UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC  20549




FORM
10-K




(Mark
One)





x
            Annual Report Pursuant to
      Section 13 or 15(d) of the Securities Exchange Act of 1934 for the


Fiscal Year Ended
December 31, 2009





or




o
            Transition Report Pursuant to
      Section 13 or 15(d) of the Securities Exchange Act of 1934 for
      the


Transition
period from _________ to _________




Commission
File Number:  000-28861




INTERNATIONAL
STAR, INC.


(Exact
Name of Registrant as Specified in Its Charter)




Nevada
            
            86-0876846(State or
      other jurisdiction of
              incorporation or
      organization)
            
            (I.R.S.
      Employer
              Identification
      No.)71101(Address of
      principal executive offices)
            
            (Zip
      Code)








(318)
    464-8687(Registrant’s
      telephone number, including area code)


Securities
registered pursuant to Section 12(b) of the Act:  None




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




Common
Stock, par value $0.001 per share





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. o




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act. o




Indicate
by check mark if the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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.   x Yes  o No




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).  o Yes  o No




Indicate
by check mark if disclosure of delinquent filers in response to Item 405 of
Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.  (Check one):




Large accelerated
      filer o
            Accelerated filer
      o
            Non-accelerated
      filer o
            Smaller reporting
      company x




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




Based on
the closing sale price of $0.010 on June 30, 2009, the aggregate market value of
the voting and non-voting common stock held by non-affiliates of the registrant
was $2,202,780.




As of
March 22, 2009, there were 282,012,274 shares of the registrant’s Common Stock
issued and outstanding.












INTERNATIONAL
STAR, INC.


Form
10-K


For
the Fiscal Year Ended December 31, 2009




TABLE
OF CONTENTS





PART
      I
            
            1ITEM
      1.
            BUSINESS
            2ITEM
      1A.
            RISK
      FACTORS
            5ITEM
      1B.
            UNRESOLVED
      STAFF COMMENTS
            8ITEM
      2.
            PROPERTIES
            8ITEM
      3.
            LEGAL
      PROCEEDINGS
            10ITEM
      4.
            (RESERVED)
            11PART
      II
            
            11ITEM
      5.
            MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES
            11ITEM
      6.
            SELECTED
      FINANCIAL DATA
            13ITEM
      7.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            13ITEM
      7A.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            21ITEM
      8.
            FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
            21ITEM
      9.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
            21ITEM
      9A.
            CONTROLS
      AND PROCEDURES
            21ITEM
      9B.
            OTHER
      INFORMATION
            22PART
      III
            
            23ITEM
      10.
            DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
            23ITEM
      11.
            EXECUTIVE
      COMPENSATION
            26ITEM
      12.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
            28ITEM
      13.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
            29ITEM
      14.
            PRINCIPAL
      ACCOUNTING FEES AND SERVICES
            30ITEM
      15.
            EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES
            31




















PART
I





CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS





This Form
10-K, the other reports, statements, and information that we have previously
filed or that we may subsequently file with the Securities and Exchange
Commission (“SEC”) and public announcements that we have previously made or may
subsequently make include, incorporate by reference or may include or
incorporate by reference certain statements that may be deemed to be
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995.  These forward-looking statements
relate to such matters as, among other things, our anticipated financial
performance, business prospects and developments, possible strategic
alternatives, new business concepts, capital expenditures, consumer and economic
trends and similar matters.





Forward
looking statements necessarily involve known and unknown risks, uncertainties
and other factors that may cause our actual results, levels of activity,
performance, or achievements to be materially different from any future results,
levels of activity, performance, or achievement expressed or implied by such
forward-looking statements.  In some cases, you can identify
forward-looking statements by terminology such as “may,” “will,” “should,”
“could,” “intend,” “expect,” “anticipate,” “assume,” “hope,” “plan,” “believe,”
“seek,” “estimate,” “predict,” “approximate,” “potential,” “continue,” or the
negative of such terms.  Statements including these words and
variations of such words, and other similar expressions, are forward-looking
statements.





Since our
trading shares are classified as “penny stocks”, we are not entitled to rely
upon the “safe harbor” provisions adopted by the SEC under the Securities
Exchange Act of 1934 (the “Exchange Act”) with respect to forward-looking
statements.  Nevertheless, we urge readers to seriously consider those
factors identified as outside of our control and the consequences to us and our
investors if our anticipated results do not come to pass as expected as a result
of material deviations from assumptions we have relied upon in making
forward-looking statements.





We note
that a variety of factors could cause our actual results and experience to
differ materially from the anticipated results or other expectations expressed
in our forward-looking statements.  These risks and uncertainties
include, but are not limited to, factors described elsewhere in this Annual
Report on Form 10-K and the following:





●
            changes
      in consumer spending patterns and general economic, business and social
      conditions in the United States and the areas we do
    business;




●
            changes
      in market prices of precious and base
metals;




●
            the
      impact of changes in the conditions and regulation of financial markets
      and public companies;




●
            the
      availability and cost of debt and equity
  financing;




●
            the
      availability and reliability of qualified geology, mining and other
      industry professionals;




●
            the
      impact of competition from other mineral exploration and mining
      companies;




●
            the
      financial condition of companies on which we rely for analysis of
      geological samples and of the suppliers and manufacturers from whom we
      source our equipment;




●
            changes
      in the costs of interest rates, insurance, energy, fuel and other business
      utilities;




●
            the
      costs of complying with changes in applicable environmental or land use
      laws or regulations;




●
            the
      costs of complying with changes in applicable labor laws or requirements,
      including without limitation with respect to health
  care;




●
            changes
      in tax laws;




●
            threats
      or acts of terrorism or war; and




●
            strikes,
      work stoppages or slow downs by unions affecting businesses which have an
      impact on our ability to conduct our own business
    operations.




1




Although
we believe that the expectations reflected in the forward-looking statements are
reasonable based upon our knowledge of our business, we cannot absolutely
predict or guarantee our future results, levels of activity, performance, or
achievements.  Consequently, these cautionary statements qualify all
of the forward-looking statements we make herein.  We caution readers
not to place undue reliance on these forward-looking statements, which speak
only as of their dates, or on any subsequent written and oral forward-looking
statements attributable to us or persons acting on our behalf which are
expressly qualified in their entirety by these cautionary
statements.  We do not undertake any obligation to release publicly
any revisions to such forward-looking statements to reflect events or
circumstances after the date hereof or thereof or to reflect the occurrence of
unanticipated events.




ITEM
      1.
            BUSINESS





Our
Background and Business Development





International
Star, Inc. (“us,” “we,” “our” or the “Company”) was organized under the laws of
the State of Nevada on October 28, 1993, as Mattress Showrooms,
Inc.  In 1997, we changed our corporate name to International Star,
Inc. and became engaged in the business of construction, sale and operation of
state of the art waste management systems, specializing in turnkey systems for
management of hospital, industrial, petroleum, chemical and municipal solid
waste collection systems.  Despite our efforts, we were unable to
develop this business beyond the start-up stage.  Following our
unsuccessful venture in waste management, we refocused our business efforts on
mineral exploration in 1998.  Currently, we are primarily engaged in
the acquisition and exploration of precious and base metals mineral
properties.





Since
1998, we have examined various mineral properties prospective for precious and
base metals and minerals and have acquired interests in those we believe may
contain precious and base metals and minerals.  Our properties are
located in Arizona.  We have not established that any of our
properties contain reserves.  A reserve is that part of a mineral
deposit which could be economically and legally extracted or produced at the
time of the reserve determination.  Further exploration will be needed
before a final determination can be made whether any mineral extraction from our
property is economically and legally feasible.  Therefore, at present
we have no reserves and no income from mineral production.





We
acquired our initial mineral properties in March 1998 through a 20-year mining
property lease agreement for the rights to eight mineral claims located in the
Detrital Wash area around mile marker 22 on Highway 93, Mohave County, Arizona,
for the purpose of exploring for minerals and for the extraction, treatment, and
sale of minerals found on the lands leased.  In July 2004, we acquired
additional claims totaling approximately 20,000 acres adjacent to our original
claims pursuant to an exploration rights agreement with the holders of the
claims, some of whom were then directors or officers of the
Company.  During our exploration, we have located other mineral claims
in the area as mineralization has been discovered and as funding has
permitted.  In August 2008, the Company eliminated its holdings in the
original eight claims acquired in 1998 as well as the claims acquired in 2004 in
accordance with the terms of the lease and exploration agreements.  We
presently hold approximately 80 claims in the Detrital Wash area, and our
current exploration activities are focused on these claims and surrounding areas
of interest.





The
Company holds 42 mining claims located in the Wikieup mining district, Mohave
County, Arizona (collectively, the “Wikieup Property”), which we purchased in
March 2001 along with the exclusive rights to an extraction process for the
recovery of precious metals from the Wikieup Property that was developed by the
previous claim owner.  We have not had the extraction process for the
Wikieup Property verified by an independent source and have not engaged in any
exploration activity on this property during the past three years due to limited
financial resources.




The
Company has in the past pursued additional business ventures outside of mineral
exploration.  In October 2001, we formed a wholly owned subsidiary,
Qwik Track, Inc., to engage in web-based information distribution services and
to provide timely and accurate thoroughbred handicapping analytical data and
statistical information to the international account wagering
market.  Due to our limited finances and lack of funding, in 2003 we
suspended indefinitely the further development of Qwik-Track, Inc.  In
October 2002, we acquired Pita King Bakeries International, Inc. (“Pita King”),
after which Pita King operated as our wholly-owned subsidiary engaged in the
production and marketing of a variety of pita breads and
chips.  However, we and the principals of Pita King mutually agreed to
dissolve our business relationship effective January 1, 2004.  As a
result of the dissolution agreement, Pita King is no longer affiliated with the
Company.  Currently, our business is focused exclusively on mineral
exploration and the development of our mineral properties, and our management
has no present intention to pursue additional outside business
ventures.




2




In
January 2006, we entered into a joint venture agreement with Resolve Capital
Funding Corporation, Inc. (“Resolve”) for the formation of Star-Resolve Detrital
Wash, LLC to engage in the development and commercial exploitation of our
Detrital Wash property.  Under the terms of the joint venture, we
would contribute our mineral rights in the Detrital Wash property under a mining
property lease and Resolve would contribute a specified amount of funding and
manage the LLC, including providing access to its industry related contracts and
its expertise in the commercial exploitation of mineral
rights.  Although the LLC was formed, Resolve did not make the
required cash contribution and remains in default under the joint venture
agreement.  We have suspended further pursuit of the joint venture as
well as efforts to obtain a resolution to Resolve’s breach of the joint venture
agreement.





We
developed our current mineral exploration program in 2008, through a geologist
and a registered professional mining engineer, both whom were “qualified
persons” under Canadian National Instrument (NI) 43-101 recognized industry
standards, along with an additional geologist.  This exploration
program is focused exclusively on our properties in the Detrital Wash area and
consists of sampling, mapping, assaying and conducting geophysical exploration
activities designed to gather and evaluate data under NI 43-101 industry
standards and bring historical data on these properties up to current NI 43-101
standards for the purpose of determining whether mineable reserves exist on our
Detrital Wash properties.  Since 2008, we have collected and assayed
several phases of geological samples from the area and have mapped the geology
and evaluated the assay results in light of historical mineral data for the
area.  We have modified our claim holdings during 2008 and 2009 based
on our evaluations of this data and as funding has permitted.  During
2010, subject to available funding, the Company plans to develop and conduct
further phases of this exploration program to determine whether commercially
extractable reserves exist on our Detrital Wash properties.  However,
we cannot guarantee that we will be able to obtain the necessary funding to
complete this program or, even if we obtain sufficient funding, that we will be
able to establish the existence of such reverves or to commercially exploit any
such reserves.  See “MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – GENERAL – Plan
of Operation.”





Exploration
Planning – Speculative Nature of Mineral Exploration





Exploration
for and production of minerals is highly speculative and involves greater risks
than exist in many other industries.  Many exploration programs do not
result in the discovery of minerals and any mineralization discovered may not be
of a sufficient quantity or quality to be profitably mined.  Also,
because of the uncertainties in determining metallurgical amenability of any
minerals discovered, the mere discovery of mineralization may not warrant the
mining of the minerals on the basis of available technology.





Although
we have processed and tested mineralized materials showing evidence of precious
and base metals mineralization on a testing basis in our Detrital Wash
properties, our decision as to whether any of the mineral properties we now
hold, or which we may acquire in the future, contain commercially mineable
deposits, and whether such properties should be brought into production, will
depend upon the results of our exploration program and independent feasibility
analysis and the recommendation of engineers and geologists.  The
decision will involve the consideration and evaluation of a number of
significant factors, including, but not limited to:





●
            the
      ability to obtain all required
permits;




●
            costs
      of bringing the property into production, including exploration and
      development or preparation of feasibility studies and construction of
      production facilities;




●
            availability
      and costs of financing;




●
            ongoing
      costs of production;




●
            market
      prices for the metals to be produced;
and




●
            the
      existence of reserves or mineralization with economic grades of metals or
      minerals.





We cannot
be certain that any of our properties contain commercially mineable mineral
deposits, and no assurance can be given that we will ever generate a positive
cash flow from production operations on such properties.




3


Regulation





Our
exploration activities are subject to various federal, state and local laws and
regulations governing such matters as:





●
            prospecting;




●
            development;




●
            taxes;




●
            labor
      standards;




●
            waste
      disposal;




●
            occupational
      safety and health;




●
            protection
      of the environment;




●
            reclamation
      of the environment; and




●
            toxic
      substances.





We
believe we are currently in substantial compliance with any such regulations
that apply to us.  However, we may not be able to anticipate all
liabilities that may arise in the future under existing regulations, or the
costs of compliance.  If we are not in compliance, we may be subject
to fines, clean-up orders, restrictions on our operations or other
penalties.





Federal,
state and local provisions regulating the discharge of material into the
environment, or otherwise relating to the protection of the environment, such as
the Clean Air Act, Clean Water Act, the Resource Conservation and Recovery Act,
and the Comprehensive Environmental Response, Compensation and Liability Act
affect mineral operations.  For exploration and mining operations,
applicable environmental regulation includes a permitting process for mining
operations, an abandoned mine reclamation program and a permitting program for
industrial development and siting.  Other non-environmental
regulations can impact exploration and mining operations and indirectly affect
compliance with environmental regulations.  For example, a state
highway department may have to approve a new access road to make a project
accessible at lower costs, but the new road itself may raise environmental
issues.  Compliance with these laws, and any regulations, can make the
development of mining claims prohibitively expensive, thereby impeding the sale
or lease of properties, or curtailing profits or royalties, which might have
been received.  We cannot anticipate what the further costs and/or
effects of compliance with any environmental laws might be.





Facilities





We own no
production, laboratory, storage or facilities and rent space as appropriate when
necessary.  Our executive offices are located at 1818 Marshall Street,
Shreveport, Louisiana 71101.





Employees





As of
December 31, 2009, we had no employees other than our executive officers, nor
any plans to recruit employees within the next twelve
months.  However, employees, consultants and expertise will be added
to the Company as management deems necessary and when financing
permits.





Competition





The
business of mineral exploration is highly competitive, and tends to be dominated
by a limited number of major mining companies.  Inasmuch as we have
exclusive exploration rights to the properties that are the targets of our
current exploration activities, we do not compete directly against any
particular firm for sales or market share.  However, we may compete
with other mineral resource exploration companies and prospectors for claim to
areas of potential exploration interest to the Company.  In addition,
many of the human and physical resources we may require, such as engineering
professionals, managers, skilled equipment operators, and metallurgical and
extractive processes and equipment, among others, are also sought by companies
with substantially greater financial resources than we possess, which places us
at a competitive disadvantage in obtaining such resources for our own
use.  Accordingly, such competition may make our exploration
activities more difficult than for a larger, more substantial
company.




4





We also
compete with other mineral resource exploration companies for financing and
joint venture opportunities from a limited number of investors that are prepared
to make investments in junior mineral exploration
companies.  Investors may view investments in competitors as more
attractive based on the merit of the mineral properties under investigation and
the price of the investment offered, which may impact our ability to raise
additional capital to fund our exploration programs.





Subsidiaries





Qwik Track,
Inc.





On
October 15, 2001, we organized Qwik Track, Inc. as our wholly-owned subsidiary
to operate as a web-based service business providing the wagering enthusiast
with thoroughbred handicapping, analytical data and statistical information for
racetrack wagering over the Internet.  As of November 2003, we
suspended business development of our Qwik Track subsidiary in order to focus
our limited resources on exploring our mineral properties.  As a
result, Qwik Track, Inc. is not currently an active business
entity.  We do not have any present plans to reactivate this
subsidiary.





Star-Resolve Detrital Wash,
LLC





On
January 10, 2006, we entered into a joint venture agreement with Resolve Capital
Funding Corporation, Inc. (“Resolve”) for the formation of Star-Resolve Detrital
Wash, LLC to engage in the development and commercial exploitation of our
Detrital Wash property.  The joint venture agreement provided that
each of Resolve and our Company would have a 50% membership interest in
Star-Resolve Detrital Wash, LLC.  As our capital contribution to the
joint venture, upon the formation of Star-Resolve Detrital Wash, LLC, we were
required to contribute our mineral rights in the Detrital Wash property under a
mining property lease.  As Resolve’s capital contribution to
Star-Resolve Detrital Wash, LLC, Resolve was required to contribute 600,000
Canadian Dollars (approximately $515,996 U.S. Dollars based on the exchange rate
as of January 10, 2006) within 60 to 90 days of the joint venture’s
formation.  In addition, Resolve was required to use its best efforts
to manage Star-Resolve Detrital Wash, LLC, including, without limitation,
providing Star-Resolve Detrital Wash, LLC with access to its industry related
contracts and its expertise in the commercial exploitation of mineral
rights.  Resolve was to be the exclusive managing member of
Star-Resolve Detrital Wash, LLC.  Although the LLC was formed pursuant
to the joint venture agreement, Resolve did not make the required cash
contribution and, as of the date of this report, remains in default under the
joint venture agreement.  Our management has suspended further pursuit
of the joint venture and its efforts to obtain a resolution to Resolve’s breach
of the joint venture agreement.  As a result, Star-Resolve Detrital
Wash, LLC is not currently an active business entity.  At the time of
this filing, we do not have plans to seek reactivation of this
subsidiary.





