NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 – Basis of Presentation
The
consolidated financial statements included herein have been prepared by Liberty Star Uranium & Metals Corp. (the “Company”,
“we”, “our”) 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, 2022
as filed with the SEC under the Securities and Exchange Act of 1934 (the “Exchange Act”) on May 17, 2022. 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 omitted, as permitted by the SEC, although we believe the disclosures which are made are adequate
to make the information presented not misleading. The consolidated financial statements reflect, in the opinion of management, all normal
recurring adjustments necessary to present fairly our financial position at July 31, 2022, 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 six months ended July 31, 2022,
are not necessarily indicative of the results to be expected for the full year.
NOTE
2 – Going concern
The
Company has incurred losses from operations and requires additional funds for further exploratory activity and to maintain its claims
prior to attaining a revenue generating status. There are no assurances that a commercially viable mineral deposit exists on any of our
properties. In addition, the Company may not find sufficient ore reserves to be commercially mined. As such, there is substantial doubt
about the Company’s ability to continue as a going concern.
Management
is working to secure additional funds through the exercise of stock warrants already outstanding, equity financings, debt financings
or joint venture agreements. The consolidated financial statements do not include any adjustments that might result from the outcome
of these uncertainties.
NOTE
3 – Summary of Significant Accounting Policies
Fair
Value
ASC
820 Fair Value Measurements and Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value
and enhances disclosures about fair value measurements. It 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. ASC 820 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: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level
2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted
prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not
active; and model-driven valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be
obtained from, or corroborated by, third-party pricing services.
Level
3: Unobservable inputs to measure fair value of assets and liabilities for which there is little, if any market activity at the measurement
date, using reasonable inputs and assumptions based upon the best information at the time, to the extent that inputs are available without
undue cost and effort.
Schedule of Fair Value of Financial Instruments
| |
| | |
Fair value measurements at reporting date using: | |
Description | |
Fair Value | | |
Quoted
prices in
active markets
for identical
liabilities
(Level 1) | | |
Significant
other
observable
inputs
(Level 2) | | |
Significant
unobservable
inputs
(Level 3) | |
Warrant and convertible note derivative liability at July 31, 2022 | |
$ | 458,796 | | |
| - | | |
| - | | |
$ | 458,796 | |
Warrant and convertible note derivative liability at January 31, 2022 | |
$ | - | | |
| - | | |
| - | | |
$ | - | |
Our
financial instruments consist of cash and cash equivalents, prepaid expenses, accounts payable, accrued liabilities, notes payable, convertible
notes payable, and derivative liability. It is management’s opinion that we are not exposed to significant interest, currency or
credit risks arising from these financial instruments. With the exception of the derivative liability, the fair value of these financial
instruments approximates their carrying values based on their short maturities or for long-term debt based on borrowing rates currently
available to us for loans with similar terms and maturities. Gains and losses recognized on changes in estimated fair value of the derivative
liability are reported in other income (expense) as gain (loss) on change in fair value of derivative liability.
Income
Taxes
Income
taxes are recorded using the asset and liability method. Under the asset and liability method, tax assets and liabilities are recognized
for the tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Future tax assets and liabilities are measured using the enacted tax rates expected to apply when the
asset is realized or the liability settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in
income in the period that enactment occurs. To the extent that the Company does not consider it more likely than not that a future tax
asset will be recovered, it provides a valuation allowance against the excess. Interest and penalties associated with unrecognized tax
benefits, if any, are classified as additional income taxes in the statement of operations. The current period net income will be offset
against the prior periods net operating losses which were approximately $32 million as of January 31, 2022, resulting in no current period
income tax expense or benefit. The Company continues to record a valuation allowance to fully offset the deferred tax asset.
Reclassification
Certain
reclassifications may have been made to our prior year’s financial statements to conform to our current year presentation. These
reclassifications had no effect on our previously reported results of operations or accumulated deficit.
NOTE
4 – Related party transactions
Our
CEO, Brett Gross, was elected as President and Chief Executive Officer on December 7, 2018 and received no compensation for these services
during the six months ended July 31, 2022 and 2021.
Accrued
Wages
As
of July 31, 2022, and January 31, 2022, we had a balance of accrued unpaid wages of $ to a former President and $36,137 to Patricia
Madaris, VP Finance & CFO. As of January 31, 2022, total accrued wages were $811,711, which included $759,949 to the Company’s
former CEO, James Briscoe. As of April 22, 2022, the Company reached terms of settlement with James
Briscoe and no longer owes him accrued wages.
