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EX-32.1 - CERTIFICATION - LIBERTY STAR URANIUM & METALS CORP.f10k2016ex32i_libertystar.htm
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EX-21.1 - SUBSIDIARIES - LIBERTY STAR URANIUM & METALS CORP.f10k2016ex21i_libertystar.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended January 31, 2016

 

☐ 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   (IRS Employer
incorporation or organization)    Identification No.)

 

5610 E. Sutler Lane, Tucson, Arizona 85712

(Address of principal executive offices)

 

520.731.8786

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:    
Title of each class   Name of each exchange on which registered
None   N/A

 

Securities registered pursuant to Section 12(g) of the Act:

 

Common Stock, par value $0.00001

(Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐     No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐     No ☒

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 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 ☒     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 ☒     No ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

 

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.

 

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

 

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

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $1,996,418 as of July 31, 2015.

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 1,632,552,893 shares of Common Stock issued and outstanding as of May 17, 2016.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 

 

 

 

TABLE OF CONTENTS

 

FORWARD-LOOKING STATEMENTS
PART I  
  Item 1. Business 1
  Item 1A. Risk Factors. 3
  Item 1B. Unresolved Staff Comments 7
  Item 2. Properties 7
  Item 3. Legal Proceedings 16
  Item 4. Mine Safety Disclosures 16
PART II    
  Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 17
  Item 6. Selected Financial Data 18
  Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 18
  Item 7A. Quantitative and Qualitative Disclosures About Market Risk 21
  Item 8. Financial Statements and Supplementary Data F-1
  Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 22
  Item 9A. Controls and Procedures 22
  Item 9B. Other Information 22
PART III    
  Item 10. Directors, Executive Officers and Corporate Governance 23
  Item 11. Executive Compensation 26
  Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 28
  Item 13. Certain Relationships and Related Transactions, and Director Independence 29
  Item 14. Principal Accounting Fees and Services 29
  Item 15 Exhibits, Financial Statement Schedules 30
  SIGNATURES 31

 

 

 

FORWARD-LOOKING STATEMENTS

 

This annual report on Form 10-K 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.

 

All dollar amounts refer to U.S. dollars unless otherwise indicated. Our consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The following discussion should be read in conjunction with our consolidated financial statements and the related notes that appear elsewhere in this annual report on Form 10-K.

 

As used in this annual report on Form 10-K, the terms "we", "us", the “Company” and "Liberty Star" mean Liberty Star Uranium & Metals Corp. and our subsidiaries, Big Chunk Corp. and Hay Mountain Super Project, LLC, unless otherwise indicated.

 

 

 

PART I

 

ITEM 1. BUSINESS.

 

Business development

 

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”), our wholly owned subsidiary, is engaged in the acquisition and exploration of mineral properties business in the State of Alaska. In April 2007, we changed our name to Liberty Star Uranium & Metals Corp. Hay Mountain Super Project LLC (“HMSP”), our wholly owned subsidiary, serves as the primary holding company for development of the potential ore bodies encompassed in the Hay Mountain area of interest in Arizona. We are in the exploration phase of operations and have not generated any revenues from operations.

 

Our current business

 

We are engaged in the acquisition and exploration of mineral properties in the States of Arizona and Alaska. Claims in the State of Alaska are held in the name of Big Chunk. 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.

 

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

 

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

 

Tombstone Super Project (“Tombstone”) (formerly referred to as Tombstone Porphyry Precious Metals Project): 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.

 

East Silver Bell Porphyry Copper Project (“East Silver Bell”): East Silver Bell is located northwest of Tucson, Arizona. We plan to ascertain whether the East Silver Bell claims possess commercially viable deposits of copper. We have not identified any ore reserves to date.

 

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 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.

 

 1 
 

 

Competition

 

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

 

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

 

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

 

Compliance with Government Regulation

 

We will be required to comply with all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in the States of Arizona and Alaska.

 

We are required to perform annual assessment work in order to maintain the Big Chunk mining claims. If annual assessment work is not performed, we must pay the assessment amount in cash in order to maintain the claims. Completion of annual assessment work in the amount of $400 per 1/4 section (160 acre) claim or $100 per 1/16 section (40 acre) claim extends the claims for a one year period. Assessment work performed in excess of the required amount may be carried forward for up to 4 years to reduce future obligations for assessment work. Since we have in excess of the required amount remaining from work performed within the four year period, assessment work was not required, but was and will be carried forward up to 4 years.

 

The annual state rentals for the Big Chunk mining claims vary from $70 to $680 per mineral claim and escalate with the age of the mining 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. Annual rent is due in full within 45 days of staking a new claim and covers the period from staking until the next September 1st. The rentals of $6,120 to extend the Big Chunk claims through September 1, 2015 were paid in November 2014. The estimated state rentals due for the Big Chunk claims were not paid for 2016, but we may remedy that up to November 2016 by paying rentals due. 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.

 

Our North Pipes claims are federal lode mining claims located on U.S. federal lands and administered by the Department of Interior, Bureau of Land Management (the “BLM”). The BLM has prepared an environmental impact statement (“EIS”) addressing potential for contamination of significant amounts of uranium leaking into the Colorado River. The EIS indicated the danger of such contamination insignificant. Regardless, the United States Secretary of the Interior, Kenneth Salazar, through executive order, has withdrawn federal lands from locatable mineral exploration and mining North of the Grand Canyon along the Utah border in Arizona, the so-called “Arizona Strip”. Nearly 1 million acres of land managed by the BLM and the Forest Service were segregated in July 2009 by the Secretary of Interior. The executive order has resulted in the withdrawal of an area of the Arizona Strip from mining in particular, and the moratorium now is instated for the next 20 years. However, the moratorium permits existing claims and mines to continue as before, including our North Pipes lode mining claims.

 

We are required to pay annual rentals to maintain our North Pipes federal lode mining claims in good standing. The rental period begins at 12:01 PM on September 1st through the following September 1st at 12:00 PM, and rental payments are due by the first day of the rental period starting at 12:01 PM. The annual rental is $155 per claim. Additional fees of $57 per claim are due in the first year of filing a federal lode mining claim along with the first year’s rent. The rentals of $1,705 for the period from September 1, 2015 to September 1, 2016 have been paid. The annual rentals due by September 1, 2016 of $1,705 are required to maintain the North Pipes claims for the period from September 1, 2016 through September 1, 2017. There is no requirement for annual assessment or exploration work on the federal lode mining claims, this having been supplanted by the rental fee. There are no royalties associated with the federal lode mining claims.

 

 2 
 

 

We are required to pay annual rentals for our federal lode mining claims for our East Silver Bell 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 rental is $155 per claim. The rental fees of $4,030 for the period from September 1, 2015 to September 1, 2016 have been paid. The annual rentals due by September 1, 2016 of $4,030 are required to maintain the East Silver Bell claims are for the period from September 1, 2016 through September 1, 2017. There is no requirement for annual assessment or exploration work on the federal lode mining claims, this having been supplanted by the rental fee. There are no royalties associated with the federal lode mining claims.

 

We are required to pay annual rentals for our federal lode mining claims for our 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 rental is $155 per claim. Additional fees of $57 per claim are due in the first year of filing a federal lode mining claim along with the first year’s rent. The rental fees of $14,725 for the period from September 1, 2015 to September 1, 2016 have been paid. The annual rentals due by September 1, 2016 of $ $14,725 are required to maintain the Tombstone claims for the period from September 1, 2016 through September 1, 2017. There is no requirement for annual assessment or exploration work on the federal lode mining claims, this having been supplanted by the rental fee. There are no royalties associated with the federal lode mining claims. Beginning September 1, 2011 at 12:01 PM, Liberty Star started, and subsequently completed, staking 9 federal lode mining claims along the east edge of old patented mining claims in the main producing part of the old Tombstone mining area. These new claims are adjacent to the south end of the Walnut Creek TS claim block and are also named the TS claims. These claims occupy fractional land areas open to location by federal lode mining claims.

 

We are required to pay annual rentals for our Arizona State Land Department (“ASLD”) Mineral Exploration Permits (“AZ MEP”) at our Tombstone Hay Mountain Project in the State of Arizona. A mineral exploration permit is permission from ASLD to prospect and explore for minerals on State Trust land. Exploration is any activity conducted for the purpose of determining the existence of a valuable mineral deposit, such as: geologic mapping, drilling, geochemical sampling, and geophysical surveys. Prior to exploration, the Plan of Operations must be approved by ASLD. The permitting process for an exploration permit takes a minimum of 60 days. If the application is approved, the initial rent is $2 per acre. If renewed, no additional rents are due for the second year. Rents are set at $1 per acre for years 3 thru 5. Work expenditure requirements are: $10 per acre for years 1-2; and $20 per acre for years 3-5. Removal of any minerals or materials from State Trust land without the appropriate lease or permit is prohibited. The permit is valid for one year from the due date of the rental and bond. If renewal requirements are met, the permit can be renewed annually for up to five years. If discovery of a valuable mineral deposit is made, the permittee must apply for a mineral lease before actual mining activities can begin. A mineral lease permits the mining of minerals discovered under the exploration permit. The approval process takes a minimum of six months. The mineral lease is issued for a term of 20 years. Leases may be renewed for an additional term. Both rents and royalties are determined by appraisal. Royalties may be based on: 1) a fixed rate subject to annual adjustment; or 2) a sliding-scale rate which is linked to a commodity index price and the operation's break-even price. There is a statutory minimum royalty rate of 2% of gross value. These AZ MEPs require a reclamation bond of $3,000 which we currently hold. The first year’s rental has been paid for these MEPs and the escalating rental is due on the anniversary of the MEP each year. After the end of the 4th year, the MEPs must transition to a State Mineral Lease upon satisfaction of the State Mineral Inspector that economic indications of a minable deposit exist. After commencement of mining, the State of Arizona shall be paid a minimal net smelter return after taking into consideration any extenuating mining challenges royalty but not less than a 2% gross royalty. The rental period begins on September 30 through the following September 29 and rental payments are due by the first day of the rental period. We hold AZ MEP permits for 1,886.88 acres at our Tombstone project. Required minimum work expenditures for the period ended September 29, 2016 are $37,737. The annual rentals and renewal fees due by September 30, 2016 to maintain the AZ MEP permits are $3,886.88.

 

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

 

Personnel

 

Currently we employ one full time geologist who is also our CEO, CFO, President and Chairman of the Board, James A. Briscoe. We also employ one full time VP for management of finance and accounting, one as-needed PhD consulting geologist specializing in GIS computer mapping and database creation, one full time geo-tech, who is also our manager of field operations, and one investor relations representative.and one CPA on an as needed basis. We hire consultants for investor relations, exploration, derivative accounting, and administrative functions also on an as needed basis.

 

ITEM 1A. Risk Factors.

 

Investing in our common stock involves a high degree of risk. You should not invest in our stock unless you are able to bear the complete loss of your investment. You should carefully consider the risks described below, as well as other information provided to you in this prospectus, including information in the section of this annual report on Form 10-K entitled “Forward-Looking Statements” before making an investment decision. The risks and uncertainties described below are not the only ones facing our company. Additional risks and uncertainties not presently known to us or that we currently believe are immaterial may also impair our business operations. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected, the value of our common stock could decline, and you may lose all or part of your investment.

 

 3 
 

  

Risks Related to Our Company and Our Business

 

Because of the speculative nature of the exploration of natural resource properties, there is substantial risk that this business will fail.

 

There is no assurance that any of the claims we explore or acquire will contain commercially exploitable reserves of minerals. Exploration for natural resources is a speculative venture involving substantial risk. Hazards such as unusual or unexpected geological formations and other conditions often result in unsuccessful exploration efforts. We may also become subject to significant liability for pollution or hazards, which we cannot insure or which we may elect not to insure. There is substantial risk that our business will fail.

 

If we cannot compete successfully for financing and for qualified managerial and technical employees, our exploration program may suffer.

 

Our competition in the mining industry includes large established mining companies with substantial capabilities and with greater financial and technical resources than we have. As a result of this competition, we may be unable to acquire additional financing on terms we consider acceptable because investors may choose to invest in our competitors instead of investing in us. We also compete with other mining companies in the recruitment and retention of qualified managerial and technical employees. Our success will be largely dependent on our ability to hire and retain highly qualified personnel. These individuals are in high demand and we may not be able to attract the personnel we need. We may not be able to afford the high salaries and fees demanded by qualified personnel, or may lose such employees after they are hired. If we are unable to successfully compete for financing or for qualified employees, our exploration program may be slowed down or suspended.

 

Exploration and exploitation activities are subject to comprehensive regulation which may cause substantial delays or require capital outlays in excess of those anticipated causing an adverse effect on our company.

 

Exploration and exploitation activities are subject to federal, state, and local laws, regulations and policies, including laws regulating the removal of natural resources from the ground and the discharge of materials into the environment. Exploration and exploitation activities are also subject to federal, state, and local laws and regulations which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment.

 

Various permits from government bodies are required for drilling operations to be conducted; no assurance can be given that such permits will be received. Environmental and other legal standards imposed by federal, state, or local authorities may be changed and any such changes may prevent us from conducting planned activities or increase our costs of doing so, which would have material adverse effects on our business. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages which we may not be able to or elect not to insure against due to prohibitive premium costs and other reasons. Any laws, regulations or policies of any government body or regulatory agency may be changed, applied or interpreted in a manner which will alter and negatively affect our ability to carry on our business.

 

There are no known reserves of minerals on our mineral claims and we cannot guarantee that we will find any commercial quantities of minerals.

 

We have not found any mineral reserves on our claims and there can be no assurance that any of our mineral claims contain commercial quantities of any minerals. Even if we identify commercial quantities of minerals in any of our claims, there can be no assurance that we will be able to exploit the reserves or, if we are able to exploit them, that we will do so on a profitable basis.

 

Because the probability of an individual prospect ever having reserves is extremely remote, any funds spent on exploration will probably be lost.

 

The probability of an individual prospect ever having reserves is extremely remote. In all probability our properties do not contain any reserves. As such, any funds spent on exploration will probably be lost which would most likely result in a loss of your investment.

 

We have a limited operating history and as a result there is no assurance we can operate on a profitable basis.

 

We have a limited operating history and must be considered in the exploration stage. Our operations will be subject to all the risks inherent in the establishment of an exploration stage enterprise and the uncertainties arising from the absence of a significant operating history. Potential investors should be aware of the difficulties normally encountered by mineral exploration companies and the high rate of failure of such enterprises, especially those with a limited operating history. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates. The expenditures to be made by us in the exploration of the mineral claim may not result in the discovery of mineral deposits. Problems such as unusual or unexpected formations of rock or land and other conditions are involved in mineral exploration and often result in unsuccessful exploration efforts. If the results of our exploration do not reveal viable commercial mineralization, we may decide to abandon our claim and acquire new claims for new exploration or cease operations. The acquisition of additional claims will be dependent upon us possessing capital resources at the time in order to purchase such claims. If no funding is available, we may be forced to abandon our operations. No assurance can be given that we will ever operate on a profitable basis.

 

 4 
 

 

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

 

We had cash and cash equivalents in the amount of $536 and negative working capital of $943,763 as of January 31, 2016. We currently do not generate revenues from our operations. Our business plan calls for substantial investment and cost in connection with the acquisition and exploration of our mineral properties currently under lease and option. Any direct acquisition of any of the claims under lease or option is subject to our ability to obtain the financing necessary for us to fund and carry out exploration programs on the subject properties. The requirements are substantial. There is no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on their investment in our common stock. Further, we may continue to be unprofitable. Obtaining additional financing would be subject to a number of factors, including market prices for minerals, investor acceptance of our properties, contractual restrictions on our ability to enter into further financing arrangements, and investor sentiment. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us and our business could fail.

 

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

 

We have not earned any revenues and have never been profitable. We do not have an interest in any revenue generating properties. We were incorporated in 2001 and took over our current business in 2004. To date, we have been involved primarily in organizational and exploration activities. We will incur substantial operating and exploration expenditures without realizing any revenues. We therefore expect to incur significant losses into the foreseeable future. We have limited operating history upon which an evaluation of our future success or failure can be made. We recognize that if we are unable to generate significant revenues from our activities, we will not be able to earn profits or continue operations. Based upon current plans, we also expect to incur significant operating losses in the future. We cannot guarantee that we will be successful in raising capital to fund these operating losses or generate revenues in the future. We can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail and our investors could lose their investment.

 

Our independent registered public accounting firm’s report states that there is a substantial doubt about our ability to continue as a going concern.

 

Our independent registered public accounting firm, MaloneBailey, LLP, stated in its audit report attached to our audited financial statements for the fiscal year ended January 31, 2016 that since we have suffered recurring losses from operations, requires additional funds for further exploratory activity prior to attaining a revenue generating status, and we may not find sufficient ore reserves to be commercially mined, there is a substantial doubt about our ability to continue as a going concern.

 

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

 

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

 

Risks Related to Our Common Stock

 

Because we will likely issue additional shares of our common stock, investment in our company could be subject to substantial dilution.

 

Investors’ interests in our company will be diluted and investors may suffer dilution in their net book value per share when we issue additional shares. We are authorized to issue 6,250,000,000 shares of common stock, $0.00001 par value per share. As of May 3, 2016, there were 1,632,552,893 shares of our common stock issued and outstanding. We anticipate that all or at least some of our future funding, if any, will be in the form of equity financing from the sale of our common stock. If we do sell more common stock, investors’ investment in our company will likely be diluted. Dilution is the difference between what you pay for your stock and the net tangible book value per share immediately after the additional shares are sold by us. If dilution occurs, any investment in our company’s common stock could seriously decline in value.

 

The sale of our stock under the convertible notes and the common share purchase warrants could encourage short sales by third parties, which could contribute to the future decline of our stock price.

 

In many circumstances, the provision of financing based on the distribution of equity for companies that are traded on the OTC Pink market tier has the potential to cause a significant downward pressure on the price of common stock. This is especially the case if the shares being placed into the market exceed the market’s ability to take up the increased stock or if we have not performed in such a manner to show that the equity funds raised will be used to grow our business. Such an event could place further downward pressure on the price of our common stock. Regardless of our activities, the opportunity exists for short sellers and others to contribute to the future decline of our stock price. If there are significant short sales of our common stock, the price decline that would result from this activity will cause the share price to decline more, which may cause other stockholders of the stock to sell their shares, thereby contributing to sales of common stock in the market. If there are many more shares of our common stock on the market for sale than the market will absorb, the price of our common shares will likely decline.

 

 5 
 

 

Trading in our common stock on the OTC Pink market tier is limited and sporadic making it difficult for our stockholders to sell their shares or liquidate their investments.

 

Our common stock is currently quoted for public trading on the OTC Pink market tier. The trading price of our common stock has been subject to wide fluctuations. Trading prices of our common stock may fluctuate in response to a number of factors, many of which will be beyond our control. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with no current business operation. There can be no assurance that trading prices and price earnings ratios previously experienced by our common stock will be matched or maintained. These broad market and industry factors may adversely affect the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management’s attention and resources.

 

Our bylaws contain provisions indemnifying our officers and directors against all costs, charges and expenses incurred by them.

 

Our bylaws contain provisions with respect to the indemnification of our officers and directors against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by them, including an amount paid to settle an action or satisfy a judgment in a civil, criminal or administrative action or proceeding to which they are made parties by reason of their being or having been our directors or officers.

 

Our bylaws do not contain anti-takeover provisions which could result in a change of our management and directors if there is a take-over of our company.

