LIBERTY STAR URANIUM & METALS CORP. - Quarter Report: 2010 October (Form 10-Q)

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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, 2010

[ ] 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)

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 [ ] 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):

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: 571,174,487 as of December 13, 2010.

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TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

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

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

Our condensed consolidated financial statements are stated in United States Dollars (US$) and are prepared in conformity with accounting principles generally accepted in the United States of America 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 subsidiaries Big Chunk Corp. and Redwall Drilling Inc., unless otherwise indicated. All dollar amounts refer to U.S. dollars unless otherwise indicated.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

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

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

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

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

NOTE 1 – Organization

Liberty Star Uranium & Metals Corp. (the “Company” or “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 our mineral properties. Redwall ceased drilling activities in July 2008 and was dissolved on March 30, 2010. In April 2007, we changed our name to Liberty Star Uranium & Metals Corp. to reflect our current concentrated efforts on uranium exploration. We are considered to be an exploration stage company, as we have not generated any revenues from operations.

In December 2006, we entered into a joint venture agreement (“Elle Venture”) with XState Resources Limited (“XState”). We hold a 50% interest in the Elle Venture, a general partnership with XState that was formed to explore and, if warranted, develop certain US Federal lode mining claims within the North Pipes Super Project area on the Arizona strip, Northern Arizona. The Elle Venture ceased exploration activities in 2008.

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 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 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, 2010 as filed with the SEC under the Securities and Exchange Act of 1934. 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, 2010 and the results of our operations and cash flows for the periods presented.

Interim results are subject to significant seasonal variations and the results of operations for the three and nine months ended October 31, 2010 are not necessarily indicative of the results to be expected for the full year.

NOTE 3 - Summary of significant accounting policies

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

NOTE 3 - Summary of significant accounting policies - continued

Use of estimates

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

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

Principles of consolidation

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

Mineral claim costs

Mineral claim costs of carrying, retaining and developing properties are charged to expense in the period incurred in our geological and geophysical costs.

Property and equipment

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

Convertible promissory notes

We report convertible promissory notes as liabilities at their carrying value less unamortized discounts, which approximates fair value. We bifurcate conversion options and detachable common stock purchase warrants and report them as liabilities at fair value at each reporting period when 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. For common stock purchase warrants reported as a derivative liability we utilize the Black-Scholes valuation method in order to determine fair market value.

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, 2010 and January 31, 2010, there were 256,292,038 and 62,260,338, respectively, potentially dilutive instruments outstanding. Additionally, at October 31, 2010 and January 31, 2010 if settlement of the Convertible Promissory Notes were completed by the issuance of common shares there would be 60,753,341 and 2,021,513,000 shares, respectively. At October 31, 2010 and January 31, 2010 there are 1,250,000,000 shares authorized. These instruments were not included in the determination of diluted loss per share as their effect was anti-dilutive.

NOTE 3 - Summary of significant accounting policies – continued

Recently issued accounting standards

With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the nine months ended October 31, 2010, that are of significance, or potential significance, to us.

In January 2010, the FASB issued Accounting Standards Update 2010-06 (“ASU 2010-06”) on improving disclosure of fair value measurements. This guidance is effective for fiscal years beginning after December 15, 2009 except for disclosures about purchases, sales, issuances, and settlements in the roll forward of activity of Level 3 fair value measurements which is effective for fiscal years beginning after December 15, 2010. 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:

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. The convertible notes issued in May 2007, August 2008, May 2009 and August 2009 were paid in full on July 15, 2010.

On July 15, 2010 we issued a secured convertible promissory note to Northern Dynasty Minerals Ltd (“Northern Dynasty”). The original advanced amount is $4,000,000 and bears interest at a rate of 10% per annum compounded monthly. On August 17, 2010 we transferred 95 of our Alaska State mineral claims to Northern Dynasty for consideration of $1,000,000 of the original advanced amount under the secured convertible promissory note. No interest accrued on the $1,000,000 of the original advanced amount.

As part of the transaction noted above, 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 and Bonanza Hills projects 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.