Advances
During
the six months ended July 31, 2022, the CEO advanced the Company $10,000
in cash and paid $1,946
of expenses on the Company’s behalf. Additionally, during the six months ended July 31, 2022, board members advanced $7,050 to the Company and the Company $150 of advances
to related parties. The advances are unsecured,
non-interest bearing and payable on demand. As of July 31, 2022 and January 31, 2022, the advances related party totaled $18,846
and $0,
respectively.
Other
On
April 22, 2022, the Company reached terms of settlement of the litigation Case No. C20194139, involving our former CEO, James Briscoe,
previously filed in the Superior Court of Arizona. Effective April 22, 2022, the Company’s board of directors voted on, accepted
and the settlement is now hereby approved, ratified, and confirmed (See Note 10).
NOTE
5 – Stock options
Qualified
and Non-qualified incentive stock options outstanding at July 31, 2022 are as follows:
Schedule of Stock Option Activity
| |
Number of
options | | |
Weighted
average exercise
price per share | |
Outstanding, January 31, 2022 | |
| 145,250 | | |
$ | 2.97 | |
Granted | |
| 158,760 | | |
| 12.76 | |
Expired | |
| - | | |
| - | |
Exercised | |
| - | | |
| - | |
Outstanding, July 31, 2022 | |
| 304,010 | | |
$ | 8.08 | |
| |
| | | |
| | |
Exercisable, July 31, 2022 | |
| 304,010 | | |
$ | 8.08 | |
These
options had a weighted average remaining life of 14.71 years and an aggregate intrinsic value of $0 as of July 31, 2022.
On
April 22, 2022, the Company reached terms of settlement of the litigation Case No. C20194139, involving our former CEO, James Briscoe
(see Note 10). As part of the terms of settlement, the Company will reinstate Mr. Briscoe’s stock options that expired following
his resignation from the Board. This reinstatement will be on the same terms as originally issued, as evidenced in the August 10, 2010,
Stock Option Agreement and October 11, 2016, Stock Option Agreement, each as adjusted for the February 25, 2021, reverse stock split,
and pursuant to the Company’s 2010 Stock Option Plan, except for the option exercise window, which will be expanded to 30 years.
A total of 118,760 stock options were reinstated for Mr. Briscoe, which is comprised of 105,000 options with an exercise price of $19.00
and 13,760 options with an exercise price of $1.50. The total fair value of these option grants at issuance was $44,706.
On
June 21, 2022, the Company entered into an agreement with an advisor to advise its executive management on strategic partnerships, investments,
and other undertakings of material value to the Company. As compensation, the Company will grant the advisor monthly stock options of
20,000 for a term of three months. The options have a strike price equal to the closing price per share on the day the options are issued
and expire in one year. During the six months ended July 31, 2022, the Company granted of 40,000 options to consultants. The exercise
price of the options ranges from $0.24 to $0.30. The total fair value of these option grants at issuance was $8,039. During the six months
ended July 31, 2022, the Company recognized $3,177 of expense related to these options. At July 31, 2022, the Company had $4,861 of unrecognized
expenses related to outstanding options.
NOTE
6 – Warrants
As
of July 31, 2022, there were 2,170,167 purchase warrants outstanding and exercisable. The warrants have a weighted average remaining
life of 2.85 years and a weighted average exercise price of $1.12 per warrant for one common share. The warrants had no aggregate intrinsic
value as of July 31, 2022.
Stock
warrants outstanding at July 31, 2022 are as follows:
Schedule of Stock Warrants Outstanding
| |
Number of
warrants | | |
Weighted
average exercise
price per share | |
Outstanding, January 31, 2022 | |
| 2,164,167 | | |
$ | 2.16 | |
Issued | |
| 6,649 | | |
| 0.53 | |
Expired | |
| - | | |
| - | |
Exercised | |
| - | | |
| - | |
Outstanding, July 31, 2022 | |
| 2,170,816 | | |
$ | 1.12 | |
| |
| | | |
| | |
Exercisable, July 31, 2022 | |
| 1,663,284 | | |
$ | 0.85 | |
As
of May 18, 2022, the Company extended all warrants issued by the Company which expired or will expire during the year 2022. These warrants
are extended for an additional three years. All other terms of the warrants remain unchanged, fully considering the reverse split effective
on February 25, 2021, which applied equivalently to price and number of shares for all warrants.
