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

FORM 10-KSB

(Mark One)

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

For the fiscal year ended January 31, 2008

[   ] TRANSITION REPORT UNDER 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.(Name of small business issuer in its charter)

|Nevada                                                               | 90-0175540                          
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)
|                                                                     |                                     
|3024 E Fort Lowell Road, Tucson, Arizona                             | 85716                               
|(Address of principal executive offices)                             | (Zip Code)                          

Issuer's telephone number (520) 731-8786

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

|Title of each class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|Nil                 | Nil                                      

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

Common Stock, par value $0.001(Title of class)

Check whether the issuer is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act. [   ]

Note: Checking the box above will not relieve any registrant
required to file reports pursuant to Section 13 or 15(d) of the Exchange Act
from their obligations under those Sections.

Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X]   No [   ]

Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-KSB or any amendment to this Form 10-KSB. [   ]

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

State issuer's revenues for its most recent fiscal year. Nil

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State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price at
which the common equity was sold, or the average bid and asked prices of such
common equity, as of a specified date within 60 days. (See definition of
affiliate in Rule 12b-2 of the Exchange Act.)

Note: If determining whether a person is an affiliate will
involve an unreasonable effort and expense, the issuer may calculate the
aggregate market value of the common equity held by non-affiliates on the basis
of reasonable assumptions, if the assumptions are stated.

37,233,130 shares of Common Stock @ $0.255(1)= $9,494,448(1)Average of bid and ask closing prices on April 23, 2008.

State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.

45,983,130 shares of Common Stock issued and outstanding as
of April 23, 2008.

DOCUMENTS INCORPORATED BY REFERENCE

If the following documents are incorporated by reference,
briefly describe them and identify the part of the Form 10-KSB (e.g., Part
I, Part II, etc.) into which the document is incorporated: (1) any annual report
to security holders; (2) any proxy or information statement; and (3) any
prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933
(Securities Act). The listed documents should be clearly described for
indentification purposes (e.g., annual report to security holders for the
fiscal years ended December 24, 1990).

Transitional Small Business Disclosure Format (Check one): Yes
[   ]   No [X].

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TABLE OF CONTENTS

|         |                                                                                                                                                   |  | Page
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|         |                                                                                                                                                   |  |     
|         | **PART I**                                                                                                                                        |  | 4   
|         |                                                                                                                                                   |  |     
|Item 1.  | Description
      of Business                                                                                                                     |  | 4   
|Item 2.  | Description of Property                                                                                                                           |  | 11  
|Item 3.  | Legal
      Proceedings                                                                                                                           |  | 20  
|Item 4.  | Submission of Matters to a
      Vote of Security Holders                                                                                         |  | 20  
|         |                                                                                                                                                   |  |     
|         | **PART II**                                                                                                                                       |  | 20  
|         |                                                                                                                                                   |  |     
|Item 5.  | Market for Common Equity and
      Related Stockholder Matters                                                                                    |  | 20  
|Item 6.  | Management's
      Discussion and Analysis or Plan of Operation                                                                                   |  | 23  
|Item 7.  | Financial Statements                                                                                                                              |  | 30  
|Item 8.  | Changes In
      and Disagreements With Accountants on Accounting and Financial Disclosure                                                        |  | 57  
|Item 8A. | Controls and Procedures                                                                                                                           |  | 57  
|Item 8B. | Other Information                                                                                                                                 |  | 57  
|         |                                                                                                                                                   |  |     
|         | **PART III**                                                                                                                                      |  | 58  
|         |                                                                                                                                                   |  |     
|Item 9.  | Directors,
      Executive Officers, Promoters, Control Persons and Corporate Governance;
      Compliance with Section 16(a) of the Exchange Act |  | 58  
|Item 10. | Executive Compensation                                                                                                                            |  | 61  
|Item 11. | Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters                                        |  | 65  
|Item 12. | Certain Relationships and
      Related Transactions, and Director Independence                                                                   |  | 66  
|Item 13. | Exhibits                                                                                                                                          |  | 66  
|Item 14. | Principal Accountant Fees
      and Services                                                                                                      |  | 68  
|         | Signatures                                                                                                                                        |  | 69  

FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements as that
term is defined in Section 27A of the United States Securities Act of 1933 and
Section 21E of the Securities and Exchange Act of 1934. 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 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. The following discussion
should be read in conjunction with our consolidated financial statements and the
related notes that appear elsewhere in this annual report.

As used in this annual 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

Item
1.           Description of
Business.

Business development

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. is our wholly owned subsidiary and was incorporated on December
14, 2003 in the State of Alaska. Big Chunk Corp. is engaged in the acquisition
and exploration of mineral properties business in the State of Alaska. Redwall
Drilling Inc. (Redwall) is our wholly owned subsidiary and was incorporated on
August 31, 2007 in the State of Arizona. Redwall is a drilling contractor. On
December 1, 2007 Redwall began performing drilling services on the Companys
mineral properties. In April 2007, the Company changed its name to Liberty Star
Uranium & Metals Corp. to reflect the Companys current concentrated efforts
on uranium exploration. The Company is considered to be an exploration stage
company, as it has not generated any revenues from operations.

In December 2006, the Company entered into a joint venture
agreement (Elle Venture) with XState Resources Limited (XState). The Company
holds 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 22 square mile joint venture area.

Our current business

We are an exploration stage company engaged in the acquisition
and exploration of mineral properties in the States of Arizona and Alaska.
Claims in the State of Alaska are held in the name of our wholly-owned
subsidiary, Big Chunk Corp. Claims in the State of Arizona are held in the name
of Liberty Star. The Company uses the term Super Project to indicate a project
in which numerous mineral targets have been identified, any one or more of which
could potentially contain commercially viable quantities of minerals. The
Companys significant projects are described below.

North Pipes Super Project (NPSP):

The Company holds a 100% interest in 1,757 Federal lode mining
claims strategically placed over approximately 60 square miles on the Colorado
Plateau Province of Northern Arizona. The 1,757 Federal lode mining claims
include approximately 300 breccia pipe targets (Pipes). Breccia pipes are
cylindrical formations in the Earths crust, identified by a surface depression,
and containing a high concentration of fragmented rock breccia cemented by
uranium and other minerals. We plan to ascertain whether the North Pipes Super
Project claims possess commercially viable deposits of uranium.

The Company also holds a 50% interest in 37 Federal lode mining
claims covering 7 breccia pipe targets (Elle Venture claims) at the North
Pipes Super Project location through the Elle Venture, a general partnership
with XState Resources Limited (XState). XState has the right of first refusal
to buy or joint venture in relation to the other pipes and claims later staked
in the Elle Venture area. We plan to ascertain whether the Elle Venture claims
possess commercially viable deposits of uranium.

The Company completed ground electrical geophysics surveys
covering 22 line miles on the NPSP claims. We have collected approximately
13,500 soil samples consisting of 1 kilogram of soil taken about 6 centimeters
below the surface and approximately 200 rock samples for geochemical testing. We
performed detailed geologic, mineralization, alteration and leached-cap mapping
using scintillometer and/or gamma ray spectrometer devices which detect
radioactivity. We analyzed the data received from the geochemical sampling
program and surface geologic mapping as well as using all technical data that we
have to prioritize our breccia pipe targets. We fully permitted nine breccia
pipe targets for drilling. We are currently performing diamond drilling
exploration at the NPSP on claims we own 100% and claims we own 50% in the Elle
Venture. We have drilled on 8 of the 9 breccia pipe targets permitted to date.
Details of our drilling program can be found in Item 2: Description of Property.

Big Chunk Super Project (Big Chunk):

The Company holds a 100% interest in 707 mineral claims
covering approximately 177 square miles in the Iliamna region of Southwestern
Alaska, located on the north side of the Cook Inlet, approximately 265 miles
southwest of the city of Anchorage,

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Alaska. We plan to ascertain whether the Big Chunk claims
possess commercially viable deposits of copper, gold, molybdenum, silver and
zinc.

To date, we have completed a detailed study, by airplane, of
the magnetic fields found on our Big Chunk claims. One hundred eleven miles of
induced polarization surveys have been completed over portions of our Big Chunk
claims. We have also drilled 31 drill holes to an average depth of about 400
feet for a total of 12,277 feet of drilling on our Big Chunk claims.

Bonanza Hills Project (Bonanza Hills):

The Company holds 56 mineral claims covering approximately 13.5
square miles in Southwestern Alaska approximately 13.5 miles northeast of the
northern boundary of the Big Chunk claims. We plan to ascertain whether the
Bonanza Hills claims possess commercially viable deposits of gold and silver. At
present, only a small part of our Bonanza Hills claims have been sampled.

Our board of directors decided that we will perform only the
minimum amount of exploration activity required to maintain our current Alaska
claims in good standing as a result of difficulties that other companies in the
Iliamna region have experienced trying to apply for drill permitting, mine
permitting and obtaining approved road plans to build an access road to their
potential mine site. The difficulties are likely connected to efforts by
lobbying organizations that insist that mining operations in the region would
pollute rivers and trout and salmon fisheries draining into Bristol Bay lying to
the west and disturb a large amount of forest land. It is our managements
estimate that it will take several years before these environmental issues are
resolved. Management believes that, in the mean time, our limited resources are
better spent on exploration at the North Pipes Super Project.

Title to mineral claims involves certain inherent risks due to
difficulties of determining the validity of certain claims as well as potential
for problems arising from the frequently ambiguous conveyancing history
characteristic of many mineral properties. The company has investigated title to
all its mineral properties and, to the best of its knowledge, title to all
properties are in good standing.

The mineral resource business generally consists of three
stages: exploration, development and production. Mineral resource companies that
are in the exploration stage have not yet found mineral resources in
commercially exploitable quantities, and are engaged in exploring land in an
effort to discover them. Mineral resource companies that have located a mineral
resource in commercially exploitable quantities and are preparing to extract
that resource are in the development stage, while those engaged in the
extraction of a known mineral resource are in the production stage. Our company
is in the exploration stage  we have not found any mineral resources in
commercially exploitable quantities.

Mineral resource exploration can consist of several stages. The
earliest stage usually consists of the identification of a potential prospect
through either the discovery of a mineralized showing on that property or as the
result of a property being in proximity to another property on which exploitable
resources have been identified, whether or not they are or have in the past been
extracted.

After the identification of a property as a potential prospect,
the next stage would usually be the acquisition of a right to explore the area
for mineral resources. This can consist of the outright acquisition of the land
or the acquisition of specific, but limited, rights to the land (e.g., a federal
or state mining claim, state prospecting permit or lease). After acquisition,
exploration would probably begin with a surface examination by a professional
geologist with the aim of identifying areas of potential mineralization,
followed by detailed geological sampling and mapping of this showing with
possible geophysical and geochemical grid surveys to establish whether a known
trend of mineralization continues through un-exposed portions of the property
(i.e., underground). Exploration also commonly includes systematic regularly
spaced drilling in order to determine the extent and grade of the mineralized
system at depth and over a given area, as well as gaining underground access by
ramping or shafting in order to obtain bulk samples that would allow one to
determine the ability to recover various commodities from the rock. Exploration
would conclude with a feasibility study to determine whether mining the minerals
would make economic sense. A feasibility study is a study that reaches a
conclusion with respect to the economics of bringing a mineral resource to the
production stage.

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" for additional information
about the risks of mineral exploration.

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

Competition

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

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

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

Compliance with Government Regulation

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

The Company is 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 the Company must pay the assessment
amount in cash in order to maintain the claims. Completion of annual assessment
work in the amount of $400 per 1⁄4 section (160 acre) claim or $100 per 1⁄4 -1⁄4
section (40 acre) claim extends the claims for a one year period. Assessments
work performed in excess of the required amount may be carried forward for up to
4 years to reduce future obligations for assessment work. The Company estimates
that the required annual assessments to maintain the claims for 2008, less
available carry forwards, will be approximately $28,366.

The annual state rentals for the Big Chunk and Bonanza Hills
Alaska State mining claims are $100 for each 1⁄4 section (160 acres) claim and $25
for each 1⁄4 -1⁄4 section (40 acres) claim. The rental period begins at noon
September 1st through the following September 1st and
annual rental payments are due on November 30th of each year. Annual
rent is due in full within 45 days of staking a new claim and covers the period
from staking until the next September 1st. Claims that are staked in
accordance with AS 38.05.195(b)(1) meridian, township, range, section and claim
system location MTRSC receive a onetime only credit of 50% of the second
years rent payment. Our Alaska claims are all MTRSC claims eligible for the 50%
rental credit in the second rental year. The annual state rentals required to
maintain the Big Chunk and Bonanza Hills claims is $74,650. Alaska State
production royalty is three percent of net income. State law prescribes that
after a 3.5 -year exemption from state taxes a metal mine is liable for a 15%
state licensing tax on net income from the mine.

Our North Pipes Super Project claims are Federal lode mining
claims located on U.S. Federal Lands and administered by the Department of
Interior, Bureau of Land Management. The Company is required to pay annual
rentals to maintain its Federal lode mining claims in good standing. The rental
period begins at noon on September 1st through the following
September 1st and rental payments are due by the first day of the
rental period. The annual rental is $125 per claim. Additional fees of $45 per
claim are due in the first year of filing a Federal lode mining claim along with
the first years rent. The annual rentals required to maintain the NPSP claims
are $220,000. There is no requirement for annual assessment or exploration work
on the Federal lode mining claims. There are no royalties associated with the
Federal lode mining claims.

In order to perform a drilling program on our Arizona claims,
we have to apply for various permits with the State of Arizona and the Federal
Bureau of Land Management (USBLM). The permitting process takes several weeks.
We plan to apply for a few drilling permits at a time to drill at those breccia
pipe locations that we have prioritized after geophysical and geochemical

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testing. The drilling permit fees are anticipated to be
approximately $5,000 per pipe and also require a reclamation bond of up to
$50,000 per pipe. The drilling permitting process will be ongoing as exploration
continues at the North Pipes Super Project.

In order to proceed with mining operations on our Arizona
claims, we will have to apply for various permits with the State of Arizona and
various Federal agencies. We plan to engage a full service environmental firm to
provide turnkey comprehensive services for mine permitting. Using a fast track
approach with the various requirements and agencies, we believe that a mine in
this area could be permitted for production in 1.5 to 3 years. The cost of mine
permitting, including cost of contractors assisting with the permitting process,
is estimated to be $350,000 per mine location. The mining permitting process
will commence as the results of our drilling program are analyzed.

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

Personnel

We have nine full time employees and two part-time employees.
Currently we employ or have on contract four full time geologists, including
President and CEO, James Briscoe, geologists David Boyer M.Sc. and Erik Murdock
M.Sc. who also specialize in computer mapping, and geologist Chelsea Wood. We
have contracted for services from one other full time geologist. Our wholly
owned subsidiary, Redwall Drilling Inc. has contracted services from Kaufmans
Corporation to operate our drill rig. These services include one drill
manager/driller, one full time driller, and three full time drill assistants.
This staff level allows our drill to operate one shift per day, everyday. These
permanent and contracted personnel will work approximately year round in
Arizona. Additionally, we have geoscience consultants specializing in
exploration geology, geophysics, geochemistry, and geocomputer data
applications, of whom our Technical Advisory Board is comprised. These
individuals are contracted for 140 days of consulting services over the period
January 1, 2008 through December 31, 2008.

RISK FACTORS

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

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

Risks related to our business

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

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

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

Our competition in the mining industry includes large
established mining companies with substantial capabilities and with greater
financial and technical resources than we have. As a result of this competition,
we may be unable to acquire additional financing on terms we consider acceptable
because investors may choose to invest in our competitors instead of investing
in us.

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8

We also compete with other mining companies in the recruitment
and retention of qualified managerial and technical employees. Our success will
be largely dependent on our ability to hire and retain highly qualified
personnel. These individuals are in high demand and we may not be able to
attract the personnel we need. We may not be able to afford the high salaries
and fees demanded by qualified personnel, or may lose such employees after they
are hired. If we are unable to successfully compete for financing or for
qualified employees, our exploration program may be slowed down or suspended.

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

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

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

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

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

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

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

Risks related to our company

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

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

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9

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 $1,265,187 and negative working
capital of $(505,662) as of January 31, 2008. 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 senior unsecured two year
convertible promissory notes (Unsecured Convertible Promissory Notes), further
described in Note 8 of the consolidated financial statements included in this
form, and we can provide no assurance to investors that we will be able to find
such financing if required. 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 activities and limited 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 January 31, 2008
is $(32,118,474). We recognize that if we are unable to generate significant
revenues from our activities, we will not be able to earn profits or continue
operations. Based upon current plans, we also expect to incur significant
operating losses in the future. We cannot guarantee that we will be successful
in raising capital to fund these operating losses or generate revenues in the
future. We can provide investors with no assurance that we will generate any
operating revenues or ever achieve profitable operations. If we are unsuccessful
in addressing these risks, our business will most likely fail and our investors
could lose their investment.

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

Our independent registered public accounting firm, Semple,
Marchal & Cooper, LLP, state in their audit report attached to our audited
financial statements for the fiscal year ended January 31, 2008 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.

Inability of our Chief Financial Officer and Secretary to
devote sufficient time to the operation of the business may limit our Company's
success.

Presently our Chief Financial Officer and Secretary each
allocate only a portion of their time to the operation of our business. If the
business requires more time for operations than anticipated or the business
develops faster than anticipated, the Chief Financial Officer and/or Secretary
may not be able to devote sufficient time to the operation of the business to
ensure that it continues as a going concern. Even if this lack of sufficient
time of our management is not fatal to our existence, it may result in limited
growth and success of the business.

Risks related to our common stock

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

Investors interests in our company will be diluted and
investors may suffer dilution in their net book value per share when we issue
additional shares. Our constating documents authorize the issuance of up to
200,000,000 shares of common stock with a par value of $0.001. As of January 31,
2008, there were 43,331,405 of our common shares issued and outstanding. We
anticipate that all or at least some of our future funding will be in the form
of equity financing from the sale of our common stock. If we do sell more common
stock, investors investment in our company will likely be diluted. Dilution is
the difference between what you pay for your stock and the net tangible book
value per share immediately after the additional shares are sold by us. If
dilution occurs, any investment in our companys common stock could seriously
decline in value.

Dilution will likely occur because of the Unsecured Convertible
Promissory Notes and related common share purchase warrants that we issued on
May 11, 2007. First, the entire amount of money owed under the Unsecured
Convertible Promissory Notes

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10

for a total of $4,150,000 plus 8% interest per year, may be
converted into shares of our common stock at a price ranging from $0.45 to $0.65
per share. The conversion price was amended in February 2008 to remove the floor
of $0.45 and lower the fixed conversion price to $0.50 per share. The Unsecured
Convertible Promissory Notes mature on May 11, 2009. Second, the 6,769,228
common share purchase warrants that we issued to the holders of the Unsecured
Convertible Promissory Notes on May 11, 2007 may be exercised at $0.75 per share
until they expire on May 11, 2012. Third, the 338,461 common share purchase
warrants that we issued to the broker of the Unsecured Convertible Promissory
Notes as a broker fee on May 11, 2007 may be exercised at $0.75 per share until
they expire on May 11, 2012. Because additional common shares will be issued as
a result of some of or all of these factors, there likely will be significant
dilution of investment in our company. This would cause a reduction in the
proportionate ownership and voting power of all other shareholders and may
result in a change in our control.

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

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

Trading in our common stocks on the OTC Bulletin Board is
limited and sporadic making it difficult for our shareholders to sell their
shares or liquidate their investments.

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

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

Our By-laws contain provisions with respect to the
indemnification of our officers and directors against all costs, charges and
expenses, including an amount paid to settle an action or satisfy a judgment,
actually and reasonably incurred by him, including an amount paid to settle an
action or satisfy a judgment in a civil, criminal or administrative action or
proceeding to which he is made a party by reason of his being or having been one
of our directors or officers.

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

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

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

We have never paid any cash dividends and currently do not
intend to pay any dividends for the foreseeable future. To the extent that we
require additional funding currently not provided for in our financing plan, our
funding sources may prohibit the payment of a dividend. Because we do not intend
to declare dividends, any gain on an investment in our company will need to

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11

come through an increase in the stocks price. This may never
happen and investors may lose all of their investment in our company.

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

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

Item
2.           Description of
Property.

Our offices

We rent the premises for our principal office that consists of
approximately 2,857 square feet of office space located at 3024 East Fort Lowell
Road, Tucson, Arizona 85716. We rent these premises for $3,789 per month plus a
pro rata share of taxes and maintenance. We rent a house in Fredonia, Arizona
from which we operate the North Pipes Super Project. This house also has living
quarters for up to 12 staff. We rent these premises for $1,800 per month. We
rent warehouse storage space in Fredonia, Arizona for storage of supplies and
equipment for the North Pipes Super Project. We rent these premises for $1,500
per month plus a pro rata share of utilities and maintenance.

We believe that our existing office facilities are adequate for
our needs through the end of the year ended January 31, 2009. Should we require
additional space at that time, or prior thereto, we believe that such space can
be secured on commercially reasonable terms.

Our mineral claims

North Pipes Super Project (NPSP) see Figure 1:

The Company holds a 100% interest in 1,757 Federal lode mining
claims strategically placed over approximately 60 square miles on the Colorado
Plateau Province of Northern Arizona. The 1,793 Federal lode mining claims
include approximately 300 breccia pipe targets (Pipes). Breccia pipes are
cylindrical formations in the Earths crust, identified by a surface depression,
and containing a high concentration of fragmented rock breccia cemented by
uranium and other minerals. We plan to ascertain whether our North Pipes Super
Project claims possess commercially viable deposits of uranium.

The Company also holds a 50% interest in 37 Federal lode mining
claims covering 7 breccia pipe targets (Elle Venture claims see Figure 2) at
the North Pipes Super Project location through the Elle Venture, a general
partnership with XState Resources Limited (XState). XState has the right of
first refusal to buy or joint venture in relation to the other pipes and claims
later staked in the Elle Venture area. We plan to ascertain whether the Elle
Venture claims possess commercially viable deposits of uranium.