 

We do not currently have a shareholder rights plan or any anti-takeover provisions in our bylaws. Without any anti-takeover provisions, there is no deterrent for a take-over of our company, which may result in a change in our management and directors. This could result in a disruption to the activities of our company, which could have a material adverse effect on our operations.

 

We do not intend to pay dividends on any investment in the shares of stock of our company and any gain on an investment in our company will need to come through an increase in our stock’s price, which may never happen.

 

We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may prohibit the payment of a dividend. Because we do not intend to declare dividends, any gain on an investment in our company will need to come through an increase in the stock’s price. This may never happen and investors may lose all of their investment in our company.

 

Because our securities are subject to penny stock rules, you may have difficulty reselling your shares.

 

Our shares as penny stocks, are covered by Section 15(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which imposes additional sales practice requirements on broker/dealers who sell our company’s securities including the delivery of a standardized disclosure document; disclosure and confirmation of quotation prices; disclosure of compensation the broker/dealer receives; and, furnishing monthly account statements. These rules apply to companies whose shares are not traded on a national stock exchange, trade at less than $5.00 per share, or who do not meet certain other financial requirements specified by the Securities and Exchange Commission (the “SEC”). These rules require brokers who sell “penny stocks” to persons other than established customers and “accredited investors” to complete certain documentation, make suitability inquiries of investors, and provide investors with certain information concerning the risks of trading in such penny stocks. These rules may discourage or restrict the ability of brokers to sell our shares of common stock and may affect the secondary market for our shares of common stock. These rules could also hamper our ability to raise funds in the primary market for our shares of common stock.

 

FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

 

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common shares, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

 

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Tangiers Investment Group, LLC will pay less than the then-prevailing market price for our common stock.

 

Our common stock to be issued to Tangiers Investment Group, LLC (“Tangiers”) pursuant to the investment agreement dated June 20, 2015 will be purchased at the 80% of the lowest day of the daily volume weighed average price of our common stock during the five consecutive trading days immediately prior to the receipt by Tangiers of the put notice; provided, however, an additional 5% will be added to the discount of each put if (i) we are not DWAC eligible and (ii) an additional 5% will be added to the discount of each put if we are under DTC “chill” status on the applicable date of the put notice. Tangiers has a financial incentive to sell our common stock immediately upon receiving the shares to realize the profit equal to the difference between the discounted price and the market price. If Tangiers sells the shares, the price of our common stock could decrease. If our stock price decreases, Tangiers may have a further incentive to sell the shares of our common stock that it holds. These sales may have a further impact on our stock price.

 

Your ownership interest may be diluted and the value of our common stock may decline by exercising the put right pursuant to the investment agreement with Tangiers.

 

Pursuant to the investment agreement with Tangiers, when we deem it necessary, we may raise capital through the private sale of our common stock to Tangiers at a discounted price. Because the put price is lower than the prevailing market price of our common stock, to the extent that the put right is exercised, your ownership interest may be diluted.

 

We may not have access to the full amount available under the investment agreement with Tangiers.

 

Our ability to draw down funds and sell shares under the investment agreement with Tangiers requires that the registration statement declared effective on March 15, 2016 continues to be effective. The registration statement registers the resale of 350,000,000 shares issuable under the investment agreement with Tangiers Investment Group, LLC, and our ability to sell any remaining shares issuable under the investment with Tangiers Investment Group, LLC is subject to our ability to prepare and file one or more additional registration statements registering the resale of these shares. These registration statements may be subject to review and comment by the staff of the SEC, and will require the consent of our independent registered public accounting firm. Therefore, the timing of effectiveness of these registration statements cannot be assured. The effectiveness of these registration statements is a condition precedent to our ability to sell all of the shares of our common stock to Tangiers Investment Group, LLC under the investment agreement. Even if we are successful in causing one or more registration statements registering the resale of some or all of the shares issuable under the investment agreement with Tangiers Investment Group, LLC to be declared effective by the SEC in a timely manner, we may not be able to sell the shares unless certain other conditions are met. For example, we might have to increase the number of our authorized shares in order to issue the shares to Tangiers Investment Group, LLC. Increasing the number of our authorized shares will require board and stockholder approval. Accordingly, because our ability to draw down any amounts under the investment agreement with Tangiers Investment Group, LLC is subject to a number of conditions, there is no guarantee that we will be able to draw down future amounts of the $8,000,000 under the investment agreement with Tangiers Investment Group, LLC.

 

Certain restrictions on the extent of puts and the delivery of advance notices may have little, if any, effect on the adverse impact of our issuance of shares in connection with the investment agreement with Tangiers, and as such, Tangiers may sell a large number of shares, resulting in substantial dilution to the value of shares held by existing stockholders.

 

Tangiers has agreed, subject to certain exceptions listed in the investment agreement with Tangiers, to refrain from holding an amount of shares which would result in Tangiers or its affiliates owning more than 4.99% of the then-outstanding shares of our common stock at any one time. These restrictions, however, do not prevent Tangiers from selling shares of our common stock received in connection with a put, and then receiving additional shares of our common stock in connection with a subsequent put. In this way, Tangiers could sell more than 4.99% of the outstanding common stock in a relatively short time frame while never holding more than 4.99% at one time.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

Not applicable to smaller reporting companies.

 

ITEM 2. PROPERTIES.

 

Our offices

 

We rent the premises for our principal office located at 5610 E. Sutler Lane, Tucson, Arizona 85712. We rent this office space which is located in the home of our CEO, CFO and President for $522 per month plus a pro rata share of taxes and maintenance. Our employees work either from our principal office or from offices maintained in their homes.

 

We believe that our existing office facilities are adequate for our needs. Should we require additional space in the future, we believe that such space can be secured on commercially reasonable terms.

 

 7 
 

 

Our warehouse

 

In 2011 we rented a warehouse located at Building No. 1, 7900 South Kolb Road, Tucson, Arizona 85706. We rent this warehouse space for $3,673 per month. The lease is currently on a month-to-month basis. In addition to using the warehouse for standard purposes, such as storage of our exploration equipment, supplies and samples, the warehouse space also includes office facilities.

 

Our mineral claims

 

All of the Company’s claims for mineral properties are in good standing as of January 31, 2016.

 

North Pipes:

 

We hold a 100% interest in 11 (unpatented) federal lode mining claims strategically placed on the Arizona Strip. The 11 unpatented federal lode mining claims with an area of 227.7 acres include breccia pipe targets (“Pipes”). Breccia pipes are cylindrical formations in the earth’s crust sometimes identified by a surface depression, or surface bump or no visible surface expression at all, and contain a high concentration of fragmented rock “breccia” sometimes cemented by uranium and other minerals. We plan to ascertain whether our North Pipes claims possess commercially viable deposits of uranium. Due to the moratorium of location of lode mining claims on the Arizona Strip and the low price of U3O8 we have no current exploration plans and will not until the uranium price increases and the moratorium expires in about 15 years. We intend to hold a strategic position until such time that it is economically feasible to mount a new drilling program. We want to take advantage of more than a million dollars of exploration data which was acquired by Liberty Star when uranium prices were higher and before the moratorium was instituted.

 

North Pipes is located on the Arizona Strip, which is located approximately 10 miles south of the town of Fredonia, AZ. Access is by Hwy 389 and various dirt roads, some of which are maintained and some that are very primitive. 4WD vehicles are necessary for the primitive dirt roads. Some of the claims cannot be driven to and require hiking to their location or under an approved plan of operation it is possible to create an access road.

 

 

North Pipes-AZ Claims:
 
11 LA Claims
 
Total: 11 Claims - 227.7 Acres

 

 

 

Our NPSP claims are undeveloped. There are neither open-pit nor underground mines, nor is there any mining plant or equipment located on the properties. There is no power supply to the properties. We have not found any mineral resources on any of our claims. The Arizona Strip was an active exploration district in the 1970’s and 1980’s with multiple producing uranium mines. No evidence of actual development work has been found on any of our properties and no significant exploration activities have been performed on our NPSP claims since 2008 due to many factors including the lowered uranium prices and the moratorium on locating claims. Below is a summary of prior exploration activities performed on our NPSP claims:

 

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Geophysics: We have completed PEM (Pulse Electro-magnetic) geophysical surveys on some of our NPSP claims. Two types of PEM surveys were conducted in 2007: (i) Downhole PEM and (ii) In-Loop PEM. We have also used CSAMT and NSAMT (Controlled and Natural Source Audio-range Magneto Tellurics), run on the ground and executed by Zonge Engineering of Tucson AZ. A survey was also completed on an approximately six square mile area by VTEM helicopter borne electromagnetic survey along right angle crossing grid lines spaced 100 meters apart, which was performed by Geotech of Aurora, Ontario, Canada. Significant anomalies resulted from this survey. Preliminary drilling on one of Liberty Star’s anomalies intersected strong breccia, alteration and pyrite mineralization. The holes did not penetrate down to the elevation where uranium mineralization would be expected, but are targets for future work. As of this date we have not developed any uranium resources on the Arizona Strip.

 

Stereoscopic geologic color air photo interpretation (photo-geology): Stereoscopic geologic interpretation of 1:24,000 (1 inch = 2,000 feet) high resolution color air photographs were contracted for and completed by Dr. Karen Wenrich and Edward Ulmer, a Registered Professional Geologist. Dr. Wenrich worked on the Arizona Strip uranium bearing breccia pipes almost exclusively during her twenty three year tenure with the United States Geological Survey from which she is now retired. During this period of study she authored many professional papers on breccia pipes of the Grant Canyon area, and is considered a foremost expert on them. Mr. Ulmer worked on the Arizona Strip in the mid to late 1970s working on both imagery interpretation and surface geology.

 

Geologic field mapping on the surface: Geological field mapping was conducted in the fall of 2005 through 2007 by our staff geologists as well as contracted geologists. Approximately 180 of the breccia pipe target areas have been mapped in detail 1:5,000 (1 inch = 417 feet). Several detailed measured stratigraphic sections have also been completed.

 

Geochemical sampling: A comprehensive soil geochemical survey was completed in 2007. We have collected approximately 14,000 soil samples over all identifiable breccia pipes, both those with known ore and those that are yet to be proven by drilling. A strict chain of custody procedures were followed and quality assurance/quality control (QA/QC) samples were inserted regularly into the sample stream. The samples were assayed for 63 elements. Assay analyses were conducted by a Certified Assay Lab, Acme Analytical Laboratories of Vancouver, British Columbia, Canada. We believe that these samples allow us to identify potential uranium bearing breccia pipes versus barren or non-uranium bearing breccia pipes.

 

Drilling: In 2007 a drilling program was undertaken using both rotary drilling and core drilling. Rotary drilling was contracted by Boart Longyear. Diamond core drilling was completed by Redwall Drilling Inc., a former wholly owned subsidiary of Liberty Star. A total of 22 holes were drilled for a total of 16,226 feet of drilling. Important intersections of rock generally associated with producing breccia pipes were made. We did not intersect any ore mineralization during the drilling program.

 

Total costs including claim staking (initially in 2005), claim maintenance and a drilling program (exploratory) in calendar years 2007 and 2008, are $5,220,794.

 

Beginning in 2006, Certified Professional Geologist Dr. Karen Wenrich and a dozen other well regarded geoscientists engaged in an exploratory program centering on the region’s breccia pipes. By the time Dr. Wenrich came to work on the North Pipes project, she had 27 years with the USGS working on breccia pipe research and was a member of a Nobel Peace Prize winning team of UN atomic science specialists. The Liberty Star team worked with high resolution color aerial photographs and other reconnaissance covering approximately 2,000 square miles to format geological maps of the terrain. In addition to geology, geophysics gamma ray spectroscopy, approximately 14,000 soil samples were collected and analyzed by a certified lab for 63 elements. These were located precisely as they were collected using GPS. The results were compiled and plotted using GIS software, and various contouring and interpretation techniques. Expenses included food and lodging and a daily commute of approximately 100 miles. Road conditions were extreme and resulted in vehicle expenses of approximately $2.00 per mile. Various contractors were used in claim staking, and other contract work in sample collection. Helicopters and light planes were used for various transportation tasks. Home office support also involved permanent and contract support.

 

Exploratory drilling includes costs of travel, food and lodging, payments on the drill rig, drill bits, fuel, drilling permits, and maintenance costs of the drill rig and of support vehicles. Also included are the costs of reclamation bonds and reclamation costs of lands disturbed by drilling, as well as the costs of conducting archaeological surveys to identify prehistoric remains of human habitation or human activity.

 

Currently there are no planned costs for the North Pipes Super Project unless commodity prices, specifically for uranium, increase sufficiently to make exploration financially tenable. The Moratorium on acquiring any additional land has also negatively affected the current investment climate for such work. However we have a letter agreement with Mr. Andrew Mueller to option our existing claims North Pipes claims to him for mining using his vertical bore technology. He believes this will make the Pipes exploitable.

 

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Big Chunk Super Project – Location, claims, geology and technical studies:

 

We’ve held and may retain a 100% interest in 9 State mining claims in the Iliamna region of Southwestern Alaska with an area of 1,440 acres, located on the north side of the Cook Inlet, approximately 265 miles southwest of the city of Anchorage, Alaska. We plan to ascertain whether the Big Chunk claims possess commercially viable deposits of copper, gold, molybdenum, silver, palladium, rhenium and zinc. Due to decisions made by the EPA regarding the nearby Pebble Deposit we have no immediate exploration plans, however, we intend to hold our land position until such a time we determine it is clear that exploration is economically viable again.

 

 

Big Chunk-AK Claims   
BC 817  BC 1114
BC 818  BC 1115
BC 841   
BC 842   
BC 1104   
BC 1105   
BC 1113   
   9 BC Claims- 1,440 acres

 

 

Our Big Chunk claims are undeveloped. Big Chunk is in the Iliamna region of Southwestern Alaska, located on the north side of the Cook Inlet, approximately 265 miles southwest of the city of Anchorage Alaska. The claims are located in a remote area of Southwestern Alaska near Lake Iliamna, Alaska’s largest lake. The claims are immediately adjacent and contiguous to the Pebble mine property and about 3 miles north east from the Pebble Porphyry copper, gold, molybdenum, silver, palladium, rhenium and zinc mineral deposit which is reportedly one of the largest of its type in the world. Two or more Air Taxi services connect to the village of Iliamna roughly 240 miles distant from Anchorage. At Iliamna, approximately 27 miles southeast of Big Chunk, there is a major regional airport, Fixed Base Operator (FBO), fuel, bush planes and, periodically, helicopters for rent with pilot. Air is the only practical way to the property either by float plane, ski plane in the winter, or helicopter. Ground travel is unsafe and impractical in the summer due to the dense population of black bears, grizzly bears, bogs and small lakes. Winter access by snow machine could be possible, although difficult.

 

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In 2011, the Company engaged the international firm of SRK Consulting, Engineering and Scientist of Tucson (“SRK”) through its Tucson, Arizona office to prepare a Technical Report in the same format of the internationally accepted Canadian National Instrument NI 43-101. Because the Company’s stock does not trade on any Canadian stock exchanges, this Technical Report was not submitted to SEDAR, the electronic system for the official filing of documents by public companies and investment funds across Canada. In their report which encompasses some 194 pages of technical data, they compared the Northern Dynasty NI 43-101 geologic and drill data, published on the Northern Dynasty web site in its entirety, to results of Liberty Star’s technical work on the Big Chunk ground. They concluded amongst other things: (1) Twenty seven scout diamond drill holes drilled by Liberty Star in 2004 – 2005 intersected the same rock types as were intersected in the exploration drilling on the Pebble deposit (2) All drill holes, which were spaced over some 500 square miles, intersected the outer shell or propylitic halo of multiple porphyry copper systems, which is the model co-developed by our director, Dr. John Guilbert; and (3) Copper and molybdenum sulfides along with low grade gold were intersected in two drill holes in the White Sox target area. “This mineralization and associated alteration may indicate a porphyry Cu-Mo system” (SRK Big Chunk Technical Report- page 109, 11.2 Results of Drilling). After publication of the report in August of 2012 during a review of core logs it was discovered that diamond core hole 1003 showed characteristic copper and molybdenum chalcopyrite and molybdenite, as well as lead, zinc and silver. The hole was stopped prematurely in increasing values of these metals at a depth of 206.4 meters. The area of the Big Chunk Claims is largely covered by glacial debris, soil, and tundra. There are no open-pit or underground mines, nor is there any mining plant or equipment located on the properties. There is no power supply to the properties. There is no road access to the properties, but such public road access is planned for the Pebble mine, and as currently planned, that road will cross the Company’s land, and be accessible for the Company’s use. Extensive geotechnical data on the Big Chunk claims has been acquired between startup of 2004 and the current time. Extensive geophysical data has been acquired by the Company of several types, which includes the following:

 

(1) an extensive airborne magnetic survey flown by McPhar Geosurveys Ltd., Newmarket, Ontario Canada over 18,243 line kilometers covering 3,646 square kilometers using: (a) a draped survey with a mean elevation of the instrument above the terrain of 200 meters (600 feet) feet; (b) a line spacing of 250 meters (800 feet); (c) and a sample interval of 8 meters (26.4 feet). State of the art magnetometer, GPS, radar altimeter, and computer recording of data were used and in our opinion no other survey of this quality and precision is available in the area.

 

(2) 127 linear miles of Induced Polarization (IP) was run by Zonge Engineering of Tucson AZ. Of necessity lines were brushed of all trees and undergrowth and all access was by helicopter, however, the lines themselves were done on the ground by foot. All data was recorded on appropriate computers, downloaded each evening and sent to the Zonge Office in Tucson and to our consulting geophysicist Mr. Jan Klein in Vancouver, BC, Canada. Mr. Klein supervised all IP and other geophysical surveys over the Pebble for Cominco who sold the Pebble Project to Northern Dynasty. Thus, we believe Mr. Klein has had more experience in the geophysics of the area, which includes over 2,000 square miles, than any other geophysicist. The results were interpreted and sent back to the Alaska headquarters every night.

 

(3) Liberty Star contracted with Geotech Limited of London, Ontario, Canada to run their ZTEM Electro Magnetic (EM) airborne survey equipment over the Big Chunk project. This thoroughly tested system can look down 2,000 meters (6,000 feet) in to the crust of the earth and detect sulfide mineralization associated with porphyry copper-gold systems, as well as other geologic features. This survey was completed in August 2009. The survey covered 315.2 sq. kilometers (121.7 sq. miles) and consisted of north-south lines spaced 250 meters apart on our Big Chunk Super Project mineral claims. In May 2010, Liberty Star received feedback from Geotech Ltd. that its interpretation showed at least 4 to 7 signatures that are consistent with porphyry copper responses. The 2D computer model shows typical low responsive areas, which could correspond to an ore mineral core zones with a surrounding responsive cylinders representing a pyrite halos typical of Porphyry copper systems. For control, Geotech flew a survey the day after completing the Big Chunk survey, over the Pebble mineral deposit. The anomalies on Big Chunk show strong similarities to the Pebble.

