UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC  20549





FORM
10-K




(Mark
One)




x
            Annual Report
      Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for
      the
              Fiscal Year Ended December 31,
  2008




or




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





Commission
File Number:  000-28861





INTERNATIONAL
STAR, INC.


(Exact
Name of Small Business Issuer as Specified in Its Charter)




Nevada
              
              86-0876846(State
      or other jurisdiction of incorporation or organization)
              
              (I.R.S.
      Employer Identification No.)1818 Marshall Street, Shreveport,
      LA
              
              71101(Address
      of principal executive offices)
              
              (Zip
      Code)(318)
      464-8687(Registrant’s
      telephone number, including area
code)




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





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





Common
Stock, par value $0.001 per share





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




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




Indicate
by check mark if the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.   Yes x    No
o




Indicate
by check mark if disclosure of delinquent filers in response to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  o




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






Large accelerated
      filer  o
            Accelerated
      filer  o
            Non-accelerated
      filer  o
            Smaller reporting
      company  x(Do not check if
      smaller reporting company)




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.).


Yes  o   No 
x




Based on
the closing sale price of $0.010 on June 30, 2008, the aggregate market value of
the voting and non-voting common stock held by non-affiliates of the registrant
was $2,197,780.




As of
March 20, 2009, there were 281,512,274 shares of the registrant’s Common Stock
issued and outstanding.







INTERNATIONAL
STAR, INC.


Form
10-K


For
the Fiscal Year Ended December 31, 2008





TABLE
OF CONTENTS




PART
      I
              
              1ITEM
      1.
              BUSINESS
              2ITEM
      1A.
              RISK
      FACTORS
              6ITEM
      1B.
              UNRESOLVED
      STAFF COMMENTS
              6ITEM
      2.
              PROPERTIES
              7ITEM
      3.
              LEGAL
      PROCEEDINGS
              9ITEM
      4.
              SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
              9PART
      II
              
              9ITEM
      5.
              MARKET
      FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
    MATTERS
              9ITEM
      6.
              SELECTED
      FINANCIAL DATA
              12ITEM
      7.
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATION
              12ITEM
      7A.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
              19ITEM
      8.
              FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
              19ITEM
      9.
              CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
              20ITEM
      9A.
              CONTROLS
      AND PROCEDURES
              20ITEM
      9B.
              OTHER
      INFORMATION
              21PART
      III
              
              22ITEM
      10.
              DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
              22ITEM
      11.
              EXECUTIVE
      COMPENSATION
              24ITEM
      12.
              SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
              26ITEM
      13.
              CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
              27ITEM
      14.
              PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
              28ITEM
      15.
              EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES
              29







PART
I





CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS





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





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





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





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





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




·
            changes
      in market prices of precious and base
metals;




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




·
            the
      availability and cost of debt and equity
  financing;




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




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




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




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




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




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




·
            changes
      in tax laws;




·
            threats
      or acts of terrorism or war; and




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







1




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





ITEM
      1.
            BUSINESS





Our
Background and Business Development





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





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





In March
1998, we entered into a 20-year mining property lease agreement with James R.
Ardoin pursuant to which Mr. Ardoin leased to our Company eight mineral claims
located in the Detrital Wash area around mile marker 22 on Highway 93, Mohave
County, Arizona, for the purpose of exploring for minerals and for the
extraction, treatment, and sale of minerals found on the lands
leased.  We agreed to pay Mr. Ardoin a production royalty equal to 2%
of net smelter returns (“NSR”) (as defined in the lease).  In July
2004, we acquired additional claims totaling approximately 20,000 acres adjacent
to our original claims pursuant to an exploration rights agreement with the
holders of the claims, some of whom were then directors or officers of the
Company.  The agreement granted us exploration rights on the claims,
and first right of refusal to enter into a mineral lease agreement in exchange
for a 0.25% NSR payable to the claimholders should the Company bring the
property into production.  The agreement required us to expend a
minimum of $125,000 on exploration during the three-year period following the
execution of the exploration agreement and to maintain the claims in good
standing by paying federally required maintenance fees.  In August
2008, based on an assessment by the Company’s current geology and mining
consultants of a lack mineralization in these claims and because the Company had
staked new claims in the area covering areas of evidenced mineralization, the
Company terminated its lease agreement with Mr. Ardoin in accordance with its
terms and allowed the claims acquired through the 2004 exploration rights
agreement, under which the Company had fully performed its obligations, to
expire.