Our Arizona claims are on U.S. Federal Lands and are
administered by the Department of Interior, Bureau of Land Management (surface
and mineral) land. Our claims may be kept in good standing by paying an advance
annual maintenance and rental fee before noon, September the 1st, in the amount
of $125 per mining claim. To keep our existing property in good standing, we
must pay annual maintenance and rental fees of $232,000. The State Mineral
Exploration Permits are administered by the Arizona State Land Department
located in Phoenix, Arizona.

The only royalties, payments or other encumbrances on the
property are those owed to the Bureau of Land Management as mentioned above. No
production royalties are due on mineral production. Federal taxes will be owed
on profits made from mining on the properties. A royalty of approximately 3% of
net mineral production after deducting mining and processing of ore is payable
on the State land parcels.

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Figure 1: North Pipes SuperProjectoverview



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13

Figure 2  ElleVentureArea ofMutualInterest



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14

Bonanza Hills Project (Bonanza Hills) see Figure 3:

The Company holds 56 mineral claims covering approximately 13.5
square miles in Southwestern Alaska approximately 13.5 miles northeast of the
northern boundary of the Big Chunk claims. We plan to ascertain whether the
Bonanza Hills claims possess commercially viable deposits of gold and silver.
Management has decided that we will spend only the required money necessary to
maintain our Bonanza Hills claims during the next year.

Big Chunk Super Project (Big Chunk) see Figure 3:

The Company holds a 100% interest in 707 mineral claims
covering approximately 177 square miles in the Iliamna region of Southwestern
Alaska, located on the north side of the Cook Inlet, approximately 265 miles
southwest of the city of Anchorage, Alaska. We plan to ascertain whether the Big
Chunk claims possess commercially viable deposits of copper, gold, molybdenum,
silver and zinc.

Developments On Adjacent Property And Its Effect On The Big
Chunk Super Project

A major impediment to the development of mineral claims near
our Big Chunk claims is sustained intervention by environmentalists. The
environmentalists have raised the concern that pollution from mineral claims
near ours will destroy the trout and salmon fisheries that drain into Bristol
Bay. There is a possibility of the Alaska legislature passing a mine tax 
specifically designed to inhibit or stop certain development in the area. This
will inhibit mining everywhere in Alaska if it should become law. Liberty Star
believes that even though we have some favorable geologic results to date, it is
unwise to spend substantial amounts of Company money on exploration until this
current issue is resolved. If mineral claims near our Big Chunk claims are
denied mining permits, the strong likelihood is that even if we discovered a
mineable resource, our Company would never be able to permit a mine, as we are
essentially in the same place with the same perceived problems as mineral claims
near our Big Chunk claims. However, if the permitting is approved we will
consider moving ahead with exploration. It will be Liberty Stars policy,
evaluated continuously as has been done to date, that we will spend only the
required money necessary to maintain our Big Chunk claims and await the outcome.
Then, we intend to act accordingly.

Present condition of our claims

Both the Alaskan and Arizona properties are undeveloped. There
are no open-pit or underground mines, nor is there any mining plant or equipment
located on the properties. There is no power supply to the properties. There is
not any road access to the Alaskan properties, but there is abundant road access
to the Arizona properties. We have not found any mineral resources on any of our
claims.

Claim status

On November 28, 2005 we filed assessment affidavits and paid
the applicable fees required by Alaskan mining regulations for the Alaska
claims. The rental period for Alaska State mining claims begins at noon on
September 1st through the following September 1st and
annual rental payments of $100 per quarter section and $25 per quarter-quarter
section are due by November 30th of each year. We are required to
perform annual assessment work of $400 per quarter section and $100 per
quarter-quarter section in order to keep the claims in good standing. We
conducted a detailed aerial study of the magnetic fields of our Big Chunk claims
in Alaska and associated work at a cost of $283,889 during the period January 10
through June 6, 2004. Additional studies including extensive soil sampling,
Induced Polarization geophysical surveying, diamond core drilling and
interpretation of the data and samples from those studies were conducted in
2005. The approximate cost of these activities has been in excess of $1.8
million and may be applied towards maintaining the claims in good standing for
2005 and three additional years up to and including some of 2008s obligations.
We estimate that we will be required to perform $28,366 of assessment work in
2008 in order to maintain the Alaska claims in good standing. We estimate that
we will be required to pay $74,650 by November 30, 2008 to maintain the Alaska
claims in good standing.

In Arizona, during the months of August 2005 to September 2007
we filed with the Bureau of Land Management the Notices of Intent to Hold and
Certifications of Payment of Rental and Maintenance Fee Affidavits for the 1,757
federal unpatented lode mining claims that we currently own a 100% interest in.
The combined 1,757 mining claims have had all applicable fees paid, and are in
good standing as of the date of this annual report on Form 10-KSB. The rental
period for the federal lode mining claims begins at noon on September
1st through the following September 1st and rental
payments are due by the first day of the rental period. The annual rental is
$125 per claim. There is no requirement for annual assessment or exploration
work on the federal lode mining claims. We estimate that we will be required to
pay $219,625 by September 1, 2008 to maintain the federal lode mining claims in
good standing.

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Figure 3: Alaska Properties  Big Chunk and Bonanza Hills-
Location Map



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16

Liberty Star Uranium and Metals Corp. Phased Uranium Program,
  Arizona  Development of the North PipesSuper Project

Managements plan for exploring and, if warranted, developing
  commercially exploitable resources of uranium began in the spring of 2004. The
  phased program began with research to determine whether the State of Arizona,
  an important uranium producer in the 1960s, 1970s and 1980s, still had potential
  for additional uranium production. The Company assembled an expert team and
  began an exploration program to identify potential breccia pipe targets on the
  Colorado Plateau Province of Northern Arizona. The Company acquired potential
  breccia pipe targets by staking Federal lode mining claims. Management plans
  to approach the exploration of the potential breccia pipe targets in a systematic
  approach due to the similarity of the Pipes in geology, ore mineralization,
  mining approach and their proximity to one another. Technical studies such as
  geologic mapping, geophysics and geochemistry were performed in order to prioritize
  the potential breccia pipe targets for drilling. The Company is currently in
  the drilling phase of the Uranium Program at the North Pipes Super Project.
  Management plans to continue the drilling program using the diamond drill rig
  owned by its wholly owned subsidiary, Redwall Drilling Inc. The next phases
  of the exploration program are conditional upon many risk factors, the most
  important of which is discovery of a mineable resource. We have not found any
  mineral resources in commercially exploitable quantities on any of our breccia
  pipe targets.

Within our Arizona claims, aside from the foreseeable displacement
  of wildlife resources and increased human access within the small area of exploration
  activities, we are not aware of any specific environmental impact that affect
  the mineral claims. We expect these disturbances will impact less than 10 acres
  per breccia pipe target.

The following table summarizes the permits required for
drilling that have been obtained by the Company (additional permits will be
acquired as needed):

Arizona Permit/Filing (Per 2001 43CFR3809)
      Date Obtained or Renewed
      ExpirationNotice of Intent (< five acres of disturbance -
      includes Archaeological Survey
      ) ****AZA-33693 ****AZA
      33819 ****AZA
      34303 ****AZA
      34339 ****AZA
      34345 ****AZA
      34346 ****AZA
      34347 ****AZA
      34348 ****AZA
      34349 ****AZA 34362
    All were obtained or renewed
      on January 4, 2008
    All will expire or will need to
      be renewed on January 3, 2009****Bond
      Reclamation ****Arizona Statewide Bond/BLM Bond
      No. ****AZB000193 ($150,000 total)
    January 2007 ($50,000) March 2007
      ($50,000) November 2007 ($50,000)
    None None NoneState of Arizona Water Resources Drilling
      Permit ****File No. B(37-7)3
      000 ****File No. B(38-7)34
      000 ****File No. B(37-5)14
      000 ****File No. B(37-5)13
      000 ****File No. B(38-7)27 000
    January 4, 2008
      January 4, 2008 January 4, 2008 January 4, 2008
      January 4, 2008
    None None
      None None None


Our Arizona properties are from 13 to 38 miles from the towns
of Fredonia, Arizona or Kanab, Utah. Isolated from the rest of Arizona by the
deep canyons of the Colorado River, this area is closely linked geographically,
culturally and economically with southern Utah. The town of Kanab, Utah is the
primary supply depot to our Arizona claims. Our

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17

field office for the North Pipes Super Project is located in
Kanab. The town of St. George, the largest in southern Utah, lies about 150
miles by two lane paved highway west of Kanab. The area is vegetated with sage
and juniper, with incised arroyos and canyons.

The only paved highways, three of them, cross the northern tier
of the Arizona Strip. No paved roads extend into the interior, but over 4,400
miles of unpaved roads and truck trails criss-cross the area. Most of the
development in the interior of the Arizona Strip is related to ranching
operations and includes waters, fences and diverse other types of rangeland
improvements. The few ranch houses (line cabins) scattered across the Strip are
not permanent residences but only occasionally used by ranch hands.

The principal industries in the Arizona Strip are ranching and
minerals exploration and development. Grazing of livestock has been a major use
of the public lands since the 1860's and continues to be to this day. Active
uranium exploration and development operations have occurred over the past three
decades. Eight mines were operated on the Strip. Three were mined out and the
sites rehabilitated. The other five have been shut down due to low uranium
prices.

Current Exploration Underway at the North Pipes Super
Project

The Liberty Star Team

The Liberty Star team is comprised of full time employees,
contractors and consultants in numerous professional categories including
geologic, legal and accounting professions. Our full time staff consists of 9
members, all of whom have college degrees or long time work experience in their
field. Mr. Briscoe, President and CEO, is a Registered Professional Geologist in
the States of California and Arizona. Mr. Boyer, NPSP Manager, is a Registered
Professional Geologists in the State of Washington. We have contracted for
services from one additional full-time geologist.

Part-time staff includes our CFO Jon Young, CPA and Controller
Kristine Hoey, CPA. The six members of the Technical Advisory Board, widely
recognized scientists in their area of specialty, are available on an as needed
basis.

Our wholly owned subsidiary, Redwall Drilling Inc., has
contracted services from Kaufmans Corporation to operate our drill rig. These
services include one full-time drill manager/driller, one full-time driller, and
three full-time drill assistants. This staff level allows our drill to operate
one shift per day, everyday.

These permanent and contracted personnel will work
approximately year round in Arizona.

Elle Venture with XState Resources Ltd (XState)(previously
OCR Limited)

In June of 2006 the Company entered into a letter agreement
with XState for them to provide funding for exploration of three breccia pipe
targets and a right of first refusal on seventeen additional breccia pipe
targets within a twenty two square mile area of mutual interest. A
non-refundable deposit was made by XState on July 17, 2006. In October 2006, the
Company entered into the joint venture agreement with XState, thus, forming the
Elle Venture. The entire required funding of an additional $2,900,000 was
deposited to the Elle Venture account in Tucson, Arizona and the Elle Venture
commenced on December 15, 2006. The deposit of this money earned XState a 50%
interest in the 14 Federal lode mining claims overlying three breccia pipe
targets  Hada, Elle and Hermina. In September 2007 an additional breccia pipe
target consisting of 4 Federal lode mining claims was transferred to the Elle
Venture.

On February 19, 2008 the Company entered into an amendment to
the joint venture agreement with XState which governs the operation of the Elle
Venture. The amendment defines the alternate joint venture breccia pipe targets
and allows the joint venture funds to be expended on exploration of the initial
three joint venture breccia pipe targets as well as the four alternate joint
venture breccia pipe targets. When the sole funding amount ($2.9 million)
contributed by XState is expended, XState will have the right to select a total
of three of either the initial or alternate joint venture breccia pipe targets
to retain a 50% interest in. The initial and alternate joint venture breccia
pipe targets consist of 7 breccia pipe targets and 37 standard Federal lode
mining claims.

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Exploration History

Prior History

Except as indicated with respect to our Arizona claims and
otherwise as set out below, we are unaware of any previous claim ownership
anywhere on the properties, nor any exploration, other then minor surface
sampling. No evidence of development work has been found on the properties. No
historical mineral resources or reserves are in the published literature.

Our Alaska claims

Our Alaska claims are located in a remote area of Southwestern
Alaska where limited exploration and development activity has occurred. The area
is largely covered by glacial debris, soil, and tundra. Little geologic,
geochemical or geophysical data is available, and that which is available is of
a general nature and of low quality.

Our Big Chunk Super Project claims

We are unaware of any previous claim ownership anywhere on our
Big Chunk claims in Alaska. No historical mineral resources or reserves are in
the published literature concerning the property. Other than minor exploration
that was conducted by Cominco Alaska, Anaconda and the United States Geological
Survey, we are not aware of any prior exploration that was conducted on our Big
Chunk claims in Alaska prior to January 10, 2004, when our aerial survey of the
magnetic fields began.

Our Bonanza Hills claims

Anaconda and Cominco Alaska also conducted some minor tests on
our Bonanza Hills claims in the past. The work they conducted consisted of
surface sampling and a small geophysical survey. We are not aware of any other
exploration that occurred there before we began our exploration there.

Our North Pipes Super Project claims

The Arizona Strip, where our North Pipes Super Project claims
are located, was an active exploration district in the 1960s, 1970s and 1980s
with multiple producing uranium mines and huge tracts of claims held by
companies including International Uranium Corp., Energy Fuels Nuclear,
Pathfinder as well as others. The work accomplished by these companies included
geophysics, geochemistry and drilling. Little to none of this information is
available to the public, though many of the drill holes are marked and still
visible. No evidence of actual development work has been found on any of our
properties. No historical mineral resources or reserves are in the published
literature.

Technical Studies and Drilling on the North Pipes Super
Project, 2006 to Present.

Geophysics

We have completed several geophysical surveys on our North
Pipes Super Project claims, as outlined below:

| | 1) | CSAMT/NSAMT (Controlled Source-Natural Source Audio
      MagnetoTellurics). Twenty-two line miles over 7 target areas were
      completed by our geophysical contractor Zonge Engineering and Research
      Organization Inc. The surveys were conducted from mid-June to mid October
      2006. Several audio magneto tellurics anomalies were drill tested (see
      drilling below). Logging and assay results from these drill holes did not
      indicate the presence of an ore-bearing breccia pipe. Additional modeling
      of the audio magneto tellurics dataset and integrating this data with
      recent drill results is being considered.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 2) | NanoTEM (Fast Sampling Transient Electromagnetics).
      NanoTEM data was collected in select areas to permit better inversion
      (analysis) of CSAMT/NSAMT data at shallow levels. This geophysical
      technique identified a shallow resistive layer followed by a weakly
      conductive layer. This data correlated well with the AMT data but did not
      aid in the identification of additional
targets.                                                                                                                                                                                                                                        

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19

| | 3) | VTEM (Versatile Time-Domain Electromagnetics). A 200 line
      kilometre airborne VTEM geophysical survey was conducted by Geotech
      Aribrone Ltd over the Elle Venture area of mutual interest in 2006.
      Processing and modeling of the data was completed independently by two
      geophysical consulting firms - Geotech and Condor. Several anomalies were
      identified in the VTEM survey. Management plans to drill test these
      anomalies in 2008.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | 4) | PEM (Pulse Electro-magnetic). Two types of PEM surveys
      were conducted in 2007: Downhole PEM and In- Loop PEM. These surveys were
      designed to test the applicability of this geophysical technique. At this
      time results are not conclusive. Downhole PEM may be used in the
      future.                                                                                                                                                                  

Stereoscopic geologic color air photo interpretation
(photo-geology)

Stereoscopic geologic interpretation of 1:24,000 (1 inch =
2,000 feet) high resolution color air photographs was contracted and completed
by Edward Ulmer, a Registered Professional Geologist who worked on the Arizona
Strip in the mid to late 1970s. He has specialized throughout his career in
geologic photo interpretation. His work built on the work started by Dr. Karen
Wenrich. This air photo interpretative work was useful in defining and rating
potential target areas.

Geologic field mapping on the surface

Geological field mapping has been ongoing during 2007 and 2008.
Mapping has been performed by the Companys staff geologists as well as
contracted geologists. Approximately 180 of the 300 pipe target areas have been
mapped in detail 1:5,000 (1 inch = 5,000 feet). Geologic mapping has been
focused on favourable areas identified by air photo interpretation, geophysics,
soil geochemistry and/or field reconnaissance. Several detailed measured
stratigraphic sections have also been completed. A mapping campaign is planned
for the rest of 2008 to finish un-mapped target areas.

Geochemical sampling

A comprehensive soil geochemical survey was completed in 2007.
Approximately 14,000 soil samples were collected. Samples were collected by
employees and contractors. Strict chain of custody procedures were followed and
quality assurance/quality control (QA/QC) samples were inserted regularly into
the sample stream. The samples were assayed for 63 elements. Assay analyses were
conducted by a Certified Assay Lab, Acme Analytical Laboratories of Vancouver,
British Columbia, Canada. A geochemical Summit Meeting was held in Tucson with
Technical Advisory Board members and Company geologists on January
23rd, 24th and 25th of 2008. Geochemical
analyses developed by members of the Company and the technical board over the
past 15 years were the basis for a rigorous and methodical interpretation of the
complex geochemical data. Several geochemical signatures over known and
suspected mineralized breccia pipe targets (held by others) were identified.
These signatures were then compared to signatures in the Companys target areas.
Numerous target areas display favourable signatures. Management plans to
continue exploration activities on these breccia pipe targets in 2008.

Drilling

The following table summarizes completed drilling to date on
the North Pipes Super Project:

Target Area
      Dates Drilled
      No. Holes
      Footage Drilled (ft)
      CommentsElle
    02-03/07
    1
    2005
    Rotary Drilling; negative test of
      AMT anomaly.Hada
    03/07
    1
    1504
    Rotary Drilling; negative test of
      AMT anomaly.Oni
    03/07 & 12/07
    3
    3201
    Rotary and Core Drilling;
      negative test of AMT anomaly; results pending from core drilling


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20

Target Area
      Dates Drilled
      No. Holes
      Footage Drilled (ft)
      CommentsHolda
    12/07
    3
    3067
    Core drilling; entered existing drill hole;
      encountered minor alteration.Galaxy
    12/07
    1
    575
    Core drilling; entered existing drill hole;
      encountered alteration and pyrite mineralization.Neola
    01-03/07
    8
    3427
    Core drilling; shallow drilling to test
      breccia pipe center; encountered alteration and pyrite mineralization;
      deep hole drilled  did not intersect ore mineralization at depth; assays
      pending.Hafsa
    03/07
    2
    1012
    Core drilling; shallow drilling did not
      indicate presence of down dropped block; assays pending.Helvia
    03/07
    3
    1435
    Core drilling; shallow drilling did not
      indicate presence of down dropped block; assays pending.


Rotary drilling was contracted by Boyart Longyear. Diamond core
drilling was completed by Redwall Drilling Inc., a wholly owned subsidiary of
Liberty Star. A total of 16,226 feet of drilling has been completed as of March
31, 2008. An aggressive drilling program consisting of shallow and deep drilling
is planned throughout 2008.

Item
3.           Legal
Proceedings.

We know of no material, active or pending legal proceedings
against us, nor are we involved as a plaintiff in any material proceedings or
pending litigation. There are no proceedings in which any of our directors,
officers or affiliates, or any registered or beneficial shareholder are an
adverse party or has a material interest adverse to us.

Item
4.           Submissions of
Matters to a Vote of Security Holders.

None.

PART II

Item
5.           Market for Common
Equity and Related Stockholder Matters.

Our common stock was listed and commenced trading on the OTC
Bulletin Board on July 15, 2003 when our corporate name was Titanium
Intelligence Inc. On February 3, 2004, we merged with our subsidiary and changed
our name to Liberty Star Gold Corp. and traded under the symbol "LBTS.OB". On
April 16, 2007 we again changed our name to Liberty Star Uranium & Metals
Corp. and our stock changed its trading symbol to LBSU.OB. Since July 15,
2003, trading in our common stock has been limited and sporadic. The following
table sets forth, for the periods indicated, the high and low bid prices for our
common stock on the OTC Bulletin Board:

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21

OTC Bulletin Board(1)Quarter Ended
      High
      LowJanuary 31, 2008
      $0.371
      $0.20October 31, 2007
      $0.47
      $0.279July 31, 2007
      $0.56
      $0.35April 30, 2007
      $0.98
      $0.53January 31, 2007
      $1.05
      $0.50October 31, 2006
      $1.265
      $0.35July 31, 2006
      $1.44
      $0.71April 30, 2006
      $1.54
      $0.86


| | (1) | These bid prices were taken from OTC Bulletin Board
      quarterly trade and quote summary report. Such over-the-counter market
      quotations reflect inter-dealer prices, without retail mark-up, mark down
      or commission and may not necessarily represent actual
  transactions.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

On January 31, 2008, the shareholders' list for our common
stock showed 68 registered stockholders and 43,331,405 shares issued and
outstanding. The closing sale price for our common stock on April 23, 2008, as
reported on the OTC Bulletin Board, was $0.25.

Recent Sales of Unregistered Securities

On March 8, 2006, we issued 256,637 shares of common stock to
Cornell Capital Partners, L.P. as a one time commitment fee under the Standby
Equity Distribution Agreement. The units were issued to an accredited investor
pursuant to exemptions from registration set out in Rule 506 of Regulation D
under the Securities Act of 1933.

On March 8, 2006, we issued 8,850 shares of common stock to
Newbridge Securities Corporation as a placement agent fee under the Standby
Equity Distribution Agreement with Cornell Capital Partners, L.P. The units were
issued to an accredited investor pursuant to exemptions from registration set
out in Rule 506 of Regulation D under the Securities Act of 1933.

During the year ended January 31, 2007, the Company issued
3,696,895 shares to Cornell Capital Partners pursuant to the SEDA in exchange
for proceeds of $2,245,995, net of fees of $126,105. The units were issued to an
accredited investor pursuant to exemptions from registration set out in Rule 506
of Regulation D under the Securities Act of 1933.

During the year ended January 31, 2008, the Company issued
1,718,799 shares to Cornell Capital Partners pursuant to the SEDA in exchange
for proceeds of $1,074,417, net of fees of $56,500. The units were issued to an
accredited investor pursuant to exemptions from registration set out in Rule 506
of Regulation D under the Securities Act of 1933.

