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

FORM 10-Q

(Mark One)

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

For the quarterly period ended October 31, 2012

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

For the transition period from __________ to __________

Commission file number 000-50071

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

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

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

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

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

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

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

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

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


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

The number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
719,078,787 as of December 14, 2012.

ii


TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS 1
   
PART I - FINANCIAL INFORMATION 2
   
ITEM 1. FINANCIAL STATEMENTS. 2
   
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 19
   
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 24
   
ITEM 4. CONTROLS AND PROCEDURES. 24
   
PART II - OTHER INFORMATION 24
   
ITEM 1. LEGAL PROCEEDINGS. 24
   
ITEM 1A. RISK FACTORS 24
   
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. 27
   
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 27
   
ITEM 4. MINE SAFETY DISCLOSURES. 27
   
ITEM 5. OTHER INFORMATION. 27
   
ITEM 6. EXHIBITS 28
   
SIGNATURES 30

iii


FORWARD-LOOKING STATEMENTS

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

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

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

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

1


PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

2


LIBERTY STAR URANIUM & METALS CORP.
(An Exploration Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in U.S. Dollars)

ASSETS    
             
    October 31, 2012        
    (Unaudited)     January 31, 2012  
Current            
   Cash and cash equivalents $  95,071   $ 155,869  
   Prepaid expenses and supplies   14,370     14,151  
    109,441     170,020  
             
Property and equipment, net   89,198     129,510  
Certificates of deposit   -     3,000  
             
  $  198,639   $ 302,530  
             
LIABILITIES AND STOCKHOLDERS’ DEFICIT   
             
Current            
   Current portion of long-term debt $  4,631   $ 4,631  
   Convertible promissory notes payable   3,730,174     3,730,174  
   Accounts payable and accrued liabilities   192,186     12,470  
   Accrued wages to related parties   237,617     183,367  
   Accrued interest payable   857,420     526,971  
    5,022,028     4,457,613  
             
Long-term Debt, net of current portion   13,962     17,393  
Warrant Liability   47,540     53,948  
             
    5,083,530     4,528,954  
             
Stockholders’ Deficit            
   Common stock            
         Authorized - $0.00001 par value; 1,250,000,000 shares 
         Issued and outstanding – 703,096,964 and 635,899,389 
                  shares at October 31, 2012 and January 31, 2012, respectively
  7,031     6,359  
   Additional paid-in capital   47,349,688     45,998,478  
   Deficit accumulated during the exploration stage   ( 52,241,610 )   ( 50,231,261 )
    (4,884,891 )   ( 4,226,424 )
             
  $  198,639   $ 302,530  

The accompanying notes are an integral part of the condensed consolidated financial statements.

3


LIBERTY STAR URANIUM & METALS CORP.
(An Exploration Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in U.S. Dollars)
(Unaudited)

                            Cumulative Period  
                            From Inception  
    For The Three     For The Nine     (August 20,  
    Months Ended October 31     Months Ended October 31     2001) to  
    2012     2011     2012     2011     October 31, 2012  
                               
Revenues $  -   $ -   $   $ -   $ -  
                               
Expenses                              
 Geological and geophysical costs   621,857     703,150     933,692     910,262     15,193,272  
 Salaries and benefits   86,257     84,536     266,936     225,777     4,183,292  
 Public relations   64,631     5,299     75,253     46,442     851,735  
 Depreciation   10,259     15,758     33,612     47,902     913,142  
 Legal   17,810     25,058     47,297     50,380     941,874  
 Professional services   22,140     12,655     89,990     68,207     1,358,577  
 General and administrative   81,222     50,224     199,972     213,604     2,172,408  
 Travel   5,383     8,941     24,691     48,150     267,199  
 Settlement expense   -     -     -     -     13,241,020  
 Impairment loss   -     -     -     -     16,092,870  
    909,559     905,621     1,671,443     1,610,724     55,215,389  
                               
Loss From Operations   (909,559 )   (905,621 )   (1,671,443 )   (1,610,724 )   (55,215,389 )
                               
Other Income (Expense)                              
 Interest income   13     114     128     805     198,752  
 Interest expense   (114,999 )   (93,731 )   (333,323 )   (259,328 )   (6,257,599 )
 Debt conversion expense   -     -     -     -     ( 103,437 )
 Loss on sale of fixed assets   -     -     (12,119 )   -     (54,572 )
 Gain on change in fair value of warrant liability   21,650     -     6,408     -     (3,667,626 )
 Other income   -     -     -     -     1,350,390  
 Income from Elle Venture   -     -     -     -     300,000  
 Foreign exchange gain   -     -     -     -     505  
 Gain on settlement of debt to related party   -     -     -     -     7,366  
    (93,336 )   (93,617 )   (338,906 )   (258,523 )   (8,226,221 )
                               
Net Loss $  (1,002,895 ) $ (999,238 ) $ (2,010,349 ) $ (1,869,247 ) $ (63,441,610 )
                               
Basic And Diluted Net Loss Per Share of Common Stock $  ( 0.00 ) $  ( 0.00 ) $  ( 0.00 ) $ ( 0.00 )    
                               
Basic And Diluted Weighted Average Number Of Shares Of Common Stock Outstanding   697,892,432     625,158,491     663,840,046     613,735,561      

The accompanying notes are an integral part of the condensed consolidated financial statements.

4


LIBERTY STAR URANIUM & METALS CORP.
(An Exploration Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ EQUITY (DEFICIT)
FROM INCEPTION (AUGUST 20, 2001) TO October 31, 2012
(Stated in U.S. Dollars)
(Unaudited)

                Additional     Deficit Accumulated     Total  
    Common Stock     Paid-in     During The     Stockholders'  
    Shares     Amount     Capital     Exploration Stage     Equity (Deficit)  
Balance, August 20, 2001 (Date of inception)   -   $ -   $  -   $  -   $ -  
                               
   Common stock issued for cash   5,000,000     50     99,950     -     100,000  
   Net loss for the period   -     -     -     ( 132,602 )   ( 132,602 )
                               
Balance, January 31, 2004   5,000,000     50     99,950     ( 132,602 )   ( 32,602 )
                               
   Acquisition, February 3, 2004   4,375,000     44     15,924,956     -     15,925,000  
   Issuance of common stock and warrants 
      private placement
  650,000     7     2,999,993     -     3,000,000  
   Options issued for services   -     -     94,350     -     94,350  
   Return of shares   ( 1,750,000 )   (18 )   (11,199,982 )   11,200,000     -  
   Net loss for the year   -     -     -     ( 18,392,024 )   ( 18,392,024 )
                               
Balance, January 31, 2005   8,275,000     83     7,919,267     ( 7,324,626 )   594,724  
                               
   Issuance of common stock and warrants 
      private placement
  972,172     10     5,052,722     -     5,052,732  
   Net loss for the year   -     -     -     ( 4,627,965 )   ( 4,627,965 )
                               
Balance, January 31, 2006   9,247,172     93     12,971,989     ( 11,952,591 )   1,019,491  
                               
   Issuance of common stock private 
      placement
  990,596     10     2,545,985     -     2,545,995  
   Issuance of common stock for services   37,500     -     93,000     -     93,000  
   Expenses of common stock issuance   -     -     ( 320,000 )   -     ( 320,000 )
   Options granted to consultants and employees   -     -     832,343     -     832,343  
   Net loss for the year   -     -     -     ( 3,267,948 )   ( 3,267,948 )
                               
Balance, January 31, 2007   10,275,268     103     16,123,317     ( 15,220,539 )   902,881  
                               
   Issuance of common stock private placement   429,700     4     1,074,413     -     1,074,417  
   Issuance of common stock for services   28,000     -     54,540     -     54,540  
   Issuance of common stock for conversion of 
      promissory note
  99,884     1     259,698     -     259,699  
   Options granted to employees and consultants   -     -     358,646     -     358,646  

