| Convertible promissory notes [Text Block] | NOTE 7 – Convertible promissory notes Following is a summary of convertible promissory notes:
July 31, January 31,
2015 2015
12% convertible note payable issued August 2013, $38,784
due September 2015 and $55,500
due February 2016
$
62,161
$
144,519
Convertible note payable issued November 2013, due November 2015
-
147,500
12% convertible note payable issued August 2014, due August 2015
-
157,792
10% convertible note payable issued October 2014, due October 2015
-
108,136
10% convertible note payable issued December 2014, due December 2016
149,911
106,697
212,072
664,644
Less debt discount
(36,891
)
(41,928
)
Less current portion of convertible notes
(25,270
)
(516,019
)
Long-term convertible notes payable $
149,911
$
106,697
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.
On July 15, 2010 we issued a secured convertible promissory note bearing interest at a rate of
10% per annum compounded monthly (the “2010 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 was 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.
As part of the transaction noted above, Northern Dynasty could 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 could be applied as part of Northern Dynasty’s earn-in requirements. Northern Dynasty’s minimum annual expenditures under the earn-in would be the minimum level necessary to keep the Joint Venture Claims in good standing. Northern Dynasty could elect to abandon the earn-in at any time on
30
days’ notice, so long as sufficient annual labor was performed, or a cash payment in lieu of labor was made, in order to fulfill the annual labor requirements for the Joint Venture Claims for a minimum of
12
months after termination of the earn-in. No such notice by Northern Dynasty was received.
On November 14, 2012, we signed a loan settlement agreement with Northern Dynasty which would have discharged the $3,730,174
principal balance and $1,592,769
of accrued interest for the 2010 Convertible Note and would have terminated Northern Dynasty’s earn-in rights. In exchange for the settlement, we initiated the transfer of
199
Alaska mining claims to Northern Dynasty’s subsidiary, U5 Resources. However, MBGS, LLC filed liens against the claims before the transfer could be completed. In March 2014 Liberty Star and Big Chunk entered into a settlement agreement with MBGS, LLC, following a resolution conference conducted in Anchorage, Alaska whereby all Northern Dynasty claims recorded by MBGS, LLC were released. As a result of the settlement agreement with MBGS, LLC, the Company completed its loan settlement agreement with Northern Dynasty and discharged the principal balance and accrued interest for the 2010 Convertible Note and terminated Northern Dynasty’s earn-in-rights. A gain of $5,322,943
for the settlement of the Northern Dynasty debt and accrued interest was recorded in other income in April 2014. As of April 30, 2014, we had no principal or interest outstanding for the 2010 Convertible Note.
In August 2013, we entered into a promissory note (the “August 2013 Note”) for a principal sum of $555,000
plus accrued and unpaid interest and any other fees. The consideration is up to $500,000, which would produce an original issue discount of $55,000
if all the consideration is received. The lender paid $150,000
upon closing pursuant to the terms of the August 2013 Note. The August 2013 Note has a maturity of one year from the delivery of each payment. The August 2013 Note may be convertible into shares of common stock of our company at any time from
180
days after the date of each payment of consideration, at a conversion price which is
70% of the average of the three lowest closing prices in the
20
trading days previous to the conversion. We may repay the August 2013 Note at any time on or before
90
days from the effective date of the August 2013 Note with an interest rate of
0%, after which we may not make any further payments on the August 2013 Note prior to the maturity date without written approval from the lender. If we elect not to repay the August 2013 Note on or before
90
days from the effective date of the August 2013 Note, a one-time interest charge of
12% will be applied to the principal sum. We elected not to pay the $150,000
portion of the August 2013 Note within
90
days from the effective date. After the $150,000
portion of the August 2013 Note became convertible, the note holder elected to convert the principal and interest totaling $186,480
into
17,937,915
shares of the company’s common stock during the months of February through May of 2014. On December 9, 2013, we received additional consideration of $75,000
pursuant to the terms of the August 2013 Note. We elected not to pay the $75,000
portion of the August 2013 Note within
90
days from the effective date. In June, July and August 2014, the note holder converted principal and interest totaling $93,240
into
9,983,507
shares of the Company’s common stock. On June 24, 2014 and September 3, 2014, we received additional consideration of $75,000
and $75,000, respectively, pursuant to the terms of the August 2013 Note. In December 2014 and January 2015, the note holder converted principal and interest totaling $41,961
into
5,900,000
shares of the Company’s common stock. On February 25, 2015, we received additional consideration of $50,000
pursuant to the terms of the August 2013 Note. During the three months ended April 30, 2015, the note holder converted principal and interest totaling $105,733
into
30,800,000
shares of the Company’s common stock. During the three months ended July 31, 2015, the note holder converted principal and interest totaling $38,784
into
31,715,187
shares of the Company’s common stock. As of July 31, 2015, we had $62,161
of principal and interest outstanding for the August 2013 Note.