NOTE
7 – Derivative Liabilities
The
embedded conversion feature in the convertible debt instruments that the Company issued (See Note 8), that became convertible during
the six months ended July 31, 2022, qualified it as a derivative instrument since the number of shares issuable under the note is indeterminate
based on guidance in FASB ASC 815, Derivatives and Hedging. These convertible notes tainted all other equity linked instruments including
outstanding warrants and fixed rate convertible debt on the date that the instrument became convertible.
The
valuation of the derivative liability of the warrants was determined through the use of a Monte Carlo options model that values the liability
of the warrants based on a risk-neutral valuation where the price of the option is its discounted expected value. The technique applied
generates a large number of possible (but random) price paths for the underlying common stock via simulation, and then calculates the
associated exercise value (i.e. “payoff”) of the option for each path. These payoffs are then averaged and discounted to
a current valuation date resulting in the fair value of the option.
The
valuation of the derivative liability attached to the convertible debt was arrived at through the use of a Monte Carlo model that values
the derivative liability within the notes. The technique applied generates a large number of possible (but random) price paths for the
underlying (or underlyings) via simulation, and then calculates the associated payment value (cash, stock, or warrants) of the derivative
features. The price of the underlying common stock is modeled such that it follows a geometric Brownian motion with constant drift, and
elastic volatility (increasing as stock price decreases). The stock price is determined by a random sampling from a normal distribution.
Since the underlying random process is the same, for enough price paths, the value of the derivative is derived from path dependent scenarios
and outcomes. The features in the notes that were analyzed and incorporated into the model included the conversion features with the
reset provisions, the call/redemption/prepayment options, and the default provisions. Based on these features, there are six primary
events that can occur; payments are made in cash; payments are made with stock; the note holder converts upon receiving a redemption
notice; the note holder converts the note; the issuer redeems the note; or the Company defaults on the note. The model simulates the
underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms
that would be in effect at the time (i.e. stock price, conversion price, etc.). Probabilities were assigned to each variable such as
redemption likelihood, default likelihood, and timing and pricing of reset events over the remaining term of the notes based on management
projections. This led to a cash flow simulation over the life of the note. A discounted cash flow for each simulation was completed,
and it was compared to the discounted cash flow of the note without the embedded features, thus determining a value for the derivative
liability.
Key
inputs and assumptions used to value the convertible note when it became convertible and upon settlement, and warrants upon tainting,
were as follows:
|
● |
The
stock projections are based on the historical volatilities for each date. These volatilities were in the 85.0% to 132.7% range. The
stock price projection was modeled such that it follows a geometric Brownian motion with constant drift and a constant volatility,
starting with the market stock price at each valuation date; |
|
|
|
|
● |
An
event of default would not occur during the remaining term of the note; |
|
|
|
|
● |
Conversion
of the notes to stock would be completed monthly after any holding period and would be limited based on: 5% of the last 6 months
average trading volume and the ownership limit identified in the contract assuming the underlying number of common shares increases
at 1% per month. |
|
|
|
|
● |
The
effective discount was determined based on the historical trading history of the Company based on the specific pricing mechanism
in each note; |
|
● |
The
Company would not have funds available to redeem the notes during the remaining term of the convertible notes; |
|
|
|
|
● |
Discount
rates were based on risk free rates in effect based on the remaining term and date of each valuation and instrument. |
|
|
|
|
● |
The
Holder would exercise the warrant at maturity if the stock price was above the exercise price; |
|
|
|
|
● |
The
Holder would exercise the warrant after any holding period prior to maturity at target prices starting at 2 times the exercise price
for the Warrants or higher subject to monthly limits of: 5% of the last 6 months average trading volume increasing by 1% per month
and the ownership limit identified in the contract assuming the underlying number of common shares increases at 1% per month. |
Using
the results from the model, the Company recorded a derivative liability during the six months ended July 31, 2022 of $733,081 for newly
granted and existing warrants (see Note 6) that were tainted and a derivative liability of $104,886 for the fair value of the convertible
feature included in the Company’s convertible debt instruments. The derivative liability recorded for the convertible feature created
a “day 1” derivative loss of $0 and a debt discount of $104,886 that was amortized over the remaining term of the note using
the effective interest rate method. Interest expense related to the amortization of this debt discount for the six months ended July
31, 2022, was $96,264. The remaining unamortized debt discount related to the derivative liability was $8,622 as of July 31, 2022.