5



   Issuance of common stock purchase warrants   -     -     1,421,538     -     1,421,538  
   Beneficial conversion feature of convertible 
      promissory notes
  -     -     1,842,734     -     1,842,734  
   Net loss for the year   -     -     -     ( 5,697,935 )   ( 5,697,935 )
                               
Balance, January 31, 2008   10,832,852     108     21,134,886     ( 20,918,474 )   216,520  
                               
   Issuance of common stock for conversion or 
      payment of promissory note
  37,646,325     376     1,839,135     -     1,839,511  
   Issuance of common stock for inducement to 
      convert promissory note
  7,500     -     9,000     -     9,000  
   Reduction of conversion price for inducement 
      to convert promissory note
  -     -     94,437     -     94,437  
   Stock based compensation   -     -     576,244     -     576,244  
   Common stock purchase warrants exercise 
      price reduction
  -     -     67,700     -     67,700  
   Net loss for the year   -     -     -     ( 4,176,066 )   ( 4,176,066 )
                               
Balance, January 31, 2009   48,486,677     484     23,721,402     ( 25,094,540 )   ( 1,372,654 )
                               
   Issuance of common stock for conversion or 
      payment of promissory note
  199,170,302     1,992     603,661     -     605,653  
   Beneficial conversion feature of convertible 
      promissory notes
  -     -     330,366     -     330,366  
   Net loss for the year   -     -     -     ( 2,809,843 )   ( 2,809,843 )
                               
Balance, January 31, 2010   247,656,979     2,476     24,655,429     ( 27,904,383 )   ( 3,246,478 )
                               
   Issuance of common stock for conversion or 
      payment of promissory note
  187,127,678     1,872     273,105     -     274,977  
   Issuance of common stock and warrants private 
      placement, net
  31,778,484     318     1,284,363     -     1,284,681  
   Exercise of common stock purchase warrants   135,848,741     1,358     1,880,588     -     1,881,946  
   Issuance and modification of common stock 
      purchase warrants
  -     -     15,089,884     -     15,089,884  
   Stock based compensation   -     -     2,530,750     -     2,530,750  
   Net loss for the year   -     -     -     ( 19,865,419 )   ( 19,865,419 )
                               
Balance, January 31, 2011   602,411,882     6,024     45,714,119     ( 47,769,802 )   (2,049,659 )
                               
   Exercise of common stock purchase warrants   22,687,507     227     (227 )   -     -  

6



   Issuance of common stock and warrants private 
      placement, net
  10,800,000     108     180,636     -     180,744  
   Stock based compensation   -     -     103,950     -     103,950  
   Net loss for the year   -     -     -     (2,461,459 )   (2,461,459 )
                               
Balance, January 31, 2012   635,899,389     6,359     45,998,478     (50,231,261 )   (4,226,424 )
                               
   Exercise of common stock purchase warrants   20,555,571     205     (205 )   -     -  
   Issuance of common stock and warrants private 
      placement, net
  17,225,537     173     512,711     -     512,884  
   Issuance of common shares pursuant to 
      investment agreement
  29,416,467     294     799,706     -     800,000  
   Stock based compensation   -     -     38,998     -     38,998  
   Net loss for the period   -     -     -     (2,010,349 )   (2,010,349 )
                               
Balance, October 31, 2012   703,096,964   $  7,031   $  47,349,688   $  (52,241,610 ) $ (4,884,891 )

The accompanying notes are an integral part of the condensed consolidated financial statements.

7


LIBERTY STAR URANIUM & METALS CORP.
(An Exploration Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in U.S. Dollars)
(Unaudited)

                Cumulative Period  
                From Inception  
    For The Nine     (August 20, 2001)  
    Months Ended October 31     to  
    2012     2011     October 31, 2012  
Cash Flows (Used In) Provided By:                  
Operating Activities                  
   Net loss $  (2,010,349 ) $ ( 1,869,247 ) $ (63,441,610 )
   Adjustments to reconcile net loss to net cash from operating activities:            
         Depreciation   33,612     47,902     913,142  
         Amortization of deferred financing charges   -     -     542,716  
         Amortization of discount on convertible promissory notes   -     -     3,632,995  
         Impairment loss   -     -     16,092,870  
         Loss on sale of fixed assets   12,119     -     54,572  
         (Gain) Loss on change in fair value of warrant liability   (6,408 )   -     3,667,626  
         Share based compensation   38,998     -     4,440,931  
         Share and warrant based payments   -     -     14,421,627  
         Non-cash other income from sale of mineral claims   -     -     (1,000,000 )
         Non-cash geological costs paid from the issuance of
             convertible promissory note
  -     561,816     730,174  
   Changes in assets and liabilities:                  
         Prepaid expenses and supplies   (219 )   2,447     28,077  
         Other current assets   -     -     (7,875 )
         Certificates of deposit   3,000     -     (8,435 )
         Other assets   -     -     (25,000 )
         Accounts payable and accrued expenses   179,716     (14,008 )   186,171  
         Accrued wages to related parties   54,250     27,000     237,617  
         Accrued interest   330,449     257,651     1,265,621  
    (1,364,832 )   ( 986,439 )   (18,268,781 )
Investing Activities                  
   Proceeds from the sale of fixed assets   -     -     407,327  
   Proceeds from redemption of certificate of deposit   -     -     213,232  
   Purchase of certificate of deposit   -     -     (204,797 )
   Purchase of equipment   (5,419 )   ( 28,813 )   (1,184,693 )
    (5,419 )   (28,813 )   (768,931 )
Financing Activities                  
   Principal activity on long-term debt   (3,431 )   ( 2,671 )   (503,747 )
   Principal activity on capital lease obligation   -     -     (39,298 )
   Principal activity on convertible promissory notes   -     -     (286,227 )
   Proceeds from the issuance of common stock, net of expenses   1,312,884     100,000     13,990,759  
   Proceeds from the sale of convertible promissory notes   -     -     5,772,371  
   Proceeds from long-term debt   -     -     198,925  
    1,309,453     97,329     19,132,783  
Net Increase (Decrease) In Cash And Cash Equivalents   (60,798 )   (917,923 )   95,071  
         Cash And Cash Equivalents, Beginning Of Period   155,869     1,100,315     -  
Cash And Cash Equivalents, End Of Period $  95,071   $ 182,392   $ 95,071  
                   
Supplemental Information                  
Cash Activities                  
   Interest paid $  2,889   $ 1,677   $ 205,740  
   Income taxes paid $  -   $ -   $ -  

The accompanying notes are an integral part of the condensed consolidated financial statements.

8


LIBERTY STAR URANIUM & METALS CORP.
(An Exploration Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Stated in U.S. Dollars)
(Unaudited)

NOTE 1 – Organization

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

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

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

NOTE 2 – Interim financial statement disclosure

The condensed consolidated financial statements included herein have been prepared by Liberty Star Uranium & Metals Corp. without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) and should be read in conjunction with our annual report on Form 10-K for the year ended January 31, 2012 as filed with the SEC under the Securities and Exchange Act of 1934 (the “Exchange Act”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted, as permitted by the SEC, although we believe the disclosures which are made are adequate to make the information presented not misleading. The condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary to present fairly our financial position at October 31, 2012 and the results of our operations and cash flows for the periods presented.

Interim results are subject to significant seasonal variations and the results of operations for the nine months ended October 31, 2012 are not necessarily indicative of the results to be expected for the full year.

9


NOTE 3 - Summary of significant accounting policies

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

Use of estimates

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

The valuation of stock-based compensation, 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 material change in these estimates may occur in the near term.

Principles of consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Big Chunk and Redwall, from the dates of acquisition, February 5, 2004 and August 31, 2007, respectively. All significant intercompany accounts and transactions have been eliminated upon consolidation.

Cash and cash equivalents

We consider cash held at banks and all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. We maintain our cash in bank deposit accounts which, for periods of time, may exceed federally insured limits. At October 31, 2012 and January 31, 2012, we did not have cash 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.