ITEM
      1A.
            RISK
      FACTORS





The
business of mineral exploration is inherently speculative and involves a number
of general risks which could materially adversely affect our results of
operation and financial condition, including among others, the rarity of
commercial mineral deposits, environmental and other laws and regulations,
physical dangers to personnel associated with exploration activity, and
political events.  Risks and uncertainties that are currently unknown
to management may also adversely affect our business and
operation.  The following is a discussion of the most significant
risks and uncertainties that may affect our business, financial condition and
future results.




5


Risks
Related to Our Business





Exploration
for mineral deposits is highly speculative.





There is
generally no way to recover any of the funds expended on exploration unless the
company establishes the existence of mineable reserves and then exploits those
reserves by either commencing mining operations, selling or leasing its interest
in the property, or entering into a joint venture with a larger resource company
that can develop the property to the production stage.  Unless we can
establish and exploit reserves before our funds are exhausted, we will have to
discontinue operations, which could make our stock valueless.





We
have no reserves, no mining operations and no mineral related income, and
therefore, we are continually dependent on the availability of debt and equity
financing to fund our operations.





Reserves,
by definition, contain mineral deposits in a quantity and in a form from which
the target minerals may be economically and legally extracted or
produced.  We have not established that such reserves exist on our
properties, and unless and until we do so, we will not have any income from our
mineral operations.  As a result, we are dependent on equity or debt
financing to fund our operations.  We anticipate that our current
funds will be exhausted during the second quarter of 2010 if we do not raise
additional capital.  We cannot guarantee that we will be able to raise
the necessary funds on terms that are favorable to us or at all to continue our
operations for the current year.  If we are unable to raise additional
capital before our funds are exhausted, we will have to discontinue operations,
which could make our stock valueless.





Our
directors and executive officers lack significant experience or technical
training in exploring for precious and base metal deposits and in developing
mines.





Our
directors and executive officers lack significant experience or technical
training in exploring for precious and base metal deposits and in developing
mines.  Accordingly, our management may not be fully aware of many of
the specific requirements related to working within this
industry.  Their decisions and choices may not take into account
standard engineering or managerial approaches that mineral exploration companies
commonly use.  Consequently, our operations, earnings, and ultimate
financial success could suffer irreparable harm due to our management’s lack of
experience in the mining industry.  We have aligned our Company with
reputable, knowledgeable experts in the mining industry to mitigate this lack of
experience and expertise.  However, this may not fully compensate for
our directors’ and officers’ lack of experience and expertise in the mining
industry.





Undetected
defects in our mining claims and competition for claims to areas of interest
could have a material adverse effect on us.





Property
rights uncertainties exist in the mining industry.  We believe that we
have valid claims to our properties; however, defects in such claims could have
a material adverse effect on us.  We have investigated our rights to
explore, exploit and develop our various properties in manners consistent with
industry practice, and to the best of our knowledge, those rights are in good
standing.  However, we cannot assure that the rights to our properties
will not be challenged or impugned by third parties or governmental agencies or
that third parties have not staked claims, or will not in the future stake
claims, on lands for which we believe we have valid existing
claims.  In addition, we cannot assure that the properties in which we
have an interest are not subject to prior unregistered
agreements.  Any such undetected defects could cause us to lose our
rights to the property or to incur substantial expense in defending our
rights.





We are
aware that third parties have previously staked placer and lode claims over a
portion of our lode claims in our Detrital Wash property.  We have
investigated the matter and considered potentially available options to assert
our rights with respect to these properties.  As of this Report, we do
not believe there are currently any valid claims conflicting with our existing
claims in this area.  We plan to continue to monitor for and
investigate any claims that appear to conflict with our Detrital Wash lode
claims.  We believe our lode claims are properly located and that we
have valid and superior legal interest in these properties over any subsequent
claim holders.




6




Additionally,
federal law limits the size of the area that is covered by a mining
claim.  If we discover mineralization in an area that extends beyond
our existing claims, we can only obtain a valid claim to such additional area if
there are no valid existing claims to that area or if we are able to purchase or
lease the rights to such claim by the claim holder.  Prospectors and
mineral exploration companies often compete for the rights to mineral
lands.  If a third party holds a valid claim to a nearby area that we
believe has significant mineral reserve potential, the commercial value of our
existing properties could be materially adversely affected if we are unable to
secure rights to those additional claims, or we may be required to incur
significant expense to obtain the rights to such claims.





Future
changes in regulatory or political policy could adversely affect our
exploration.





Any
changes in government policy may result in changes to laws affecting ownership
of assets, land tenure, mining policies, taxation, environmental regulations,
labor relations, or other factors relating to our exploration activities. Such
changes could cause us to incur significant unforeseen expenses of compliance or
even require us to suspend our activities altogether.





Our
directors and executive officers own a significant amount of our common stock
and can exert considerable influence over us.





Our
directors and executive officers own, directly or indirectly, a significant
amount of our voting capital common stock, and accordingly, can exert
considerable influence over us.  As of March 1, 2010, our directors
and executive officers beneficially owned common stock which would equal in the
aggregate approximately 21.89% of the voting power of our outstanding common
stock.  As a result, these stockholders are potentially able to
significantly influence the decision on all matters requiring stockholder
approval, including the election of directors and the approval of significant
corporate transactions.





If
we are unable to retain our directors, executive officers and key consultants,
our business, financial condition and results of operations could be
harmed.





Because
our two executive officers are our only employees, we are highly dependent upon
their services.  Due to our small size, historical operating losses
and limited financial resources, if we were to lose the services of any of our
directors or executive officers, we may have difficulty attracting a new
director or executive officer in their place.  Additionally, due to
the nature of our business and our management’s lack of extensive experience and
expertise in the mineral exploration industry, we are highly dependent on the
services of our geologist and mining engineer consultants.  We compete
with other mining and mineral exploration entities for their services, and we
cannot assure that we will have the financial resources to retain or replace
qualified personnel to conduct our mineral exploration
activities.  The loss of the services of any of our directors,
executive officers or consultants could have a material adverse effect on our
operations and financial condition.





Risks
Related to Owning Our Stock





We historically
have not paid dividends on our common stock and may be unable to, or choose not
to, do so in the future.





Historically,
we have not paid dividends on our common stock.  Our ability to pay
dividends depends on whether we have sufficient earnings to pay our debts as
they become due in the usual course of business and whether our total assets are
greater than our total liabilities plus any amount necessary to satisfy our
obligations to any preferred stock holders of the Company upon a liquidation of
the Company.  Due to our lack of proven mineral reserves and lack of
operating income, we have been unable to pay to dividends on our common stock
since our inception as an exploration stage company.  We cannot assure
that we will be able to pay dividends on our common stock at any time in the
future.  In addition, even if funds are available for dividend
payments, our board of directors may determine that retaining the funds for
internal uses, such as expansion of our operations, is a better
strategy.  We have no current intention to pay dividends in the near
future.  If we do not pay dividends, capital appreciation, if any, of
our common stock may be the sole opportunity for gains on an investment in our
common stock.




7




Our stock trading
volume may not provide adequate liquidity for investors, and the price of our
common stock may fluctuate significantly.  This may make it difficult
for you to resell our common stock when you want or at prices you find
attractive.





Shares of
our common stock are traded on the over-the-counter markets, including the OTC
Bulletin Board and the Pink Sheets.  The average daily trading volume
in our common stock is generally less than that of larger companies whose stocks
are listed on an exchange and can often be sporadic and very
limited.  A public trading market having the desired characteristics
of depth, liquidity and orderliness depends on the presence in the marketplace
of a sufficient number of willing buyers and sellers of the common stock at any
given time.  This presence depends on the individual decisions of
investors and general economic and market conditions over which we have no
control.  Additionally, because our common stock is a “penny stock,”
broker-dealers must comply with certain suitability, disclosure and other
requirements in connection with transactions in our shares, which may restrict
the ability of broker-dealers to trade and/or maintain a market in our common
stock.  See
“MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS – Penny
Stock.”  Given these requirements and the limited and sporadic trading
of our common stock, holders of our common stock may be unable to make
significant sales of the common stock in a brief period of time.  In
addition, our common stock may be subject to significant price swings even when
a relatively small number of shares are traded.  We cannot predict the
volume or prices at which our common stock will trade in the
future.





There may be
future sales of additional common stock or preferred stock or other dilution of
our equity, which may adversely affect the value of our common stock.





We are
not restricted from issuing additional common stock or preferred stock,
including any securities that are convertible into or exchangeable for, or that
represent the right to receive, common stock or preferred stock or any
substantially similar securities.  The value of our common stock could
decline as a result of sales by us of a large number of shares of common stock
or preferred stock or similar securities in the market or the perception that
such sales could occur.





ITEM
      1B.
            UNRESOLVED
      STAFF COMMENTS





Not
applicable.





ITEM
      2.
            PROPERTIES





We
currently hold interests in two properties that we believe show potential for
mineral development.  Both properties consist of unpatented mining
claims located on federal public land managed by the United States Department of
Interior, Bureau of Land Management (“BLM”).  We are obligated to pay
a maintenance fee to the BLM of $189 per claim plus a $14 local filing fee for
each newly filed claim and $140 per claim per year for each existing
claim.





Unpatented
mining claims are “located” or “staked” by individuals or companies on
particular parcels of federal public land upon which the individual or company
asserts the right to extract and develop a mineral deposit.  Mining
claims may be one of two types: lode and placer.  Lode claims are
claims on land where mineral deposits have been discovered encased in or
surrounded by hard rock, such as veins, fissures, lodes and disseminated ore
bodies.  Placer claims are claims upon land containing deposits of
loose, unconsolidated material, such as gravel beds, or containing certain
consolidated sedimentary deposits lying at the surface.  Federal law
limits each lode claim to no more than 1,500 feet along the length of the
deposit and no more than 300 feet to either side of the center line of the
deposit.  A placer claim may be up to 20 acres for a single individual
or corporation, and up to as many as 160 acres for an association of at least
eight owners.





If the
statutes and regulations for the location and maintenance of a mining claim are
complied with, the locator obtains a valid possessory right to the contained
minerals.  Failure to pay maintenance fees may render the mining claim
void or voidable.  We believe we have valid claims, but, because
mining claims are self-initiated and self-maintained, it is impossible to
ascertain their validity solely from public real estate records.  If
the government challenges the validity of an unpatented mining claim, we would
have the burden of proving the present economic feasibility of mining minerals
located on the claims.




8




Detrital
Wash, Mohave County, Arizona Property





Property
and Location





Our
Detrital Wash property (the “Detrital Wash Property”) consists of approximately
3.5 square miles of land located approximately 56 miles from Las Vegas, Nevada,
and 22 miles south of the Hoover Dam on U.S. Highway 93, Mohave County,
Arizona.  The property is easily accessed by partially paved entry off
Highway 93 and has availability to electricity and water.





The
Detrital Wash Property is comprised solely of lode mining
claims.  Prior to September 1, 2008, our Detrital Wash Property
consisted of approximately 21,000 acres of land consisting primarily of placer
mining claims we had obtained in part through a mineral lease with James R.
Ardoin in 1998 and in part through a 2004 exploration rights agreement with a
group of individuals including several former directors and officers of the
Company.  Based on assessments by our geologist and mining engineer
consultants in 2008, we determined that the mineralization of these placer
claims was not sufficient to justify the costs to continue maintaining these
claims.  Therefore, we terminated our lease agreement with Mr. Ardoin
on August 29, 2008, pursuant to the terms of the
agreement.  Additionally, following the termination of the lease
agreement and because our obligations under the 2004 exploration rights
agreement had been fully performed, we allowed all of our placer claims in the
Detrital Wash Property to expire as of August 31, 2008.





Our
Detrital Wash Property presently consists of approximately 80 lode claims
located in the Black Mountains in the Detrital Wash area in northwestern
Arizona.  We have recorded 75 claims with the BLM and Mohave
County.  These lode claims cover areas of bedrock mineralization
indicated by historical data obtained by the Company and confirmed by
geochemical assays of mineral samples performed for the Company in 2008 and 2009
by licensed independent labs and evaluated according to National Instrument (NI)
43-101 standards, as well as other areas where we have obtained evidence of
mineralization occuring in the bedrock.  Based on the presence of gold
and silver producing mines in the Black Mountains area and the data we have
collected, we believe deposits of precious and base metals may exist within the
Detrital Wash Property.  We cannot assure that we will discover such
deposits or that, if such deposits are discovered, we will be able to
commercially produce such mineral deposits.





During
2009, our Chairman, on behalf of the Company, paid a total of $10,500 in annual
maintenance fees to the BLM for the 75 recorded lode claims in the Detrital Wash
Property.  We have agreed to reimburse our Chairman for this
payment.





Operations





In 2008,
our geology and mining engineer consultants developed a program of testing
geological samples from our Detrital Wash Property for mineralization and
mapping the existing geology.  Assay results from the initial phase of
this program support historical records obtained by the Company in 2008 of
significant copper and molybdenum mineralization in the areas of our Detrital
Wash claims.  Based on these results, in March 2009, we assayed an
additional group of mineral samples collected in 2008 for copper, molybdenum,
silver and gold.  The results of these assays confirm the presence of
gold and silver rich zones of mineralization along trends containing
historically mined deposits.  These assays also show improved results
in copper and molybdenum values from the Company’s 2008
assays.  Following these results, we collected and assayed another
group of samples.  The results of this third round of assays were
generally consistent with the mineralization found in our previous
assays.  See
“MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS – GENERAL – Exploration Program” for more information regarding our
exploration program.





We have
modified our claim holdings in the Detrital Wash area during 2008 and 2009 by
converting previous placer claims to lode claims, releasing all of our placer
claims and certain unfiled lode claims, and locating new lode claims in our
primary areas of interest based on our the results of our current exploration
program.  The goal of these changes is to focus our limited resources
on the areas that we believe, based on the assessments of our geologists, hold
the most significant potential for mineral reserves.  During 2010, we
plan to continue to evaluate our claim holdings based on the results of our
exploration work.  Subject to available funding and the assessment of
our geologists, we plan to record any unfiled claims which show significant
potential for mineral reserves, and we may locate additional claims or release
existing claims depending on our assessments of their mineral potential and
available funds.




9




During
2010, we have obtained BLM approval and have conducted drilling work on certain
areas of our Detrital Wash Property showing high mineralization results from our
previous assays.  We have assayed the mineral samples collected from
this drilling and have conducted additional geological mapping of these
areas.  We are currently evaluating this data to assess the value of
our existing properties and to determine the next phase of our exploration
work.  Based on this determination and subject to available funding,
we plan to conduct further geochemical and geophysical testing as needed to
complete our assessment of the mineral reserve potential of these
properties.  We also plan to continue to seek potential joint venture
opportunities to complete the exploration work and to bring the property to the
production stage should sufficient reserves be established. However, we have
limited financial resources and cannot guarantee that we will have, or be able
to obtain, the necessary funds to conduct our planned exploration
activities.  See “MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – GENERAL – Plan
of Operation” and “ – Going Concern.”





Wikieup,
Arizona Property





Property
and Location





Our
Wikieup property (the “Wikieup Property”) consists of 42 lode claims located
approximately three miles west of U.S. Highway 93 in Section 36, Township 16N,
Range 14W in the Hualapai Mountain Range at Wikieup, Arizona.  These
claims comprise approximately 840 acres of mountainous terrain.  The
property is easily accessible by paved and dirt roads west of Wikieup, Arizona,
from U.S. Highway 93 and has nearby access to electricity and
water.





The
Hualapai Mountain Range consists of pre-cambrian gneiss and schist that has
locally been intruded by quartz monzonite and granitic rocks of probable
Laramide age.  Laramide age intrusives are traditionally one of the
primary host rocks for Arizona porphyry copper deposits.  Notable ore
deposits and mines nearby are the Oatman Mining District to the northwest and
the Bagdad open pit copper mine to the southeast of this area.





We
purchased the Wikieup claims from Gold Standard Mines, Inc. in March 2001 in
exchange for which we issued 1,000,000 shares of our restricted common stock
having an aggregate value of $400,000 as of the date of the
acquisition.  We received from Gold Standard Mines a notarized
quitclaim deed granting us all rights, interest and title to 51 lode mining
claims.  The deed was subsequently recorded at the United States
Bureau of Land Management office in Phoenix, Arizona, and at Mohave County in
Kingman, Arizona.





In 2009,
our Chairman, on behalf of the Company, paid an aggregate of $5,880 in annual
maintenance fees to the BLM for the Wikieup Property.  We have agreed
to reimburse our Chairman for this payment.





Operations





Due to
our limited financial resources, we did not engage in exploration activities on
the Wikieup Property during 2009 and do not currently have plans to do so during
2010.  Should adequate funding become available in the future,
management may implement an aggressive campaign to identify through accepted
geological processes any mineralization occurring on our Wikeiup
claims.





ITEM
      3.
            LEGAL
      PROCEEDINGS





During
the second quarter of 2009, the Company received a notice of balance due from
the Internal Revenue Service (IRS), dated June 8, 2009, demanding payment in the
amount of $15,125 for unpaid taxes, penalty and interest.  The
outstanding liability included $8,811 in unpaid taxes, $4,273 in penalty and
$2,041 in interest.  The unpaid taxes consist of payroll taxes which
were not remitted by a former officer of the Company for the tax period of
September 30, 2006.  We reviewed the matter and concluded that the
taxes owed have been properly calculated.  We contacted the IRS in
attempt to resolve the outstanding balance and to request relief from the
penalty and interest owed.  As of December 31, 2009, we had not
received a response from the IRS.  Prior to the filing of this Report,
we received a letter from the IRS dated March 15, 2010, denying our request for
relief.  On March 22, 2010, we submitted payment to the IRS for the
full outstanding liability, including penalty and interest calculated through
March 25, 2010, in the amount of $15,900.




