**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-KSB**




x
            Annual
                Report Pursuant to Section 13 or 15(D) of the Securities Exchange
                Act of
                1934 for
                the fiscal year ended December 31, 2006.  o
            Transition Report Under Section 13
              or 15(D) of
              the Securities Exchange Act of 1934 for
              the transition period from __________ to
              __________





Commission
      file number: 000-26017





**INTERNATIONAL
      STAR, INC.**


(Exact
      name of Small Business Issuer as specified in its charter)


NEVADA
              86-0876846(State
                  or other jurisdiction
              (IRS
                  Employer Identification No.)of
                  incorporation or organization)1818
                  Marshall StreetShreveport,
                  LA
              71101(Address
                  of principal executive offices)
              (Zip
                  Code)




Issuer's
      telephone number, including area code: (318)
      464-8687


Securities
      registered under Section 12(b) of the Exchange Act: None





Securities
      registered under Section 12(g) of the Exchange Act: Common Stock, par value
      $0.001 per share





Check
      whether the issuer (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.
o Yes   
x
      No





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant's knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. o





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





State
      issuer's revenues for its most recent fiscal year ended December 31, 2006,
      was
      $0.





Based
      on
      the closing sale price of $0.012 on December 29, 2006, the aggregate market
      value of the voting stock held by non-affiliates of the registrant was
      $1,926,869.68.





As
      of
      April 16, 2007, there were 271,450,195  shares
      of
      the registrant’s Common Stock issued and outstanding.





Transitional
      Small Business Disclosure Format (check one): Yes oNo x










**INTERNATIONAL
      STAR, INC.**


**Form
      10-KSB**


**For
      the Fiscal Year Ended December 31, 2006**





**TABLE
      OF CONTENTS**




PART
                I
            
            **1******ITEM
                1. BUSINESS
            
            2**ITEM
                2. DESCRIPTION OF PROPERTY**
            
            7**ITEM
                3. LEGAL PROCEEDINGS**
            
            10**ITEM
                4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                HOLDERS**
            
            10PART
                II
            
            **11****ITEM
                5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
                ISSUER
                PURCHASES OF EQUITY SECURITIES**
            
            11**ITEM
                6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                CONDITION**
            
            14**ITEM
                7. FINANCIAL STATEMENTS**
            
            19**ITEM
                8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                FINANCIAL DISCLOSURE**
            
            19**ITEM
                8A. CONTROLS AND PROCEDURES**
            
            19**ITEM
                8B. OTHER INFORMATION**
            
            20PART
                III
            
            **21****ITEM
                9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
                COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT**
            
            21**ITEM
                10. EXECUTIVE COMPENSATION**
            
            24**ITEM
                11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                MANAGEMENT**
            
            25**ITEM
                12. CERTAIN RELATIONSHIPS AND RELATED
                TRANSACTIONS**
            
            26**ITEM
                13. EXHIBITS**
            
            27










**PART
      I**





**FORWARD
      LOOKING STATEMENTS**





This
      Form
      10-KSB, the other reports, statements, and information that we have previously
      filed or that we may subsequently file with the Securities and Exchange
      Commission and public announcements that we have previously made or may
      subsequently make include, may include, incorporate by reference or may
      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, technological developments, new products, future distribution or
      license rights, international expansion, possible strategic alternatives, new
      business concepts, capital expenditures, consumer 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. 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.
      Moreover, neither we nor any other person assumes responsibility for the
      accuracy and completeness of such 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. The risks and uncertainties that may affect
      the operations, performance, development and results of our business include,
      but are not limited to, the following: changes in consumer spending patterns;
      changes in consumer preferences and overall economic conditions; the impact
      of
      competition and pricing; the financial condition of the suppliers and
      manufacturers from whom we source our merchandise; economic and political
      instability in foreign countries or restrictive actions by the governments
      of
      foreign countries in which suppliers and manufacturers from whom we source
      products are located or in which we may actually conduct or intend to expand
      our
      business; changes in tax laws, or the laws and regulations governing direct
      or
      network marketing organizations; our ability to hire, train and retain a
      consistent supply of reliable and effective participants in our direct or
      network marketing operation; general economic, business and social conditions
      in
      the United States and in countries from which we may source products, supplies
      or customers; the costs of complying with changes in applicable labor laws
      or
      requirements, including without limitation with respect to health care; changes
      in the costs of interest rates, insurance, shipping and postage, energy, fuel
      and other business utilities; the reliability, longevity and performance of
      our
      licensors and others from whom we derive intellectual property or distribution
      rights in our business; the risk of non-payment by, and/or insolvency or
      bankruptcy of, customers and others owing indebtedness to us; 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





Forward-looking
      statements that we make, or that are made by others on our behalf with our
      knowledge and express permission, are based on a knowledge of our business
      and
      the environment in which we operate, but because of the factors listed above,
      actual results may differ from those in the forward-looking statements.
      Consequently, these cautionary statements qualify all of the forward-looking
      statements we make herein. We cannot assure the reader that the results or
      developments anticipated by us will be realized or, even if substantially
      realized, that those results or developments will result in the expected
      consequences for us or affect us, our business or our operations in the way
      we
      expect. 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 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 metals mineral
      properties. Since 1998, we have examined various mineral properties prospective
      for precious metals and minerals and have acquired interests in those we believe
      may contain precious 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
      property is economically and legally feasible. Therefore, at present we have
      no
      reserves and no income from mineral production.





On
      March
      2, 1998, we entered into a Mining Property Lease Agreement with James R. Ardoin
      pursuant to which Mr. Ardoin leased to our Company the Detrital Wash mineral
      claims located around mile marker 22 on Highway 93, Mohave County, Arizona,
      for
      the purpose of exploring for minerals, and if minerals are found on the lands
      leased to us pursuant to this lease, for the extraction, treatment, and sale
      of
      such Minerals. In exchange, we agreed to pay Mr. Ardoin a production royalty
      equal to two percent (2%) of Net Smelter Returns (as defined in the Mining
      Property Lease). The term of this lease is for 20 years, although we have the
      option to renew the lease for successive 20 year terms.




In
      September 2000, we acquired from Gold Standard Mines, Inc. 51 lode mining claims
      located in the Wikieup mining district, Mohave County, Arizona (the “Wikieup
      Property”) and the exclusive rights to an extraction process for the recovery of
      precious metals from the Wikieup Property that was developed by the claim owner.
      We have not had the extraction process verified by an independent source. This
      acquisition was completed on March 26, 2001 and the consideration was 1,000,000
      shares of our restricted common stock having an aggregate value of $400,000
      as
      of the date of the agreement. In exchange, we received a notarized quit claim
      deed granting us for all rights, interest and title to 51 lode Mining Claims,
      which was subsequently recorded at the United States Bureau of Land Management
      office in Phoenix, Arizona and at Mohave County in Kingman,
      Arizona.




2





On
      October 15, 2001, we announced the formation of 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. However,
      due to our limited finances and lack of funding, we have suspended the further
      development of Qwik-Track, Inc. for an indefinite period.





Effective
      October 1, 2002, we acquired Pita King Bakeries International, Inc. (“Pita
      King”). Up until we dissolved our business relationship with Pita King, this
      company operated as our wholly-owned subsidiary engaged in the production and
      marketing of a variety of pita breads and chips. However, effective January
      1,
      2004, we and the principals of Pita King mutually agreed to dissolve our
      business relationship pursuant to a Mutual Agreement to Dissolve Business
      Relationship (the “Dissolution Agreement”). Pursuant to the terms of the
      Dissolution Agreement, we forgave a debt owing from Pita King to our Company
      in
      the aggregate amount of $35,000 and in exchange, the principals and officers
      of
      Pita King agreed to return 4,000,000 shares of our common stock that was issued
      in connection with our acquisition of Pita King. We agreed that the remaining
      139,500 shares of our common stock that was issued to the original shareholders
      of Pita King in connection with the acquisition would remain the property of
      such shareholders and would be unaffected by the Dissolution Agreement. As
      a
      result, Pita King no longer operates as our wholly-owned subsidiary.





On
      February 16, 2005, we finalized an agreement with Zereko Nevada, Inc. (Zereko),
      a Nevada based corporation engaged in mining engineering and related services,
      for various services in support of the ongoing exploration activities at the
      Detrital Wash Property. Under the terms of the agreement, Zereko will review
      in
      detail available information on all previous work done on the property, define
      areas that merit further detailed examination, then propose an implementation
      plan, prepare budgets and obtain quotes for the indicated exploration
      activity.





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 the
      Detrital Wash Property. Each of Resolve and our Company will 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 are 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 is required to contribute 600,000
      Canadian Dollars, equivalent to approximately $518,000 translated into U.S.
      Dollars using current exchange rate, within 60 to 90 days of the joint venture's
      formation. In addition, Resolve is 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
      will
      be the exclusive managing member of Star-Resolve Detrital Wash, LLC. As of
      the date of filing of this report, Resolve has not made the required cash
      contribution and is in default under the joint venture agreement. Our management
      is currently engaged in discussions with Resolve regarding a resolution to
      Resolve’s breach of the joint venture agreement. However, there can be no
      assurance that the parties will reach an amicable resolution.





3


**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 and produced very small
      amounts of precious metals on a testing basis (these have come from the testing
      of mineralized material from both the Detrital Wash and Wikieup 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 the exploration programs 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.





However,
      encouraged by the early stage exploration performed on our Detrital Wash
      Property by Kokanee Placer, Inc. of White Rock, BC, a geological exploration
      company and Zereko Nevada, Inc., a mining engineering company, and independent
      tests performed by us on our Wikieup Property, we are in the process of
      developing a staged exploration plan based on the perceived merits of the
      Detrital Wash Property and projected costs of further exploration.





**Regulation**





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




·  prospecting;




·  development;




·  taxes;




·  labor
      standards;




4




·  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 Liability Act ("Superfund") 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 or storage facilities and rent space as appropriate
      when
      necessary. Our executive offices are located at 1818 Marshall Street,
      Shreveport, LA 71101.





**Employees**





As
      of
      December 31, 2006, we had no employees other than our executive officers, nor
      any plans to recruit employees within the next twelve months.





**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, 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.





5


**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.





Pita
      King Bakeries International, Inc.





Effective
      October 1, 2002, we acquired Pita King Bakeries International, Inc. (“Pita
      King”) and appointed Hassan Alaeddine to our Board of Directors. Up until we
      dissolved our business relationship with Pita King, this subsidiary company
      produced and marketed a variety of pita breads and chips. However, effective
      January 1, 2004, we and the principals of Pita King mutually agreed to dissolve
      our business relationship pursuant to a Mutual Agreement to Dissolve Business
      Relationship (the “Dissolution Agreement”). Pursuant to the terms of the
      Dissolution Agreement, we forgave a debt owing form Pita King to our Company
      in
      the aggregate amount of $35,000, and in exchange, the principals and officers
      of
      Pita King agreed to return 4,000,000 shares of our common stock that was issued
      in connection with our acquisition of Pita King. We agreed that the remaining
      139,500 shares of our common stock that was issued to the original shareholders
      of Pita King in connection with the acquisition would remain the property of
      such shareholders and would be unaffected by the Dissolution Agreement. As
      a
      result, effective January 1, 2004, Pita King no longer operates as our
      wholly-owned subsidiary and we have recognized a loss of $99,472 on the
      divestiture of Pita King.





Star-Resolve
      Detrital Wash, LLC





As
      discussed elsewhere in this Annual Report, 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 the Detrital Wash Property.
      Each
      of Resolve and our Company will 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 are 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
      is
      required to contribute 600,000 Canadian Dollars, equivalent to approximately
      $518,000 translated into U.S. Dollars using current exchange rate, within 60
      to
      90 days of the Joint Venture's formation. In addition, Resolve is 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 will be the exclusive managing member of Star-Resolve
      Detrital Wash, LLC. Nonetheless, as of the date of filing of this report,
      Resolve has not made the required cash contribution and is in default under
      the
      joint venture agreement. Our management is currently engaged in discussions
      with
      Resolve regarding a resolution to Resolve’s breach of the joint venture
      agreement. However, there can be no assurance that the parties will reach an
      amicable resolution.