NOTE 5 – Convertible promissory notes – continued

The Loan is a secured convertible loan, secured against our company’s assets. The Loan is due for repayment 45 days after the earlier to occur of: (i) Northern Dynasty’s completion of its earn-in to the Joint Venture Claims unless it has elected to deem the entire outstanding balance of the Loan (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 Loan 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, 2010 Northern Dynasty has not yet expended the $1,000,000 earn in expenses.

The Loan may be pre-paid by our company without penalty at any time on 10 days prior notice during which time Northern Dynasty’s conversion rights are unaffected.

If settlement of all of the Convertible Notes occurred on October 31, 2010 we would have been obligated to pay $3,000,000 in principal. If the settlement were completed by the issuance of common shares the conversion price at October 31, 2010 would have been $0.04938 per share for a total of 60,753,341 shares required to convert the note.

We have classified the entire amount as a current liability as the joint venture agreement has not been finalized at October 31, 2010 and as a result the note can be called by Northern Dynasty.

NOTE 6 – Common stock

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

As of October 31, 2010, there were 159,774,663 whole share purchase warrants outstanding and exercisable. The warrants have a weighted average remaining life of 4.2 years and a weighted average exercise price of $0.03 per whole warrant for one common share. Whole share purchase warrants outstanding at October 31, 2010 are as follows:

On September 15, 2010 we issued 22,098,601 common stock purchase warrants exercisable at $0.10 through September 15, 2013 pursuant to a settlement agreement with two of our warrant holders. We also amended the August 2009 common stock purchase warrants for four of our warrant holders pursuant to a settlement agreement. The warrants were increased by 134,712,799 warrants and the exercise price was reduced from $0.02 per common share to $0.002 per common share. The company recognized settlement expense of $13,241,020 related to these settlement agreements and is reported under public relations expense on our financial statements.

NOTE 6 – Common stock – continued

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

On October 20, 2010, we sold 25,000,000 units at a price of $0.04 per unit to one investor for net proceeds of $999,980. 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 $0.056 until October 20, 2013. The securities were issued to an accredited investor pursuant to an exemption from the registration requirements of the Securities Act of 1933 provided by Rule 506 of Regulation D.

NOTE 7 – Share-based compensation

On August 10, 2010 we granted incentive stock options and non-qualified stock options to certain of our directors, officers, employees and consultants to purchase an aggregate of 95,500,000 shares of our common stock at an exercise price of $0.038 per share for a term expiring on August 10, 2015. The options were fully vested upon granting.

The following tables summarize the Company’s stock option activity during the nine months ended October 31, 2010.

Incentive stock options to employees outstanding at October 31, 2010 are as follows:

Non-qualified stock options to non-employee consultants outstanding at October 31, 2010 are as follows:

The aggregate intrinsic value is calculated based on the October 29, 2010 stock price of $0.04813 per share.

As of October 31, 2010 there were no nonvested stock options. During the nine months ended October 31, 2010 the stock options granted were immediately fully vested. The weighted average grant date fair value of options vested during the nine months ended October 31, 2010 was $0.0265.

The Company estimates the fair value of option awards on the grant date using the Black-Scholes valuation model. The Company uses historical volatility as its method to estimate expected volatility. The Company used the following assumptions to estimate the fair value of stock option grants:

NOTE 7 – Share-based compensation – continued

The weighted average grant date fair value of the options granted during the nine months ended October 31, 2010 was $0.0265 per option. There were no options exercised during the nine months ended October 31, 2010.

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

At October 31, 2010 there is no unrecognized share-based compensation for all share-based awards outstanding.

NOTE 8 – Related party transactions

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

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

We sold a trailer to Jim Briscoe, our President and CEO, for $3,000.

Accrued $94,059 of unpaid wages to Jim Briscoe, our President and CEO.

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

We entered into the following transactions with related parties during the year ended January 31, 2010:

Paid or accrued $5,512 in rent. We rented an office from Jim Briscoe, our President and CEO, on a month-to-month basis for $459 per month.

Accrued $99,500 of unpaid wages to Jim Briscoe our President and CEO.