10




From time
to time we are involved in legal proceedings relating to claims arising out of
operations in the normal course of business, as well as claims arising from our
status as an issuer of securities and/or a publicly reporting
company.  Except as described above, at December 31, 2009, we know of
no other current or threatened legal proceedings involving us or our properties
reportable under this Item 3.




ITEM
      4.
            (RESERVED)





PART
II





ITEM
      5.
            MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES





Until May
23, 2003, our common stock was traded on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc. (“NASD”) under the symbol
ISRI.  Since May 23, 2003, our common stock has been traded on the
Pink Sheets, initially under the Symbol ISRI.PK.  On February 22,
2005, the NASD assigned our Company a new trading symbol and our common stock
began trading on the Pink Sheets under the symbol ILST.PK.  On June
20, 2005, our common stock was approved by the NASD for listing on the OTC
Bulleting Board, and since such date, our common stock has been trading under
the symbol ILST.OB.  The following table indicates quarterly high and
low prices per share for our common stock during the fiscal years ended December
31, 2009 and 2008.  These prices represent quotations among dealers
without adjustments for retail mark-ups, markdowns or commissions, and may not
represent actual transactions.  The market for our shares has been
sporadic and at times very limited.





Fiscal
      Year Ended December 31, 2009
            
            HIGH
            
            
            LOW4th
      Quarter ended December 31, 2009
            
            $
            0.0056
            
            
            $
            0.00203rd
      Quarter ended September 30, 2009
            
            $
            0.0150
            
            
            $
            0.00222nd
      Quarter ended June 30, 2009
            
            $
            0.0100
            
            
            $
            0.00301st
      Quarter ended March 31, 2009
            
            $
            0.0170
            
            
            $
            0.0030Fiscal
      Year Ended December 31, 20084th
      Quarter ended December 31, 2008
            
            $
            0.0100
            
            
            $
            0.00253rd
      Quarter ended September 30, 2008
            
            $
            0.0210
            
            
            $
            0.00402nd Quarter ended June 30,
      2008
            
            $
            0.0140
            
            
            $
            0.00601st
      Quarter ended March 31, 2008
            
            $
            0.0200
            
            
            $
            0.0060





The
closing price of our common stock as of March 22, 2010, was $0.0100 per
share.





Number
of Shareholders





At March
22, 2010, we had approximately 161 stockholders of record of our common
stock.  This figure does not include beneficial owners of common stock
held in nominee or street name, as we cannot accurately estimate the number of
these beneficial owners.





Dividend
Policy





We did
not declare or pay any dividends during our fiscal years ended December 31, 2009
and 2008.  There are no legal, contractual or other restrictions which
limit our ability to pay dividends.  Payment of future dividends, if
any, on our common stock, will be dependent upon the amounts of our future
after-tax earnings, if any, and will be subject to the discretion of our Board
of Directors.  Our Board of Directors is not legally obligated to
declare dividends, even if we are profitable.  We have never paid any
dividends on or common stock, and we have no plans to do so in the near
future.  Instead, we plan to retain any earnings to finance the
development of the business and for general corporate purposes.




11


Penny
Stock





Our
common stock is subject to the provisions of Section 15(g) and Rule 15g-9 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), commonly
referred to as the “penny stock rule.”  Section 15(g) sets forth
certain requirements for transactions in penny stocks, and Rule 15g-9(d)(1)
incorporates the definition of “penny stock” that is found in Rule 3a51-1 of the
Exchange Act.  The SEC generally defines “penny stock” to be any
equity security that has a market price less than $5.00 per share, subject to
certain exceptions.  Because our common stock is deemed to be a penny
stock, trading in the shares is subject to additional sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors.  “Accredited
investors” are persons with net worth, or joint net worth with their spouse, in
excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse, for each of the past two years and with the reasonable
expectation of attaining the same level of income in the current
year.  For transactions covered by these rules, broker-dealers must
make a special suitability determination for the purchase of such security and
must have the purchaser’s written consent to the transaction prior to the
purchase.  Additionally, for any transaction involving a penny stock,
unless exempt, the rules require the delivery, prior to the first transaction,
of a risk disclosure document prepared by the SEC relating to the penny stock
market.  A broker-dealer also must disclose the commissions payable to
both the broker-dealer and the registered representative, and current quotations
for the securities.  Finally, monthly statements must be sent
disclosing recent price information for the penny stocks held in an account and
information on the limited market in penny stocks.  Consequently,
these rules may restrict the ability of broker-dealers to trade and/or maintain
a market in our common stock and may affect the ability of our shareholders to
sell their shares.





Securities
Authorized For Issuance Under Equity Compensation Plans





On
September 13, 2006, our Board unanimously voted to adopt a Stock Option Plan
(the “Plan”) and to submit such Plan to a vote of our
shareholders.  Our shareholders voted and approved the adoption of the
Plan on December 1, 2006, at our annual shareholders meeting.  The
Plan provides for a share reserve of 18,000,000 common shares for future
issuances as direct awards or upon exercise of options granted under the
Plan.  As of the date of this filing, no stock options have been
granted to our executive officers or our directors pursuant to the
Plan.





The
following table provides information with respect to the shares authorized for
issuance under equity compensation plans of the Company.





Equity
Compensation Plan Information





Plan
      category
            
            Number
      of
              securities
      to
              be
      issued
              upon
      exercise
              of
      outstanding
              options,
              warrants
      and
              rights
              (a)
            
            Weighted-
              average
              exercise
      price
              of
      outstanding
              options,
              warrants
      and
              rights
              (b)
            
            Number
      of
              securities
              remaining
              available
      for
              issuance
              under
      equity
              compensation
              plans
              (excluding
              securities
              reflected
      in
              column
      (a))
              (c)Equity
      compensation plans approved by security holders
            
            —
            
            —
            
            
            18,000,000Equity
      compensation plans not approved by security holders
            
            —
            
            —
            
            
            —Total
            
            —
            
            —
            
            
            18,000,000






12


Recent
Sales of Unregistered Securities





On
November 17, 2009, we sold a total of 250,000 shares of our common stock to an
existing shareholder upon exercise of stock warrants at an exercise price per
share of $0.001, or 50% of the closing price of the common stock on the day
immediately preceding the exercise date, for an aggregate of $250.  We
believe the issuance of these securities was exempt from registration under Rule
506 of Regulation D promulgated under Section 4(2) of the Securities
Act.





We did
not engage in any other sales of our securities that were not registered under
the Securities Act during the three month period ended December 31,
2009.  Our sales of unregistered securities during the fiscal years
ended December 31, 2007 and 2008, and during the nine months ended September 30,
2009, have been previously reported in our Annual Reports on Forms 10-KSB and
10-K, our Quarterly Reports on Form 10-Q and/or our Current Reports on Form 8-K
filed with the SEC.  During the fourth quarter of 2009, we refunded to
a shareholder an overpayment of $375 for shares of common stock issued to the
shareholder in May 2009 in connection with the exercise of the stock
warrants.





Purchases
of Equity Securities





We did
not repurchase any of our securities during the fourth quarter of our fiscal
year ended December 31, 2009.





ITEM
      6.
            SELECTED
      FINANCIAL DATA





Not
applicable.





ITEM
      7.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





GENERAL





The
following presentation of Management’s Discussion and Analysis of Financial
Condition and Results of Operations has been prepared by internal management and
should be read in conjunction with the Financial Statements and notes thereto
included in Item 8 of this Annual Report on Form 10-K.  Except for the
historical information contained herein, the discussion in this report contains
certain forward-looking statements that involve risks and uncertainties, such as
statements of our business plans, objectives, expectations and intentions as of
the date of this filing.  The cautionary statements about reliance on
forward-looking statements made earlier in this document should be given serious
consideration with respect to all forward-looking statements wherever they
appear in this report, notwithstanding that the “safe harbor” protections
available to some publicly reporting companies under applicable federal
securities law do not apply to us as an issuer of penny stocks.  Our
actual results could differ materially from those discussed here.





Our
Business





We were
organized under the laws of the State of Nevada on October 28, 1993, as Mattress
Showrooms, Inc.  In 1997, we changed our corporate name to
International Star, Inc. and became engaged in the business of construction,
sale and operation of state of the art waste management systems, specializing in
turnkey systems for management of hospital, industrial, petroleum, chemical and
municipal solid waste collection systems.  Despite our efforts, we
were unable to develop this business beyond the start-up
stage.  Following our unsuccessful venture in waste management, we
refocused our business efforts on mineral exploration in
1998.  Currently, we are primarily engaged in the acquisition and
exploration of precious and base metals mineral properties.  Since
1998, we have examined various mineral properties prospective for precious and
base metals and minerals and have acquired interests in those we believe may
contain precious and base metals and minerals.  Our properties are
located in Arizona.  Although we have confirmed the existence of
mineralization in some of our properties, we have not established that any of
our properties contain reserves.  A reserve is that part of a mineral
deposit which could be economically and legally extracted or produced at the
time of the reserve determination.  Further exploration will be needed
before a final determination can be made whether any mineral extraction on our
property is economically and legally feasible.  Therefore, at present
we have no reserves and no income from mineral production.




13


Going
Concern





We have
incurred substantial operating and net losses, as well as negative operating
cash flow, since our inception. Accordingly, we continued to have significant
stockholder deficits and working capital deficits during the year ended December
31, 2009.  In recognition of these trends, our independent registered
accountants have included cautionary statements in their report on our financial
statements for the year ended December 31, 2009, that expressed “substantial
doubt” regarding our ability to continue as a going
concern.  Specifically, our independent accountants have opined that
the continuation of our Company as a going concern is dependent upon obtaining
sufficient working capital to be successful in that effort.





Our
ability to continue as a going concern is dependent on obtaining additional
working capital.  Our management has developed a long-term strategy
for generating revenues from our mineral properties, with a short-term focus on
obtaining additional equity or debt funding until such operating revenues can be
generated.  We will continue to consider and pursue available and
feasible options to raise additional capital to fund our operating costs and to
continue work on establishing the existence of mineral reserves within our
properties to enable us to seek feasible revenue generating
opportunities.





During
the fourth quarter of 2009, we obtained a cash advance from our Chairman to
satisfy our current obligations and to continue exploration work on our Detrital
Wash Property through the first quarter of 2010.  See “– GENERAL –
Financing.”  We will need to raise additional equity or debt financing
to fund our operating costs and our planned mineral exploration work and to
service our current debt obligations for the remainder of 2010, unless and until
we are able to generate substantial revenues from our mineral
properties.  If we do not obtain substantial additional financing, we
may not have sufficient capital to continue operating as a public company or at
all beyond the second quarter of 2010.  We cannot assure that we will
be able to obtain the necessary funding or, even if such financing is obtained,
that we will be able to establish the existence of mineral reserves or generate
revenues from our properties sufficient to sustain our continued operations or
at all.





Financial
Condition and Results of Operations





We have
incurred substantial net losses since our inception as an exploration stage
company.  Our ability to generate revenue is dependent on our ability
to establish the existence of mineral reserves on our properties.  We
have not generated any revenue during any period since the date of our
inception, and unless and until we establish that such reserves exist, we will
not have any revenue from our mineral operations.





Our
current management has engaged consultants who developed an exploration plan
involving geochemical and geophysical exploration methods to determine under
recognized industry standards whether mineral reserves exist on our
properties.  We have implemented mapping, sampling and drilling phases
of this plan, which have included assaying of collected geological
samples.  We are assessing the results of our drilling and most recent
assays and considering our future exploration plans, but we believe further
exploration work will be needed and is warranted to determine the commercial
value of our property.  During the fourth quarter of 2009, we obtained
funding for the recent drilling and assay work.  See “– GENERAL – Plan of
Operation.”  However, further exploration work will be dependent our
obtaining additional debt or equity financing.





We are
currently considering potential options to obtain funding to continue
exploration work on our properties and to fund our future operating and
compliance costs. As of the date of this Annual Report, we have not yet obtained
the necessary level of funds to continue our exploration program on our Detrital
Wash Property or to fund our operating and compliance costs beyond the second
quarter of 2010.  We cannot guarantee that we will obtain such
financing on terms that will be favorable to us or at all, or, even if such
financing is obtained, that we will determine that mineral reserves exist or
that we will be able to commercially exploit any reserves found on our
properties.  See “– GENERAL – Going
Concern.”





As of
December 31, 2009, our total assets are $49,039, consisting of $48,588 in cash
and $451 in property and equipment, net of depreciation.  Our total
assets at December 31, 2008, were $29,413, consisting of $8,889 in cash, $11,388
in prepaid expenses and $9,136 in property and equipment, net of
depreciation.  The $19,626 increase in our total assets during the
year ended December 31, 2009, is primarily due to our larger amount of cash on
hand at the end of 2009, compared to year-end 2008, resulting from a cash
advance to the Company from our Chairman during the fourth quarter of
2009.  The increase in cash was offset partially by the elimination of
our prepaid expenses and the reduction in our property and equipment, net of
depreciation, during 2009.  The elimination of our prepaid expenses
during 2009 related to assays performed on mineral samples from our properties,
and the reduction in our property and equipment resulted from our sale and
disposition of a trailer and all-terrain vehicles no longer used by the
Company.  We expect to use the cash on hand at December 31, 2009, to
fund our operating and compliance costs and exploration activities for a portion
of 2010.  We anticipate these funds being depleted during the second
quarter of 2010 unless we are able to raise additional funds to support our
continued operations.




14




Our total
liabilities as of December 31, 2009, are $1,255,212, an increase of $328,274
over total liabilities at December 31, 2008, of $926,938.  This
increase is attributable primarily to our borrowing an additional $170,000 under
our December 2008 line of credit to fund our exploration activities and general
operating and compliance costs during the period, interest accrued on our
borrowings under our two lines of credit, and a $116,817 balance owed to our
Chairman for a $100,000 cash advance during the fourth quarter of 2009 to fund
our operating costs and for certain expenses paid by her on behalf of the
Company during 2009.  See Footnote E in the Notes
to the Consolidated Financial Statements and “– GENERAL –
Financing.”  These items were offset slightly by a $31,853 decrease in
accounts payable primarily attributable to less exploration activity and
regulatory compliance costs in 2009 versus 2008 and the use of funds received in
the fourth quarter of 2009 to pay certain outstanding expenses prior to
year-end.  The trends in our liabilities during 2010 will be dictated
by a number of factors, such as our assessment of the amount of exploration work
necessary to substantially complete our exploration program on our Detrital Wash
Property, the amount of additional financing we are able to raise, if any, to
fund our operating costs and exploration activities for the year, whether such
financing is in the form of equity or debt, whether we are able to determine the
existence of extractable reserves on our properties, and whether we are able to
successfully attract and consummate a joint venture or other opportunity to
commercially exploit our mineral properties during 2010.  We cannot
predict at this time how these factors will unfold or what affect they will have
on our financial condition for 2010 and beyond.





Fiscal Year Ended December
31, 2009, Compared to Fiscal Year Ended December 31, 2008





Net Loss.  Our net
loss for the fiscal year ended December 31, 2009, was $312,648 compared to a net
loss of $541,218 during the fiscal year ended December 31, 2008, a decrease of
42.23%.  The over 40% reduction in our net loss for the year ended
December 31, 2009, over the year ended December 31, 2008, was due primarily to a
significant reduction in our mineral exploration activity over 2008 and
generally limited operations in 2009, which resulted in significantly lower
mineral exploration costs, professional fees and general and administrative
costs.  The significant reduction in mineral exploration activity in
2009 was partly the result of the work required to develop and begin
implementing our current exploration program in 2008.  Our 2009
exploration work was primarily limited to assaying collected samples, an
additional sampling effort, mapping work, and modifying and maintaining our
claim holdings.  Our operations were also restricted by our limited
financial resources and inability to raise substantial additional capital due in
part to the weak economy.  These reduced operating costs during 2009
were offset partially by increases in compensation and management fees expense,
interest expense on our outstanding debt, and a one-time loss on the disposal of
equipment.





Mineral Exploration Costs
Expense.  Our mineral exploration costs expense was
substantially lower in 2009 at $70,149, compared to $257,898 for 2008, a
decrease of $187,749, or 72.80%.  This substantial decrease was the
result of our more limited exploration activities in 2009 as compared to 2008
when we were developing and beginning implementation of our current mineral
exploration program for our Detrital Wash mining claims.  Our 2009
mineral exploration costs generally consisted of expenses related to assays
performed on existing and newly collected geological samples from our
properties, collection of the additional samples, mapping activities, locating
additional claims, and the maintenance of our claim holdings.





Professional Fees
Expense.  Professional fees expense decreased in 2009 by
$67,313, or 40.49%, from $166,240 for 2008 to $98,927 for 2009.  The
significant decrease resulted primarily from our reduced exploration activities
in 2009, lower legal and accounting compliance costs due to our reduced
exploration activities and general operations, and the mutual termination in the
summer of 2008 of our consulting agreement with our financial consultant due to
his acceptance of employment with one of our major shareholders.




15




Compensation and Management Fees
Expense.  Our compensation and management fees expense for 2008
increased by $13,640, or 43.54%, from $31,326 during 2008 to $44,966 during
2009.  This large increase, however, was due primarily to our payment
in January 2009 of compensation owed to our president for the fourth quarter of
2008, which was not included in the 2008 expense, and to our president’s current
employment agreement being in place for a full year.  Under the
current agreement, which became effective April 1, 2008, our president receives
a salary of $3,500 per month.  From his appointment as president in
December 2007 to April 1, 2008, he received a monthly salary of $2,700, along
with 100,000 shares of common stock per month.