On November 18, 2013, we entered into a securities purchase agreement (the “November 2013 Note”), whereby we agreed to issue a convertible note to one lender in the principal amount of $250,000. The proceeds from the note were $225,000, which created an original issue discount of $25,000. The note was payable in full on November 18, 2014 and bears no interest except in an event of default. The lender may, at its option, after the 183rd day (after May 20, 2014) following the closing date, convert the principal amount or any portion of such principal amount of the note into shares of common stock of our company at the price equal to the lesser of (a)
100% of the volume weighted average price (VWAP), as reported on the closing date (November 18, 2013), and (b)
70% of the average of the
5
day VWAP immediately prior to the day of conversion. On November 13, 2014, we entered into an Assignment of Promissory Note & Acknowledgment, whereby we consented to an assignment of the note to another lender, pursuant to which $250,000
remains owing by the Company. The maturity date of the November 2013 Note was extended to November 18, 2015. From November 2014 through January 2015, the new noteholder converted principal of $102,500
into
11,792,944
shares of the Company’s common stock. During the three months ended April 30, 2015, the new noteholder converted principal of $125,001
into
29,248,823
shares of the Company’s common stock. During the three months ended July 31, 2015, the new noteholder converted principal and interest of $28,046
into
18,995,113
shares of the Company’s common stock. As of July 31, 2015, we had $0
of principal and interest outstanding for the November 2013 Note.
In August 2014, we received $150,000
pursuant to the terms of a convertible promissory note (the “August 2014 Note”) dated August 26, 2014. The Note bears interest at
12%, is due on August 26, 2015, and is convertible after
180
days at a
45% discount to the average of the daily VWAP prices for the previous
10
trading days before the date of conversion During the three months ended April 30, 2015, the new noteholder converted principal of $160,834
into
56,676,739
shares of the Company’s common stock. As of July 31, 2015, we had $0
of principal and interest outstanding for this Note.
On October 14, 2014, we entered into a securities purchase agreement, whereby we agreed to issue a convertible note (the “October 2014 Note”) to one lender in the principal amount of $105,000. The Note is payable in full on October 14, 2015, bears interest at the rate of
10% per annum, and includes a $5,000
original issuance discount. The Note may be convertible into shares of common stock of our company at any time from
180
days after the execution date of the Note at a price per share of
40% discount to the average of the daily VWAP for the previous five trading days before the date of conversion. During the three months ended April 30, 2015, the note holder converted principal and interest totaling $57,000
into
26,000,000
shares of the Company’s common stock. During the three months ended July 31, 2015, the note holder converted principal and interest totaling $53,901
into
48,878,264
shares of the Company’s common stock. As of July 31, 2015, we had $0
of principal and interest outstanding for this Note.
On December 3, 2014, we entered into a note purchase agreement, whereby we agreed to issue a convertible note (the “December 2014 Note”) to lender in the principal amount of $210,000, with a $10,000
original issuance discount. The initial purchase price was $105,000
of consideration of which $100,000
was received our company and $5,000
was retained through the original issue discount. An additional $50,000
was received on February 27, 2015 with a $2,500
original issue discount. An additional $30,000
was received on June 11, 2015 with a $1,500
original issue discount. An additional $20,000
was received on July 9, 2015 with a $1,000
original issue discount. The Note bears interest at
10%, is due on December 3, 2016, and is convertible after six months of advance of funds at a
37.5% discount to the average of the daily VWAP prices for the previous
5
trading days before the date of conversion. During the three months ended July 31, 2015, the note holder converted principal and interest totaling $69,357
into
61,028,598
shares of the Company’s common stock. As of July 31, 2015, we had of $149,911
of principal and interest outstanding for this Note.
During the six months ended July 31, 2015 and 2014, the Company recorded debt discounts of $411,247
and $325,031, respectively, due to the derivative liabilities, and original issue debt discounts of $10,500
and $10,500, respectively, due to the convertible notes. The Company recorded amortization of these discounts of $563,152
and $225,953
for the six months ended July 31, 2015 and 2014, respectively.