 

During the field seasons of 2004 and 2005 Liberty collected approximately 11,000 geochemical samples. The sampling program was designed by both consulting geochemist, Shea Clark Smith, of MEG Laboratories in the Reno area of Nevada, and Liberty Chief Geologist, James A. Briscoe. The sampling program was based on many years of geochemical studies and sampling throughout the world by Mr. Smith and his Master’s Degree thesis on sampling tundra plants and detecting metals in their woody stems reflecting metals at depth. Further, Mr. Smith and Mr. Briscoe used this technique to locate buried porphyry copper deposits in the Silver Bell district (see discussion of the East Silver Bell Project in this report) near Tucson, Arizona in 1996 -1998. The methodology was conceived, discovered and proven in a well-known porphyry district south of Tucson, Arizona between the periods 1950 to 1955. At Big Chunk the samples collected included: (1) stream sediment; (2) stream water; (3) pond and small-lake water; (4) soil samples; and (5) vegetation sampling new growth of woody plants. These samples were analyzed by Acme Labs, a Certified Assayer in Canada for 64 elements for each sample. For the eleven thousand samples, this resulted in approximately seven hundred thousand separate analyses including blanks, repeat and control samples part of the QA/QC (Quality Assurance Quality Control) procedures. Because of the overload worldwide in all assay labs at the time, turnaround time for the assays was up to three or more months. After receipt of the samples, they were processed using computer techniques and the results analyzed and interpreted. Known indicator elements, including porphyry copper-gold mineral center elements, formed typical porphyry copper center anomaly zones. Additionally, samples taken by Liberty Star over the Pebble deposit, with the permission of Northern Dynasty, indicated that mineral body to be detectable by these methods. The geochemical methodology was used by the US Geological Survey, under contract for the Pebble partnership over the Pebble mineral zone, and data was published in 2010. It was again shown to be effective in indicating the Pebble deposit mineralization at depth. The anomalies generated by both deep looking ZTEM and geochemistry by Liberty Star have been tested by published results from drilling in the Pebble mineral body. The same types of targets in the Liberty Star Big Chunk have yet to be tested by drilling in a significant way.

 

We are unaware of any previous claim ownership anywhere on our Big Chunk claims in Alaska. No historical drilling resulting in mineral resources or reserves appears in the published literature concerning the property. Minor exploration was conducted by Teck Cominco Alaska, and Anaconda Mining Inc. The United States Geological Survey does not do exploration but they had done minor geological mapping in the north part of the Big Chunk caldera, along with widely spaced aeromag surveys in the same area. We are not aware of any prior exploration that was conducted on our Big Chunk claims in Alaska prior to January 10, 2004, when our aerial magnetic survey began.

 

We have not defined mineral resources on any of our claims at Big Chunk.

 

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Letter Agreement and Secured Convertible Note with Northern Dynasty Minerals Ltd. With Respect to Big Chunk

 

On July 15, 2010, we issued a secured convertible promissory note (the “2010 Convertible Note”) to Northern Dynasty Minerals Ltd (“Northern Dynasty”). The original advanced amount is $4,000,000 and bears interest at a rate of 10% per annum compounded monthly (the “Loan”). On August 17, 2010, we transferred 95 of our Alaska State mineral claims from the Big Chunk Super Project to Northern Dynasty for consideration of $1,000,000 of the original advanced amount under the Convertible Note, leaving $3,000,000 of the Loan amount outstanding. No interest accrued on the $1,000,000 of the original advanced amount. Effective September 1, 2011, the agreement with Northern Dynasty was amended to increase the 2010 Convertible 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 fiscal 2011 and fiscal 2012 because we could not come to an agreement on an earn-in option and joint venture agreement with Northern Dynasty. On February 29, 2012, with effect from November 30, 2011, we executed an additional convertible promissory note (the “2011 Convertible Note” and together with the 2010 Convertible Note, the “Convertible Notes”) in the amount of $168,358 in reimbursement to Northern Dynasty of assessment work, rental fees and filing fees on our mineral claims.

 

As part of the transactions noted above, we entered into a letter agreement with Northern Dynasty whereby, subject to negotiating and signing a definitive earn-in option and joint venture agreement, Northern Dynasty could earn a 60% interest in our Big Chunk and Bonanza Hills projects in Alaska (the “Joint Venture Claims”) by spending $10,000,000 on those properties over six years. The outstanding loan amounts from Northern Dynasty could 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 could elect to abandon the earn-in at any time on 30 days’ notice, so long as sufficient annual labor was performed, or a cash payment in lieu of labor was 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.

 

On November 14, 2012, we signed a loan settlement agreement with Northern Dynasty which would have discharged the $3,730,174 principal balance and $1,592,769 of accrued interest for the 2010 Convertible Note and would have terminated Northern Dynasty’s earn-in rights. In exchange for the settlement, we initiated the transfer of 199 Alaska mining claims to Northern Dynasty’s subsidiary, U5 Resources. However, MBGS, LLC filed liens against the claims before the transfer could be completed. In March 2014 Liberty Star and Big Chunk entered into a settlement agreement with MBGS, LLC, following a resolution conference conducted in Anchorage, Alaska whereby all Northern Dynasty claims recorded by MBGS, LLC were released. As a result of the settlement agreement with MBGS, LLC, the Company completed its loan settlement agreement with Northern Dynasty and discharged the principal balance and accrued interest for the 2010 Convertible Note and terminated Northern Dynasty’s earn-in-rights. A gain of $5,322,943 for the settlement of the Northern Dynasty debt and accrued interest was recorded in other income in April 2014.

 

Tombstone:

 

Our CEO, CFO, President, Chief Geologist and Chairman of the Board, James A. Briscoe, has long experience in the Tombstone district, southeast Arizona, where he first worked in 1972. In the mid-1980s, he concluded that much earlier regional geologic work had reached erroneous conclusions and that Tombstone was a large and ancient (72 million years before the present – or Laramide in age) volcanic structure – a caldera. He brought this to the attention of the US Geological Survey caldera experts, who after study concluded that Briscoe was correct. Subsequently, more than seventeen calderas of various ages have been identified in Arizona by the US Geological survey, the Arizona Geological Survey and others. Such calderas of Laramide age are all associated with porphyry alteration and copper and associated mineralization; many of these have become very large copper mines. Studies by Mr. Briscoe over the years, and more recently using advanced technology, have indicated that alteration associated mineralization at Tombstone is much more extensive than originally thought. This alteration lies largely under cover and is indicated by geochemistry, geophysics and projection of known geology into covered areas.

 

We hold 95 unpatented standard federal lode mining claims with an area of 1,798.68 acres located due east and southeast of the town of Tombstone, Arizona. The Walnut Creek Project is located immediately east of the town of Tombstone. The Hay Mountain Project is located 6.5 miles southeast of Tombstone; access is by Hwy 89 and Davis Rd. We also hold Arizona State Mineral Exploration Permits (MEPs) covering (1,886.88 acres) or 3 square miles in the same area. We also hold an option to explore 29 unpatented standard federal lode mining claims (604 acres out of the total 1,798.68 acres) located in the same region. On April 29, 2008 Liberty Star announced that it had leased, with an option to purchase, three properties from JABA US Inc. in Arizona and Nevada, USA. Liberty Star President James A. Briscoe controls JABA US INC and Dr. J. M. Guilbert, Director of the Company, holds a small stock position as well. The properties in Arizona are part of the Tombstone and the 26 claims East Silver Bell projects. The option covering the property in Nevada was sold in October, 2008 to NPX Metals. Proceeds from that sale were loaned immediately back to Liberty Star by Mr. Briscoe. For the remaining claims, according to the option agreement, Liberty Star could earn up to 100% interest by keeping up annual assessment work and spending $175,000 in exploration expenditures on the properties between April 2008 and January 1, 2011. This provision payment of assessment and related expenses has been met and option agreement has been maintained over the Tombstone and East Silver Bell Claims. 

 

LIBERTY STAR   
TOMBSTONE-AZ  JABA Optioned Claims
Federal Unpatented Claims
Claim Names
HM 87-143  TS 129- 152
TS 168-176  TS 163- 167
Claim Acreage
57 HM Claims- 1095.18 acres  29 TS Claims- 604 acres
9 TS Claims- 99.5 acres   
    
State Exploration Permits
3 State MEP's- 1,886.88 acres   

 

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

 

The Tombstone claims are undeveloped. However significant amounts of aeromagnetic surveys, IP (Induced Polarization Surveys), geologic mapping by the USGS and others, and geochemical surveys including soil, rock and vegetation sampling have been conducted at various times by various parties, over the last 60 years. When compiled and analyzed these various data suggest a compelling series of anomalies that are typical of buried, dirt and rock covered porphyry copper system(s). Below is a summary of prior exploration activities performed on our Tombstone claims: Technical Report : In mid-March 2011, Liberty Star contracted SRK to prepare three (3) Technical studies and Reports in a form similar to mineral reports prescribed under NI 43-101. Members of SRK’s engineering/scientific staff supervised by a Qualified Person as defined under NI 43-101 and SRK’s Tucson Office Principal Geologist, Corolla Hoag, and geologist Dr. Jan Rasmussen have visited the Tombstone property. This information was combined with historic technical reports going back to 1878 and more recent data up to August 2011 (the date of their reports). The three Technical Reports are entitled: (1) Walnut Creek Exploration Report, Tombstone District, Arizona –August 31, 2011, 147 pages; (2) The Tombstone Caldera South Exploration Report, Tombstone District, Arizona –August 31, 2011, 144 pages; and (3) Hay Mountain Exploration Report, Tombstone District, Arizona – August 31 2011, 155 pages. Because the Company’s stock does not trade on any Canadian stock exchanges, these three Technical Reports were not submitted to SEDAR, the electronic system for the official filing of documents by public companies and investment funds across Canada. We had also requested that SRK prepare a report on the Tombstone Consolidated Mines patented claims. These claims covered the entirety of historic productive area of the Tombstone mines which date to their discovery in 1877. However, before that report could be completed a competitor acquired a lease on those lands. These Technical Reports thoroughly summarize and illustrate the salient geotechnical data of the Tombstone Mining District covering about 250 square miles and present much data in computer map format. In such context, they analyze Liberty Star’s exploration programs as related to the entire area, make estimates and recommend execution of proposed Company exploration programs. Because of competitive pressure and the unique nature of the data which includes 40+ years of private report compilation by Mr. Briscoe, these reports are considered confidential and will not be released for the foreseeable future. Geochemical sampling at the Hay Mountain Project: In 2011 and early 2012 we collected nearly 1,800 rock, soil and vegetation samples over 621 sample sites over approximately 14 square miles centered on the Hay Mountain property. These samples have been assayed for 63 elements generating about 113,000 analyses. The samples were prepared by MEG Inc. and have been shipped to ALS Minerals (ALS-Chemex) a Certified (under NI 43-101 criteria and approved by regulatory processes) geochemical analysis lab in Vancouver, British Columbia. Assay results have been sent to our Tucson office and all assays have been received. Our geology team has generated computer analyses that allow interpretation of the data.

 

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

 

ZTEM EM Survey: We have requested and have received a cost estimate from Geotech of Aurora (Toronto area) Ontario, Canada, which is the only purveyor of this helicopter borne electromagnetic (EM) geophysical method. This geophysical method has the ability to “look down” into the crust of the earth about 2,000 meters (6,000 feet) and detect sulfides which may be associated with porphyry copper systems. Test work over known Safford, Arizona porphyry copper deposits along with thousands of verifying drill holes show the geometry of such mineral systems can be determined, thus identifying whether it is a porphyry copper system or some other mineral system. When combined with our geochemical data, we can determine the position of the copper-moly center of the system and design our drill program to efficiently test and define mineralization. We flew ZTEM in July 2013 and the analysis report was received in February 2014.

 

East Silver Bell:

 

Located northwest of Tucson, Arizona, these claims currently are within the Ironwood National Monument, which was established after the claims were staked and validated by numerous drill holes in addition to extensive technical studies. We plan to ascertain whether the East Silver Bell claims possess commercially viable deposits of copper. We hold an option to explore 26 unpatented standard federal lode mining claims with an area of 536.03 acres located in the same region. The optioned mineral claims are owned by JABA US Inc., a corporation in which two of our directors are owners. On April 29, 2008 Liberty Star announced that it had leased, with an option to purchase, three properties from JABA US Inc. in Arizona and Nevada, USA. The properties in Arizona, are part of the Tombstone (and the 26 claims) East Silverbell projects. The option covering the property in Nevada was sold in October, 2008 to NPX Metals, and the proceeds were paid by JABA US Inc. as a loan to Liberty Star. According to the option agreement, Liberty Star can earn up to 100% interest by keeping up annual assessment work and spending $175,000 in exploration expenditures on the properties between April 2008 and January 1, 2011. This provision has been met for the assessment work and other related expense payments, and even though the work commitment is now in arrears, the option agreement has been maintained over the Tombstone and East Silver Bell Claims.

 

 

JABA Optioned Properties
East Silver Bell-AZ Claims
ESB 180-191
ESB 193
ESB 195
ESB 238
ESB 240
ESB 242-245
ESB 247-251
ESB 301
26 ESB Claims- 536.03 acres

 

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Located approximately 30 miles northwest of Tucson, Arizona, 18 miles from the Avra Valley road off ramp and then 18 miles west, just north of that road on dirt roads (accessible with a 2 wheel drive vehicle), the claims currently are within the Ironwood Forest National Monument, which was created after the claims were staked, underwent detailed geochem and geophysical studies and drilled with numerous drill holes revealing a mineralized body. We plan to ascertain whether the East Silverbell claims possess commercially viable deposits of copper. Due to difficulty of doing work on the Ironwood Forest National Monument, which was created after drill definition of a mineral body on our claims, we are negotiating with an adjacent fee-simple, land-owner on which half of the mineral zone lies, to explore in detail to develop a viable ore body.

 

The East Silver Bell claims are undeveloped. The ESB block of claims were staked circa 1994 about five miles east of the ASARCO Solvent-Extraction-Electro-Winning (SXEW) plant. The East Silver Bell claims are directly adjacent and contiguous to the ASARCO Patented (fee simple) lands. Circa 1994 JABA (US) Inc. compiled geophysics –consisting of existing, widely spaced airborne magnetics, collected soil and vegetation geochemical samples, performed detailed photo interpretation from high resolution color aerial photography, mapped surface geology, breccia pipes and performed detailed mapping and interpretation of leached capping and performed very closely spaced man borne magnetic surveys over alteration and projection of the edge of the Silver Bell caldera and associated mineral belt that includes the Silver Bell porphyry copper mines that could be seen on the color air photos. The surface magnetic survey was interpreted by geophysicist Edward DeRidder, who pointed out a magnetic low that he interpreted as a porphyry copper magnetic low. Subsequently, north-south Induced Polarization (IP) lines were run and interpreted by Zonge engineering, to show a sulfide response at 900 to 1,000 feet below the surface. All of this data was plotted in 3D images showing overlapping and mutually reinforcing geochemical, ground magnetic and IP geophysics, and geologic- alteration mapped anomalies. Half of this responsive area lies on the adjacent ASARCO ground and half lies on JABA (US) ground. Subsequent to these studies, the ground was lease-optioned to Valarie Gold Exploration Inc., (Valarie) a Canadian exploration company. They drilled 6 holes to a predetermined depth of 600 feet, using a rotary drill and recovered drill chips, sampled at 5 foot intervals. The drilling penetrated and recovered classic chalcocite leached capping typical of that material occurring over ore bodies in the Silver Bell mines of North Silver Bell, El Tiro and Oxide open pit mines. Geochemical assays of the cuttings showed three to four relict ghost copper enriched zones to the final arbitrary depth of six hundred feet. These holes did not penetrate the leached chalcocite capping rock and did not enter sulfides. Valarie relinquished their lease. Latter Kennecott Copper Corp. optioned the claims and drilled three rotary drill holes. Of these holes two twisted off the drill bits at shallow depth and had to be abandoned while in the leached chalcocite capping. One hole penetrated to a depth of 1,000 feet but poor sampling procedures negated any meaningful data from this hole, when primary samples were irretrievably lost. These two drill attempts were predictably not successful but geochemistry from the Valarie drill holes did show shadow geochemical copper enrichment indicating chalcocite enrichment in the sulfide blanket below and the Kennecott effort did recover some chalcocite (enriched copper sulfide) circa 1998 the Ironwood National Monument was created over JABA’s valid mining claims. The surface of these claims cannot be used to extract the copper mineral body below by the open pit mining method. Since half of the of the geophysically, geochemically, geologically, alteration indicated mineral body is located on ASARCO patented land and because the ASARCO SXEW plant is only five miles to the west, it is believed that this mineral body can be extracted from the ASARCO property by underground – in situ leach technology at some point in the future. To date we have not identified any ore reserves on the East Silver Bell Project.

 

We have not found any mineral resources on any of our claims.

 

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Sampling Protocols for all projects

 

Liberty Star trains all employees/contractors conducting sample collection to use a handheld digital mobile device to record all aspects of each individual sample. The handheld mobile device leads the sampler through a series of dropdown menu windows with various description capabilities and the ability to record a GPS coordinate. Data from the device is uploaded to our database daily. Liberty Star also uses professionally created video training to teach samplers the proper techniques of obtaining a proper sample whether it is soil, rock or vegetation and instruction on avoiding contamination. After samples are collected they are stored in a secure location under lock and key until they are shipped via FedEx or UPS using chain of custody guidelines to a professional sample prep lab in Washoe Valley, Nevada run by Shea Clark Smith, MSc/ Geochemist. Mr. Smith prepares the samples by crushing, mixing, pulverizing and homogenizing. Then a 200 gram sample is scientifically split for shipment to a Certified Assay Laboratory of each original sample. Standards, blanks and duplicates are added to the sample stream, including such Quality Assurance Quality Control (QA/QC) every 10th assay sample. Before being sent to a certified assay lab using ICP-MS analysis the samples are randomized. Once Liberty Star gets the analysis data back from the laboratory, checks for quality assurance and control are made using data from the blanks, standards and duplicates. The results are sent to Liberty Star by email and a paper copy mailed for verification and as a permanent record. The data are then de- randomized and processed for interpretation by various software programs designed for the purpose.

 

ITEM 3. LEGAL PROCEEDINGS

 

We currently have no outstanding litigation.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Under Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and under Item 104 of Regulation S-K, promulgated under the Exchange Act, each operator of a coal or other mine is required to include disclosures regarding certain mine safety results in its periodic reports filed with the SEC. The operation of our mine(s) that may be developed in the future would be subject to regulation by the federal Mine Safety and Health Administration (MSHA) under the Federal Mine Safety and Health Act of 1977. We do not own any mines in the United States and as a result, this information is not required.

 

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PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

Our common stock is currently quoted on the OTC Pink Tier of the OTC Markets and on the OTCBB under the symbol, “LBSR.” The OTC Market is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current “bids” and “asks”, as well as volume information. Trading in stocks quoted on the OTC Pink tier is often thin and is characterized by wide fluctuations in trading prices due to many factors that may be unrelated or have little to do with a company’s operations or business prospects. Prior to January 14, 2016, our common stock was quoted on the OTCQB.

 

The following table sets forth the range of high and low closing bid quotations for our common stock for each of the periods indicated as reported by the OTC Markets. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

 

Quarter Ended  High   Low 
January 31, 2016  $0.0019   $0.0017 
October 31, 2015  $0.0021   $0.0011 
July 31, 2015  $0.0035   $0.0015 
April 30, 2015  $0.0087   $0.0024 
January 31, 2015  $0.0199   $0.0084 
October 31, 2014  $0.0146   $0.0114 
July 31, 2014  $0.0210   $0.0115 
April 30, 2014  $0.0235   $0.0120 

 

The Nevada Agency and Transfer Company, of Suite 880 Bank of America, 50 West Liberty Street, Reno, Nevada 89501 (telephone: 775.322.0626; facsimile 775.322.5632) is the registrar and transfer agent for our common stock.