6


**ITEM
      2. DESCRIPTION OF PROPERTY** ****





We
      currently hold interests in two properties that we believe show potential for
      mineral development. Both properties are unpatented mining claims located on
      federal public land and managed by the United States Bureau of Land
      Management.





Unpatented
      claims are "located" or "staked" by individuals or companies on federal public
      land. Each placer claim covers 20 to 160 acres; each lode claim covers 20 acres.
      We are obligated to pay a maintenance fee of $100 per claim per year to the
      BLM
      or file an Affidavit of Assessment Work with the BLM showing labor and
      improvements of at least $100 for each claim yearly.





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 such fees or make the required filings 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.





There
      are
      uncertainties as to title matters in the mining industry. We believe that we
      have good title to our properties; however, defects in such title 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 title to our properties will not be
      challenged or impugned by third parties or governmental agencies. In addition,
      there can be no assurance that the properties in which we have an interest
      are
      not subject to prior unregistered agreements; transfers or claims and title
      may
      be affected by undetected defects. Any such defects could cause us to lose
      our
      rights to the property or to incur substantial expense in defending our
      rights.





**Detrital
      Wash, Mohave County, Arizona Property**





On
      March
      3, 1998, we entered into a mineral lease with James R. Ardoin for the Detrital
      Wash mineral claims located one mile east of mile marker 22 on Highway 93,
      Mohave County, Arizona. The lease does not require any minimum payments, and
      charges a royalty of 2% of net smelter returns (NSR). The term of the lease
      is
      for 20 years with an option to renew for additional, successive 20-year terms.




The
      Detrital Wash Property originally consisted of 8 placer claims lying in Section
      36, Township 28 North, Range 21 West and is easily accessed by partially paved
      entry off Highway 93 and has availability to electricity and water.





In
      July
      2004, we reached an agreement in principle with the holders of 131 placer
      association claims covering approximately 20,000 acres adjacent to and
      surrounding our Detrital Wash Property. The agreement will grant us exclusive
      exploration rights on the claims, and first right of refusal for exclusive
      development rights in exchange for a 0.25% net smelter return payable to the
      claimholders. The agreement will require the company to expend a minimum of
      $125,000 on exploration during a three-year period.





The
      majority of this 22,240-acre property is composed of "alluvial sand," that
      is to
      say, a dry riverbed lying 210 feet above the existing water table. Two
      historically documented sources found at the County seat archives in Kingman,
      Arizona provide possible explanation for the deposition of valuable minerals
      in
      the Detrital Valley:





1.
            A
                major flood in early 1900's washed away approximately 15 major gold
                and
                silver mines overlooking the Detrital on the West. These mining camps,
                among the most prolific and highest producing mines in the Western
                USA,
                were known as Silverado, Excelsior, Prince Albert, Occidental, Etc.
                According to County records most of the mine stockpiles and tailing
                were
                washed into the Detrital Wash. The flood acted as a water cannon
                stripping
                the landscape and washing everything down into the valley
                below.




7




2.
            In
                1982, County Historian, Roman Malach, in a book entitled " White
                Hills,
                Silverado in Mohave County" confirms the disaster in White Hills,
                the
                valuable gold camps, particularly Silverado that were lost to the
                flood
                and, the likely presence of an ancient river which flowed through
                the
                Detrital Valley. This river was likely the transporter of gold, silver,
                platinum and palladium to the
                Valley.





Although
      limited in number prior to 2005, all "spot/surface samples" taken by the Company
      on this property indicated the existence of "precious metals". Of major
      significance was a 2-ton "bulk sample" (at a depth of 4 to 12 feet) by AuRIC
      Metallurgical Laboratories, LLC, Salt Lake City, Utah, conducted in 1998 under
      a
      "chain of custody" (COC) that provided evidence of gold and silver with traces
      of palladium and platinum.





Two
      batch
      tests of 1,000 lbs. each were performed, each batch produced a "dore bar"
      (composite of all metalliferous minerals recovered from the sample). One of
      the
      dore bars was then refined and yielded metals equivalent to the following values
      per ton of original material:





Gold
                (Au)
            
            0.812
                oz.Silver
                (Ag)
            
            1.359
                oz.Platinum
                (Pt)
            
            0.440
                oz.Palladium
                (Pd)
            
            0.019
                oz.




Our
      Management believed that the precious metals derived from the surface and bulk
      samples were of sufficient quantity and quality to warrant further exploration
      of the Detrital Wash Property. Accordingly, on January 9, 2004, we engaged
      Kokanee Placer, Inc. of White Rock, BC, a geological exploration company, to
      execute the initial phase of an exploration program on our original 1,280 acre
      Detrital Wash Property, the results of which would dictate subsequent
      exploration phases, if found to be practical. The initial effort by Kokanee
      Placer, Inc. called for surface sampling of the property in a grid pattern
      at
      intervals of every 500 feet (in excess of 200 samples). The results of the
      sampling program identified areas of elevated to anomalous values of placer
      gold
      and silver that required follow-up exploration and evaluation.





As
      result, on February 16, 2005, the Company finalized an agreement with Zereko
      Nevada, Inc. (Zereko), a Nevada based corporation engaged in mining engineering
      and related services, for various services in support of the ongoing exploration
      activities at our Detrital Wash Property. In May 2005, Zereko issued a final
      report (the “Zereko Report”) on assay test results from the Detrital Wash
      Property. In order to prove the best process for extracting precious metals
      on
      the Detrital Wash Property, samples from drilling that took place in early
      April
      2005 were sent to three different metallurgical laboratories as part of a blind
      test process: Mountain States R&D (“Mountain States”), AuRic Metallurgical
      Laboratories, LLC (“AuRic”), and Nevada Bureau of Geology and Mines (“NBGM”).




8





In
      assessing the samples, Mountain States used a strictly “fire assay” analysis
      process and returned negative results from all samples tested, which was not
      a
      surprise since, the “alluvial sand” on the Detrital Wash Property rarely tests
      positive in fire assays and the purposes of testing at Mountain States was
      to
      help validate the blind test process. On the other hand, AuRic reported positive
      results for gold, silver, platinum and palladium for each sample presented
      to
      AuRic for analysis and was consistent with Auric’s 1998 conclusions with respect
      to the Detrital Wash Property. It should be noted that since AuRic had been
      used
      in the past for testing samples on the Detrital Wash Property, this was a
      completely blind test and AuRic was not aware of the origin of the samples.
      Nevertheless, these recent samples returned with comparable results from earlier
      tests performed by AuRic on the Detrital Wash Property. The third lab, NBGM,
      received the bulk of the samples and reported no detectable results for gold,
      palladium or platinum, but reported significantly for silver in a large number
      of the samples. The findings of NBGM were qualified by Zereko in that NBGM’s
      testing procedures do not allow NBGM to go to the lower levels of gold, platinum
      and palladium detection necessary to obtain ‘detectable amounts.’ Gold, platinum
      and palladium must be tested at a lower level than silver for an accurate
      reading. AuRic’s findings in particular, led Zereko to conclude that gold,
      silver, platinum and palladium do exist at lower levels of detection on the
      Detrital Wash Property and are considered to have some economic value.





Currently
      we are attempting to raise additional capital to continue a staged exploration
      program on this property. .





**Wikieup,
      Arizona Property**





In
      March
      2001, we purchased from Gold Standard Mines Inc. 51 lode mining claims located
      in the Wikieup mining district, Mohave County, Arizona (the “Wikieup Property”).
      Consideration for the acquisition was 1,000,000 restricted common shares valued
      at $400,000 as of the date of the agreement. In connection with the acquisition
      of the Wikieup Property and for no additional consideration, we were assigned
      all right, title and interest in certain proprietary gold, silver and/or
      platinum metal recovery formulae for the processing of ore in and about the
      Wikieup Property. As of the date of this filing, we have not had the formulae
      and processing techniques independently verified.





The
      Wikieup Property at present consists of approximately 840 acres (42 lode claims)
      of mountainous terrain and is accessible by paved and dirt roads west of
      Wikieup, Arizona off U.S. Highway 93. The property is located in Section 36,
      Township 16N, Range 14W in the Holapa Mountain Range. There is nearby access
      to
      electricity and water.





In
      the
      area of the claims where we have explored, is the Oakman mining district, which
      is located to the northwest and also the Bagdad open pit copper property located
      to the southeast of this area.





We
      processed a limited number of "spot samples" of stockpiled screened material
      from a claim immediately adjacent to our Wikieup Property and found precious
      metals to exist in the material, although our sampling did not permit a reliable
      quantitative evaluation as we could not be certain of the degree of
      pre-treatment and concentration the material had undergone. Nevertheless, the
      spot samples confirmed our belief, based on the available literature, that
      the
      property shows promise as an exploration target. However, the mountainous
      terrain and complex nature of the geological makeup of the Wikieup Property
      would likely make it much more costly to explore and develop than the Detrital
      Wash Property. As a result, we have focused our efforts and available resources
      on the continued exploration of the Detrital Wash Property.





9


We
      have
      not systematically drilled and sampled the Wikieup Property. The sampling of
      Detrital Wash Property is not sufficient to confirm the presence of any
      concentrations of precious metals in a mineable mass. We believe that the staged
      exploration program being conducted by Zereko Nevada will assist in making
      those
      determinations. There is substantial risk that such testing would show limited
      concentrations of precious metals, and such testing may show a lack of precious
      metals in a mineable mass. Test results so far have been positive and confirm
      the presence of precious metals in the samples. However, we cannot safely assume
      that precious metals-bearing materials exist in quality and quantity to make
      a
      mining operation economically feasible.





Wikieup
      testing to date has focused principally on assaying materials for precious
      metals content, with very limited testing of how to process materials for
      production. The various procedures we have used to assay the samples have not
      addressed what metallurgical procedures would be best suited to process precious
      metals out of the materials on an economic scale. Even if independent reserve
      reports indicate the presence of precious metals, further extensive work will
      be
      needed in the form of a feasibility study to determine if the precious metals
      (if any are shown likely to be present in the property) in fact can be processed
      out of the material at a profit. Some companies decide that even though one
      of
      their properties contains valuable minerals, it is impossible to remove them
      profitably in commercial production.




**ITEM
      3. LEGAL PROCEEDINGS** ****





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. At
      December 31, 2006, we know of no current or threatened legal proceedings
      involving us or our properties reportable under this Item 3.




**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS** ****





We
      held
      our annual shareholders meeting on December 1, 2006, in Shreveport, Louisiana.
      At the annual meeting, our shareholders elected as directors the following
      individuals: Denver Cashatt (7,378,499 shares for; 58,986,349 shares withheld),
      Joseph Therrell, Jr. (62,589,848 shares for; 3,775,000 shares withheld),
      Virginia Shehee (62,592,848 shares for; 3,772,000 shares withheld), Robert
      M.
      Glover (62,361,848 shares for; 3,775,000 shares withheld) and John Tuma
      (66,361,848 shares for; 3,000 shares withheld). The shareholders also approved
      our 2006 Stock Option Plan (58,059,848 shares for; 8,275,000 shares against;
      and
      30,000 shares abstained) and ratified our appointment of Madsen & Associates
      CPA's, Inc. as our independent registered public accountant for the year ended
      December 31, 2006 (58,089,848 shares for; 4,500,000 shares against; and
      3,775,000 shares abstained).