NOTE 9 – Commitments

We are required to perform annual assessment work in order to maintain the Big Chunk and Bonanza Hills Alaska State mining claims. If annual assessment work is not performed we must pay the assessment amount in cash in order to maintain the claims. Assessment work performed in excess of the required amount may be carried forward for up to four years to satisfy future obligations. We estimate that the required annual assessments to maintain the claims will be approximately $298,600. We have been informed by Northern Dynasty Minerals Inc. that sufficient funds have been expended by them to maintain the claims until August 31, 2011.

The annual state rentals for the Big Chunk and Bonanza Hills Alaska State mining claims vary from $70 to $280 per mineral claim. The rental period begins at noon September 1^st through the following September 1^st and annual rental payments are due on November 30^th of each year. 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. The estimated state rentals due by November 30, 2010 for the period from September 1, 2010 through September 1, 2011 are $202,440.

NOTE 9 – Commitments – continued

We are required to pay annual rentals for our Federal lode mining claims for the North Pipes project in the State of Arizona. The rental period begins at noon on September 1^st through the following September 1^st and rental payments are due by the first day of the rental period. The annual rentals are $140 per claim. Rentals due for the period from September 1, 2010 to September 1, 2011 of $60,340 have been paid.

In November 2006, we began renting our previous office space. The lease requires monthly payments of $3,825. In September 2008 we exercised our option to renew the lease for an additional two years. In January 2009 we vacated the premises. The landlord has not released us from our obligations related to the two year renewal and we are responsible for any shortage in rent received from a new tenant and the $3,825 that we would have paid per month during the renewal period. At October 31, 2010 the landlord has asserted a claim against us for damages of $48,909 related to this lease and a judgment has been issued against us for the full amount of damages asserted by the landlord. During the nine months ended October 31, 2010 we recognized $12,617 of rent expense related to this lease. We have included $48,909 in accounts payable at October 31, 2010 related to the lawsuit.

NOTE 10 – Supplemental disclosures with respect to cash flows

For the nine months ended October 31, 2010:

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

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

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

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

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

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

NOTE 11 – Fair value of financial instruments

Our financial instruments consist of cash and cash equivalents, accounts payable, accrued liabilities, convertible notes payable, notes payable, and warrant liability. It is management's opinion that we are not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying values. Gains and losses recognized on changes in fair value of financial instruments are reported in other income (expense) as gain (loss) on change in fair value.

We estimate the fair value of level 3 inputs using the Black-Scholes valuation model. We use historical volatility as its method to estimate expected volatility. At October 31, 2010 we had no financial instruments outstanding that were estimated using level 1, level 2 or level 3 inputs.

NOTE 11 – Fair value of financial instruments – continued

NOTE 12 – Subsequent events

On November 17, 2010 one warrant holder exercised 26,943,569 of the August 2009 warrants in a partial exercise using the cashless exercise provisions. We issued 25,758,064 shares of common stock pursuant to this cashless exercise request. The warrant was exercisable at $0.002 per common share. We received no proceeds from the partial exercise of this warrant.

On November 12, 2010, we sold 5,465,114 units at a price of $0.043 per unit to four investors for net proceeds of $234,701. 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 $0.06 until November 12, 2013. The securities were issued to accredited investors pursuant to an exemption from the registration requirements of the Securities Act of 1933 provided by Rule 506 of Regulation D.

On January 26, 2010 we were named in a lawsuit filed with the clerk of the Superior Court of Arizona in the County of Pima by our former landlord B&D Ventures LLC. The former landlord is seeking to obtain damages in the amount of $48,909 from our termination of our lease obligation before the end of the lease term. We vacated the premises in January 2009 and the lease end date was November 30, 2010. On May 13, 2010 a judgment was issued in this case in favor of B&D Ventures LLC for $48,909 plus interest accruing at 10% until paid. On November 12, 2010 we settled the outstanding balance with B&D Ventures for a payment of $25,000 and we have been released from all other liability related to this judgment.