Depreciation and Amortization
Expense.  Depreciation and amortization expense decreased
91.65% from $3,400 during 2008 to $284 during 2009.  This decrease
resulted from our sale and disposal of a trailer and all-terrain vehicles no
longer in use by the Company during the first quarter of 2009, for which we took
a one-time loss of $7,902.





General and Administrative Costs
Expense.  Our general and administrative costs decreased by
$24,589, or 42.81%, to $32,842 during 2009, compared to $57,431 during
2008.  The decrease in general and administrative expense is
attributable primarily to the reduction in exploration activity on our Detrital
Wash Property during 2009 as compared to 2008, when we were developing and
implementing the initial stages of our current exploration program, and to
generally reduced operating activity during 2009 due to our limited
funds.





Interest
Income.  We did not have any interest income during 2009,
compared to $326 during 2008.





Other
Income.  During 2009, we recognized $3,535 in other income,
which consists of a $3,522 refund received from the Internal Revenue Service for
an overpayment of payroll taxes for a prior period and a small tax refund from
the State of Louisiana.  We did not have any other income during
2008.





Interest
Expense.  During 2009, we incurred interest expense of $61,063
as a result of interest accruing on our two lines of credit obtained from
Kilpatrick’s Rose-Neath Funeral Homes, Crematorium and Cemeteries, Inc. in
December 2007 and December 2008, respectively.  See “– GENERAL – Financing”
and Footnote E in the Notes to the Consolidated Financial
Statements.  Our interest expense for 2008, which was attributable to
the December 2007 line of credit, was $25,249.





Exploration
Program





In 2008,
through our consultants, including a geologist and a registered professional
mining engineer, both of whom were “qualified persons” under NI 43-101, and an
additional geologist, we developed a new exploration program for our Detrital
Wash Property of testing geological samples for the existence of minerals and
mapping the existing geology.  Our consultants utilized the initial
results of this program obtained in 2008, which indicated the presence of
copper, molybdenum and silver mineralization, to further design the exploration
program to evaluate the mineral potential of our Detrital Wash Property and the
viability of extracting any mineral reserves discovered.





During
2008, we obtained historical records created by various mining companies from
the 1960’s through the 1980’s in connection with substantial exploration
conducted in the Northern Black Mountains, where our Detrital mining claims are
located.  Work completed by these companies included soil sampling,
stream sampling, rock sampling and drilling, bouguer gravity surveys, and
resistivity and IP (induced polarization) surveys.  The historical
soil, sediment and rock sampling data obtained by the Company indicated copper
and molybdenum mineralization on the property in the form of projected and
drilled areas of chalcocite mineralization.  As part of our
exploration program, our geologist and engineering consultants reproduced and
verified under NI 43-101 industry standards the accuracy of much this historical
data.





In the
initial phase of this exploration program conducted in 2008, 252 assays were
performed by Mountain States R&D International, Inc., an Arizona registered
and licensed lab (“Mountain States”), on samples taken from our Detrital Wash
claims.  Results of these assays support the historical data
indicating significant copper and molybdenum mineralization in the areas of our
Detrital Wash claims.




16




The
assays report that copper values of the rock samples collected range from 25
parts per million (ppm) to 6.10% copper (10,000 ppm equals one
percent).  A value of 20 ppm (or 0.002%) or higher is generally
considered to be of potential value for exploration purposes.  There
were thirteen samples above 1.0% copper, seventeen samples with values between
0.10% and 0.99% copper, and one soil sample at 0.081% copper.  The
remainder of the rock and soil samples ranged from 25 ppm to 599 ppm
copper.  The molybdenum values from rock and soil samples range from
nine samples below detection limit of 1 ppm to 906 ppm
molybdenum.  Anomalous silver, lead and arsenic are also present in
these samples.





Due to
budget constraints, the assays performed in 2008 did not test for gold
mineralization.  However, the Detrital Wash area includes several
former gold mines, and the historical data we obtained indicates mineralization
of gold in the vicinity of our claims.  In March 2009, we submitted
over 200 additional samples collected during our initial sampling phase and
several new samples to Skyline Assayers & Laboratories in Tucson, Arizona,
an Arizona registered and licensed lab (“Skyline”), to be assayed for copper,
molybdenum, and silver as well as gold mineralization.  The samples
delivered to Skyline consisted of 91 new rock samples and 155 new soil samples,
as well as 259 rock and soil pulps of samples previously analyzed at Mountain
States.





The
Skyline assay results show the presence of anomalous gold, silver, copper and
molybdenum, as well as many indicator and pathfinder elements for both precious
and base metals deposits.  Results from the rock samples include
grades of up to 7.17 grams per metric ton (gpmt) gold and 712.0 gpmt silver,
confirming the presence of gold and silver rich zones of mineralization along
trends containing historically mined deposits.  Soil geochemical
samples include values of up to 1.325 ppm gold and 6.9 ppm
silver.  These assays also show improved results in copper and
molybdenum values from the Company’s 2008 sampling.  Rock sample
geochemical values of greater than 10,000 ppm (or 1.0%) copper and up to 1,827.3
ppm molybdenum were also reported.





Our
consultants plotted, contoured and evaluated the Mountain States and Skyline
assay results data, along with historical results consisting of soil and rock
geochem data plotted by previous exploration companies working the same
property, to determine appropriate drilling locations for further
exploration.  We also staked additional lode claims on areas of
further interest as indicated by the March 2009 Skyline assay
results.





After
receiving the March 2009 Skyline assay values, we conducted an aggressive
follow-up program of soil, rock chip and channel sampling to test the extent and
grade of any mineralization associated with the high value
samples.  In August 2009, we submitted samples collected from this
follow-up program to Skyline to be analyzed with the same procedures as the
previous Skyline assays.  The results of these assays show
mineralization that is generally consistent with the results of our previous
assays.  Following these assays, we focused our efforts on
preparations to conduct drilling work on the Detrital Wash
Property.





As of
this filing, we have completed a limited phase of drilling on our Detrital Wash
Property.  We drilled 10 holes in various locations on our Detrital
Wash Property where previous sampling had indicated evidence of
mineralization.  Samples were taken from the drill holes and nearby
areas and submitted for assay at the Skyline lab in Tucson.  We have
also obtained additional mapping of the geology in the Detrital Wash Property
and nearby areas.  We have received the results of these assays from
Skyline as well as the new mapping, and we are currently evaluating these
results and assessing the additional work needed to determine the commercial
viability of our exploration program.  Based on our initial
assessment, we intend to conduct additional mapping of the area and to further
modify our claim holdings in the area by adding claims to capture additional
areas showing mineral promise and dropping claims that we believe have less
mineral potential.





Plan
of Operation





Our
management, in consultation with our geologists, is working to develop a
short-term plan for further exploration on the Detrital Wash
Property.  Management’s goal is to bring the data on the Detrital Wash
Property to a sufficient level to attract a joint venture or other sale or lease
opportunity with a larger resource entity or investor to provide additional
capital and infrastructure to complete the exploration program and bring the
property to the production stage should mineral reserves be
established.  During 2010, we intend to continue to seek potential
joint venture opportunities to fund any further exploration work needed toward
the establishment of precious and base metal reserves in the Detrital Wash
Property and assessment of the feasibility of extracting potential mineral
deposits on these properties.




17




We
believe the results obtained thus far show sufficient mineralization to warrant
further exploration of the properties.  However, further exploration
activity will require us to obtain additional capital resources to continue such
work.  We are currently considering options to pursue additional
equity financing to fund our operating expenses for the remainder of 2010 and to
complete our exploration work.  However, our fundraising plans for
2010 will depend on the exploration plan currently being developed by management
and our geologists.  We will continue to consider all available
financing options as well as any opportunities that may arise to sell or lease
our interest in our properties that we believe would be favorable to our
shareholders.





We cannot
guarantee that we will be able to raise the necessary additional capital on
terms favorable to us or at all to allow us to continue our exploration
program.  We also cannot assure, even if such financing is obtained,
that mineral reserves will be determined to exist on our properties or that we
will be able to successfully attract and consummate a joint venture to develop
the property to production stage or any other opportunity to commercially
exploit our properties.  Our ability to establish and exploit any
reserves of precious or base minerals found on our properties will depend, in
part, on factors beyond our control, including technological capabilities in the
mining industry, current economic conditions and the current market price of any
minerals discovered.  Until such funding is obtained, we are unable to
substantially continue our exploration program.  See “– GENERAL – Going
Concern.”





We do not
presently plan to conduct development activities on the Wikieup Property during
2009.  Should adequate financial resources become available in the
future, we may aggressively pursue a program to identify any mineralization
occurring on the Wikieup Property.  See “PROPERTIES – Wikieup,
Arizona Property.”





Due to
our limited financial resources, we do not anticipate any purchase or sale of
property, plant, or other significant equipment, and we do not expect any
significant changes in the number of our employees.  However,
employees, consultants and expertise will be added to the Company as management
deems necessary and when financing permits.





Financing





We do not
have any revenues and continue to be dependent on debt and equity financing to
meet our immediate cash needs.  We continue to pursue means to fund
our current and future operations and to continue our exploration activities,
either by seeking additional capital through loans or private placements of our
securities, or by entering into joint venture or similar arrangements with one
or more other, more substantial companies.





On
December 1, 2008, we obtained a short-term line of credit of up to $200,000 from
Kilpatrick’s Rose-Neath Funeral Homes, Crematorium and Cemeteries, Inc.
(“KRFH”).  Funds advanced to us under the line of credit carry simple
interest at the rate of 10% per annum beginning on the date of each
advance.  All unpaid principal and accrued interest on funds advanced
under the line of credit was due on March 31, 2009 (the “Maturity
Date”).  No payments on this line of credit were required prior to the
Maturity Date.  For any principal amounts not paid within five days
after the Maturity Date, the simple interest rate would increase to 18% per
annum effective as of the Maturity Date.  We had the right to prepay
any amounts owing under the line of credit at any time without
penalty.  We also have the right to pay the amounts due, at our
election, in the form of cash payment, issuance of shares of our common stock,
or any combination thereof.  In the event we default, KRFH may
institute legal action against us.  In such event, KRFH would be
entitled to its collection costs, including attorney fees and courts
costs.  The line of credit is unsecured.





We
borrowed $30,000 under this line of credit during December
2008.  During 2009, we borrowed the remaining $170,000 available under
this line of credit.  We have not made any payments of principal or
interest toward this line of credit as of December 31, 2009.





Our
Chairman of the Board, Ms. Virginia Shehee, may be deemed the beneficial owner
of over 50% of the outstanding shares of KRFH due to the voting power she has
obtained pursuant to a voting agreement.  Due to the voting power she
has obtained pursuant to a similar voting agreement, Ms. Shehee may also be
deemed the beneficial owner of over 50% of the outstanding shares of Kilpatrick
Life Insurance Company (“KLIC”), one of our major shareholders.  Ms.
Shehee serves as Chairman of the Board of KLIC and until July 1, 2008, served as
its President and Chief Executive Officer.  KLIC also employs as its
Corporate Secretary Ms. Jacqulyn Wine.  Ms. Wine is our Secretary,
Treasurer/Chief Financial Officer and one of our directors.




18





During
2009, we recognized a total of $3,750 in capital from the sale of shares of our
restricted common stock upon exercise of stock warrants issued during
2008.  These funds were received by the Company in October 2008, but
the funds were classified for accounting purposes as shareholder deposits until
the stock certificates representing these shares were issued to the shareholders
in 2009.  We also sold an additional 250,000 shares of our restricted
common stock in November 2009 upon the exercise of stock warrants for a total of
$250.  We believe these issuances were exempt from registration under
Rule 506 of Regulation D under Section 4(2) of the Securities Act.  We
did not secure any additional funding through the issuance of our common stock
during 2009.  See “MARKET FOR REGISTRANT’S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS – Recent Sales of Unregistered
Securities.”





Historically,
certain of our directors have from time to time advanced funds to our Company
for the payment of operating expenses.  These advances have been
repaid in cash and through the issuance of restricted shares of our common
stock.  During 2009, our Chairman of the Board paid certain corporate
filing fees and annual maintenance fees on our mining claims on behalf of the
Company in an aggregate amount of $16,817.  In November 2009, our
Chairman advanced an additional $100,000 to the Company to be used as working
capital.  We have agreed to reimburse the Chairman for these advanced
funds.  As of this Report, we have not made any reimbursement payments
to the Chairman for the advanced funds.





LIQUIDITY





Liquidity
and Capital Resources





Year
      ended December 31,2009
            
            2008Net
      cash used in operating activities
            
            $
            (247,867
            )
            $
            (447,252
            )Net
      cash provided by investing activities
            
            
            499
            
            
            —Net
      cash provided by financing activities
            
            
            287,067
            
            
            360,000





General





Overall,
we had positive cash flows of $39,699 for the fiscal year ended December 31,
2009, resulting from $247,867 used in our operating activities, $499 provided by
our investing activities and $287,067 provided by our financing
activities.  For the fiscal year ended December 31, 2008, we had
negative cash flows of $87,252.  The increase in cash flows for the
year ended December 31, 2009, over the year ended December 31, 2008, reflects a
$199,385 decrease in cash used for operating activities and a $499 increase in
cash provided by investing activities, offset partially by a $72,933 decrease in
cash provided by financing activities during 2009, compared to the respective
amounts in 2008.  No cash was provided by investing activities during
the fiscal year ended December 31, 2008.





Cash
Used in Our Operating Activities





For the
year ended December 31, 2009, net cash used in our operating activities was
$247,867, a decrease of $199,385, or 44.58%, from the year ended December 31,
2008.  This decrease was mostly due to the $228,570 decrease in our
net loss for 2009 over 2008, which resulted primarily from our significantly
reduced mineral exploration activity on our Detrital Wash Property and limited
operations in 2009.  These two factors were offset partially by other
variables, most notably a $12,356 decrease in accounts payable and accrued
expenses during 2009 compared to a $90,454 increase in accounts payable and
accrued expenses during 2008.  The decrease in accounts payable and
accrued expenses was due to our more limited operations and exploration
activities in 2009 and the use of funds received in the fourth quarter of 2009
to pay certain outstanding expenses prior to year-end.




19


Cash
Provided by Our Investing Activities





Net cash
provided by our investing activities during the year ended December 31, 2009,
was $499, which was comprised of proceeds from our sale and disposal of a
trailer and all-terrain vehicles no longer in use by the Company during the
first quarter of 2009, for which we took a one-time loss of
$7,902.  We had no cash provided by investing activities during
2008.





Cash
Provided by Our Financing Activities





Net cash
provided by our financing activities of $287,067 during the year ended December
31, 2009, was comprised of proceeds from a short-term line of credit we obtained
in December 2008, proceeds from the exercise of our common stock warrants and
cash advances from our Chairman.  See “– GENERAL –
Financing.”  This reflects a decrease of $72,933 as compared to net
cash provided by financing activities during the year ended December 31,
2008.  This decrease is primarily attributable to the substantial
proceeds borrowed in 2008 from a line of credit we obtained in December 2007 and
to the lack of substantial equity financing during 2009.  The decrease
was offset partially by $116,817 in cash advances from our Chairman in November
2009.  Net cash provided by financing activities during 2008 resulted
from $275,000 provided by proceeds from our December 2007 line of credit,
$55,000 provided by the sale of our common stock and stock warrants in 2008 and
$30,000 provided by proceeds from our December 2008 line of credit.





Internal
Sources of Liquidity





For the
fiscal year ended December 31, 2009, the funds generated from our operations
were insufficient to fund our daily operations.  We can provide no
assurance that funds from our operations will meet the requirements of our daily
operations in the future.  Unless and until funds from our operations
are sufficient to meet our operating requirements, we will continue to need to
seek other sources of financing to maintain liquidity.





External
Sources of Liquidity





Because
we have been unable to generate funds from operations sufficient to fund our
daily operations, we must rely on external sources of liquidity.  We
continue to consider and pursue potential financing options to secure funds to
continue and, where possible, grow our business operations.  Our
management will review any financing options at its disposal, and will judge
each potential source of funds on its individual merits.





On
December 1, 2008, we obtained a $200,000 short-term line of credit from
KRFH.  During December 2008, we borrowed $30,000 under this line of
credit to fund the remainder of our operating and compliance costs for
2008.  In 2009, we borrowed the remaining $170,000 available under
this line of credit to fund our operating and compliance costs for a portion of
2009.  See “–
GENERAL – Financing.”





On
November 17, 2009, we sold shares of our restricted common stock upon exercise
of stock warrants for a total of $250.  In addition, during 2009, we
recognized a total of $3,750 in additional capital for the sale of shares of our
restricted common stock upon exercise of stock warrants issued during
2008.  These funds were received by the Company in 2008 but were
classified for accounting purposes as shareholder deposits until the stock
certificates representing these shares were issued to the shareholders in
2009.  We did not secure any additional funding through sales of our
equity securities during 2009.  See “– GENERAL – Financing”
and “MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS –
Recent Sales of Unregistered Securities.”





We also
received advances of funds from our Chairman of the Board totaling $116,817
during 2009.  See “– GENERAL –
Financing.”  We have used most of these funds to pay operating
expenses for the fourth quarter of 2009 and to fund our drilling work and
operating expenses in 2010 as of this Report.  We intend to use the
remaining funds toward our 2010 exploration and operating expenses.





Because
we presently do not have sufficient revenues to fund our operating and
compliance costs or to fund our repayment of these two lines of credit, we will
need to raise other funds in 2010 through debt or equity
financings.  We can provide no assurance that we will be able to raise
the necessary funds on terms favorable to us or at all.  See “– GENERAL – Going
Concern.”