Property and equipment

Property and equipment is stated at cost. We capitalize all purchased equipment over $500 with a useful life of more than one year. Depreciation is calculated using the straight line method over the estimated useful lives of the assets. Leasehold improvements are stated at cost and are amortized over their estimated useful lives or the lease term, whichever is shorter. Maintenance and repairs are expensed as incurred while betterments or renewals are capitalized. Property and equipment is reviewed periodically for impairment. The estimated useful lives range from 3 to 7 years.

10


Convertible promissory notes

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

Common stock purchase warrants

We report common stock purchase warrants as equity unless a condition exists which requires reporting as a derivative liability at fair market value when material. For common stock purchase warrants reported as a derivative liability, as well as new and modified warrants reported as equity, we utilize the Black-Scholes valuation method in order to estimate fair market value.

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 at October 31, 2012 and January 31, 2012.

Fair Value of Financial Assets and Liabilities

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

Level 1 -

Quoted prices in active markets for identical assets or liabilities.

 

Level 2 -

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

 

Level 3 -

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

Net loss per share

Basic net loss per share is computed by dividing net loss attributable to common shareholders by the weighted average number of shares of common stock outstanding during the period. The calculation of basic loss per share gives retroactive effect to an eight for one forward stock split on January 6, 2004 which resulted in 20,000,000 common shares outstanding. The calculation of basic loss per share gives retroactive effect to a one for four reverse stock split on September 1, 2009 which resulted in 67,261,764 common shares outstanding. Diluted net loss per share takes into consideration shares of common stock outstanding (computed under basic loss per share) and potentially dilutive shares of common stock that are not anti-dilutive. At October 31, 2012 and January 31, 2012, there were 178,156,230 and 187,086,566 potentially dilutive instruments outstanding, respectively. Additionally, at October 31, 2012 and January 31, 2012 if settlement of the Convertible Promissory Notes were completed by the issuance of common shares there would be 197,741,128 and 168,133,617 additional shares, respectively. These instruments were not included in the determination of diluted loss per share as their effect was anti-dilutive.

11


Recently issued accounting standards

In May 2011, the FASB issued Accounting Standards Update 2011-04 (“ASU 2011-04”) to achieve common fair value measurement and disclosure requirements in US GAAP and IFRS. This guidance is effective for interim and annual periods beginning after December 15, 2011. This guidance did not have a material impact on our financial position and results of operations.

NOTE 4 – Property and equipment

The balances of our major classes of depreciable assets are:

    October 31, 2012     January 31, 2012  
Geology equipment $  261,055   $ 290,736  
Vehicles and transportation equipment   50,180     50,180  
Office furniture and equipment   73,451     73,451  
    384,686     414,367  
Less: Accumulated depreciation   (295,488 )   (284,857 )
  $  89,198   $ 129,510  

NOTE 5 – Convertible promissory notes

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

On July 15, 2010 we issued a secured convertible promissory note bearing interest at a rate of 10% per annum compounded monthly (the “Convertible Note”) to Northern Dynasty Minerals Ltd (“Northern Dynasty”). During the year ended January 31, 2012 the agreement with Northern Dynasty was amended to issue additional secured convertible promissory notes totaling $730,174 to reimburse Northern Dynasty for assessment work, rental fees, cash in lieu of assessment work and filing fees on the mineral claims that were paid in fiscal 2011 and fiscal 2012 because we could not come to an agreement on the earn-in option and joint venture agreement with Northern Dynasty. The principal balance of the Convertible Notes at October 31, 2012 and January 31, 2012 was $3,730,174. Accrued interest on the Convertible Notes at October 31, 2012 and January 31, 2012 was $857,420 and $526,971, respectively.

As part of the transaction noted above, Northern Dynasty can earn a 60% interest in our Big Chunk project in Alaska (the “Joint Venture Claims”) by spending $10,000,000 on those properties over six years. The borrowings from Northern Dynasty may be applied as part of Northern Dynasty’s earn-in requirements. Northern Dynasty’s minimum annual expenditures under the earn-in would be the minimum level necessary to keep the Joint Venture Claims in good standing. Northern Dynasty may elect to abandon the earn-in at any time on 30 days’ notice, so long as sufficient annual labor is performed, or a cash payment in lieu of labor is made, in order to fulfill the annual labor requirements for the Joint Venture Claims for a minimum of 12 months after termination of the earn-in. As of October 31, 2012, no such notice by Northern Dynasty has been received.

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

Provided a minimum of $1,000,000 has been expended by Northern Dynasty on earn-in expenses, the Convertible Notes will be convertible until repaid or deemed repaid, into common shares of our company at the 5 day volume weighted average trading price immediately prior to Northern Dynasty giving a notice of conversion less the maximum allowable discount applicable as if our shares were listed on the TSX Venture Exchange. At October 31, 2012, Northern Dynasty has expended approximately $815,000 of the $1,000,000 earn-in expenses. In accordance with authoritative guidance, the contingent beneficial conversion feature on the Convertible Note will not be recorded unless the $1,000,000 earn-in expenditures are expended and the note becomes convertible. The Convertible Note may be pre-paid by our Company without penalty at any time on 10 days prior notice during which time Northern Dynasty’s conversion rights are unaffected.

12


If settlement of the Convertible Note occurred on October 31, 2012, we would have been obligated to pay $3,730,174 in principal and $857,420 of accrued interest. If the settlement were completed by the issuance of common shares, the conversion price at October 31, 2012 would have been $0.0232 per share for a total of 197,741,128 shares required to convert the Convertible Note.

We have classified the entire amount as a current liability as we were not able to come to terms with an agreement regarding the joint venture agreement, and as a result, the Convertible Note can be called by Northern Dynasty on 45 days notice. (See Note 11 for changes to the Convertible Note agreement subsequent to October 31, 2012.)

NOTE 6 – Capital stock

a) Common Shares

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.

i) In August and September 2012, we sold 6,156,153 units, at prices ranging from $0.027 to $0.031 per unit, to investors for gross proceeds of $180,000. Each unit consisted of one common share of our company and one non-transferable common stock purchase warrant. Each common stock purchase warrant entitles the investors to purchase one additional common share of our company at prices ranging from $0.038 to $0.044 until August 29, 2015. The investors are U.S. Persons and are accredited investors and in issuing securities to the investors we relied on the exemption from the registration requirements of the Securities Act of 1933 provided by Rule 506 of Regulation D promulgated thereunder.

ii) In May and July 2012, we sold 4,859,073 units, at prices ranging from $0.027 to $0.033 per unit, to investors for gross proceeds of $150,004. Each unit consisted of one common share of our company and one non-transferable common stock purchase warrant. Each common stock purchase warrant entitles the investors to purchase one additional common share of our company at prices ranging from $0.027 to $0.047 until July 23, 2015. The investors are U.S. Persons and are accredited investors and in issuing securities to the investors we relied on the exemption from the registration requirements of the Securities Act of 1933 provided by Rule 506 of Regulation D promulgated thereunder.

iii) In May and July 2012, investors exercised 19,861,870 of the May 2007 common stock purchase warrants using the cashless exercise provision. We issued 18,033,814 shares of common stock and cancelled 1,828,056 common stock purchase warrants pursuant to the cashless exercise provision. No cash proceeds were received. We issued these shares pursuant to an exemption from registration set out in Section 4(2) of the Securities Act of 1933. The remaining 759,160 common stock purchase warrants from May 2007 expired on May 11, 2012 without exercise.

iv) In March 2012, we sold 2,000,000 units at a price of $0.02844 per unit to one investor for gross proceeds of $56,880. Each unit consisted of one common share of our company and one non-transferable common stock purchase warrant. Each common stock purchase warrant entitles the investor to purchase one additional common share of our company at a price of $0.03982 until March 14, 2015. The investor is a U.S. Person and is an accredited investor and in issuing securities to the investor we relied on the exemption from the registration requirements of the Securities Act of 1933 provided by Rule 506 of Regulation D promulgated thereunder.

v) In March 2012, one investor exercised 84,615 of the May 2007 common stock purchase warrants using the cashless exercise provision. The cashless exercise provision allows the investor, if the fair market value of one share of common stock is greater than the exercise price, to elect to receive shares equal to the value of the warrant less a portion of the warrant that is cancelled using a specific formula. We issued 21,757 shares of common stock and cancelled 62,858 common stock purchase warrants pursuant to the cashless exercise provision. No cash proceeds were received. We issued these shares pursuant to an exemption from registration set out in Section 4(2) of the Securities Act of 1933.