On January 17, 2007 the Company issued 150,000 shares to
Equititrend Advisors LLC upon the execution of an agreement to perform public
and investor relations services as an independent contractor. The contract with
Equititrend Advisors LLC was terminated on July 27, 2007. The shares were issued
to an accredited investor pursuant to exemptions from registration set out in
Rule 506 of Regulation D under the Securities Act.

On May 2, 2007 the Company issued 50,000 shares to Equititrend
Advisors LLC for the performance of public and investor relations services as an
independent contractor. The contract with Equititrend Advisors LLC was
terminated on July 27, 2007. The shares were issued to an accredited investor
pursuant to exemptions from registration set out in Rule 506 of Regulation D
under the Securities Act.

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22

The Company issued 40,000 common shares to Friedland Investment
Events LLC on August 27, 2007 pursuant to the public relations agreement the
Company entered into in June 2007. The shares were issued to an accredited
investor pursuant to exemptions from registration set out in Rule 506 of
Regulation D under the Securities Act.

The Company issued 12,000 shares of restricted stock on August
27, 2007 to LDV Corporation (LDV) to arrange and conduct a meeting with
brokers and/or accredited investors to increase investor awareness of the
Company. The shares were issued to an accredited investor pursuant to exemptions
from registration set out in Rule 506 of Regulation D under the Securities Act.

The Company issued 10,000 common shares to SCIA National Small
Cap Syndicates designated agent Cherry Kau on August 27, 2007 pursuant to the
agreement with SCIA for attendance as a presenter at a capital conference hosted
by SCIA. The shares were issued to an accredited investor pursuant to exemptions
from registration set out in Rule 506 of Regulation D under the Securities
Act.

Unsecured Convertible Promissory Notes

On May 11, 2007, the Company issued senior unsecured
convertible two year promissory notes (Unsecured Convertible Promissory Notes)
for gross proceeds of $4,400,000 in a private placement of its securities to
institutional investors pursuant to exemptions from registration set out in Rule
506 of Regulation D under the Securities Act of 1933. The net proceeds received
after placement agent fee, due diligence fee and legal fees was $4,010,238.

On May 11, 2007 the Company also issued 338,461 whole share
purchase warrants to Hunter Wise Securities as a broker fee for the sale of the
Unsecured Convertible Promissory Notes. The warrants have an exercise price of
$0.75 and a life of 5 years. The exercise price may be adjusted if the Company
issues other shares, warrants or stock options before the expiration of the
warrants at a price less than $0.45 per share.

On May 11, 2007 the Company also issued 6,769,228 whole share
purchase warrants to the holders of the Unsecured Convertible Promissory Notes.
The warrants have an exercise price of $0.75 and a life of 5 years. The exercise
price may be adjusted if the Company issues other shares, warrants or stock
options before the expiration of the warrants at a price less than $0.45 per
share.

The Unsecured Convertible Promissory Notes bear interest at 8%.
Repayment of the Unsecured Convertible Promissory Notes begins in February 2008
with sixteen monthly principal payments of $275,000 plus accrued unpaid
interest. Following the occurrence of an event of default that is not cured
within 20 days, the Unsecured Convertible Promissory Notes will bear an interest
rate of 15% per annum beginning from the date of such occurrence through the
maturity date. The Company may elect to make repayments in cash or by the
issuance of common stock of the Company. The stock will be issued at the lesser
of the fixed conversion price of $0.65 per share or 85% of the volume weighted
average price for 10 days preceding the repayment date, but not less than $0.45
per share. Stock payment cannot be made if the amount of shares to be issued
would exceed 33% of the aggregate daily trading volume for 7 trading days
preceding the repayment date, unless waived by the holders of the Unsecured
Convertible Promissory Notes. Stock payment cannot be made if the holders of the
Unsecured Convertible Promissory Notes own more than 4.99% of the then
outstanding common stock of the Company.

In February 2008, the Company entered into a modification
agreement with the holders of the Unsecured Convertible Promissory Notes. The
modification agreement is effective from February 2008 through April 2008. The
fixed conversion price was reduced from $0.65 to $0.50. The calculation of the
maximum allowable shares to be issued for the February, March and April monthly
payments was increased to 200% of the aggregate daily trading volume for the 15
trading days preceding the Repayment Date multiplied by the VWAP for the 7
trading days preceding the repayment date. If the monthly payment amount cannot
be paid in full with the maximum allowable shares then an excess amount results.
The note holders may elect to receive cash, additional stock, or defer the
excess amount. For deferred excess amounts, the conversion price shall be the
lowest conversion price that could be calculated for any repayment date until
such deferred amount is actually paid. As incentive for the note holders to
enter into the Modification Agreement the Company subscribed 30,000 shares of
common stock allocated pro-rata to the note holders who executed the
modification agreement. These shares have not been issued yet.

In the event that a delay in delivery of conversion shares
occurs, as defined in the subscription agreement and Unsecured Convertible
Promissory Note, the Company agrees to pay liquidated damages of $100 per
business day for each $10,000 of purchase price of shares subject to the
delivery default. In the event that the Company fails to deliver

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23

shares issuable under the Unsecured Convertible Promissory
Notes within 7 business dates of the Delivery Date and the selling security
holder purchases shares of common stock of the Company in an open market, then
the Company shall pay in cash to the selling security holder the amount by which
the selling security holders total purchase price including brokers commissions
exceeds the aggregate purchase price of the shares issuable together with
interest at 15% per annum.

The Company was required to file and have declared effective a
registration statement with the SEC within 140 days of the sale of the Unsecured
Convertible Promissory Notes. The Company filed the registration statement and
it was declared effective on September 28, 2007. The Company is required to
maintain the effectiveness of the registration statement for up to two years, or
until all shares have been traded by the holders of the Unsecured Convertible
Promissory Notes.

During the year ended January 31, 2008 one note holder
converted $250,000 of the principal balance of their Unsecured Convertible
Promissory Note and $9,699 of unpaid accrued interest at a conversion price of
$0.65 per share pursuant to the original terms of the notes. The Company issued
399,537 shares of common stock related to these conversions.

The Company issued 2,621,725 shares of common stock and
$403,971 of cash for the February, March and April monthly payments on the
Unsecured Convertible Promissory Notes. Currently, the note holders have a
balance of $51,394 of monthly payment amounts that have been deferred. If the
note holders were to demand payment of this amount the Company would be
obligated to issue 226,175 additional shares of common stock.

All proceeds received have been and will be used for
exploration of our mineral properties and working capital.

Equity Compensation Plan Information

As of January 31, 2008 we had one compensation plan in place,
entitled "2004 Stock Option Plan." This plan has not been approved by our
security holders.

Total number of
      securities authorized
    Number of securities to be issued upon
      exercise of outstanding options as at January 31,
      2008
    Weighted-average exercise price of
      outstanding options as at January 31, 2008
    Number of securities remaining available
      for further issuance as at January 31, 20083,850,000
    3,294,000
    $0.94
    556,000


On April 6, 2006, we granted to our employees, consultants,
officers and directors stock options to purchase an aggregate of 1,594,000
common shares exercisable at the price of $1.11 per share for a term of ten
years. The grant of stock options was made under the terms of our 2004 Stock
Option Plan.

On December 8, 2006, we granted to our employees, consultants,
officers and directors stock options to purchase an aggregate of 1,590,000
common shares exercisable at the price of $0.72 per share for a term of ten
years. The grant of stock options was made under the terms of our 2004 Stock
Option Plan.

On May 24, 2007, the Company granted 10,000 incentive stock
options to an employee in accordance with the 2004 Stock Option Plan. The
options have an exercise price of $1.11 per share and a term of 8.875 years. The
options vest 50% on the grant date, 25% on October 6, 2007 and 25% on April 6,
2008.

On August 15, 2007, the Company granted 250,000 non-qualified
stock options pursuant to the 2004 Stock Option Plan to an investor relations
consultant in exchange for future services. The Options have an exercise price
of $0.45 per share and a term of 3 years. The options vest 25% every three month
anniversary of the grant date.

Item
6.           Management's
Discussion and Analysis or Plan of Operation.

The following discussion should be read in conjunction with our
consolidated audited financial statements and the related notes that appear
elsewhere in this annual report. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. We
refer you to the cautionary statement regarding forward-looking statements
included at the beginning of this annual report. Our actual results could differ
materially from those

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24

discussed in the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed below and elsewhere in this annual report, particularly in the section
entitled "Risk Factors" included in this annual report.

Our consolidated audited financial statements are stated in
United States Dollars and are prepared in accordance with accounting principles
generally accepted in the United States of America.

Overview

We are an exploration stage company engaged in the acquisition
and exploration of mineral properties in the States of Arizona and Alaska.
Claims in the State of Alaska are held in the name of our wholly-owned
subsidiary, Big Chunk Corp. Claims in the State of Arizona are held in the name
of Liberty Star. The Company uses the term Super Project to indicate a project
in which numerous mineral targets have been identified, any one or more of which
could potentially contain commercially viable quantities of minerals. The
Companys significant projects are described below.

North Pipes Super Project (NPSP):

The Company holds a 100% interest in 1,757 Federal lode mining
claims covering approximately 60 square miles on the Colorado Plateau Province
of Northern Arizona. The 1,793 Federal lode mining claims include approximately
300 breccia pipe targets (Pipes). Breccia pipes are cylindrical formations in
the Earths crust, identified by a surface depression, and containing a high
concentration of fragmented rock breccia cemented by uranium and other
minerals. We plan to ascertain whether the North Pipes Super Project claims
possess commercially viable deposits of uranium.

The Company also holds a 50% interest in 37 Federal lode mining
claims covering 7 breccia pipe targets (Elle Venture claims) at the North
Pipes Super Project location through the Elle Venture, a general partnership
with XState Resources Limited (XState). XState has the right of first refusal
to buy or joint venture in relation to the other pipes and claims later staked
in the Elle Venture area. We plan to ascertain whether the Elle Venture claims
possess commercially viable deposits of uranium.

The Company completed ground electrical geophysics surveys
covering 22 line miles on the NPSP claims. We have collected approximately
13,500 soil samples consisting of 1 kilogram of soil taken about 6 centimeters
below the surface and approximately 200 rock samples for geochemical testing. We
performed detailed geologic, mineralization, alteration and leached-cap mapping
using scintillometer and/or gamma ray spectrometer devices which detect
radioactivity. We analyzed the data received from the geochemical sampling
program and surface geologic mapping as well as using all technical data that we
have to prioritize our breccia pipe targets. We fully permitted nine breccia
pipe targets for drilling. We are currently performing diamond drilling
exploration at the NPSP on claims we own 100% and claims we own 50% in the Elle
Venture. We have drilled on 8 of the 9 breccia pipe targets to date. Details of
our drilling program can be found in Item 2: Description of Property.

Big Chunk Super Project (Big Chunk):

The Company holds a 100% interest in 707 mineral claims
covering approximately 177 square miles in the Iliamna region of Southwestern
Alaska, located on the north side of the Cook Inlet, approximately 265 miles
southwest of the city of Anchorage, Alaska. We plan to ascertain whether the Big
Chunk claims possess commercially viable deposits of copper, gold, molybdenum,
silver and zinc.

To date, we have completed a detailed study, by airplane, of
the magnetic fields found on our Big Chunk claims. One hundred eleven miles of
induced polarization surveys have been completed over portions of our Big Chunk
claims. We have also drilled 31 drill holes to an average depth of about 400
feet for a total of 12,277 feet of drilling on our Big Chunk claims.

Bonanza Hills Project (Bonanza Hills):

The Company holds 56 mineral claims covering approximately 13.5
square miles in Southwestern Alaska approximately 13.5 miles northeast of the
northern boundary of the Big Chunk claims. We plan to ascertain whether the
Bonanza Hills claims possess commercially viable deposits of gold and silver. At
present, only a small part of our Bonanza Hills claims have been sampled.

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25

Our board of directors decided that we will perform only the
minimum amount of exploration activity required to maintain our current Alaska
claims in good standing as a result of difficulties that other companies in the
Iliamna region have experienced trying to apply for drill permitting, mine
permitting and obtaining approved road plans to build an access road to their
potential mine site. The difficulties are likely connected to efforts by
lobbying organizations that insist that mining operations in the region would
pollute rivers and trout and salmon fisheries draining into Bristol Bay lying to
the west and disturb a large amount of forest land. It is our managements
estimate that it will take several years before these environmental issues are
resolved. Management believes that, in the mean time, our limited resources are
better spent on exploration at the North Pipes Super Project.

Title to mineral claims involves certain inherent risks due to
difficulties of determining the validity of certain claims as well as potential
for problems arising from the frequently ambiguous conveyancing history
characteristic of many mineral properties. The company has investigated title to
all its mineral properties and, to the best of its knowledge, title to all
properties are in good standing.

PLAN OF OPERATIONS AND CASH REQUIREMENTS

Cash Requirements

Over the next twelve months we intend to pay annual rentals on
our Big Chunk and Bonanza Hills claims and performing only the minimal
exploration work necessary to maintain these claims in good standing. Over the
next twelve months we intend to continue our exploration and diamond drilling
program at the North Pipes Super Project to identify mineralized breccia pipes.
We also plan to perform the diamond drilling program on two of our 100% owned
breccia pipe targets. We intend to drill several holes per breccia pipe target
and analyze the data received on each of our prioritized targets. The diamond
drilling program is expected to be performed on the Elle Venture claims
utilizing approx $1.4 million of funds already contributed by the joint venture
partner, XState Resources. We intend to drill those breccia pipe targets that we
identify as having ore grade potential to bankable feasibility stage in one
operation. This will be done using directional NQ size diamond drilling from a
central parent hole, drilled to a depth of about 2,000 feet. Directional holes
will be drilled at 100 foot intervals. We will begin environmental permitting
for mining operations as the directional hole drilling commences. We anticipate
that we will incur expenses over the next twelve months for geological,
geophysical, and geochemical studies and interpretation of that data.

Our anticipated cash requirement over the next twelve months is
approximately $4,725,000. We will require additional funds to implement our
diamond drilling program and other exploration operations. These funds may be
raised through equity financing, debt financing, or other sources, which may
result in further dilution in the equity ownership of our shares. The Unsecured
Convertible Promissory Notes entered into in May 2007 contained restrictions on
raising new capital from the sale of registered stock to other investors. We are
also limited to raising up to $7,000,000 in private placement funds during the 2
year term of the Unsecured Convertible Promissory Notes. These restrictions may
make it difficult for us to raise the cash required to proceed with our planned
exploration activities. 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.

Our net cash provided by financing activities during the year
ended January 31, 2008 was $4,968,340. We raised capital through the sale of
stock to Cornell Capital Partners in the first quarter pursuant to the Standby
Equity Distribution Agreement. We raised capital in the second quarter through
the sale of Senior Unsecured Convertible Promissory Notes.

Over the next twelve months we intend to use all available
funds to expand on the exploration of our mineral properties, as follows:

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26

Estimated Funding Required During the Next Twelve MonthsExpense
      AmountGeological, geochemical, geophysical and drilling
      exploration expenses
    $ 3,700,000Salaries and
      benefits
    285,000Accounting and
      auditing
    165,000Public relations
    175,000Legal fees
    165,000Office, general
      and administrative
    205,000Travel
    30,000Total
    $
      4,725,000


The results that we expect to be able to accomplish with our
current budgeted expenditures of approximately $4,725,000 will be limited. We
will need additional funding to determine whether we have a commercially viable
mineral resource.

There is no assurance that we will be able to raise additional
funds in the amounts and at the times we will require them. Please refer to the
section of this quarterly report entitled "Risk Factors" for a more detailed
description of the risks that we will face, and the risks that any person
investing in our company will face, that may arise as the result of our attempt
to raise money for the continuation of our exploration program through the sale
of equity in our company. Because of these risks and for other reasons, our
auditors, in their report on the annual consolidated financial statements for
the year ended January 31, 2008, included an explanatory paragraph regarding
their concerns about our ability to continue as a going concern.

Purchase or Sale of Equipment

We do not anticipate that we will expend any significant amount
on the purchase of equipment for our present operations or for our projected
operations over the next 12 months. Nor do we anticipate that we will sell any
equipment over the next 12 months.

Personnel

We have nine full time employees and two part-time employees.
Currently we employ or have on contract four full time geologists, including
President and CEO, James Briscoe, geologists David Boyer M.Sc. and Erik Murdock
M.Sc. who also specialize in computer mapping, and geologist Chelsea Wood. We
have contracted for services from one other full time geologist. Our wholly
owned subsidiary, Redwall Drilling Inc. has contracted services from Kaufmans
Corporation to operate our drill rig. These services include one drill
manager/driller, one full time driller, and three full time drill assistants.
This staff level allows our drill to operate one shift per day, everyday. These
permanent and contracted personnel will work approximately year round in
Arizona. Additionally, we have geoscience consultants specializing in
exploration geology, geophysics, geochemistry, and geocomputer data
applications, of whom our Technical Advisory Board is comprised. These
individuals are contracted for 140 days of consulting services over the period
January 1, 2008 through December 31, 2008.

Currently our drill rig is contracted to operate one day shift
per day, everyday. The Company would like to contract for a second shift per
day, everyday.

Results of Operations for the year ended January 31, 2008

As of January 31, 2008, we had $2,238,746 in current
liabilities compared to $146,340 at January 31, 2007. The increase in current
liabilities is due to the new debt acquired for equipment purchases and the sale
of Unsecured Convertible Promissory Note. In February 2008, the Company begins
making repayments on the Unsecured Convertible Promissory Notes. The Company
plans to elect to make repayments in stock, however, due to volume

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27

limitations it is possible that the Company will not be able to
convert all of the principal outstanding into shares of common stock and the
Company may be required to pay that difference in cash to the note holders at
their election.

We had a net loss of ($5,697,935) for the twelve month period
ended January 31, 2008 compared to a net loss of ($3,267,948) for the
twelve-month period ended January 31, 2007. The increase in net loss this year
is due to the increase in geological and geophysical exploration costs as a
result of the geochemical sampling and diamond drilling that were performed at
the North Pipes Super Project this year. The increase in net loss is also due to
the increase in interest expense as a result of the interest accrued and the
amortization of discounts and deferred financing costs on the sale of the
Unsecured Convertible Promissory Notes.

Liquidity and Capital Resources

We had cash and cash equivalents in the amount of $1,265,187 as
of January 31, 2008. We had negative working capital of $(505,662) as of January
31, 2008.

Off-Balance Sheet Arrangements

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

Investment in Elle Venture

The Elle Venture is a general partnership with XState Resources
Limited (XState) that was formed to explore, develop and, if warranted, mine
certain Federal lode mining claims within the 22 mile joint venture area. The
Company holds a 50% interest in the Elle Venture. XState has the right of first
refusal to buy or joint venture in relation to the other pipes and claims later
staked in the Elle Venture area of mutual interest. After the initial $2,900,000
contributed by XState is expended each party agrees to contribute to the Elle
Venture expenditures in proportion to their joint venture interests until the
exploration operations are completed. If a partner is unable to make a
proportional contribution then that partys interest will be diluted. At January
31, 2008 the Elle Venture has $2,054,884 cash remaining available for
exploration activities. The Company does not anticipate that we will make any
additional or proportional contributions to the Elle Venture in the next twelve
months.

Presentation of Financial Information

Our consolidated financial statements for the period ended
January 31, 2008 reflect financial information for the twelve month period
ending January 31, 2008, as well as from inception through January 31, 2008 and
for the twelve-month period ended January 31, 2007.

Since we have not generated any revenue, we have included a
reference to our ability to continue as a going concern in connection with our
consolidated financial statements for the years ended January 31, 2008 and 2007.
Our accumulated stockholders equity at January 31, 2008, was $216,520 and the
net loss for the twelve-month period ended January 31, 2008 was ($5,697,935).
All of our exploration costs are expensed as incurred.

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

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

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28

Critical Accounting Policies

The consolidated financial statements of Liberty Star Uranium
& Metals Corp. (formerly Liberty Star Gold 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 7 in the Form 10-KSB. 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, 2008. Our
total stockholders equity at January 31, 2008 was $216,520. All exploration
costs are expensed as incurred.

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

Mineral claims

The Company accounts 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, the company
does not have any proven mineral resources on any of its mineral
properties.

Convertible promissory notes

The Company accounts for convertible promissory notes in
accordance with Statement of Financial Accounting Standards No. 150 (SFAS
150). The Company reviewed the convertible promissory notes and the related
subscription agreement to determine the appropriate reporting within the
financial statements. The notes are reported as liabilities stated at fair
value. The Company determined that reporting the notes as equity would not be
appropriate as the conversion of the notes into common stock was not guaranteed.
No gain or loss is reported when the notes are converted into shares of the
Companys common stock in accordance with the notes original terms.

New Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No. 161 Disclosures
about Derivative Instruments and Hedging Activities  an amendment of FASB
Statement No. 133. This statement changes the disclosure requirements for
derivative instruments and hedging activities. Entities are required to provide
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement No. 133 and its related interpretations, and (c)
how derivative instruments and related hedged items affect an entitys financial
position, financial performance, and cash flows. This statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early adoption encouraged. This statement encourages,
but does not require, comparative disclosures for earlier periods at initial
adoption. The Company does not believe that the adoption of SFAS No. 160 will
have a material effect on its results of operations or financial position.

In December 2007, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No. 160
Noncontrolling Interests in Consolidated Financial Statements  an amendment of
ARB No. 51. This statement amends ARB 51 to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. An ownership interest in subsidiaries held by
parties other than the parent should be clearly identified, labeled, and
presented in the consolidated statement of financial position within equity, but
separate from the parents equity. The amount of consolidated net income
attributable to the parent and to the noncontrolling interest should be clearly
identified and presented on the face of the consolidated statement of income.
Changes in a parents ownership interest while the parent retains its
controlling financial interest in its subsidiary should be accounted for
similarly as equity transactions. When a subsidiary is deconsolidated, any
retained

---

29

noncontrolling equity investment in the former subsidiary
should be initially measured at fair value. The gain or loss on the
deconsolidation of the subsidiary is measured using the fair value of any
noncontrolling equity investment rather than the carrying amount of that
retained investment. Entities should provide sufficient disclosures that clearly
identify and distinguish between the interests of the parent and the interests
of the noncontrolling owners. This statement is effective for fiscal years, and
interim periods within those fiscal years, beginning on or after December 15,
2008. Earlier adoption is prohibited. This statement shall be applied
prospectively as of the beginning of the fiscal year in which this statement is
initially applied, except for the presentation and disclosure requirement which
shall be applied retrospectively for all periods presented. The Company does not
believe that the adoption of SFAS No. 160 will have a material effect on its
results of operations or financial position.