In November of 2013, the Company recorded $45,663
of deferred financing costs, of which $15,500
was paid in cash and $30,163
paid with common stock, related to the November 18, 2013 convertible note. The Company recorded amortization of these deferred financing costs of $0
and $22,831
for the six months ended July 31, 2015 and 2014, respectively.
The Company recognized a gain on settlement of debt of $72,308
during the three and six month ended July 31, 2015 as a result of convertible note conversions during the three months ended July 31, 2015. | NOTE 7 – Long-term debt and convertible promissory notes
Note payable to Ford Credit is payable in monthly installments of $544
including interest at a fixed rate of
9.49% through maturity in February 2016. The principal balance at January 31, 2015 and 2014 is $6,710
and $12,304, respectively. The carrying amount of the vehicle that serves as collateral is $6,891
and $14,410
at January 31, 2015 and 2014, respectively.
The following is a summary of the principal maturities of long-term debt during the next five years:
Minimum future debt payments
For the year ending January 31,
2016 $
6,149
2017
561
2018 and thereafter
-
$
6,710
Less: current maturities
6,149
$
561
Following is a summary of convertible promissory notes:
January 31, January 31,
2015 2014
10% convertible note payable with Northern Dynasty Minerals Ltd (“Northern Dynasty”) issued July 15, 2010
$
-
$
3,730,174
12% convertible note payable issued August 2013, $51,279
due in June 2015 and $93,240
due in September 2015
144,519
247,500
Convertible note payable issued November 2013, due November 2015
147,500
250,000
12% convertible note payable issued August 2014, due August 2015
157,791
-
10% convertible note payable issued October 2014, due October 2015
108,136
-
10% convertible note payable issued December 2014, due December 2016
106,697
-
664,643
4,227,674
Less debt discount
(41,928
)
(34,584
)
Less current portion of convertible notes
(516,018
)
(4,193,090
)
Long-term convertible notes payable $
106,697
$
-
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.
On July 15, 2010 we issued a secured convertible promissory note bearing interest at a rate of
10% per annum compounded monthly (the “2010 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 was 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.
As part of the transaction noted above, Northern Dynasty could 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 could be applied as part of Northern Dynasty’s earn-in requirements. Northern Dynasty’s minimum annual expenditures under the earn-in would be the minimum level necessary to keep the Joint Venture Claims in good standing. Northern Dynasty could elect to abandon the earn-in at any time on
30
days’ notice, so long as sufficient annual labor was performed, or a cash payment in lieu of labor was made, in order to fulfill the annual labor requirements for the Joint Venture Claims for a minimum of
12
months after termination of the earn-in. No such notice by Northern Dynasty was received.
On November 14, 2012, we signed a loan settlement agreement with Northern Dynasty which would have discharged the $3,730,174
principal balance and $1,592,769
of accrued interest for the 2010 Convertible Note and would have terminated Northern Dynasty’s earn-in rights. In exchange for the settlement, we initiated the transfer of
199
Alaska mining claims to Northern Dynasty’s subsidiary, U5 Resources. However, MBGS, LLC filed liens against the claims before the transfer could be completed. In March 2014 Liberty Star and Big Chunk entered into a settlement agreement with MBGS, LLC, following a resolution conference conducted in Anchorage, Alaska whereby all Northern Dynasty claims recorded by MBGS, LLC were released. As a result of the settlement agreement with MBGS, LLC, the Company completed its loan settlement agreement with Northern Dynasty and discharged the principal balance and accrued interest for the 2010 Convertible Note and terminated Northern Dynasty’s earn-in-rights. A gain of $5,322,943
for the settlement of the Northern Dynasty debt and accrued interest was recorded in other income in April 2014. As of January 31, 2015, we had no principal or interest outstanding for the 2010 Convertible Note.