During
the six months ended July 31, 2022, the Company recorded a reclassification from derivative liability to equity of $0 for warrants becoming
untainted and $78,474 due to the conversions of a portion of the Company’s convertible notes. The Company also recorded the change
in the fair value of the derivative liability as a gain of $300,697 to reflect the value of the derivative liability for warrants and
convertible notes as of July 31, 2022.
During
the six months ended July 31,2021, the Company recorded a reclassification from derivative liability to equity of $0 for warrants becoming
untainted and $281,361 due to the conversions of a portion of the Company’s convertible notes. The Company also recorded the change
in the fair value of the derivative liability as a gain of $76,990 to reflect the value of the derivative liability for warrants and
convertible notes as of July 31, 2021.
The
following table sets forth a reconciliation of changes in the fair value of the Company’s derivative liability:
Schedule of Changes in Fair Value of Derivative Liabilities
| |
Six months ended July 31, | |
| |
2022 | | |
2021 | |
Beginning balance | |
$ | - | | |
$ | - | |
Total gain | |
| (300,697 | ) | |
| (76,990 | ) |
Settlements | |
| (78,474 | ) | |
| (281,361 | ) |
Additions recognized as debt discount | |
| 104,886 | | |
| 64,823 | |
Additions due to tainted warrants | |
| 733,081 | | |
| 293,528 | |
Ending balance | |
$ | 458,796 | | |
$ | - | |
| |
| | | |
| | |
Change in gain on fair value of derivative liability included in earnings relating to derivatives | |
$ | (300,697 | ) | |
$ | (76,990 | ) |
NOTE
8 – Long-term debt and convertible promissory notes
Following
is a summary of convertible promissory notes:
Summary of Convertible Promissory Notes
| |
July 31, 2022 | | |
January 31, 2022 | |
| |
| | |
| |
8% convertible note payable issued October 2021, due October 2022 | |
$ | – | | |
$ | 69,300 | |
8% convertible note payable issued November 2021, due November 2022 | |
| - | | |
| 69,000 | |
8% convertible note payable issued December 2021, due December 2022 | |
| 20,000 | | |
| 63,000 | |
8% convertible note payable issued February 2022, due February 2023 | |
| 74,800 | | |
| - | |
8% convertible note payable issued April 2022, due April 2023 | |
| 71,500 | | |
| - | |
8% convertible note payable issued July 2022, due July 2023 | |
| 45,138 | | |
| - | |
Convertible note payable | |
| 211,438 | | |
| 201,300 | |
Less debt discount | |
| (33,526 | ) | |
| (20,178 | ) |
Less current portion of convertible notes | |
| (177,912 | ) | |
| (181,122 | ) |
Long-term convertible notes payable | |
$ | - | | |
$ | - | |
On
February 7, 2022, the Company entered into a convertible promissory note with 1800 Diagonal Lending (formerly known as Sixth Street
Lending LLC) in the aggregate principal amount of $74,800
(the “February 2022 Note”). The note bears interest at 8%,
with an Original Issue Discount of $9,800,
matures on February
7, 2023, and is convertible after 180
days into shares of the Company’s common stock at a price of 75%
of the average of the lowest 5 weighted average market price of the Company’s common stock during the 10
trading days prior to conversion.
On
April 25, 2022, the Company entered into a convertible promissory note with 1800 Diagonal Lending (formerly known as Sixth Street
Lending LLC) in the aggregate principal amount of $71,500
(the “April 2022 Note”). The note bears interest at 8%,
with an Original Issue Discount of $8,000,
matures on April
25,2023, and is convertible after 180
days into shares of the Company’s common stock at a price of 75%
of the average of the lowest 5 weighted average market price of the Company’s common stock during the 10
trading days prior to conversion.
On
July 14, 2022, the Company entered into a convertible promissory note with 1800 Diagonal Lending LLC in the aggregate principal
amount of $45,138
(the “July 2022 Note”). The note bears interest at 8%,
with an Original Issue Discount of $10,138,
matures on July
14, 2023, and is convertible after 180
days into shares of the Company’s common stock at a price of 75%
of the average of the lowest 5 weighted average market price of the Company’s common stock during the 10
trading days prior to conversion.
During
the six months ended July 31, 2022 and 2021, the Company recorded debt discounts of $66,328 and $64,823, respectively, due to the derivative
liabilities, and original issue debt discounts of $29,438 and $6,000, respectively, due to the convertible notes. The Company recorded
amortization of these discounts of $61,602 and $73,551 for the six months ended July 31, 2022 and 2021, respectively.
Notes
Payable
On
June 22, 2020, the Company received loan proceeds of $32,300 (net of $100 loan fee) under the SBA’s Economic Injury Disaster Loan
program (“EIDL”). The EIDL loan, dated June 16, 2020, bears interest at 3.75%, has a 30-year term, is secured by substantially
all assets of the Company, and is due in monthly installments of $158 beginning June 18, 2021 (extended to June 18, 2023).
On
February 16, 2021, the Company received loan proceeds of $32,497 under the Payroll Protection Program (“PPP”). The PPP loan
bears interest at 1%, has a 5-year term, and is due in equal monthly installments beginning July 19, 2022. In March 2022, the Company’s
SBA PPP loan was forgiven in full resulting in a gain on forgiveness of debt of $32,497 of principal and $354 of interest.
In
April 2022, the Company entered into a Premium Finance Agreement related to an insurance policy. The policy premiums total $33,400 for
a one year policy period. The Company financed $24,750 of the policy over a nine month period. The monthly payments under the agreement
are due in nine installments of $2,871, at an annual interest rate of 10.45%.
As
of July 31, 2022, the notes payable, net balance was $13,958, which was recorded as current portion, with accrued interest of $0. As
of January 31, 2022, the notes payable, net balance was $64,897, which include term long notes payable of $64,897 and current portion
of notes payable of $0, with accrued interest of $2,287.
NOTE
9 – Stockholders’ deficit
Common
Stock
Our
undesignated 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.
During
the six months ended July 31, 2022, the Company issued a total of 684,199 shares of our common stock for conversions of $181,300 in principal
and $4,720 of interest on convertible notes payable at exercise prices ranging from $0.1746 to $0.3207.
On
May 19, 2022, the Company sold 13,298 units at a price of $0.376 per unit to an accredited investor for proceeds of $5,000. Each unit
consists of 1 share of our common stock and 0.50 warrants. The warrants have relative fair value of $1,372. Each warrant allows the holder
to purchase one share of our common stock at a price of $0.526 per share at any time on or before May 16, 2025.
On
July 31, 2022, the Company issued 26,738 shares of its common stock to an accredited investor for gross proceeds of $5,000, or $0.187
per share.
On
August 20, 2021, the Company executed a financing agreement for the purpose of drilling for the Red Rock Canyon Gold Project, in
Cochise County, Arizona. The agreement allows for a $1,000,000
common stock purchase agreement (the “Purchase Agreement”) and a $1,000,000
warrant agreement (the “Warrant Agreement,” together “the Agreements”) with Triton Funds LP
(“Triton”) of San Diego, California under an S1 registration now effective. On July 7, 2022, the Company issued 1,109,804
shares of its common stock and recorded a subscription receivable of $187,030,
or $0.1685
per share. The subscription receivable was collected in full on August 3, 2022.
On
July 1, 2022, the Company entered into a stock compensation and subscription agreement with Dutchess Group LLC. Per the agreement, Dutchess
Group will provide services to the Company and will be issued 500,000 shares of the Company’s common stock. During the six months
ended July 31, 2022, the Company issued 500,000 shares of common stock valued at $160,000.
NOTE
10 – Commitments and contingencies
We
currently rent a storage space for $45 per month in Tombstone, Arizona on a month-to-month basis.
We
are required to pay annual rentals for Liberty Star’s federal lode mining claims for the Tombstone project in the State of Arizona.
The rental period begins at noon on September 1st through the following September 1st and rental payments are due by the first day of
the rental period. The annual rentals are $165 per claim. The rentals due by September 1, 2022 for the period from September 1, 2022
through September 1, 2023 of $15,345 have not been paid yet, but we plan to pay when due.
We
are required to pay annual rentals for our Arizona State Land Department Mineral Exploration Permits (“AZ MEP”) at our Tombstone
Hay Mountain project in the State of Arizona. AZ MEP permits cost $500 per permit per year in non-refundable filing fees and 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
the date of acceptance for each permit. Rental payments are due by the first day of the rental period. We hold AZ MEP permits for 15,793.24
acres at our Tombstone project. We paid filing and rental fees for our AZ MEP’s before their respective due dates in the amount
of $29,355.
Legal
Matter
On
August 22, 2019 (and amended on December 23, 2019), the Company filed a complaint with the Superior Court of Arizona (Case No. C20194139),
demanding the titles and possession of certain vehicles and equipment of the Company from our former CEO, as well as seeking recovery
of damages from the former CEO in an amount of not less than $50,000. None of the vehicles and equipment, individually or in total, have
any material net book value (being fully depreciated) as of July 31, 2022 and January 31, 2022.
On
February 18, 2020, our former CEO and his spouse (the “Counterclaimants”) filed a First Amended Answer: First Amended Complaint
and Counterclaim with the Superior Court of Arizona seeking dismissal of the Company’s complaint and reimbursement of Counterclaimants’
attorney fees incurred related to the matter. Additionally, the counterclaim alleges breach of contract by the Company and requests
reimbursement of amounts loaned to the Company by our former CEO and his spouse, along with reimbursement of attorney fees. The Company
believes these counterclaims are without merit and will aggressively defend them and believes no unfavorable outcome or material effect
on our consolidated financial statements will result.
On
April 22, 2022, the Company reached terms of settlement of the litigation Case No. C20194139, involving our former CEO, James Briscoe,
previously filed in the Superior Court of Arizona. Effective April 22, 2022, the Company’s board of directors voted on, accepted
and the settlement is now hereby approved, ratified, and confirmed.
A
summary of the terms of that settlement is as follows:
|
● |
Mr.
Briscoe dropped his demand for “accrued wages” (see Note 4). |
|
● |
Mr.
Briscoe dropped his claim for payment of his credit card debt (see Note 4). These balances were included in accounts payable and accrued
liabilities on the consolidated balance sheet in prior period. |
|
● |
Mr.
Briscoe dropped all other claims and waives and releases all claims, known or unknown. |
|
● |
Mr.
Briscoe returned title and possession of all the vehicles that he previously transferred to his name. Mr. Briscoe to also return
to the Company all Company property identified in our First Amended Complaint. |
|
● |
The
Company reinstated Mr. Briscoe’s stock options that expired following his resignation from the Board. This reinstatement
was on the same terms as originally issued, as evidenced in the August 10, 2010, Stock Option Agreement and October 11, 2016,
Stock Option Agreement, each as adjusted for the February 25, 2021, reverse stock split, and pursuant to the Company’s 2010
Stock Option Plan, except for the option exercise window, which was expanded to 30 years (see Note 5). |
|
● |
The
Company is paying Mr. Briscoe a sum of $29,627 in 15 equal monthly installments reflected in accounts payable and accrued liabilities
on the accompanying consolidated balance sheets. |
|
● |
Both
parties agreed to a non-disparagement clause that expressly establishes prior consent to the Pima County Court’s jurisdiction
for issuance of mandatory injunctive relief if an aggrieved Party reasonably believes this clause has been violated by the other
Party whether such violation is done directly by the violating Party or via proxy. |
In
connection with the settlement, we wrote off $1,072,667 of liabilities in exchange for $29,677 of new debt and the issuance of options
with a fair value of $44,706, resulting in a gain of $998,284.
NOTE
11 – Subsequent events
On
August 5, 2022, the Company issued a total of 91,855 shares of our common stock for conversions of $15,000 in principal for the December
2021 Note at the exercise price $0.1633.
On
August 10, 2022, the Company issued a total of 45,603 shares of our common stock for conversions of $5,000 in principal and $2,000 of
accrued interest for the December 2021 Note at the exercise price $0.1535.
On
August 12, 2022, the Company settled a $5,000
advance from a related party for the issuance of 26,738
units at a price of $0.187
per unit. Each
unit consists of 1 share of our common stock and 0.50 warrants. Each warrant allows the holder to purchase one share of our
common stock at a price of $0.262
per share at any time on or before August 12, 2025.
On
August 19, 2022, the Company issued a total of 111,276 shares of our common stock for conversions of $15,000 in principal for the February
2022 Note at the exercise price $0.1348.
On
August 26, 2022, the Company issued a total of 159,109 shares of our common stock for conversions of $20,000 in principal for the February
2022 Note at the exercise price $0.1257.
On August 29, 2022 (the “Record Date”),
the Company’s Board of Directors unanimously approved, and recommended for shareholder approval, the Amendment in order to increase
the number of authorized shares of the Company’s common stock to 74,800,000. On the Record Date, the holders of all the issued and
outstanding shares of our Class A Stock stockholders, representing approximately 56.41% of the stockholder voting power, approved the
Amendment.
On
September 8, 2022, the Company issued a total of 168,776 shares of our common stock for conversions of $20,000 in principal for the February
2022 Note at the exercise price $0.1185.
Subsequent
to July 31, 2022, the CEO paid $2,500 of expenses on behalf of the Company and was repaid $14,446. In addition, the Company repaid $1,900
in advances to related parties.