-month basis for $459 per month through July 2010 and $522 per month beginning in August 2010.

We sold a trailer to Jim Briscoe, our Chairman of the Board, President, CEO and CFO, for $3,000.

At October 31, 2010 we had a balance of accrued unpaid wages of $94,059 to Jim Briscoe, our Chairman of the Board, President, CEO and CFO.

We recognized $2,451,250 of compensation expense for stock options granted to officers and directors of our company.

NOTE 8 – Commitments

We are required to perform annual assessment work in order to maintain the Big Chunk and Bonanza Hills Alaska State mining claims. If annual assessment work is not performed the Company must pay the assessment amount in cash in order to maintain the claims. Completion of annual assessment work in the amount of $400 per ¼ section (160 acre) claim or $100 per ¼ -¼ section (40 acre) claim extends the claims for a one-year period from the staking of claims. Assessment work performed in excess of the required amount may be carried forward for up to four years to satisfy future obligations. The Company estimates that the required annual assessments to maintain the claims will be approximately $260,600. Sufficient funds have been expended to maintain the claims until August 31, 2012.

The annual state rentals for the Big Chunk and Bonanza Hills Alaska State mining claims vary from $70 to $280 per mineral claim. The rental period begins at noon September 1st through the following September 1st and annual rental payments are due on November 30th of each year. The rentals of $174,580 to extend the claims through September 1, 2012 were paid in November 2011. The estimated state rentals due by November 30, 2012 for the period from September 1, 2012 through September 1, 2013 are $174,580. Alaska State production royalty is three percent of net income. State law prescribes that after a 3.5 -year exemption from state taxes a metal mine is liable for a 15% state licensing tax on net income from the mine.

We are required to pay annual rentals for our Federal lode mining claims for the North Pipes project in the State of Arizona. The rental period begins at noon on September 1st through the following September 1st and rental payments are due by the first day of the rental period. The annual rentals are $140 per claim. The rentals of $60,340 for the period from September 1, 2011 to September 1, 2012 have been paid. The rentals due by September 1, 2012 for the period from September 1, 2012 through September 1, 2013 of $60,340 have not been paid.

We are required to pay annual rentals for our Federal lode mining claims for the Tombstone project in the State of Arizona. The rental period begins at noon on September 1st through the following September 1st and rental payments are due by the first day of the rental period. The annual rentals are $140 per claim. The rentals and initial filing fees of $12,474 for the period from September 1, 2011 to September 1, 2012 have been paid. The rentals due by September 1, 2012 for the period from September 1, 2012 through September 1, 2013 of $9,240 have not been paid.

On September 7, 2011 we entered into a letter agreement with Sagebrush Gold Ltd. to form a joint venture agreement. Under the terms of the letter agreement, all the uranium properties held by Sagebrush and Liberty Star will be transferred to a new corporation in exchange for shares of the new corporation. The letter agreement will terminate on December 31, 2011 if the reorganization is not complete unless extended by both parties. The reorganization has not yet completed as at the date of this quarterly report on Form 10-Q, and has had no effect on the condensed consolidated financial statements.

In December 2010 we entered into a 12 month non-cancellable operating lease for office space. The lease calls for monthly payments of rent plus sales tax of $2,280. We have the option to extend the lease for one additional twelve month term at current market rates. We recognized rent expense of $20,518 during the nine months ended October 31, 2011 pursuant to this lease. Future minimum lease payments pursuant to this lease total $3,751 payable during the fiscal year ending January 31, 2012.

In June 2011 we entered into a two year non-cancellable operating lease for warehouse space in Tucson. The lease calls for monthly payments of rent plus sales tax of $3,550. We have the option to extend the lease for one additional two year term at current market rates. We recognized rent expense of $17,750 during the nine months ended October 31, 2011 pursuant to this lease. Future minimum lease payments pursuant to this lease total $42,600 payable during the twelve months ended October 31, 2012 and $24,850 payable during the twelve months ended October 31, 2013.


12

LIBERTY STAR URANIUM & METALS CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - continued

NOTE 9 – Supplemental disclosures with respect to cash flows

The significant non-cash investing and financing transactions for the nine month period ended October 31, 2011 were as follows:

Issued 22,687,507 shares of common stock and cancelled 1,165,462 common stock purchase warrants for $0 proceeds received from the cash-less exercise of August 2009 and May 2007 common stock purchase warrants.