In March
2001, we purchased from Gold Standard Mines, Inc. 51 mining claims located in
the Wikieup mining district, Mohave County, Arizona (collectively, 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 for the Wikieup
Property verified by an independent source.  As consideration for the
claims, we issued 1,000,000 shares of our restricted common stock having an
aggregate value of $400,000 as of the date of the acquisition.  In
exchange, we received a notarized quitclaim deed granting us all rights,
interest and title to the claims.  The deed was subsequently recorded
at the United States Bureau of Land Management office in Phoenix, Arizona, and
at Mohave County in Kingman, Arizona.  The Company presently holds 42
of these claims.






2





In
October 2001, we formed a wholly owned subsidiary, Qwik Track, Inc., to engage
in web-based information distribution services and to provide timely and
accurate thoroughbred handicapping analytical data and statistical information
to the international account wagering market.  Due to our limited
finances and lack of funding, in 2003 we suspended indefinitely the further
development of Qwik-Track, Inc.





In
October 2002, we acquired Pita King Bakeries International, Inc. (“Pita King”),
after which Pita King operated as our wholly-owned subsidiary engaged in the
production and marketing of a variety of pita breads and
chips.  Effective January 1, 2004, we and the principals of Pita King
mutually agreed to dissolve our business relationship.  Pursuant to
the terms of the dissolution agreement, we forgave a debt owed by Pita King to
the 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 of the dissolution agreement, Pita
King is no longer affiliated with the Company.





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





In 2008,
we engaged as consultants an additional geologist and a registered professional
mining engineer, both whom are “qualified persons” under Canadian National
Instrument (NI) 43-101 recognized industry standards, along with our existing
consultant geologist to coordinate development and implemention of a new
exploration program for our properties in the Detrital Wash
area.  This program consists of sampling, mapping, assaying and
conducting geophysical exploration activities designed to gather and evaluate
data under NI 43-101 industry standards and bring historical data on these
properties up to current NI 43-101 standards for the purpose of determining
whether mineable reserves exist on our Detrital Wash Property.  We
implemented the initial phase of this exploration program during 2008, which
involved collecting and assaying geological samples and mapping the
geology.  As of the date of this Annual Report, we have begun
implementation of a second phase of the program involving assaying additional
geological samples.  Pending the results of the additional assays and
subject to available funding, the Company plans to continue implementation this
exploration program during 2009 to determine whether commercially extractable
reserves exist on our Detrital Wash properties.  However, we cannot
guarantee that we will be able to obtain the necessary funding to complete this
program or, even if we obtain sufficient funding, that we will be able to
establish the existence of such reverves or to commercially exploit any such
reserves.  See “MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION – GENERAL – Plan of
Operation.”





Exploration
Planning – Speculative Nature of Mineral Exploration





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






3





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





·
            the
      ability to obtain all required
permits;




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




·
            availability
      and costs of financing;




·
            ongoing
      costs of production;




·
            market
      prices for the metals to be produced;
and




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





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





Regulation





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





·
            prospecting;




·
            development;




·
            taxes;




·
            labor
      standards;




·
            waste
      disposal;




·
            occupational
      safety and health;




·
            protection
      of the environment;




·
            reclamation
      of the environment; and




·
            toxic
      substances.





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





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






4




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, Louisiana 71101.





Employees





As of
December 31, 2008, we had no employees other than our executive officers, nor
any plans to recruit employees within the next twelve
months.  However, employees, consultants and expertise will be added
to the Company as management deems necessary and when financing
permits.





Competition





The
business of mineral exploration is highly competitive, and tends to be dominated
by a limited number of major mining companies.  Inasmuch as we have
exclusive exploration rights to the properties that are the targets of our
current exploration activities, we do not compete directly against any
particular firm for sales or market share.  However, 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.





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





Subsidiaries





Qwik Track,
Inc.





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





Star-Resolve Detrital Wash,
LLC





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






5





ITEM
      1A.
            RISK
      FACTORS





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





Exploration
for mineral deposits is highly speculative.





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





We
have no reserves, no mining operations and no mineral related
income.





Reserves,
by definition, contain mineral deposits in a quantity and in a form from which
the target minerals may be economically and legally extracted or
produced.  We have not established that such reserves exist on our
properties, and unless and until we do so, we will not have any income from our
mineral operations.





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





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





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





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





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





Our
directors and executive officers own, directly or indirectly, a significant
amount of our voting capital common stock, and accordingly, can exert
considerable influence over us.  As of March 1, 2009, our directors
and executive officers beneficially owned common stock which would equal in the
aggregate approximately 21.93% of the voting power of our outstanding common
stock.  As a result, these stockholders are potentially able to
significantly influence the decision on all matters requiring stockholder
approval, including the election of directors and the approval of significant
corporate transactions.





ITEM
      1B.
            UNRESOLVED
      STAFF COMMENTS





Not
applicable.






6




ITEM
      2.
            PROPERTIES





We
currently hold interests in two properties that we believe show potential for
mineral development.  Both properties consist of unpatented mining
claims located on federal public land managed by the United States Department of
Interior, Bureau of Land Management (“BLM”).  We are obligated to pay
a maintenance fee to the BLM of $170 per claim plus a $14 local filing fee for
each newly filed claim and $125 per claim per year for each existing
claim.





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





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





Property
title uncertainties exist 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 or
that third parties have not staked claims, or will not in the future stake
claims, on lands for which we believe we have good title to existing
claims.  In addition, we cannot assure that the properties in which we
have an interest are not subject to prior unregistered
agreements.  Any such undetected defects could cause us to lose our
rights to the property or to incur substantial expense in defending our
rights.





Detrital
Wash, Mohave County, Arizona Property





Property
and Location





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





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






7





Our
Detrital Wash Property presently consists of 434 lode claims located in the
Black Mountains and along the western front of the White Hills in the Detrital
Wash area in northwestern Arizona.  As of this Report, we have
obtained legal title to 75 of these claims.  Based on the presence of
gold and silver producing mines in the Black Mountains and the White Hills, we
believe deposits of precious metals may exist within the Detrital Wash
Property.  We cannot assure that we will discover such deposits or
that, if such deposits are discovered, we will be able to commercially produce
such mineral deposits.





These
lode claims have been converted from our previous placer claims based on
evidence of the existence of mineralization in the bedrock.  The lode
claims cover areas of bedrock mineralization indicated by historical data
obtained by the Company and confirmed by geochemical assays of mineral samples
performed for the Company in 2008 by a licensed independent lab and evaluated
according to National Instrument (NI) 43-101 standards.  These areas
include portions of the Black Mountains as well as known and anticipated
northerly extensions of veins found in the White Hills and mineralized
structures to the south.





We did
not pay any maintenance fees to the BLM for our lode claims in the Detrital Wash
Property in 2008.  In 2009, we have paid $13,800 in filing fees for 75
of our current lode claims in the Detrital Wash Property.





Operations





During
2008, we increased our lode claim holdings in the Detrital Wash area by adding
new lode claims and converting placer claims to lode claims where mineralization
occurs in the bedrock.  Based on our conclusion that our placer claims
in the area did not contain placer deposits, we released all of our placer claim
holdings in the Detrital Wash area upon their expiration as of August 31,
2008.  We did not add any new lode claims during the fourth quarter of
2008.





Our
current geology and mining engineer consultants developed a program during 2008
of testing geological samples from our Detrital Wash Property for mineralization
and mapping the existing geology and have implemented an initial phase of this
program.  The initial assay results of this program support historical
records obtained by the Company in 2008 of significant copper and molybdenum
mineralization in both the Black Mountains and Northern White Hills areas of the
Detrital region.  Based on these results, our consultants have
developed a plan for additional phases of our exploration program to further
assess under industry standards the mineral potential of our
properties.  As of this filing, we have submitted over 200 additional
mineral samples for assays of copper, molybdenum, silver and
gold.  Further implementation of this phase is dependent on our
obtaining additional funding.  Pending favorable results from these
most recent assays, we may pursue additional funding through joint venture
opportunities or from other equity investors.  See “MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION – GENERAL – Plan of
Operation.”  We cannot guarantee that the results of these assays will
be favorable or that we will be able to obtain the necessary funds to conduct
our planned exploration activities.  See “MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION – GENERAL – Going
Concern.”





Wikieup,
Arizona Property





Property
and Location





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





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






8





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





In 2008,
we paid an aggregate of $5,250 in annual maintenance fees to the BLM for the
Wikieup Property.





Operations





Due to
our limited financial resources, we do not currently have plans to engage in
development activities on the Wikieup Property during 2009.  However,
should adequate financing become available, management may implement an
aggressive campaign to identify through accepted geological processes any
mineralization occurring on our Wikeiup claims.





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, 2008, 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





None.




PART
II





ITEM
      5.
            MARKET
      FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
    MATTERS





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 NASD
assigned our Company a new trading symbol and our common stock began trading on
the Pink Sheets under the symbol ILST.PK.  On June 20, 2005, our
common stock was approved by the NASD for listing on the OTC Bulleting Board,
and since such date, our common stock has been trading under the symbol
ILST.OB.  The following table indicates quarterly high and low prices
per share for our common stock during the fiscal years ended December 31, 2008
and 2007.  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.




[Table follows on the next
page.]





9







Fiscal
      Year Ended December 31, 2008
            
            HIGH
            
            
            LOW4th
      Quarter ended December 31, 2008
            
            $
            0.0100
            
            
            $
            0.00253rd
      Quarter ended September 30, 2008
            
            $
            0.0210
            
            
            $
            0.00402nd
      Quarter ended June 30, 2008
            
            $
            0.0140
            
            
            $
            0.00601st
      Quarter ended March 31, 2008
            
            $
            0.0200
            
            
            $
            0.0060Fiscal
      Year Ended December 31, 20074th
      Quarter ended December 31, 2007
            
            $
            0.0200
            
            
            $
            0.00703rd
      Quarter ended September 30, 2007
            
            $
            0.0280
            
            
            $
            0.01002nd Quarter ended June 30, 2007
            
            $
            0.0380
            
            
            $
            0.01301st
      Quarter ended March 31, 2007
            
            $
            0.0220
            
            
            $
            0.0110




The
closing price of our common stock as of March 20, 2009, was $0.0100 per
share.





Number
of Shareholders





At March
20, 2009, we had approximately 160 stockholders of record of our common
stock.  This figure does not include beneficial owners of common stock
held in nominee or street name, as we cannot accurately estimate the number of
these beneficial owners.





Dividend
Policy





We did
not declare or pay any dividends during our fiscal years ended December 31, 2008
and 2007.  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.  Because our Common Stock is deemed to be a penny
stock, trading in the shares is subject to additional sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors.  “Accredited
investors” are persons with net worth, or joint net worth with their spouse, in
excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse, for each of the past two years and with the reasonable
expectation of attaining the same level of income in the current
year.  For transactions covered by these rules, broker-dealers must
make a special suitability determination for the purchase of such security and
must have the purchaser’s written consent to the transaction prior to the
purchase.  Additionally, for any transaction involving a penny stock,
unless exempt, the rules require the delivery, prior to the first transaction,
of a risk disclosure document prepared by the SEC relating to the penny stock
market.  A broker-dealer also must disclose the commissions payable to
both the broker-dealer and the registered representative, and current quotations
for the securities.  Finally, monthly statements must be sent
disclosing recent price information for the penny stocks held in an account and
information on the limited market in penny stocks.  Consequently,
these rules may restrict the ability of broker-dealers to trade and/or maintain
a market in our Common Stock and may affect the ability of our shareholders to
sell their shares.






10





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 provides for a share reserve of 18,000,000 common shares for future
issuances as direct awards or upon exercise of options granted under the
Plan.  As of the date of this filing, no stock options or stock awards
have been granted to our executive officers or our directors pursuant to the
Plan.





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





Equity
Compensation Plan Information





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




Recent
Sales of Unregistered Securities





On
October 10, 2008, we sold 500,000 shares of our common stock and warrants to
purchase an additional 250,000 shares of our common stock to an existing
shareholder of the Company at a price of $0.01 per unit for an aggregate of
$5,000.  The warrants are exercisable upon issuance for a term of
three years from date of issuance at an exercise price of 50% of the closing
price of our common stock on the day immediately preceding the date of
exercise.  We believe the issuance of these securities was exempt from
registration under Rule 506 of Regulation D promulgated under Section 4(2) of
the Securities Act of 1933, as amended (the “Securities Act”).





On
October 14, 2008, we sold a total of 2,250,000 shares of our common stock to
three existing shareholders upon exercise of stock warrants at an exercise price
per share of $0.0015, or 50% of the closing price of the common stock on the day
immediately preceding the exercise date, for an aggregate of
$3,375.  We believe the issuance of these securities was exempt from
registration under Rule 506 of Regulation D promulgated under Section 4(2) of
the Securities Act.  The stock certificates representing these
2,250,000 shares of restricted common stock were not issued to the shareholders
until 2009, and therefore, for accounting purposes, the proceeds from the
exercise of these warrants have been recognized in the financial statements as
of December 31, 2008, included with this Annual Report as shareholder deposits
rather than as capital or as proceeds from the sale of common
stock.





We did
not engage in any other sales of our securities that were not registered under
the Securities Act during the three month period ended December 31,
2008.  Our sales of unregistered securities during the fiscal years
ended December 31, 2006 and 2007, and during the nine months ended September 30,
2008, have been previously reported in our Annual Reports on Form 10-KSB, our
Quarterly Reports on Form 10-Q or 10-QSB and/or our Current Reports on Form 8-K
filed with the SEC.






11




Purchases
of Equity Securities





We did
not repurchase any of our securities during the fourth quarter of our fiscal
year ended December 31, 2008.





ITEM
      6.
            SELECTED
      FINANCIAL DATA





Not
applicable.





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





GENERAL





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





Our
Business





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





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, 2008.  In recognition of these trends, our independent registered
accountants have included cautionary statements in their report on our financial
statements for the year ended December 31, 2008, that expressed “substantial
doubt” regarding our ability to continue as a going
concern.  Specifically, our independent accountants have opined that
the continuation of our Company as a going concern is dependent upon obtaining
sufficient working capital to be successful in that effort.





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






12





During
the fourth quarter of 2008, we obtained funding from a related party to satisfy
our current obligations and to continue exploration work on our Detrital Wash
Property through the first quarter of 2009.  See “– GENERAL –
Financing.”  We will need to raise additional equity or debt financing
to fund our operating costs and our planned mineral exploration work and to
service our current debt obligations for the remainder of 2009, unless and until
we are able to generate substantial revenues from our mineral
properties.  If we do not obtain substantial additional financing, we
may not have sufficient capital to continue operating as a public company or at
all beyond the first quarter of 2009.  We cannot assure that we will
be able to obtain the necessary funding or, even if such financing is obtained,
that we will be able to establish the existence of mineral reserves or generate
revenues from our properties sufficient to sustain our continued operations or
at all.





Financial
Condition and Results of Operations





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





Our
current management has engaged consultants who have developed an exploration
plan involving geochemical and geophysical exploration methods to determine
under recognized industry standards whether mineral reserves exist on our
properties.  We have implemented an initial mapping and sampling phase
of this plan that included assaying of collected geological
samples.  We believe the assay results from this initial phase justify
further implementation of this exploration plan.  During the fourth
quarter of 2008, we obtained funding for a broader phase of assays of our
collected samples.  See “– GENERAL – Plan of
Operation.”  However, further exploration work will be dependent our
obtaining additional debt or equity financing.





We are
currently considering potential options to obtain funding to continue
exploration work on our properties and to fund our future operating and
compliance costs.  As of the date of this Annual Report, we have not
yet obtained the necessary level of funds to further implement our exploration
program on our Detrital Wash Property or to fund our operating and compliance
costs beyond the first quarter of 2009.  We cannot guarantee that we
will obtain such financing on terms that will be favorable to us or at all, or,
even if such financing is obtained, that we will determine that mineral reserves
exist or that we will be able to commercially exploit any reserves found on our
properties.  See “– GENERAL – Going
Concern.”





As of
December 31, 2008, our total assets are $29,413, consisting of $8,889 in cash,
$11,388 in prepaid expenses and $9,136 in property and equipment, net of
depreciation.  Our total assets at December 31, 2007, were $108,676,
consisting of $96,141 in cash and $12,535 in property and equipment, net of
depreciation.  The $79,263 decrease in our total assets during the
year ended December 31, 2008, is primarily due to a reduction in our cash
resulting from our operating and compliance expenses during the interim
period.  These expenses have been largely comprised of costs
associated with the development and implementation of our current mineral
exploration program for our Detrital Wash claims and our general operating and
compliance costs.





Our total
liabilities as of December 31, 2008, are $926,937, an increase of $402,983 over
total liabilities at December 31, 2007, of $523,983.  This increase is
attributable primarily to our borrowing an additional $275,000 under an existing
line of credit and $30,000 under a new line of credit to fund our exploration
activities and general operating and compliance costs during the period, along
with a $70,489 increase in our accounts payable and a $19,965 increase in
accrued expenses at December 31, 2008.  The increase in accounts
payable is primarily attributable amounts owed at December 31, 2008, for
consultant fees related to our exploration program and legal fees related to our
regulatory compliance.  The increase in accrued expenses is
attributable to the accrued interest on our December 2007 line of
credit.  See
“– GENERAL – Financing” for a discussion of our lines of credit.






13





Fiscal Year Ended December
31, 2008, Compared to Fiscal Year Ended December 31, 2007





Net Loss.  Our net
loss for the fiscal year ended December 31, 2008, was $541,218, compared to a
net loss of $400,340 during the fiscal year ended December 31, 2007, an increase
of 35.19%.  The significant increase in our net loss for the year
ended December 31, 2008, over the year ended December 31, 2007, was due
primarily to an almost five-fold increase in our mineral exploration costs
during 2008.  This large increase in our mineral exploration costs was
partially offset by a significant decrease in professional fees and a moderate
decrease in compensation and management fees during 2008 as compared to
2007.





Mineral Exploration Costs
Expense.  Mineral exploration costs expense for 2008, which
included expenses related to geological sampling and mapping activities and
assays performed on the samples taken from our properties, was $257,898,
compared to $44,737 for 2007, an increase of $213,161, or
476.48%.  This substantial increase was the result of costs associated
with the development and implementation of our current mineral exploration
program for our Detrital Wash mining claims.





Professional Fees
Expense.  During 2008, professional fees expense decreased by
$84,879, or 33.80%, from $251,119 during 2007, to $166,240 during
2008.  The significant decrease resulted primarily from the mutual
termination of our consulting agreement with our financial consultant due to his
acceptance of employment with one of our major shareholders.





Compensation and Management Fees
Expense.  Our compensation and management fees expense for 2008
decreased by $5,174, or 14.17%, from $36,500 during 2007 to $31,326 during 2008
as a result of the resignation of one of our executive officers in August 2007,
offset mostly by the salary of our current president, who was appointed in
December 2007.





Depreciation and Amortization
Expense.  Depreciation and amortization expense was unchanged
from 2007 to 2008 at $3,400.





General and Administrative Costs
Expense.  We incurred a $3,989, or 7.46%, increase in general
and administrative costs to $57,431 during the year ended December 31, 2008,
compared to $53,442 during the year ended December 31, 2007.  The
increase in general and administrative expense is attributable primarily to
costs associated with our current exploration program and regulatory compliance
costs.





Interest
Income.  Our interest income during 2008 was $327, compared to
$2,612 during 2007.





Interest
Expense.  During 2008, we incurred interest expense of $25,249
as a result of interest accruing on our line of credit obtained from
Kilpatrick’s Rose-Neath Funeral Homes, Crematorium and Cemeteries, Inc. in
December 2007.  See “– GENERAL –
Financing.”  Our interest expense for 2007, which was attributable to
the December 2007 line of credit, was $1,125.