10




**PART
      II**





**ITEM
      5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL ISSUER
      PURCHASES OF EQUITY SECURITIES**





Up
      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 under
      the Symbol ISRI.PK. On February 22, 2005, the NASDAQ 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 price per share for our common stock during the fiscal years ended
      December 31, 2006 and 2005. 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, 2006**HIGH
              
              LOW4th
                  Quarter ended December 31, 2006
              
              $
              0.018
              
              $
              0.0103rd
                  Quarter ended September 30, 2006
              
              $
              0.045
              
              $
              0.0162nd
                  Quarter ended June 30, 2006
              
              $
              0.068
              
              $
              0.0251st
                  Quarter ended March 31, 2006
              
              $
              0.041
              
              $
              0.0374th
                  Quarter ended December 31, 2005
              
              $
              0.11
              
              $
              0.0253rd
                  Quarter ended September 30, 2005
              
              $
              0.11
              
              $
              0.042nd
                  Quarter ended June 30, 2005
              
              $
              0.17
              
              $
              0.071st
                  Quarter ended March 31, 2005
              
              $
              0.21
              
              $
              0.06




The
      closing price of our common stock as of April 13, 2007 was $0.024 per share.





**Stock
      Split**





As
      of
      February 18, 2005, the NASDAQ approved a 3:1 forward split of our common stock.
      As a result, shareholders of record received three shares for each one share
      held by them as of the effective date, February 22, 2005. As of the approval
      date, we had 64,428,741 common stock shares outstanding and as a result of
      the
      forward stock split, we had 193,286,223 common stock shares outstanding as
      of
      the approval date.





**Number
      of Shareholders**





At
      December 31, 2006, we had approximately 158 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.




11


**Dividend
      Policy**





We
      did
      not declare or pay any dividends during our fiscal years ended December 31,
      2006
      and 2005. 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.





**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. If our Common Stock is deemed to be a penny stock, trading in the
      shares will be 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 assets in
      excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
      with their spouse. 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 and
      Restricted Stock 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 provided 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 were granted to our named executive officers during
      the
      fiscal year ended December 31, 2006, nor have any stock options been granted
      to
      our named executive officers since December 31, 2006, through and including
      the
      filing date of this Report.




12




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
              
              
              0
              
              
              —
              
              
              18,000,000Equity
                  compensation plans not approved by security holders
              
              
              0
              
              
              —
              
              
              0Total
              
              
              0
              
              
              0
              
              
              18,000,000




**Recent
      Sales of Unregistered Securities**





Set
      forth
      below is information regarding the sale of securities during the year ended
      December 31, 2006 that were not registered under the Securities Act of 1933,
      as
      amended (the “Securities Act”):





On
      January 6, 2006, we issued a total of 1,437,500 shares of our common stock
      to
      two of our officers pursuant to the conversion of outstanding loans totaling
      $57,500 at a rate of $0.04 per share. We believe the issuance was exempt from
      the registration requirements pursuant to Regulation D or Section 4(2) of the
      Securities Act.





In
      March
      of 2006, we sold 1,666,667 shares of our common stock to an individual at $0.015
      per share. In connection with this sale, we paid an officer of our company
      $2,500 in commission. We believe the sale was exempt from the registration
      requirements pursuant to Regulation D or Section 4(2) of the Securities Act.





On
      March
      13, 2006, we sold 9,100,000 shares of our common stock to an individual at
      $0.01
      per share. In connection with this sale, we paid an officer of our company
      $9,100 in commission. We believe the sale was exempt from the registration
      requirements pursuant to Regulation D or Section 4(2) of the Securities Act.





On
      March
      13, 2006, we sold 2,433,333 units of our securities, each unit consists of
      one
      share of our common stock and a warrant to purchase one share of common stock,
      to an individual at $0.015 per unit. Each warrant has an exercise price equal
      to
      75% of the closing price of a share of our common stock on the date of exercise
      and expires on March 13, 2007. In connection with this sale, we paid an officer
      of our company $3,750 in commission. We believe the sale was exempt from the
      registration requirements pursuant to Regulation D or Section 4(2) of the
      Securities Act.





In
      June
      of 2006, we issued 1,000,000 shares of our common stock pursuant to the exercise
      of warrants at an exercise price of $0.02 per share. We believe the issuance
      was
      exempt from the registration requirements pursuant to Regulation D or Section
      4(2) of the Securities Act.


13


On
      June
      27, 2006, we issued 2,000,000 shares of our common stock to an individual for
      services provided at a rate of $0.03 per share. This individual later became
      a
      director of our company. We believe the sale was exempt from the registration
      requirements pursuant to Regulation D or Section 4(2) of the Securities Act.




In
      August
      of 2006, we sold 2,000,000 shares of our common stock to three accredited
      investors for $0.015 per share. We believe the issuance was exempt from the
      registration requirements pursuant to Regulation D or Section 4(2) of the
      Securities Act.





In
      August
      of 2006, we issued 1,666,667 shares of our common stock to a shareholder
      pursuant to the exercise of warrants at $0.012 per share. We believe the
      issuance was exempt from the registration requirements pursuant to Regulation
      D
      or Section 4(2) of the Securities Act.





In
      August
      of 2006, we repriced the exercise price of warrants with the expiration date
      of
      August 5, 2006 from $0.05 to $0.01 per share. Pursuant to our warrant repricing,
      two shareholders and four affiliates of our company exercised the warrants
      to
      purchase an aggregate of 3,810,000 share of our common stock. We believe the
      sale was exempt from the registration requirements pursuant to Regulation D
      or
      Section 4(2) of the Securities Act.





In
      September and October of 2006, we issued an aggregate of 1,000,000 shares of
      our
      common stock to a shareholder pursuant to the exercise of warrants at $0.01
      per
      share. We believe the issuance was exempt from the registration requirements
      pursuant to Regulation D or Section 4(2) of the Securities Act.





On
      October 30, 2006, we committed to issue 18,591,682 share of our common stock
      to
      Kilpatrick Life Insurance Company, pursuant to the conversion of an outstanding
      loan of $250,000 and interest due in the amount of $28,875.25 at a rate of
      $0.015 per share. We believe the issuance was exempt from the registration
      requirements pursuant to Regulation D or Section 4(2) of the Securities Act.





**Purchases
      of Equity Securities**





We
      are
      required by the Securities Act of 1933 to disclose, in tabular format, any
      repurchases of our securities in the fourth quarter of our fiscal year ended
      December 31, 2006. We did not repurchase any of our securities in the fourth
      quarter of our fiscal year ended December 31, 2006, and accordingly, we have
      eliminated such table.





**ITEM
      6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
      CONDITION**





**GENERAL**





The
      following presentation of Management’s Discussion and Analysis of Financial
      Condition has been prepared by internal management and should be read in
      conjunction with the Financial Statements and notes thereto included in Item
      7
      of this Annual Report on Form 10-KSB. 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.




14




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 metals mineral properties. Since 1998, we have examined various mineral
      properties prospective for precious metals and minerals and have acquired
      interests in those we believe may contain precious 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 property is economically and legally
      feasible. Therefore, at present we have no reserves and no income from mineral
      production





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.




Reserves,
      by definition, contain mineral deposits in a quantity and in a form room 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.





The
      business of mineral exploration is very speculative because 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.





Our
      directors and executive officers lack significant experience or technical
      training in exploring for precious metal deposits and 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
      such as 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
      plan
      to align our Company with reputable, knowledgeable experts in the mining
      industry to overcome this lack of experience and expertise, such as our service
      agreement with Zereko Nevada, Inc, and Karel Pieterse, a mining engineer.




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.




15




Our
      directors and executive officers own a significant amount of our voting capital
      common stock, and accordingly, exert considerable influence over us. As of March
      31, 2006, our directors and executive officers beneficially owned common stock
      and securities convertible into our common stock which, upon exercise, would
      equal to approximately 38% of the voting power. As a result, these stockholders
      are potentially able to decide all matters requiring stockholder approval,
      including the election of directors and the approval of significant corporate
      transactions. This concentration of ownership could also delay or prevent a
      change in control that may be favored by other stockholders.





**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, 2006. In recognition of these trends, our independent registered accountants
      included cautionary statements in their report on our financial statements
      for
      the year ended December 31, 2006 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 and our management has developed a strategy which it believes
      will accomplish this objective through additional equity funding, long term
      financing, and payment of our expenses by our officers, if needed, which will
      enable us to operate for the coming year.





**Plan
      of Operation**





Over
      the
      next twelve months, we intend to focus on obtaining financing necessary for
      further exploration on the Detrital Wash Property and implementation of the
      recommendations of the Zereko Report to assess the commercial viability of
      mineral extraction from deposits on the Detrital Wash Property and the
      establishment of a precious metal reserve. Given our limited resources and
      our
      ability to obtain financing, we intend to concentrate our efforts and our
      available finances on the continued exploration of the Detrital Wash Property.
      At present, our Management has no intention of continuing the exploration of
      the
      Wikieup Property, although should financing become available with respect to
      the
      Wikieup Property, our Management may consider further mineral exploration of
      the
      Wikieup 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.





**Financing**





We
      have
      no credit lines or other sources of cash. We believe our current cash is
      sufficient to sustain our administrative overhead over the next twelve months,
      and to continue some exploration operations on our Detrital Wash Property.
      We
      will continue to pursue means to expand our exploration activities, either
      by
      seeking additional capital through loans or private placements of our
      securities, or possibly entering joint venture arrangements with one or more
      other, more substantial companies. If we raise capital by selling our equity
      stock, the proportionate ownership of existing shareholders will be diluted.




16




During
      our fiscal year ended December 31, 2006, we secured additional funding through
      the private placement of our restricted common stock shares at prices ranging
      from $0.010 to $0.015 per share. In the aggregate, we sold 22,676,667 restricted
      common stock shares during our fiscal year 2006 for a net purchase price of
      $270,600. We believe the issuance was exempt from the registration requirements
      pursuant to Regulation D or Section 4(2) of the Securities Act. (See: “Recent
      Sales of Unregistered Securities”).





In
      addition, 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.
      There
      were no amounts owing to the Company’s directors at December 31, 2006 and 2005.
      During the year ended December 31, 2006, our Directors did not contribute any
      capital amounts to the Company.





**LIQUIDITY**





**Liquidity
      and Capital Resources**





2006
            
            2005Net
                cash Used in Operating Activities
            
            $
            (492,560
            )
            $
            (651,875
            )Net
                Cash Used in Investing Activities
            
            
            —
            
            
            —Net
                Cash Provided by Financing Activities
            
            
            290,600
            
            
            656,826





**General**





Overall,
      we had negative cash flows of $201,960 for the year ended December 31, 2006,
      resulting from $492,560 used in our operating activities and $290,600 provided
      by our financing activities. No cash was provided by our investing activities
      for the fiscal year 2006.




**Cash
      Used in Our Operating Activities**





For
      the
      year ended December 31, 2006, net cash used in our operating activities of
      $492,560 was due primarily to general and administrative expenses and expenses
      associated with professional services and management fees and
      compensations.





**Cash
      Provided by Our Financing Activities**





Net
      cash
      used in our financing activities of $290,600 in the year ended December 31,
      2006
      was comprised of cash provided by the issuance of common stock and warrants.





**Internal
      Sources of Liquidity**





For
      the
      year ended December 31, 2006, the funds generated from our operations were
      insufficient to fund our daily operations. There is no assurance that funds
      from
      our operations will meet the requirements of our daily operations in the future.
      In the event that funds from our operations are insufficient to meet our
      operating requirements, we will need to seek other sources of financing to
      maintain liquidity.




17




**External
      Sources of Liquidity**





We
      actively pursue all potential financing options as we look to secure additional
      funds to both stabilize and grow our business operations. Our management will
      review any financing options at their disposal, and will judge each potential
      source of funds on its individual merits. There can be no assurance that we
      will
      be able to secure additional funds from debt or equity financing, as and when
      we
      need to, or if we can, that the terms of such financing will be favorable to
      us
      or our existing stockholders.





On
      October 28, 2003, we approved the acceptance of a subscription agreement and
      loan agreement between us and Kilpatrick Life Insurance Company. Under the
      terms
      of these agreements, Kilpatrick Life Insurance Company loaned to us $250,000
      pursuant to a promissory note, carrying an interest rate of 6% pr annum, with
      interest payable in quarterly installments with the first quarterly interest
      payment due on April 28, 2004. This note is due and payable in full on October
      28, 2006, and is secured by a mortgage of a 25% mineral interest in our 1,280
      acre Detrital Wash Mining Claims in Mohave County, Arizona. Kilpatrick Life
      Insurance Company had waived payment of all interest due until October 28,
      2006.





On
      October 30, 2006, Kilpatrick Life Insurance Company converted the outstanding
      loan of $250,000 and interest due in the amount of $28,875.25 into shares of
      our
      common stock at a rate of $0.015 per share for a total of 18,591,682
      shares.





**Inflation**





Management
      believes that inflation has not had a material effect on our results of
      operations, and does not expect that it will in fiscal year 2007, except that
      rising oil and gas prices may materially and adversely impact the economy
      generally.





**Forward
      Looking Statements**





This
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations includes a number of forward-looking statements that reflect our
      management’s current views with respect to future events and financial
      performance. Those statements include statements regarding our intent, belief
      or
      current expectations, and those of members of our management team, as well
      as
      the assumptions on which such statements are based. Prospective investors are
      cautioned that any such forward-looking statements are not guarantees of future
      performance and involve risk and uncertainties, and that actual results may
      differ materially from those contemplated by such forward-looking statements.
      Readers are urged to carefully review and consider the various disclosures
      made
      by us throughout this Report, as well as in our other reports filed with the
      Securities and Exchange Commission. Important factors currently known to
      Management could cause actual results to differ materially from those in
      forward-looking statements. We undertake no obligation to update or revise
      forward-looking statements to reflect changed assumptions, the occurrence of
      unanticipated events or changes in future operating results over time. We
      believe that our assumptions are based upon reasonable data derived from and
      known about our business and operations. No assurances are made that actual
      results of operations or the results of any future activities will not differ
      materially from our assumptions.




18




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 Exchange Act with
      respect to Forward Looking Statements. Nevertheless, investors are urged to
      give
      serious consideration to those factors which we have 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
      which
      may occur from the assumptions we have relied upon in making Forward-Looking
      Statements.





**Off-Balance
      Sheet Arrangements**





We
      do not
      have any off-balance sheet arrangements.





**ITEM
      7. FINANCIAL STATEMENTS**




Our
      Financial Statements and supplementary data are included beginning immediately
      following the signature page to this Report. See Item 13 for a list of the
      Financial Statements and financial statement schedules included with this
      filing.




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





None.




**ITEM
      8A. CONTROLS AND PROCEDURES** ****





**(a)**  **Disclosure
      Controls and Procedures.**




Our
      management evaluated, with the participation of our Chief Executive and
      Financial Officer, the effectiveness of our disclosure controls and procedures
      as of the end of the period covered by this Annual Report on Form 10-KSB,
      December 31, 2006. Based on this evaluation, our Chief Executive and Financial
      Officer has concluded that our disclosure controls and procedures (as defined
      in
      Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the
      Exchange Act) are ineffective to ensure that information required to be
      disclosed by us in reports that we file or submit under the Exchange Act is
      recorded, processed, summarized and reported within the time periods specified
      in SEC rules and forms. We are developing a plan to ensure that all information
      will be recorded, processed, summarized and reported on a timely basis. This
      plan is dependent, in part, upon reallocation of responsibilities among various
      personnel, possibly hiring additional personnel and additional funding. It
      should also be noted that the design of any system of controls is based in
      part
      upon certain assumptions about the likelihood of future events, and there can
      be
      no assurance that any design will succeed in achieving its stated goals under
      all potential future conditions, regardless of how remote.





**(b)**  **Changes in Internal Control over Financial Reporting**





There
      was
      no change in the 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.





19


**ITEM
      8B. OTHER INFORMATION**





**Item
      1.01 Entry into a Material Definitive Agreement**





As
      disclosed in our previous filings with the SEC, on October 28, 2003, we approved
      the acceptance of a subscription agreement and loan agreement between us and
      Kilpatrick Life Insurance Company, a major shareholder of our company. Under
      the
      terms of these agreements, Kilpatrick Life Insurance Company loaned to us
      $250,000 pursuant to a promissory note, carrying an interest rate of 6% pr
      annum, with interest payable in quarterly installments with the first quarterly
      interest payment due on April 28, 2004. This note is due and payable in full
      on
      October 28, 2006, and is secured by a mortgage of a 25% mineral interest in
      our
      1,280 acre Detrital Wash Mining Claims in Mohave County, Arizona. Kilpatrick
      Life Insurance Company had waived payment of all interest due until October
      28,
      2006.





On
      October 30, 2006, Kilpatrick Life Insurance Company entered into an agreement
      with us to convert the outstanding loan of $250,000 and interest due in the
      amount of $28,875.25 into shares of our common stock at a rate of $0.015 per
      share for a total of 18,591,682 shares.





**Item
      3.02 Unregistered Sales of Equity Securities**





As
      disclosed in Item 1.01 above, on October 30, 2006, we committed to issue
      18,591,682 share of our restricted common stock to Kilpatrick Life Insurance
      Company, pursuant to the conversion of an outstanding loan of $250,000 and
      interest due in the amount of $28,875.25 at a rate of $0.015 per share. We
      believe the issuance was exempt from the registration requirements pursuant
      to
      Regulation D or Section 4(2) of the Securities Act.





20


**PART
      III**





**ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
      WITH
      SECTION 16(A) OF THE EXCHANGE ACT** ****




Our
      executive officers and directors, and their respective ages as of April 17,
      2007, are as follows:





Name
            
            Age
            
            Position(s)
                Held
            
            Date
                Service BeganJoseph
                E. Therrell, Jr.
            
            66
            
            Acting
                President, Acting Treasurer/Chief Financial Officer,
                Director
            
            October
                2004Jacqulyn
                B. Wine
            
            63
            
            Acting
                Secretary
            
            January
                2007Virginia
                K. Shehee
            
            83
            
            Director,
                Chairman of the Board
            
            January
                2005Robert
                M. Glover
            
            53
            
            Director
            
            November
                2006John
                E. Tuma
            
            49
            
            Director
            
            November
                2006





**Mr.
      Joseph E. Therrell, Jr.** currently serves as our Acting President, our Acting Treasurer/Chief Financial
      Officer, and as a Director on our Board of Directors. Mr. Therrell concurrently
      serves as the Vice President and Chief Investment Officer for Kilpatrick Life
      Insurance Company, a major shareholder of our Company. Mr. Therrell has served
      as a Director of our Company since October of 2005 and has served as the Vice
      President and Chief Investment Officer for Kilpatrick Life Insurance Company
      since December of 1989. He oversees all investments and commercial loans funded
      by Kilpatrick Life Insurance Company. Mr. Therrell attended Vanderbilt
      University in Nashville, Tennessee and graduated with a Bachelor’s Degree in
      History. He also attended Tennessee Bankers Association School at Vanderbilt
      in
      1969 and received his Masters Degree in 1982 from the Graduate School of Banking
      of Louisiana State University in Baton Rouge, Louisiana. From 1965 to 1974,
      Mr.
      Therrell served as Branch Manager for First American National Bank in Nashville,
      Tennessee, and from 1974 to 1989, Mr. Therrell served as the Vice President
      of
      Louisiana Bank & Trust Company.





**Ms.
      Jacqulyn B. Wine** currently serves as our Acting Secretary. Ms. Wine is also the Assistant
      Secretary/Treasurer for Kilpatrick Life Insurance Company, a major shareholder
      of our Company. Ms. Wine commenced working for Kilpatrick Life Insurance Company
      as Executive Assistant to the President in 1990. Ms. Wine was elected Assistant
      Secretary and Assistant Treasurer in March of 1995. 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.
      Virginia K. Shehee** currently
      serves as the Chairman of our Board of Directors, a position she has held since
      January 2005. Mr. Shehee concurrently serves as the President and Chief
      Executive Officer of Kilpatrick Life Insurance Company, a major shareholder
      of
      our Company, and Kilpatrick’s Rose-Neath Funeral Homes and Cemeteries, Inc. Ms.
      Shehee has served as the President and Chief Executive Officer of Kilpatrick
      Life Insurance Company and Kilpatrick’s Rose-Neath Funeral Homes, Crematorium
      and Cemeteries, Inc. since October 1971. She oversees all operations of
      Kilpatrick Life Insurance Company and Kilpatrick’s Rose-Neath Funeral Homes,
      Crematorium and Cemeteries, Inc. 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, Mrs. 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. Mrs. Shehee is a
      director of the Louisiana Insurers’ Conference and has previously served in
      various executive capacities for the Life Insurers Conference. She is the
      chairman of the Louisiana Life & Health Insurance Guaranty Association and a
      member of the National Organization of Life and Health Insurance Guaranty
      Association.





21




**Mr.
      Robert M. Glover** has
      served as a Director of our company since November 2006. Mr. Glover has also
      assisted our Company as a business consultant since April 2005. For the past
      30
      years, Mr. Glover has been the President of Glover Enterprises, a business
      consulting firm, and the President of Glover Security Services, a company
      specializing in personal protection services.





**Mr.
      John E. Tuma** has
      served as a Director of our Company since December 2006. Mr. Tuma has been
      the
      President and CEO of ARKLA Disposal Services, Inc., a water treatment and
      processing company, since February of 2001. From 1998 to January 2001, Mr.
      Tuma
      was the founder, President and CEO of Southwest Vacuum Services, Inc., which
      provided transportation of non-hazardous and hazardous waste water generators
      in
      Houston, Texas, and Shreveport, Louisiana. From 1994 to 1998, Mr. Tuma was
      the
      President and CEO of Re-Claim Environmental, Inc., where he operated two waste
      water facilities.





**Term
      of Office**





Our
      directors are elected for a one-year term to hold office until the next annual
      general 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 removed by the Board.





**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 five years, no present or former 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 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
                subject to any order, judgment or decree, not subsequently reversed,
                suspended or vacated, of any court of competent jurisdiction, permanently
                or temporarily enjoining, barring, suspending or otherwise limiting
                his
                involvement in any type of business, securities or banking activities;
                or





(4)
            was
                found by a court of competent jurisdiction (in a civil action), the
                Securities and Exchange Commission or the Commodity Futures Trading
                Commission to have violated a Federal or state securities or commodities
                law, and the judgment has not been reversed, suspended or
                vacated.




22




**Audit
      Committee and Financial Expert Disclosures**





Section
      301 of the Sarbanes-Oxley Act of 2003, 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, 2006, 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, 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.





**Compliance
      with Section 16(A) of the Securities Exchange Act**





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 Securities and
      Exchange Commission. 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 the copies of such
      reports furnished to us during, and with respect to, the fiscal year ended
      December 31, 2006 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, 2006, all Section 16(a) filing requirements applicable to
      our
      reporting persons were met except for the following reports: Forms 5 for John
      Tuma and Robert Glover.





**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 was filed as an Exhibit
      to
      the Annual Report on Form 10KSB for the fiscal year ended December 31, 2005.
      In
      addition, a copy of our code of ethics can be obtained by writing our Company
      at
      1818 Marshall Street, Shreveport, Louisiana 71101.




23
 
  ITEM 10. EXECUTIVE COMPENSATION




**Summary
      Compensation Table**





The
      following table sets forth information concerning the compensation of our
      executive officers during 2006:





Annual
                Compensation
            
            Long
                Term CompensationAwards
            
            Payouts(a)
            
            (b)
            
            (c)
            
            (d)
            
            (e)
            
            (f)
            
            (g)
            
            (h)
            
            (i)Name
                and Principal Position
            
            Year
            
            Salary
                ($)
            
            Bonus
                ($)
            
            Other
              Annual
                Compensation
              ($)
            
            Restricted
                Stock Award(s)
              ($)
            
            Securities
                Underlying Options/
              SARs
                (#)
            
            LTIP
              Payouts
              ($)
            
            All
              Other
                Compensation
              ($)Joseph
                E. Therrell, Jr., Acting President, Acting Treasurer/Chief Financial
                Officer
            
            
            2006
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Denver
                Cashatt
            
            
            2006
            
            
            55,538
            
            
            6,250
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0Dorothy
                Wommack
            
            
            2006
            
            
            45,000
            
            
            9,100
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0





**Stock
      Option Grants**





No
      stock
      options were granted to our executive officers or directors during the year
      ended December 31, 2006.





**Securities
      Authorized For Issuance under Equity Compensation Plans**




We
      did
      not issue any securities to our executive officers or directors under our equity
      compensation plans during the year ended December 31, 2006.





**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, 2006, nor have any stock options been exercised by our named
      executive officers since December 31, 2006, through and including the filing
      date of this Report.





**Compensation
      of Directors**





Our
      directors do not receive any compensation for the services they provide to
      the
      Company as directors.





**Employment
      Agreements**





We
      currently do not have any written or oral employment agreements with Mr.
      Therrell or Ms. Wine to serve as our officers, nor have any terms of
      compensation for their services been approved.





24


**ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT** ****




**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 the date of this Report 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.




Title
                of Class
            
            Name
                and Address
              of
                Beneficial Owner
            
            
            Amount
                of Beneficial Ownership
            
            
            Percent
                of ClassCommon
            
            Joseph
                E. Therrell, Jr.
              1818
                Marshall Street
              Shreveport,
                LA 71101
            
            
            1,704,545
            
            
            0.63
            %Common
            
            Jacqulyn
                B. Wine
              1818
                Marshall Street
              Shreveport,
                LA 71101
            
            
            266,667
            (1)
            
            0.10
            %Common
            
            Virginia
                K. Shehee
              1818
                Marshall St.
              Shreveport,
                LA 71161
            
            
            57,954,409
            (2)
            
            21.35
            %Common
            
            Robert
                M. Glover
              1485
                County Road 3225
              Mt.
                Pleasant, TX 75455-7902
            
            
            2,150,000
            
            
            8.35
            %Common
            
            John
                Tuma
              18342
                Wild Lilac Trail
              Humble,
                TX 77346
            
            
            2,166,668
            
            
            0.79
            %Common
            
            All
                officers and directors as a group
            
            
            64,242,289
            
            
            23.67
            %Common
            
            Denver
                B. Cashatt (3)
              301
                Alexander Road,
              Mt.
                Pleasant, TX 75455
            
            
            1,768,752
            
            
            0.65
            %Common
            
            Dottie
                Wommack (4)
              412
                Country Road
              Mt.
                Pleasant, TX 75455-7906
            
            
            2,241,669
            
            
            0.83
            %Common
            
            Kamal
                Alawas
              P.O.
                Box 1191
              Everett,
                WA 98206
            
            
            27,964,524
                (5
            )
            
            10.30
            %




(1)
            Includes
                166,667 shares owned by Ms. Wine’s
                husband.





(2)
            Includes
                33,760,000 shares beneficially owned by Kilpatrick Life Insurance
                Company,
                a privately-owned company controlled by Mrs.
                Shehee.





(3)
            Mr.
                Cashatt resigned as our President, Chief Executive Officer and Director
                on
                January 8, 2007.





(4)
            On
                January 16, 2007, Ms. Wommack was replaced by Mr. Therrell as our
                Acting
                Treasurer/Chief Financial Officer and by Ms. Wine as our Acting
                Secretary.





(5)
            Includes
                1,500,000 shares beneficially owned by Alawas Investments, an entity
                controlled by Mr. Alawas.




25




**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS** ****




Except
      for the transactions described below, during the last two years, 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.





Transactions
      with Executive Officers and Directors





In
      April
      of 2004, we agreed to pay our executive officers Denver Cashatt and Dottie
      Wommack finder’s fees in an amount equal to 10% of the funds they raised in our
      private placements. During the fiscal year ended December 31, 2006, we paid
      Mr.
      Cashatt and Ms. Wommack a total of $6,250 and $9,100 in finder’s fees,
      respectively.





On
      or
      about November 4, 2005, we entered into an employment agreement with Robert
      M.
      Glover, who was, at the time, not a director of our company. Pursuant to the
      employment agreement, Mr. Glover agreed to act as our Director of Operations
      for
      an annual compensation of $100,000, to be paid on bi-monthly basis. Mr. Glover
      also receives a monthly car expense of $1,000 for the use of his personal
      vehicle and reimbursements for all documented cellular and other telephone
      expenses, as well as other business-related expenses. Mr. Glover is eligible
      for
      quarterly merit bonuses at the discretion of upper management. We also agreed
      to
      pay for taxes resulting from Mr. Glover’s compensation under the employment
      agreement. Upon the completion of an acquisition of any of our corporate
      properties, the entry of a joint venture that results in a dramatic improvement
      of the status of our company, or the successful buyout of our company, Mr.
      Glover is to receive 1,000,000 shares of our restricted common stock as a bonus
      at the discretion of our management. On January 18, 2006, the parties terminated
      this employment agreement.





Mr.
      Glover currently receives a monthly salary of $5,000 and reimbursement for
      gasoline for his car for services he provides us as our Director of Operations.





On
      or
      about November 4, 2005, we entered into an employment agreement with Denver
      Cashatt, our then President and Chief Executive Officer pursuant to which we
      agreed to pay Mr. Cashatt an annual salary of $100,000, to be paid on a monthly
      basis, to serve as our President and Chief Executive Officer. Furthermore,
      we
      agreed to reimburse Mr. Cashatt for his individual health insurance in the
      event
      that Mr. Cashatt qualifies for such and to pay taxes resulting from compensation
      Mr. Cashatt received under Form 1099. Mr. Cashatt was to also receive
      reimbursement for actual and reasonable business expenses incurred, including
      automobile expenses for the use of his personal vehicles and use of his personal
      dwelling for business offices at a monthly rate of $550 for office space and
      $50
      for utilities. The term of the agreement was three years. Mr. Cashatt also
      received 2,000,000 shares of our restricted common stock as a signing bonus.





26




On
      or
      about November 4, 2005, we entered into an employment agreement with Dottie
      Wommack, our then Secretary, Treasurer and Chief Financial Officer, under which
      we agreed to pay Ms. Wommack an annual salary of $60,000, to be paid on a
      monthly basis, to serve as our Secretary, Treasurer and Chief Financial Officer.
      We further agreed to reimburse Ms. Wommack for all documented business-related
      expenses and individual health insurance in the event that Ms. Wommack qualifies
      for such and to pay taxes resulting from compensation Ms. Wommack received
      under
      Form 1099. Ms. Wommack was also to receive a monthly car expense of $500 for
      the
      use of her personal vehicle and reimbursements for all documented cellular
      and
      other telephone expenses, as well as other documented business-related expenses.
      Ms. Wommack was eligible for quarterly merit bonuses at the discretion of our
      management. Upon the completion of an acquisition of any of our corporate
      properties, the entry of a joint venture that results in a dramatic improvement
      of the status of our company, or the successful buyout of our company, Ms.
      Wommack was to receive 1,000,000 shares of our restricted common stock as a
      bonus at the discretion of our management.




In
      August
      of 2006, our Director Joseph E. Therrell, Jr. exercised warrants to purchase
      shares of our common stock at an exercise price of $0.01 per share, receiving
      51,000 shares of our common stock for $5,100.




In
      August
      of 2006, our Director Virginia K. Shehee exercised warrants to purchase shares
      of our common stock at $0.01 per share, receiving 1,000,000 shares of our common
      stock for $10,000.





Transactions
      with Other Related Parties





As
      discussed above, on October 30, 2006, Kilpatrick Life Insurance Company, a
      major
      shareholder of our Company who employs Ms. Shehee as its Chief Executive
      Officer, Mr. Therrell as its Vice President and Chief Investment Officer, and
      Ms. Wine as its Assistant Secretary/Treasurer entered into an agreement with
      us
      to convert the outstanding loan of $250,000 and interest due in the amount
      of
      $28,875.25 into shares of our common stock at a rate of $0.015 per share for
      a
      total of 18,591,682 shares.




**ITEM
      13. EXHIBITS** ****





**Exhibit
      Index**





Exhibit
                No.
            
            Description2.1
                (3)
            
            Acquisition
                Agreement and Plan of Reorganization dated November 15, 2002 by and
                among
                the Company, Pita King Bakeries and the Shareholders of Pita King3.(I)
                (1)
            
            Articles
                of Incorporation of the Company dated October 26, 1993.3.(i)
                (10)
            
            Certificate
                of Amendment to Articles of Incorporation, as filed with the Nevada
                Secretary of State on December 21, 2004.




27




3.(i)
                (10)
            
            Certificate
                of Amendment to Articles of Incorporation, as filed with the Nevada
                Secretary of State on April 30, 1997.3.(i)
                (10)
            
            Certificate
                of Amendment to Articles of Incorporation, as filed with the Nevada
                Secretary of State on April 30, 1997.3.(i)
                (10)
            
            Certificate
                of Amendment to Articles of Incorporation, as filed with the Nevada
                Secretary of State on February 18, 1997.3.(i)
                (10)
            
            Certificate
                of Amendment to Articles of Incorporation, as filed with the Nevada
                Secretary of State on January 22, 19973.(II)
                (1)
            
            Bylaws
                of the Company4.1
                (11)
            
            Form
                of 2006 Stock Option Plan4.2*
            
            Form
                of Warrant Certificate10.1
                (2)
            
            Independent
                Contractor/Consulting Agreement dated May 9, 2001 between the Company
                and
                James Williams.10.1
                (4)
            
            Mining
                Property Lease Agreement dated March 2, 1998 between the Company
                and James
                R. Ardoin10.2
                (4)
            
            Agreement
                dated July 17, 1998 between the Company and AuRc Metallurgical
                Laboratories, Inc.10.3
                (6)
            
            Exploration
                Rights Agreement dated February 13, 2004 between the Company and
                Associated Placer Group10.4
                (7)
            
            Service
                Agreement dated February 16, 2005 between the Company and Zereko
                Nevada,
                Inc.10.5
                (8)
            
            Joint
                Venture Agreement dated January 10, 2006 between the Company and
                Resolve
                Capital Funding Corporation, Inc.10.6
                (9)
            
            Agreement
                dated September 23, 2000 between the Company, Gold Standard Mines,
                Inc.
                and Howard Sadlier10.7
                (9)
            
            Assignment
                of Rights to Proprietary Formula dated March 21, 2001 between the
                Company,
                Gold Standard Mines, Inc. and Howard Sadlier10.8
                (9)
            
            Officer
                Employment Agreement dated April 1, 2004 between the Company and
                Dottie
                Wommack10.9
                (9)
            
            Mutual
                Agreement to Dissolve Business Relationships with an effective date
                of
                January 1, 2004 between the Company Pita King Bakeries International,
                Inc.10.10
                (9)
            
            Officer
                Employment Agreement dated November 4, 2005 between the Company and
                Denny
                Cashatt.10.11*
            
            Subscription
                Agreement dated March 9, 2006 between the Company and Davy
                Palmans




28




10.12*
            
            Subscription
                Agreement dated March 13, 2006 between the Company and Robert
                Brown10.13*
            
            Subscription
                Agreement dated March 13, 2006 between the Company and Tim
                Harts10.14*
            
            Subscription
                Agreement dated August 4, 2006 between the Company and Plaut Holding
                Co. -
                J, L.P.10.15*
            
            Subscription
                Agreement dated August 4, 2006 between the Company and Joseph Burk
                and
                Marlene Burk JTWROS10.16*
            
            Subscription
                Agreement dated August 18, 2006 between the Company and Joseph C.
                Stauffer10.17*
            
            Subscription
                Agreement dated October 30, 2006 between the Company and Kilpatrick
                Life
                Insurance Company14.1
                (9)
            
            Code
                of Ethics for Principal Executive Officers and Senior Financial 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
                2002.32.1*
            
            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
                2002




29




**Financial
      Statements**





PageReport
                of Independent Registered Accounting Firm
            
            F-1Consolidated
                Balance Sheets as at December 31, 2006
            
            F-3Consolidated
                  Statements of Operations for the years ended December 31, 2006
                  and
                  2005
            
            F-4Consolidated
                    Statements of Cash Flows for the years ended December 31, 2006
                    and
                    2005
            
            F-5Consolidated
                Statement of Stockholders' Equity for the years ended December 31,
                2006
                and 2005
            
            F-6Notes
                to Consolidated Financial Statements for the years ended December
                31, 2006
                and 2005
            
            F-8





**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.




**ITEM
      14. PRINCIPAL ACCOUNTANT 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,
      2006 and 2005. During our fiscal years 2006 and 2005, accrued fees owed to
      Madsen are as follows:





**Audit
      Fees**





2006
            
            2005$13,276
            
            $12,431




**Audit
      Related Fees**


2006
              
              2005$0
              
              $0





Audit
      Fees and Audit Related Fees consist of fees billed for professional services
      rendered for auditing our Financial Statements, reviews of interim Financial
      Statements included in quarterly reports, services performed in connection
      with
      other filings with the Securities & Exchange Commission and related comfort
      letters and other services that are normally provided by our independent
      auditors in connection with statutory and regulatory filings or
      engagements.





**Tax
      Fees**


2006
                
                2005$0
                
                $0
  30




Tax
      Fees
      consists of fees billed 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.





**All
      Other Fees**




2006
                
                2005$0
                
                $0


31




**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/*Joseph E. Therrell, Jr.Joseph
              E. Therrell, Jr.Acting
              President, Acting Treasurer and Director




Date:
      April 17, 2007




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.




By:   */s/*Joseph E. Therrell, Jr.Joseph E.
              Therrell, Jr.Acting President, Acting Treasurer and Director




Date:
        April 17, 2007





By:   */s/*Jacqulyn
                    B. WineJacqulyn B.
                  WineActing Secretary
  Date:
            April 17, 2007
 By:  ***/s/*Virginia K. SheheeVirginia
                          K.
                          SheheeDirector
 Date:
          April 17, 2007




By:  */s/*Robert M. GloverRobert
                                              M.
                                              GloverDirector


Date:
        April 17, 2007




By:  */s/*John E. TumaJohn
                              E. TumaDirector
 Date:
          April 17, 2007
  32
  Board
            of
            Directors
 International
            Star, Inc. and Subsidiaries
 Shreveport,
            Louisiana
  **REPORT
            OF INDEPENDENT REGISTERED ACCOUNTING FIRM**
 
 We
            have
            audited the accompanying consolidated balance sheet of International
            Star, Inc.
            and Subsidiaries (an Exploration Stage Company) as of December 31, 2006
            and the
            consolidated statements of operations, stockholders’ equity and cash flows for
            the years ended December 31, 2006 and 2005, and for the period from inception
            of
            exploration stage (January 1, 2004) through December 31, 2006. 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. An audit 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 audit provides a reasonable basis for
            our
            opinion.
 
 In
            our
            opinion, based upon our audits, these consolidated financial statements
            present
            fairly, in all material aspects, the consolidated financial position
            of the
            Company as of December 31, 2006, and the consolidated results of its
            operations
            and cash flows for the years ended December 31, 2006 and 2005, and for
            the
            period from inception of exploration stage (January 1, 2004) through
            December
            31, 2006, in conformity with accounting principles generally accepted
            in the
            United States of America.
  F-1
 
 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 J 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
            13,
            2007
 Salt
            Lake
            City, Utah
  F-2
 **INTERNATIONAL
                    STAR, INC.****AND
                    SUBSIDIARIES****CONSOLIDATED
                    BALANCE SHEET****(An
                    Exploration Stage Company)**
  **ASSETS****December
                    31,****2006****Current
                    Assets:**Cash
                
                **$**
                **3,260****Total
                    Current Assets**
                
                
                **3,260****Fixed
                    Assets (Net of Accumulated Depreciation)**
                
                
                **28,564****Total
                    Assets**
                
                **$**
                **31,824****LIABILITIES
                    AND SHAREHOLDERS' EQUITY (DEFICIT)****Current
                    Liabilities:**Accounts
                    payable
                
                **$**
                **256,791**Deposits
                
                
                **20,000****Total
                    Current Liabilities**
                
                
                **276,791****Stockholders'
                    Equity (Deficit):**Common
                    Stock, $.001 par value; authorized 780,000,000 shares;
                
                **$**
                **257,694**issued
                    and outstanding 257,693,292 at December 31, 2006Paid-In
                    Capital
                
                
                **4,162,327**Accumulated
                    Deficit
                
                
                **(4,664,988**
                **)****Total
                    Stockholders' Equity**
                
                
                **(244,967**
                **)****Total
                    Liabilities and Stockholders' Equity**
                
                **$**
                **31,824****See
                    accompanying notes to the financial statements.**
  F-3
  **INTERNATIONAL STAR, INC.****AND SUBSIDIARIES****CONSOLIDATED STATEMENTS OF
                      OPERATIONS**
  **Cumulative from****Inception of
                      Exploration****Year****Ended**
                  
                  **Year****Ended**
                  
                  **Stage (January 1, 2004) to****December 31, 2006**
                  
                  **December 31, 2005**
                  
                  **December 31, 2006****Revenue:**
                  
                  **$**
                  **-**
                  
                  **$**
                  **-**
                  
                  **$**
                  **-****Total Revenue**
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  **-****Expenses:**Mineral
                      exploration costs
                  
                  
                  **57,217**
                  
                  
                  **247,640**
                  
                  
                  **536,002**Professional
                      fees
                  
                  
                  **110,601**
                  
                  
                  **24,435**
                  
                  
                  **222,849**Management
                      fees & Compensation
                  
                  
                  **426,355**
                  
                  
                  **420,727**
                  
                  
                  **1,343,909**Depreciation
&
amortization
                  
                  
                  **3,400**
                  
                  
                  **1,614**
                  
                  
                  **7,873**General
&
administrative
                  
                  
                  **211,986**
                  
                  
                  **93,615**
                  
                  
                  **347,975****Total Expenses**
                  
                  
                  **809,559**
                  
                  
                  **788,031**
                  
                  
                  **2,458,608****Net (Loss) from
                      Operations**
                  
                  **$**
                  **(809,559**
                  **)**
                  **$**
                  **(788,031**
                  **)**
                  **$**
                  **(2,458,608**
                  **)****Other Income (Expenses)**Interest
                      Expense
                  
                  
                  **(12,500**
                  **)**
                  
                  **(11,250**
                  **)**
                  
                  **(53,027**
                  **)**Loss
                      on divestiture of subsidiary
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  **(99,472**
                  **)****Total Other Expenses**
                  
                  
                  **(12,500**
                  **)**
                  
                  **(11,250**
                  **)**
                  
                  **(152,499**
                  **)****Net Loss**
                  
                  
                  **(822,059**
                  **)**
                  
                  **(799,281**
                  **)**
                  
                  **(2,611,107**
                  **)****Weighted Average Shares****Common Stock
                      Outstanding**
                  
                  
                  **234,642,916**
                  
                  
                  **201,308,938****Net Loss Per Common Share****(Basic and Fully Dilutive)**
                  
                  **$**
                  **(0.00**
                  **)**
                  **$**
                  **(0.00**
                  **)****See accompanying notes to financial
                      statements.**
  F-4
  **INTERNATIONAL
                      STAR, INC.****AND
                      SUBSIDIARIES****STATEMENTS
                      OF CASH FLOWS**
  **Cumulative
                      from****Inception
                      of Exploration****Year****Ended**
                  
                  **Year****Ended**
                  
                  **Stage
                      (January 1, 2004) to****December
                      31,**
                    **2006**
                  
                  **December
                      31,**
                    **2005**
                  
                  **December
                      31,**
                    **2006****Cash
                      Flows Used in Operating Activities:****Net
                      Loss**
                  
                  **$**
                  **(822,059**
                  **)**
                  **$**
                  **(799,281**
                  **)**
                  **$**
                  **(2,611,107**
                  **)**Common
                      stock issued for services
                  
                  
                  **76,000**
                  
                  
                  **-**
                  
                  **$**
                  **207,500**Loss
                      of divestiture of Pita King
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  **$**
                  **99,472**Depreciation
                      & Amortization
                  
                  
                  **3,400**
                  
                  
                  **1,614**
                  
                  **$**
                  **7,873****Changes
                      to Operating Assets and Liabilities:**
                  
                  
                  **-**(Increase)
                      decrease in screened ore
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  **$**
                  **2,600**(Increase)
                      decrease in Accounts Receivable and Prepaids
                  
                  
                  **-**
                  
                  
                  **54,000**
                  
                  **$**
                  **79,795**(Increase)
                      decrease in Inventories
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  **$**
                  **63,812**(Increase)
                      decrease in goodwill
                  
                  
                  
                  
                  
                  
                  
                  **$**
                  **92,874**(Decrease)
                      Increase in accounts payables and accrued interest
                  
                  
                  **250,099**
                  
                  
                  **91,792**
                  
                  **$**
                  **209,224****Cash
                      Flows Used in Operating Activities**
                  
                  
                  **(492,560**
                  **)**
                  
                  **(651,875**
                  **)**
                  
                  **(1,847,957**
                  **)****Cash
                      Flows used in Investing Activities:**Purchase
                      fixed assets
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  **$**
                  **(29,355**
                  **)****Cash
                      Flows Used in Investing Activities**
                  
                  
                  **-**
                  
                  
                  **-**
                  
                  
                  **(29,355**
                  **)****Cash
                      Flows from Financing Activities:**Deposits
                  
                  
                  **20,000**
                  
                  
                  
                  
                  
                  **20,000**Common
                      stock and warrants issued for cash
                  
                  
                  **270,600**
                  
                  
                  **656,826**
                  
                  **$**
                  **1,496,426****Cash
                      Flows from Financing Activities**
                  
                  
                  **290,600**
                  
                  
                  **656,826**
                  
                  
                  **1,516,426****Net
                      Increase (Decrease) in Cash**
                  
                  
                  **(201,960**
                  **)**
                  
                  **4,951**
                  
                  
                  **(360,886**
                  **)****Cash
                      at Beginning of Period**
                  
                  
                  **205,220**
                  
                  
                  **200,269**
                  
                  
                  **364,146****Cash
                      at End of Period**
                  
                  **$**
                  **3,260**
                  
                  **$**
                  **205,220**
                  
                  **$**
                  **3,260****Supplemental
                      Non-Cash Financing Activities:**Common
                      stock issued for payment of notes payable and accrued
                      interest
                  
                  
                  **278,875**Common
                      stock issued for accrued compensation
                  
                  
                  **57,500**Capital
                      contributed for payment of loans, cash advances and
                      interest
                  
                  **$**
                  **-**
                  
                  **$**
                  **81,392**
                  
                  **$**
                  **81,392****Interest
                      Paid**
                  
                  
                  
                  
                  **$**
                  **21,777**
                  
                  **$**
                  **31,883****Income
                      Taxes Paid**
                  
                  **$**
                  **-**
                  
                  **$**
                  **-**
                  
                  **$**
                  **-****See
                      accompanying notes to financial
                      statements.**
  F-5
  **INTERNATIONAL
                      STAR, INC.****AND
                      SUBSIDIARIES****STATEMENT
                      OF STOCKHOLDERS' EQUITY**
  **Cumulative
                      from Inception of Exploration Stage (January 1, 2004) through
                      December 31,
                      2006**
  **Common**
                  
                  
                  **Common****Stock**
                  
                  
                  **Stock**
                  
                  
                  **Paid-In**
                  
                  
                  **Accumulated**
                  
                  
                  **Total****Shares**
                  
                  
                  **Amount**
                  
                  
                  **Capital**
                  
                  
                  **Deficit**
                  
                  
                  **Equity****Balances
                    at December 31, 2003**
                  
                  
                  **180,126,681**
                  
                  $
                  **180,127**
                  
                  **$**
                  **2,183,198**
                  
                  **$**
                  **(2,053,882**
                  **)**
                  **$**
                  **309,443**Shares
                      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, 2004
                  
                  
                  **-**Valued
                      at $.05 per share
                  
                  
                  **90,000**
                  
                  **$**
                  **90**
                  
                  **$**
                  **1,410**
                  
                  **$**
                  **-**
                  
                  **$**
                  **1,500**-Common
                      stock issued for cash. February 20, 2004
                  
                  
                  **-**Valued
                      at $.06 per share
                  
                  
                  **300,000**
                  
                  **$**
                  **300**
                  
                  **$**
                  **5,700**
                  
                  **$**
                  **-**
                  
                  **$**
                  **6,000**-Common
                      stock issued for cash. April 27, 2004
                  
                  
                  **-**Valued
                      at $.11 per share
                  
                  
                  **409,092**
                  
                  **$**
                  **409**
                  
                  **$**
                  **14,591**
                  
                  **$**
                  **-**
                  
                  **$**
                  **15,000**-Common
                      stock issued for cash. May 28, 2004
                  
                  
                  **-**Valued
                      at $.07 per share
                  
                  
                  **454,545**
                  
                  **$**
                  **455**
                  
                  **$**
                  **9,545**
                  
                  **$**
                  **-**
                  
                  **$**
                  **10,000**-Common
                      stock issued for cash. June 7, 2004
                  
                  
                  **-**Valued
                      at $.07 per share
                  
                  
                  **4,090,908**
                  
                  **$**
                  **4,091**
                  
                  **$**
                  **85,909**
                  
                  **$**
                  **-**
                  
                  **$**
                  **90,000**-Capital
                      contributed for interest expenses. June 30, 2004
                  
                  
                  **-**
                  
                  **$**
                  **-**
                  
                  **$**
                  **7,500**
                  
                  **$**
                  **-**
                  
                  **$**
                  **7,500**-Common
                      stock issued for services. September 30, 2004
                  
                  
                  **-**Valued
                      at $.03 per share
                  
                  
                  **6,000,000**
                  
                  **$**
                  **6,000**
                  
                  **$**
                  **54,000**
                  
                  **$**
                  **-**
                  
                  **$**
                  **60,000**-Common
                      stock issued for cash. October 6, 2004
                  
                  
                  **-**Valued
                      at $.10 per share
                  
                  
                  **2,250,000**
                  
                  **$**
                  **2,250**
                  
                  **$**
                  **72,750**
                  
                  **$**
                  **-**
                  
                  **$**
                  **75,000**-Common
                      stock issued for cash. November 29, 2004
                  
                  
                  **-**Valued
                      at $.10 per share
                  
                  
                  **1,500,000**
                  
                  **$**
                  **1,500**
                  
                  **$**
                  **48,500**
                  
                  **$**
                  **-**
                  
                  **$**
                  **50,000**-Common
                      stock issued for cash. December 8, 2004
                  
                  
                  **-**Valued
                      at $.10 per share
                  
                  
                  **9,750,000**
                  
                  **$**
                  **9,750**
                  
                  **$**
                  **315,250**
                  
                  **$**
                  **-**
                  
                  **$**
                  **325,000**-Common
                      stock issued for services. December 31, 2004
                  
                  
                  **-**Valued
                      at $.10 per share
                  
                  
                  **420,000**
                  
                  **$**
                  **420**
                  
                  **$**
                  **13,580**
                  
                  **$**
                  **-**
                  
                  **$**
                  **14,000**-Capital
                      contributed for services and accrued expenses
                  
                  
                  **-**
                  
                  **$**
                  **-**
                  
                  **$**
                  **73,892**
                  
                  **$**
                  **-**
                  
                  **$**
                  **73,892**-**Net
                      (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**1
                      for 3 forward stock split. February 22, 2005Common
                      stock issued for cash. February 4, 2005Valued
                      at $.05 per share
                  
                  
                  **199,500**
                  
                  **$**
                  **200**
                  
                  **$**
                  **9,776**
                  
                  
                  
                  
                  
                  **9,975**Common
                      stock issued for cash. February 4, 2005Valued
                      at $.05 per share
                  
                  
                  **1,151,013**
                  
                  **$**
                  **1,151**
                  
                  **$**
                  **56,400**
                  
                  
                  
                  
                  
                  **57,551**Common
                      stock issued for cash. March 3, 2005Valued
                      at $.049
                  
                  
                  **509,036**
                  
                  **$**
                  **509**
                  
                  **$**
                  **24,447**
                  
                  
                  
                  
                  
                  **24,956**Common
                      stock and warrants issued for cash. March 3, 2005Valued
                      at $.03
                  
                  
                  **1,666,667**
                  
                  **$**
                  **1,667**
                  
                  **$**
                  **48,313**
                  
                  
                  
                  
                  
                  **49,980**
  F-6
  Common
                      stock and warrants issued for cash. March 3, 2005Valued
                      at $.02
                  
                  
                  **4,500,000**
                  
                  **$**
                  **4,500**
                  
                  **$**
                  **85,477**
                  
                  
                  
                  
                  
                  **89,977**Common
                      stock issued for cash, March 31, 2005Valued
                      at $.10
                  
                  
                  **500,000**
                  
                  **$**
                  **500**
                  
                  **$**
                  **49,500**
                  
                  
                  
                  
                  
                  **50,000**Common
                      stock and warrants issued for cash, April 26, 2005Valued
                      at $.12
                  
                  
                  **833,334**
                  
                  **$**
                  **833**
                  
                  **$**
                  **99,137**
                  
                  
                  
                  
                  
                  **99,970**Common
                      stock issued for cash, June 1, 2005.Valued
                      at $.066
                  
                  
                  **150,000**
                  
                  **$**
                  **150**
                  
                  **$**
                  **9,850**
                  
                  
                  
                  
                  
                  **10,000**Common
                      stock and warrants issued for cash, June 8, 2005Valued
                      at $.06
                  
                  
                  **975,000**
                  
                  **$**
                  **975**
                  
                  **$**
                  **57,495**
                  
                  
                  
                  
                  
                  **58,470**Common
                      stock and warrants issued for cash, August 22, 2005Valued
                      at $.02
                  
                  
                  **6,300,000**
                  
                  **$**
                  **6,300**
                  
                  **$**
                  **119,700**
                  
                  
                  
                  
                  
                  **126,000**Common
                      stock and warrants issued for cash, August 22, 2005Valued
                      at $.12
                  
                  
                  **166,667**
                  
                  **$**
                  **167**
                  
                  **$**
                  **19,833**
                  
                  
                  
                  
                  
                  **20,000**Common
                      stock issued for cash, December 16, 2005.Valued
                      at $.02
                  
                  
                  **2,500,000**
                  
                  **$**
                  **2,500**
                  
                  **$**
                  **47,450**
                  
                  
                  
                  
                  
                  **49,950**Common
                      stock issued for cash, December 30, 2005.Valued
                      at $.04
                  
                  
                  **250,000**
                  
                  **$**
                  **250**
                  
                  **$**
                  **9,750**
                  
                  
                  
                  
                  
                  **10,000****Net
                      (loss) for year ended December 31, 2005**
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  **(799,281**
                  **)**
                  
                  **(799,281**
                  **)****212,987,443**
                  
                  **$**
                  **212,987**
                  
                  **$**
                  **3,524,059**
                  
                  **$**
                  **(3,842,929**
                  **)**
                  
                  **(105,883**
                  **)**Common
                      stock issued for accrued compensaton, January 6, 2006Valued
                      at $ .04
                  
                  
                  **1,437,500**
                  
                  **$**
                  **1,438**
                  
                  **$**
                  **56,062**
                  
                  
                  
                  
                  
                  **57,500**Common
                      stock issued for cash, March 13, 2006Valued
                      at $ .015
                  
                  
                  **1,666,667**
                  
                  **$**
                  **1,667**
                  
                  **$**
                  **23,333**
                  
                  
                  
                  
                  
                  **25,000**
 Common
                      stock and warrants issued for cash, March 13, 2006Valued
                      at $ .015
                  
                  
                  **2,433,333**
                  
                  **$**
                  **2,433**
                  
                  **$**
                  **34,067**
                  
                  
                  
                  
                  
                  **36,500**Common
                      stock issued for cash, March 20, 2006Valued
                      at $.01
                  
                  
                  **9,100,000**
                  
                  **$**
                  **9,100**
                  
                  **$**
                  **81,900**
                  
                  
                  
                  
                  
                  **91,000**Common
                      stock issued for cash, June 12, 2006Valued
                      at $.02
                  
                  
                  **1,000,000**
                  
                  **$**
                  **1,000**
                  
                  **$**
                  **19,000**
                  
                  
                  
                  
                  
                  **20,000**Common
                      stock issued for services, June 27, 2006Valued
                      at $ .038
                  
                  
                  **2,000,000**
                  
                  **$**
                  **2,000**
                  
                  **$**
                  **74,000**
                  
                  
                  
                  
                  **$**
                  **76,000**Common
                      stock issued for cash, July 31, 2006Valued
                      at $ .012
                  
                  
                  **1,666,667**
                  
                  **$**
                  **1,667**
                  
                  **$**
                  **18,333**
                  
                  
                  
                  
                  **$**
                  **20,000**Common
                      stock issued for cash, August 2006Valued
                      at $ .01
                  
                  
                  **3,810,000**
                  
                  **$**
                  **3,810**
                  
                  **$**
                  **34,290**
                  
                  
                  
                  
                  **$**
                  **38,100**Common
                      stock issued for cash, August 2006Valued
                      at $.015
                  
                  
                  **2,000,000**
                  
                  **$**
                  **2,000**
                  
                  **$**
                  **28,000**
                  
                  
                  
                  
                  **$**
                  **30,000**Common
                      stock issued for cash, October, 2006Valued
                      at $ .01 per share
                  
                  
                  **1,000,000**
                  
                  **$**
                  **1,000**
                  
                  **$**
                  **9,000**
                  
                  
                  
                  
                  **$**
                  **10,000**Common
                      stock issued for note payable and accrued interestOctober
                      30, 2006, Valued at $ .015 per share
                  
                  
                  **18,591,682**
                  
                  **$**
                  **18,592**
                  
                  **$**
                  **260,283**
                  
                  
                  
                  
                  **$**
                  **278,875****Net
                      (loss) for year ended December 31, 2006**
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  **$**
                  **(822,059**
                  **)**
                  **$**
                  **(822,059**
                  **)****257,693,292**
                  
                  
                  **257,694**
                  
                  
                  **4,162,327**
                  
                  
                  **(4,664,988**
                  **)**
                  
                  **(244,967**
                  **)****See
                      accompanying notes to financial
                      statements.**
 
 F-7
  **INTERNATIONAL
          STAR, INC.**
 **AND
          SUBSIDIARIES**
 
 **NOTES
          TO FINANCIAL STATEMENTS**
 
 **DECEMBER
          31, 2006**
 
 **A.**
                **ORIGINATION
                    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.
 
 F-8
 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 racetrack wagering
          via
          the internet.
 
 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
          H).
 
 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.
 
 F-9
 **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, 2006 and the accounts of International Star, Inc., Qwik Track,
          Inc.
          for the fiscal year ended December 31, 2005. Qwik Track, Inc. has no assets
          and
          has not had any operations during 2006 and 2005.
 
 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 fiscal years ended
          December 31, 2006 and 2005. 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 antidultive and then only the basic
          per share
          amounts are shown in the report.
 
 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 Accounting Principles Board Opinion No.25
          (APB 25)
          and related interpretations in accounting for its employee stock options.
          Under
          APB25, when the exercise price of employee stock options is equal to the
          estimated market price of the stock on the date of grant, no compensation
          expense is recorded. The Company has adopted the disclosure-only provisions
          of
          Statement of Financial Accounting Standards No. 123 (SFAS 123) with respect
          to
          employee stock options.
 
 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 losses have been fully reserved and no net tax benefit
          has been
          recorded in these financial statements.
 
 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,
          tax
          credit recoverable, reclamation bond, accounts payable and accrued liabilities,
          amount due to a director and loan payable.
 
 F-11
 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 three months or less to be cash
          equivalents.
 
 13.
                Financial
                    and Concentration Risk
 
 The
          Company does not have any concentration or related financial credit
          risk
 
 **C.**
                **ESTABLISHING
                    THE DETRITAL WASH PROJECT**
 
 On
          May
          30, 2001, the Company announced plans to focus on widening their exploration
          area, by re-establishing a project from 1998, the “Detrital Wash” project.
          Though positive results were generated from testing conducted of a 2-ton
          composite sample; the Company’s limited capital during the past 12 months has
          delayed commencement of any significant project operations. Still, the
          Company
          is continuing to expend efforts and resources to maintain the operating
          costs of
          its mining interests.
 
 **D.**
                **LOANS
                    AND ADVANCES FROM COMPANY
                    DIRECTORS**
 
 Company
          directors have from time to time advanced funds to the Company for the
          payment
          of operating expenses. These advances are repaid in cash and through common
          stock of the Company. There were no amounts owing to directors on December
          31,
          2006 and 2005.
 
 **E.**
                **COMMON
                    STOCK**
  The
          Company issued options for the purchase of 2,280,000 common shares, to
          its
          directors on November 7, 2000. The options had an exercise price of $.25
          per
          share, are vested as of the November 7, 2000, and have a 5-year duration.
          The
          Company did not recognize any compensation expense in connection with their
          issuance, as the Company values the issuance of its options under the “intrinsic
          value method”. Also, the option price exceeded or equaled the market value of
          the stock at the time of the grant of these options. These options
          expired **** on
          November 7, 2005.
 
 F-12
 On
          October 1, 2001, the Company
          issued 310,000 options, valued at $77,500, ($0.25 per option) to directors
          and
          employees of Qwik Track, Inc. These options are valid until October 1,
          2005, and
          will be vested at 25% each year. These options expired on October 1,
          2005.
 
 During
          the year ended December 31, 2004, the Company issued 6,281,515 shares of
          common
          stock for cash with the shares valued at a range of $0.05 to $0.11 per
          share.
          The Company also issued 2,140,000 shares of common stock for services rendered
          to the Company at $0.03 and $0.10 per share.
 
 On
          February 2, 2005, the Company executed a 1 for 3 forward stock split. This
          transaction has been retroactively applied to give effect to this forward
          stock
          split as if it occurred at the Company’s inception.
 
 During
          the year ended December 31, 2005, the Company issued 19,701,217 shares
          of common
          stock and 16,025,001 warrants for cash with the shares valued at a range
          of
          $0.02 to $0.15 per share, and the warrants with an exercise price range
          of $0.03
          to $0.15. These warrants do not have any registration rights and carry
          a
          two-year life. .
 
 On
          September 13, 2006, subject to shareholder approval, the Board of Directors
          adopted resolutions approving a Stock Option Plan whereby the Company would
          reserve 18,000,000 common shares for issuance as incentive awards in the
          future.
          The Plan was approved by the shareholders on December 1, 2006. There were
          no
          options or shares issued from this plan during the year ended December
          31,
          2006.
 
 During
          the year ended December 31, 2006, the Company issued 22,676,667 shares
          of common
          stock and 7,476,557 warrants for cash received in the amount of $271,600
          with
          the common shares valued at a range of $0.01 to $0.03 per share, and the
          warrants with an exercise price of $0.01 to $0.03 per share. The Company
          issued
          3,437,500 common shares valued at a range of $0.038 to $0.04 per share
          for
          services rendered to the Company. The Company also issued 18,591,682 common
          shares as payment for a note payable with a principal amount due of $250,000
          and
          accrued interest of $28,875 on October 30, 2006.
 
 At
          December 31, 2006 there were 8,333,333 warrants outstanding with an average
          exercise price of $0. 015 per share. The fair value of all warrants has
          been
          calculated using the Black-Scholes method, with the resulting value being
          immaterial to the financial statement presentation.
 
 F-13
 
 **F.**
                **ACQUISITION
                    AND DIVESTITURE OF PITA KING BAKERIES INTERNATIONAL, INC.**
 
 On
          October 1, 2002, the Company issued 4,139,500 restricted shares of common
          stock
          to the shareholders of Pita King Bakeries International, Inc. (Pita King)
          and
          acquired all of the outstanding shares of Pita King. Pita King Bakeries
          International, Inc. (a Nevada corporation) is a wholly owned subsidiary
          and the
          holding company for Pita King Ltd. (a Washington corporation). Pita King,
          Ltd.
          began operations as a retail bakery in Everett, Washington in September
          of 2001
          and continues to operate as a retail bakery. The results of Pita King’s
          operations for the fiscal year ended October 31, 2003 are included in the
          consolidated statement of operations.
 
 Effective
          January 1, 2004, the original shareholders of Pita King and the management
          of
          the Company mutually agreed to dissolve their business relationship. Under
          terms
          of this dissolution, the original shareholders of Pita King returned 4,000,000
          shares of common stock to the Company and Company agreed to forgive a $35,000
          loan made to Pita King. The original shareholders of Pita King were allowed
          to
          retain 139,500 shares of the Company’s common stock which they had received as
          part of the original purchase of Pita King. The Company has recognized
          a loss of
          $99,472 on the divestiture of Pita King.
 
 **G.**
                **INVESTMENT
                    IN QWIK TRACK, INC.**
 
 On
          October 15, 2001, Qwik Track, Inc. (Q-Track) was organized as a wholly
          owned
          subsidiary of International Star, Inc. Q-Track operates as a web-based
          service
          business providing the wagering enthusiast with thoroughbred handicapping,
          analytical data and statistical information for racetrack wagering over
          the
          internet. Q-Track has not commenced principal operations and has incurred
          minimal expenses since inception.
 
 **H.**
                **QUANTITATIVE
                    AND QUALITATIVE DISCLOSURES**
 
 The
          Company will be exposed to various market risks as a part of its future
          operations. As an effort to mitigate losses associated with these risks,
          the
          Company may, at times, enter into derivative financial instruments. These
          may
          take the form of forward sales contracts and interest rate swaps. The Company
          does not actively engage in the practice of trading derivative securities
          for
          profit. This discussion of the Company’s market risk assessments contains
“forward looking statements” that contain risks and uncertainties. Actual
          results and actions could differ materially from those discussed
          below.
 
 The
          Company’s future operating results will be substantially dependent upon the
          world market prices of Palladium, Platinum, Gold and Silver, which can
          fluctuate
          widely and are affected by numerous factors, such as supply and demand
          and
          investor sentiment. In order to mitigate some of the risk associated with
          these
          fluctuations, the Company may at times enter into forward sale contracts.
          The
          Company will continually evaluate the potential benefits of engaging in
          these
          strategies based on the then current market conditions. The Company may
          be
          exposed to nonperformance by counterparties as a result of its hedging
          activities. This exposure would be limited to the amount that the spot
          price of
          the metal falls short of the contract price.
 
 F-14
 I.
                **NOTE
                    PAYABLE**
 
 On
          October 28, 2003 management approved the acceptance of a Subscription Agreement
          and Loan Agreement between the Company and a Life Insurance Company. Under
          the
          terms of the agreement, the Life Insurance Company loaned $250,000 to the
          Company. This note carries an interest rate of 6% per annum with interest
          only
          payable in quarterly installments with the first quarterly interest payment
          due
          on April 28, 2004. This note is due and payable in full on October 28,
          2006 and
          is secured by a mortgage of a 25% mineral interest in the Company’s 1,280 acre
          Detrital Wash Mining Claims in Mohave County, Arizona (see Note C Establishing
          the Detrital Wash Project). This Life Insurance Company also purchased
          7,663,500
          shares of the Company’s common stock at a value of $0.03 1/3 for a total
          purchase price of $250,000. On October 30, 2006 the Company paid this note
          payable through the issuance of 18,591,682 shares of common stock for the
          payment of the principal balance of $250,000 and accrued interest of
          $28,875.
 
 **J.**
                **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 short term
          loans,
          and equity funding, which will enable the Company to operate for the coming
          year.
 
 **K.**
                **RESTATEMENT**
 
 The
          Company has restated its financial statements for the year ended December
          31,
          2005 to correct an accounting error in the recording of mineral exploration
          costs and additional paid in capital. The following tables reflect the
          effect of
          the restatement adjustment on the balance sheet, statement of operations
          and net
          loss per share.
  F-15
  OriginallyReported
                
                Restated
                
                Adjustment**Balance
                  Sheet**Total
                  Assets
                
                
                237,184
                
                
                237,184
                
                
                -Paid
                  in Capital
                
                
                3,621,346
                
                
                3,524,059
                
                
                (
                    97,287
                )Accumulated
                  Deficit
                
                
                (3,940,216
                )
                
                (3,842,929
                )
                
                97,287Total
                  Liabilities & Stockholders’
                  Equity
                
                
                237,184
                
                
                237,184**Statement
                  of
                  Operations**Mineral
                  Exploration costs
                
                
                344,927
                
                
                247,640
                
                
                (
                    97,287
                )Net
                  Loss
                
                
                (
                  896,568
                )
                
                (
                  799,281
                )
                
                97,287Weighted average shares
                  Common stock outstanding
                
                
                201,308,938
                
                
                201,308,938
                
                
                201,308,938Net
                  loss per share
                
                $
                (0.00
                )
                $
                (0.00
                )
                $
                (0.00
                )
  **L.**
                **RELATED
                    PARTY TRANSACTIONS**
 
 The
          Company has agreed to pay officers, directors and employees of the Company
          a 10%
          finder’s fee on any private placement sales of common stock and upon any funds
          loaned to the Company for working capital. During the years ended December
          31,
          2006 and 2005 the amounts paid to officers, directors and employees as
          finder’s
          fees totaled $15,350 and $ 33,494 respectively.
 
 In
          August
          of 2006, our Director Joseph E. Therrell, Jr. exercised warrants to purchase
          shares of our common stock at an exercise price of $0.01 per share, receiving
          51,000 shares of our common stock for $5,100.
 
 In
          August
          of 2006, our Director Virginia K. Shehee exercised warrants to purchase
          shares
          of our common stock at $0.01 per share, receiving 1,000,000 shares of our
          common
          stock for $10,000.
 
 On
          October 30, 2006, Kilpatrick Life Insurance Company, a major shareholder
          of our
          Company who employs Ms. Shehee as its Chief Executive Officer, Mr. Therrell
          as
          its Vice President and Chief Investment Officer, and Ms. Wine as its Assistant
          Secretary/Treasurer entered into an agreement with us to convert the outstanding
          loan of $250,000 and interest due in the amount of $28,875.25 into shares
          of our
          common stock at a rate of $0.015 per share for a total of 18,591,682
          shares.
 
 F-16
 On
          January 8, 2007, Mr. Denver Cashatt resigned as the President of the Company.
          On
          January 16, 2007 the Board of Directors appointed Mr. Joseph Therrell,
          as Acting
          President of the Company. The Company also relocated its offices to Shreveport,
          Louisiana. The Company shares office space with Kilpatrick Life Insurance
          Company (see Note I) who is a major shareholder of the Company. Mr. Therrell
          also serves a Vice-President and Chief Investment Officer of Kilpatrick
          Life
          Insurance Company.
 
 **M.**
                **SUBSEQUENT
                    EVENTS**
 
 As
          noted
          above the Company relocated its offices to Shreveport, Louisiana and currently
          shares office space with Kilpatrick Life Insurance Company, a major shareholder
          of the Company.
 
 From
          January to March 31, 2007, the Company issued 14,025,642 shares of its
          common
          stock through private placements for $180,000.
 
 F-17