13


vi) In February 2012, we sold 2,209,596 units at a price of $0.03168 per unit to one investor for gross proceeds of $70,000. Each unit consisted of one common share of our company and one non-transferable share purchase warrant. Each share purchase warrant entitles the investor to purchase one additional common share of our company at a price of $0.04435 until February 23, 2015. The investor is a U.S. Person and in issuing securities to the investor we relied on the exemption from the registration requirements of the Securities Act of 1933 provided by Rule 506 of Regulation D promulgated thereunder.

vii) In February 2012 we sold 2,000,715 units at a price of $0.02799 per unit to one investor for gross proceeds of $56,000. Each unit consisted of one common share of our company and one non-transferable share purchase warrant. Each share purchase warrant entitles the investor to purchase one additional common share of our company at a price of $0.03919 until February 3, 2015. The investor is a U.S. Person and in issuing securities to the investor we relied on the exemption from the registration requirements of the Securities Act of 1933 provided by Rule 506 of Regulation D promulgated thereunder.

viii) In February 2012 one investor exercised 2,646,199 of the August 2009 common stock purchase warrants using the cashless exercise provision. The cashless exercise provision allows the investor, if the fair market value of one share of common stock is greater than the exercise price, to elect to receive shares equal to the value of the warrant less a portion of the warrant that is cancelled using a specific formula. We issued 2,500,000 shares of common stock and cancelled 146,199 common stock purchase warrants pursuant to the cashless exercise provision. No cash proceeds were received. We issued these shares pursuant to an exemption from registration set out in Section 4(2) of the Securities Act of 1933.

ix) On January 19, 2012, we entered into an investment agreement (the "Investment Agreement") with Fairhills Capital Offshore Ltd., a Cayman Islands exempted company ("Fairhills"). Pursuant to the terms of the Investment Agreement, Fairhills committed to purchase, in a series of purchase transactions ("Puts") up to $10,000,000 of our common stock over a period of up to 36 months.

The amount that is entitled to be requested with each Put delivered to Fairhills is equal to 200% of the average daily volume (U.S. market only) of the common stock for the 10 trading days prior to the applicable notice date. Our common stock will be valued at a 27.5% discount from the weighted average trading price of our stock for the 5 trading days before Fairhills Capital receives our notice of sale. We will be unable to deliver an additional Put until a closing of a previous Put has been completed. Pursuant to the Investment Agreement, the closing of a Put shall be no more than 7 trading days following the delivery of a Put. Upon each closing of a Put, we shall deliver to Fairhills certificates representing the shares. Within one business day after receipt of such certificate, Fairhills shall deliver to us the purchase price to be paid for such shares.

On May 1, 2012, we entered into an amendment to the Investment Agreement (the "Amendment"). Pursuant to the Amendment, the Investment Agreement will only expire upon any of the following events: (i) when the Investor has purchased an aggregate of $10,000,000 in the Common Stock of the Company pursuant to the Investment Agreement; or (ii) on the date which is 36 months after the effective date of the Investment Agreement; or (iii) at such time that the Registration Statement registering the shares of common stock contemplated by the Investment Agreement is no longer in effect. In addition, the Company may terminate the Investment Agreement upon 30 days written notice. The obligations of Fairhills under the Investment Agreement are non-transferable.

In connection with the Investment Agreement, we also entered into a registration rights agreement with Fairhills. Pursuant to this registration rights agreement, we registered with the Securities and Exchange Commission 185,000,000 shares of the common stock underlying the Investment Agreement.

At October 31, 2012 and subsequently, we have issued 29,416,467 and 15,981,823 shares, respectively, of common stock for gross proceeds of $800,000 and $225,000, respectively, related to this financing agreement. As a result, in the future we would potentially be eligible to receive up to $8,975,000 on the issuance of an additional 139,601,710 shares. We are currently authorized to issue 1,250,000,000 shares of our common stock. Fairhills has agreed to refrain from holding an amount of shares which would result in Fairhills owning more than 4.99% of the then-outstanding shares of our common stock at any one time, or 62,375,000 shares. At an assumed purchase price under the Investment of $0.0109 (equal to 72.5% of the closing price of our common stock of $0.015 on December 14, 2012), we will be able to receive up to $1,518,169 in gross proceeds. (See Note 11 for information regarding an assignment of this agreement by Fairhills to Deer Valley Management, LLC, a related entity, subsequent to October 31, 2012.)

14


b) Incentive Stock Options

During the nine months ended October 31, 2012 there were 2,500,000 vested incentive stock options that expired, 207,875 that were forfeited, and no stock options granted. The expired and forfeited options had a weighted average exercise price of $0.038 and $0.728, respectively, per option. At October 31, 2012 there were 903,500 non-qualified stock options outstanding with a weighted average exercise price of $1.429 per option; of those options 841,000 are exercisable. At October 31, 2012 there were 90,552,500 incentive stock options outstanding with a weighted average exercise price of $0.046 per option; of those options 85,427,500 are exercisable.

c) Share Purchase Warrants

As of October 31, 2012, there were 86,700,230 whole share purchase warrants outstanding and exercisable. The warrants have a weighted average remaining life of 2.2 years and a weighted average exercise price of $0.058 per whole warrant for one common share. Whole share purchase warrants outstanding at October 31, 2012 are as follows:

    Number of whole share     Weighted average exercise  
    purchase warrants     price per share  
Outstanding, January 31, 2012   92,922,691   $  0.053  
         Issued   17,225,537     0.041  
         Exercised   (22,592,684 )   (0.003 )
         Expired   (855,314 )   (0.020 )
             
Outstanding, October 31, 2012   86,700,230   $  0.058  
Exercisable, October 31, 2012   86,700,230   $  0.058  

NOTE 7 – Related party transactions

We entered into the following transactions with related parties during the nine months ended October 31, 2012:

Paid or accrued $5,219 in rent. We rented an office from Jim Briscoe, our Chairman of the Board, CEO and CFO, on a month-to-month basis for $522 per month.

We have an option to explore 26 standard Federal lode mining claims at the East Silver Bell project and 33 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. We paid rental fees in September 2012 to maintain the claims in good standing of approximately $8,300. The original option agreement was for the period from April 11, 2008 through January 1, 2011 and has been extended through June 1, 2013.

At October 31, 2012 we had a balance of accrued unpaid wages of $237,617 to Jim Briscoe, our Chairman of the Board, CEO and CFO, and to the President and Director of the Company.

We recognized compensation expense of $37,125 for stock options granted to officers and board members.

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

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

We have an option to explore 26 standard Federal lode mining claims at the East Silver Bell project and 33 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. We paid rental fees in September 2012 to maintain the claims in good standing of approximately $8,300. The original option agreement was for the period from April 11, 2008 through January 1, 2011 and has been extended through June 1, 2013.