We amended our secured convertible promissory notes to increase the principal balance by $561,816 to reimburse the note holder for geological costs paid on our Alaska claims on our behalf.

The significant non-cash investing and financing transactions for the nine month period ended October 31, 2010 were as follows:

We issued 187,127,678 shares of common stock as repayment of $227,455 principal portion and $47,522 interest portion of the monthly payments on the convertible notes.

We issued $4,000,000 secured convertible promissory note to Northern Dynasty in exchange for $466,217 cash received and payoff of principal and interest on the May 2007, August 2008, May 2009 and August 2009 secured convertible promissory notes totaling $3,533,783.

We issued 22,098,601 common stock purchase warrants exercisable at $0.10 through September 15, 2013 pursuant to a settlement agreement with two of our warrant holders. We also amended the August 2009 common stock purchase warrants for four of our warrant holders pursuant to a settlement agreement. The warrants were increased by 134,712,799 warrants and the exercise price was reduced from $0.02 per common share to $0.002 per common share. The company recognized settlement expense of $13,241,020 related to these settlement agreements.

We issued 80,166,652 shares of common stock upon exercise of common stock purchase warrants for no cash proceeds as all exercises were completed pursuant to the cashless exercise provisions of the August 2009 common stock purchase warrants.

We recognized $2,530,750 of compensation expense related to the granting of 95,500,000 incentive and non-qualified stock options to officers, employees and consultants.

We transferred 95 of our mineral claims in the state of Alaska to Northern Dynasty in exchange for a $1,000,000 reduction of the principal of our secured convertible promissory note.

NOTE 10 – Fair value of financial instruments

Our financial instruments consist of cash and cash equivalents, accounts payable, accrued liabilities, convertible notes payable, notes payable, and warrant liability. It is management's opinion that we are not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying values. Gains and losses recognized on changes in fair value of financial instruments are reported in other income (expense) as gain (loss) on change in fair value. We estimate the fair value of the warrant liability using level 3 inputs and the Black-Scholes valuation model. We use historical volatility as a method to estimate expected volatility. At October 31, 2011 and January 31, 2011 we had no financial instruments outstanding that were estimated using level 1, level 2 or level 3 inputs that were deemed material.

NOTE 11 – Subsequent events

In November 2011 pursuant to the amended Northern Dynasty secured convertible promissory note, Northern Dynasty paid the annual rental fees in the amount of $166,740 on our Big Chunk mineral claims to renew them in good standing for an additional year. The amount will also apply against the $1,000,000 earn-in requirement resulting in a total of $712,756 of earn in expenditures paid by November 18, 2011.

NOTE 12 – Reclassifications

Certain amounts in the prior-year financial statements have been reclassified for comparative purposes to conform with the presentation in the current-year financial statements.


13

LIBERTY STAR URANIUM & METALS CORP.
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - continued

NOTE 13– Going concern

The Company is in the exploration stage, has incurred losses from operations, 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, the Company's auditors have expressed an uncertainty about the Company's ability to continue as a going concern in their opinion attached to our audited financial statements for the fiscal year ended January 31, 2011.

Management is working to secure additional funds through the exercise of stock warrants already outstanding, equity financings or joint venture agreements. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.


14

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

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.

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".

Our Business

The following Management’s Discussion and Analysis is intended to help the reader understand the results of operations and financial condition of Liberty Star Uranium & Metals Corp. (the “Company”, “we”, “us”, or “Liberty Star”). Management’s Discussion and Analysis 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 is in the acquisition and exploration of mineral properties business. Big Chunk Corp. (“Big Chunk”) is our wholly owned subsidiary and is engaged in the acquisition and exploration of mineral properties business in the State of Alaska. We are an exploration stage company, as we have not generated revenues from operations. Our significant projects are:

North Pipes Super Project (“NPSP”): NPSP is located in Northern Arizona on the Arizona Strip and we plan to ascertain whether the North Pipes Super Project claims possess commercially viable deposits of uranium. We have not identified any ore reserves to date.

Big Chunk Super Project (“Big Chunk”): Big Chunk is located in the Iliamna region of Southwestern Alaska and we plan to ascertain whether the Big Chunk claims possess commercially viable deposits of copper, gold, molybdenum, silver and zinc. We have not identified any ore reserves to date.

Bonanza Hills Project (“Bonanza Hills”): Bonanza Hills is located in the Iliamna region of Southwestern Alaska and we plan to ascertain whether the Bonanza Hills claims possess commercially viable deposits of gold and silver. We have not identified any ore reserves to date.

Tombstone Porphyry-Precious Metals Project (“Tombstone”): Tombstone is located in Cochise County, Arizona and we plan to ascertain whether the Tombstone claims possess commercially viable deposits of copper, molybdenum, gold, silver, lead and zinc. We have not identified any ore reserves to date.

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 reserve (a reserve is a commercially viable mineral deposit). Please refer to the section entitled "Risk Factors" in this Form 10-Q and in our Form 10-K for the year ended January 31, 2011 for additional information about the risks of mineral exploration.

To date, we have not generated any revenues and we remain in the exploration stage. 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.

On September 7, 2011 we entered into a letter agreement with Sagebrush Gold Ltd. to form a joint venture agreement. Under the terms of the letter agreement, all the uranium properties held by Sagebrush and Liberty Star will be transferred to a new corporation in exchange for shares of the new corporation. The letter agreement will terminate on December 31, 2011 if the reorganization is not complete unless extended by both parties. The reorganization is not yet completed as at the date of this quarterly report on Form 10-Q and has had no effect on the accompanying condensed consolidated financial statements.

Effective September 1, 2011 our secured convertible promissory note with Northern Dynasty was amended to increase the secured convertible promissory note by $561,816 to reimburse Northern Dynasty for assessment work, rental fees, cash in lieu of assessment work and filing fees on the mineral claims that was paid in 2010 and 2011 because we could not come to an agreement on the earn-in option and joint venture agreement with Northern Dynasty. Pursuant to a letter agreement dated November 14, 2011 amending the Northern Dynasty secured convertible promissory note, Northern Dynasty paid the annual rental fees in the amount of $166,740 on our Big Chunk mineral claims to renew them in good standing for an additional year. The amount will also apply against the $1,000,000 earn-in requirement resulting in a total of $712,756 of earn in expenditures paid by November 18, 2011.


15

Results of Operations

Material Changes in Financial Condition for the Nine Month Period Ended October 31, 2011

We had cash and cash equivalents in the amount of $182,392 as of October 31, 2011 compared to $1,100,315 as of January 31, 2011. We had negative working capital of $(3,946,615) as of October 31, 2011 compared to $(2,193,786) as of January 31, 2011. We received $97,329 cash inflows from financing activities during the nine months ended October 31, 2011 which was utilized for working capital. We also utilized our cash funds to increase exploration activities at our Tombstone claims by working with a geology consulting firm and starting on geochemical soil, rock chip and vegetation sampling. We also increased our administrative staffing in order to assist our executives in their efforts to raise additional funds for operations. During the nine months ended October 31, 2011, the Company purchased computer equipment for $28,813 as part of a project to upgrade our computer systems. We acquired new office space and warehouse space in Tucson, AZ spending approximately $38,000 on rent during the nine months ended October 31, 2011.

Material Changes in Results of Operations for the Three and Nine Month Periods Ended October 31, 2011 and October 31, 2010

We had a net loss of $(999,238) for the three months ended October 31, 2011 compared to a net loss of $(18,523,671) for the three months ended October 31, 2010. During the nine months ended October 31, 2011 we had a net loss of $(1,869,247) compared to a net loss of $(19,543,494) for the nine months ended October 31, 2010. During the three and nine months ended October 31, 2010 we incurred several non-cash expenses totaling approximately $16.6 million and $16.9 million, respectively for the fair-market value of the modification of existing common stock purchase warrants and the issuance of new common stock purchase warrants, and the changes in fair value of our warrant liabilities, no such expenses were incurred this year. During the prior year we recognized other income from the sale of mineral claims for $1,125,000. No mineral claims were sold this year. During the three and nine months ended October 31, 2011, we incurred more costs for administrative activities and travel and incurred less costs for geology, legal fees, salaries and interest expense than we did during the three and nine months ended October 31, 2010. We recognized $2.5 million in total compensation costs last year in our geology department and administrative department for the fair market value of stock options granted last year, no stock options were granted this year causing the decrease in the geology costs and salaries and benefits. Increase in administrative costs was due to new office space leased this year and a new computer system implementation. The increase in travel costs was due to an increase in international travel by our executives in an effort to pursue financing sources.

Critical Accounting Policies

The 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 consolidated financial statements included in Item 8 in our Form 10-K for the year ended January 31, 2011. The critical accounting policies adopted by our company are as follows:

Going Concern

Since we have not generated any revenue, we have negative cash flows from operations, and negative working capital we have included a reference to the substantial doubt about our ability to continue as a going concern in connection with our consolidated financial statements for the year ended January 31, 2011. Our total stockholders’ equity (deficit) at October 31, 2011 was $(3,818,906).

Our 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, our 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. Management is working to secure additional funds through the exercise of stock warrants already outstanding, debt financings, equity financings or joint venture agreements. Such financings may not be available, or may not be available on reasonable terms.

Mineral claims

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.

Convertible promissory note

We reviewed the convertible promissory note and the related subscription agreement to determine the appropriate reporting within the financial statements. We report convertible promissory notes as liabilities at their carrying value less unamortized discounts in accordance with the applicable accounting guidance. We bifurcate conversion options and detachable common stock purchase warrants and report them as liabilities at fair value at each reporting period when material and 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.


16

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 when material. For common stock purchase warrants reported as a derivative liability, as well as new and modified warrants reported as equity, we utilize the Black-Scholes valuation method in order to estimate fair market value.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

As required by Rule 13a-15 under the Exchange Act, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures at October 31, 2011, which is the end of the fiscal quarter covered by this report. This evaluation was carried out by Mr. James Briscoe, our principal executive officer and principal financial officer. Based on this evaluation, Mr. Briscoe has concluded that the design and operation of our disclosure controls and procedures are effective as at the end of the period covered by this report. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by our company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the quarter ended October 31, 2011 there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A.                  RISK FACTORS

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.

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".

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended January 31, 2011, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

If we do not obtain additional financing, our business will fail and our investors could lose their investment.

We had cash in the amount of $182,392 and negative working capital of $(3,946,615) as of October 31, 2011. 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. We do not currently have any arrangements for financing in addition to the Convertible Note and private placements of our securities. 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.


17

Because there is no assurance that we will generate revenues, we face a high risk of business failure.

We have not earned any revenues as of the date of this filing and have never been profitable. We do not have an interest in any revenue generating properties. We were incorporated on August 20, 2001 and took over our current business on February 5, 2004. To date we have been involved primarily in organizational and exploration activities. We will incur substantial operating and exploration expenditures without realizing any revenues. We therefore expect to incur significant losses into the foreseeable future. We have limited operating history upon which an evaluation of our future success or failure can be made. Our net loss from inception to October 31, 2011 is $(60,839,049). 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 that we will be able to continue as a going concern.

Our independent registered public accounting firm, Semple, Marchal & Cooper, LLP, states in their audit report attached to our audited financial statements for the fiscal year ended January 31, 2011 that since we are an exploration stage company, have no established source of revenue and are dependent on our ability to raise capital from shareholders or other sources to sustain operations, there is a substantial doubt that we will be able to continue as a going concern.

The existence of our mining claims depends on our ability to fund exploratory activity or to pay fees.

Our mining claims, which are the central part of our business, require that we either pay fees, or incur certain minimum development costs annually, or the claims will be forfeited. Due to our current financial situation we may not be able to meet these obligations and we could therefore lose our claims. This would impair our ability to raise capital and would negatively impact the value of the Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

In August 2011, we sold 5,000,000 units at a price of $0.02 per unit to one investor for net proceeds of $100,000. The financing consisted of 5,000,000 common shares of our company and 2,500,000 whole share non-transferable common stock purchase warrants. Each common stock purchase warrant entitles the investor to purchase one additional common share of our company at a price of $0.04 until August 31, 2016. The common stock purchase warrants contain a cashless exercise provision allowing the investor, if the fair market value of one share of common stock is greater than the exercise price, to elect to receive shares equal to the value of the warrant less a portion of the warrant that is cancelled using a specific formula. The common stock purchase warrants also contain an exercise price adjustment whereby if we issue common stock, convertible debt instruments, warrants or stock options prior to the expiration of the warrants or complete exercise of the warrants at a price less $0.04 per common share, then the exercise price of these warrants shall be reduced to such lower price. The securities were issued to an accredited investor pursuant to an exemption from the registration requirements of the Securities Act of 1933 provided by Rule 506 of Regulation D.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. (Removed and Reserved).

Item 5. Other Information.

None.

Item 6. Exhibits

Exhibit
Number

Description of Exhibit
3.1 Articles of Incorporation(1)
3.2 Bylaws(2)
3.3 Certificate of Change to Authorized Capital(3)


18

Exhibit
Number

Description of Exhibit
3.4 Articles of Merger(3)
10.10 Form of Securities Purchase Agreement for May 11, 2007 Senior May 2007 Convertible Notes (4)
10.11 Form of Convertible Promissory Note for May 11, 2007 Senior May 2007 Convertible Notes (4)
10.12 Form of Common Stock Purchase Warrant for May 11, 2007 Senior May 2007 Convertible Notes (4)
10.13 List of Subscribers for May 11, 2007 Senior May 2007 Convertible Notes (4)
10.14 Form of Subscription Agreement for August 28, 2008 Secured Convertible Promissory Notes (5)
10.15 Form of Secured Convertible Promissory Notes dated August 28, 2008 (5)
10.16 Form of Security Agreement for August 28, 2008 Secured Convertible Promissory Notes (5)
10.17 Form of Subscription Agreement for May 21, 2009 Secured Convertible Promissory Notes (6)
10.18 Form of Secured Convertible Promissory Notes dated May 21, 2009 (6)
10.19 Form of Guarantee dated May 21, 2009 of Big Chunk Corp for May 21, 2009 Secured Convertible Promissory Notes (6)
10.20 Form of Lock Up Agreement for May 21, 2009 Secured Convertible Promissory Notes (6)
10.21 Form of Escrow Agreement for May 21, 2009 Secured Convertible Promissory Notes (6)
10.22 Form of Subscription Agreement for August 14, 2009 Secured Convertible Promissory Notes(7)
10.23 Form of Secured Convertible Promissory Notes dated August 14, 2009(7)
10.24 Form of Escrow Agreement for August 14, 2009 Secured Convertible Promissory Notes (7)
10.25 Form of Lock Up Agreement for August 14, 2009 Secured Convertible Promissory Notes(7)
10.26 Form of Warrant dated August 14, 2009(7)
10.27 Form of Guarantee dated August 14, 2009 of Big Chunk Corp for August 14, 2009 Secured Convertible Promissory Notes (7)
10.28 Form of Extension and Modification Agreement of Secured Convertible Promissory Notes (8)
10.29 Code of Ethics(3)
10.30 Subsidiaries: Big Chunk Corp.
10.31 Form of Letter Agreement with Northern Dynasty Minerals, Ltd dated June 29, 2010 (9)
10.32 Form of Subscription Agreement for private placement of securities issued October 20, 2010 and November 12, 2010.
10.33 Form of Subscription Agreement for private placement of securities issued January 12, 2011 (11)
10.34 Form of Letter Agreement with Sagebrush Gold Ltd dated August 31, 2011(12)
10.35 Letter Agreement dated November 14, 2011 with Northern Dynasty (13)
31.1* Section 302 Certification under Sarbanes-Oxley Act of 2002 of James Briscoe
32.1* Section 906 Certification under Sarbanes-Oxley Act of 2002 of James Briscoe
101.INS* XBRL INSTANCE DOCUMENT
101.SCH* XBRL TAXONOMY EXTENSION SCHEMA
101.CAL* XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF* XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB* XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.PRE* XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

(1)

Filed as an exhibit to our Registration Statement on Form SB-2, filed with the SEC on May 14, 2002.

(2)

Files as an exhibit to our Quarterly Report on Form 10-QSB, filed with the SEC on December 14, 2007.



19

(3)

Filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on September 1, 2009.

(4)

Filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on May 15, 2007.

(5)

Filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on September 3, 2008.

(6)

Filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on May 26, 2009.

(7)

Filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on August 14, 2009.

(8)

Filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on March 3, 2010.

(9)

Filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on June 29, 2010.

(10)

Filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on November 15, 2010.

(11)

Filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on January 12, 2011.

(12)

Filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on September 7, 2011.

(13)

Filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on November 25, 2011.

* Filed herewith.


20

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

LIBERTY STAR URANIUM & METALS CORP.

By: /s/ James Briscoe          
James Briscoe, Chairman,
Chief Executive Officer,
Chief Financial Officer, and Director
(Principal Executive Officer, Principal Financial Officer
and Principal Accounting Officer)

Date: December 13, 2011