 

As of May 3, 2016, we had 1,632,552,893 shares of our common stock issued and outstanding, with 102 record stockholders. The number of record holders does not include beneficial owners of common stock whose shares are held in the names of banks, brokers, nominees or other fiduciaries. The closing sale price for our common stock on May 3, 2016, as reported on the OTC Pink was $0.0024.

 

Recent Sales of Unregistered Securities

 

During the fiscal year ended January 31, 2016, $206,679 of a convertible note issued in August 2013 (the “August 2013 Note”) was converted into 123,158,044 shares of the Company’s common stock. The conversions occurred on multiple dates with conversion prices ranging from $0.00098 to $0.00574.

 

During the year fiscal ended January 31, 2016, $153,046 of a convertible note issued in November 2013 (the “November 2013 Note”) was converted into 48,243,936 shares of the Company’s common stock. The conversions occurred on multiple dates with conversion prices ranging from $0.00147 to $0.00609.

 

During the fiscal year ended January 31, 2016, $206,679 of a convertible note issued in August 2014 (the “August 2014 Note”) was converted into 123,158,044 shares of the Company’s common stock. The conversions occurred on multiple dates with conversion prices ranging from $0.00193 to $0.00416.

 

During the fiscal year ended January 31, 2016, $110,901 of a convertible note issued in October 2014 (the “October 2014 Note”) was converted into 74,878,264 shares of the Company’s common stock. The conversions occurred on multiple dates with conversion prices ranging from $0.00101 to $0.00263.

 

During the fiscal year ended January 31, 2016, $231,000 of a convertible note issued in December 2014 (the “December 2014 Note”) was converted into 196,244,876 shares of the Company’s common stock. The conversions occurred on multiple dates with conversion prices ranging from $0.00090 to $0.00197.

 

In May 2015, we issued 2,941,176 units to an investor for total proceeds of $10,000. Each unit consists of one share of our common stock and two warrants to purchase one share each of the Company’s common stock. The warrants have an exercise price of $0.0048 and have a three year term.

 

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On May 29, 2015, we issued a non-interest bearing promissory note in the principal amount of $30,000 to Brett Gross, a director of our company. The promissory note is convertible into 16,806,723 units at a price of $0.001785 per unit upon the increase of the authorized capital of our company. Each unit is comprised of one share of common stock and two warrants. Each warrant will be exercisable for a period of three years at a price of $0.002499. On August 11, 2015, the note was converted in full and the 16,806,723 common shares were issued.

 

In June 2015, we issued 1,846,154 units to an investor for total proceeds of $3,000. Each unit consists of one share of our common stock and one warrant to purchase one share of our common stock. The warrants have an exercise price of $0.002275 and have a three year term.

 

In August 2015, the Company issued 16,077,170 units to an investor for total proceeds of $25,000. Each unit consists of one share of the Company’s common stock and one warrant to purchase one share of the Company’s common stock. The warrants have an exercise price of $0.00218 and have a three year term.

 

In July 2015, the Company issued 2,822,912 units to the Company’s CEO, CFO, President and Chairman of the Board for proceeds of $4,300. Each unit consists of one share of the Company’s common stock and one warrant to purchase one share each of the Company’s common stock. The warrants have an exercise price of $0.002130 and have a three year term.

 

In September 2015, the Company issued 1,851,852 units to an investor for total proceeds of $3,000. Each unit consists of one share of the Company’s common stock and one warrant to purchase one share of the Company’s common stock. The warrants have an exercise price of $0.00227 and have a three year term.

 

In November 2015, we issued 1,655,629 units to an investor for total proceeds of $5,000. Each unit consists of one share of our common stock and one warrant to purchase one share of our common stock. The warrants have an exercise price of $0.00423 and have a three year term.

 

In September 2015, the Company issued 5,733,000 shares to a former service provider for services totaling $10,320.

 

In issuing the securities set forth above, we relied on the registration exemption provided for in Rule 506 of Regulation D and/or Section 4(a)(2) of the Securities Act of 1933, as amended.

 

Dividends

 

We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to increase our working capital and do not anticipate paying any cash dividends in the foreseeable future.

 

ITEM 6. SELECTED FINANCIAL DATA.

 

Not applicable to smaller reporting companies.

 

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion should be read in conjunction with our consolidated audited financial statements and the related notes that appear elsewhere in this annual report on Form 10-K. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. We refer you to the section of this annual report on Form 10-K entitled, “Forward-Looking Statements.” Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this annual report on Form 10-K, particularly in the section entitled "Risk Factors.”

 

Overview

 

We are an exploration company engaged in the acquisition and exploration of mineral properties in the States of Arizona and Alaska. Claims in the State of Alaska are held in the name of our wholly-owned subsidiary, Big Chunk. 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 within a mineral province such as the Arizona Strip or a large structural feature such as a caldera which occur at Big Chunk, East Silver Bell and Tombstone, any one or more of which could potentially contain commercially viable quantities of minerals.

 

Liquidity and Capital Resources

 

We had cash and cash equivalents in the amount of $536 as of January 31, 2016. We had negative working capital of $943,763 as of January 31, 2016. We had cash inflows from financing activities of $501,902 for the fiscal year ended January 31, 2016. We will need additional funds in order to proceed with our planned exploration program.

 

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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.

 

In August 2013, we entered issued a promissory note (the “August 2013 Note”) for a principal sum of $555,000 plus accrued and unpaid interest and any other fees. The consideration is up to $500,000, which would produce an original issue discount of $55,000 if all the consideration is received. The lender paid $150,000 upon closing pursuant to the terms of the August 2013 Note. The August 2013 Note has a maturity of one year from the delivery of each payment. The August 2013 Note may be convertible into shares of common stock of our company at any time from 180 days after the date of each payment of consideration, at a conversion price which is 70% of the average of the three lowest closing prices in the 20 trading days previous to the conversion. We may repay the August 2013 Note at any time on or before 90 days from the effective date of the August 2013 Note with an interest rate of 0%, after which we may not make any further payments on the August 2013 Note prior to the maturity date without written approval from the lender. If we elect not to repay the August 2013 Note on or before 90 days from the effective date of the August 2013 Note, a one-time interest charge of 12% will be applied to the principal sum. We elected not to pay the $150,000 portion of the August 2013 Note within 90 days from the effective date. After the $150,000 portion of the August 2013 Note became convertible, the note holder elected to convert the principal and interest totaling $186,480 into 17,937,915 shares of the company’s common stock during the months of February through May of 2014. On December 9, 2013, we received additional consideration of $75,000 pursuant to the terms of the August 2013 Note. We elected not to pay the $75,000 portion of the August 2013 Note within 90 days from the effective date. In June, July and August 2014, the note holder converted principal and interest totaling $93,240 into 9,983,507 shares of the Company’s common stock. On June 24, 2014 and September 3, 2014, we received additional consideration of $75,000 and $75,000, respectively, pursuant to the terms of the August 2013 Note. In December 2014 and January 2015, the note holder converted principal and interest totaling $41,961 into 5,900,000 shares of the Company’s common stock. On February 25, 2015, we received additional consideration of $50,000 with $5,500 of original issue discount pursuant to the terms of the August 2013 Note. On August 28, 2015, we received additional consideration of $50,000 with $5,500 of original issue discount pursuant to the terms of the August 2013 Note. We elected not to repay the $50,000 portion of the August 2013 Note within 90 days from the effective date. During the fiscal year ended January 31, 2016, the note holder converted principal and interest totaling $206,679 into 123,158,044 shares of the Company’s common stock. As of January 31, 2016, we had $62,160 of principal and interest outstanding for the August 2013 Note.

 

On November 18, 2013, we entered into a securities purchase agreement, pursuant to which we agreed to issue a convertible note to one lender in the principal amount of $250,000 (the “November 2013 Note”). The proceeds from the November 2013 Note were $225,000, which created an original issue discount of $25,000. The November 2013 Note was payable in full on November 18, 2014 and bears no interest except in an event of default. The lender may, at its option, after the 183rd day (after May 20, 2014) following the closing date, convert the principal amount or any portion of such principal amount of the November 2013 Note into shares of common stock of our company at the price equal to the lesser of (a) 100% of the volume weighted average price (VWAP), as reported on the closing date (November 18, 2013), and (b) 70% of the average of the 5-day VWAP immediately prior to the day of conversion. On November 13, 2014, we entered into an Assignment of Promissory Note & Acknowledgment, pursuant to which we consented to an assignment of the November 2013 Note to another lender, pursuant to which $250,000 remains owing by the Company. The maturity date of the November 2013 Note was extended to November 18, 2015. From November 2014 through January 2015, the new noteholder converted principal of $102,500 into 11,792,944 shares of the Company’s common stock. During the fiscal year ended January 31, 2016, the new noteholder converted principal of $153,046 into 48,243,936 shares of the Company’s common stock. As of January 31, 2016, we had $0 of principal and interest outstanding for the November 2013 Note.

 

In August 2014, we received $150,000 pursuant to the terms of a convertible promissory note (the “August 2014 Note”) dated August 26, 2014. The August 2014 Note bears interest at 12%, is due on August 26, 2015, and is convertible after 180 days at a 45% discount to the average of the daily VWAP prices for the previous 10 trading days before the date of conversion. During March and April 30, 2015, the new noteholder converted principal of $160,834 into 56,676,739 shares of the Company’s common stock. As of January 31, 2016, we had $0 of principal and interest outstanding for the August 2014 Note.

 

On October 14, 2014, we entered into a securities purchase agreement, pursuant to which we agreed to issue a convertible note (the “October 2014 Note”) to one lender in the principal amount of $105,000. The October 2014 Note is payable in full on October 14, 2015, bears interest at the rate of 10% per annum, and includes a $5,000 original issuance discount. The October 2014 Note may be convertible into shares of common stock of our company at any time from 180 days after the execution date of the October 2014 Note at a price per share of 40% discount to the average of the daily VWAP for the previous five trading days before the date of conversion. During the fiscal year ended January 31, 2016, the note holder converted principal and interest totaling $110,901 into 74,878,264 shares of the Company’s common stock. As of January 31, 2016, we had $0 of principal and interest outstanding for this October 2014 Note.

 

On December 3, 2014, we entered into a note purchase agreement, pursuant to which we agreed to issue a convertible note (the “December 2014 Note”) to lender in the principal amount of $210,000, with a $10,000 original issuance discount. The initial purchase price was $105,000 of consideration of which $100,000 was received our company and $5,000 was retained through the original issue discount. An additional $50,000 was received on February 27, 2015 with a $2,500 original issue discount. An additional $30,000 was received on June 11, 2015 with a $1,500 original issue discount. An additional $20,000 was received on July 9, 2015 with a $1,000 original issue discount. The December 2014 Note bears interest at 10%, is due on December 3, 2016, and is convertible after six months of advance of funds at a 37.5% discount to the average of the daily VWAP prices for the previous 5 trading days before the date of conversion. During the fiscal year ended January 31, 2016, the note holder converted principal and interest totaling $231,000 into 196,244,876 shares of the Company’s common stock. As of January 31, 2016, we had of $0 of principal and interest outstanding for the December 2014 Note.

 

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On November 2, 2015, we entered into a promissory note (the “November 2015 Note”) for a principal sum of up to $500,000. The consideration is up to $450,000, which would produce an original issue discount of $50,000 if all the consideration is received. The lender paid $50,000 upon closing pursuant to the terms of the November 2015 Note, which resulted in the Company recording a $5,000 original issue discount. The maturity date is two years from the effective date of each payment, as well as any unpaid interest and other fees. The November 2015 Note may be convertible into shares of common stock of our company at any time from 180 days after the date of each payment of consideration at a conversion price of 70% of the average of the three lowest closing prices in the 20 trading days previous to the conversion. We may repay the November 2015 Note at any time on or before 90 days from the effective date of the November 2015 with an interest rate of 0%, after which we may not make any further payments on the November 2015 Note prior to the maturity date without written approval from the lender. If we elect not to repay the November 2015 Note on or before 90 days from the effective date of the November 2015, a one-time interest charge of 12% will be applied to the principal sum. As of January 31, 2016, we had of $55,000 of principal and interest outstanding for the November 2015 Note.

 

On December 29, 2015, the Company entered into a convertible promissory note (the “December 2015 Note”) for a principal sum of $50,000, due on demand by the lender at any time on or after September 29, 2016, with interest at 12% per annum. The lender paid $49,000 upon closing of the December 2015 Note, which included the lender retaining $1,000 as an original issue discount. The December 2015 Note may be convertible into shares of the common stock of our company at any time after 180 days at a conversion price of the lower of: (i) a 45% discount to the second lowest trading price during the previous ten trading days to the date of a conversion notice; or (ii) a 45% discount to the second lowest trading price during the previous ten trading days before the date the December 2015 Note was executed on December 29, 2015. As of January 31, 2016, we had of $50,542 of principal and interest outstanding for the December 2015 Note.

 

Proceeds from issuance of common stock

 

During the fiscal years ended January 31, 2016 and 2015, we also entered into certain private investment agreements pursuant to which we received a total of $210,051 and $474,251 in net proceeds, respectively.

 

Results of Operations for the Fiscal Year Ended January 31, 2016

 

We had a net loss of $1,569,662 for the fiscal year ended January 31, 2016 compared to net income of $4,115,431 for the fiscal year ended January 31, 2015. Net income decreased by $5,685,093 due to the $5,322,943 gain on the debt settlement of debt with Northern Dynasty in the fiscal year ended January 31, 2014, a decrease in public relations expense of $92,666 due to a decreased investor relations activity, a decrease in geological and geophysical costs of $38,546 due to decreased survey and land research, and a decrease in general and administrative expenses of $44,664 due to a decrease in the use of contract labor.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

 

Presentation of Financial Information

 

Our consolidated financial statements for the fiscal year ended January 31, 2016 reflect financial information for the fiscal years ended January 31, 2016 and 2015.

 

Since we have not generated any revenue, we have included a reference to our ability to continue as a going concern in connection with our consolidated financial statements for the fiscal years ended January 31, 2016 and 2015. Our accumulated deficit at January 31, 2016, was $52,648,326 and the net loss from operations for the fiscal year ended January 31, 2016 was $863,032. All of our exploration costs are expensed as incurred.

 

These consolidated financial statements have been prepared on the going concern basis, which assumes that adequate sources of financing will be obtained as required and that our assets will be realized, and liabilities settled in the ordinary course of business. Accordingly, these consolidated financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.

 

In order to continue as a going concern, we require additional financing. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to continue as a going concern, we would likely be unable to realize the carrying value of our assets reflected in the balances set out in the preparation of the consolidated financial statements.

 

 20 
 

 

Critical Accounting Policies

 

Our consolidated financial statements have been prepared in conformity with GAAP. Our significant accounting policies are described in Note 2 to the consolidated financial statements included in Item 8 of this annual report on Form 10-K. 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 period ended January 31, 2016. Our total stockholders’ deficit at January 31, 2016 was $980,193.

 

These consolidated financial statements have been prepared on the going concern basis, which assumes that adequate sources of financing will be obtained as required and that our assets will be realized, and liabilities settled in the ordinary course of business. Accordingly, these consolidated financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.

 

Development Stage

 

During the fiscal year ended January 31, 2015, the Company elected to early adopt Accounting Standards Update (“ASU”) No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. The adoption of this ASU allows the Company to remove the inception to date information and all references to exploration stage.

 

Mineral claims

 

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

 

Convertible promissory notes

 

We reviewed the convertible promissory notes and the related subscription agreements to determine the appropriate reporting within the 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 required in accordance with the applicable accounting guidance. No gain or loss is reported when the notes are converted into shares of our common stock in accordance with the note’s terms.

 

Common stock purchase warrants

 

We report common stock purchase warrants as equity unless a condition exists which requires reporting as a derivative liability at fair market value. The valuation of the derivative liability of the warrants is determined through the use of a Monte Carlo options model that values the liability of the warrants based on a risk-neutral valuation where the price of the option is its discounted expected value.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable to smaller reporting companies.

 

 21 
 

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

LIBERTY STAR URANIUM & METALS CORP.

TABLE OF CONTENTS

 

   Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  F-2
CONSOLIDATED FINANCIAL STATEMENTS 
Consolidated Balance Sheets as of January 31, 2016 and 2015  F-3
Consolidated Statements of Operations for the Years Ended January 31, 2016 and 2015  F-4
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended January 31, 2016 and 2015  F-5
Consolidated Statements of Cash Flows for the Years Ended January 31, 2016 and 2015  F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  F-7

 

 F-1 
 

 

Report of Independent Registered Public Accounting Firm

 

Board of Directors and Stockholders of

Liberty Star Uranium & Metals Corp.

Tucson, Arizona

 

We have audited the accompanying consolidated balance sheets of Liberty Star Uranium & Metals Corp. and its subsidiaries (collectively, the “Company”) as of January 31, 2016 and 2015, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. Our audits include consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Star Uranium & Metals Corp. and its subsidiaries as of January 31, 2016 and 2015, and the results of their operations and their cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America. 

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations, and requires additional funds for further exploratory activity prior to attaining a revenue generating status. In addition, the Company may not find sufficient ore reserves to be commercially mined. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

 

/s/ MaloneBailey, LLP

Houston, Texas

 

May 17, 2016

 

 F-2 
 

  

LIBERTY STAR URANIUM & METALS CORP.