15


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

NOTE 8 – Commitments

a) We are required to perform annual assessment work in order to maintain our Big Chunk Super Project (“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. Assessment work performed in excess of the required amount may be carried forward for up to four years to satisfy future obligations. The Company estimates that the required annual assessments to maintain the claims will be approximately $238,000. Sufficient funds have been expended and the assessments filed to maintain the claims for at least the next twelve months.

b) The annual state rentals for the Big Chunk Alaska State mining claims vary from $70 to $680 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 company has paid state rentals due by November 30, 2012 for the period from September 1, 2012 through September 1, 2013 in the amount of $113,000. 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.

c) We are required to pay annual rentals for our Federal lode mining claims for the North Pipes Super Project (“North Pipes”), East Silver Bell project and Tombstone project in the State of Arizona. The rental period begins at noon on September 1st through the following September 1st and rental payments are due by the first day of the rental period. The annual rentals are $140 per claim. Rentals for the period from September 1, 2012 through September 1, 2013 of approximately $77,000 have been paid.

d) We are required to pay annual rentals for our Arizona State Land Department Mineral Exploration Permits (“AZ MEP”) at our Tombstone 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 and rental payments are due by the first day of the rental period. We hold AZ MEP permits for 7,515 acres at our Tombstone project. Required minimum work expenditures for the period ended September 29, 2012 of approximately $41,000 have been paid. Rentals due by September 30, 2012 to maintain the AZ MEP permits for the period from September 30, 2012 through September 30, 2013 of approximately $11,000 have been paid.

e) In December 2010 we entered into a 12 month non-cancellable operating lease for office space. In December 2011 the lease was extended for an additional one year term. The lease calls for monthly payments of rent plus sales tax of $2,280. We recognized rent expense of $22,798 during the nine months ended October 31, 2012 pursuant to this lease. Future minimum lease payments pursuant to this lease total $4,560 payable during the twelve months ending October 31, 2013.

f) In June 2011 we entered into a two year non-cancellable operating lease for warehouse space in Tucson, Arizona. The lease calls for monthly payments of rent plus sales tax of $3,550. We have the option to extend the lease for one additional two year term at current market rates. We recognized rent expense of $31,950 during the nine months ended October 31, 2012 pursuant to this lease. Future minimum lease payments pursuant to this lease total $24,850 payable during the twelve months ended October 31, 2013.

16


NOTE 9 – Supplemental disclosures with respect to cash flows

During the nine months ended October 31, 2012 we issued 20,555,571 shares of common stock and cancelled 2,037,113 common stock purchase warrants for $0 proceeds received from the cash-less exercise of August 2009 and May 2007 common stock purchase warrants.

During the nine months ended October 31, 2012 we recognized $38,998 of compensation expense related to incentive and non-qualified stock options previously granted to officers, employees and consultants.

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

During the nine months ended October 31, 2011 we issued 22,687,507 shares of common stock and cancelled 1,165,462 common stock purchase warrants for $0 proceeds received from the cash-less exercise of August 2009 and May 2007 common stock purchase warrants.

During the nine months ended October 31, 2011 we amended our secured convertible promissory notes to increase the principal balance by $561,816 to reimburse the note holder for geological costs paid on our Alaska claims on our behalf.

NOTE 10 – Fair value of financial instruments

Our financial instruments consist of cash and cash equivalents, accounts payable, accrued liabilities, convertible notes payable, notes payable, and warrant liability. It is management's opinion that we are not exposed to significant interest, currency or credit risks arising from these financial instruments. With the exception of the warrant 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, which represents a Level 3 input. 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.

We estimate the fair value of the warrant liability using level 3 inputs and the Black-Scholes valuation model. We use historical volatility as a method to estimate expected volatility. At October 31, 2012 and January 31, 2012 we had nil and 622,138, respectively, whole share purchase warrants outstanding that contain a full ratchet down anti-dilution provision which is triggered if we enter into any issuance priced lower than $0.02 per common share. At October 31, 2012 and January 31, 2012 we had 2,500,000 whole share purchase warrants outstanding that contain a full ratchet down anti-dilution provision which is triggered if we enter into any lower priced issuance than $0.0264 per common share. We used the following assumptions to estimate the fair value of the warrant liability at October 31, 2012 and January 31, 2012:

    Expected   Risk-free
  Expected dividend Expected interest
Description volatility yield term rate
Warrant liability at
       October 31, 2012

135.0%

0%

3.83 years

0.49%
Warrant liability at
       January 31, 2012

127.6%

0%

4.59 years

0.71%

          Fair value measurements at reporting date using:  
          Quoted prices in           Significant  
          active markets for     Significant other     unobservable  
          identical liabilities     observable inputs     inputs  
Description   October 31, 2012     (Level 1)     (Level 2)     (Level 3)  
Warrant liability $  47,540   $  -   $  - $  47,540  

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    Fair value measurements using significant  
    unobservable inputs (Level 3):
Description   Warrant liability  
Balance, January 31, 2012 $  53,948  
           Total gain   (6,408 )
           Purchases, issuances and settlements   -  
           Transfers in or out of Level 3   -  
Balance, October 31, 2012 $  47,540  

NOTE 11 – Subsequent events

a) On November 13, 2012, we filed a 424B prospectus with the Securities Exchange Commission, acknowledging the assignment of all the rights under our investment agreement with Fairhills Capital Offshore Ltd. (Fairhills) to Deer Valley Management, LLC (Deer Valley). The Investment Agreement and other associated agreements were assigned by Fairhills to Deer Valley on November 6, 2012, and Liberty Star consented to the assignment. Fairhills and Deer Valley share the same ownership and management and there will not be any substantial change to our arrangement under the Investment Agreement as a result of the Assignment.

b) In November and December, 2012 we issued 15,981,823 shares for gross proceeds of $225,000 related to the investment agreement with Fairhills Capital Offshore Ltd. and Deer Valley Management, LLC.

c) A supplier has purported to file liens on the company’s Alaska properties. The company disputes the claim.

d) The company has conveyed title to certain of its Alaska mining claims to an affiliate of Northern Dynasty Minerals Ltd in order to extinguish the debt owed by the company to Northern Dynasty pursuant to an agreement dated November 13, 2012, and the deed was accepted and recorded. However, Northern Dynasty has asserted that the conveyance of the mining claims and the cancellation of the debt should be set aside because of the lien claims discussed in c) above. The company disputes Northern Dynasty’s contention. The matter has been referred to our legal counsel.

NOTE 12 – Reclassifications

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

NOTE 13 – Going concern

The Company is in the exploration stage, has incurred losses from operations, requires additional funds for further exploratory activity and to maintain its claims prior to attaining a revenue generating status. There are no assurances that a commercially viable mineral deposit exists on any of our properties. In addition, the Company may not find sufficient ore reserves to be commercially mined. As such, the Company's independent registered public accounting firm has expressed an uncertainty about the Company's ability to continue as a going concern in their opinion attached to our audited financial statements for the fiscal year ended January 31, 2012.

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

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Much of the information included in this quarterly report includes or is based upon estimates, projections or other “forward looking statements”. Such forward looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.

Such estimates, projections or other “forward looking statements” involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other “forward looking statements”.

Our Business

The following Management’s Discussion and Analysis is intended to help the reader understand the results of operations and financial condition of Liberty Star Uranium & Metals Corp. (the “Company”, “we”, “us”, or “Liberty Star”). Management’s Discussion and Analysis is provided as a supplement to, and should be read in conjunction with, our condensed consolidated financial statements and the accompanying notes to the condensed consolidated financial statements.