In December 2007, the FASB issued Statement of Financial
Accounting Standards No. 141 Revised Business Combinations. This statement
retains the fundamental requirements in SFAS No. 141 that the acquisition method
of accounting be used for all business combinations and for an acquirer to be
identified for each business combination. This statement improves the relevance,
representational faithfulness and comparability of the information that a
reporting entity provides in its financial reports about a business combination
and its effects. This statement defines the acquirer as the entity that obtains
control of one or more business in the business combination and establishes the
acquisition date as the date the acquirer achieves control. This statement
establishes principles and requirements for how the acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree. This
statement also established principles and requirements for recognizing and
measuring the goodwill acquired in the business combination or a gain from a
bargain purchase. This statement determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination. This statement applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008. Early application is not permitted. The Company does not believe that
the adoption of SFAS No. 141 Revised will have a material effect on its results
of operations or financial position.

In February 2007, the FASB issued Statement of Financial
Accounting Standards No. 159 The Fair Value Option for Financial Assets and
Financial Liabilities  including an amendment of FASB Statement No. 115. This
statement permits entities to choose to measure many financial instruments and
certain other items at fair value at specified election dates. A business entity
shall report unrealized gains and losses on items for which the fair value
option has been elected in earnings at each subsequent reporting date. A
not-for-profit organization shall report unrealized gains and losses in its
statement of activities or similar statement. The fair value measurement may be
applied instrument by instrument and is irrevocable. Financial assets and
liabilities are eligible for the fair value measurement option established by
this statement except: financial assets and liabilities recognized under leases
as defined in FASB Statement No. 13; deposit liabilities, withdrawable on
demand, of banks, savings and loan associations, credit unions, and other
similar depository institutions; financial instruments that are, in whole or in
part, classified by the issuer as a component of shareholders equity;
investments that are required to be consolidated; employers and plans
obligations, postemployment benefits, employee stock options and stock purchase
plans, and other forms of deferred compensation. This statement also permits
fair value measurement for firm commitments that would otherwise not be
recognized at inception and that involve only financial instruments,
nonfinancial insurance contract and warranties that the insurer can settle by
paying a third party to provide those goods or services, and host financial
instruments resulting from separation of an embedded nonfinancial derivative
instrument from a nonfinancial hybrid instrument. This statement is effective as
of the beginning of the entitys first fiscal year that begins after November
15, 2007. Earlier application is permitted as of the beginning of a fiscal year
that begins on or before November 15, 2007. The Company does not believe that
the adoption of SFAS No. 159 will have a material effect on its results of
operations or financial position.

---

30

Item
7.           Financial
Statements.

Our consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United States of
America.

The following consolidated financial statements are filed as
part of this annual report:

| | Report of Independent Registered
      Public Accounting Firm                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                   
| | Consolidated Balance Sheets as of
      January 31, 2008 and 2007                                                                                                                                                                 
| |                                                                                                                                                                                                                                   
| | Consolidated Statements of Operations
      for the twelve month period ended January 31, 2008, the twelve month
      period ended January 31, 2007 and the period from inception (August 20,
      2001) to January 31, 2008    
| |                                                                                                                                                                                                                                   
| | Consolidated Statements of
      Stockholders' Equity for the period from inception (August 20, 2001) to
      January 31, 2008                                                                                                   
| |                                                                                                                                                                                                                                   
| | Consolidated Statements of Cash Flows
      for the twelve month period ended January 31, 2008, the twelve month
      period ended January 31, 2007 and for the period from inception (August
      20, 2001) to January 31, 2008
| |                                                                                                                                                                                                                                   
| | Notes to the Consolidated Financial
      Statements                                                                                                                                                                              

---

31

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders of

Liberty Star Uranium & Metals Corp.

We have audited the accompanying consolidated balance sheets of
Liberty Star Uranium & Metals Corp. an exploration stage company (formerly
Liberty Star Gold Corp.) as of January 31, 2008 and 2007, and the related
consolidated statements of operations, stockholders equity, and cash flows for
the years then ended and for the cumulative period from inception (August 20,
2001) through January 31, 2008. These consolidated financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of the
Company as of January 31, 2008 and 2007, and the results of its operations,
changes in stockholders equity, and its cash flows for the years then ended,
and for the cumulative period from inception (August 20, 2001) through January
31, 2008, in conformity with accounting principles generally accepted in the
United States of America.

The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 18 to the consolidated financial statements, the Company is in
the exploration stage, has suffered recurring losses from operations, and
requires additional funds for further exploratory activity prior to attaining a
revenue generating status. In addition, the Company may not find sufficient ore
reserves to be commercially mined. These conditions raise substantial doubt
about the Companys ability to continue as a going concern. Managements plans
in regard to these matters are also described in Note 18. The consolidated
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.



/s/ Semple, Marchal & Cooper, LLP Phoenix, Arizona
April 16, 2008

---

32

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY) CONSOLIDATED BALANCE
SHEETS

|ASSETS                                                                   |  
|------------------------------------------------------------------------ | -
|                                                                         |  
|                                                                         |  
|Current:                                                                 |  
|Cash and cash equivalents                                                | $
|Prepaid expenses and supplies                                            |  
|Other current assets                                                     |  
|Due from related parties                                                 |  
|Deposits                                                                 |  
|Total current assets                                                     |  
|                                                                         |  
|Property and equipment, net                                              |  
|Certificates of deposit                                                  |  
|Deposits                                                                 |  
|Deferred financing charges, net                                          |  
|Investment in Elle Venture                                               |  
|                                                                         |  
|****Total assets                                                         | $
|                                                                         |  
|LIABILITIES AND STOCKHOLDERS
      EQUITY                               |  
|                                                                         |  
|Current:                                                                 |  
|Current portion of long-term
      debt                                  | $
|Current portion of capital lease obligation                              |  
|Current portion of convertible
      promissory notes, net of            |  
|discounts                                                                |  
|Accounts payable and accrued
      liabilities                           |  
|Accrued interest                                                         |  
|****Total current liabilities                                            |  
|                                                                         |  
|Long-term debt, net of current portion                                   |  
|Convertible promissory notes, net of current portion and
      discounts |  
|Capital lease obligation, net of current
      portion                   |  
|                                                                         |  
|Total liabilities                                                        |  
|                                                                         |  
|Stockholders equity                                                     |  
|Common stock - $.001 par value; 200,000,000
      shares                 |  
|authorized; 43,331,405 and 41,101,069 issued and                         |  
|****outstanding                                                          |  
|Additional paid-in capital                                               |  
|Deficit accumulated during the exploration
      stage                   |  
|Total
      stockholders equity                                         |  
|                                                                         |  
|Total liabilities and stockholders equity                               | $

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

---

33

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY) CONSOLIDATED STATEMENTS
OF OPERATIONS

|                                                  |   |                  |   |   |                  |   |   | Cumulative from   |  
|------------------------------------------------- | - | ---------------- | - | - | ---------------- | - | - | ----------------- | -
|                                                  |   |                  |   |   |                  |   |   | date of inception |  
|                                                  |   | For the twelve   |   |   | For the twelve   |   |   | (August 20, 2001) |  
|                                                  |   | months ended     |   |   | months ended     |   |   | to                |  
|                                                  |   | January 31, 2008 |   |   | January 31, 2007 |   |   | January 31, 2008  |  
|Revenues                                          | $ | -                |   | $ | -                |   | $ | -                 |  
|                                                  |   |                  |   |   |                  |   |   |                   |  
|Expenses:                                         |   |                  |   |   |                  |   |   |                   |  
|Geological and geophysical costs                  |   | 2,480,475        |   |   | 1,960,999        |   |   | 9,894,077         |  
|Salaries and benefits                             |   | 579,770          |   |   | 474,624          |   |   | 1,440,292         |  
|Accounting and auditing                           |   | 186,579          |   |   | 206,512          |   |   | 687,671           |  
|Public relations                                  |   | 198,219          |   |   | 246,101          |   |   | 590,113           |  
|Depreciation                                      |   | 147,534          |   |   | 59,144           |   |   | 251,279           |  
|Legal                                             |   | 129,008          |   |   | 124,441          |   |   | 467,231           |  
|Professional services                             |   | -                |   |   | -                |   |   | 143,992           |  
|General and administrative                        |   | 348,750          |   |   | 281,812          |   |   | 1,190,559         |  
|Travel                                            |   | 21,845           |   |   | 28,575           |   |   | 134,924           |  
|Impairment loss                                   |   | -                |   |   | -                |   |   | 15,907,500        |  
|Net operating expenses                            |   | 4,092,180        |   |   | 3,382,208        |   |   | 30,707,638        |  
|                                                  |   |                  |   |   |                  |   |   |                   |  
|Loss from operations                              |   | (4,092,180       | ) |   | (3,382,208       | ) |   | (30,707,638       | )
|                                                  |   |                  |   |   |                  |   |   |                   |  
|Other income (expense):                           |   |                  |   |   |                  |   |   |                   |  
|Interest income                                   |   | 92,227           |   |   | 16,520           |   |   | 181,705           |  
|Interest expense                                  |   | (1,697,982       | ) |   | (1,830           | ) |   | (1,700,006        | )
|Loss on sale of assets                            |   | -                |   |   | (430             | ) |   | (406              | )
|Other income                                      |   | -                |   |   | 100,000          |   |   | 100,000           |  
|Income from Elle Venture                          |   | -                |   |   | -                |   |   | -                 |  
|Foreign exchange gain                             |   | -                |   |   | -                |   |   | 505               |  
|Gain on settlement of debt to
      related party |   | -                |   |   | -                |   |   | 7,366             |  
|Total other income (expense)                      |   | (1,605,755       | ) |   | 114,260          |   |   | (1,410,836        | )
|                                                  |   |                  |   |   |                  |   |   |                   |  
|Loss before income taxes                          |   | (5,697,935       | ) |   | (3,267,948       | ) |   | (32,118,474       | )
|                                                  |   |                  |   |   |                  |   |   |                   |  
|Income tax expense                                |   | -                |   |   | -                |   |   | -                 |  
|                                                  |   |                  |   |   |                  |   |   |                   |  
|Net loss                                          | $ | (5,697,935       | ) | $ | (3,267,948       | ) | $ | (32,118,474       | )
|                                                  |   |                  |   |   |                  |   |   |                   |  
|Basic and diluted net loss per share of           |   |                  |   |   |                  |   |   |                   |  
|common stock                                      | $ | (0.13            | ) | $ | (0.08            | ) | $ | (1.01             | )
|                                                  |   |                  |   |   |                  |   |   |                   |  
|                                                  |   |                  |   |   |                  |   |   |                   |  
|Basic and diluted weighted average number         |   |                  |   |   |                  |   |   |                   |  
|of shares of common stock
      outstanding       |   | 42,743,758       |   |   | 38,525,724       |   |   | 31,724,238        |  

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

---

34

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)

Deficitaccumulated
      
      
      TotalAdditional
      
      
      during the
      
      
      stockholdersCommon
        stock
      
      
      paid- in
      
      
      exploration
      
      
      equityShares
      
      
      Amount
      
      
      capital
      
      
      stage
      
      
      (deficit)Balance, August 20, 2001 (Date of inception)
      
      -
      
      $
      -
      
      $
      -
      
      $
      -
      
      $
      -Common stock issued for cash
      
      20,000,000
      
      
      20,000
      
      
      80,000
      
      
      -
      
      
      100,000Net loss for the period from
        inception, August 20, 2001, toJanuary 31, 2004
      
      -
      
      
      -
      
      
      -
      
      
      (132,602
      )
      
      (132,602
      )Balance, January 31, 2004
      
      20,000,000
      
      
      20,000
      
      
      80,000
      
      
      (132,602
      )
      
      (32,602
      )Acquisition, February 3, 2004
      
      17,500,000
      
      
      17,500
      
      
      15,907,500
      
      
      -
      
      
      15,925,000Issuance of common stock private
        placement
      
      1,000,000
      
      
      1,000
      
      
      999,000
      
      
      -
      
      
      1,000,000Issuance of common stock and warrants private
        placement
      
      1,600,000
      
      
      1,600
      
      
      1,998,400
      
      
      -
      
      
      2,000,000Options issued for services
      
      -
      
      
      -
      
      
      94,350
      
      
      -
      
      
      94,350Return of shares
      
      (7,000,000
      )
      
      (7,000
      )
      
      (11,193,000
      )
      
      11,200,000
      
      
      -Net loss for the year ended
        January 31, 2005
      
      -
      
      
      -
      
      
      -
      
      
      (18,392,024
      )
      
      (18,392,024
      )Balance, January 31, 2005
      
      33,100,000
      
      
      33,100
      
      
      7,886,250
      
      
      (7,324,626
      )
      
      594,724Issuance of common stock and
        warrants private placement
      
      3,886,717
      
      
      3,887
      
      
      5,048,845
      
      
      -
      
      
      5,052,732Issuance of common stock and warrants private
        placement
      
      1,970
      
      
      2
      
      
      (2
      )
      
      -
      
      
      -Net loss for the year ended
        January 31, 2006
      
      -
      
      
      -
      
      
      -
      
      
      (4,627,965
      )
      
      (4,627,965
      )Balance, January 31, 2006
      
      36,988,687
      
      
      36,989
      
      
      12,935,093
      
      
      (11,952,591
      )
      
      1,019,491Issuance of common stock private
        placement
      
      256,637
      
      
      256
      
      
      289,744
      
      
      -
      
      
      290,000Issuance of common stock private placement
      
      8,850
      
      
      9
      
      
      9,991
      
      
      -
      
      
      10,000Issuance of common stock
      
      3,696,895
      
      
      3,697
      
      
      2,242,298
      
      
      
      
      
      2,245,995Issuance of common stock for services
      
      150,000
      
      
      150
      
      
      92,850
      
      
      
      
      
      93,000Expenses of common stock issuance
      
      -
      
      
      -
      
      
      (320,000
      )
      
      -
      
      
      (320,000
      )Options granted to consultants
      
      -
      
      
      -
      
      
      610,560
      
      
      -
      
      
      610,560Options granted to employees
      
      -
      
      
      -
      
      
      221,783
      
      
      -
      
      
      221,783Net loss for the year ended January 31 2007
      
      -
      
      
      -
      
      
      -
      
      
      (3,267,948
      )
      
      (3,267,948
      )Balance, January 31, 2007
      
      41,101,069
      
      
      41,101
      
      
      16,082,319
      
      
      (15,220,539
      )
      
      902,881Issuance of common stock
      
      1,718,799
      
      
      1,719
      
      
      1,072,698
      
      
      -
      
      
      1,074,417Issuance of common stock for
        services
      
      112,000
      
      
      112
      
      
      54,428
      
      
      -
      
      
      54,540Issuance of common stock in conversion of promissory
        note
      
      399,537
      
      
      399
      
      
      259,300
      
      
      -
      
      
      259,699Options granted to employees
        and consultants
      
      -
      
      
      -
      
      
      358,646
      
      
      -
      
      
      358,646Issuance of common stock purchase warrants
      
      -
      
      
      -
      
      
      1,421,538
      
      
      -
      
      
      1,421,538Beneficial conversion feature
        of convertible promissory notes
      
      -
      
      
      -
      
      
      1,842,734
      
      
      -
      
      
      1,842,734Net loss for the year ended January 31, 2008
      
      -
      
      
      -
      
      
      -
      
      
      (5,697,935
      )
      
      (5,697,935
      )Balance, January 31, 2008
      
      43,331,405
      
      $
      43,331
      
      $
      21,091,663
      
      $
      (20,918,474
      )
      $
      216,520


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

---

35

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY) CONSOLIDATED STATEMENTS
OF CASH FLOWS

|                                                                   |   |                  |   |   |                  |   |   | Cumulative from date |  
|------------------------------------------------------------------ | - | ---------------- | - | - | ---------------- | - | - | -------------------- | -
|                                                                   |   |                  |   |   |                  |   |   | of inception         |  
|                                                                   |   | For the twelve   |   |   | For the twelve   |   |   | (August 20, 2001)    |  
|                                                                   |   | months ended     |   |   | months ended     |   |   | to                   |  
|                                                                   |   | January 31, 2008 |   |   | January 31, 2007 |   |   | January 31, 2008     |  
|Net change in cash and cash equivalents                            |   |                  |   |   |                  |   |   |                      |  
|Cash flows from operating activities:                              |   |                  |   |   |                  |   |   |                      |  
|Net loss                                                           | $ | (5,697,935       | ) | $ | (3,267,948       | ) | $ | (32,118,474          | )
|Adjustments to reconcile net loss to net cash
      from operating |   |                  |   |   |                  |   |   |                      |  
|activities:                                                        |   |                  |   |   |                  |   |   |                      |  
|Depreciation                                                       |   | 148,545          |   |   | 59,144           |   |   | 252,290              |  
|Amortization of
      deferred financing charges                   |   | 178,873          |   |   | -                |   |   | 178,873              |  
|Amortization of discount on convertible
      promissory notes     |   | 1,249,421        |   |   | -                |   |   | 1,249,421            |  
|Mineral claim costs                                                |   | -                |   |   | -                |   |   | 343,085              |  
|Impairment loss                                                    |   | -                |   |   | -                |   |   | 15,907,500           |  
|Loss (gain) on sale
      of fixed asset                           |   | -                |   |   | 430              |   |   | 406                  |  
|Share based compensation                                           |   | 358,646          |   |   | 925,343          |   |   | 1,190,989            |  
|Share based payments                                               |   | 64,239           |   |   | -                |   |   | 157,239              |  
|Changes in assets and liabilities:                                 |   |                  |   |   |                  |   |   |                      |  
|Prepaid
      expenses and supplies                                |   | (166,934         | ) |   | (1,584           | ) |   | (95,675              | )
|Other current
      assets                                         |   | 6,230            |   |   | (6,230           | ) |   | (7,875               | )
|Deposits                                                           |   | (11,000          | ) |   | 6,875            |   |   | (16,707              | )
|Certificates
      of deposit                                      |   | (53,109          | ) |   | (3,000           | ) |   | (56,109              | )
|Accounts payable
      and accrued expenses                        |   | 172,259          |   |   | (48,760          | ) |   | 277,559              |  
|Accrued interest                                                   |   | 239,524          |   |   | -                |   |   | 239,524              |  
|Net cash used in operating activities                              |   | (3,511,241       | ) |   | (2,335,730       | ) |   | (12,497,954          | )
|                                                                   |   |                  |   |   |                  |   |   |                      |  
|Cash flows from investing activities:                              |   |                  |   |   |                  |   |   |                      |  
|Proceeds from the sale of fixed asset                              |   | -                |   |   | 6,229            |   |   | 8,005                |  
|Purchase of certificate of deposit                                 |   | (204,797         | ) |   | -                |   |   | (204,797             | )
|Purchase of equipment                                              |   | (663,424         | ) |   | (103,473         | ) |   | (1,024,250           | )
|Net cash used in investing activities                              |   | (868,221         | ) |   | (97,244          | ) |   | (1,221,042           | )
|                                                                   |   |                  |   |   |                  |   |   |                      |  
|Cash flows from financing activities:                              |   |                  |   |   |                  |   |   |                      |  
|Principal activity on long-term debt                               |   | (48,183          | ) |   | (2,668           | ) |   | (50,851              | )
|Principal activity on capital lease obligation                     |   | (26,905          | ) |   | (9,633           | ) |   | (36,538              | )
|Net (advances) repayments from related parties                     |   | (240,152         | ) |   | (37,513          | ) |   | (277,665             | )
|Advance payment on joint venture in formation                      |   | -                |   |   | -                |   |   | -                    |  
|Proceeds from the issuance of common stock                         |   | 1,074,417        |   |   | 2,245,995        |   |   | 11,160,074           |  
|Expenses of common stock issuance                                  |   | -                |   |   | (20,000          | ) |   | (20,000              | )
|Proceeds from the sale of convertible promissory
      notes       |   | 4,010,238        |   |   | -                |   |   | 4,010,238            |  
|Proceeds from long-term debt                                       |   | 198,925          |   |   | -                |   |   | 198,925              |  
|Net cash provided by financing activities                          |   | 4,968,340        |   |   | 2,176,181        |   |   | 14,984,183           |  
|                                                                   |   |                  |   |   |                  |   |   |                      |  
|Net increase (decrease) in cash and cash equivalents for period    |   | 588,878          |   |   | (256,793         | ) |   | 1,265,187            |  
|                                                                   |   |                  |   |   |                  |   |   |                      |  
|Cash and cash equivalents, beginning of period                     |   | 676,309          |   |   | 933,102          |   |   | -                    |  
|                                                                   |   |                  |   |   |                  |   |   |                      |  
|Cash and cash equivalents, end of period                           | $ | 1,265,187        |   | $ | 676,309          |   | $ | 1,265,187            |  
|                                                                   |   |                  |   |   |                  |   |   |                      |  
|Interest paid during the period                                    | $ | 20,465           |   | $ | 194              |   | $ | 22,489               |  

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

---

36

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY) NOTES TO 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) is our wholly owned subsidiary and
was incorporated on August 31, 2007 in the State of Arizona. Redwall is a
drilling contractor. On December 1, 2007 Redwall began performing drilling
services on the Companys mineral properties. In April 2007, the Company changed
its name to Liberty Star Uranium & Metals Corp. to reflect the Companys
current concentrated efforts on uranium exploration. The Company is considered
to be an exploration stage company, as it has not generated any revenues from
operations.

In December 2006, the Company entered into a joint venture
agreement (Elle Venture) with XState Resources Limited (XState). The Company
holds 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 22 square mile joint venture area.

These consolidated financial statements include the results of
operations and cash flows of Big Chunk and Redwall from the date of acquisition.
All significant intercompany accounts and transactions were eliminated upon
consolidation.

These consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America with the on-going assumption that the Company will be able to realize
its assets and discharge its liabilities in the normal course of business.
However, certain conditions noted below currently exist which raise substantial
doubt about the Companys ability to continue as a going concern. These
consolidated financial statements do not include any adjustments to the amounts
and classifications of assets and liabilities that might be necessary should the
Company be unable to continue as a going concern. The operations of the Company
have primarily been funded by the issuance of common stock and debt. Continued
operations of the Company are dependent on the Companys 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 or loans. Such financings or loans may not be available, may not be
available on reasonable terms, or the Company may be prevented from obtaining
further financings because of restrictions that apply to it pursuant to the
Unsecured Convertible Promissory Notes discussed in Note 8.

NOTE 2  Summary of significant accounting policies

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

Use of estimates

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

---

37

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 2  Summary of significant accounting policies -
continued

Use of estimates - continued

The valuation of stock-based compensation, valuation of common
stock purchase warrants, value of beneficial conversion feature, and the
determination of useful lives 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 consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries, Big Chunk and Redwall, from the
date of acquisition, February 5, 2004 and August 31, 2007, respectively. All
significant intercompany accounts and transactions have been eliminated upon
consolidation.

Cash and cash equivalents

The Company considers cash held at banks and all highly liquid
investments with original maturities of three months or less to be cash and cash
equivalents. The Company maintains its cash in bank deposit accounts which, for
periods of time, may exceed federally insured limits. At January 31, 2008 and
January 31, 2007, the amount of cash in bank deposit accounts that exceeded
federally insured limits was approximately $1,202,000 and $681,000,
respectively.

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.

Investment in Elle Venture

Investment in Elle Venture, a general partnership in which the
Company is a 50% partner, is accounted for by the equity method as effective
control of the venture rests with XState Resources Limited, our joint venture
partner.

Property and equipment

Property and equipment is stated at cost. The Company
capitalizes 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. Property and equipment consists of office furniture and equipment,
leasehold improvements, vehicles, computer equipment and field equipment.

The estimated useful lives range from 2 to 7 years. At January
31, 2008 and January 31, 2007 accumulated depreciation was $248,854 and
$100,310, respectively.

---

38

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 2  Summary of significant accounting policies -
continued

Deferred finance charges

The Company capitalizes costs incurred to issue new debt as
deferred finance charges. Amortization is calculated using the straight line
method over the life of the related debt instrument and is included in interest
expense. At January 31, 2008 and January 31, 2007 the Company has capitalized
deferred finance charges of $432,538 and $0, respectively, and accumulated
amortization of debt issuance costs was $152,882 and $0, respectively.

Discount on convertible promissory notes

Discounts on convertible promissory notes include the fair
value of detachable common stock purchase warrants issued with convertible
promissory notes and the intrinsic value of the embedded beneficial conversion
feature of the convertible promissory notes. These amounts are being amortized
to interest expense using the effective interest method over the term of the
convertible promissory notes. At January 31, 2008 and January 31, 2007 the
Company has recorded discounts on convertible promissory notes of $3,014,956 and
$0, respectively and accumulated amortization of discounts on convertible
promissory notes was $1,067,797 and $0, respectively.

Accounting for the impairment of long-lived assets and
long-lived assets to be disposed of

The Company reviews property and equipment for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell.

Accounting for lease obligations

The Company records rent expense from noncancelable operating
leases on the straight-line basis over the life of the lease. The Company
records an asset and a related capital lease obligation for property and
equipment acquired by capital lease. The asset is amortized and amortization
expense is included in depreciation.

Convertible promissory notes

The Company accounts for convertible promissory notes in
accordance with Statement of Financial Accounting Standards No. 150 (SFAS 150)
requiring the convertible promissory notes to be reported as liabilities at fair
value. When convertible promissory notes are converted into shares of the
Companys common stock in accordance with the debts original terms, no gain or
loss is recognized.

Environmental expenditures

The operations of the Company have been and may in the future
be affected from time to time in varying degree by changes in environmental
regulations, including those for future removal and site restoration costs. The
likelihood of new regulations and their overall effect upon the Company are not
predictable. The Company will provide for any reclamation costs in accordance
with Financial Accounting Standard No. 143 Accounting for Asset Retirement
Obligations. It is managements opinion that the Company is not currently
exposed to significant environmental and reclamation liabilities and has
recorded no reserve for environmental and reclamation expenditures at January
31, 2008 and January 31, 2007.

---

39

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 2  Summary of significant accounting policies 
continued

Stock-based compensation

The Companys stock-based compensation arrangements are
designed to attract and retain employees and non-employee consultants. The
amount, frequency, and terms of stock-based awards may vary based on competitive
practices, company operating results, and government regulations. The Company
may grant non-qualified and incentive stock options to employees and
non-qualified stock options to non-employee consultants. New shares are issued
upon option exercises.

On February 1, 2006 the Company adopted the provisions of
Statement of Financial Accounting Standards No. 123R (SFAS 123R) requiring the
measurement and recognition of all stock-based compensation under the fair value
method. The Company charges stock-based compensation expense for options granted
to employees to earnings using the straight-line method over the options
requisite service period. The Company implemented SFAS 123R using the modified
prospective transition method. Prior to February 1, 2006 the Company accounted
for stock options granted to employees under Accounting Principles Board Opinion
25 (APB 25) intrinsic value method. Under APB 25, there was generally no
charge to earnings for employee stock option awards because the options granted
had an exercise price at least equal to the market value of the underlying
common stock on the grant date. The fair value of options granted to employees
prior to February 1, 2006 had been determined to be $0, based on the
Black-Scholes Valuation method. The Company determines the measurement date for
stock options granted to non-employee consultants using EITF 96-18. Periods
prior to February 1, 2006 in the consolidated financial statements have not been
adjusted to reflect fair value stock-based compensation expense under SFAS 123R
for options issued to employees as there is no effect.

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.

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 which
resulted in 20,000,000 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 January 31, 2008 and January 31, 2007, there were
12,345,047 and 5,684,342 potentially dilutive instruments outstanding,
respectively, and shares that may be issued contingent to the Unsecured
Convertible Promissory Notes, that were not included in the determination of
diluted loss per share as their effect was anti-dilutive.

Recently issued accounting standards

In December 2007, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No. 161 Disclosures
about Derivative Instruments and Hedging Activities  an amendment of FASB
Statement No. 133. This statement changes the disclosure requirements for
derivative instruments and hedging activities. Entities are required to provide
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement No. 133 and its related interpretations, and (c)
how derivative instruments and related hedged items affect an entitys financial
position,

---

40

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 2 - Summary of significant accounting policies 
continued

Recently issued accounting standards - continued

financial performance, and cash flows. This statement is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, with early adoption encouraged. This
statement encourages, but does not require, comparative disclosures for earlier
periods at initial adoption. The Company does not believe that the adoption of
SFAS No. 160 will have a material effect on its results of operations or
financial position.

In December 2007, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards No. 160
Noncontrolling Interests in Consolidated Financial Statements  an amendment of
ARB No. 51. This statement amends ARB 51 to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. An ownership interest in subsidiaries held by
parties other than the parent should be clearly identified, labeled, and
presented in the consolidated statement of financial position within equity, but
separate from the parents equity. The amount of consolidated net income
attributable to the parent and to the noncontrolling interest should be clearly
identified and presented on the face of the consolidated statement of income.
Changes in a parents ownership interest while the parent retains its
controlling financial interest in its subsidiary should be accounted for
similarly as equity transactions. When a subsidiary is deconsolidated, any
retained noncontrolling equity investment in the former subsidiary should be
initially measured at fair value. The gain or loss on the deconsolidation of the
subsidiary is measured using the fair value of any noncontrolling equity
investment rather than the carrying amount of that retained investment. Entities
should provide sufficient disclosures that clearly identify and distinguish
between the interests of the parent and the interests of the noncontrolling
owners. This statement is effective for fiscal years, and interim periods within
those fiscal years, beginning on or after December 15, 2008. Earlier adoption is
prohibited. This statement shall be applied prospectively as of the beginning of
the fiscal year in which this statement is initially applied, except for the
presentation and disclosure requirement which shall be applied retrospectively
for all periods presented. The Company does not believe that the adoption of
SFAS No. 160 will have a material effect on its results of operations or
financial position.

In December 2007, the FASB issued Statement of Financial
Accounting Standards No. 141 Revised Business Combinations. This statement
retains the fundamental requirements in SFAS No. 141 that the acquisition method
of accounting be used for all business combinations and for an acquirer to be
identified for each business combination. This statement improves the relevance,
representational faithfulness and comparability of the information that a
reporting entity provides in its financial reports about a business combination
and its effects. This statement defines the acquirer as the entity that obtains
control of one or more business in the business combination and establishes the
acquisition date as the date the acquirer achieves control. This statement
establishes principles and requirements for how the acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree. This
statement also established principles and requirements for recognizing and
measuring the goodwill acquired in the business combination or a gain from a
bargain purchase. This statement determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial
effects of the business combination. This statement applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008. Early application is not permitted. The Company does not believe that
the adoption of SFAS No. 141 Revised will have a material effect on its results
of operations or financial position.

In February 2007, the FASB issued Statement of Financial
Accounting Standards No. 159 The Fair Value Option for Financial Assets and
Financial Liabilities  including an amendment of FASB Statement No. 115. This
statement permits entities to choose to measure many financial instruments and
certain other items at fair value at specified election dates. A business entity
shall report unrealized gains and losses on items for which the fair value
option has been elected in earnings at each subsequent reporting date. A
not-for-profit organization shall report unrealized gains and losses in its
statement of activities or similar statement. The fair value measurement may be
applied instrument by instrument and is irrevocable. Financial assets and
liabilities are eligible for the fair value measurement option established by
this statement except: financial assets and liabilities recognized under leases
as defined in FASB Statement No. 13; deposit liabilities, withdrawable on
demand, of banks, savings and loan associations, credit unions,

---

41

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 2 - Summary of significant accounting policies 
continued

Recently issued accounting standards - continued

and other similar depository institutions; financial
instruments that are, in whole or in part, classified by the issuer as a
component of shareholders equity; investments that are required to be
consolidated; employers and plans obligations, postemployment benefits,
employee stock options and stock purchase plans, and other forms of deferred
compensation. This statement also permits fair value measurement for firm
commitments that would otherwise not be recognized at inception and that involve
only financial instruments, nonfinancial insurance contract and warranties that
the insurer can settle by paying a third party to provide those goods or
services, and host financial instruments resulting from separation of an
embedded nonfinancial derivative instrument from a nonfinancial hybrid
instrument. This statement is effective as of the beginning of the entitys
first fiscal year that begins after November 15, 2007. Earlier application is
permitted as of the beginning of a fiscal year that begins on or before November
15, 2007. The Company does not believe that the adoption of SFAS No. 159 will
have a material effect on its results of operations or financial position.

NOTE 3 Mineral claims

On January 31, 2008 the Company held a 100% interest in 1,793
standard Federal lode mining claims spanning approximately 60 square miles on
the Colorado Plateau Province of Northern Arizona (the North Pipes Claims).

On January 31, 2008 the Company held an option to explore 59
standard Federal lode mining claims located at the East Silver Bell and Walnut
Creek region of Arizona. The mineral claims are owned by JABA US Inc, an Arizona
Corporation in which two directors of the Company are owners.

On January 31, 2008 the Company held a 100% interest in 707
Alaska State mining claims spanning approximately 177 square miles in the
Iliamna region of Southwestern Alaska, located on the north side of the Cook
Inlet, approximately 200 miles southwest of the city of Anchorage, Alaska (the
Big Chunk Claims). On January 31, 2008 the Company held a 100% interest in 56
Alaska State mining claims spanning approximately 13.5 square miles in the
Iliamna region of Southwestern Alaska, located on the north side of the Cook
Inlet approximately 60 miles north of Lake Iliamna (the Bonanza Hills
Claims).

The Company entered into a letter of intent for a proposed
option and joint venture agreement with Millrock Resources, Inc. for the Bonanza
Hills claims, subject to the execution of a definitive agreement and approval of
the transaction from the TSX Venture Exchange. The proposed agreement calls for
Millrock to earn a 60% interest in the claims in exchange for an exploration
work commitment of $3,500,000 over the course of 4 years. At January 31, 2008,
Millrock performed $22,816 of exploration work on the claims. At January 31,
2008, Millrock has not earned any interest in the Bonanza Hills claims as a
definitive agreement and approval of the transaction from the TSX Venture
Exchange have not been completed.

Title to mineral claims involves certain inherent risks due to
difficulties of determining the validity of certain claims as well as potential
for problems arising from the frequently ambiguous conveyancing history
characteristic of many mineral properties. The Company has investigated titles
to all its mineral properties and, to the best of its knowledge; titles to all
properties are in good standing as of January 31, 2008.

NOTE 4  Investment in Elle Venture

The Company holds a 50% interest in Elle Venture, a general
partnership with XState Resources Limited (XState) that was formed to explore,
develop and, if warranted, mine certain US Federal lode mining claims within the
22 mile joint venture area. At January 31, 2008 the Elle Venture held a 100%
interest in 18 standard Federal lode mining claims located on the Colorado
Plateau Province of Northern Arizona (Elle Venture Claims). The Elle Venture
commenced on December 15, 2006 when XState deposited $2,900,000 into the joint
venture bank account. XState has the right of first refusal to buy or joint
venture in relation to the other pipes and claims later staked in the Elle
Venture area. After

---

42

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 4  Investment in Elle Venture  continued

the initial $2,900,000 is expended each party agrees to
contribute to the Elle Venture expenditures in proportion to their joint venture
interests until the exploration operations are completed. If a partner is unable
to make a proportional contribution then that partys interest will be diluted.

At January 31, 2008 the Company made no capital contributions
to the Elle Venture and was not at risk for any of the Elle Venture losses. The
investment in Elle Venture at January 31, 2008 and 2007 is $0.

In October 2006, the Company entered into a Subcontracting
Agreement with XState to perform the duties as the Manager of the Elle Venture
including maintaining the joint venture bank account, paying joint venture
expenses, and performing the duties necessary to execute the approved work
program for the joint venture claims. During the year ended January 31, 2008 and
2007, the Company incurred $543,337 and $133,671, respectively as compensation
from the Elle Venture for the use of the Companys personnel and resources in
performing its duties under the Subcontracting Agreement. Compensation received
from the subcontracting agreement is reported as a reduction of our geological
and geophysical exploration costs.

Summary financial information of Elle Venture at:

January 31, 2008
    
    
    January 31, 2007Current assets
    $
    2,054,884
    
    $
    2,768,292Other assets
    
    102,858
    
    
    50,000Total assets
    $
    2,157,742
    
    $
    2,818,292Current liabilities
    $
    277,665
    
    $
    46,192Total liabilities
    
    277,665
    
    
    46,192Partners capital
    
    1,880,077
    
    
    2,772,100Total liabilities and
      partners capital
    $
    2,157,742
    
    $
    2,818,292Net loss from inception
      (December 15, 2006) tothe period
      ended
    $
    1,019,923
    
    $
    127,899


NOTE 5  Property and equipment

The balances of our major classes of depreciable assets are:

January 31, 2008
    
    
    January 31, 2007Geology equipment
    $
    418,802
    
    $
    195,947Drilling equipment
    
    463,700
    
    
    -Vehicles and transportation
      equipment
    
    355,950
    
    
    150,415Office furniture and equipment
    
    93,375
    
    
    80,413Leasehold improvements
    
    24,302
    
    
    20,0561,356,129
    
    
    446,831Less accumulated depreciation and
      amortization
    
    (248,854
    )
    
    (100,310
    )$
    1,107,275
    
    $
    346,521


---

43

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 6  Long-term debt

Notes payable to Chase Bank payable in aggregate monthly
installments of $2,442 including interest at a fixed rates ranging from 8.9% to
10% maturing at various dates through September 2013, secured by liens on a
vehicles. Principal balances at January 31, 2008 and 2007 are $108,412 and
$55,885, respectively. Carrying amount of vehicles that serve as collateral is
$110,876 and $57,216 at January 31, 2008 and 2007, respectively.

Note payable to Atlas Copco payable in monthly installments of
$5,436 including interest at a fixed rate of 9% through maturity in September
2010, secured by a lien on equipment. Principal balance at January 31, 2008 and
2007 is $145,564 and $0, respectively. Carrying amount of equipment that serves
as collateral is $376,055 and $0 at January 31, 2008 and 2007, respectively.

Note payable to Zions First National Bank payable in monthly
installments of $4,018 including interest at 7.5% through maturity in October
2012, secured by a certificate of deposit. Principal balance at January 31, 2008
and 2007 is $191,726 and $0, respectively. Carrying amount of certificate of
deposit that serves as collateral is $204,797 and $0 at January 31, 2008 and
2007, respectively.

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

For the twelve months ended January 31,2009
    $
    107,8662010
    
    118,0412011
    
    98,0552012
    
    65,6172013
    
    50,290Thereafter
    
    5,833445,702Less current maturities
    
    (107,866
    )$
    337,836


NOTE 7  Capital lease obligation

In November 2006, the Company entered into a noncancelable
capital lease with Thermo Fisher Financial Services, Inc. for a Niton XLp 532
Industrial Analyzer. The lease calls for an initial down payment of $2,894
payable at lease signing in November 2006, a $7,000 one-time payment in January
2007 and 11 monthly payments of $2,794 beginning in April 2007. The Company has
recorded an asset of $39,298 related to this lease. For the years ended and at
January 31, 2008 and 2007 amortization expense of $5,614 and $0, respectively,
and accumulated amortization of $5,614 and $0, respectively, has been recorded
in relation to this lease.

The future minimum lease payments related to this lease are as
follows:

For the twelve months ended January 31,
      2009
    $
    2,768Less amount representing interest
    
    (8
    )Capital lease obligation, current portion
    $
    2,760


---

44

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 8  Convertible promissory notes

On May 11, 2007, the Company issued senior unsecured
convertible two year promissory notes (Unsecured Convertible Promissory Notes)
for gross proceeds of $4,400,000 in a private placement of its securities to
institutional investors pursuant to exemptions from registration set out in Rule
506 of Regulation D under the Securities Act of 1933. The net proceeds received
after placement agent fee, due diligence fee and legal fees was $4,010,238. The
Unsecured Convertible Promissory Notes bear interest at 8%. Following the
occurrence of an event of default that is not cured within 20 days, the
Unsecured Convertible Promissory Notes will bear an interest rate of 15% per
annum beginning from the date of such occurrence through the maturity date.
Repayment of the Unsecured Convertible Promissory Notes begins in February 2008
with sixteen monthly principal payments of $275,000 plus accrued unpaid
interest. Holders of the Unsecured Convertible Promissory Notes may elect to
convert all or a portion of their note balance before the scheduled repayment
dates at a fixed rate of $0.65 per share.

The Company may elect to make repayments of the Unsecured
Convertible Promissory Notes in cash or by the issuance of common stock of the
Company. The stock will be issued at the lesser of the fixed conversion price of
$0.65 per share or 85% of the volume weighted average price for 10 days
preceeding the repayment date, but not less than $0.45 per share. Stock payment
cannot be made if the amount of shares to be issued would exceed 33% of the
aggregate daily trading volume for 7 trading days preceding the repayment date,
unless waived by the holders of the Unsecured Convertible Promissory Notes.
Stock payment cannot be made if the holders of the Unsecured Convertible
Promissory Notes own more than 4.99% of the then outstanding common stock of the
Company.

In the event that a delay in delivery of conversion shares
occurs, as defined in the subscription agreement and Unsecured Convertible
Promissory Note, the Company agrees to pay liquidated damages of $100 per
business day for each $10,000 of purchase price of shares subject to the
delivery default. In the event that the Company fails to deliver shares issuable
under the Unsecured Convertible Promissory Notes within 7 business dates of the
Delivery Date and the selling security holder purchases shares of common stock
of the Company in an open market, then the Company shall pay in cash to the
selling security holder the amount by which the selling security holders total
purchase price including brokers commissions exceeds the aggregate purchase
price of the shares issuable together with interest at 15% per annum.

The Company was required to file and have declared effective a
registration statement with the SEC within 140 days of the sale of the Unsecured
Convertible Promissory Notes. The Company filed the registration statement and
it was declared effective on September 28, 2007. The Company is required to
maintain the effectiveness of the registration statement for up to two years, or
until all shares have been traded by the holders of the Unsecured Convertible
Promissory Notes. The proceeds of the private placement have been and will be
used for working capital, exploration of mineral properties and/or acquiring
additional mineral properties.

The Company incurred deferred financing costs of $457,454 in
connection with the issuance of the Unsecured Convertible Promissory Notes. The
deferred financing costs consist of $389,762 paid for broker fees, legal fees
and due diligence fee. The deferred financing costs also consist of 338,461 of
common stock purchase warrants issued as a broker fee to Hunter Wise Securities.
The warrants have an exercise price of $0.75 and a life of 5 years. The exercise
price may be adjusted if the Company issues other shares, warrants or stock
options before the expiration of the warrants at a price less than $0.45 per
share. The warrants were assigned a value of $67,692 estimated using the
Black-Scholes valuation model. The following assumptions were used to determine
the fair value of the warrants using the Black-Scholes valuation model: a term
of 5 years, risk-free rate of 4.56%, volatility of 60%, and dividend yield of
zero. The Company reported $178,802 and $0 of interest expense for the
amortization of deferred financing costs during the years ended January 31, 2008
and 2007, respectively.

The holders of the Unsecured Convertible Promissory Notes were
issued 6,769,228 detachable common stock purchase warrants with an exercise
price of $0.75 and a life of 5 years. The exercise price may be adjusted if the
Company issues other shares, warrants or stock options before the expiration of
the warrants at a price less than $0.45 per share. In the

---

45

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 8  Convertible promissory notes  continued

event that a delay in delivery of exercised shares occurs, as
defined in the subscription agreement, the Company agrees to pay liquidated
damages of $100 per business day for each $10,000 of purchase price of shares
subject to the delivery default. In the event that the Company fails to deliver
the exercised shares within 7 business dates of the Delivery Date and the
selling security holder purchases shares of common stock of the Company in an
open market, then the Company shall pay in cash to the selling security holder
the amount by which the selling security holders total purchase price including
brokers commissions exceeds the aggregate purchase price of the shares issuable
together with interest at 15% per annum.