NOTE 13 – Going concern

We are in the exploration stage, have incurred losses from operations, and require additional funds for further exploratory activity and to maintain our 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, we may not find sufficient ore reserves to be commercially mined. As such, our auditors have expressed an uncertainty about our ability to continue as a going concern in their opinion attached to our audited financial statements for the fiscal year ended January 31, 2010.

Management is working to secure additional funds through the exercise of stock warrants already outstanding, equity financings or joint venture agreements. The 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".

Overview

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. 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 Uranium & Metals Corp. (the “Company” or “We”) 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. Redwall Drilling Inc. (“Redwall”) was our wholly owned subsidiary and was a drilling contractor. Redwall was dissolved on March 30, 2010. We are an exploration stage company, as we have not generated revenues from operations. Our significant projects are:

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

Big Chunk Super Project (“Big Chunk”): 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 and zinc. We have not identified any ore reserves to date.

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

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, 2010 for additional information about the risks of mineral exploration.

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

Letter Agreement and Secured Convertible Note with Northern Dynasty Minerals Ltd.

On July 15, 2010 we issued a secured convertible promissory note to Northern Dynasty Minerals Ltd (“Northern Dynasty”). The original advanced amount is $4,000,000 and bears interest at a rate of 10% per annum compounded monthly. On August 17, 2010 we transferred 95 of our Alaska State mineral claims to Northern Dynasty for consideration of $1,000,000 of the original advanced amount under the secured convertible promissory note. No interest accrued on the $1,000,000 of the original advanced amount.

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

The Loan is a secured convertible loan, secured against our company’s assets. The Loan is due for repayment 45 days after the earlier to occur of: (i) Northern Dynasty’s completion if its earn-in to the Joint Venture Claims unless it has elected to deem the entire outstanding balance of the Loan (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 Loan 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. To date Northern Dynasty has not yet expended the $1,000,000 earn in expenses. The Loan 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.

Material Changes in Financial Condition from January 31, 2010 to October 31, 2010

We had cash and cash equivalents in the amount of $1,113,027 as of October 31, 2010 compared to $20,522 as of January 31, 2010. We had negative working capital of $(2,125,193) as of October 31, 2010 compared to $(3,625,627) as of January 31, 2010. We had cash inflows from financing activities of $1,347,566 during the nine months ended October 31, 2010. During the nine months ended October 31, 2010 the Company sold vehicles and equipment to generate cash inflows from investing activities of $251,221. We utilized these funds to pay down our accounts payable and our debt.

We received $466,217 of proceeds during the nine months ended October 31, 2010 from the issuance of a secured convertible promissory note and sale of mineral claims to Northern Dynasty. The remaining proceeds of $3,533,783 were used to pay off the May 2007, August 2008, May 2009 and August 2009 secured convertible notes that were in default.

We received $999,980 of proceeds during the nine months ended October 31, 2010 from the private placement of our securities with an accredited investor pursuant to an exemption from the registration requirements of the Securities Act of 1933 provided by Rule 506 of Regulation D. We sold 25,000,000 units consisting of one common share of our stock and one whole share purchase warrant exercisable at $0.056 for a period of three years.

Material Changes in Results of Operations from October 31, 2010 to October 31, 2009

We had a net loss of $(18,523,671) for the three months ended October 31, 2010 compared to a net loss of $(964,165) for the three months ended October 31, 2009. We had a net loss of $(19,543,494) for the nine months ended October 31, 2010 compared to a net loss of $(2,095,041) for the nine months ended October 31, 2009. The large increase in net loss during the three and nine months ended October 31, 2010 is the result of the following factors:

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Critical Accounting Policies

The condensed consolidated financial statements of Liberty Star Uranium & Metals Corp. 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, 2010. 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 our ability to continue as a going concern in connection with our consolidated financial statements for the period ended January 31, 2010. Our total stockholders’ deficit at October 31, 2010 was $(2,012,435).

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.

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 we utilize the Black-Scholes valuation method in order to determine fair market value.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

As required by Rule 13a-15 under the Exchange Act, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures at October 31, 2010, which is the end of the fiscal quarter covered by this report. This evaluation was carried out by our principal executive officer and principal financial officer, Mr. James Briscoe. 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, as appropriate, to allow timely decisions regarding required disclosure.