Liberty Star is in the acquisition and exploration of mineral properties business. Big Chunk Corp. (“Big Chunk”) is our wholly owned subsidiary and is engaged in the acquisition and exploration of mineral properties business in the State of Alaska. We are an exploration stage company, as we have not generated revenues from operations. 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:

North Pipes Super Project (“NPSP”): 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 (“Big Chunk”): Located in the Iliamna region of Southwestern Alaska, we plan to ascertain whether the Big Chunk claims possess commercially viable deposits of copper, gold, molybdenum, silver, palladium rhenium and zinc. We have not identified any ore reserves to date. During the past two years, Liberty Star commissioned an arm’s length, extensive technical report by the international mining consulting firm of SRK Consulting. This report which is approximately 144 pages in length is published on the Liberty Star web site. The report recommends an extensive drilling program to test various targets developed by Liberty Star using advanced geologic, geochemical and geophysical techniques. Liberty Star expects that ZTEM geophysics, a new airborne audio-frequency magnetics system for plane-wave frequency domain electromagnetic surveying, will provide us with effective surveying by indicating mineralization associated with porphyry copper systems to a depth of approximately six thousand feet below the surface. Using these techniques Geotech Ltd. (ZTEM operator) and geologists from Liberty Star believes that four to twelve anomaly targets are present on the Big Chunk claims and should be tested by core sample drilling. In July, 2012, Geotech announced they had perfected a new software package that would allow a much more comprehensive analysis of our ZTEM geophysical data including all the lines, not just 50% of the lines that had been heretofore processed, and surface hills and valleys would also be taken into account. The result was a much more precise 3 dimensional image. We paid for this new interpretation of the base data for Big Chunk South at a cost of $8,000. In August, 2012, we paid for the same process on the Big Chunk North Block, also at a cost of $10,200. These new interpretations made the definition of anomalies much more precise. During the latter half of this year a drill program was planned and executed and an HQ (about 2.5 inches) size core drill program which drilled Drill Hole 1of Target 1 was completed to a depth of 1693 feet, and terminated on September 1, 2012, completing all assessment work required for the entire claim block. Evaluation of this drill core is going on now. All applicable work for the Big Chunk claims has been totaled and coordinated with the Alaska Department of Mines and Mineral Resources (ADMMR) and has been found to be sufficient to hold the claims for at least another year and perhaps more. According to ADNR regulations for State Mining Claims, Liberty Star submitted full documentation for its assessment work prior to guideline requirements date of November 30, 2012. As a result of this work, no money was advanced by Northern Dynasty to Liberty Star for assessment work.

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Bonanza Hills Project (“Bonanza Hills”): Bonanza Hills is located in the Iliamna region of Southwestern Alaska. Our plans have been to ascertain whether the Bonanza Hills claims possess commercially viable deposits of gold and silver. We have not identified any ore reserves to date. We were not able to identify gold in any location but narrow veins, in spite of interesting wall rock alteration. Bonanza Hills is hampered by its remote location and its immediate proximity to a national park. We have paid cash in lieu of physical exploration in assessment year 2011/2012 as permitted by Alaska state mining regulations. We did not pay rental fees in a timely fashion as required by regulation because we chose to expend those monies on other more promising Liberty Star projects. We could have chosen to pay those rental fees in arrears, as permitted by Alaska state mining regulations, and reinstate those claims if a third party had not over staked those claims in the interim. We chose not to pay such fees because of our negative geologic appraisal. We have completely relinquished any rights we may have had at the end of the Assessment Year 2011/2012, effective 12:01 pm Alaska time September 1, 2012.

Tombstone Super Project (“Tombstone”)(formerly referred to as Tombstone Porphyry Precious Metals Project): Tombstone is located in Cochise County, Arizona. We plan to ascertain whether the Tombstone claims possess commercially viable deposits of copper, molybdenum, gold, silver, lead, zinc, rare earth elements (REEs) manganese and other metals. At our Hay Mountain target and claim block within Tombstone, during the summer and fall of 2011 and spring and summer 2012, we conducted and completed a very thorough geochemical sampling campaign consisting of the collection of soil, rock chip and vegetation samples over a northeast trending grid, with a 200 meter spacing between sample sites along lines spaced 400 meters apart. This grid covered about 14 square miles. The samples were carefully transported and processed using Canadian National Instrument 43-101 Standards of Disclosure for Mineral Projects protocols, including low level detection limit assays for 64 elements from a certified analytical laboratory (assayer) in Vancouver B.C., Canada. The result was the definition of five significant multi metal anomalies. The copper anomaly measures approximately 2.5 miles long and 1.5 miles at its widest point and contains metal zoning patterns characteristic of a porphyry copper-gold-silver mineral zone. The other four targets are similar, but smaller. The sampling also revealed spatially large (more than nine square miles) anomalies of rare earth metals. An exploration program consisting of drilling approximately 10,000 feet of diamond core holes from 500 to 1,000 feet in depth each is planned for the spring of 2013. 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 and we plan to ascertain whether the East Silver Bell claims possess commercially viable deposits of copper. Leached capping material from drill holes are like other areas in the district in which the same leached capping overlies chalcocite ore bodies. We have not identified any ore reserves to date.

Our Business in General

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 are in the exploration stage – as 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 reserve (a reserve is a commercially viable mineral deposit). Please refer to the section entitled “Risk Factors” in this Form 10-Q and in our Form 10-K for the year ended January 31, 2012 for additional information about the risks of mineral exploration.

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

Agreement with Northern Dynasty Minerals Ltd.: 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 was $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 cash 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 for cash in lieu of assessment work, rental fees and filing fees on our mineral claims. The principal balance of the Convertible Notes at October 31, 2012 was $3,730,174 with accrued interest on the Convertible Notes at October 31, 2012 at $857,420.

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 can earn a 60% interest in our Big Chunk claims (the “Joint Venture Claims”) by spending $10,000,000 on those properties over six years. The outstanding loan amounts from Northern Dynasty may be applied as part of Northern Dynasty’s earn-in requirements. Northern Dynasty’s minimum annual expenditures under the earn-in would be the minimum level necessary to keep the Joint Venture Claims in good standing. Northern Dynasty may elect to abandon the earn-in at any time on 30 days’ notice, so long as sufficient annual labor is performed, or a cash payment in lieu of labor is made, in order to fulfill the annual labor requirements for the Joint Venture Claims for a minimum of 12 months after termination of the earn-in.Should Liberty Star find an investor that would better the terms of the joint venture, Liberty Star can buy out the Venture with Northern Dynasty.

To date, no joint venture agreement has been agreed upon and as such, Northern Dynasty may demand payment of the funds due under the Convertible Notes at any time upon 45 days’ notice.

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

Provided a minimum of $1,000,000 has been expended by Northern Dynasty on earn in expenses, the Convertible Notes will be convertible until repaid or deemed repaid, into common shares of our company at the 5 day volume weighted average trading price immediately prior to Northern Dynasty giving a notice of conversion less the maximum allowable discount applicable as if our shares were listed on the TSX Venture Exchange. At October 31, 2012, Northern Dynasty has expended approximately $815,000 of the $1,000,000 earn in expenses. The Convertible Note may be prepaid by our company without penalty at any time on 10 days prior notice during which time Northern Dynasty’s conversion rights are unaffected.

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Financing Agreement with Fairhills Capital Offshore Ltd. and Deer Valley Management, LLC

On January 19, 2012, we entered into a financing agreement (the “Financing Agreement”) with Fairhills Capital Offshore Ltd. (“Fairhills Capital”), whereby Fairhills Capital will provide for a non-brokered financing arrangement of up to $10,000,000. The financing allows but does not require us to issue and sell up to the number of shares of common stock having an aggregate purchase price of $10,000,000 to Fairhills Capital. On May 1, 2012, we entered into an amendment to the Financing Agreement (the “Amendment”). Pursuant to the Amendment, the Financing Agreement will only expire upon any of the following events: (i) when the Investor has purchased an aggregate of Ten Million dollars ($10,000,000) in the Common Stock of the Company pursuant to the Financing Agreement; or (ii) on the date which is thirty-six (36) months after the effective date of the Financing Agreement; or (iii) at such time that the Registration Statement registering the shares of common stock contemplated by the Financing Agreement is no longer in effect. In addition, the Company may terminate the Financing Agreement upon thirty (30) days written notice. Subject to the terms and conditions of the Financing Agreement and a registration rights agreement entered into concurrently (the “Registration Rights Agreement”), we may, in our sole discretion, deliver a notice to Fairhills Capital which states the dollar amount which we intend to sell to Fairhills Capital on a certain date. The amount that we shall be entitled to sell to Fairhills Capital shall be equal to two hundred percent (200%) of the average daily volume (U.S. market only) of our shares of common stock for the ten (10) trading days prior to the applicable notice date. Such shares of common stock will be valued at a 27.5% discount from the weighted average trading price of our stock for the five (5) trading days before Fairhills Capital receives our notice of sale. It is our discretion to accept offers for any sale of stock under this financing arrangement. Accordingly, we have established a floor price of $0.027 per share. The shares of common stock that we sell to Fairhills Capital must be registered stock, among other conditions of investment.