20


Inflation





Management
believes that inflation has not had a material effect on our results of
operations in 2008 and 2009, and does not expect that it will in fiscal year
2010, except to the extent higher fuel and energy prices could materially and
adversely impact the Company by increasing costs for our exploration program and
any travel related expenses.





Off-Balance
Sheet Arrangements





We do not
have any off-balance sheet arrangements.





ITEM
      7A.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
applicable.





ITEM
      8.
            FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA





Our
Financial Statements and supplementary data are included beginning immediately
following the signature page to this Annual Report.  See Item 15 for a
list of the Financial Statements and financial statement schedules included with
this filing.





ITEM
      9.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE





None.





ITEM
      9A.
            CONTROLS
      AND PROCEDURES





(a)      Disclosure
Controls and Procedures.





Our
President and our Treasurer/Chief Financial Officer evaluated the effectiveness
of our disclosure controls and procedures as of the end of the period covered by
this Annual Report on Form 10-K, December 31, 2009.  Based on this
evaluation, our President and our Treasurer/Chief Financial Officer have
concluded that our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period
covered by this report were effective in timely alerting management to material
information relating to us and required to be included in our periodic filings
with the SEC.





Disclosure
controls and procedures are controls and procedures that are designed to ensure
that information required to be disclosed in our periodic reports under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the Commission’s rules and forms.  Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in our periodic
reports that we file under the Exchange Act is accumulated and communicated to
our management, including our principal executive and principal financial
officers, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure.





(b)      Internal
Control over Financial Reporting





Management’s Annual Report
on Internal Control Over Financial Reporting





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rules
13a-15(f) and 15d-15(f).  Internal control over financial reporting is
a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles.  Internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
conformity with U.S. generally accepted accounting principles, and that our
receipts and expenditures are being made only in accordance with authorizations
of our management and directors; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of our assets that could have a material effect on the financial
statements.




21




Because
of its inherent limitations, our controls and procedures may not prevent or
detect misstatements.  A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the
objectives of the controls system are met.  Because of the inherent
limitations in all controls systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, have
been detected.





Our
management has assessed the effectiveness of our internal control over financial
reporting based on the criteria in Internal Control — Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission.  Based on our evaluation under the criteria in
Internal Control — Integrated
Framework, we concluded that there are material weaknesses in our
internal control over financial reporting as of December 31, 2009, with respect
to the lack of segregation of duties pertaining to our financial record keeping
responsibilities and our lack of an audit committee, both of which are due to
the small size of our Company.





Because
we do not have any employees other than our President and our Secretary and
Treasurer, our ability to segregate financial record keeping and monitoring
responsibilities is limited.  This could potentially allow financial
inaccuracies or unauthorized transactions to go
undetected.  Additionally, due to the small size of our board of
directors and our current lack of independent directors, we do not have, and
historically have not had, an audit committee.  Historically, the
board of directors as a whole has performed the functions of an audit committee,
such as monitoring record keeping and financial reporting of the Company’s
transactions, approving transactions not made in the ordinary course of business
and related party transactions, and evaluating and approving the hiring of the
Company’s auditor.  Because our management makes up a significant
portion, currently a majority, of our board of directors, management can
significantly influence or control the board’s decisions with respect to matters
considered by the board.





As a
result of the material weaknesses in our internal control over financial
reporting described herein, we have concluded that our internal control over
financial reporting is not effective as of December 31,
2009.  However, notwithstanding these inherent internal control
weaknesses due to our small size and limited resources, management believes that
the Company’s limited resources and general lack of extensive or complex
business transactions partially mitigates the risk posed by these
weaknesses.  Management also believes that the Company’s records as of
December 31, 2009, fairly and accurately reflect the Company’s transactions and
dispositions of assets as necessary to permit the preparation of financial
statements in conformity with U.S. generally accepted accounting principles and
that our receipts and expenditures have been made only with proper
authorization.





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





Changes in Internal Control
Over Financial Reporting





There was
no change in our internal controls that occurred during the fourth quarter of
the period covered by this report that has materially affected, or is reasonably
likely to affect, the Company’s internal controls over financial
reporting.





ITEM
      9B.
            OTHER
      INFORMATION





None.






22





PART
III





ITEM
      10.
            DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE





Our
executive officers and directors and their respective ages as of the date of
this report are as follows:





Name
            
            Age
            
            Position(s)
      Held
            
            Date
      Service BeganVirginia
      K. Shehee
            
            86
            
            Chairman
      of the Board of Directors
            
            January
      2005Sterling
      M. Redfern
            
            76
            
            President,
      Director
            
            December
      2007Jacqulyn
      B. Wine
            
            66
            
            Secretary,
      Treasurer / Chief Financial Officer, Director
            
            January
      2007





Ms. Virginia K. Sheheehas
served as the Chairman of our Board of Directors since May 2005 and as a
director of the Company since January 2005.  Ms. Shehee concurrently
serves as Chairman of the Board of Kilpatrick Life Insurance Company (“KLIC”), a
major shareholder of our Company, and Kilpatrick’s Rose-Neath Funeral Homes,
Crematorium and Cemeteries, Inc. (“KRFH”).  Ms. Shehee served as the
President and Chief Executive Officer of KLIC and KRFH from October 1971 to July
2008.  Ms. Shehee is a former State Senator of Louisiana and has
served on the Forum 500 Board of Governors and on the Committee on Committees of
the American Council of Life Insurance (“ACLI”).  She has also served
on the Board of Directors and on the Taxation Steering Committee of the
ACLI.  In addition, Ms. Shehee is Chairman Emeritus of the Biomedical
Research Foundation of Northwest Louisiana, for which she has previously served
as the President and Chairman of its board of directors.  Ms. Shehee
is a director of the Louisiana Insurers’ Conference and has previously served in
various executive capacities for the Life Insurers Conference.  Ms.
Shehee has extensive executive and board experience through her many years with
KLIC and KRFH and various trade and nonprofit organizations.  She is
an accomplished business and civic leader and has developed a strong
understanding of the Company during her five years of service on our Board of
Directors.  Through her affiliation with KLIC, our largest
shareholder, the Board of Directors believes her interests are closely aligned
with those of our shareholders.





Mr. Sterling M. Redfern has
served as President and as a director of the Company since December
2007.  From March 2001 through September 2003, Mr. Redfern served as a
director of Cryocon, Inc., but has otherwise been retired since December
2003.  From June 1960 to December 1994, Mr. Redfern was the
President/Chief Executive Officer of Educational Employees Credit Union (EECU)
located in Bridgeton, Missouri.  Mr. Redfern has also served as a
director of the Missouri Credit Union League, the Credit Union National
Association, and the Metro Collegian Baseball League.  He has also
served as President of the Metro Collegian Baseball League, as a member of the
Governor’s White House Conference on Education in Missouri and as a member of
the Board of Education, Pattonville School District, Bridgeton,
Missouri.  In 1955, Mr. Redfern received a Bachelors of Arts Degree in
Mathematics from Arkansas State University, located in Jonesboro,
Arkansas.  Mr. Redfern has over three decades of executive experience
as well as prior experience as a public company director.  As
President of the Company, he provides an intimate knowledge of the management
and ongoing operations of our business.





Ms. Jacqulyn B. Wine has
served as Secretary and Treasurer/Chief Financial Officer of the Company since
May 2008 and as a director of the Company since July 2007.  She served
as Acting Secretary of the Company from January 2007 to May 2008 and as Acting
Treasurer/Chief Financial Officer of the Company from August 2007 to May
2008.  Ms. Wine is also the Corporate Secretary for Kilpatrick Life
Insurance Company, a major shareholder of our Company, a position she has held
since August 2008.  From March 1995 to August 2008, she served as
Assistant Secretary/Treasurer of Kilpatrick Life Insurance
Company.  She began working for Kilpatrick Life Insurance Company as
Executive Assistant to the President in 1990.  From February 1979 to
September 1990, Ms. Wine concurrently served as Corporate Secretary of two
related companies, McConathy Oil and Gas Company and McConathy Production,
Inc.  Ms. Wine has many years of experience as a corporate secretary
and over two years of experience as one of our directors.  In
addition, as our Secretary and Treasurer, she has particular knowledge of the
Company’s financial matters.





23





Term
of Office





Our
directors are elected for a one-year term to hold office until the next annual
meeting of our shareholders, or until removed from office in accordance with our
bylaws and applicable law.  Our officers are appointed by our Board of
Directors and hold office until the earlier of their resignation or removal by
the Board, except for our President, Sterling Redfern, with whom the Company has
a formal employment agreement, effective April 1, 2008.  As of April
1, 2009, however, under the agreement, Mr. Redfern now serves and may continue
to serve at the will of the parties.  See “EXECUTIVE COMPENSATION –
Employment Agreements.”





Family
Relationships





There are
no familial relationships among any of our directors, executive officers, or
persons nominated or chosen to become directors or executive
officers.





Involvement
in Certain Legal Proceedings





During
the past ten years, no present director, executive officer or person nominated
to become a director or an executive officer of the Company:





(1)
            was
      a general partner or executive officer of any business against which any
      bankruptcy petition was filed, either at the time of the bankruptcy or
      within two years prior to that
time;





(2)
            was
      convicted in a criminal proceeding or named subject to a pending criminal
      proceeding (excluding traffic violations and other minor
      offenses);





(3)
            was
      the subject of 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 or
      her involvement in any type of business, securities or banking
      activities;





(4)
            was
      the subject of any order, judgment or decree, not subsequently reversed,
      suspended or vacated, of any Federal or state authority barring,
      suspending or otherwise limiting for more than 60 days his or her right to
      engage in any type of business, securities or banking activities, or to be
      associated with persons engaged in any such
  activities;





(5)
            was
      found by a court of competent jurisdiction in a civil action or by the SEC
      to have violated a Federal or state securities law, and the judgment or
      finding has not been reversed, suspended or
  vacated;





(6)
            was
      found by a court of competent jurisdiction in a civil action or by the
      Commodity Futures Trading Commission to have violated a Federal or state
      commodities law, and the judgment has not been reversed, suspended or
      vacated;





(7)
            was
      the subject of, or a party to, any Federal or state judicial or
      administrative order, judgment, decree or finding, not subsequently
      reversed, suspended or vacated, relating to an alleged violation
      of:




(i)
            any
      Federal or state securities or commodities law or regulation;
      or




(ii)
            any
      law or regulation respecting financial institutions or insurance companies
      including, but not limited to, a temporary or permanent injunction, order
      of disgorgement or restitution, civil money penalty or temporary or
      permanent cease-and-desist order, or removal or prohibition order;
      or




(iii)
            any
      law or regulation prohibiting mail or wire fraud or fraud in connection
      with any business entity; or





(8)
            was
      the subject of, or a party to, any sanction or order, not subsequently
      reversed, suspended or vacated, of any self-regulatory organization (as
      defined in Section 3(a)(26) of the Exchange Act), any registered entity
      (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any
      equivalent exchange, association, entity or organization that has
      disciplinary authority over its members or persons associated with a
      member.






24


Director
Nomination Procedures





We have
not adopted formal procedures for nominating director candidates.  Our
Board of Directors identifies qualified director nominees from among persons
known to the members of the Board, by reputation or otherwise, and through
referrals from trusted sources, including management, existing Board members,
and shareholders.  The Board evaluates candidates based upon the
candidate’s qualifications, recommendations, or other relevant information,
which includes a personal interview.  The Board then considers and
approves candidates for nomination.





Section
16(a) Beneficial Ownership Reporting Compliance





Section
16(a) of the Exchange Act requires our executive officers and directors, and
persons who beneficially own more than ten percent of our equity securities, to
file reports of ownership and changes in ownership with the SEC on Forms 3, 4
and 5.  Officers, directors and greater than ten percent shareholders
are required by SEC regulation to furnish us with copies of all Section 16(a)
forms they file.  Based solely upon review of copies of any such
reports furnished to us during, and with respect to, the fiscal year ended
December 31, 2009, or any written representations we received from a director,
officer, or beneficial owner of more than 10% of our common stock that no other
reports were required during that period, we believe that, for the fiscal year
ended December 31, 2009, all Section 16(a) filing requirements applicable to our
reporting persons were met.





Code
of Ethics





We have
adopted a Code of Ethics applicable to our principal executive officers,
principal financial officers, principal accounting officers or controllers, or
persons performing similar functions, a copy of which is filed as an exhibit to
this Annual Report on Form 10-K.  In addition, a copy of our code of
ethics can be obtained without charge by writing our Company at P.O. Box 7202,
Shreveport, Louisiana 71137.





Audit
Committee and Financial Expert Disclosures





Section
301 of the Sarbanes-Oxley Act of 2002 and SEC regulations implementing that
provision require that public companies disclose a determination by their Board
of Directors as to the existence of a financial expert on their audit committee
and, if none is determined to exist, that the Board of Directors has determined
that no one serving on its Board of Directors meets the qualification of a
financial expert as defined in the Sarbanes-Oxley Act and implementing
regulations.





As of
December 31, 2009, and as of the date of filing of this report, we have not
created any standing committees of the Board of Directors, including an audit
committee.  Accordingly, our entire Board of Directors serves as our
audit committee.





We also
disclose that our Board has determined that we have not possessed, and we do not
possess, on our Board of Directors anyone who qualifies as an audit committee
financial expert, and unless and until one is identified and agrees to serve, we
will continue to rely on outside professional consultants who advise us with
respect to audit matters.








[The
remainder of this page is intentionally left blank.]




25





ITEM
      11.
            EXECUTIVE
      COMPENSATION





Summary Compensation
Table





The
following table sets forth information concerning the compensation of our
executive officers during the fiscal years ended December 31, 2009 and
2008:





Summary
Compensation Table





Name
      and principal
                  position
              
              Year
              
              Salary
              
              Bonus
              
              Stock
                awards
              
              
              Option
      awards
              
              Non-equity
      incentive plan compensation
              
              Change
      in pension value and non-qualified deferred compensation
      earnings
              
              All
      other
                compensation
              
              TotalSterling
      M. Redfern,
              
              2009
              
              $
              42,000
              
              
              --
              
              
              --
              
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              $
              42,000President
              
              2008
              
              
              39,600
              
              
              --
              
              $
              3,900
              (1)
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              43,500Jacqulyn
      B. Wine,
              
              2009
              
              
              --
              
              
              --
              
              
              --
              
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              --Secretary
      and Treasurer / Chief Financial Officer(2)
              
              2008
              
              
              --
              
              
              --
              
              
              --
              
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              --






(1)
            Represents
      300,000 shares of our common stock issued on April 30, 2008, valued based
      upon the closing price of our common stock on the date of issuance of
      $0.013 per share.  These shares were issued to Mr. Redfern for
      his services to the Company during the months of January through March
      2008.




(2)
            Ms.
      Wine was appointed Secretary and Treasurer/Chief Financial Officer by our
      Board of Directors on May 19, 2008.  She was appointed Acting
      Secretary by our Board of Directors on January 16, 2007, and Acting
      Treasurer/Chief Financial Officer on August 16, 2007.  She did
      not receive compensation for her services as an officer of the Company
      during 2009 or 2008.




Employment
Agreements





On
December 6, 2007, our Board of Directors appointed Sterling M. Redfern to be our
President and a director of the Company.  As compensation for serving
as our President, the Board agreed to pay Mr. Redfern $2,700 a month and to
issue to him 100,000 shares of our common stock per month.  Mr.
Redfern agreed to be responsible for all withholding taxes on this
compensation.  All shares of Company common stock received by Mr.
Redfern as part of his compensation would not be adjusted for any reverse split,
and the shares would be issued to him on a quarterly basis.  The terms
of Mr. Redfern’s compensation were partially documented in the Board resolution
offering Mr. Redfern his position.  The Board issued 400,000 shares of
common stock to Mr. Redfern on April 30, 2008, for his services to the Company
for the months of December 2007 through March 2008.





On March
19, 2008, our Board of Directors renegotiated Mr. Redfern’s compensation and
entered into a formal employment agreement with Mr. Redfern effective April 1,
2008.  Under the agreement, Mr. Redfern would serve as our President
for a term of one year, after which he may continue to serve at the will of the
parties.  As compensation for serving as our President, Mr. Redfern
will receive an annual salary of $42,000.  The original terms of the
agreement provided that Mr. Redfern would also receive two non-qualified stock
options pursuant to the Company’s 2006 Stock Option Plan (the “Plan”) for
5,000,000 shares of our common stock at an exercise price of $0.01 per share and
an additional 5,000,000 shares of our common stock at an exercise price of $0.03
per share.  This agreement was amended by the Company and Mr. Redfern
on August 13, 2008, to ensure that the terms of the agreement with respect to
stock options are consistent with the terms of the Plan.  The amended
agreement provides that, in addition to an annual salary of $42,000, Mr. Redfern
will receive stock options for an aggregate of 10,000,000 shares of our common
stock to be granted on such dates and according to such terms as designated by
our Board of Directors pursuant to the Plan. To date, no stock options have been
issued to Mr. Redfern.




26




We do not
have any written employment agreement for Ms. Wine to serve as our Secretary and
Treasurer/Chief Executive Officer, nor have any terms of compensation for Ms.
Wine been approved by our Board of Directors.  As of the date of this
filing, she has not received compensation for her services as an officer of the
Company.  She may or may not receive compensation for her services in
the future.





Stock
Option and Stock Award Grants





No stock
options or stock awards were granted to our executive officers or directors
during the year ended December 31, 2009.





Exercises
of Stock Options and Year-End Option Values





No stock
options were exercised by our named executive officers during the fiscal year
ended December 31, 2009, and no unexercised stock options or unvested stock
awards were outstanding as of December 31, 2009.





Pension
and Other Benefits





We do not
currently have in effect any plan that provides for payment to our executive
officers of specified retirement benefits or benefits that will be paid
primarily following retirement.





Nonqualified
Deferred Compensation





We do not
currently have in effect any defined contribution or other plan that provides
for the deferral of compensation to any of our executive officers on a basis
that is not tax-qualified.





Payments
Upon Termination or Change-In-Control





We do not
currently have in effect any compensatory plan or other arrangement that
provides for payments or the provision of benefits to any of our executive
officers upon their termination of employment with the Company or upon a change
in control of the Company or a change in the officer’s
responsibilities.





Compensation
of Directors





Our
directors did not receive any fees or other compensation for the services they
provided to the Company as directors during 2009.  We do not
anticipate providing any such fees to our directors for their service during
2010.








[The
remainder of this page is intentionally left blank.]






27





ITEM
      12.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS





Security
Ownership of Certain Beneficial Owners and Management





The
following table sets forth certain information concerning the number of shares
of our common stock owned beneficially as of March 1, 2010, by: (i) each person
(including any group) known to us to own more than five percent (5%) of any
class of our voting securities; (ii) each of our directors and named executive
officers; and (iii) all of our officers and directors as a
group.  Except as otherwise indicated, all stockholders have sole
voting and investment power with respect to the shares listed as beneficially
owned by them, subject to the rights of spouses under applicable community
property laws.





Name
      of Beneficial Owner
            
            Amount
      and Nature
                of
      Beneficial
                Ownership
            
            
            Percent
      of
                Shares
                Outstanding
      (1)5%
      or greater holders:Kilpatrick
      Life Insurance Company
            
            
            52,351,682
            
            
            
            18.56%Kamal
      Alawas (2)
            
            
            27,964,524
            
            
            
            9.92%Directors
      and executive officers:Sterling
      M. Redfern
            
            
            400,000
            
            
            
            *Virginia
      K. Shehee (3)
            
            
            61,022,590
            
            
            
            21.64%Jacqulyn
      B. Wine (4)
            
            
            311,667
            
            
            
            *All
      directors and executive officers as a group (3 persons)
            
            
            61,734,257
            
            
            
            21.89%








*
            Less
      than 1%.




(1)
            The
      percentage of our common stock beneficially owned was calculated based on
      282,012,274 shares of our common stock outstanding as of March 1,
      2010.




(2)
            Includes
      1,500,000 shares beneficially owned by Alawas Investments, an entity
      controlled by Mr. Alawas.




(3)
            Includes
      52,351,682 shares beneficially owned by Kilpatrick Life Insurance Company,
      a privately-owned company controlled by Ms. Shehee, and an aggregate of
      4,090,098 shares held in Ms. Shehee’s IRA
  accounts.




(4)
            Includes
      211,667 shares owned by Ms. Wine’s
husband.





Securities
Authorized For Issuance Under Equity Compensation Plans





See “MARKET FOR REGISTRANT’S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS – Securities Authorized For
Issuance Under Equity Compensation Plans” for information regarding the shares
of our common stock authorized for issuance under our 2006 Stock Option
Plan.






28





ITEM
      13.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE





Certain
Relationships and Related Transactions





Except
for the transactions described below, during 2009, none of our directors,
officers or principal stockholders, nor any associate or affiliate of the
foregoing have any interest, direct or indirect, in any transaction, or in any
proposed transactions, which has materially affected or will materially affect
us.





As
discussed above, on December 1, 2008, we obtained a short-term line of credit of
up to $200,000 from Kilpatrick’s Rose-Neath Funeral Homes, Crematorium and
Cemeteries, Inc. (“KRFH”).  Funds advanced to us under the line of
credit carry simple interest at the rate of 10% per annum beginning on the date
of each advance.  All unpaid principal and accrued interest on funds
advanced under the line of credit was due on March 31, 2009 (the “Maturity
Date”).  No payments on this line of credit were required prior to the
Maturity Date.  For any principal amounts not paid within five days
after the Maturity Date, the simple interest rate would increase to 18% per
annum effective as of the Maturity Date.  We had the right to prepay
any amounts owing under the line of credit at any time without
penalty.  We also have the right to pay the amounts due, at our
election, in the form of cash payment, issuance of shares of our common stock,
or any combination thereof.  In the event we default, KRFH may
institute legal action against us.  In such event, KRFH would be
entitled to its collection costs, including attorney fees and courts
costs.  The line of credit is unsecured.





We
borrowed $30,000 under this line of credit during December
2008.  During 2009, we borrowed the remaining $170,000 available under
this line of credit.  We have not made any payments of principal or
interest toward this line of credit as of December 31, 2009.  The
total outstanding balance, including principal and interest, on this line of
credit as of December 31, 2009, is $232,741.





Our
Chairman of the Board, Ms. Virginia Shehee, may be deemed the beneficial owner
of over 50% of the outstanding shares of KRFH due to the voting power she has
obtained pursuant to a voting agreement.  Due to the voting power she
has obtained pursuant to a similar voting agreement, Ms. Shehee may also be
deemed the beneficial owner of over 50% of the outstanding shares of Kilpatrick
Life Insurance Company (“KLIC”), one of our major shareholders.  Ms.
Shehee serves as Chairman of the Board of KLIC and until July 1, 2008, served as
its President and Chief Executive Officer.  KLIC also employs as its
Corporate Secretary Ms. Jacqulyn Wine.  Ms. Wine is our Secretary,
Treasurer/Chief Financial Officer and one of our directors.





Additionally,
as of December 31, 2009, we have an outstanding debt balance of $546,722,
including principal and interest, from a $500,000 line of credit we obtained
from KRFH on December 3, 2007.  This line of credit carries simple
interest at the rate of 6% per annum.  All unpaid principal and
accrued interest is due on December 2, 2010.  Until the maturity date,
we are only required to pay interest, with the first such payment due in arrears
on June 3, 2007, and then with additional payments every 90 days
thereafter.  At any time, KRFH can demand immediate repayment of the
outstanding balance on the line of credit with ten days notice.  Any
payments due from us that are not paid within ten days of the due date are
subject to late fee of 5%.  We have the right to prepay any amounts
due KRFH at any time without penalty.  We did not make any payments of
principal or interest on this debt during 2009.





We
believe the terms of these lines of credit are no less favorable to us than we
could have obtained from an unaffiliated third party.   See “MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION – GENERAL –
Financing” for more information regarding the lines of credit.





During
2009, our Chairman of the Board also paid certain corporate filing fees and
annual maintenance fees on our mining claims on behalf of the Company in an
aggregate amount of $16,817.  In November 2009, our Chairman advanced
an additional $100,000 to the Company to be used as working
capital.  As of this Report, we have not made any reimbursement
payments to the Chairman for the advanced funds.  See “MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION – GENERAL –
Financing.”




29


Director
Independence





Our
Articles of Incorporation allow us to have a Board of Directors consisting of no
less than two and no more than five directors.  Currently, our Board
of Directors consists of three directors.  We do not believe that any
of our current directors would qualify as “independent” under the listing
standards of The Nasdaq Stock Market, which we use to determine whether each of
our directors is independent.  Under Nasdaq rules, an “independent
director” generally means a person other than an officer or employee of the
listed company or its subsidiaries, or any other individual having a
relationship which, in the opinion of the listed company’s board of directors,
would interfere with the exercise of independent judgment in carrying out the
responsibilities of a director.  Certain categories of persons are
deemed not to be independent under the Nasdaq rules, such as:  (i)
persons employed by the Company within the last three years; (ii) persons who
have received (or whose immediate family members have received) payments
exceeding a specified amount from the Company within the last three years,
excluding payments that are not of a disqualifying nature (such as compensation
for board service, payments arising solely from investments in the Company’s
securities, and benefits under a tax-qualified retirement plan); and (iii)
persons who are (or whose immediate family members are) a partner, controlling
shareholder or executive officer of an organization to which the Company made,
or from which the Company received, payments for property or services in the
current or any of the past three fiscal years that exceed $200,000, other than
payments arising solely from investments in the Company’s securities or under
non-discretionary charitable contribution matching programs.





ITEM
      14.
            PRINCIPAL
      ACCOUNTING FEES AND SERVICES





We
appointed the accounting firm of Madsen & Associates CPA’s, Inc. (“Madsen”)
to serve as our independent auditors for the fiscal years ended December 31,
2009 and 2008.  The following table represents aggregate fees billed
for professional audit services rendered by Madsen to provide the audit of our
annual financial statements for the years ended December 31, 2009 and 2008,
respectively:





2009
            
            
            2008Audit
      fees
            
            $
            23,700
            
            
            $
            20,920Audit-related
      fees
            
            
            --
            
            
            
            --Tax
      fees
            
            
            --
            
            
            
            --All
      other fees
            
            
            --
            
            
            
            --





Audit
Fees





Audit
Fees consist of fees billed for professional services rendered for auditing our
annual financial statements, reviews of our interim financial statements
included in our quarterly reports and services performed in connection with
other filings with the SEC.  We incurred audit fees from Madsen of
$23,700 for 2009 and $20,920 for 2008.





Audit
Related Fees





Audit
Related Fees may consist of fees billed for professional services rendered in
connection with comfort letters and other services that are normally provided by
our independent auditors in connection with statutory and regulatory filings or
engagements.  We did not incur any audit related fees from Madsen
during 2009 or 2008.





Tax
Fees





Tax Fees
may consist of fees for professional services for tax compliance, tax advice and
tax planning.  These services include assistance regarding federal,
state and local tax compliance and consultation in connection with various
transactions and acquisitions.  We did not incur any tax fees from
Madsen during 2009 or 2008.





All
Other Fees





We did
not incur any other fees from Madsen during 2009 or 2008.




30




ITEM
      15.
            EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES





Exhibit
Index




Exhibit
      No.
                
                Description3.1
                
                Articles
      of Incorporation of the Company dated October 26, 1993 (incorporated by
      reference to Exhibit 3.(I) to the Company’s registration statement on Form
      10-SB filed on January 12, 2000)3.2
                
                Certificate
      of Amendment to Articles of Incorporation, as filed with the Nevada
      Secretary of State on January 22, 1997 (incorporated by reference to
      Exhibit 3.(i) to the Company’s Annual Report on Form 10-KSB, as amended,
      for the year ended December 31, 2005, filed on August 18,
      2006)3.3
                
                Certificate
      of Amendment to Articles of Incorporation, as filed with the Nevada
      Secretary of State on February 18, 1997 (incorporated by reference to
      Exhibit 3.(i) to the Company’s Annual Report on Form 10-KSB, as amended,
      for the year ended December 31, 2005, filed on August 18,
      2006)3.4
                
                Certificate
      of Amendment to Articles of Incorporation, as filed with the Nevada
      Secretary of State on April 30, 1997 (incorporated by reference to Exhibit
      3.(i) to the Company’s Annual Report on Form 10-KSB, as amended, for the
      year ended December 31, 2005, filed on August 18, 2006)3.5
                
                Certificate
      of Amendment to Articles of Incorporation, as filed with the Nevada
      Secretary of State on April 30, 1997 (incorporated by reference to Exhibit
      3.(i) to the Company’s Annual Report on Form 10-KSB, as amended, for the
      year ended December 31, 2005, filed on August 18, 2006)3.6
                
                Certificate
      of Amendment to Articles of Incorporation, as filed with the Nevada
      Secretary of State on December 21, 2004 (incorporated by reference to
      Exhibit 3.(i) to the Company’s Annual Report on Form 10-KSB, as amended,
      for the year ended December 31, 2005, filed on August 18,
      2006)3.7
                
                Bylaws
      of the Company, as amended (incorporated by reference to Exhibit 3.7 to
      the Company’s Annual Report on Form 10-KSB for the year ended December 31,
      2007, filed on March 31, 2008)4.1
                
                Form
      of 2006 Stock Option Plan (incorporated by reference to Exhibit A to the
      Company’s Proxy Statement for the Annual Meeting of Shareholders filed on
      November 13, 2006)10.1
                
                Corporate
      Loan Agreement, entered into on December 3, 2007, by Kilpatrick’s
      Rose-Neath Funeral Homes, Crematorium and Cemeteries, Inc. and the Company
      (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
      on Form 8-K filed on December 26, 2007)10.2
                
                Corporate
      Promissory Note, dated December 3, 2007, and issued by the Company to
      Kilpatrick’s Rose-Neath Funeral Homes, Crematorium and Cemeteries, Inc.
      (incorporated by reference to Exhibit 10.2 to the Company’s Current Report
      on Form 8-K filed on December 26, 2007)10.3
                
                Security
      Agreement, entered into on December 3, 2007, by Kilpatrick’s Rose-Neath
      Funeral Homes, Crematorium and Cemeteries, Inc. and the Company
      (incorporated by reference to Exhibit 10.3 to the Company’s Current Report
      on Form 8-K filed on December 26, 2007)10.4
                
                Officer
      Employment Agreement between International Star, Inc. and Sterling M.
      Redfern, as amended on August 13, 2008 (incorporated by reference to
      Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on August
      14, 2008)10.5
                
                Subscription
      Agreement dated August 22, 2008, between the Company and Plaut Holdings J
      (incorporated by reference to Exhibit 10.20 to the Company’s Annual Report
      on Form 10-K for the year ended December 31, 2008, filed on March 31,
      2009, and amended on September 30,
2009)
   31
  10.6
              
              Subscription
      Agreement dated August 22, 2008, between the Company and Plaut Holdings GE
      (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report
      on Form 10-K for the year ended December 31, 2008, filed on March 31,
      2009, and amended on September 30, 2009)10.7
              
              Subscription
      Agreement dated September 30, 2008, between the Company and J. Joseph Burk
      (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report
      on Form 10-K for the year ended December 31, 2008, filed on March 31,
      2009, and amended on September 30, 2009)10.8
              
              Subscription
      Agreement dated September 30, 2008, between the Company and Harold and
      Paula Taub (incorporated by reference to Exhibit 10.23 to the Company’s
      Annual Report on Form 10-K for the year ended December 31, 2008, filed on
      March 31, 2009, and amended on September 30, 2009)10.9
              
              Subscription
      Agreement dated September 30, 2008, between the Company and Tim Harts
      (incorporated by reference to Exhibit 10.24 to the Company’s Annual Report
      on Form 10-K for the year ended December 31, 2008, filed on March 31,
      2009, and amended on September 30, 2009)10.10
              
              Corporate
      Loan Agreement, entered into on December 1, 2008, by Kilpatrick’s
      Rose-Neath Funeral Homes, Crematorium and Cemeteries, Inc. and the Company
      (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
      on Form 8-K filed on December 5, 2008)10.11
              
              Corporate
      Promissory Note, dated December 1, 2008, and issued by the Company to
      Kilpatrick’s Rose-Neath Funeral Homes, Crematorium and Cemeteries, Inc.
      (incorporated by reference to Exhibit 10.2 to the Company’s Current Report
      on Form 8-K filed on December 5, 2008)14.1*
              
              Corporate
      Code of Ethics for Directors and Executive Officers of the
      Company21.1*
              
              List
      of Subsidiaries of the Company31.1*
              
              Certification
      of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      200231.2*
              
              Certification
      of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232.1*
              
              Certification
      of Chief Executive Officer pursuant to pursuant to 18 U.S.C. Section 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      200232.2*
              
              Certification
      of Chief Financial Officer pursuant to pursuant to 18 U.S.C. Section 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002


_________________________________




* Filed
herewith





Financial
Statements




PageReport
      of Independent Registered Accounting Firm
            F-1Consolidated
      Balance Sheets as of December 31, 2009 and 2008
            F-2Consolidated
      Statements of Operations for the years ended December 31, 2009 and
      2008
            F-3Consolidated
      Statements of Cash Flows for the years ended December 31, 2009 and
      2008
            F-4Consolidated
      Statement of Stockholders’ Equity for the years ended December 31, 2009
      and 2008
            F-5Notes
      to Consolidated Financial Statements for the years ended December 31, 2009
      and 2008
            F-9





Financial Statement
Schedules





The
financial statement schedules required by Regulation S-X are omitted because
they are not applicable or the required information is shown in the Financial
Statements or notes thereto.




32





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.




INTERNATIONAL STAR,
      INC.By:
              /s/ Sterling
      M. RedfernSterling
      M. RedfernDate:  April
      14, 2010
              
              President
      and Director
  In
accordance with the Securities 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.





Signature
            
            Title
            
            Date/s/ Sterling M.
      Redfern
              
              Sterling
      M. Redfern
            
            President
      and Director (Principal Executive Officer)
            
            April
      14, 2010/s/ Virginia K.
      Shehee
              
              Virginia
      K. Shehee
            
            Chairman
      of the Board of Directors
            
            April
      14, 2010/s/ Jacqulyn B.
      Wine
              
              Jacqulyn
      B. Wine
            
            Secretary,
      Treasurer/Chief Financial Officer and Director (Principal Financial
      Officer and Principal Accounting Officer)
            
            April
      14, 2010










33





Board of
Directors


International
Star, Inc. and Subsidiaries


Shreveport,
Louisiana





REPORT OF INDEPENDENT
REGISTERED ACCOUNTING FIRM





We have
audited the accompanying consolidated balance sheets of International Star, Inc.
and Subsidiaries (an Exploration Stage Company) as of December 31, 2009 and
2008, and the consolidated statements of operations, stockholders’ equity and
cash flows for the years ended December 31, 2009 and 2008, and for the period
from inception of exploration stage (January 1, 2004) through December 31,
2009.  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
audit.





We
conducted our audit in accordance with auditing standards of the Public Company
Accounting Oversight Board (“PCAOB”).  Those standards require that we
plan and perform an audit to obtain reasonable assurance 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 its internal
control over financial reporting.  Our audit included 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, significant estimates made by management and evaluating the
overall financial statement presentation.  We believe that our audits
provide a reasonable basis for our opinion.





In our
opinion, these consolidated financial statements referred to above present
fairly, in all material aspects, the consolidated financial position of the
Company as of December 31, 2009, and the consolidated results of its operations
and cash flows for the years ended December 31, 2009 and 2008, and for the
period from inception of exploration stage (January 1, 2004) through December
31, 2009, in conformity with accounting principles generally accepted in the
United States of America.





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  The Company does not have the
necessary working capital to service its debt and for its planned activity,
which raises substantial doubt about its ability to continue as a going
concern.  Management’s plans in regard to these matters are described
in Note G to the financial statements.  These financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.





Madsen
& Associates CPA’s, Inc.


April 14,
2010


Salt Lake
City, Utah






F-1





INTERNATIONAL
STAR, INC.


AND
SUBSIDIARIES


(An
Exploration Stage Company)


CONSOLIDATED
BALANCE SHEETS




ASSETS
            
            December
      31,
            
            
            December
      31,2009
            
            
            2008Current
      Assets:Cash
      and cash equivalents
            
            $
            48,588
            
            
            $
            8,889Prepaid
      expenses
            
            
            --
            
            
            
            11,388Total
      Current Assets
            
            
            48,588
            
            
            
            20,277Property
      and Equipment–
      net of accumulated depreciation of $1,133 at December 31, 2009
      and$10,
      200 at December 31, 2008
            
            
            451
            
            
            
            9,136Total
      Assets
            
            $
            49,039
            
            
            $
            29,413LIABILITIES
      AND STOCKHOLDERS’ DEFICIENCYCurrent
      Liabilities:Accounts
      payable
            
            $
            334,995
            
            
            $
            366,848Accrued
      expenses
            
            
            23,687
            
            
            
            4,190Accrued
      interest on note payable – related party
            
            
            79,463
            
            
            
            18,400Note
      payable – related party
            
            
            200,000
            
            
            
            30,000Shareholder
      deposits
            
            
            250
            
            
            
            7,500Advances
      from shareholder
            
            
            116,817
            
            
            
            --Total
      Current Liabilities
            
            
            755,212
            
            
            
            426,938Long
      Term Liabilities:Long
      term note payable – related party
            
            
            500,000
            
            
            
            500,000Total
      Long Term Liabilities
            
            
            500,000
            
            
            
            500,000Total
      Liabilities
            
            
            1,255,212
            
            
            
            926,938Stockholders’
      Deficiency:Preferred
      Stock20,000,000
      shares authorizedUndesignated
      par value – none issued
            
            
            --
            
            
            
            --Common
      Stock780,000,000
      shares authorized, at $.001 par value;282,012,274
      and 279,262,274 shares issued andoutstanding
      at December 31, 2009 and 2008, respectively
            
            
            282,012
            
            
            
            279,262Capital
      in excess of par value
            
            
            4,431,009
            
            
            
            4,429,759Deficit
      accumulated during the exploration stage
            
            
            (5,919,194
            )
            
            
            (5,606,546
            )Total
      Stockholders’ Deficiency
            
            
            (1,206,173
            )
            
            
            (897,525
            )Total
      Liabilities and Stockholders’ Deficiency
            
            $
            49,039
            
            
            $
            29,413




See
accompanying notes to the financial statements.


F-2





INTERNATIONAL
STAR, INC.


AND
SUBSIDIARIES


(An
Exploration Stage Company)


CONSOLIDATED
STATEMENTS OF OPERATIONS




Year
      Ended December 31,
              
              
              January
      1,
                2004
      (date of inception of exploration
                stage)
      to
                December
      31,2009
              
              
              2008
              
              
              2009Revenue:Total Revenue
              
              $
              --
              
              
              $
              --
              
              
              $
              --Expenses:Mineral exploration
      costs
              
              
              70,149
              
              
              
              257,898
              
              
              
              908,787Professional
    fees
              
              
              98,927
              
              
              
              166,240
              
              
              
              739,135Compensation & management
      fees
              
              
              44,966
              
              
              
              31,326
              
              
              
              1,456,701Depreciation &
      amortization
              
              
              284
              
              
              
              3,400
              
              
              
              14,957General &
      administrative
              
              
              32,842
              
              
              
              57,431
              
              
              
              491,690Total Operating
      Expenses
              
              
              247,168
              
              
              
              516,295
              
              
              
              3,611,270Net
      (Loss) from Operations
              
              $
              (247,168
              )
              
              $
              (516,295
              )
              
              $
              (3,611,270
              )Other
      Income and ExpensesInterest income
              
              
              --
              
              
              
              326
              
              
              
              2,939Other income
              
              
              3,535
              
              
              
              --
              
              
              
              3,535Interest
expense
              
              
              (61,063
              )
              
              
              (25,249
              )
              
              
              (140,465
              )Other expense
              
              
              (50
              )
              
              
              --
              
              
              
              (50
              )Loss on disposal of
      assets
              
              
              (7,902
              )
              
              
              --
              
              
              
              (20,531
              )Loss on divestiture of
      subsidiary
              
              
              --
              
              
              
              --
              
              
              
              (99,472
              )Total Other
      Expenses
              
              
              (65,480
              )
              
              
              (24,923
              )
              
              
              (254,044
              )Net
      (Loss)
              
              $
              (312,648
              )
              
              $
              (541,218
              )
              
              $
              (3,865,314
              )Weighted
      Average SharesCommon Stock Outstanding (Basic
      and diluted)
              
              
              281,685,191
              
              
              
              279,262,274Net
      Loss Per Common Share(Basic and
    diluted)
              
              $
              (0.00
              )
              
              $
              (0.00
              )






See
the accompanying notes to the financial statements.


F-3





INTERNATIONAL
STAR, INC.


AND
SUBSIDIARIES


(An
Exploration Stage Company)


CONSOLIDATED
STATEMENTS OF CASH FLOWS





Year
      Ended December 31,
              
              
              January
      1,
                2004
      (date of inception of exploration
                stage)
      to
                December
      31,2009
              
              
              2008
              
              
              2009Cash
      flows from operating activities:Net (loss)
              
              $
              (312,648
              )
              
              $
              (541,218
              )
              
              $
              (3,865,314
              )Adjustments to reconcile net
      loss to cash used in operating activities:Depreciation &
      amortization
              
              
              284
              
              
              
              3,400
              
              
              
              14,958Loss on disposal of
      assets
              
              
              7,902
              
              
              
              --
              
              
              
              20,531Loss on divestiture of
      subsidiary
              
              
              --
              
              
              
              --
              
              
              
              99,472Common stock issued for
      services
              
              
              --
              
              
              
              4,000
              
              
              
              211,500Changes in operating assets and
      liabilities:Accounts receivable and prepaid
      expenses
              
              
              11,388
              
              
              
              (11,388
              )
              
              
              79,795Inventories
              
              
              --
              
              
              
              --
              
              
              
              63,812Other assets
              
              
              --
              
              
              
              --
              
              
              
              95,474Accounts payables and accrued
      expenses
              
              
              (12,356
              )
              
              
              90,454
              
              
              
              328,514Accrued
      interest on related party notes (included in notes payableon
      Balance Sheet)
              
              
              61,063
              
              
              
              --
              
              
              
              61,063Shareholder
      deposits
              
              
              (3,500
              )
              
              
              7,500
              
              
              
              250Net cash used in operating
      activities
              
              
              (247,867
              )
              
              
              (447,252
              )
              
              
              (2,889,945
              )Cash
      flows from investing activities:Proceeds from disposal of
      assets
              
              
              499
              
              
              
              --
              
              
              
              499Purchase of fixed
      assets
              
              
              --
              
              
              
              --
              
              
              
              (29,355
              )Net cash provided by investing
      activities
              
              
              499
              
              
              
              --
              
              
              
              (28,856
              )Cash
      flows from financing activities:Repayments of long term
      borrowings
              
              
              --
              
              
              
              --
              
              
              
              (25,000
              )Proceeds from exercise of
      warrants
              
              
              250
              
              
              
              --
              
              
              
              4,000Proceeds from advances from
      shareholder
              
              
              116,817
              
              
              
              --
              
              
              
              116,817Proceeds from note payable –
      related party
              
              
              170,000
              
              
              
              305,000
              
              
              
              725,000Proceeds from sale of common
      stock
              
              
              --
              
              
              
              55,000
              
              
              
              1,782,426Net cash provided by financing
      activities
              
              
              287,067
              
              
              
              360,000
              
              
              
              2,603,243Net
      increase (decrease) in cash and cash equivalents
              
              
              39,699
              
              
              
              (87,252
              )
              
              
              (315,558
              )Cash
      and cash equivalents, beginning of period
              
              
              8,889
              
              
              
              96,141
              
              
              
              364,146Cash
      and cash equivalents, end of period
              
              $
              48,588
              
              
              $
              8,889
              
              
              $
              48,588Supplemental
      non-cash financing activities:Common stock issued for
      deposits
              
              $
              3,750
              
              
              $
              --
              
              
              $
              3,750





See
the accompanying notes to the financial statements.
  F-4





INTERNATIONAL
STAR, INC.


AND
SUBSIDIARIES


CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY





Cumulative
from Inception of Exploration Stage (January 1, 2004) through December 31,
2009





Common
            
            
            CommonStock
            
            
            Stock
            
            
            Paid-In
            
            
            Accumulated
            
            
            TotalShares
            
            
            Amount
            
            
            Capital
            
            
            Deficit
            
            
            EquityBalances
      at December 31, 2003
            
            
            180,126,681
            
            
            $
            180,127
            
            
            $
            2,183,198
            
            
            $
            (2,053,882
            )
            
            $
            309,443Shares
      cancelled from divestiture of Pita King Bakeries, Int’l,
    Inc.
            
            
            (12,000,000
            )
            
            $
            (12,000
            )
            
            $
            4,000
            
            
            
            
            
            
            $
            (8,000
            )Shares
      retained to Company and cancelled
            
            
            (105,000
            )
            
            $
            (105
            )
            
            $
            (2,895
            )
            
            
            
            
            
            $
            (3,000
            )Common
      stock issued for cash, February 20, 2004Valued
      at $.05 per share
            
            
            90,000
            
            
            $
            90
            
            
            $
            1,410
            
            
            
            
            
            
            $
            1,500Common
      stock issued for cash, February 20, 2004Valued
      at $.06 per share
            
            
            300,000
            
            
            $
            300
            
            
            $
            5,700
            
            
            
            
            
            
            $
            6,000Common
      stock issued for cash, April 27, 2004Valued
      at $.11 per share
            
            
            409,092
            
            
            $
            409
            
            
            $
            14,591
            
            
            
            
            
            
            $
            15,000Common
      stock issued for cash, May 28, 2004Valued
      at $.07 per share
            
            
            454,545
            
            
            $
            455
            
            
            $
            9,545
            
            
            
            
            
            
            $
            10,000Common
      stock issued for cash, June 7, 2004Valued
      at $.07 per share
            
            
            4,090,908
            
            
            $
            4,091
            
            
            $
            85,909
            
            
            
            
            
            
            $
            90,000Capital
      contributed for interest expenses, June 30, 2004
            
            
            
            
            
            
            
            
            
            $
            7,500
            
            
            
            
            
            
            $
            7,500Common
      stock issued for services, September 30, 2004Valued
      at $.03 per share
            
            
            6,000,000
            
            
            $
            6,000
            
            
            $
            54,000
            
            
            
            
            
            
            $
            60,000Common
      stock issued for cash, October 6, 2004Valued
      at $.10 per share
            
            
            2,250,000
            
            
            $
            2,250
            
            
            $
            72,750
            
            
            
            
            
            
            $
            75,000Common
      stock issued for cash, November 29, 2004Valued
      at $.10 per share
            
            
            1,500,000
            
            
            $
            1,500
            
            
            $
            48,500
            
            
            
            
            
            
            $
            50,000Common
      stock issued for cash, December 8, 2004Valued
      at $.10 per share
            
            
            9,750,000
            
            
            $
            9,750
            
            
            $
            315,250
            
            
            
            
            
            
            $
            325,000Common
      stock issued for services, December 31, 2004Valued
      at $.10 per share
            
            
            420,000
            
            
            $
            420
            
            
            $
            13,580
            
            
            
            
            
            
            $
            14,000Capital
      contributed for services and accrued expenses
            
            
            
            
            
            
            
            
            
            $
            73,892
            
            
            
            
            
            
            $
            73,892Net
      (loss) for year ended December 31, 2004
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (799,281
            )
            
            $
            (799,281
            )Balances
      at December 31, 2004
            
            
            193,286,226
            
            
            $
            193,286
            
            
            $
            2,886,930
            
            
            $
            (3,043,648
            )
            
            $
            36,569




(continued
below)
 F-5
  INTERNATIONAL
STAR, INC.


AND
SUBSIDIARIES


CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY


(CONTINUED)





Cumulative
from Inception of Exploration Stage (January 1, 2004) through December 31,
2009





Common
            
            
            CommonStock
            
            
            Stock
            
            
            Paid-In
            
            
            Accumulated
            
            
            TotalShares
            
            
            Amount
            
            
            Capital
            
            
            Deficit
            
            
            Equity1
      for 3 forward stock split, February 22, 2005Common
      stock issued for cash, February 4, 2005Valued
      at $.05 per share
            
            
            199,500
            
            
            $
            200
            
            
            $
            9,776
            
            
            
            
            
            $
            9,975Common
      stock issued for cash, February 4, 2005Valued
      at $.05 per share
            
            
            1,151,013
            
            
            $
            1,151
            
            
            $
            56,400
            
            
            
            
            
            $
            57,551Common
      stock issued for cash, March 3, 2005Valued
      at $.049
            
            
            509,036
            
            
            $
            509
            
            
            $
            24,447
            
            
            
            
            
            $
            24,956Common
      stock and warrants issued for cash, March 3, 2005Valued
      at $.03
            
            
            1,666,667
            
            
            $
            1,667
            
            
            $
            48,313
            
            
            
            
            
            $
            49,980Common
      stock and warrants issued for cash, March 3, 2005Valued
      at $.02
            
            
            4,500,000
            
            
            $
            4,500
            
            
            $
            85,477
            
            
            
            
            
            $
            89,977Common
      stock issued for cash, March 31, 2005Valued
      at $.10
            
            
            500,000
            
            
            $
            500
            
            
            $
            49,500
            
            
            
            
            
            $
            50,000Common
      stock and warrants issued for cash, April 26, 2005Valued
      at $.12
            
            
            833,334
            
            
            $
            833
            
            
            $
            99,137
            
            
            
            
            
            $
            99,970Common
      stock issued for cash, June 1, 2005.Valued
      at $.066
            
            
            150,000
            
            
            $
            150
            
            
            $
            9,850
            
            
            
            
            
            $
            10,000Common
      stock and warrants issued for cash, June 8, 2005Valued
      at $.06
            
            
            975,000
            
            
            $
            975
            
            
            $
            57,495
            
            
            
            
            
            $
            58,470Common
      stock and warrants issued for cash, August 22, 2005Valued
      at $.02
            
            
            6,300,000
            
            
            $
            6,300
            
            
            $
            119,700
            
            
            
            
            
            $
            126,000Common
      stock and warrants issued for cash, August 22, 2005Valued
      at $.12
            
            
            166,667
            
            
            $
            167
            
            
            $
            19,833
            
            
            
            
            
            $
            20,000Common
      stock issued for cash, December 16, 2005.Valued
      at $.02
            
            
            2,500,000
            
            
            $
            2,500
            
            
            $
            47,450
            
            
            
            
            
            $
            49,950Common
      stock issued for cash, December 30, 2005.Valued
      at $.04
            
            
            250,000
            
            
            $
            250
            
            
            $
            9,750
            
            
            
            
            
            $
            10,000Net
      (loss) for year ended December 31, 2005
            
            
            
            
            
            
            
            
            
            
            
            
            
            (799,281
            )
            
            $
            (799,281
            )Balances at December 31,
      2005
            
            
            212,987,443
            
            
            $
            212,987
            
            
            $
            3,524,059
            
            $
            (3,842,929
            )
            
            $
            (105,883
            )





(continued below)


F-6





INTERNATIONAL
STAR, INC.


AND
SUBSIDIARIES


CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY


(CONTINUED)





Cumulative
from Inception of Exploration Stage (January 1, 2004) through December 31,
2009





Common
              
              
              CommonStock
              
              
              Stock
              
              
              Paid-In
              
              
              
              Accumulated
              
              
              TotalShares
              
              
              Amount
              
              
              Capital
              
              
              
              Deficit
              
              
              EquityCommon
      stock issued for services, January 6, 2006Valued
      at $ .04
              
              
              1,437,500
              
              
              $
              1,438
              
              
              $
              56,062
              
              
              
              
              
              
              $
              57,500Common
      stock issued for cash, March 14, 2006Valued
      at $.015
              
              
              1,666,667
              
              
              $
              1,667
              
              
              $
              23,333
              
              
              
              
              
              
              $
              25,000Common
      stock and warrants issued for cash, March 18, 2006Valued
      at $ .015
              
              
              2,500,000
              
              
              $
              2,500
              
              
              $
              35,000
              
              
              
              
              
              
              $
              37,500Common
      stock issued for cash, March 20, 2006Valued
      at $.01
              
              
              9,100,000
              
              
              $
              9,100
              
              
              $
              81,900
              
              
              
              
              
              
              $
              91,000Common
      stock issued for cash, June 12, 2006Valued
      at $.027
              
              
              731,261
              
              
              $
              731
              
              
              $
              19,269
              
              
              
              
              
              
              $
              20,000Common
      stock issued for services, June 15, 2006Valued
      at $.038
              
              
              2,000,000
              
              
              $
              2,000
              
              
              $
              74,000
              
              
              
              
              
              
              $
              76,000Common
      stock issued for cash, July 31, 2006Valued
      at $.01
              
              
              235,000
              
              
              $
              235
              
              
              $
              2,115
              
              
              
              
              
              
              $
              2,350Common
      stock issued for cash, August 2, 2006Valued
      at $.01
              
              
              3,575,000
              
              
              $
              3,575
              
              
              $
              32,175
              
              
              
              
              
              
              $
              35,750Common
      stock issued for cash, August 7, 2006Valued
      at $.0125
              
              
              1,600,000
              
              
              $
              1,600
              
              
              $
              18,400
              
              
              
              
              
              
              $
              20,000Common
      stock issued for cash, August 11, 2006Valued
      at $.015
              
              
              1,000,000
              
              
              $
              1,000
              
              
              $
              14,000
              
              
              
              
              
              
              $
              15,000Common
      stock issued for cash, August 22, 2006Valued
      at $.015
              
              
              1,000,000
              
              
              $
              1,000
              
              
              $
              14,000
              
              
              
              
              
              
              $
              15,000Common
      stock issued for cash, September 29, 2006Valued
      at $ .01 per share
              
              
              1,000,000
              
              
              $
              1,000
              
              
              $
              9,000
              
              
              
              
              
              
              $
              10,000Common
      stock issued for note payable and accrued interest, October 30,
      2006Valued
      at $ .015 per share
              
              
              18,591,682
              
              
              $
              18,592
              
              
              $
              260,283
              
              
              
              
              
              
              $
              278,875Net
      (loss) for year ended December 31, 2006
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (822,059
              )
              
              $
              (822,059
              )257,693,292
              
              
              $
              257,694
              
              
              $
              4,162,327
              
              
              $
              (4,664,988
              )
              
              $
              (244,967
              )Common
      stock issued for deposit, January 13, 2007Valued
      at $ .018 per share
              
              
              1,064,595
              
              
              $
              1,064
              
              
              $
              18,936
              
              
              
              
              
              
              $
              20,000





(continued
below)


F-7


INTERNATIONAL
STAR, INC.


AND
SUBSIDIARIES


CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY


(CONTINUED)




Cumulative
from Inception of Exploration Stage (January 1, 2004) through December 31,
2009




Common
            
            
            CommonStock
            
            
            Stock
            
            
            Paid-In
            
            
            Accumulated
            
            
            TotalShares
            
            
            Amount
            
            
            Capital
            
            
            Deficit
            
            
            EquityCommon
      stock issued for cash, January 15, 2007Valued
      at $ .015 per share
            
            
            4,166,666
            
            
            $
            4,167
            
            
            $
            45,833
            
            
            
            
            
            $
            50,000Common
      stock issued for cash, January 18, 2007Valued
      at $ .012 per share
            
            
            833,334
            
            
            $
            833
            
            
            $
            9,167
            
            
            
            
            
            $
            10,000Common
      stock issued for cash, January 24, 2007Valued
      at $ .013 per share
            
            
            7,692,308
            
            
            $
            7,692
            
            
            $
            92,308
            
            
            
            
            
            $
            100,000Common
      stock issued for cash, April 9, 2007Valued
      at $ .013 per share
            
            
            769,232
            
            
            $
            769
            
            
            $
            9,231
            
            
            
            
            
            $
            10,000Common
      stock issued for cash, April 17, 2007Valued
      at $ .035 per share
            
            
            1,142,847
            
            
            $
            1,142
            
            
            $
            38,857
            
            
            
            
            
            $
            40,000Net
      (loss) for year ended December 31, 2007
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (400,340
            )
            
            $
            (400,340
            )Balances
      at December 31, 2007
            
            
            273,362,274
            
            
            $
            273,362
            
            
            $
            4,376,659
            
            
            $
            (5,065,328
            )
            
            $
            (415,307
            )Common
      stock issued for services, April 30, 2008Valued
      at $ .01 per share
            
            
            400,000
            
            
            $
            400
            
            
            $
            3,600
            
            
            
            
            
            
            $
            4,000Common
      stock issued for cash, August 22, 2008Valued
      at $ .01 per share
            
            
            3,500,000
            
            
            $
            3,500
            
            
            $
            31,500
            
            
            
            
            
            
            $
            35,000Common
      stock issued for cash, September 30, 2008Valued
      at $ .01 per share
            
            
            1,500,000
            
            
            $
            1,500
            
            
            $
            13,500
            
            
            
            
            
            
            $
            15,000Common
      stock issued for cash, October 10, 2008Valued
      at $ .01 per share
            
            
            500,000
            
            
            $
            500
            
            
            $
            4,500
            
            
            
            
            
            
            $
            5,000Net
      (loss) for year ended December 31, 2008
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (541,218
            )
            
            $
            (541,218
            )Balances
      at December 31, 2008
            
            
            279,262,274
            
            
            $
            279,262
            
            
            $
            4,429,659
            
            
            $
            (5,606,546
            )
            
            $
            (897,525
            )Common
      stock issued in January 2009 for deposits made in 2008Valued
      at $ .0015 per share
            
            
            2,250,000
            
            
            $
            2,250
            
            
            $
            1,125
            
            
            
            
            
            
            $
            3,375Common
      stock issued in June 2009 for deposits made in 2008Valued
      at $ .0015 per share
            
            
            250,000
            
            
            $
            250
            
            
            $
            125
            
            
            
            
            
            
            $
            375Common
      stock issued in November 2009 for warrants exercisedValued
      at $ .001 per share
            
            
            250,000
            
            
            $
            250
            
            
            $
            --
            
            
            
            
            
            
            $
            250Net
      (loss) for year ended December 31, 2009
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (312,648
            )
            
            $
            (312,648
            )Balances
      at December 31, 2009
            
            
            282,012,274
            
            
            $
            282,012
            
            
            $
            4,431,009
            
            
            $
            (5,919,194
            )
            
            $
            (1,206,173
            )




See
accompanying notes to financial statements.




F-8





INTERNATIONAL
STAR, INC.


AND
SUBSIDIARIES





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





DECEMBER
31, 2009





A.
            ORGANIZATION
      AND HISTORY





International
Star, Inc. (the “Company”) was incorporated October 28, 1993 as a Nevada
corporation.  On November 5, 1993, the Company issued 2,500 shares, no
par value, for cash consideration of $5,000 in a 504 intrastate
offering.  The Company amended its Articles of Incorporation on
January 22, 1997, increasing its authorized common stock from 2,500 shares to
100,000,000 shares and modifying its par value to $.001 per share.





In
January 1997, the Company forward split its common stock to 6,000,000 shares in
a 2400:1 exchange.  In April 1997, the Company again forward split its
stock 5:1, increasing the total outstanding shares to 30,000,000 and, in a
reorganization of outstanding shares, canceled 17,400,000 shares, forward split
the balance of the shares 8:1 for an additional issuance of 10,080,000 shares to
the 12,600,000 shares outstanding, and then issued 300,000 shares to the
shareholders who canceled the 17,400,000 shares, resulting in 22,980,000 shares
issued and outstanding.  Also, in April 1997, the Company issued
4,500,000 shares (valued at $10,000) in consideration of services performed by
various individuals and corporations.  The 4,500,000-share
transaction, which predates the 5:1 and 8:1 transactions, were apparently not
impacted by either of the two aforementioned forward splits, but resulted in a
total of 27,480,000 shares of common stock issued and outstanding.





In April
1997, the Company entered the waste management business.  The Company
and an affiliated entity, American Holding Group entered into an oral agreement
under which American Holding Group loaned the Company $50,000 at an interest
rate of 3%.  A portion of the loan was used to open a Company office
in Idaho Falls, Idaho.





Due to a
lack of capital, the Company sold its waste management business to Asia Kingtec
Co., Ltd. in December 1997 in a small instrumentation sale for
$17,444.  The Company closed its office in January 1998 and abandoned
the computers and office equipment, purchased at $6,981, to the three
individuals who lead the Company into the waste management
business.  The Company accounts payable reflect $11,455 in disputed
bills from these discontinued operations, which the Company does not intend to
pay.





The three
officers and directors who were appointed at the time of the Company’s
connection with the foray into the waste management business, resigned in August
1999.  The Company accepted the resignations on September 8,
1999.





On July
17, 1998, the Company entered into an extraction agreement with AuRic
Metallurgical Laboratories, Inc., a Utah limited liability corporation, with the
requirement that the Company pay a 1% net smelter return to AuRic for
utilization of its technology.





On
October 12, 1998, the Company entered into a letter of intent with North
American Industrial Development Authority, Inc. (NAIDA) of Kingman,
Arizona.  The original proposal involved constructing an investment in
a mineral processing plant in order to process ores from the Company’s mineral
property.  In exchange, NAIDA would receive 15% of the total ore
produced. However, because of NAIDA’s inability to perform, the proposal was
never set into motion.





On
October 15, 2001, the Company formed a wholly owned subsidiary called Qwik
Track, Inc. (Qwik Track). Qwik Track operated as an internet web-based business
that provides handicapping, analytical data and statistical information for
wagering on thoroughbred horse races.  Qwik Track also offers wagering
enthusiasts the opportunity to participate in multiple racetracks wagering via
the internet.




F-9




On
October 1, 2002, the Company acquired all of the outstanding shares of common
stock of Pita King Bakeries International, Inc. (Pita King) making Pita King a
wholly owned subsidiary of the Company.  Pita King operated a retail
bakery outlet in Everett, Washington which commenced operations in September of
2001.





On
January 1, 2004, the original shareholders of Pita King and the management of
the Company mutually agreed to dissolve their business relationship (see Note
C).





The
Company’s main focus of business, commencing January 1, 2004, is the exploration
of mining claims and mining properties.  The Company has, in
accordance with guidelines of the Securities and Exchange Commission (SEC),
appropriately disclosed that the company is considered an exploration stage
company.





During
2006 the Company relocated its principal offices from Henderson, Nevada to Mount
Pleasant, Texas and then to Shreveport, Louisiana.





B.
            SIGNIFICANT
      ACCOUNTING POLICIES





1.
            Principles
      of Consolidation and Accounting
Methods





These
consolidated financial statements include the accounts of International Star,
Inc., and Qwik Track, Inc. (a wholly owned subsidiary) for the fiscal year ended
December 31, 2009.  Qwik Track, Inc. has no assets and has not had any
operations during the previous three years.





2.
            Use
      of Estimates





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





3.
            Dividend
      Policy





The
Company did not declare or pay any dividends during the years ended December 31,
2009 and 2008.  There are no legal, contractual or other restrictions,
which limit the Company’s ability to pay dividends.  Payment of future
dividends, if any, on the Company’s common stock, will be dependent upon the
amounts of its future after-tax earnings, if any, and will be subject to the
discretion of its Board of Directors.  The Company’s Board of
Directors is not legally obligated to declare dividends, even if the Company is
profitable.  The Company has never paid any dividends on its common
stock and has no plans to do so in the near future.  Instead, the
Company plans to retain any earnings to finance the development of its business
and for general corporate purposes.





4.
            Mineral
      Properties and Equipment





The
Company has expensed the costs of acquiring and exploring its properties during
the periods in which they were incurred, and will continue to do so until it is
able to determine that commercially recoverable ore reserves are present on the
properties.  If it determines that such reserves exist, it will
capitalize further costs.





5.
            Basic
      and Dilutive Net Income (Loss) Per
Share





Basic net
income (loss) per share amounts are computed based on the weighted average
number of shares actively outstanding in accordance with SFAS NO. 128 “Earnings
Per Share.”  Diluted net income (loss) per share amounts are computed
using the weighted average number of common shares and common equivalent shares
outstanding as if shares had been issued on the exercise of any common share
rights unless the exercise becomes anti-dilutive and then only the basic per
share amounts are shown in the report. At December 31, 2009, the Company had no
common equivalent shares of stock outstanding.




F-10




6.
            Comprehensive
      Income





The
Company adopted SFAS No. 130, “Reporting Comprehensive Income”, which requires
inclusion of foreign currency translation adjustments, reported separately in
its Statement of Stockholders’ Equity, in other comprehensive
income.  Such amounts are immaterial and have not been reported
separately.  The Company had no other forms of comprehensive income
since inception.





7.
            Stock
      Based Compensation





The
Company has elected to follow the provisions of Statement of Financial
Accounting Standards No. 123(R) – fair value reporting and related
interpretations in accounting for its stock based compensation and stock option
plans.  Under this accounting standard, share-based awards are fair
valued and the related stock compensation expense, when applicable, is reported
in the current financial statements.





8.
            Income
      Taxes





The
Company has adopted SFAS No. 109 “Accounting for Income Taxes”.  The
Company accounts for income taxes under an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company’s
financial statements or tax returns.  In estimating future tax
consequences, all expected future events, other than enactment of changes in the
tax laws or rates, are considered.





Due to
the uncertainty regarding the Company’s future profitability, the future tax
benefits of its net operating losses have been fully offset by a valuation
allowance.





9.
            Fair
      Value of Financial Instruments





The
respective carrying value of certain on-balance-sheet financial instruments
approximated their fair values.  These financial instruments include
cash, prepaid expenses, accounts payable and accrued liabilities, shareholder
deposits and notes payable.





10.
            Recent
      Accounting Pronouncements





The
Company does not expect that the adoption of other recent account pronouncements
will have a material effect on its financial statements.





11.
            Revenue
      Recognition





Revenue
will be recognized on the sale and delivery of a product or the completion of a
service provided.





12.
            Statement
      of Cash Flows





For the
purposes of the statement of cash flows, the Company considers all highly liquid
investments with a maturity of nine months or less to be cash
equivalents.





13.
            Financial
      and Concentration Risk





The
Company does not have any concentration or related financial credit
risk.




F-11





C.
            DIVESTITURE
      OF PITA KING BAKERIES INTERNATIONAL,
INC.





Effective
January 1, 2004, the original shareholders of Pita King Bakeries International,
Inc. and the management of International Star, Inc. (the Company) mutually
agreed to dissolve their business relationship.  Under terms of this
dissolution, the original shareholders of Pita King Bakeries International, Inc.
returned 4,000,000 shares of common stock to the Company and the Company agreed
to forgive a $35,000 loan made to Pita King Bakeries International,
Inc.  The original shareholders of Pita King Bakeries International,
Inc. were allowed to retain 139,500 share of the Company’s common stock which
they had received as part of the original purchase of Pita King Bakeries
International, Inc. by the Company.  The Company has recognized a loss
of $99,472 on the divestiture of Pita King Bakeries International,
Inc.





D.
            DISPOSAL
      OF ASSETS





The
Company sold equipment for $499 during 2009 with a net book value of
approximately $1,500.  The Company also disposed of unusable equipment
during 2009, with an approximate net book value of $6,400, for a total recorded
loss of $7,902.





E.
            COMMON
      STOCK





During
the twelve months ended December 31, 2008, the Company issued 5,500,000 shares
of common stock and warrants for $55,000.  The Company also issued
400,000 shares of common stock for services rendered valued at
$4,000.





The
Company entered into an employment agreement effective April 1, 2008 whereby the
Company would issue two separate option agreements to the Company
president.  The first option agreement would have allowed the Company
president to purchase up to 5,000,000 shares of the Company common stock at $.01
per share and the second option agreement would have allowed the Company
president to purchase up to 5,000,000 shares of the Company common stock at $.03
per share.  The vesting of the option agreements were to be based upon
performance incentives to be determined by the Board of
Directors.  The employment agreement was amended on August 13, 2008,
to allow the Company to issue stock options for an aggregate of 10,000,000
shares of common stock of the Company on such dates and according to such terms
as designated by the Board of Directors of the Company.





During
the twelve months ended December 31, 2009, the Company issued 2,500,000 shares
of common stock for deposits it received in 2008, and an additional 250,000
shares for $500 it received for the exercise of warrants.  The Company
should have only received $250 for this last warrant exercise and accordingly
has recorded a shareholder deposit at December 31, 2009 for $250, reflecting the
amount to be returned to the shareholder.  The total value of the
stock issued during 2009 was $4,000, and $3,750 in deposits were returned to the
shareholders, as original deposit amounts exceeded the agreed upon stock prices
in the underlying stock subscription agreements.





F.
            LONG
      TERM NOTE PAYABLE – RELATED PARTY





The
Company entered into a loan agreement with Kilpatrick’s Rose-Neath Funeral
Homes, Crematorium and Cemeteries, Inc.on December 3, 2007.  This
Company is controlled through ownership by a shareholder/director of
International Star, Inc.  Under terms of the agreement, the Company
has an available credit line balance of $500,000 with interest accruing at 6%
per annum.  The interest is due and payable on a quarterly basis
(every three months).  The loan is  collateralized by a
security interest to the above mentioned lender in the amount of 51% interest in
the mineral rights of all mining claims owned by or having an interest in now or
in the future in the Detrital Wash and Wickieup properties located in Mohave
County, Arizona along with any future claims acquired by the
Company.  At December 31, 2009, the Company had borrowed $500,000
under the terms of this loan agreement.  The principal amount
borrowed, together with accrued interest, is due and payable on December 3,
2010.





The
Company entered into another loan agreement with Kilpatrick’s Rose-Neath Funeral
Homes, Crematorium and Cemeteries, Inc. on December 1, 2008.  Under
terms of the agreement, the Company has an available credit line of $200,000
with interest accruing at 10% per annum. The interest rate increased from 10% to
18% per annum as of March 31, 2009, which was the Maturity date of the
Note.  At December 31, 2009, the Company had borrowed $200,000 under
the terms of this loan agreement, and had accrued interest of
$32,741.  The principal amount borrowed, together with any unpaid
interest, is due and payable as of March 31, 2009.




F-12




G.
            GOING
      CONCERN





The
Company will need additional working capital for its future planned activity and
to service its debt, which raises substantial doubt about its ability to
continue as a going concern.  Continuation of the Company as a going
concern is dependent upon obtaining sufficient working capital to be successful
in that effort.  The management of the Company has developed a
strategy, which it believes will accomplish this objective, through additional
loans, and equity funding, which will enable the Company to operate for the
coming year.





H.
            SUBSEQUENT
      EVENTS





The
Company has evaluated subsequent events through April 14, 2010, which is the
date the financial statements were issued.

























F-13