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Changes in Internal Control over Financial Reporting

During the quarter ended October 31, 2010 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.

Wintrode Settlement:
On January 26, 2010 we were named in a lawsuit filed with the clerk of the Superior Court of Arizona in the County of Pima by our former landlord B&D Ventures LLC. The former landlord was seeking to obtain damages in the amount of $48,909 from our termination of our lease obligation before the end of the lease term. We vacated the premises in January 2009 and the lease end date was November 30, 2010. On May 13, 2010 a judgment was issued in this case in favor of B&D Ventures LLC for $48,909 plus interest accruing at 10% until paid. On November 12, 2010 we settled the outstanding balance with B&D Ventures for a payment of $25,000 and we have been released from all other liability related to this judgment.

Alpha and Platinum Settlement:
On August 26, 2010, Platinum Long Term Growth VI LLC (“Platinum”) and Alpha Capital Anstalt (“Alpha”), two former lenders of the Company (the “Plaintiffs”), filed lawsuit in the United States District Court, Southern District of New York, against Liberty Star and James Briscoe, our president and CEO. The Plaintiffs sought to require Liberty Star to honor outstanding warrants held by the Plaintiffs at an exercise price of $0.002 (two tenths of one cent) per share and to issue to the Plaintiffs ten times the number of warrants that Liberty Star had on record, or in the alternative money damages. The claim was based on a provision in the warrant agreements that would permit a “ratchet down” of price and a multiplication of number of warrants in the event of certain share issuances by Liberty Star.

The Plaintiffs claimed that Platinum was entitled to 201,053,015 warrants and that Alpha was entitled to 240,919,010 warrants all exercisable at $0.002 per share. These warrants all contained a cashless exercise feature, permitting issuance of shares without payment of any cash to the company. The Plaintiffs also claimed money damages for non-compliance with what they claimed were the terms of the warrants, costs and attorney fees incurred in the action.

On September 15, 2010 we entered into a settlement agreement with Platinum and Alpha whereby we agreed to amend the warrants issued to Platinum and Alpha on August 14, 2009 as follows: Platinum’s warrant was increased to 70,368,557 common stock purchase warrants exercisable at $0.002 per common share until August 14, 2015. Alpha’s warrant was increased to 84,321,650 common stock purchase warrants exercisable at $0.002 per common share until August 14, 2015. These warrants may still be exercised using a cashless exercise feature, however, the holders of the warrants are not permitted to own or have beneficial ownership in excess of 4.99% of our outstanding common stock.

In addition to the amendment of the August 14, 2009 warrants, we agreed to issue to Platinum and Alpha common stock purchase warrants of 10,052,651 and 12,045,950, respectively, exercisable at $0.10 per common share expiring three years from the date of issuance with no cashless exercise provision.

We also agreed that the warrants issued to Platinum and Alpha in May 2007 will be modified so as not to permit the holders to own or have beneficial ownership in excess of 4.99% of our outstanding common stock.

Harborview and Brio Settlement:
On October 15, 2010 we settled a threatened lawsuit by two of our August 2009 common stock purchase warrant holders Harborview Master Fund LP (“Harborview”) and Brio Capital LP (“Brio”). These two warrant holders were seeking to require Liberty Star to honor outstanding warrants at an exercise price of $0.002 (two tenths of one cent) per share and to issue to them 10 times the number of warrants that Liberty Star had on record. The claim was based on a provision in the warrant agreements that would permit a “ratchet down” of price and a multiplication of number of warrants in the event of certain share issuances by Liberty Star. We agreed to amend the warrants issued to Harborview and Brio on August 14, 2009 as follows: Harborview’s warrant was increased to 23,054,100 common stock purchase warrants exercisable at $0.002 per common share. Brio’s warrant was increased to 13,275,591 common stock purchase warrants exercisable at $0.002 per common share. Pursuant to the settlement, these warrants were immediately exercised using the cashless exercise provision and we issued 22,293,234 common shares to Harborview and 12,837,452 common shares to Brio.