Pursuant to the Registration Rights Agreement, we agreed to file a registration statement on Form S-1 with the Securities and Exchange Commission within twenty-one (21) days of the date of the Registration Rights Agreement and to have a registration statement declared effective by the Securities and Exchange Commission within one hundred and twenty (120) calendar days from January 19, 2012. A registration statement was filed on March 13, 2012. On June 1, 2012 our company requested withdrawal of the registration statement after receipt of a specific comment from the Securities and Exchange Commission advising that withdrawal of the registration statement was appropriate. On June 4, 2012 our company filed a new registration statement. The registration statement was declared effective as of June19, 2012.

On November 6, 2012, the Financing Agreement and other associated agreements were assigned to Deer Valley Management, LLC (“Deer Valley”) and we consented to the assignment. Fairhills Capital and Deer Valley share the same ownership and management and there will not be any substantial change to our arrangement under the Financing Agreement as a result of the assignment.

Subsequent to the effective date Liberty Star has drawn down 11 tranches for total cash draw downs of $1,025,000 in exchange for 45,398,290 shares of common stock.

Results of Operations

Material Changes in Financial Condition for the Three and Nine Month Periods Ended October 31, 2012

We had cash and cash equivalents in the amount of $95,071 as of October 31, 2012 compared to $155,869 as of January 31, 2012. We had negative working capital of $(4,912,587) as of October 31, 2012 compared to $(4,287,593) as of January 31, 2012. We received $1,312,884 cash inflows from financing activities during the nine months ended October 31, 2012 which was utilized for working capital. We also utilized our cash funds to continue exploration activities at our Tombstone and Big Chunk claims by working on geochemical soil, rock chip and vegetation sampling. We purchased $5,419 in new equipment during the three months ended October 31, 2012. We have been raising capital from selling equity by way of private placements. We intend to continue to raise capital from such sources. In addition, we have entered into the Financing Agreement whereby we are permitted, but not required, to issue and sell up to the number of shares of common stock having an aggregate purchase price of $10,000,000 to Fairhills, of which we have drawn down $1,025,000 in exchange for 45,398,290 shares of common stock.

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Material Changes in Results of Operations for the Three and Nine Month Periods Ended October 31, 2012 and October 31, 2011

We had a net loss of $(1,002,894) for the three months ended October 31, 2012 compared to a net loss of $(999,238) for the three months ended October 31, 2011. During the nine months ended October 31, 2012 we had a net loss of $(2,010,349) compared to a net loss of $(1,869,247) for the nine months ended October 31, 2011. During the nine months ended October 31, 2012 we incurred an increase of approximately $28,800 in public relations expense compared to the nine months ended October 31, 2011 due to the use of outside consultants. We incurred an increase in salaries and benefits of approximately $41,200 during the nine months ended October 31, 2012 as compared to the nine months ended October 31, 2011, primarily due to employee stock option expense. During the nine months ended October 31, 2012, interest expense increased approximately $74,000, as compared to the nine months ended October 31, 2011, primarily due to additional accrued interest on the Convertible Note.

Critical Accounting Policies

The condensed consolidated financial statements of Liberty Star have been prepared in conformity with accounting principles generally accepted in the United States of America. Our significant accounting policies are described in Note 2 to the consolidated financial statements included in Item 8 in our Form 10-K for the year ended January 31, 2012. 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 condensed consolidated financial statements for the nine month period ended October 31, 2012. Our total stockholders’ (deficit) at October 31, 2012 was $(4,884,891).

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

Mineral claims

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

Convertible promissory notes

We reviewed the convertible promissory notes and the related subscription agreements to determine the appropriate reporting within the 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.

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Common stock purchase warrants

We report common stock purchase warrants as equity unless a condition exists which requires reporting as a derivative liability at fair market value. For common stock purchase warrants reported as a derivative liability, as well as new and modified warrants reported as equity, we utilize the Black-Scholes valuation method in order to determine fair value.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES.

As required by Rule 13a-15 under the Exchange Act, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures at October 31, 2012, which is the end of the fiscal quarter covered by this report. This evaluation was carried out by Mr. James Briscoe, our principal executive officer and principal financial officer. Based on this evaluation, Mr. Briscoe has concluded that the design and operation of our disclosure controls and procedures are effective as at the end of the period covered by this report. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by our company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the quarter ended October 31, 2012 there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 1A. RISK FACTORS

Much of the information included in this quarterly report includes or is based upon estimates, projections or other “forward looking statements”. Such forward looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.

Such estimates, projections or other “forward looking statements” involve various risks and uncertainties as outlined below. We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other “forward looking statements”.

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In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended January 31, 2012, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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

We had cash in the amount of $95,071 and negative working capital of $(4,912,587) as of October 31, 2012. We currently do not generate revenues from our operations. Our business plan calls for substantial investment and cost in connection with the acquisition and exploration of our mineral properties currently under lease and option. Any direct acquisition of any of the claims under lease or option is subject to our ability to obtain the financing necessary for us to fund and carry out exploration programs on the subject properties. The requirements are substantial. We do not currently have any arrangements for financing in addition to the Convertible Note and Financing Agreement. 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 as of the date of this filing and have never been profitable. We do not have an interest in any revenue generating properties. We were incorporated on August 20, 2001 and took over our current business on February 5, 2004. To date we have been involved primarily in organizational and exploration activities. We will incur substantial operating and exploration expenditures without realizing any revenues. We therefore expect to incur significant losses into the foreseeable future. We have limited operating history upon which an evaluation of our future success or failure can be made. Our net loss from inception to October 31, 2012 is $(63,441,610). We recognize that if we are unable to generate significant revenues from our activities, we will not be able to earn profits or continue operations. Based upon current plans, we also expect to incur significant operating losses in the future. We cannot guarantee that we will be successful in raising capital to fund these operating losses or generate revenues in the future. We can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail and our investors could lose their investment.

Our independent registered public accounting firm’s report states that there is a substantial doubt that we will be able to continue as a going concern.

Our independent registered public accounting firm, Semple, Marchal & Cooper, LLP, states in their audit report attached to our audited financial statements for the fiscal year ended January 31, 2012 that since we are an exploration stage company, have no established source of revenue and are dependent on our ability to raise capital from shareholders or other sources to sustain operations, there is a substantial doubt that we will be able to continue as a going concern.

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

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

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Deer Valley will pay less than the then-prevailing market price for our common stock.

The common stock to be issued to Deer Valley pursuant to the Financing Agreement will be purchased at a 27.5% discount from the volume weighted average trading price of our stock for the five (5) trading days before Deer Valley receives our notice of sale. Deer Valley 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 Deer Valley sells the shares, the price of our common stock could decrease. If our stock price decreases, Deer Valley 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.

Our stockholders’ ownership interest may be diluted and the value of our common stock may decline by exercising the Put right pursuant to the Financing Agreement.

Effective January 19, 2012, we entered into the Financing Agreement. Pursuant to the Financing Agreement, when we deem it necessary, we may raise capital through the private sale of our common stock to Deer Valley at a price equal to a 27.5% discount from the weighted average trading price of our stock for the five (5) trading days before Deer Valley receives our notice of sale. Because the Put price is lower than the prevailing market price of our common stock, to the extent that the Put right is exercised, our stockholders’ ownership interest may be diluted.

We registered an aggregate of 185,000,000 shares of common stock issuable under the Financing Agreement. The sale of such shares could depress the market price of our common stock.