CONSOLIDATED BALANCE SHEETS

 

   January 31,   January 31, 
   2016   2015 
Assets        
         
Current:          
Cash and cash equivalents  $536   $53,517 
Advances   1,152    1,052 
Prepaid expenses   77,113    88,288 
Total current assets   78,801    142,857 
           
Property and equipment, net    14,132    32,338 
Total assets  $92,933   $175,195 
           
Liabilities and Stockholders' Deficit          
           
Current:          
Current portion of long-term debt  $561   $6,149 
Convertible promissory note, net of debt discount of $8,470 and $41,928   108,670    516,018 
Accounts payable and accrued liabilities   421,462    250,932 
Accrued wages to related parties   488,578    404,992 
Derivative liability   3,293    216,705 
Total current liabilities   1,022,564    1,394,796 
           
Long-term:          
Long-term debt, net of current portion   -    561 
Long-term convertible note payable   50,562    106,697 
Total long-term liabilities   50,562    107,258 
           
Total liabilities   1,073,126    1,502,054 
           
COMMITMENTS AND CONTINGENCIES (Note  14)          
           
Stockholders' deficit          
Common stock - $.00001 par value; 6,250,000,000 and 1,250,000,000 shares authorized; 1,568,937,905 and 920,001,430 shares issued and outstanding   15,689    9,200 
Stock subscription receivable   (55,673)   (55,673)
Additional paid-in capital   51,708,117    49,798,278 
Accumulated deficit   (52,648,326)   (51,078,664)
Total stockholders' deficit   (980,193)   (1,326,859)
           
Total liabilities and shareholders' deficit  $92,933   $175,195 

  

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

 

 F-3 
 

  

LIBERTY STAR URANIUM & METALS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

   For the Years Ended 
   January 31, 
   2016   2015 
Revenues   $-   $- 
Expenses:           
Geological and geophysical costs   134,511    173,057 
Salaries and benefits    318,426    293,096 
Public relations    43,787    136,453 
Depreciation      22,509    27,324 
Legal      80,521    79,117 
Professional services      74,329    89,785 
General and administrative      178,464    223,128 
Travel      10,485    24,824 
Net operating expenses    863,032    1,046,784 
Loss from operations    (863,032)   (1,046,784)
           
Other income (expense):           
Interest income    1    5 
Interest expense    (676,495)   (643,430)
Gain (Loss) on settlement of debt   72,308    5,322,943 
Gain (loss) on change in fair value of derivative liability   (102,444)   482,697 
Total other income (expense)   (706,630)   5,162,215 
Net income (loss)   (1,569,662)   4,115,431 
           
Basic net income (loss) per share of common stock  $(0.00)  $0.00 
           
Diluted net income (loss) per share of common stock  $(0.00)  $0.00 
           
Basic  weighted average number of shares of common stock outstanding   1,262,841,472    884,138,341 
           
Diluted weighted average number of shares  of common stock outstanding   1,262,841,472    1,004,926,936 

 

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

 

 F-4 
 

  

LIBERTY STAR URANIUM & METALS CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) 

 

           Stock   Additional       Total 
   Common stock   subscription   paid-in   Accumulated   stockholders’ 
   Shares   Amount   receivable   capital   deficit   equity (deficit) 
                         
Balance, January 31, 2014   830,236,231    8,302    -    49,026,144    (55,194,095)   (6,159,649)
Issuance of common stock and warrants private placement, net   6,424,979    64    -    72,936    -    73,000 
Issuance of common shares for cash pursuant to investment agreement   34,214,226    343    (55,673)   456,581    -    401,251 
Issuance of common shares pursuant to legal settlement   1,000,000    10    -    17,490    -    17,500 
Shares issued in exchange for services   2,511,628    25    -    53,975    -    54,000 
Shares issued for conversion of notes   45,614,366    456    -    423,724    -    424,180 
Resolution of derivative liabilities due to debt conversions   -    -    -    256,748    -    256,748 
Warrants reclassified to derivative liabilities   -    -    -    (520,552)   -    (520,552)
Stock based compensation   -    -    -    11,232    -    11,232 
Net income for the year ended January 31, 2015   -    -    -    -    4,115,431    4,115,431 
Balance, January 31, 2015   920,001,430    9,200    (55,673)   49,798,278    (51,078,664)   (1,326,859)
Issuance of common stock and warrants private placement, net   27,194,893    272    -    50,028    -    50,300 
Issuance of common shares for cash pursuant to investment agreement   100,000,000    1,000    -    128,751    -    129,751 
Shares issued in exchange for services   5,733,000    57    -    10,263    -    10,320 
Shares issued for conversion of notes   516,008,582    5,160    -    887,419    -    892,579 
APIC reclassified to gain on debt extinguishment   -    -    -    (72,308)   -    (72,308)
Resolution of derivative liabilities due to debt conversions   -    -    -    833,583    -    833,583 
Warrants reclassified to derivative liabilities   -    -    -    31,804    -    31,804 
Stock based compensation   -    -    -    40,299    -    40,299 
Net loss for the year ended January 31, 2016   -    -    -    -    (1,569,662)   (1,569,662)
Balance, January 31, 2016   1,568,937,905    15,689    (55,673)   51,708,117.00    (52,648,326)   (980,193)

 

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

 

 F-5 
 

 

LIBERTY STAR URANIUM & METALS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   For the Years Ended
January 31,
 
   2016   2015 
         
Cash flows from operating activities:        
Net income (loss)  $(1,569,662)  $4,115,431 
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation   22,509    27,324 
Amortization of deferred financing charges   -    38,052 
Amortization of debt discount   606,270    403,579 
(Gain) loss on settlement of debt   (72,308)   (5,322,943)
(Gain) loss on change in fair value of derivative liabilities   102,444    (482,697)
Share based compensation   40,299    11,232 
Common shares issued for third party services   10,320    54,000 
Warrants issued for third party services   -    17,500 
Warrants issued pursuant to legal settlement        6,440 
Changes in assets and liabilities:          
     Prepaid expenses   11,175    (79,179)
     Other current assets   (100)   (52)
     Accounts payable and accrued expenses   170,530    (3,329)
     Accrued wages related parties   83,586    64,000 
     Accrued interest   44,357    190,283 
Cash flows used in operating activities:   (550,580)   (960,359)
           
Cash flows from investing activities:          
Purchase of equipment   (4,303)   (9,870)
Net cash used in investing activities   (4,303)   (9,870)
           
Cash flows from financing activities:          
Payments on long-term debt   (6,149)   (5,594)
Principal activity on convertible promissory notes   328,000    500,000 
Proceeds from the issuance of common stock, net of expenses   180,051    474,251 
Net cash provided by financing activities   501,902    968,657 
           
Increase (decrease) in cash and cash equivalents   (52,981)   (1,572)
Cash and cash equivalents, beginning of period   53,517    55,089 
Cash and cash equivalents, end of period  $536   $53,517 
           
Supplemental disclosure of cash flow information:          
Income tax paid  $-   $- 
Interest paid  $12,271   $10,587 
Supplemental disclosure of non-cash items:          
Stock subscription receivable  $-   $55,673 
Resolutions of derivative liabilities due to debt conversions  $833,583   $256,748 
Warrants reclassed to derivative liabilities  $31,804   $520,552 
Debt discounts due to derivative liabilities  $549,531   $382,173 
Common stock issued for conversion of debt and interest  $892,579   $242,180 
Original issue discount  $22,000   $28,750 

 

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

 

 F-6 
 

  

LIBERTY STAR URANIUM & METALS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

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. We formed the wholly owned subsidiary, Hay Mountain Super Project LLC (“HMSP”) incorporated on October 24, 2014, to serve as the primary holding company for development of the potential ore bodies encompassed in the Hay Mountain area of interest in Arizona. In April 2007, we changed our name to Liberty Star Uranium & Metals Corp. We have not generated any revenues from operations.

 

These 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 HMSP. All significant intercompany accounts and transactions were eliminated upon consolidation.

 

These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) with the on-going assumption that we will be able to realize our assets and discharge our liabilities in the normal course of business. However, certain conditions noted below currently exist which raise substantial doubt about our ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should we be unable to continue as a going concern. Our operations have primarily been funded by the issuance of common stock and debt. Continued operations are dependent on our ability to complete equity financings or generate profitable operations in the future. Management’s plan in this regard is to secure additional funds through future equity financings, joint venture agreements or debt. Such financings may not be available, or may not be available on reasonable terms.

 

NOTE 2 – Summary of significant accounting policies

 

The summary of significant accounting policies presented below is designed to assist in understanding the Company's consolidated financial statements. Such consolidated financial statements and accompanying notes are the representations of the Company’s management, who is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America in all material respects, and have been consistently applied in preparing the accompanying consolidated financial statements. The significant accounting policies adopted by the Company are as follows:

 

Use of estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

The valuation of stock-based compensation, classification and valuation of common stock purchase warrants, classification and value of embedded conversion options, value of beneficial conversion features, valuation allowance on deferred tax assets, the determination of useful lives and recoverability of depreciable assets, accruals, and contingencies are significant estimates made by management. It is at least reasonably possible that a change in these estimates may occur in the near term.

 

Principles of consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Big Chunk and HMSP. All significant intercompany accounts and transactions have been eliminated upon consolidation.

 

Cash and cash equivalents

 

We consider cash held at banks and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. We maintain our cash in bank deposit accounts which, for periods of time, may exceed federally insured limits. At January 31, 2016 and 2015, we had no cash balances in bank deposit accounts that exceeded federally insured limits.

 

Mineral claim costs

 

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

 

 F-7 
 

 

Long-lived assets and impairment of long-lived assets

 

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 3 to 7 years.

 

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of a long-lived asset group to be held and used in operations is measured by a comparison of the carrying amount to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset group. If such asset group is considered to be impaired, the impairment loss is measured as the amount by which the carrying amount of the asset group exceeds its fair value. Long-lived assets to be disposed of are carried at the lower of cost or fair value less the costs of disposal.

 

Convertible promissory notes

 

We report convertible promissory notes as liabilities at their carrying value less unamortized discounts, which approximates fair value. We bifurcate conversion options and detachable common stock purchase warrants and report them as liabilities at fair value at each reporting period when required in accordance with the applicable accounting guidance. When convertible promissory notes are converted into shares of our common stock in accordance with the debt’s terms, no gain or loss is recognized. We account for inducements to convert as an expense in the period incurred, included in debt conversion expense.

 

Derivative liabilities

 

The valuation of the derivative liability of our warrants is determined through the use of a Monte Carlo options model that values the liability of the warrants based on a risk-neutral valuation where the price of the option is its discounted expected value. The technique applied generates a large number of possible (but random) price paths for the underlying common stock via simulation, and then calculates the associated exercise value (i.e. “payoff”) of the option for each path. These payoffs are then averaged and discounted to a current valuation date resulting in the fair value of the option.

 

The valuation of the derivative liability attached to the convertible debt is arrived at through the use of a Monte Carlo model that values the derivative liability within the notes. The technique applied generates a large number of possible (but random) price paths for the underlying (or underlyings) via simulation, and then calculates the associated payment value (cash, stock, or warrants) of the derivative features. The price of the underlying common stock is modeled such that it follows a geometric Brownian motion with constant drift, and elastic volatility (increasing as stock price decreases). The stock price is determined by a random sampling from a normal distribution. Since the underlying random process is the same, for enough price paths, the value of the derivative is derived from path dependent scenarios and outcomes. The features in the notes are analyzed and incorporated into the model included the conversion features with the reset provisions, the call/redemption/prepayment options, and the default provisions. Based on these features, there are six primary events that can occur; payments are made in cash; payments are made with stock; the note holder converts upon receiving a redemption notice; the note holder converts the note; the issuer redeems the note; or the Company defaults on the note. The model simulates the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms that would be in effect at the time (i.e. stock price, conversion price, etc.). Probabilities are assigned to each variable such as redemption likelihood, default likelihood, and timing and pricing of reset events over the remaining term of the notes based on management projections. This leads to a cash flow simulation over the life of the note. A discounted cash flow for each simulation is completed, and is compared to the discounted cash flow of the note without the embedded features, thus determining a value for the derivative liability.

 

Common stock purchase warrants

 

We report common stock purchase warrants as equity unless a condition exists which requires reporting as a derivative liability at fair market value.

 

Stock based compensation

 

The Company recognizes stock-based compensation for all share-based payment awards made to employees based on the estimated fair values, using the Black-Scholes option pricing model.

 

Non-employee stock-based compensation is accounted for based on the fair value of the related stock or options or the fair value of the services on the grant date, whichever is more readily determinable. The fair value of options to be granted are estimated on the date of each grant using the Black-Scholes option pricing model and amortized ratably over the option's vesting periods, which approximates the service period.

 

Environmental expenditures

 

Our operations have been and may in the future be affected from time to time in varying degree by changes in environmental regulations, including those for future removal and site restoration costs. The likelihood of new regulations and their overall effect upon us are not predictable. We provide for any reclamation costs in accordance with the accounting standards codification section 410-30. It is management’s opinion that we are not currently exposed to significant environmental and reclamation liabilities and have recorded no reserve for environmental and reclamation expenditures as of January 31, 2016 or 2015.

 

 F-8 
 

 

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.

 

Income taxes

 

Income taxes are recorded using the asset and liability method. Under the asset and liability method, tax assets and liabilities are recognized for the tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future tax assets and liabilities are measured using the enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that enactment occurs. To the extent that the Company does not consider it more likely than not that a future tax asset will be recovered, it provides a valuation allowance against the excess. Interest and penalties associated with unrecognized tax benefits, if any, are classified as additional income taxes in the statement of operations. With few exceptions, we are no longer subject to U.S. federal, state and local examinations by tax authorities for the tax year ended January 31, 2012 and prior.

 

Net income (loss) per share

 

Basic net income (loss) per share is computed by dividing net loss attributable to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per share takes into consideration shares of common stock outstanding (computed under basic income or loss per share) and potentially dilutive shares of common stock that are not anti-dilutive. For the year ended January 31, 2016, potentially dilutive instruments were not included in the determination of diluted loss per share as their effect was anti-dilutive. For the year ended January 31, 2015, potentially dilutive shares included in the calculation of diluted net income per share included 1,345,666 shares related to warrants and 119,442,929 shares related to convertible promissory notes.

 

Statement Presentation

 

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.

 

NOTE 3 – Going concern

 

The Company has incurred losses from operations and requires additional funds for further exploratory activity and to maintain its claims prior to attaining a revenue generating status. There are no assurances that a commercially viable mineral deposit exists on any of our properties. In addition, the Company may not find sufficient ore reserves to be commercially mined. As such, there is substantial doubt about the Company’s ability to continue as a going concern.

 

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

 

NOTE 4 – Mineral claims

 

At January 31, 2016 we held a 100% interest in 11 standard federal lode mining claims on the Colorado Plateau Province of Northern Arizona (the “North Pipes Claims”).

 

 F-9 
 

 

At January 31, 2016 we held a 100% interest in 95 standard federal lode mining claims located in the Tombstone region of Arizona. 29 federal lode mining claims are owned by JABA US Inc, an Arizona Corporation in which two of our directors are owners and 66 federal lode mining claims belong to Liberty Star Uranium & Metals Corp. At January 31, 2016 we held Arizona State Land Department Mineral Exploration Permits covering 1,886.88 acres in the Tombstone region of Arizona.

 

At January 31, 2016 we held an option to explore 26 standard federal lode mining claims located in the East Silver Bell region of northwest Tucson, Arizona. The mineral claims are owned by JABA US Inc., an Arizona Corporation in which two of our directors are owners.

 

At January 31, 2016 we held a 100% interest to retain 9 Alaska State mining claims in the Iliamna region of Southwestern Alaska, located on the north side of the Cook Inlet, approximately 200 miles southwest of the city of Anchorage, Alaska (the “Big Chunk Claims”). The transaction for 199 claims transferred to Northern Dynasty in conjunction with our loan settlement agreement has now closed, and is no longer pending.

 

Title to mineral claims involves certain inherent risks due to difficulties of determining the validity of certain claims as well as potential for problems arising from the frequently ambiguous conveyance history characteristic of many mineral properties.

 

All of the Company’s claims for mineral properties are in good standing as of January 31, 2016.

 

NOTE 5 – Prepaid expenses

 

At January 31, 2016, the company had prepaid approximately $70,000 relating to a private investor event scheduled for a future date. This amount is included in prepaid expenses as of January 31, 2016.

 

NOTE 6 – Property and equipment

 

The balances of our major classes of depreciable assets and useful lives are:

  

   January 31, 2016   January 31, 2015 
Geology Equipment (3 to 7 years)  $264,734   $264,734 
Vehicles and transportation equipment (5 years)   44,284    44,284 
Office furniture and equipment (3 to 7 years)   85,363    81,061 
    394,381    390,079 
Less: accumulated depreciation and amortization   (380,249)   (357,741)
   $14,132   $32,338 

 

Depreciation expense was $22,509 and $27,324 for the years ended January 31, 2016 and 2015, respectively.

 

NOTE 7 – Long-term debt and convertible promissory notes

 

Note payable to Ford Credit is payable in monthly installments of $544 including interest at a fixed rate of 9.49% through maturity in February 2016. The principal balance at January 31, 2016 and 2015 is $561 and $6,710, respectively. The carrying amount of the vehicle that serves as collateral is $0 and $6,891 at January 31, 2016 and 2015, respectively.

 

The following is a summary of the principal maturities of long-term debt during the next five years:

 

Minimum future debt payments    
     
For the year ending January 31,    
2017   561 
2018 and thereafter   - 
   $561 
Less: current maturities   561 
   $- 

 

 F-10 
 

 

Following is a summary of convertible promissory notes:

 

   January 31,   January 31, 
   2016   2015 
         
12% convertible note payable issued August 2013, due in August 2016  $62,160   $144,519 
Convertible note payable issued November 2013, due November 2015   -    147,500 
12% convertible note payable issued August 2014, due August 2015   -    157,791 
10% convertible note payable issued October 2014, due October 2015   -    108,136 
10% convertible note payable issued December 2014, due December 2016   -    106,697 
12% convertible note payable issued November 2015, due November 2017   55,000    - 
12% convertible note payable issued December 2015, due September 2016   50,542    - 
    167,702    664,643 
Less debt discount   (8,470)   (41,928)
Less current portion of convertible notes   (108,670)   (516,018)
Long-term convertible notes payable  $50,562   $106,697 

 

In August 2013, we entered into a promissory note (the “August 2013 Note”) for a principal sum of $555,000 plus accrued and unpaid interest and any other fees. The consideration is up to $500,000, which would produce an original issue discount of $55,000 if all the consideration is received. The lender paid $150,000 upon closing pursuant to the terms of the August 2013 Note. The August 2013 Note has a maturity of one year from the delivery of each payment. The August 2013 Note may be convertible into shares of common stock of our company at any time from 180 days after the date of each payment of consideration, at a conversion price which is 70% of the average of the three lowest closing prices in the 20 trading days previous to the conversion. We may repay the August 2013 Note at any time on or before 90 days from the effective date of the August 2013 Note with an interest rate of 0%, after which we may not make any further payments on the August 2013 Note prior to the maturity date without written approval from the lender. If we elect not to repay the August 2013 Note on or before 90 days from the effective date of the August 2013 Note, a one-time interest charge of 12% will be applied to the principal sum. We elected not to pay the $150,000 portion of the August 2013 Note within 90 days from the effective date. After the $150,000 portion of the August 2013 Note became convertible, the note holder elected to convert the principal and interest totaling $186,480 into 17,937,915 shares of the company’s common stock during the months of February through May of 2014. On December 9, 2013, we received additional consideration of $75,000 pursuant to the terms of the August 2013 Note. We elected not to pay the $75,000 portion of the August 2013 Note within 90 days from the effective date. In June, July and August 2014, the note holder converted principal and interest totaling $93,240 into 9,983,507 shares of the Company’s common stock. On June 24, 2014 and September 3, 2014, we received additional consideration of $75,000 and $75,000, respectively, pursuant to the terms of the August 2013 Note. In December 2014 and January 2015, the note holder converted principal and interest totaling $41,961 into 5,900,000 shares of the Company’s common stock. On February 25, 2015, we received additional consideration of $50,000 with $5,500 of original issue discount pursuant to the terms of the August 2013 Note. On August 28, 2015, we received additional consideration of $50,000 with $5,500 of original issue discount pursuant to the terms of the August 2013 Note. We elected not to repay the $50,000 portion of the August 2013 Note within 90 days from the effective date. During the year ended January 31, 2016, the note holder converted principal and interest totaling $206,679 into 123,158,044 shares of the Company’s common stock. As of January 31, 2016, we had $62,160 of principal and interest outstanding for the August 2013 Note.

 

On November 18, 2013, we entered into a securities purchase agreement (the “November 2013 Note”), whereby we agreed to issue a convertible note to one lender in the principal amount of $250,000. The proceeds from the note were $225,000, which created an original issue discount of $25,000. The note was payable in full on November 18, 2014 and bears no interest except in an event of default. The lender may, at its option, after the 183rd day (after May 20, 2014) following the closing date, convert the principal amount or any portion of such principal amount of the note into shares of common stock of our company at the price equal to the lesser of (a) 100% of the volume weighted average price (VWAP), as reported on the closing date (November 18, 2013), and (b) 70% of the average of the 5 day VWAP immediately prior to the day of conversion. On November 13, 2014, we entered into an Assignment of Promissory Note & Acknowledgment, whereby we consented to an assignment of the note to another lender, pursuant to which $250,000 remains owing by the Company. The maturity date of the November 2013 Note was extended to November 18, 2015. From November 2014 through January 2015, the new noteholder converted principal of $102,500 into 11,792,944 shares of the Company’s common stock. During the year ended January 31, 2016, the new noteholder converted principal of $153,046 into 48,243,936 shares of the Company’s common stock. As of January 31, 2016, we had $0 of principal and interest outstanding for the November 2013 Note.

 

In August 2014, we received $150,000 pursuant to the terms of a convertible promissory note (the “August 2014 Note”) dated August 26, 2014. The Note bears interest at 12%, is due on August 26, 2015, and is convertible after 180 days at a 45% discount to the average of the daily VWAP prices for the previous 10 trading days before the date of conversion. During March and April 30, 2015, the new noteholder converted principal and accrued interest of $160,834 into 56,676,739 shares of the Company’s common stock. As of January 31, 2016, we had $0 of principal and interest outstanding for this Note.

 

 F-11 
 

 

On October 14, 2014, we entered into a securities purchase agreement, whereby we agreed to issue a convertible note (the “October 2014 Note”) to one lender in the principal amount of $105,000. The Note is payable in full on October 14, 2015, bears interest at the rate of 10% per annum, and includes a $5,000 original issuance discount. The Note may be convertible into shares of common stock of our company at any time from 180 days after the execution date of the Note at a price per share of 40% discount to the average of the daily VWAP for the previous five trading days before the date of conversion. During the year ended January 31, 2016, the note holder converted principal and interest totaling $110,901 into 74,878,264 shares of the Company’s common stock. As of January 31, 2016, we had $0 of principal and interest outstanding for this Note.

 

On December 3, 2014, we entered into a note purchase agreement, whereby we agreed to issue a convertible note (the “December 2014 Note”) to lender in the principal amount of $210,000, with a $10,000 original issuance discount. The initial purchase price was $105,000 of consideration of which $100,000 was received our company and $5,000 was retained through the original issue discount. An additional $50,000 was received on February 27, 2015 with a $2,500 original issue discount. An additional $30,000 was received on June 11, 2015 with a $1,500 original issue discount. An additional $20,000 was received on July 9, 2015 with a $1,000 original issue discount. The Note bears interest at 10%, is due on December 3, 2016, and is convertible after six months of advance of funds at a 37.5% discount to the average of the daily VWAP prices for the previous 5 trading days before the date of conversion. During the year ended January 31, 2016, the note holder converted principal and interest totaling $231,000 into 196,244,876 shares of the Company’s common stock. As of January 31, 2016, we had of $0 of principal and interest outstanding for the December 2014 Note.

 

On November 2, 2015, we entered into a promissory note (the “November 2015 Note”) for a principal sum of up to $500,000. The consideration is up to $450,000, which would produce an original issue discount of $50,000 if all the consideration is received. The lender paid $50,000 upon closing pursuant to the terms of the November 2015 Note, which resulted in the Company recording a $5,000 original issue discount. The maturity date is two years from the effective date of each payment, as well as any unpaid interest and other fees. The November 2015 Note may be convertible into shares of common stock of our company at any time at a conversion price of 70% of the average of the three lowest closing prices in the 20 trading days previous to the conversion. We may repay the November 2015 Note at any time on or before 90 days from the effective date of the November 2015 with an interest rate of 0%, after which we may not make any further payments on the November 2015 Note prior to the maturity date without written approval from the lender. If we elect not to repay the November 2015 Note on or before 90 days from the effective date of the November 2015, a one-time interest charge of 12% will be applied to the principal sum. On March 23, 2016, the November 2015 Note was amended to allow for conversion only after 180 days. As of January 31, 2016, we had of $55,000 of principal and interest outstanding for the November 2015 Note.

 

On December 29, 2015, the Company entered into a convertible promissory note (the “December 2015 Note”) for a principal sum of $50,000, due on demand by the lender at any time on or after September 29, 2016, with interest at 12% per annum. The lender paid $49,000 upon closing of the December 2015 Note, which included the lender retaining $1,000 as an original issue discount. The December 2015 Note may be convertible into shares of the common stock of our company at any time after 180 days at a conversion price of the lower of: (i) a 45% discount to the second lowest trading price during the previous ten trading days to the date of a conversion notice; or (ii) a 45% discount to the second lowest trading price during the previous ten trading days before the date the December 2015 Note was executed on December 29, 2015. As of January 31, 2016, we had of $50,542 of principal and interest outstanding for the December 2015 Note.

 

During the years ended January 31, 2016 and 2015, the Company recorded debt discounts of $549,531 and $382,173, respectively, due to the derivative liabilities, and original issue debt discounts of $22,000 and $28,750, respectively, due to the convertible notes. The Company recorded amortization of these discounts of $606,270 and $403,579 for the years ended January 31, 2016 and 2015, respectively.

 

NOTE 8 – Derivative Liabilities

 

The embedded conversion feature in the convertible debt instruments that the Company issued (See Note 7), that became convertible during the years ended January 31, 2016 and 2015, qualified it as a derivative instrument since the number of shares issuable under the note is indeterminate based on guidance in FASB ASC 815, Derivatives and Hedging. This convertible note tainted all other equity linked instruments including outstanding warrants and fixed rate convertible debt on the date that the instrument became convertible. 

 

The valuation of the derivative liability of the warrants was determined through the use of a Monte Carlo options model that values the liability of the warrants based on a risk-neutral valuation where the price of the option is its discounted expected value. The technique applied generates a large number of possible (but random) price paths for the underlying common stock via simulation, and then calculates the associated exercise value (i.e. “payoff”) of the option for each path. These payoffs are then averaged and discounted to a current valuation date resulting in the fair value of the option.

 

 F-12 
 

 

The valuation of the derivative liability attached to the convertible debt was arrived at through the use of a Monte Carlo model that values the derivative liability within the notes. The technique applied generates a large number of possible (but random) price paths for the underlying (or underlyings) via simulation, and then calculates the associated payment value (cash, stock, or warrants) of the derivative features. The price of the underlying common stock is modeled such that it follows a geometric Brownian motion with constant drift, and elastic volatility (increasing as stock price decreases). The stock price is determined by a random sampling from a normal distribution. Since the underlying random process is the same, for enough price paths, the value of the derivative is derived from path dependent scenarios and outcomes. The features in the notes that were analyzed and incorporated into the model included the conversion features with the reset provisions, the call/redemption/prepayment options, and the default provisions. Based on these features, there are six primary events that can occur; payments are made in cash; payments are made with stock; the note holder converts upon receiving a redemption notice; the note holder converts the note; the issuer redeems the note; or the Company defaults on the note. The model simulates the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms that would be in effect at the time (i.e. stock price, conversion price, etc.). Probabilities were assigned to each variable such as redemption likelihood, default likelihood, and timing and pricing of reset events over the remaining term of the notes based on management projections. This led to a cash flow simulation over the life of the note. A discounted cash flow for each simulation was completed, and it was compared to the discounted cash flow of the note without the embedded features, thus determining a value for the derivative liability.

 

Key inputs and assumptions used to value the convertible notes and warrants upon issuance or tainting and also as of January 31, 2016:

 

The stock projections are based on the historical volatilities for each date. These ranged in the 146.9-155.8% range. The stock price projection was modeled such that it follows a geometric Brownian motion with constant drift and a constant volatility, starting with the market stock price at each valuation date;

 

An event of default would not occur during the remaining term of the note;

 

Conversion of the notes to stock would be completed monthly after any holding period and would be limited based on: 5% of the last 6 months average trading volume and the ownership limit identified in the contract assuming the underlying number of common shares increases at 1% per month.

 

The effective discount was determined based on the historical trading history of the Company based on the specific pricing mechanism in each note;

 

The Company would not have funds available to redeem the notes during the remaining term of the convertible notes;

 

Discount rates were based on risk free rates in effect based on the remaining term and date of each valuation and instrument.

 

The Holder would exercise the warrant at maturity if the stock price was above the exercise price;

 

The Holder would exercise the warrant after any holding period prior to maturity at target prices starting at 2 times the exercise price for the Warrants or higher subject to monthly limits of: 5% of the last 6 months average trading volume increasing by 1% per month and the ownership limit identified in the contract assuming the underlying number of common shares increases at 1% per month.

 

For the warrants with reset features, the Company assumed it would issue equity linked instruments in the quarters ended 1/31/16 through 4/30/16 at 70% of market.

 

Using the results from the model, the Company recorded a derivative liability of $52,050 for newly granted warrants (see note 11) and a derivative liability of $688,562 for the fair value of the convertible feature included in the Company’s convertible debt instruments. The derivative liability recorded for the convertible feature created a debt discount of $549,531 which is being amortized over the remaining term of the note using the effective interest rate method, and is classified as convertible debt on the balance sheet. Interest expense related to the amortization of this debt discount for the year ended January 31, 2016, was $59,239. Additionally, $547,031 of debt discount was charged to interest expense as a result of the conversion of a portion of the underlying debt instrument (See Note 7). The remaining unamortized debt discount related to the derivative liability was $0 as of January 31, 2016. The Company recorded the change in the fair value of the derivative liability as a loss of $102,444 to reflect the value of the derivative liability for warrants and convertible notes as $3,293 as of January 31, 2016. The Company also recorded a reclassification from derivative liability to equity of $833,583 for the conversions of a portion of the Company’s convertible notes.

 

The following table sets forth a reconciliation of changes in the fair value of the Company’s derivative liability:

 

   Year Ended January 31, 
   2016   2015 
Beginning balance  $216,705   $46,985 
Total (gains) losses   (102,444)   (482,697)
Settlements   (865,387)   (256,748)
Additions   549,531    909,165 
Ending balance  $3,293   $216,705 
           
Change in unrealized (gains) losses included in earnings relating to derivatives still held as of January 31, 2016 and 2015  $211   $(482,697)

 

 F-13 
 

 

NOTE 9 – 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.

 

On October 30, 2013, the Company entered into an investment agreement with KVM Capital Partners LLC, a New York limited liability company (“KVM”). Pursuant to the agreement, KVM has agreed to purchase up to $8,000,000 of our common stock over a period of up to thirty-six (36) months. The purchase price per share to be paid by KVM shall be calculated at a twenty percent (20%) discount to the lowest volume weighted average price of the common stock as reported by Bloomberg, L.P. during the five (5) consecutive trading days immediately prior to the receipt by KVM of the put notice. We initially reserved 244,500,000 shares of our common stock for issuance under the KVM Investment Agreement. In connection with the KVM Investment Agreement, we also entered into a registration rights agreement with KVM, pursuant to which we are obligated to file a registration statement with the SEC covering 244,500,000 shares of our common stock underlying the KVM Investment Agreement within 21 days after the closing of the transaction. In addition, we are obligated to use all commercially reasonable efforts to have the registration statement declared effective by the SEC and maintain the effectiveness of such registration statement until termination of the KVM Investment Agreement. On November 6, 2013, we filed form S-1 related to the KVM investment agreement. Between February 2014 and July 2014, pursuant to the KVM investment agreement, KVM purchased 34,214,226 shares for $456,924, of which $55,673 is still owed to the Company and is reflected as a stock subscription receivable as of January 31, 2016. On November 14, 2014, we filed a Post-Effective Amendment to deregister the remaining unsold securities, which became effective on December 2, 2014.

 

In March 2014, the Company issued 1,000,000 units of common stock to a designee of MBGS, LLC, pursuant to a settlement agreement with Northern Dynasty which discharged the $3,730,174 principal balance and $1,592,769 of accrued interest for the 2010 Convertible Note (See Note 7). Each unit consists of one share of the Company’s common stock and a warrant to purchase one-half share of the Company’s common stock. The fair value of the common stock issued was $17,500, which was recorded as an expense upon issuance of the units. The 500,000 warrants, which have an exercise price of $0.028 and have a three year term with a fair value of $6,440. The fair value was expensed and a derivative liability was recorded for the fair value of the warrant on the date of issuance of the units. The change in the fair value of the derivative liability between the date of issuance and the year ended January 31, 2015 was recorded in other income and expense.

 

During the year ended January 31, 2015, $321,680 of the August 2013 Note was converted into 33,821,422 shares of the Company’s common stock. The conversions occurred on multiple dates with conversion prices ranging from $0.006 to $0.012.

 

From November 2014 through January 2015, the holder of the November 2013 Note converted principal of $102,500 into 11,792,944 shares of the Company’s common stock. The conversions occurred on multiple dates with conversion prices ranging from $0.006 to $0.011.

 

During the year ended January 31, 2015, the Company issued 6,424,979 units to three investors for total proceeds of $73,000. Each unit consists of one share of the Company’s common stock and a warrant to purchase one share of the Company’s common stock. The warrants have exercise prices ranging from $0.015 to $0.021 and have a three year term.

 

During the year ended January 31, 2016, $206,679 of the August 2013 Note was converted into 123,158,044 shares of the Company’s common stock. The conversions occurred on multiple dates with conversion prices ranging from $0.00098 to $0.00574.

 

During the year ended January 31, 2016, $153,046 of the November 2013 Note was converted into 48,243,936 shares of the Company’s common stock. The conversions occurred on multiple dates with conversion prices ranging from $0.00147 to $0.00609.

 

During the year ended January 31, 2016, $160,833 of the August 2014 Note was converted into 56,676,739 shares of the Company’s common stock. The conversions occurred on multiple dates with conversion prices ranging from $0.00193 to $0.00416.

 

During the year ended January 31, 2016, $110,901 of the October 2014 Note was converted into 74,878,264 shares of the Company’s common stock. The conversions occurred on multiple dates with conversion prices ranging from $0.00101 to $0.00263.

 

During the year ended January 31, 2016, $231,000 of the December 2014 Note was converted into 196,244,876 shares of the Company’s common stock. The conversions occurred on multiple dates with conversion prices ranging from $0.00090 to $0.00197.

 

In May of 2015, we issued 2,941,176 units to an investor for total proceeds of $10,000. Each unit consists of one share of our common stock and two warrants to purchase one share each of the Company’s common stock. The warrants have an exercise price of $0.0048 and have a three year term.

 

On May 29, 2015, we issued a non-interest bearing promissory note with the principal amount of $30,000 to Brett Gross, a director of our company. The promissory note is convertible into 16,806,723 units at a price of $0.001785 per unit upon the increase of the authorized capital of our company. Each unit is comprised of one share of common stock and two warrants. Each warrant will be exercisable for a period of three years at a price of $0.002499. On August 11, 2015, the note was converted in full and the 16,806,723 common shares were issued.

 

 F-14 
 

 

In June of 2015, we issued 1,846,154 units to an investor for total proceeds of $3,000. Each unit consists of one share of our common stock and one warrant to purchase one share of our common stock. The warrants have an exercise price of $0.002275 and have a three year term.

 

In August of 2015, the Company issued 16,077,170 units to an investor for total proceeds of $25,000. Each unit consists of one share of the Company’s common stock and one warrant to purchase one share of the Company’s common stock. The warrants have an exercise price of $0.00218 and have a three year term.

 

In July of 2015, the Company issued 2,822,912 units to an investor, the Company’s CEO, CFO, President and Chairman of the Board, for proceeds of $4,300. Each unit consists of one share of the Company’s common stock and one warrant to purchase one share each of the Company’s common stock. The warrants have an exercise price of $0.002130 and have a three year term.

 

In September of 2015, the Company issued 1,851,852 units to an investor for total proceeds of $3,000. Each unit consists of one share of the Company’s common stock and one warrant to purchase one share of the Company’s common stock. The warrants have an exercise price of $0.00227 and have a three year term.

 

In November of 2015, we issued 1,655,629 units to an investor for total proceeds of $5,000. Each unit consists of one share of our common stock and one warrant to purchase one share of our common stock. The warrants have an exercise price of $0.00423 and have a three year term.

 

On June 20, 2015, we entered into an investment agreement (the “Investment Agreement”) with Tangiers Investment Group, LLC (the “Investor”), whereby the Investor has agreed to invest up to $8,000,000 to purchase shares of our common stock. Subject to the terms and conditions of the Investment Agreement and a registration rights agreement, we may, in our sole discretion, deliver a notice to the Investor which states the dollar amount which we intend to sell to the Investor on a certain date. The amount that we shall be entitled to sell to Investor shall be equal to one hundred and fifty percent (150%) of the average daily volume (U.S. market only) of the common stock for the ten (10) trading days prior to the applicable notice date so long as such amount does not exceed an accumulative amount per month of $100,000. The minimum amount shall be equal to $5,000. In connection with the Investment Agreement, we also entered into a registration rights agreement dated June 20, 2015, whereby we agreed to file a Registration Statement on Form S-1 with the SEC within thirty (30) days of the date of the registration rights agreement and to have the Registration Statement declared effective by the SEC within ninety (90) days after we have filed the Registration Statement. We filed Form S-1 on July 2, 2015 and Form S-1 Amendment No. 1 on July 29, 2015, for registration of 100,000,000 shares of the Company’s common stock under the Investment Agreement, which was declared effective by the SEC on August 5, 2015. During the year ended January 31, 2016, the Company issued an aggregate of 100,000,000 shares of common stock for total proceeds of $129,751 to Tangiers Investment Group, LLC under the Investment Agreement.

 

In September 2015, the Company issued 5,733,000 shares to a former service provider for services totaling $10,320.

  

NOTE 10 – Share-based compensation

 

The 2010 Stock Option Plan was approved and adopted by the Board of Directors on August 10, 2010. The plan allows for up to 95,500,000 shares to be granted to key employees and non-employee consultants after specific objectives are met. The 2007 Stock Option Plan was approved and adopted by the Board of Directors on December 10, 2007. The plan allows for up to 2,500,000 shares to be granted to key employees and non-employee consultants after specific objectives are met. The 2004 Stock Option Plan was approved and adopted by the Board of Directors on December 27, 2004. The plan allows for up to 962,500 shares to be granted to key employees and non-employee consultants after specific objectives are met. Employees can receive incentive stock options and non-qualified stock options while non-employee consultants can receive only non-qualified stock options. The options granted vest under various provisions using graded vesting, not to exceed four years. The options granted have a term not to exceed ten years from the date of grant or five years for options granted to more than 10% stockholders. The option price set by the Plan Administration shall not be less than the fair market value per share of the common stock on the grant date or 110% of the fair market value per share of the common stock on the grant date for options granted to greater than 10% stockholders. Options remaining available for grant under the 2010 Stock Option Plan at January 31, 2016 and 2015 are 13,000,000 and 12,500,000, respectively. Options remaining available for grant under the 2007 Stock Option Plan at January 31, 2016 and 2015 are 50,000 and 50,000, respectively. Options remaining available for grant under the 2004 Stock Option Plan at January 31, 2016 and 2015 are 127,626 and 127,626, respectively.

 

 F-15 
 

 

In September 2013, there were 7,423,624 stock options granted at an exercise price of $0.0257 per share, exercisable until September 5, 2023 with a fair value net of forfeitures at grant date of $210,300. The options granted were 100% vested for directors and shall vest in 25% immediately and 25% over four years increments on a yearly basis over the next four years for employees. In order to calculate the fair value of stock options at the date of grant, we use the Black-Scholes option pricing model. The volatility used was based on our historical volatility. The expected term was determined based on the simplified method outlined in Staff Accounting Bulletin No. 110. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Remaining stock option expense to be recognized in future periods related to the award is $18,224 as of January 31, 2016.