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

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

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended January 31, 2010, 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 $1,113,027 and negative working capital of $(2,125,193) as of October 31, 2010. 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 Northern Dynasty Secured Convertible Note and private placements of our securities. There is no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on their investment in our common stock. Further, we may continue to be unprofitable. Obtaining additional financing would be subject to a number of factors, including market prices for minerals, investor acceptance of our properties, contractual restrictions on our ability to enter into further financing arrangements, and investor sentiment. These factors may make the timing, amount, terms or conditions of additional financing unavailable to us and our business could fail.

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, 2010 is $(58,647,877). 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.

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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, 2010 that since we are an exploration stage company, have no established source of revenue and are dependent on our ability to raise capital from shareholders or other sources to sustain operations, there is a substantial doubt that we will be able to continue as a going concern.

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

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

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

We issued 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. The convertible notes were issued in May 2007, August 2008, May 2009 and August 2009. In July 2010 the notes were paid in full. We issued 187,127,678 shares of common stock as repayment of $227,455 principal portion and $47,522 interest portion of the monthly payments on theses convertible notes during the nine months ended October 31, 2010.

On July 15, 2010 the Company issued a secured convertible promissory note to Northern Dynasty Minerals Ltd (“Northern Dynasty”). The original advanced amount is $4,000,000 and bears interest at a rate of 10% per annum compounded monthly. The Company transferred 95 of its Alaska State mineral claims to Northern Dynasty for consideration of $1,000,000 of the original advanced amount under the secured convertible promissory note. Northern Dynasty is not a U.S. person (as that term is defined in Regulation S of the Securities Act of 1933). In issuing this convertible promissory note to Northern Dynasty, we relied on the registration exemption provided for in Regulation S and/or Section 4(2) of the Securities Act of 1933.

Provided a minimum of $1,000,000 has been expended by Northern Dynasty on earn in expenses, the Loan 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 company’s shares were listed on the TSX Venture Exchange. To date Northern Dynasty has not expended the minimum of $1,000,000 earn in expenses.

On September 15, 2010 we issued 22,098,601 common stock purchase warrants exercisable at $0.10 through September 15, 2013 pursuant to a settlement agreement with two of our warrant holders. We also amended the August 2009 common stock purchase warrants for four of our warrant holders pursuant to a settlement agreement. The warrants were increased by 134,712,799 warrants and the exercise price was reduced from $0.02 per common share to $0.002 per common share. The company recognized settlement expense of $13,241,020 related to these settlement agreements and is reported under public relations expense on our financial statements. We issued these warrants pursuant to an exemption from registration set out in Section 4(2) of the Securities Act of 1933.

We issued 80,166,652 shares of common stock upon exercise of August 2009 common stock purchase warrants for no cash proceeds as all exercises were completed pursuant to the cashless exercise provisions of the August 2009 common stock purchase warrants. We issued these shares pursuant to an exemption from registration set out in Section 4(2) of the Securities Act of 1933.

On October 20, 2010, we sold 25,000,000 units at a price of $0.04 per unit to one investor for net proceeds of $999,980. 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 $0.056 until October 20, 2013. The securities were issued to an accredited investor pursuant to an exemption from the registration requirements of the Securities Act of 1933 provided by Rule 506 of Regulation D.

On November 17, 2010 one warrant holder exercised 26,943,569 of the August 2009 warrants in a partial exercise using the cashless exercise provisions. We issued 25,758,064 shares of common stock pursuant to this cashless exercise request. The warrant was exercisable at $0.002 per common share. We received no proceeds from the partial exercise of this warrant. We issued these shares pursuant to an exemption from registration set out in Section 4(2) of the Securities Act of 1933.

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On November 12, 2010, we sold 5,465,114 units at a price of $0.043 per unit to four investors for net proceeds of $234,701. 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 $0.06 until November 12, 2013. The securities were issued to accredited investors pursuant to an exemption from the registration requirements of the Securities Act of 1933 provided by Rule 506 of Regulation D.

All proceeds will be used for working capital and exploration expenses.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. (Removed and Reserved).

Item 5. Other Information.

None.

Item 6. Exhibits

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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: