Liberty Star Uranium and Metals Corp (LBSR)

[gitreal]

I am speaking of convertible notes in general. I don't usually get into the terms and conditions of the notes because I am afraid of bursting a vessel in my head....but of the ones I have looked closely at, they all seem to have prepayment terms, and their conversion conditions range from bad to really, rally bad.

The worst ones are essentially floorless, their conversion rate is tied to the lowest trading price of the previous 10 days....which means is that all they have to do is make one really low priced sell in the days before the conversion...and they have a crazy low conversion price.

The LBSR conversion rate for the Jan. 27th note is this:

1.2 Conversion Price. The conversion price (the “Conversion Price”) shall equal the Variable Conversion Price (as defined herein). The “Variable Conversion Price” shall mean 75% multiplied by the Market Price (as defined herein) (representing a discount rate of 25%). “Market Price” means the average of the lowest five (5) VWAP’s (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “VWAP” shall mean the ending daily dollar volume-weighted average sale price for the Common Stock on the Principal Market on any particular Trading Day during the period beginning at 9:30 a.m., New York City Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York City Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its “Volume at Price” functions or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30 a.m., New York City Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York City Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the OTCBB or the “pink sheets” by the National Quotation Bureau, Inc. If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the holder of the Note. All such determinations of VWAP shall to be appropriately and equitably adjusted in accordance with the provisions set forth herein for any stock split, stock combination or other similar transaction occurring during any period used to determine the Market Price (or other period utilizing VWAPs). “Trading Day” shall mean a day on which there is trading on the Principal Market. “Principal Market” shall mean the OTCBB or such other principal market, exchange or electronic quotation system on which the Common Stock is then listed for trading.

75% isn't too bad, only means about 50 million shares or so.