The Unsecured Convertible Promissory Notes are reported net of
discounts. Discounts were recorded for the detachable common stock purchase
warrants as well as the beneficial conversion feature. The beneficial conversion
feature recorded of $1,842,734 represents the difference between the conversion
price and the fair market value of the common stock on the commitment date (May
11, 2007). The 6,769,228 detachable common stock purchase warrants were assigned
a value of $1,353,846, estimated using the Black-Scholes valuation model. The
following assumptions were used to determine the fair value of the warrants
using the Black-Scholes valuation model: a term of 5 years, risk-free rate of
4.56%, volatility of 60%, and dividend yield of zero. The discounts on the
Unsecured Convertible Promissory Notes for the beneficial conversion feature and
the detachable common stock purchase warrants are being amortized to interest
expense, using the effective interest method, over the term of the Unsecured
Convertible Promissory Notes.

The Company reported $1,249,421 and $0 of interest expense
relating to the beneficial conversion feature and the warrants discount during
the years ended January 31, 2008 and 2007, respectively.

During the year ended January 31, 2008 one note holder
converted $250,000 of the principal balance of their Unsecured Convertible
Promissory Note and $9,699 of unpaid accrued interest at a conversion price of
$0.65 per share pursuant to the original terms of the notes. The Company issued
399,537 shares of common stock related to these conversions. The debt converted
was allocated $25,991 of deferred finance charges and $181,624 of discounts, the
unamortized portion of $157,269 was recorded as interest expense.

The principal balance of the Unsecured Convertible Promissory
Notes outstanding was $4,150,000 and $0 at January 31, 2008 and 2007,
respectively. If settlement of the Unsecured Convertible Promissory Notes
occurred on January 31, 2008 the Company would be obligated to pay $4,150,000
principal payments and $239,524 accrued interest for a total of $4,389,524 in
cash. If the settlement were completed by the issuance of common shares the
conversion price at January 31, 2008 was $0.45 per share for a total of
9,754,498 shares required to convert the notes.

The following is a summary of the principal maturities of
Unsecured Convertible Promissory Notes:

For the twelve months ended January 31,2009
    $
    3,112,5002010
    
    1,037,5004,150,000Less discounts for warrants and beneficial
      conversion feature
    
    (1,947,159
    )2,202,841Less current maturities, net of discounts
    
    (1,605,022
    )$
    597,819


---

46

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 9  Common stock

As of January 31, 2008, there were 9,051,047 whole share
purchase warrants outstanding and exercisable. The warrants have a weighted
average remaining life of 3.82 years and a weighted average exercise price of
$0.91 per whole warrant for one common share.

Whole share purchase warrants outstanding at January 31, 2008
are as follows:

Number of whole
    
    
    Weighted averageshare purchase
    
    
    exercise price perwarrants
    
    
    shareOutstanding, January 31, 2006
    
    2,744,342
    
    $
    1.57Forfeited or expired
    
    (800,000
    )
    
    1.75Outstanding, January 31, 2007
    
    1,944,342
    
    $
    1.50Issued
    
    7,107,689
    
    
    0.75Forfeited or expired
    
    (984
    )
    
    1.50Exercised
    
    -
    
    
    -Outstanding, January 31, 2008
    
    9,051,047
    
    $
    0.91Exercisable, January 31, 2008
    
    9,051,047
    
    $
    0.91


On January 17, 2007 the Company issued 150,000 shares to
Equititrend Advisors LLC upon the execution of an agreement to perform public
and investor relations services as an independent contractor for a period of 12
months commencing on January 9, 2007. On May 2, 2007 the Company issued 50,000
shares to Equititrend Advisors LLC. The shares were issued to an accredited
investor pursuant to exemptions from registration set out in Rule 506 of
Regulation D under the Securities Act. The transactions were reported at fair
value. Fair value of the shares issued was determined by a review of the
Companys stock trading price around the date of issuance and was determined to
be $0.62 per share for the shares issued on January 17, 2007 and $0.57 per share
for the shares issued on May 2, 2007. The Company recognized compensation
expense of $28,500 and $93,000 during the years ended January 31, 2008 and 2007,
respectively. The contract with Equititrend Advisors LLC was terminated on July
27, 2007.

The Company issued 62,000 common shares to three public
relations consultants on August 27, 2007 as compensation for public relations
services performed. The issuance of common stock is reported at fair value. Fair
value was determined to be the closing trading price on August 27, 2007, or
$0.42 per common share. The Company recorded $26,040 of public relations expense
related to the stock issuances.

On March 8, 2006, the Company entered into a Standby Equity
Distribution Agreement (SEDA) with Cornell Capital Partners, LP. Pursuant to
the Standby Equity Distribution Agreement, we may, at our discretion,
periodically sell to Cornell Capital Partners shares of our common stock for a
total purchase price of up to $10,000,000 for a period of up to two years.
Shares of common stock issued pursuant to the SEDA are reported as permanent
equity pursuant to SFAS No. 150 at the discounted price paid for the shares by
Cornell Capital Partner, LP. Expenses of shares issued pursuant to the SEDA are
reported as a reduction of additional paid-in capital. In May 2007, pursuant to
the Unsecured Convertible Promissory Notes subscription agreement, the Company
agreed that it would not exercise its rights under the SEDA without written
consent from the Unsecured Convertible Promissory Note Holders. The Company has
not issued any shares to Cornell Capital Partners after April 2007. For each
share of our common stock purchased under the Standby Equity Distribution
Agreement, Cornell Capital Partners will pay us 96%, or a 4% discount of the
lowest volume weighted average per share purchase price of our common stock on
our principal trading market for the 5 days following our request for an
advance. If the volume weighted average price of the common stock on any day
during

---

47

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 9  Common stock  continued

such five (5) day period is less than 90% of the closing bid
price on the trading day immediately preceding the notice date, then, the volume
weighted average price on such date is excluded from the calculation and the
number of shares sold and the amount of the advance are reduced by 20%. We may
waive this price protection by providing Cornell Capital Partners with notice of
the waiver prior to the relevant advance notice date. In addition, 5% of each
cash advance will be paid to Cornell Capital Partners as a commitment fee and
$500 per advance will be paid to Yorkville Advisors, LLC an affiliate of Cornell
Capital Partners as a structuring fee. The amount of each advance is subject to
a maximum amount of $300,000, and we may not submit a request for an advance
within five trading days of a prior advance. In addition, we may not request
cash advances if the shares to be issued in connection with such advances would
result in Cornell Capital Partners owning more than 9.9% of our outstanding
common stock. On March 8, 2006 Cornell Capital Partners received an initial
commitment fee of $290,000, which was paid by the issuance of 256,637 shares of
common stock. The transaction was recorded at fair value. The fair value was
determined using the closing trading price on March 6, 2006 ($1.13 per share).
Yorkville Advisors, LLC an affiliate of Cornell Capital Partners, received a one
time structuring fee and due diligence fee totalling $20,000. Proceeds received
under the Standby Equity Distribution Agreement will be used for exploration
activities and working capital.

On March 8, 2006, the Company engaged Newbridge Securities
Corporation, an unaffiliated registered broker-dealer, to advise it in
connection with the Standby Equity Distribution Agreement. Newbridge was paid a
placement agent fee of $10,000 by the issuance of 8,850 shares of common stock.
The transaction was recorded at fair value. Fair value was determined using the
closing trading price on March 6, 2006 ($1.13 per share).

During the year ended January 31, 2007, the Company issued
3,696,895 shares to Cornell Capital Partners pursuant to the SEDA in exchange
for proceeds of $2,245,995, net of fees of $126,105.

During the year ended January 31, 2008, the Company issued
1,718,799 shares to Cornell Capital Partners pursuant to the SEDA in exchange
for proceeds of $1,074,417, net of fees of $56,500. All of these shares were
issued prior to the sale of Unsecured Convertible Promissory Notes.

The common shares of the Company 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.

NOTE 10 Stock-based compensation

The 2004 Stock Option Plan was approved and adopted by the
Board of Directors on December 27, 2004. The plan allows for up to 3,850,000
shares to be granted to key employees and non-employee consultants after
specific objectives are met. Employees can receive incentive stock options and
non-qualified stock options while non-employee consultants can receive only
non-qualified stock options. The options granted vest under various provisions
using graded vesting, not to exceed two years. The options granted have a term
not to exceed ten years from the date of grant or five years for options granted
to more than 10% stockholders. The option price set by the Plan Administration
shall not be less than the fair market value per share of the common stock on
the grant date or 110% of the fair market value per share of the common stock on
the grant date for options granted to greater than 10% stockholders. Options
remaining available for grant under the 2004 Stock Option Plan at January 31,
2008 and 2007 are 556,000 and 110,000, respectively.

On April 6, 2006, the Company granted 950,000 non-qualified
stock options to non-employee consultants and 644,000 incentive stock options to
employees in accordance with the 2004 Stock Option Plan. The options have an
exercise price of $1.11 per share and a term of ten years from the date of
grant. The options vest 25% on each six month anniversary of the grant date.

---

48

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 10 Stock-based compensation  continued

On December 8, 2006, the Company granted 160,000 non-qualified
stock options to non-employee consultants and 1,430,000 incentive stock options
to employees in accordance with the 2004 Stock Option Plan. The options have an
exercise price of $0.72 per share and a term of ten years from the date of
grant. The options vest 25% on each six month anniversary of the grant date.

On May 24, 2007, the Company granted 10,000 incentive stock
options to an employee in accordance with the 2004 Stock Option Plan. The
options have an exercise price of $1.11 per share and a term of 8.875 years. The
options vest 50% on the grant date, 25% on October 6, 2007 and 25% on April 6,
2008.

On August 15, 2007, the Company granted 250,000 non-qualified
stock options pursuant to the 2004 Stock Option Plan to an investor relations
consultant in exchange for future services. The Options have an exercise price
of $0.45 per share and a term of 3 years. The options vest 25% every three month
anniversary of the grant date.

The following tables summarize the Companys stock option
activity under the 2004 Stock Option Plan during the year ended January 31,
2008.

Incentive stock options to employees outstanding at January 31,
2008 are as follows:

|                              |  |           |   |   |                |  |  | Weighted           |  |   |                 | 
|----------------------------- |  | --------- | - | - | -------------- |  |  | ------------------ |  | - | --------------- | 
|                              |  |           |   |   | Weighted       |  |  | average            |  |   |                 | 
|                              |  | Number of |   |   | average        |  |  | remaining          |  |   | Aggregate       | 
|                              |  | options   |   |   | exercise price |  |  | life
      (years) |  |   | intrinsic value | 
|Outstanding, January 31, 2007 |  | 2,581,000 |   | $ | 1.005          |  |  |                    |  |   |                 | 
|                              |  |           |   |   |                |  |  |                    |  |   |                 | 
|Granted                       |  | 10,000    |   |   | 1.110          |  |  |                    |  |   |                 | 
|Forfeited                     |  | (288,750  | ) |   | 1.110          |  |  |                    |  |   |                 | 
|Expired                       |  | (372,250  | ) |   | 1.531          |  |  |                    |  |   |                 | 
|                              |  |           |   |   |                |  |  |                    |  |   |                 | 
|Outstanding, January 31, 2008 |  | 1,930,000 |   | $ | 0.889          |  |  | 8.53               |  | $ | -               | 
|                              |  |           |   |   |                |  |  |                    |  |   |                 | 
|Exercisable, January 31, 2008 |  | 1,147,750 |   | $ | 0.981          |  |  | 8.35               |  | $ | -               | 

Non-qualified stock options to non-employee consultants
outstanding at January 31, 2008 are as follows:

|                              |  |           |   |   |                |  |  | Weighted           |  |   |                 | 
|----------------------------- |  | --------- | - | - | -------------- |  |  | ------------------ |  | - | --------------- | 
|                              |  |           |   |   | Weighted       |  |  | average            |  |   |                 | 
|                              |  | Number of |   |   | average        |  |  | remaining          |  |   | Aggregate       | 
|                              |  | options   |   |   | exercise price |  |  | life
      (years) |  |   | intrinsic value | 
|Outstanding, January 31, 2007 |  | 1,159,000 |   | $ | 1.138          |  |  |                    |  |   |                 | 
|                              |  |           |   |   |                |  |  |                    |  |   |                 | 
|Granted                       |  | 250,000   |   |   | 0.45           |  |  |                    |  |   |                 | 
|Forfeited                     |  | (22,500   | ) |   | 1.11           |  |  |                    |  |   |                 | 
|Expired                       |  | (22,500   | ) |   | 1.11           |  |  |                    |  |   |                 | 
|                              |  |           |   |   |                |  |  |                    |  |   |                 | 
|Outstanding, January 31, 2008 |  | 1,364,000 |   | $ | 1.013          |  |  | 7.08               |  | $ | -               | 
|                              |  |           |   |   |                |  |  |                    |  |   |                 | 
|Exercisable, January 31, 2008 |  | 900,500   |   | $ | 1.133          |  |  | 7.62               |  | $ | -               | 

The aggregate intrinsic value is calculated based on the
January 31, 2008 stock price of $0.2725 per share.

A summary of the status of the Companys nonvested shares as of
January 31, 2008 and changes during the year ended January 31, 2008 is presented
below:

---

49

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 10 Stock-based compensation  continued

Incentive stock options granted to employees:

|                                                           |  |                   |   |   | Weighted average      | 
|---------------------------------------------------------- |  | ----------------- | - | - | --------------------- | 
|                                                           |  | Number of options |   |   | grant date fair value | 
|Nonvested at January 31, 2007                              |  | 1,913,000         |   | $ | 0.476                 | 
|Granted                                                    |  | 10,000            |   |   | 0.200                 | 
|Forfeited                                                  |  | (288,750          | ) |   | 0.640                 | 
|Vested                                                     |  | (852,000          | ) |   | 0.452                 | 
|                                                           |  |                   |   |   |                       | 
|Nonvested at January 31, 2008                              |  | 782,250           |   | $ | 0.438                 | 
|                                                           |  |                   |   |   |                       | 
|Total fair value of options vested during the
      period |  |                   |   |   |                       | 
|ended January 31, 2008                                     |  |                   |   | $ | 384,680               | 

Non-qualified stock options granted to non-employee
consultants:

|                                                           |  |                   |   |   | Weighted average      | 
|---------------------------------------------------------- |  | ----------------- | - | - | --------------------- | 
|                                                           |  | Number of options |   |   | grant date fair value | 
|Nonvested at January 31, 2007                              |  | 786,750           |   | $ | 0.598                 | 
|Granted                                                    |  | 250,000           |   |   | 0.130                 | 
|Forfeited                                                  |  | (22,500           | ) |   | 0.640                 | 
|Vested                                                     |  | (550,750          | ) |   | 0.552                 | 
|                                                           |  |                   |   |   |                       | 
|Nonvested at January 31, 2008                              |  | 463,500           |   | $ | 0.398                 | 
|                                                           |  |                   |   |   |                       | 
|Total fair value of options vested during the
      period |  |                   |   |   |                       | 
|ended January 31, 2008                                     |  |                   |   | $ | 304,105               | 

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:

Expected
      dividendGrant date
    
    Expected volatility
    
    yield
    
    Expected term
    
    Risk-free interest rateApril 6, 2006
    
    64%
    
    0%
    
    5 years
    
    4.84%December 8, 2006
    
    65%
    
    0%
    
    5 years
    
    4.53%May 24, 2007
    
    60%
    
    0%
    
    5 years
    
    4.56%August 15, 2007
    
    60%
    
    0%
    
    3 years
    
    4.31%


The weighted average grant date fair value of the options
granted during the years ended January 31, 2008 and 2007 was $0.13 and $0.53 per
option, respectively. There were no options exercised during the years ended
January 31, 2008 and 2007 and the period from inception (August 20, 2001) to
January 31, 2008.

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

|                                 |   |                  |  |   |                  |  |   | From inception    | 
|-------------------------------- | - | ---------------- |  | - | ---------------- |  | - | ----------------- | 
|                                 |   | Twelve months    |  |   | Twelve months    |  |   | (August 20, 2001) | 
|                                 |   | ended            |  |   | ended            |  |   | to                | 
|                                 |   | January 31, 2008 |  |   | January 31, 2007 |  |   | January 31, 2008  | 
|Geological and geophysical costs | $ | 154,862          |  | $ | 610,560          |  | $ | 859,772           | 
|Salaries and benefits            |   | 188,888          |  |   | 221,783          |  |   | 410,671           | 
|Investor relations               |   | 14,896           |  |   | -                |  |   | 14,896            | 
|                                 |   |                  |  |   |                  |  |   |                   | 
|                                 | $ | 358,646          |  | $ | 832,343          |  | $ | 1,285,339         | 

---

50

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 10 Stock-based compensation  continued

Unrecognized share-based compensation for all share-based
awards outstanding as of January 31, 2008 totaled $220,431 and is expected to be
recognized over a weighted average remaining period of 0.72 years using the
straight-line method.

NOTE 11  Income taxes

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

| |                                                      |   | January 31, 2008 |   |   | January 31, 2007 |  
| | ---------------------------------------------------- | - | ---------------- | - | - | ---------------- | -
| |                                                      |   |                  |   |   |                  |  
| | Net operating loss carryforwards                     | $ | 6,316,000        |   | $ | 4,272,200        |  
| | Temporary book and tax depreciation differences      |   | (20,000          | ) |   | (26,600          | )
| | Temporary accrued expense differences                |   | 6,000            |   |   | 3,400            |  
| | Temporary incentive stock option expense differences |   | 132,000          |   |   | -                |  
| | Less valuation allowance                             |   | (6,434,000       | ) |   | (4,249,000       | )
| |                                                      |   |                  |   |   |                  |  
| |                                                      | $ | -                |   |   | -                |  

Management has elected to provide a deferred tax asset
valuation allowance equal to the potential benefit due to the Companys history
of losses. When the Company demonstrates the ability to generate taxable income,
management will re-evaluate the allowance. The change in the valuation allowance
of $2,185,000 and $1,511,000 in the years ended January 31, 2008 and 2007
primarily represents the benefit of the change in net operating loss
carry-forwards during the period.

The Company has federal and state net operating loss
carry-forwards that are available to offset future taxable income. The schedule
below shows the amounts and expiration dates for the net operating loss
carry-forwards.

| |                                                       |   | January 31, 2008 |  |   | January 31, 2007 | 
| | ----------------------------------------------------- | - | ---------------- |  | - | ---------------- | 
| | Federal net operating loss carry-forwards:            |   |                  |  |   |                  | 
| | Expiring January
      31, 2025                       | $ | 313,895          |  | $ | 313,895          | 
| | Expiring January 31, 2026                             |   | 2,785,529        |  |   | 2,785,529        | 
| | Expiring January
      31, 2027                       |   | 4,652,642        |  |   | 4,652,642        | 
| | Expiring January 31, 2028                             |   | 3,285,552        |  |   | 3,285,552        | 
| | Expiring January
      31, 2029                       |   | 5,316,835        |  |   | -                | 
| |                                                       |   |                  |  |   |                  | 
| | Total Federal net operating loss carry-forwards       | $ | 16,354,453       |  | $ | 11,037,618       | 
| |                                                       |   |                  |  |   |                  | 
| | Arizona net operating loss carry-forwards:            |   |                  |  |   |                  | 
| | Expiring January 31, 2010                             | $ | 313,895          |  | $ | 313,895          | 
| | Expiring January
      31, 2011                       |   | 2,785,529        |  |   | 2,785,529        | 
| | Expiring January 31, 2012                             |   | 4,652,642        |  |   | 4,652,642        | 
| | Expiring January
      31, 2013                       |   | 3,285,552        |  |   | 3,285,552        | 
| | Expiring January 31, 2014                             |   | 5,316,835        |  |   | -                | 
| |                                                       |   |                  |  |   |                  | 
| | Total Arizona net operating loss
      carry-forwards | $ | 16,354,453       |  | $ | 11,037,618       | 

---

51

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 11  Income taxes - continued

A reconciliation between the provision for income taxes and the
expected tax benefit using the federal statutory rate of 34% for the years ended
January 31, 2008 and 2007 is as follows:

| |                                                          |   | January 31, 2008 |   |   | January 31, 2007 |  
| | -------------------------------------------------------- | - | ---------------- | - | - | ---------------- | -
| |                                                          |   |                  |   |   |                  |  
| | Income tax benefit at federal statutory
      rate       | $ | (1,802,000       | ) | $ | (1,251,194       | )
| | State income tax benefit, net of effect on federal taxes |   | (399,000         | ) |   | (283,006         | )
| | Permanent differences and other (federal)                |   | 12,500           |   |   | 19,000           |  
| | Permanent differences and other (state)                  |   | 3,500            |   |   | 4,200            |  
| | Increase in valuation allowance                          |   | 2,185,000        |   |   | 1,511,000        |  
| |                                                          |   |                  |   |   |                  |  
| | Income tax expenses (benefit)                            | $ | -                |   | $ | -                |  

NOTE 12  Related party transactions

The Company entered into the following transactions with
related parties during the period ended January 31, 2008:

Paid or accrued $5,991 in rent. We rented an office from an
officer on a month-to-month basis for $499 per month.

The Company has a receivable balance due from Elle Venture, a
general partnership in which the Company is a 50% partner, for subcontracting
and drilling costs incurred by the Company in December 2007 and January 2008.
The receivable is unsecured, non-interest bearing and due on demand. Balance at
January 31, 2008 is $277,665.

The Company entered into an option agreement with JABA US Inc,
an Arizona Corporation in which two directors of the Company are owners of JABA
US Inc. The option agreement grants the Company the exclusive right and option
to acquire a 100% undivided interest in 26 Federal lode mining claims in the
East Silver Bell area northwest of Tucson, AZ and 33 Federal lode mining claims
in the Walnut Creek area near Tombstone, AZ for $7,375 paid at the execution of
the agreement in December 2007 and a royalty payable ranging from 2% to 10% of
net smelter returns in the event that there is a commencement of commercial
production. The Company is required to maintain the claims in good standing and
pay the annual rentals of $7,375 during the option period which ends no later
than January 1, 2011. The Company agrees to make $175,000 in exploration
expenditures on or before dates to be determined by the Company, but no later
than January 1, 2011. No exploration expenditures have been paid or incurred
during the year ended January 31, 2008.