 

The following tables summarize the Company’s stock option activity during the years ended January 31, 2016 and 2015. Incentive stock options to employees and directors outstanding at January 31, 2016 are as follows:

 

   Number of options   Weighted average exercise price   Weighted average remaining life (years)   Aggregate intrinsic value 
Outstanding, January 31, 2014   85,476,124   $0.047        $- 
                      
Granted   -    -            
Cancelled   (54,750)   6.710             
Exercised   -    -            
Outstanding, January 31, 2015   85,421,374   $0.042        $- 
                      
Granted   -    -            
Cancelled   -    -           
Exercised   -    -           
Outstanding, January 31, 2016   85,421,374   $0.042    4.81   $- 
                     
Exercisable, January 31, 2016   84,951,211   $0.042    4.79   $    - 

 

In December 2015, the board of directors approved a five-year extension of 77,500,000 options expiring on August 16, 2015 to an extended expiration date of August 16, 2020. This modification resulted in a charge of $29,067 to share based compensation for the year ended January 31, 2016, representing the fair value of option extension. The options are held by four directors. The options cancelled during the year ended January 31, 2015 were a result of the options expiring. The aggregate intrinsic value is calculated based on the stock price of $0.0019 and $0.0086 per share as of January 31, 2016 and 2015, respectively.

 

We estimate the fair value of option awards on the grant date using the Black-Scholes valuation model. The Company uses historical volatility, disregarding identifiable periods of time in which share price was extraordinarily volatile due to certain events that are not expected to recur during the expected term, as its method to estimate expected volatility. The Company used the following assumptions to estimate the fair value of stock option grants to employees and non-employees:

 

       Expected      Risk-free     
   Expected   dividend   Expected  interest   Forfeiture 
Grant date  volatility   yield   term  rate   rate 
January 10, 2012   128%   0%  10 years   2%   10%
December 13, 2012   174%   0%  3 years   0.34%   0%
January 1, 2013   173%   0%  3 years   0.36%   0%
January 1, 2013   171%   0%  3 years   0.41%   0%
September 5, 2013   221%   0%  6.25 years   2.15%   20%

 

Share-based compensation expense is reported in our statement of operations as follows:

 

   January 31, 2016   January 31, 2015 
Geological and geophysical costs  $4,728   $4,728 
Salaries and benefits   33,795    4,728 
Investor relations   1,776    1,776 
General and administrative   -    - 
   $40,299   $11,232 

 

 F-16 
 

 

At January 31, 2016 there is $18,224 of unrecognized share-based compensation for all share-based awards outstanding with a weighted average remaining period for amortization of 1.8 years.

 

Non-qualified stock options to non-employee consultants and vendors outstanding as of January 31, 2016 are as follows:

 

   Number of options   Weighted average exercise price   Weighted
average
remaining life
(years)
   Aggregate intrinsic value 
Outstanding, January 31, 2014   903,500   $0.376        $- 
Granted   -    -            
Expired   (40,000)   1.678            
Outstanding, January 31, 2015   863,500   $0.316        $- 
Granted   -    -             
Expired   (500,000)   0.038            
Outstanding, January 31, 2016   363,500   $0.697    2.23   $    - 
                      
Exercisable, January 31, 2016   363,500   $0.697    2.23   $- 

 

The aggregate intrinsic value is calculated based on the stock price of $.0019 and $0.0086 per share for the years ended January 31, 2016 and 2015, respectively.

 

At January 31, 2016 there were 363,500 non-qualified stock options outstanding with a weighted average exercise price of $0.697 per option; of those options 363,500 are exercisable. At January 31, 2016 there were 85,421,374 incentive stock options outstanding with a weighted average exercise price of $0.042 per option; of those options 84,951,211 are exercisable with a weighted average exercise price of $0.042. 

 

During the years ended January 31, 2016 and 2015 we recognized $40,299 and $11,232  of compensation expense related to incentive and non-qualified stock options previously granted to officers, employees and consultants.

 

NOTE 11 – Warrants

 

As of January 31, 2016, there were 98,731,285 whole share purchase warrants outstanding and exercisable. The warrants have a weighted average remaining life of 1.75 years and a weighted average exercise price of $0.008 per whole warrant for one common share. Whole share purchase warrants outstanding at January 31, 2015 and 2014 are as follows:

 

   Number of
whole share
purchase warrants
   Weighted average exercise price per share 
         
Outstanding, January 31, 2014   58,441,729   $0.026 
Issued   6,924,979    0.017 
Expired   (5,800,000)   0.037 
Exercised   -    - 
           
Outstanding, January 31, 2015   59,566,708   $0.024 
Issued   63,749,514    0.003 
Expired   (24,584,937)   0.034 
Exercised   -    - 
Outstanding, January 31, 2016   98,731,285   $0.008 
           
Exercisable, January 31, 2016   98,731,285   $0.008 

 

The weighted average intrinsic value for warrants outstanding was $0 and $0 as of January 31, 2015 and 2014, respectively.

 

 F-17 
 

 

NOTE 12 – Income taxes

 

As of January 31 our deferred tax asset is as follows:

 

   January 31, 2016   January 31, 2015 
Deferred Tax Assets  $9,391,000   $8,853,000 
Less Valuation Allowance   (9,391,000)   (8,853,000)
   $-   $- 

 

Management has elected to provide a deferred tax asset valuation allowance equal to the potential benefit due to our history of losses. If we demonstrate the ability to generate future taxable income, management will re-evaluate the allowance. The decrease in the valuation allowance of $538,000 during the year ended January 31, 2016 primarily represents the increase in net operating loss carry-forwards during the period offset against the valuation allowance. The decrease in the valuation allowance of $1,390,000 during the year ended January 31, 2015 primarily represents the utilization of net operating loss carry-forwards during the period to offset taxable income for the year. As of January 31, 2016, our estimated net operating loss carry-forward is approximately $27,000,000 and expires beginning in 2026 through 2036.

 

Internal Revenue Code Section 382 limits the ability to utilize net operating losses if a 50% change in ownership occurs over a three year period. Such limitation of the net operating losses may have occurred but we have not analyzed it at this time as the deferred tax asset is fully reserved. We have federal and state net operating loss carry-forwards that are available to offset future taxable income.

 

NOTE 13 – Related party transactions

 

We entered into the following transactions with related parties during the year ended January 31, 2016:

 

Paid or accrued $6,263 in rent on an office from Jim Briscoe, our Chairman of the Board, CEO and CFO, and President on a month-to-month basis for $522 per month.

 

At January 31, 2016 we had a balance of accrued unpaid wages of $472,953 to Jim Briscoe, our Chairman of the Board, CEO, CFO and President.

 

At January 31, 2016, we had a balance of accrued unpaid wages of $15,625 to Larry Liang, our former President.

 

We have an option to explore 26 standard federal lode mining claims at the East Silver Bell project and 29 standard federal lode mining claims at the Walnut Creek project from JABA US Inc., an Arizona Corporation in which two of our directors are owners. We are required to pay annual rentals to maintain the claims in good standing. During the year ended January 31, 2016 we paid $8,525 in rental fees to maintain the mineral claims in good standing. The original option agreement was for the period from April 11, 2008 through January 1, 2011 and was extended through June 1, 2013, June 1, 2015 and now to June 1, 2021. This may additionally be extended in five year periods or increments in the future by any JABA director. 

 

We entered into the following transactions with related parties during the year ended January 31, 2015:

 

Paid or accrued $6,263 in rent on an office from Jim Briscoe, our Chairman of the Board, CEO and CFO, and President on a month-to-month basis for $522 per month.

 

At January 31, 2015 we had a balance of accrued unpaid wages of $389,367 to Jim Briscoe, our Chairman of the Board, CEO, CFO and President.

 

At January 31, 2015, we had a balance of accrued unpaid wages of $15,625 to Larry Liang, our former President.

 

We have an option to explore 26 standard federal lode mining claims at the East Silver Bell project and 29 standard federal lode mining claims at the Walnut Creek project from JABA US Inc., an Arizona Corporation in which two of our directors are owners. We are required to pay annual rentals to maintain the claims in good standing. During the year ended January 31, 2015 we paid $8,525 in rental fees to maintain the mineral claims in good standing. The original option agreement was for the period from April 11, 2008 through January 1, 2011 and has been extended through June 1, 2013 and now to June 1, 2015. This may additionally be extended in five year periods or increments in the future by any JABA director.

 

 F-18 
 

 

NOTE 14 – Commitments and Contingencies

 

We are required to perform annual assessment work in order to maintain the Big Chunk 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 per year to maintain the claims from 2015 forward will be $3,600 each year Sufficient assessment work has been performed for Big Chunk to maintain the claims beyond the next labor year if retained.

 

The annual state rentals for the Big Chunk 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 $6,120, to extend the Big Chunk claims through September 1, 2015 were not paid in November 2014. The estimated state rentals due by November 30, 2016 for the period from September 1, 2015 through September 1, 2016 are $6,120 plus an equal amount in penalty if reclaimed. 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 $155 per claim. The rentals of $1,705 for the period from September 1, 2015 to September 1, 2016 have been paid. The rentals due by September 1, 2016 for the period from September 1, 2016 through September 1, 2017 of $1,705 have not been paid.

 

We are required to pay annual rentals for our federal lode mining claims for our East Silver Bell 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 rental is $155 per claim. The rentals of $4,030 for the period from September 1, 2015 to September 1, 2016 have been paid. The annual rentals due by September 1, 2016 of $4,030 are required to maintain the East Silver Bell claims are for the period from September 1, 2016 through September 1, 2017 have not been paid. There is no requirement for annual assessment or exploration work on the federal lode mining claims. There are no royalties associated with the federal lode mining claims.

 

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 $155 per claim. The rentals due by September 1, 2016 for the period from September 1, 2016 through September 1, 2017 of $14,725 have not been paid. We are required to pay annual rentals for our Arizona State Land Department Mineral Exploration Permits (“AZ MEP”) at our Tombstone Hay Mountain project in the State of Arizona. AZ MEP permits are valid for 1 year and renewable for up to 5 years. The rental fee is $2.00 per acre for the first year, which includes the second year, and $1.00 per acre per year for years three through five. The minimum work expenditure requirements are $10 per acre per year for years one and two and $20 per acre per year for years three through five. If the minimum work expenditure requirement is not met the applicant can pay the equal amount in fees to the Arizona State Land Department to keep the AZ MEP permits current. The rental period begins on September 30th through the following September 29th for our Phase 1 permits, and September 14th through September 13th for our Phase 2 permits. Rental payments are due by the first day of the rental period. We hold AZ MEP permits for 2,366.88 acres at our Tombstone project. We will need to pay rental fees for our Phase 1 AZ MEP’s before September 29, 2016 in the amount of $3,346.88. Required minimum work expenditures for the period ending September 29, 2016 is $36,937.60. The annual rental due by September 13, 2016 to maintain the Phase 2 AZ MEP permit is $540.

 

A civil action was pending in the Alaska Superior Court in Anchorage, Alaska, that concerned title to some Alaska state mining claims owned by Big Chunk Corp., a subsidiary of Liberty Star. In that action Big Chunk and Liberty Star requested a judicial determination that certain lien claim notices recorded by a party named MBGS, LLC, against the mining claims were void; and MBGS sought an order enforcing the lien claims. Liberty Star and Big Chunk filed a motion for summary judgment to invalidate the lien claims. As was anticipated, MBGS opposed this motion. The lien claims were based on a debt alleged by MBGS to be due from Liberty Star. The existence of this alleged debt was disputed.

 

In March 2014 Liberty Star and Big Chunk entered into a settlement agreement with MBGS, LLC, following a resolution conference conducted in Anchorage, Alaska whereby all lien claims for the Northern Dynasty transfer were released. As a result of those claims released by MBGS, LLC, in May 2014 the company completed its loan settlement agreement with Northern Dynasty and discharged the principal balance and accrued interest for the 2010 Convertible Note which also terminated Northern Dynasty’s earn-in-rights.

 

On June 1, 2011 we rented a warehouse located at Building No. 1, 7900 South Kolb Road, Tucson, Arizona 85706. We rent this warehouse space for $3,673 per month. The lease was in effect until May 31, 2014 with an option to extend for two additional years. The lease was not renewed and is currently on a month to month basis. In addition to using the warehouse for standard purposes, such as storage of our exploration equipment, supplies and samples, the warehouse space also includes office facilities for the use of field geologists and geotechs.

 

 F-19 
 

 

NOTE 15 – Fair value of financial instruments

 

       Fair value measurements at reporting date using: 
Description  Fair Value   Quoted prices in
active markets
for
identical liabilities
(Level 1)
   Significant
other
observable inputs
(Level 2)
   Significant
unobservable inputs
(Level 3)
 
Warrant and convertible note derivative liability at January 31, 2016  $3,293    -    -   $3,293 
Warrant and convertible note derivative liability at January 31, 2015  $216,705    -    -   $216,705 

 

Our financial instruments consist of cash and cash equivalents, accounts payable, accrued liabilities, convertible notes payable, notes payable, and derivative liability. It is management's opinion that we are not exposed to significant interest, currency or credit risks arising from these financial instruments. With the exception of the derivative liability, the fair value of these financial instruments approximates their carrying values based on their short maturities or for long-term debt based on borrowing rates currently available to us for loans with similar terms and maturities. Gains and losses recognized on changes in estimated fair value of the warrant liability are reported in other income (expense) as gain (loss) on change in fair value.

 

NOTE 16 – Subsequent events

 

In February and March, 2016, an aggregate of $62,160 of the August 2013 Note was converted into 46,526,995 shares of the Company’s common stock.

 

In February 2016, we issued 2,631,579 units to an investor for total proceeds of $5,000. Each unit consists of one share of our common stock and one warrant to purchase one share of our common stock at a price of $0.0027 per share.

 

We filed a registration statement on Form S-1 with the SEC on January 21, 2016 and Amendment No. 1 thereto on February 24, 2016, for registration of 350,000,000 shares of the Company’s common stock under the Investment Agreement dated June 20, 2015 with Tangiers Investment Group, LLC. The registration statement, as amended, was declared effective by the SEC on March 15, 2016.

 

On March 10, 2016, we received proceeds of $50,000 under the November 2015 Note.

 

On March 29, 2016, we issued 3,588,452 shares of common stock for proceeds of $9,077 under the Investment Agreement.

 

On April 13, 2016, we issued 6,343,677 shares of common stock for net proceeds of $10,879 under the Investment Agreement.

 

On April 29, 2016, we issued 4,524,285 shares of common stock for proceeds of $7,702 under the Investment Agreement

 

 F-20 
 

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed 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 rules and forms of the SEC, and that such information is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management, including our principal executive officer and principal financial officer, reviewed and evaluated the effectiveness of our disclosure controls and procedures as of January 31, 2016. Based upon such review and evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the date of such evaluation to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and that such information is accumulated and communicated to the Company’s management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

Management's Annual Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established in Internal Control – Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion of this evaluation. Based on its evaluation, management has concluded that our internal control over financial reporting was effective as of January 31, 2016 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance with U.S. GAAP.

 

The Company's internal control over financial reporting includes policies and procedures that (1) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

 

Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. In addition, the design of any system of controls is based in part on certain assumptions about the likelihood of future events, and controls may become inadequate if conditions change. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Changes in Internal Control over Financial Reporting

 

No changes in our Company’s internal control over financial reporting occurred during the fiscal quarter ended January 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION.

 

None.

 

 22 
 

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

All directors of our company hold office until the next annual meeting of the stockholders or until their successors have been elected and qualified. The officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:

 

Name  Position(s) Held with the Company  Age  Date First Elected or Appointed
James A. Briscoe  Chief Executive Officer, Chief Financial Officer, President and Chairman of the Board  74  February 3, 2004
Gary Musil  Secretary and Director  64  October 23, 2003
John Guilbert  Director  84  February 5, 2004
Keith Brill  Director  38  December 23, 2009
Peter O’Heeron  Director  52  September 6, 2012
Brett Gross  Director  56  October 20, 2014
Patricia Madaris  VP Finance  65  May 8, 2015

 

Business Experience

 

James A. Briscoe. Mr. Briscoe was appointed as our Chief Executive Officer, President and Chairman of the Board in 2004 and Chief Financial Officer in 2008. Mr. Briscoe is a Registered Professional Geologist in the states of Arizona and California. From 1996 to 2005, Mr. Briscoe was the Vice President of Exploration, and Chairman of the Board of JABA Exploration Inc., a TSX Venture Exchange Canadian public company. Mr. Briscoe was also the President, Chief Executive Officer and a Geologist of JABA (US) Inc. and President of Compania Minera JABA, S.A. de C.V. in Mexico. Compania Minera JABA, S.A. de C.V. is no longer active and is in the process of dissolution. 

 

We believe Mr. Briscoe is qualified to serve on our board of directors because of his knowledge of our company’s history and current operations, which he gained from working for our company as described above, in addition to his extensive experience in the industry.

 

Gary Musil. Mr. Musil was appointed as one our directors in 2003 and as our corporate Secretary in 2003. Mr. Musil was our Chief Executive Officer and Chief Financial Officer from 2003 to 2004. Mr. Musil has more than 30 years of management and financial consulting experience. Mr. Musil has served as an officer and director on numerous public mining companies since 1988. This experience has resulted in his overseeing exploration projects in Peru, Chile, Eastern Europe (Slovak Republic), British Columbia, Ontario, Quebec and New Brunswick (Canada). Prior to this, he was employed for 15 years with Dickenson Mines Ltd. and Kam-Kotia Mines Ltd. as a controller for the producing silver/lead/zinc mine in the interior of British Columbia, Canada. Mr. Musil currently serves as an officer/director of four TSX Venture Exchange public companies in Canada. Mr. Musil has been the President, Chief Executive Officer, Chief Financial Officer and a director of International Montoro Resources Inc., a TSX Venture company and a reporting issuer in Canada, since 1999. Mr. Musil has been the chief financial officer and secretary and a director of Belmont Resources Inc., a TSX Venture company and a reporting issuer in Canada, since 1992. Mr. Musil has been the chief financial officer and a director of Megastar Development Corp, a TSX Venture company and a reporting issuer in Canada, since 2006. Mr. Musil has been the Chief Financial Officer and secretary of Highbank Resources Ltd., a TSX Venture company and a reporting issuer in Canada, since 1988.

 

We believe Mr. Musil is qualified to serve on our board of directors because of his knowledge of our company’s history and current operations, which he gained from working for our company as described above, in addition to his education and business experience as described above.

 

John Guilbert. Dr. Guilbert was appointed as one of our directors in 2004. Dr. Guilbert is a Professor Emeritus at the University of Arizona and is a world-renowned geologist and author of the book, The Geology of Ore Deposits, a popular 900 page text used throughout the world and a co-developer of the Lowell-Guilbert porphyry copper model and recipient of two mining awards, the R.A.F. Penrose Medal and the D.C. Jackling Award. These gold medal awards, the most coveted in American Mining, were awarded back-to-back in successive years. Dr. Guilbert served as a director of Excellon Inc., a Vancouver Stock Exchange listed company from 1992 to 1996 and as Board Chairman and director for JABA Inc., an Alberta Stock Exchange (later CDNX then TSX) listed company from 1996 to 2002.

 

We believe Dr. Guilbert is qualified to serve on our board of directors because of his knowledge of our company’s history and current operations, which he gained from working for our company as described above, in addition to his education and business experience as described above.