We registered an aggregate of 185,000,000 shares of common stock under a registration statement for issuance pursuant to the Financing Agreement. Notwithstanding Deer Valley’s ownership limitation, the 185,000,000 shares represent approximately 21.5% of our shares of common stock outstanding immediately after our exercise of the Put right under the Financing Agreement. The sale of these shares into the public market by Deer Valley could depress the market price of our common stock.

At an assumed purchase price under the Financing Agreement of 72.5% of the closing price of our common stock of $0.015 on December 14, 2012, we will be able to receive up to $1,518,169 in gross cash proceeds, assuming the sale of an additional 139,601,710 potentially issuable shares of common stock pursuant to the Financing Agreement. Due to the floating offering price, we are not able to determine the exact number of shares that we will issue under the Financing Agreement.

We may not have access to the full amount available under the Financing Agreement.

To date, we have drawn down $1,025,000 in funds in 11 draws and have issued 45,398,290 shares of our common stock under the Financing Agreement. Because our ability to draw down amounts under the Financing Agreement is subject to a number of conditions, there is no guarantee that we will be able to draw down additional portions of the $10,000,000 available to us under the Financing Agreement.

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 Financing Agreement, and as such, Deer Valley may sell a large number of shares, resulting in substantial dilution to the value of shares held by existing shareholders.

Deer Valley has agreed, subject to certain exceptions listed in the Financing Agreement, to refrain from holding an amount of shares which would result in Deer Valley 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 Deer Valley from selling shares of common stock received in connection with a put, and then receiving additional shares of common stock in connection with a subsequent put. In this way, Deer Valley 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.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

In November and December, 2012 we issued an aggregate of 15,981,823 shares of our common stock for aggregate gross proceeds of $225,000 pursuant to an investment agreement dated January 19, 2012 with Fairhills Capital Offshore Ltd., which was later assigned to Deer Valley Management, LLC on November 6, 2012. Fairhills Capital and Deer Valley share the same ownership and management and there was not any substantial change to our arrangement under the investment agreement as a result of the assignment. We issued these shares pursuant to an exemption from registration set out in Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated under the Securities Act of 1933.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Under Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and under the SEC’s recently adopted Item 104 of Regulation S-K, 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.

ITEM 5. OTHER INFORMATION.

On July 30, 2012 we announced an updated program for exploration activity on its properties in Alaska and Arizona.

On August 6, 2012 we announced that its field camp construction is on schedule.

On August 15, 2012 we announced the discovery of copper, zinc, molybdenum (moly), silver and lead in core hole 1003 collected in 2005 on our Big Chunk Super Project.

27


ITEM 6. EXHIBITS

Exhibit    
Number   Description of Exhibit

3.1

 

Articles of Incorporation(1)

3.2

 

Bylaws(2)

3.3

 

Certificate of Change to Authorized Capital(3)

3.4

 

Articles of Merger(3)

10.10

Form of Securities Purchase Agreement for May 11, 2007 Senior May 2007 Convertible Notes (4)

10.11

Form of Convertible Promissory Note for May 11, 2007 Senior May 2007 Convertible Notes (4)

10.12

Form of Common Stock Purchase Warrant for May 11, 2007 Senior May 2007 Convertible Notes (4)

10.13

 

List of Subscribers for May 11, 2007 Senior May 2007 Convertible Notes (4)

10.14

Form of Subscription Agreement for August 28, 2008 Secured Convertible Promissory Notes (5)

10.15

 

Form of Secured Convertible Promissory Notes dated August 28, 2008 (5)

10.16

 

Form of Security Agreement for August 28, 2008 Secured Convertible Promissory Notes (5)

10.17

 

Form of Subscription Agreement for May 21, 2009 Secured Convertible Promissory Notes (6)

10.18

 

Form of Secured Convertible Promissory Notes dated May 21, 2009 (6)

10.19

Form of Guarantee dated May 21, 2009 of Big Chunk Corp for May 21, 2009 Secured Convertible Promissory Notes (6)

10.20

 

Form of Lock Up Agreement for May 21, 2009 Secured Convertible Promissory Notes (6)

10.21

 

Form of Escrow Agreement for May 21, 2009 Secured Convertible Promissory Notes (6)

10.22

Form of Subscription Agreement for August 14, 2009 Secured Convertible Promissory Notes(7)

10.23

 

Form of Secured Convertible Promissory Notes dated August 14, 2009(7)

10.24

 

Form of Escrow Agreement for August 14, 2009 Secured Convertible Promissory Notes (7)

10.25

 

Form of Lock Up Agreement for August 14, 2009 Secured Convertible Promissory Notes(7)

10.26

 

Form of Warrant dated August 14, 2009(7)

10.27

Form of Guarantee dated August 14, 2009 of Big Chunk Corp for August 14, 2009 Secured Convertible Promissory Notes (7)

10.28

 

Form of Extension and Modification Agreement of Secured Convertible Promissory Notes (8)

10.29

 

Code of Ethics(3)

10.30

 

Form of Letter Agreement with Northern Dynasty Minerals, Ltd dated June 29, 2010 (9)

10.31

Form of Subscription Agreement for private placement of securities issued October 20, 2010 and November 12, 2010.(10)

10.32

Form of Subscription Agreement for private placement of securities issued January 12, 2011 (11)

10.33

 

Form of Letter Agreement with Sagebrush Gold Ltd dated August 31, 2011(12)

10.34

 

Letter Agreement dated November 14, 2011 with Northern Dynasty (13)

10.35

 

Secured Convertible Note dated September 1, 2011.(13)

10.36

 

Form of Subscription Agreement (14)

10.37

 

Form of Stock Option Agreement. (15)

10.38

 

Financing Agreement dated January 19, 2012 with Fairhills Capital Offshore Ltd. (16)

10.39

Registration Rights Agreement dated January 19, 2012 with Fairhills Capital Offshore Ltd. (16)

28



Exhibit    
Number   Description of Exhibit
10.40  

Form of Subscription Agreement for private placement of securities issued July 13, 2012 (10)

10.41  

Form of Subscription Agreement for private placement of securities issued July 23, 2012)

10.42  

Form of Warrant Certificate (17)

10.43

Form of Subscription Agreement for private placement of securities issued August 8, 2012 (10)

10.44  

Form of Warrant Certificate (17)

10.45

Form of Subscription Agreement for private placement of securities issued August 22, 2012 (10)

10.46  

Form of Warrant Certificate (17)

10.47

Form of Subscription Agreement for private placement of securities issued August 22, 2012 (10)

10.48  

Form of Warrant Certificate (17)

10.49   Settlement Agreement dated November 13, 2012 with Northern Dynasty Minerals Ltd. (18)
31.1*  

Section 302 Certification under Sarbanes-Oxley Act of 2002 of James Briscoe

32.1*  

Section 906 Certification under Sarbanes-Oxley Act of 2002 of James Briscoe

101.INS*  

XBRL INSTANCE DOCUMENT

101.SCH*  

XBRL TAXONOMY EXTENSION SCHEMA

101.CAL*  

XBRL TAXONOMY EXTENSION CALCULATION LINKBASE

101.DEF*  

XBRL TAXONOMY EXTENSION DEFINITION LINKBASE

101.LAB*  

XBRL TAXONOMY EXTENSION LABEL LINKBASE

101.PRE*  

XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE


(1)

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

(2)

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

(3)

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

(4)

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

(5)

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

(6)

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

(7)

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

(8)

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

(9)

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

(10)

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

(11)

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

(12)

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

(13)

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

(14)

Filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on December 29, 2011.

(15)

Filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on January 24, 2012.

(16)

Filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on February 1, 2012.

(17)

Filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on July30, 2012.

(18) Filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on November 15, 2012.

* Filed herewith.

29


SIGNATURES

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

LIBERTY STAR URANIUM & METALS CORP.

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

Date: December 17, 2012

30