The Company entered into the following transactions with
related parties during the period ended January 31, 2007:

Paid or accrued $4,740 in rent. We rented an office from an
officer on a month-to-month basis for $395 per month.

The Company advanced funds to XState Resources Arizona, Inc., a
corporation in which our president James Briscoe is a board member. The advance
is unsecured, non-interest bearing and due on demand. Balance at January 31,
2007 is $100.

The Company has a receivable balance due from Elle Venture, a
general partnership in which the Company is a 50% partner, for subcontracting
costs incurred by the Company in January 2007. The receivable is unsecured,
non-interest bearing and is due on demand. Balance at January 31, 2007 is
$37,413.

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52

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 13  Commitments

The Company is 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 the Company must pay the assessment
amount in cash in order to maintain the claims. Completion of annual assessment
work in the amount of $400 per 1⁄4 section (160 acre) claim or $100 per 1⁄4 -1⁄4
section (40 acre) claim extends the claims for a one-year period from the
staking of claims. Assessment work performed in excess of the required amount
may be carried forward for up to four years to satisfy future obligations. The
2007 assessments were satisfied by carry-forwards of prior assessment work and
claims made for work performed by Millrock Resources at their own expense
pursuant to a letter of intent for a potential joint venture. The Company
estimates that the required annual assessments to maintain the claims for 2008
will be approximately $298,600. At January 31, 2008 the Company has labor
carry-forwards of prior assessment work available to offset some of the 2008
assessment year liability and estimates that $28,366 of assessment work will
need to be performed in 2008 in order to maintain the current claims in good
standing.

The annual state rentals for the Big Chunk and Bonanza Hills
Alaska State mining claims are $100 for each 1⁄4 section (160 acres) claim and $25
for each 1⁄4 -1⁄4 section (40 acres) claim. The rental period begins at noon
September 1st through the following September 1st and
annual rental payments are due on November 30th of each year. Annual
rent is due in full within 45 days of staking a new claim and covers the period
from staking until the next September 1st. Claims that are staked in
accordance with AS 38.05.195(b)(1) meridian, township, range, section and claim
system location MTRSC receive a one-time only credit of 50% of the second
years rent payment. Our Alaska claims are all MTRSC claims eligible for the 50%
rental credit in the second rental year. Rentals for the period from September
1, 2007 through September 1, 2008 of $74,650 have been paid. The estimated state
rentals due by November 30, 2008 for the period from September 1, 2008 through
September 1, 2009 are $74,650. 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 Company is required to pay annual rentals for its Federal
lode mining claims for the North Pipes project in the State of Arizona. The
rental period begins at noon on September 1st through the following
September 1st and rental payments are due by the first day of the
rental period. The annual rental is $125 per claim. Additional fees of $45 per
claim are due in the first year of filing a Federal lode mining claim along with
the first years rent. Rentals, and initial filing fees for new claims, for the
period from September 1, 2007 through September 1, 2008 have been paid in the
amount of $230,425. The estimated rentals for the period from September 1, 2008
to September 1, 2009 due by the first day of the rental period are $224,125.

In November 2006, the Company began renting its current office
space. The lease requires monthly payments of $3,789. The Company has the option
to renew the lease for an additional two year term at an increase of 3.5% in
rent per year. During the year ended January 31, 2008 and 2007 the Company
recognized rent expense of $44,188 and $7,142, respectively, related to this
lease. Future minimum lease payments under this noncancelable lease for the
twelve months ended January 31, 2009 are $37,890.

The Company entered into a vehicle lease in October 2005. The
lease requires a down payment of $5,458 and monthly payments of $392 through
March 2009. For the years ended January 31, 2008 and 2007 the Company recognized
rent expense of $4,700 for each year related to this lease.

|Future minimum lease payments for the twelve months ended
      January 31, |   |       | 
|--------------------------------------------------------------------------- | - | ----- | 
|2009                                                                        | $ | 4,700 | 
|2010                                                                        |   | 1,175 | 
|                                                                            | $ | 5,875 | 

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53

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 13  Commitments  continued

In May 2007, the Company entered into a lease for lodging in
Fredonia, Arizona in order to supply temporary housing for certain field
personnel of the North Pipes project. The lease requires monthly payments of
$800 from May 2007 through June 2007 and monthly payments of $1,800 from July
2007 through June 2008. For the twelve months ended January 31, 2008 the Company
recognized rent expense of $14,200 related to this lease. Future minimum lease
payments under this noncancelable lease for the twelve months ended January 31,
2009 are $9,000.

In December 2007, the Company entered into a lease for a
warehouse in Fredonia, Arizona in order to store field equipment and supplies.
The lease requires monthly payments of $1,500 through December 2008. For the
twelve months ended January 31, 2008 the Company recognized rent expense of
$3,000 related to this lease. Future minimum lease payments under this
noncancelable lease for the twelve months ended January 31, 2009 are $15,000.

In February 2007 the Company entered into a non-exclusive
consulting contract with Hunter Wise Financial Group, LLC (Hunter Wise) to
provide services to the Company in the areas of corporate development,
financing, and consulting for a period of twelve months. Hunter Wise will
receive cash compensation ranging from 3% to 8% of aggregate consideration for
any sale, merger, acquisition, joint venture, strategic alliance, technology
partnership, licensing agreement, debt investment, secured debt financing or
similar agreement. Hunter Wise will also receive non cash compensation ranging
from 2% to 6% of the gross proceeds received by the Company in the form of
common stock or purchase warrants in the Company, with a cashless exercise
provision and term of not less than 2 years. Fees paid in connection with equity
financings are recorded as a reduction of additional-paid in capital and fees
paid in connection with debt financings are recorded as deferred financing costs
and amortized over the life of the debt. During the year ended January 31, 2008
the Company paid to Hunter Wise a broker fee of $308,000 and 338,461 whole share
purchase warrants, valued at $67,692, with an exercise price of $0.75 through
May 11, 2012 in connection with the sale of the Unsecured Convertible Promissory
Notes. The broker fee and warrants have been included in deferred financing
costs and amortized over the life of the notes.

The Company entered into a non-exclusive consulting contract
with Balanced Financial Securities (BFS) to provide services to the Company in
the areas of corporate financing and consulting. BFSs fees are all contingent
upon the closing of debt or equity financings by a funding source referred by
BFS during the term of the contract and for a period of 18 months after the
termination of the contract. The contract will remain in effect until terminated
by either party via written notice by certified mail. BFS will receive
compensation of 5% of cash equity financings, plus 3% of incremental debt
financings. BFS will also receive common stock purchase warrants to purchase
common stock of the Company equal to 5% of the equity funding and exercisable at
the negotiated shares price of the transaction. Fees paid in connection with
equity financings are recorded as a reduction of additional-paid in capital and
fees paid in connection with debt financings are recorded as deferred financing
costs and amortized over the life of the debt. The Company will also pay all of
BFSs out-of-pocket expense incurred on the Companys behalf. The Company paid
$0 to BFS during the twelve month period ended January 31, 2008.

The Company entered into an investor relations agreement with
Agoracom Investor Relations Corp. (Agoracom) in August 2007 for the
performance of investor relations services for a period of twelve months
beginning August 15, 2007. The Company has the option to renew the agreement for
an additional twelve months under the same terms. Agoracom will receive monthly
compensation of $5,000 during the term of the contract. Agoracom was also
granted 250,000 non-qualified stock options pursuant to the 2004 Stock Option
Plan, exercisable at $0.45 per share through August 15, 2010. The options vest
25% every three months from the grant date.

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54

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 14  Supplemental disclosures with respect to cash
flows

The significant non-cash investing and financing transactions
for the twelve month period ended January 31, 2008 were as follows:

Purchased vehicles and equipment in
exchange for long-term financing of $238,000.

Purchased equipment in exchange for a
receivable due in the amount of $7,875.

Stock option compensation recorded at
$358,646 for options issued to employees and consultants.

Issued 112,000 shares of common stock
in exchange for public relations consulting services reported at fair value of
$54,540.

Issued 338,461 whole share common stock
purchase warrants valued at $67,692 for a broker fee paid in connection with the
sale of the Unsecured Convertible Promissory Notes.

Issued 6,769,228 whole share common
stock purchase warrants valued at $1,353,846 in connection with the sale of the
Unsecured Convertible Promissory Notes.

The Company recorded $389,762 of
deferred financing charges that was net against the proceeds from the sale of
Unsecured Convertible Promissory Notes.

The Company recorded a beneficial
conversion feature in the amount of $1,842,734 in relation to the sale of
Unsecured Convertible Promissory Notes.

Issued 399,537 shares of common stock
for conversion of $250,000 principal amount of Unsecured Convertible Promissory
Notes plus accrued interest of $9,699. The company recorded interest expense of
$157,269 for the unamortized discounts and unamortized deferred financing
charges related to the conversion.

The significant non-cash investing and financing transactions
for the twelve month period ended January 31, 2007 were as follows:

Purchased a vehicle in exchange for
long-term financing of $36,478.

Purchased a vehicle in exchange for
long-term financing of $22,075.

Purchased equipment in exchange for
capital lease obligation of $39,298.

Issued 150,000 shares to Equititrend
Advisors LLC for public and investor relation services valued at $93,000.

Issued 256,637 shares to Cornell
Capital Partners LP for a commitment fee valued at $290,000.

Issued 8,850 shares to Newbridge
Securities Corp for a placement agent fee valued at $10,000.

Stock option compensation recorded at
$610,560 for options issued to consultants.

Stock option compensation recorded at
$221,783 for options issued to employees.

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55

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 15  Segment information

The Company's operations were conducted in one reportable
segment, being the acquisition and exploration of mineral claims, in the United
States of America.

NOTE 16  Financial instruments

The Company's financial instruments consist of cash and cash
equivalents, accounts payable, accrued liabilities, convertible notes payable,
notes payable and a capital lease obligation. It is management's opinion that
the Company is 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.

NOTE 17  Subsequent events

In February 2008, the Company entered into a modification
agreement with the holders of the Unsecured Convertible Promissory Notes. The
modification agreement is effective from February 2008 through April 2008. The
fixed conversion price was reduced from $0.65 to $0.50. The calculation of the
maximum allowable shares to be issued for the February, March and April monthly
payments was increased to 200% of the aggregate daily trading volume for the 15
trading days preceding the Repayment Date multiplied by the VWAP for the 7
trading days preceding the repayment date. If the monthly payment amount cannot
be paid in full with the maximum allowable shares then an excess amount results.
The note holders may elect to receive cash, additional stock, or defer the
excess amount. For deferred excess amounts, the conversion price shall be the
lowest conversion price that could be calculated for any repayment date until
such deferred amount is actually paid. The Company issued 30,000 shares of
common stock on April 8, 2008 to holders of the Unsecured Convertible Promissory
Notes as consideration for entering into the modification of the Unsecured
Convertible Promissory Notes in February 2008.

The Company issued 2,621,725 shares of common stock and
$403,971 of cash for the February, March and April monthly payments on the
Unsecured Convertible Promissory Notes. Currently, the note holders have a
balance of $51,394 of monthly payment amounts that have been deferred. If the
note holders were to demand payment of this amount the Company would be
obligated to issue 226,175 additional shares of common stock.

On February 19, 2008 the Company entered into an amendment to
the joint venture agreement with XState which governs the operation of the Elle
Venture. The amendment defines the alternate joint venture breccia pipe targets
and allows the joint venture funds to be expended on exploration of the initial
three joint venture breccia pipe targets as well as the four alternate joint
venture breccia pipe targets. When the sole funding amount ($2.9 million)
contributed by XState is expended, XState will have the right to select a total
of three of either the initial or alternate joint venture breccia pipe targets
to retain a 50% interest in. The initial and alternate joint venture breccia
pipe targets consist of 7 breccia pipe targets and 37 standard Federal lode
mining claims.

In April 2008 the Company was notified by the BLM that 17 of
our standard federal lode mining claims staked at the North Pipes Super Project
were not valid and would be voided because the land was not available for
staking. The Company will be reimbursed for the rental fees paid on these
claims.

On April 4, 2008, the Company offered a form of subscription
for warrants and shares to the holders of unexercised common stock purchase
warrants. The offer was for a reduction in the exercise price of all outstanding
warrants to $0.22 per share of common stock. The offer is valid until April 30,
2008. Warrant holders who elect to exercise this option will also receive, for
no additional consideration, new warrants for an equal number of common shares
with an exercise price of $0.35 per share of common stock valid through April
30, 2009. The offer is being made to accredited investors exempt from
registration under Regulation D of the Security Act. The Company has reserved
the right to rescind this offer if sufficient numbers of warrant holders do not
elect to exercise this one time option.

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56

LIBERTY STAR URANIUM & METALS CORP. (FORMERLY LIBERTY
STAR GOLD CORP.) (AN EXPLORATION STAGE COMPANY)NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS - continued

NOTE 18  Going concern

The Company is in the exploration stage, has incurred losses
from operations, and requires additional funds for further exploratory activity
prior to attaining a revenue generating status. There are no assurances that a
commercially viable mineral deposit exists on any of our properties. In
addition, the Company may not find sufficient ore reserves to be commercially
mined. As such, the Company's auditors have expressed an uncertainty about the
Company's ability to continue as a going concern in their opinion attached to
our audited financial statements for the fiscal year ended January 31, 2008.

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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57

Item
8.           Changes In and
Disagreements With Accountants on Accounting and Financial Disclosure.

During the two most recent fiscal years, and in the subsequent
interim periods, there were no disagreements with Semple, Marchal & Cooper,
LLP on any matters of accounting principles or practices, financial statement
disclosure, or auditing scope and procedures which, if not resolved to the
satisfaction of Semple, Marchal & Cooper, LLP would have caused Semple,
Marchal & Cooper, LLP to make reference to the matter in their report.

Item
8A.         Controls and
Procedures.

As required by Rule 13a-15 under the Exchange Act, we have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures at January 31, 2008, which is the end of the period
covered by this report. This evaluation was carried out by our principal
executive officer, Mr. James Briscoe and principal financial officer, Mr. Jon
Young. Based on this evaluation, Mr. Briscoe and Mr. Young have 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. There were no changes in our
internal control over financial reporting or in other factors that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting in our most recent fiscal quarter.

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.

Management's Report on Internal Control over Financial
Reporting

Management of our company is responsible for establishing and
maintaining adequate internal control over financial reporting for the company,
as such term is defined in the Securities Exchange Act Rule 13a-15(f). Our
principal financial officer, Mr. Jon Young, and principal executive officer, Mr.
James Briscoe conducted an evaluation of the effectiveness of our internal
control over financial reporting as of January 31, 2008 as required by the
Securities Exchange Act of 1934 Rule 13a-15(c). In making this assessment, our
principal financial officer and principal executive officer used the criteria
set forth in the framework in Internal Control  Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on the evaluation conducted under the framework in Internal Control 
Integrated Framework. Our principal financial officer and principal executive
officer concluded that our companys internal control over financial reporting
was effective, as of January 31, 2008, in providing reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles.

This report does not include an attestation report of our
registered public accounting firm regarding internal control over financial
reporting. Managements report was not subject to attestation by our companys
registered public accounting firm pursuant to temporary rules of the SEC that
permit our Company to provide only managements report in this Annual Report on
Form 10-KSB.

Item 8B.     
   Other Information.

None.

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58

PART III

Item
9.           Directors,
Executive Officers, Promoters, Control Persons and Corporate Governance;
Compliance with Section 16(a) of the Exchange Act.

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

Name
      Position Held with the Company
      Age
      Date First Elected or AppointedJames Briscoe
    President, Chief Executive Officer, Chairman of
      the Board and Director
    66
    February 3, 2004Jon Young
    Chief Financial Officer Director
    63
    February 3, 2004 to present February 3,
      2004 to March 28, 2008Gary
      Musil
    Secretary and Director
    56
    October 23, 2003John
      Guilbert
    Director
    76
    February 5, 2004Robert Fields
    Director
    70
    January 23, 2008


James Briscoe - Chief Executive Officer, President, Chairman
of the Board and Director

Mr. Briscoe was appointed as our Chief Executive Officer,
President, Chairman and a director on February 3, 2004. Mr. Briscoe is a
Registered Professional Geologist in the states of Arizona and California. From
1996 to April 2005, Mr. Briscoe was the Vice President of Exploration, and
Chairman of the Board of JABA Exploration Inc., a TSX Venture Exchange Canadian
public company. Mr. Briscoe was also the President, Chief Executive Officer and
a Geologist of JABA (US) Inc. and President of Compania Minera JABA, S.A. de
C.V. in Mexico. Compania Minera JABA, S.A. de C.V. is no longer active and is in
the process of dissolution. During the periods of time indicated below, Mr.
Briscoe served in the positions listed for the following two Canadian public
companies:

|Company      | Title          | From         | To          
|------------ | -------------- | ------------ | ------------
|             |                |              |             
|1. Excellon  | VP Exploration | April 1994   | January 1996
|2. JABA Inc. | CEO            | January 1980 | April 2005  

Jon Young  Chief Financial Officer and FormerDirector

Mr. Young was appointed as our Chief Financial Officer on
February 3, 2004. Mr. Young was also a director from February 3, 2004 to March
28, 2008. Mr. Young is a certified public accountant. Mr. Young is presently the
Chief Executive Officer of Oracle Capital Advisors, Ltd. and has more than 30
years experience in providing clients with business consulting services. Mr.
Young is president of Jon R. Young Company PC, an accounting practice limited to
providing litigation support, and is strategically aligned with Beach-Fleischman
& Co CPAs, P.C., Southern Arizona's largest accounting firm. Mr. Young was
a partner with the Tucson office of KPMG Peat Marwick for 13 years.

Gary Musil  Secretary and Director

Mr. Gary Musil was appointed as one our directors on October
23, 2003 and is presently our corporate Secretary. Mr. Musil was our Chief
Executive Officer and Chief Financial Officer from October 23, 2003 to February
3, 2004. Mr. Musil has more than 30 years of management and financial consulting
experience. Mr. Musil has served as an officer and director on numerous public
mining companies since 1988. This experience has resulted in his

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59

overseeing exploration projects in Peru, Chile, Eastern Europe
(Slovak Republic), British Columbia, Ontario, Quebec and New Brunswick (Canada).
Prior to this, he was employed for 15 years with Dickenson Mines Ltd. and
Kam-Kotia Mines Ltd. as a controller for the producing silver/lead/zinc mine in
the interior of British Columbia, Canada. Mr. Musil currently serves as an
officer/director of four TSX Venture Exchange public companies in Canada. Mr.
Musil has been the President, Chief Executive Officer, Chief Financial Officer
and a director of Montoro Resources Inc., a TSX Venture company and a reporting
issuer in Canada, since February 1999. Mr. Musil has been the chief financial
officer and secretary and a director of Belmont Resources Inc., a TSX Venture
company and a reporting issuer in Canada, since August 1992. Mr. Musil has been
the chief financial officer and a director of Mandalay Resources Corp, a TSX
Venture company and a reporting issuer in Canada, since January 2000. Mr. Musil
has been the Chief Financial Officer and secretary of Highbank Resources Ltd., a
TSX Venture company and a reporting issuer in Canada, since December 1988.

John Guilbert  Director

Dr. Guilbert was appointed as one of our directors on February
5, 2004. Dr. Guilbert is a Professor Emeritus at the University of Arizona and
is a world-renowned geologist and author and a co-developer of the
Lowell-Guilbert porphyry copper model and recipient of two mining awards, the
R.A.F. Penrose Medal and the D.C. Jackling Award. Dr. Guilbert has served as a
director of Excellon Inc. a Vancouver Stock Exchange listed company from 1992 
1996. Dr. Guilbert has served as a Board Chairman and director for JABA Inc., an
Alberta Stock Exchange (later CDNX then TSX) listed company from 1996  2002.

Robert Fields Director

Mr. Fields was appointed as one of our directors on December
10, 2007. He is a New York based financier, regarded as an accomplished member
of the international business community with diverse experience including key
senior management positions and directorships with major corporations, and
independent engagements in the fields of management consulting, investment
banking, mergers, asset management and dispositions. Mr. Fields has served on
the board of directors of more than a dozen companies. Mr. Fields is currently
the Chairman of ActForex, Inc., a global management service provider of currency
trading software trading billions. Mr. Fields currently serves on several other
notable boards including: Reality Gap, Inc. an online game publisher and content
aggregator for massively multiplayer online gaming in Seattle, WA, and Irvine
CA; Dorado Exploration Inc., an oil and gas exploration and production company
located in Dallas/Houston/Tyler, Texas; Statmon Technologies, Inc., a provider
of remote control and monitoring software technology located in Bannockburn, IL,
and Surge Global Energy, Inc., a gas and oil company in San Diego, CA.

Family Relationships

There are no family relationships among our directors or
officers.

Board and Committee Meetings

The board of directors of our company held seven formal
meetings in the year ended January 31, 2008 and four formal meetings in the year
ended January 31, 2007. All proceedings of the board of directors were conducted
by resolutions consented to in writing by all the directors and filed with the
minutes of the proceedings of the directors. Such resolutions consented to in
writing by the directors entitled to vote on that resolution at a meeting of the
directors are, according to the Nevada General Corporate Law and the By-laws of
our company, as valid and effective as if they had been passed at a meeting of
the directors duly called and held.

For the year ended January 31, 2008 our only standing committee
of the board of directors was our audit committee.

Audit Committee

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

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60

There has not been any defined policy or procedure requirements
for shareholders to submit recommendations or nomination for directors.

During fiscal years ended January 31, 2008 and January 31,
2007, there were no special meetings held by this committee. The business of the
Audit Committee was conducted by resolutions consented to in writing by all the
members of the board and filed with the minutes of the proceedings of the board.

Audit Committee Financial Expert

Our board of directors has determined that it does not have a
member of its audit committee that qualifies as an "audit committee financial
expert" as defined in Item 401(e) of Regulation S-B, and is "independent" as the
term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange
Act of 1934, as amended.