 

Keith Brill. Mr. Brill was appointed as one of our directors in, 2009. Mr. Brill received an International Master of Business Administration (IMBA) from the Moore School of Business, University of South Carolina in 2005. He graduated from the South Carolina Honors College, University of South Carolina in 2003 with a Bachelor of Science, magna cum laude, major in Economics and Finance, minor in Spanish. Mr. Brill has been a management consultant with PA Consulting Group, Inc., a leading global consulting firm, since 2004. He has provided multinational Fortune 500 companies with consulting advice on topics including cost reduction, operational efficiency, and IT strategy. Mr. Brill has extensive experience in conducting ROI analysis, developing business cases, and providing strategic financial advice on major business transformation programs.

 

 23 
 

 

We believe Mr. Brill is qualified to serve on our board of directors because of his knowledge of our company’s history and current operations, which he gained from working for our company as described above, in addition to his education and business experience as described above.

 

Peter O’Heeron. Mr. O’Heeron joined the board in 2012. Mr. O’Heeron leads an operational investment group which identifies early stage opportunities in the medical field with strong intellectual property positions. Through his 20+ years of medical product development experience, Mr. O’Heeron brings together the resources from strategic disciplines necessary to commercialize unique technologies. Prior to founding Advanced Medical Technologies LLC, Mr. O’Heeron founded NeoSurg Technologies, Inc. to develop a minimally invasive access system. As a result of his efforts, NeoSurg Technologies was successful in developing the T2000 Minimally Invasive Access System, the world leader in reposable surgical instrumentation. Mr. O’Heeron completed the sale of NeoSurg Technologies to CooperSurgical in 2005. Mr. O’Heeron graduated from Texas State University with a BS in Healthcare Administration and a minor in Business Administration. He received his Masters in Healthcare Administration from the University of Houston. Mr. O’Heeron currently holds 5 patents and has 4 patents pending.

 

We believe Mr. O’Heeron is qualified to serve on our board of directors because of his knowledge of our company’s history and current operations, which he gained from working with our company as described above, in addition to his education and business experience as described above. He also catalyzed a negotiation with Northern Dynasty which benefited the company by millions of dollars.

 

Brett Gross. Mr. Gross joined the board in 2014. Mr. Gross has served as Vice President and Regional Managing Attorney for URS Energy & Construction, Inc., an AECOM company, fka Washington Group International, Inc. since August 2005. Mr. Gross is a mining engineer (BS, Ohio State University, 1982; MS, Virginia Polytechnic Institute, 1988; PE, Colorado and Alabama) and attorney (JD, University of Denver, 2001) with over 30 years of experience, both domestic and international. His work experience includes surface and underground mining operations, engineering, and delivery of construction mega-projects across multiple industrial and commercial markets, and the practice of law related to each of these sectors. Mr. Gross brings a combination of professional skills that benefits every aspect of our business. Mr. Gross’ engineering career began at Virginia Tech, with research focused on rock mechanics and the stability of underground openings, particularly the phenomenon of “coal bumps” and “rock bursts,” and studying methods to monitor stress changes in the longwall barrier pillar during the onset of the active longwall face. The ensuing years of his career have been intimately involved with a broad spectrum of engineering, operations, management and project delivery. Since 2002, Mr. Gross has practiced law both in private practice and as in-house counsel, negotiating and closing complex deals with what today is among the largest engineering and construction firms in the United States.

 

We believe Mr. Gross is qualified to serve on our board of directors because of his education and business experience as described above.

 

Patricia Madaris. Ms. Madaris has served as our VP Finance since May 2015. Prior to that time, Ms. Madaris served as the Executive Assistant to our CEO and Board of Directors since 2011. Since beginning her work at our company, she has proven to be beneficial in facilitating many areas of our public company, working to engage, negotiate, and close financings, and overseeing and working actively in financial reporting, and projected budgeting for ongoing operations. She has also worked as an accountant/manager for corporations in Arizona, Florida, and California since 2005. Ms. Madaris has a Bachelor’s of Science Degree with Indiana Wesleyan University, graduating Summa Cum Laude. Ms. Madaris is currently pursuing her MBA with an expected date of graduation in 2016.

 

Family Relationships

 

There are no family relationships among our directors or officers.

 

Board and Committee Meetings

 

The board of directors of our company held three formal meetings during the fiscal year ended January 31, 2016.

 

There have been no material changes to the procedures by which our shareholders may recommend nominees to our board of directors during the fiscal year ended January 31, 2016. Shareholders may contact our President, James A. Briscoe, to recommend nominees to our board of directors.

 

For the fiscal year ended January 31, 2016 our only standing committee of the board of directors was our audit committee. We do not have a nominating committee or a compensation committee.

 

Audit Committee

 

Currently our audit committee consists of our entire board of directors. We do not have a separately-designated standing audit committee established in accordance with section 3(a)(58)(A) of the Exchange Act.

 

During the fiscal year ended January 31, 2016, the audit committee did not hold any meetings. Rather, the business of the audit committee was conducted by resolutions consented to in writing by all the members of the board and filed with the minutes of the proceedings of the board.

 

 24 
 

 

Audit Committee Financial Expert

 

Our board of directors has determined that it does not have a member of its board of directors or audit committee that qualifies as an "audit committee financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K.

 

We believe that the members of our board of directors are collectively capable of analyzing and evaluating our consolidated financial statements and understanding internal controls and procedures for financial reporting. In addition, we believe that retaining an independent director who would qualify as an "audit committee financial expert" would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated any material revenues to date.

 

Involvement in Certain Legal Proceedings

 

Our directors and executive officers have not been involved in any of the following events during the past 10 years:

 

1. any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
   
2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
   
3. being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
   
4. being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
   
5. being the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: (i) any federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease- and-desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or,
   
6. being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self- regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than 10% of our common stock, to file reports regarding ownership of, and transactions in, our securities with the SEC and to provide us with copies of those filings. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during the fiscal year ended January 31, 2016, all filing requirements applicable to its officers, directors and greater than 10% percent beneficial owners were complied with.

 

Code of Ethics

 

Effective March 15, 2004, our company's board of directors adopted a Code of Business Conduct and Ethics that applies to all employees, including our company's Chief Executive Officer, Chief Financial Officer and VP Finance. As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote:

 

1. honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
   
2. full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications made by us;
   
3. compliance with applicable governmental laws, rules and regulations;
   
4. the prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified in the Code of Business Conduct and Ethics; and
   
5. accountability for adherence to the Code of Business Conduct and Ethics. Our Code of Business Conduct and Ethics requires, among other things, that all of our company's Senior Officers commit to timely, accurate and consistent disclosure of information; that they maintain confidential information; and that they act with honesty and integrity.

 

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In addition, our Code of Business Conduct and Ethics emphasizes that all employees, and particularly senior officers, have a responsibility for maintaining financial integrity within our company, consistent with generally accepted accounting principles, and federal and state securities laws. Any senior officer who becomes aware of any incidents involving financial or accounting manipulation or other irregularities, whether by witnessing the incident or being told of it, must report it to our company. Any failure to report such inappropriate or irregular conduct of others is to be treated as a severe disciplinary matter. It is against our company policy to retaliate against any individual who reports in good faith the violation or potential violation of our company's Code of Business Conduct and Ethics by another.

 

Our Code of Business Conduct and Ethics was filed with the SEC on March 13, 2004 as Exhibit 14.1 to our annual report on Form 10-KSB for the fiscal year ended December 31, 2003. We will provide a copy of the Code of Business Conduct and Ethics to any person without charge, upon request. Requests can be sent to: Liberty Star Uranium & Metals Corp., 5610 E. Sutler Lane, Tucson, Arizona 85712.

 

ITEM 11. EXECUTIVE COMPENSATION

 

Following are the particulars of all compensation paid or accruing to our named executive officers for the last two fiscal years ended.

 

2016 Summary Compensation Table
 

Name and Principal Position

  Year
Ended January 31,
   Salary    Bonus    

Stock

Awards

    

Option

Awards

    

Nonequity

Incentive Plan

Compensation

    

Change in Pension Value and Nonqualified

Deferred

Compensation

Earnings

    

All Other

Compensation(1)

   Total 
James A. Briscoe,
Chief Executive Officer,
Chief Financial Officer
and President
  2016
2015
   

148,000

148,000

    

0

0

    

0

0

    

0

0

    

0

0

    

0

0

    

0

0

   $
$

148,000

148,000

 

 

(1) The value of perquisites and other personal benefits and property have been excluded because they total, in the aggregate, less than $10,000.

 

Outstanding Equity Awards at 2016 Fiscal Year-End

 

The following table sets forth for each named executive officer certain information concerning the outstanding equity awards as of January 31, 2016.

 

   Option Awards  Stock Awards 
                              Equity   Awards : 
                              Incentive   Market or 
           Equity                  Plan   Payout 
           Incentive                  Awards :   Value 
           Plan              Market   Number of   of 
           Awards:              Value   Unearned   Unearned 
   Number of   Number of   Number of          Number of   of Shares or   Shares,   Shares, 
   Securities   Securities   Securities          Shares or   Units of   Units   Units 
   Underlying   Underlying   Underlying          Units of   Stock   or Other   or Other 
   Unexercised   Unexercised   Unexercised   Option   Option  Stock that   that Have   Rights that   Rights that 
   Options   Options   Unearned   Exercise   Expiration  Have Not   Not   Have Not   Have Not 
Name  Exercisable   Unexercisable   Options   Price   Date  Vested   Vested   Vested   Vested 
James A. Briscoe   52,500,000    0    0   $0.038   8/10/2020   0    0    0    0 
    75,000    0    0   $0.88   5/21/2018   0    0    0    0 

 

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COMPENSATION PLANS

 

As of January 31, 2016, we had three compensation plans in place, entitled "2004 Stock Option Plan", “2007 Stock Option Plan” and “2010 Stock Option Plan”. These plans have been approved by our security holders. These plans have been given retroactive effect of the 1-for-4 reverse stock split on September 1, 2009.

 

No options were granted during the fiscal years ended January 31, 2016 and 2015.

 

In December 2015, the board of directors approved a five-year extension of 77,500,000 options expiring on August 16, 2015 to an extended expiration date of August 16, 2020. The options are held by four directors.

 

Long-Term Incentive Plans

 

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers, except that our directors and executive officers receive stock options at the discretion of our Board. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our Board.

 

We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $60,000 per executive officer.

 

Employment Contracts

 

We have not entered into any written employment agreements or compensation arrangements with any of our named executive officers. We have entered into a verbal agreement with James A. Briscoe, our Chief Executive Officer, Chief Financial Officer, President and Chairman of the Board, for an annual salary of $148,000, plus a monthly automobile allowance.

 

Compensation of Directors

 

We have no formal plan for compensating our directors for their service in their capacity as directors, although such directors are expected in the future to receive stock options to purchase common stock as awarded by our board of directors or (as to future stock options) a compensation committee which may be established. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director. No director received and/or accrued any compensation for their services as a director, including committee participation and/or special assignments.

 

No compensation was paid to or earned by any director in his capacity as a director, during the fiscal year ended January 31, 2016.

 

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 

We have set forth in the following table certain information regarding our common stock beneficially owned on May 3, 2016 for (i) each shareholder we know to be the beneficial owner of 5% or more of our outstanding common stock, (ii) each of our named executive officers and directors, and (iii) all executive officers and directors as a group. In general, a person is deemed to be a "beneficial owner" of a security if that person has or shares the power to vote or direct the voting of such security, or the power to dispose or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which the person has the right to acquire beneficial ownership within 60 days. All percentages are calculated based upon a total number of 1,632,552,893 shares of common stock issued and outstanding as of May 3, 2016, plus, in the case of the individual or entity for which the calculation is made, that number of options or warrants owned by such individual or entity that are currently exercisable or exercisable within 60 days.

 

Name and Address of Beneficial Owner 

Amount and Nature of

Beneficial Ownership

  

Percentage

of Class (1)

 
James A. Briscoe   54,762,500(2)   3.25%
Gary Musil   7,542,000(3)    *
John Guilbert   15,032,500(3)   1.00%
Keith Brill   2,500,000(3)   *
Peter O’Heeron   9,122,987(4)   * 
Brett Gross   74,858,600(5)   4.48%
Patricia Madaris   875,000(3)   * 
           
Directors and Executive Officers as a Group (7 persons)   164,694,337    9.37%

 

(1) Based on 1,632,552,893 shares of common stock issued and outstanding as of May 3, 2016. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable.
   
(2) Represents: (i) 52,575,000 incentive stock options that are currently exercisable, and (ii) 2,187,500 shares are held by Alaska Star Minerals LLC, which is wholly owned by Mr. Briscoe.
   
(3) This amount represents incentive stock options that are currently exercisable or exercisable within 60 days.
   
(4) This amount includes 5,542,973 incentive stock options and 677,507 common stock purchase warrants that are currently exercisable or exercisable within 60 days.
   
(5) This amount includes 39,655,742 common stock purchase warrants that are currently exercisable or exercisable within 60 days.

 

Equity Compensation Plan Information

 

As of January 31, 2016, we had three compensation plans in place, entitled "2004 Stock Option Plan", “2007 Stock Option Plan” and “2010 Stock Option Plan”. These plans have been approved by our security holders. These plans have been given retroactive effect of the 1-for-4 reverse stock split on September 1, 2009.

 

Plan Category 

Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights

(a)

  

Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights

(b)

  

Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))

(c)

 
Equity Compensation Plans Approved by Security Holders   85,784,874   $0.045    13,177,626 
Equity Compensation Plans Not Approved by Security Holders   --    N/A    -- 
Total   85,784,874   $0.045    13,177,626 

 

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

 

There has been no transaction, since February 1, 2013, or currently proposed transaction, in which our company was or is to be a participant and the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which any of the following persons had or will have a direct or indirect material interest:

 

  (a) Any director or executive officer of our company;
     
  (b) Any person who beneficially owns, directly or indirectly, more than 5% of any class of our voting securities; and
     
  (c) Any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the foregoing persons.

 

Director Independence

 

Our board of directors consists of the six directors: James A. Briscoe, Gary Musil, John Guilbert, Keith Brill, Peter O’Heeron and Brett Gross. Our common stock is quoted on the OTC Pink tier operated by the OTC Markets Group, which does not impose any director independence requirements. Under NASDAQ Rule 5605(a)(2), a director is not independent if he or she is also an executive officer or employee of the corporation or was, at any time during the past three years, employed by the corporation. Using this definition of independent director, we have five independent directors consisting of Gary Musil, John Guilbert, Keith Brill, Peter O’Heeron and Brett Gross.

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

The following table shows the fees that were billed for the audit and other services provided by MaloneBailey LLP for the fiscal years ended January 31, 2016 and 2015.

 

   Fiscal Year Ended
January 31,
 
   2016   2015 
Audit Fees  $30,000   $28,000 
Audit-Related Fees   4,840    1,100 
Tax Fees   -    - 
All Other Fees   -    - 
Total  $34,840   $29,100 

 

Audit Fees - This category includes the audit of our annual financial statements, review of financial statements included in our quarterly reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.

 

Audit-Related Fees - This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the SEC, other accounting consulting and other audit services.

 

Tax Fees - This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.

 

All Other Fees - This category consists of fees for other miscellaneous items.

 

Pre-Approval Policies and Procedures with respect to Services Performed by Independent Auditors

 

The board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors before the respective services were rendered.

 

The board of directors has considered the nature and amount of fees billed by MaloneBailey, LLP and believes that the provision of services for activities unrelated to the audit is compatible with maintaining MaloneBailey, LLP’s independence.

 

 29 
 

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

Exhibit    
Number   Description of Exhibit
3.1   Articles of Incorporation (incorporated by reference to Exhibit 3.1 to our registration statement on Form SB-2, filed with the SEC on May 14, 2002).
3.2   Bylaws (incorporated by reference to Exhibit 3.2 to our quarterly report on Form 10-QSB, filed with the SEC on December 14, 2007).
3.3   Certificate of Change to Authorized Capital (incorporated by reference to Exhibit 3.1 to our current report on Form 8-K, filed with the SEC on September 2, 2009).
3.4   Articles of Merger (incorporated by reference to Exhibit 3.4 to our annual report on Form 10-KSB , filed with the SEC on March 31, 2004).
10.1   Letter Agreement dated November 14, 2011 with Northern Dynasty (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K, filed with the SEC on November 25, 2011).
10.2   Form of Subscription Agreement (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K, filed with the SEC on December 29, 2011).
10.3   Form of Stock Option Agreement (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K, filed with the SEC on January 24, 2012).
10.4   Form of Warrant Certificate (incorporated by reference to Exhibit 10.2 to our current report on Form 8-K, filed with the SEC on July 30, 2012).
10.5   Settlement Agreement dated November 13, 2012 with Northern Dynasty Minerals Ltd. (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K, filed with the SEC on November 15, 2012).
10.6   Convertible Promissory Note issued to JSJ Investments Inc. (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K, filed with the SEC on September 2, 2014).
10.7   Securities Purchase Agreement dated October 15, 2014 (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K, filed with the SEC on October 20, 2014).
10.8   Convertible Promissory Note dated October 15, 2014 (incorporated by reference to Exhibit 10.2 to our current report on Form 8-K, filed with the SEC on October 20, 2014).
10.9   Investment Agreement dated December 15, 2014 with Tangiers Capital, LLC (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K, filed with the SEC on December 19, 2014).
10.10   Registration Rights Agreement dated December 15, 2014 with Tangiers Capital, LLC (incorporated by reference to Exhibit 10.2 to our current report on Form 8-K, filed with the SEC on December 19, 2014).
10.11   Investment Agreement dated June 20, 2015 with Tangiers Capital, LLC (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K, filed with the SEC on June 30, 2015).
10.12   Registration Rights Agreement dated June 20, 2015 with Tangiers Capital, LLC (incorporated by reference to Exhibit 10.2 to our current report on Form 8-K, filed with the SEC on June 30, 2015).
10.13   Convertible Promissory Note dated November 2, 2015 issued to JMJ Financial (incorporated by reference to Exhibit 10.13 to our Form 10-Q, filed with the SEC on December 15, 2015).
10.14   12% Convertible Promissory Note dated December 29, 2015 issued to JSJ Investments, Inc (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K with the SEC on January 7, 2016).
14.1   Code of Ethics (incorporated by reference to Exhibit 14.1 to our current report on Form 8-K, filed with the SEC on September 1, 2009).
21.1*   Subsidiaries.
31.1*   Section 302 Certification under Sarbanes-Oxley Act of 2002 of James A. Briscoe
32.1*   Section 906 Certification under Sarbanes-Oxley Act of 2002 of James A. 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

 

* Filed herewith.

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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.
     
Dated: May 17, 2016 By: /s/ James A. Briscoe
    James A. Briscoe
    Chief Executive Officer,
Chief Financial Officer and President

 

POWER OF ATTORNEY

 

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints James A. Briscoe as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this annual report on Form 10-K and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorney-in-fact and agent or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature   Title   Date
         
/s/ James A. Briscoe   Chief Executive Officer, Chief Financial Officer, President and Chairman of the Board (principal executive officer, principal financial officer and principal accounting officer)   May 17, 2016
Paul Mathieson        
         
/s/ Keith Brill   Director   May 17, 2016
Keith Brill        
         
/s/ Brett Gross   Director   May 17, 2016
Brett Gross        
         
/s/ John Guilbert   Director   May 17, 2016
John Guilbert        
         
/s/ Gary Musil   Secretary and Director   May 17, 2016
Gary Musil        
         
/s/ Peter O’Heeron   Director   May 17, 2016
Peter O’Heeron        

 

 

 31