In August 2013, we entered into a promissory note (the “August 2013 Note”) for a principal sum of $555,000
plus accrued and unpaid interest and any other fees. The consideration is up to $500,000, which would produce an original issue discount of $55,000
if all the consideration is received. The lender paid $150,000
upon closing pursuant to the terms of the August 2013 Note. The August 2013 Note has a maturity of one year from the delivery of each payment. The August 2013 Note may be convertible into shares of common stock of our company at any time from
180
days after the date of each payment of consideration, at a conversion price which is
70% of the average of the three lowest closing prices in the
20
trading days previous to the conversion. We may repay the August 2013 Note at any time on or before
90
days from the effective date of the August 2013 Note with an interest rate of
0%, after which we may not make any further payments on the August 2013 Note prior to the maturity date without written approval from the lender. If we elect not to repay the August 2013 Note on or before
90
days from the effective date of the August 2013 Note, a one-time interest charge of
12% will be applied to the principal sum. We elected not to pay the $150,000
portion of the August 2013 Note within
90
days from the effective date. After the $150,000
portion of the August 2013 Note became convertible, the note holder elected to convert the principal and interest totaling $186,480
into
17,937,915
shares of the company’s common stock during the months of February through May
of 2014. On December 9, 2013, we received additional consideration of $75,000
pursuant to the terms of the August 2013 Note. We elected not to pay the $75,000
portion of the August 2013 Note within
90
days from the effective date. In June, July and August 2014, the note holder converted principal and interest totaling $93,240
into
9,983,507
shares of the Company’s common stock. On June 24, 2014 and September 3, 2014, we received additional consideration of $75,000
and $75,000, respectively, pursuant to the terms of the August 2013 Note. In December 2014 and January 2015, the note holder converted principal and interest totaling $41,961
of the $75,000
of consideration received on June 24, 2014 into
5,900,000
shares of the Company’s common stock. As of January 31, 2015, we had $144,519
outstanding for the August 2013 Note.
On November 18, 2013, we entered into a securities purchase agreement (the “November 2013 Note”), whereby we agreed to issue a convertible note to one lender in the principal amount of $250,000. The proceeds from the note were $225,000, which created an original issue discount of $25,000. The note was payable in full on November 18, 2014 and bears no interest except in an event of default. The lender may, at its option, after the 183rd day (after May 20, 2014) following the closing date, convert the principal amount or any portion of such principal amount of the note into shares of common stock of our company at the price equal to the lesser of (a)
100% of the volume weighted average price (VWAP), as reported on the closing date (November 18, 2013), and (b)
70% of the average of the
5
day VWAP immediately prior to the day of conversion. On November 13, 2014, we entered into an Assignment of Promissory Note & Acknowledgment, whereby we consented to an assignment of the note to another lender, pursuant to which $250,000
remains owing by the Company. The maturity date of the November 2013 Note was extended to November 18, 2015. From November 2014 through January 2015, the new noteholder converted principal of $102,500
into
11,792,944
shares of the Company’s common stock. As of January 31, 2015, we had $147,500
principal outstanding for the November 2013 Note.
In August 2014, we received $150,000
pursuant to the terms of a convertible promissory note (the “August 2014 Note”) dated August 26, 2014. The Note bears interest at
12%, is due on August 26, 2015, and is convertible after
180
days at a
45% discount to the average of the daily VWAP prices for the previous
10
trading days before the date of conversion. As of January 31, 2015, we had $157,791
principal and interest outstanding for this Note.
On October 14, 2014, we entered into a securities purchase agreement, whereby we agreed to issue a convertible note (the “October 2014 Note”) to one lender in the principal amount of $105,000. The Note is payable in full on October 14, 2015 and bears interest at the rate of
10% per annum. There is a $5,000
original issuance discount on the Note. The Note may be convertible into shares of common stock of our company at any time from
180
days after the execution date of the Note at a price per share of
40% discount to the average of the daily VWAP for the previous five trading days before the date of conversion. As of January 31, 2015, we had $108,136
principal and interest outstanding for this Note.
On December 3, 2014, we entered into a note purchase agreement, whereby we agreed to issue a convertible note (the “December 2014 Note”) to lender in the principal amount of $210,000. There is a $10,000
original issuance discount on the Note. The initial purchase price was $105,000
of consideration of which $100,000
was received our company and $5,000
was retained through the original issue discount.. The Note bears interest at
10%, is due on December 3, 2016, and is convertible after six month at a
37.5% discount to the average of the daily VWAP prices for the previous
5
trading days before the date of conversion. As of January 31, 2015, we had $106,697
principal and interest outstanding for this Note.
During the years ended January 31, 2015 and 2014, the Company recorded debt discounts of $382,173
and $0, respectively, due to the derivative liabilities, and original issue debt discounts of $28,750
and $47,500, respectively, due to the convertible notes. The Company recorded amortization of these discounts of $403,579
and $12,916
for the years ended January 31, 2015 and 2014, respectively.
In November of 2013, the Company recorded $45,663
of deferred financing costs, of which $15,500
was paid in cash and $30,163
paid with common stock, related to the November 18, 2013 convertible note. The Company recorded amortization of these deferred financing costs of $38,052
and $7,611
for the years ended January 31, 2015 and 2014, respectively. |