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

Involvement in Certain Legal Proceedings

Our directors, executive officers and control persons have not
been involved in any of the following events during the past five years:

|1. | any bankruptcy petition filed by or against any business
      of which such person was a general partner or executive officer either at
      the time of the bankruptcy or within two years prior to that
  time;                                                                                                            
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                
|2. | any conviction in a criminal proceeding or being subject
      to a pending criminal proceeding (excluding traffic violations and other
      minor offences);                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                
|3. | being subject to any order, judgment, or decree, not
      subsequently reversed, suspended or vacated, of any court of competent
      jurisdiction, permanently or temporarily enjoining, barring, suspending or
      otherwise limiting his involvement in any type of business, securities or
      banking activities; or
|   |                                                                                                                                                                                                                                                                                                                                
|4. | being found by a court of competent jurisdiction (in a
      civil action), the Commission or the Commodity Futures Trading Commission
      to have violated a federal or state securities or commodities law, and the
      judgment has not been reversed, suspended, or
vacated.                                           

Section 16(a) Beneficial Ownership Compliance

Section 16(a) of the Securities Exchange Act requires our
executive officers and directors, and persons who own more than 10% of our
common stock, to file reports regarding ownership of, and transactions in, our
securities with the Securities and Exchange Commission and to provide us with
copies of those filings. Based solely on our review of the copies of such forms
received by us, or written representations from certain reporting persons, we
believe that during the year ended January 31, 2008, all filing requirements
applicable to its officers, directors and greater than 10% percent beneficial
owners were complied with, with the exception of the following:

Name
      Number of Late Reports
      Number of Transactions Not Reported on a Timely
      Basis
      Failure to File Requested FormsJames Briscoe
    1(1)
    1(1)
    NilJon Young
    2(1)(2)
    1(1)(2)
    NilGary Musil
    2(1)(2)
    2(1)(2)
    NilJohn Guilbert
    2(1)(2)
    2(1)(2)
    Nil


---

61

Name
    Number of Late Reports
    Number of Transactions Not Reported on a
      Timely Basis
    Failure to File Requested FormsAlaska Star
      Minerals LLC
    2(1)(2)
    2(1)(2)
    Nil


|(1) | The named officer, director or greater than 10%
      stockholder, as applicable, filed a late Form 3 - Initial Statement of
      Beneficial Ownership of Securities.   
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                          
|(2) | The named officer, director or greater than 10%
      stockholder, as applicable, filed a late Form 4 - Statement of Changes in
      Beneficial Ownership of Securities.

Code of Ethics

Effective March 15, 2004, our company's board of directors
adopted a Code of Business Conduct and Ethics that applies to, among other
persons, our company's president and secretary (being our principal executive
officer, principal financial officer and principal accounting officer), as well
as persons performing similar functions. As adopted, our Code of Business
Conduct and Ethics sets forth written standards that are designed to deter
wrongdoing and to promote:

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

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

Our Code of Business Conduct and Ethics was filed with the
Securities and Exchange Commission on March 13, 2004 as Exhibit 14.1 to our
annual report. We will provide a copy of the Code of Business Conduct and Ethics
to any person without charge, upon request. Requests can be sent to: Liberty
Star Uranium & Metals Corp., 3024 E Fort Lowell Road, Tucson, Arizona 85716.

Item
10.EXECUTIVE
COMPENSATION.

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

---

62

Summary Compensation Table

Name and
      Principal Position
      Year
      Salary
      (US$)
      Bonus
      (US$)
      Stock Awards
      (US$)
      Option
      Awards (US$)(7)
      Nonequity Incentive
      Plan Compensati on (US$)
      Non- qualified Deferred
      Compens ation Earnings (US$)
      All Other
      Compensa tion (US$)(1)
      Total
      (US$)James Briscoe Principal Executive
      Officer, President, CEO, Chairman and Director
    2008 2007
    120,000 120,000
    28,385 14,173
    Nil Nil
    Nil Nil
    Nil Nil
    Nil Nil
    Nil Nil
    $148,385 $134,173Jon Young Principal Financial
      Officer, CFO, Director, and Treasurer
    2008 2007
    36,000 36,000
    Nil Nil
    Nil Nil
    Nil 138,300(2)
    Nil Nil
    Nil Nil
    Nil Nil
    $36,000 $174,300Gary Musil Secretary and Director
    2008 2007
    Nil Nil
    Nil Nil
    Nil Nil
    Nil 13,440(3)
    Nil Nil
    Nil Nil
    Nil Nil
    Nil $13,440David Boyer 
        Geologist and GIS
      Specialist
    2008 2007
    91,667 65,004
    1,461 Nil
    Nil Nil
    Nil 143,660(4)
    Nil Nil
    Nil Nil
    Nil Nil
    $93,128 
        $208,664Erik Murdock Geologist and GIS
      Specialist
    2008 2007
    77,450 38,333
    Nil Nil
    Nil Nil
    2,000(6)115,500(5)
    Nil Nil
    Nil Nil
    Nil Nil
    $79,450 $153,833


|(1) | The value of perquisites and other personal benefits,
      securities and property for the officers that do not exceed the lesser of
      $10,000 or 10% of the total of the annual salary and bonus and is not
      reported herein.                                                                                                                                             
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                      
|(2) | Mr. Young was awarded 75,000 incentive stock options on
      April 6, 2006 with a grant date fair value of $0.64 per share and another
      215,000 options on December 8, 2006 with a grant date fair value of $0.42
      per share. The assumptions used to determine the grant date fair value can
      be found in Note 9 to our audited consolidated financial
  statements.
|    |                                                                                                                                                                                                                                                                                                                                                                                      
|(3) | Mr. Musil was awarded 21,000 incentive stock options on
      April 6, 2006 with a grant date fair value of $0.64 per share. The
      assumptions used to determine the grant date fair value can be found in
      Note 9 to our audited consolidated financial statements.                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                      
|(4) | Mr. Boyer was awarded 44,000 incentive stock options on
      April 6, 2006 with a grant date fair value of $0.64 per share and another
      275,000 options on December 8, 2006 with a grant date fair value of $0.42
      per share. The assumptions used to determine the grant date fair value can
      be found in Note 9 to our audited consolidated financial
  statements.
|    |                                                                                                                                                                                                                                                                                                                                                                                      
|(5) | Mr. Murdock was awarded 275,000 incentive stock options
      on December 8, 2006 with a grant date fair value of $0.42 per share. The
      assumptions used to determine the grant date fair value can be found in
      Note 9 to our audited consolidated financial
statements.                                                                                                  

---

63

|(6) | Mr. Murdock was awarded 10,000 incentive stock options on
      May 24, 2007 with a grant date fair value of $0.20 per share. The
      assumptions used to determine the grant date fair value can be found in
      Note 9 to our audited consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(7) | The Company granted options on April 6, 2006 that are
      exercisable at a price of $1.11 per share until April 6, 2016, and vest on
      the basis of 25% of the options on each of the 6 month anniversaries from
      the date of granting. The Company also granted options on December 8,
      2006, and are exercisable at a price of $0.72 per share until December 8,
      2016, and vest on the basis of 25% of the options on each of the 6 month
      anniversaries from the date of granting. The Company granted options on
      May 4, 2007 that are exercisable at a price of $1.11 per share until April
      6, 2006, and vest on the basis of 50% on the grant date, 25% on October 6,
      2007 and another 25% on April 6, 2008.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth for each named executive officer
certain information concerning the outstanding equity awards as of January 31,
2007.

Option Awards
      Stock AwardsName
      Number of Securities Underlying Unexercised Options Exercisable
      Number of Securities Underlying Unexercised Options Unexercisable
      Equity Incentive Plan Awards: Number of Securities
        Underlying Unexercised Unearned Options
      Option
        Exercise Price
      Option
        Expiration Date
      Number of Shares or Units of Stock that Have
        Not Vested
      Market Value
        of Shares or Units of Stock that Have
        Not Vested
      Equity Incentive Plan
        Awards : Number of Unearned Shares,
        Units or Other Rights that Have Not
        Vested
      Equity Incentive Plan Awards : Market or Payout Value of
        Unearned Shares, Units or Other Rights
        that Have Not VestedJames Briscoe
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil
      NilJon Young
      120,000
      Nil
      Nil
      $1.678
      12/27/2014
      Nil
      Nil
      Nil
      NilJon Young
      56,250
      Nil
      18,750(1)
      $1.11
      4/6/2016
      Nil
      Nil
      Nil
      NilJon Young
      107,500
      Nil
      107,500(2)
      $0.72
      12/8/2016
      Nil
      Nil
      Nil
      NilGary Musil
      17,000
      Nil
      Nil
      $1.678
      12/27/2014
      Nil
      Nil
      Nil
      NilGary Musil
      15,750
      Nil
      5,250(1)
      $1.11
      4/6/2016
      Nil
      Nil
      Nil
      NilDavid Boyer
      33,000
      Nil
      11,000(1)
      $1.11
      4/6/2016
      Nil
      Nil
      Nil
      NilDavid Boyer
      137,500
      Nil
      137,500(2)
      $0.72
      12/8/2016
      Nil
      Nil
      Nil
      NilErik Murdock
      137,500
      Nil
      137,500(2)
      $0.72
      12/8/2016
      Nil
      Nil
      Nil
      NilErik Murdock
      7,500
      Nil
      2,500(3)
      $1.11
      4/6/2016
      Nil
      Nil
      Nil
      Nil


Options vest 25% on each six month anniversary from the grant
date of April 6, 2006. The vesting dates are as follows: 25% on October 6, 2006;
25% on April 6, 2007; 25% on October 6, 2007; and 25% on April 6, 2008.

|(1) | Options vest 25% on each six month anniversary from the
      grant date of December 8, 2006. The vesting dates are as follows: 25% on
      June 8, 2007; 25% on December 8, 2007; 25% on June 8, 2008; and 25% on
      December 8, 2008.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                            
|(2) | Options vest 50% on the grant date of May 24, 2007, 25%
      on October 6, 2007 and another 25% on April 6,
2008.                                                                                                                         

---

64

COMPENSATION PLANS

As of January 31, 2008, we had one compensation plan in place,
entitled "2004 Stock Option Plan." This plan has not been approved by our
stockholders. On May 24, 2007 we granted 10,000 incentive stock options to an
employee exercisable at the price of $1.11 per share for a term of 8.875 years.
On August 15, 2007 we granted 250,000 non-qualified stock options to a
non-employee consultant at the price of $0.45 per share for a term of 3 years.
The grant of stock options was made under the terms of the Companys 2004 Stock
Option Plan. During fiscal year ended January 31, 2008 the Company granted 4% of
the total stock options to employees.

Number of
      securities authorized
    Number of securities to be issued upon
      exercise of outstanding options as at January
      31, 2008
    Weighted-average
      exercise price of outstanding options as at
      January 31, 2008
    Number of
      securities remaining available for further issuance
      as at January 31, 20083,850,000
    3,294,000
    $0.94
    556,000


Long-Term Incentive Plans

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

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

Employment Contracts

We have not entered into any employment agreements or
compensation arrangements with any of our named executive officers.

Compensation of Directors

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

The following table sets forth for each director, unless such
director is also a named executive officer, the particulars of all compensation
paid or accruing for the last fiscal year ended.

---

65

Name
      Fees Earned or
      Paid in Cash (US$)
      Stock
      Awards (US$)
      Option
      Awards (US$)(4)
      Nonequity Incentive
      Plan Compensat ion (US$)
      Non- qualified
      Deferred Compensat ion
      Earnings (US$)
      All Other
      Compensat ion (US$)(1)
      Total (US$)John Guilbert
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    $0Robert Fields
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    $0


|(1) | The value of perquisites and other personal benefits,
      securities and property for the officers that do not exceed the lesser of
      $10,000 or 10% of the total of the annual salary and bonus and is not
      reported herein.                        
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                 
|(2) | Mr. Guilbert was awarded 30,000 options on April 6, 2006
      with a grant date fair value of $0.64 per share. The assumptions used to
      determine the grant date fair value can be found in Note 9 to our audited
      consolidated financial statements.

Item
11.         Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters.

We have set forth in the following table certain information
regarding our common stock beneficially owned on January 31, 2008 for (i) each
shareholder we know to be the beneficial owner of 5% or more of our outstanding
common stock, (ii) each of our executive officers and directors, and (iii) all
executive officers and directors as a group. In general, a person is deemed to
be a "beneficial owner" of a security if that person has or shares the power to
vote or direct the voting of such security, or the power to dispose or to direct
the disposition of such security. A person is also deemed to be a beneficial
owner of any securities of which the person has the right to acquire beneficial
ownership within 60 days. As of January 31, 2008, we had outstanding 43,331,405
shares of common stock issues and outstanding.

Name and Address of Beneficial
      Owner
      Amount and Nature of Beneficial Ownership
      Percentage of Class(1)James Briscoe 5610 E Sutler Lane
      Tucson AZ 85712 USA
    8,750,000 (2)
    20%Jon Young 1985 E River Road Tucson AZ
      85718 USA
    Nil
    0%Gary Musil 3577 Marshall Street
      Vancouver BC V5N 4S2 Canada
    Nil
    0%John Guilbert 961 E Linda Vista Blvd.
      Tucson AZ 85727 USA
    Nil
    0%


---

66

Name and Address of Beneficial Owner
      Amount and Nature of Beneficial Ownership
      Percentage of Class(1)Robert Fields 215 E. 68thStreet New
      York, NY 10065 USA
    Nil
    0%Directors and
      Executive Officers as a Group
    8,750,000
    20%


|(1) | Based on 43,331,405 shares of common stock issued and
      outstanding as of January 31, 2008. Beneficial ownership is determined in
      accordance with the rules of the Securities and Exchange Commission and
      generally includes voting or investment power with respect to securities.
      Except as otherwise indicated, we believe that the beneficial owners of
      the common stock listed above, based on information furnished by such
      owners, have sole investment and voting power with respect to such shares,
      subject to community property laws where applicable.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(2) | These shares are held by Alaska Star Minerals LLC. James
      Briscoe beneficially owns 100% of the membership interest in Alaska Star
      Minerals LLC.                                                                                                                                                                                                                                                                                                                                                                                                                                              

Changes in Control

We are unaware of any contract or other arrangement the
operation of which may at a subsequent date result in a change in control of our
company.

Item
12.         Certain Relationships
and Related Transactions.

Other than as listed below, we have not been a party to any
transaction, proposed transaction, or series of transactions in which the amount
involved exceeds $60,000, and in which, to our knowledge, any of our directors,
officers, five percent beneficial security holder, or any member of the
immediate family of the foregoing persons has had or will have a direct or
indirect material interest.

Item
13.         Exhibits.

Exhibit
        Number
      Description of Exhibit3.1
      Articles of Incorporation(1)3.2
      Bylaws(13)3.3
      Certificate of Change to Authorized
          Capital(4)3.4
      Articles of Merger(4)10.10
      Form of Subscription Agreement
          for Canadian investors for March 2005 private placement(7)10.11
      Form of Subscription Agreement
          for US investors for March 2005 private placement(7)10.12
      Form of Subscription Agreement
          for Overseas investors for March 2005 private placement(7)10.13
      Form of Registration Rights Agreement
          for March 2005 private placement(7)10.14
      Registration Rights Agreement
          dated as of March 8, 2006, by and between Liberty Star and Cornell Capital
          Partners LP(8)10.15
      Standby Equity Distribution Agreement
          dated as of March 8, 2006, by and between Liberty Star and Cornell Capital
          Partners, LP(8)10.16
      Placement Agent Agreement dated
          as of March 8, 2006, by and between Liberty Star and Newbridge Securities
          Corporation(8)10.17
      Joint Venture Agreement dated
          October 6, 2006, by and between Liberty Star and XState Resources Limited
          (9)


---

67

Exhibit
        Number
      Description of Exhibit10.18
      Subcontracting Agreement dated
          October 24, 2006, by and between Liberty Star and XState Resources Limited
          (10)10.19
      Form of Securities Purchase Agreement
          for May 11, 2007 Senior Unsecured Convertible Promissory Notes (11)10.20
      Form of Convertible Promissory
          Note for May 11, 2007 Senior Unsecured Convertible Promissory Notes
          (11)10.21
      Form of Common Stock Purchase
          Warrant for May 11, 2007 Senior Unsecured Convertible Promissory Notes
          (11)10.22
      List of Subscribers for May 11,
          2007 Senior Unsecured Convertible Promissory Notes (11)10.23
      Modification Agreement to the
          Senior Unsecured Convertible Promissory Notes (12)14.1
      Code of Ethics(4)21.1
      Subsidiaries: Big Chunk Corp.31.1*
      Section
          302 Certification under Sarbanes-Oxley Act of 2002 of James Briscoe31.2*
      Section
          302 Certification under Sarbanes-Oxley Act of 2002 of Jon Young32.1*
      Section
          906 Certification under Sarbanes-Oxley Act of 2002 of James Briscoe32.2*
      Section
          906 Certification under Sarbanes-Oxley Act of 2002 of Jon Young


|(1)  | Filed as an exhibit to our Registration Statement on
        Form SB-2, filed with the SEC on May 14, 2002.        
|---- | -------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                    
|(2)  | Filed as an exhibit to our Quarterly Report on Form
        10-QSB for the fiscal quarter ended September 30, 2003.
|     |                                                                                                                    
|(3)  | Filed as an exhibit to our Current Report on Form 8-K,
        filed with the SEC on January 23, 2004.             
|     |                                                                                                                    
|(4)  | Filed as an exhibit to our Annual Report on Form 10-KSB,
        filed with the SEC on March 31, 2004.             
|     |                                                                                                                    
|(5)  | Filed as an exhibit to our Quarterly Report on Form
        10-QSB/A for the fiscal quarter ended April 30, 2004.  
|     |                                                                                                                    
|(6)  | Filed as an exhibit to our Annual Report on Form 10-KSB
        for the fiscal year ended January 31, 2005.        
|     |                                                                                                                    
|(7)  | Filed as an exhibit to our Registration Statement on
        Form SB-2, filed with the SEC on May 19, 2005.        
|     |                                                                                                                    
|(8)  | Filed as an exhibit to our Registration Statement on
        Form SB-2, filed with the SEC on March 23, 2006.      
|     |                                                                                                                    
|(9)  | Filed as an exhibit to our Current Report on Form 8-K,
        filed with the SEC on October 16, 2006.             
|     |                                                                                                                    
|(10) | Filed as an exhibit to our Current Report on Form 8-K,
        filed with the SEC on October 27, 2006.             
|     |                                                                                                                    
|(11) | Filed as an exhibit to our Current Report on Form 8-K,
        filed with the SEC on May 15, 2007.                 
|     |                                                                                                                    
|(12) | Filed as an exhibit to our Current Report on Form 8-K,
        filed with the SEC on April 23, 2008.               
|     |                                                                                                                    
|(13) | Filed as an exhibit to our Quarterly Report on Form 10-QSB for the fiscal
      quarter ended October 31, 2007.    
|     |                                                                                                                    
|*    | Filed herewith.                                                                                                    



---

68

Item
14.         Principal Accountants
Fees and Services.

Audit Fees

For the fiscal year ended January 31, 2008, the aggregate fees
billed by Semple, Marchal & Cooper, LLP for professional services rendered
for the audit of our annual consolidated financial statements included in our
annual report on Form 10-KSB and for the review of our consolidated financial
statements included in Forms 10-QSB were $103,358. For the fiscal year ended
January 31, 2007, the aggregate fees billed by Semple, Marchal & Cooper, LLP
for professional services rendered for the audit of our annual consolidated
financial statements included in our annual report on Form 10-KSB were $78,695.

Audit Related Fees

For the fiscal year ended January 31, 2008, the aggregate fees
billed for assurance and related services by Semple, Marchal & Cooper LLP
relating to the performance of the audit of our consolidated financial
statements which are not reported under the caption "Audit Fees" above, was
$3,414. For the fiscal year ended January 31, 2007, the aggregate fees billed
for assurance and related services by Semple, Marchal & Cooper LLP relating
to the performance of the audit of our consolidated financial statements which
are not reported under the caption "Audit Fees" above, was $18,180.

Tax Fees

For the fiscal year ended January 31, 2008, the aggregate fees
billed by Semple, Marchal & Cooper, LLP for other non-audit professional
services, other than those services listed above, totalled $0. For the fiscal
year ended January 31, 2007, the aggregate fees billed by Semple, Marchal &
Cooper, LLP for other non-audit professional services, other than those services
listed above, totalled $0.

We do not use Semple, Marchal & Cooper, LLP for financial
information system design and implementation. These services, which include
designing or implementing a system that aggregates source data underlying the
financial statements or generates information that is significant to our
consolidated financial statements, are provided internally or by other service
providers. We do not engage Semple, Marchal & Cooper, LLP to provide
compliance outsourcing services.

Effective May 6, 2003, the Securities and Exchange Commission
adopted rules that require that before Semple, Marchal & Cooper, LLP is
engaged by us to render any auditing or permitted non-audit related service, the
engagement be:

- approved by our audit committee (which consists of our entire board of
  directors); or
- entered into pursuant to pre-approval policies and procedures established
  by the board of directors, provided the policies and procedures are detailed
  as to the particular service, the board of directors is informed of each
  service, and such policies and procedures do not include delegation of the
  board of directors' responsibilities to management.

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

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

---

69

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

LIBERTY STAR URANIUM & METALS CORP. (Formerly Liberty
Star Gold Corp.)

By: /s/ James A. Briscoe James A. Briscoe Chief
Executive Officer, President and Director (Principal Executive Officer)
Dated: April 28, 2008



By: /s/ Jon Young Jon Young Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer) Dated:
April 28, 2008



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



By: /s/ James A. Briscoe James A. Briscoe Chief
Executive Officer, President and Director (Principal Executive Officer)
Dated: April 28, 2008



By: /s/ Jon Young Jon Young Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer) Dated:
April 28, 2008



By: /s/ Gary Musil Gary Musil Secretary and Director
Dated: April 28, 2008



By: /s/ John Guilbert Dr. John Guilbert Director
Dated: April 28, 2008

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