Plan
of Operation





During
2009, we intend to focus on obtaining sufficient financing to make the required
filings to obtain legal title to the remainder of our lode claims in the
Detrital Wash Property and to continue exploration work toward the establishment
of precious and base metal reserves and assessment of the commercial viability
of mineral extraction from deposits on these properties.  If we are
able to establish significant mineralization through our ongoing efforts, we may
seek joint venture opportunities or potential investment by a larger resource
mining company or investor to fund the additional exploration work and potential
mineral extraction.  We do not presently have plans to stake
additional claims to the Detrital Wash Property.  However, we may add
additional lode claims to our Detrital Wash Property for further exploration
where we believe the land may hold commercial mining value, subject to available
funding.  See
“PROPERTIES – Detrital Wash, Mohave County, Arizona Property.”





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






14





In 2008,
we engaged as consultants an additional geologist and a registered professional
mining engineer, both of whom are “qualified persons” under NI 43-101, along
with our existing consultant geologist, to develop and conduct a program for our
Detrital Wash Property of testing geological samples for the existence of
minerals and mapping the existing geology.  Our consultants have
utilized the initial results of this program, which indicated the presence of
copper, molybdenum and silver mineralization, to further design the exploration
program to evaluate the mineral potential of our Detrital Wash
Property.  We have recently implemented a second phase of testing of
geological samples collected during 2008 and are awaiting the results to
determine the best course to obtain funding and to further implement our
exploration program.  We do not presently intend to conduct any
significant additional sampling and mapping in the Detrital Wash Property;
however, should any new claims be added to our inventory based on anticipated
mineralization and available funding, we may extend this sampling and mapping
program to any such new areas of interest.





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





During
2008, we added new lode claims and converted placer claims to lode claims where
mineralization occurs in the bedrock in our Detrital Wash
Property.  Through August 2008, we maintained approximately 21,000
acres of placer claims in the Detrital Wash area.  Based on
assessments by our consultant geologists and mining engineer of the lack of
placer deposits on these properties, we determined that our placer claims did
not have sufficient value to justify the cost of maintaining the claims, and
therefore, we released all of our placer claim holdings in the Detrital Wash
area upon their expiration as of August 31, 2008.  See “PROPERTIES – Detrital
Wash, Mohave County, Arizona Property.”





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





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





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





Due to
budget constraints, the assays performed in 2008 did not test for gold
mineralization.  However, our existing claim block consists of several
former gold mines, and the historical data we have obtained indicates
mineralization of gold in the area.  In March 2009, we submitted the
original 252 samples to Skyline Assayers & Laboratories in Tucson, Arizona,
an Arizona registered and licensed lab (“Skyline”), to be assayed for
gold.  As of the date of this filing, we are waiting to receive the
results from these assays.  We cannot provide assurance that
mineralization of gold will be confirmed or that any mineralization determined
by these or future assays will be sufficient to establish the existence of
precious or base mineral reserves on our properties.






15





Based on
the initial assay results from Mountain States, we have worked with our
geologist and engineering consultants on planning and implementation of
additional phases of geological testing to determine the mineral potential of
these properties and the viability of extracting any mineral reserves
discovered.  In March 2009, in addition to assaying the original 252
samples for gold, we submitted over 200 additional samples collected during our
initial sampling phase and several new samples to Skyline to be assayed for
copper, molybdenum, and silver as well as gold mineralization.  As of
the date of this filing, we are waiting to receive the results from these
assays.





Subject
to available funding, the following phases of our exploration program will
involve conducting geophysical probing and scanning of areas where
mineralization is shown to exist by our geochemical assay
results.  The geophysical exploration methods may include core
drilling and IP (induced polarization) and resistivity surveys as well as a VTEM
(versatile time-domain electromagnetic) airborne survey.  If we are
able to obtain the necessary financing to substantially begin our geophysical
exploration work, we anticipate such activities could commence as early as
mid-to-late 2009.  If these activities further indicate the potential
existence of significant mineralization on our properties, we intend to conduct
subsequent testing, as necessary, to determine whether such mineralization is of
sufficient quantity to establish mineral reserves.  If we are able to
establish the existence of mineral reserves on our properties, management
intends to pursue a means to exploit those reserves by commencing mining
operations, selling or leasing our interest in the property, or entering into a
joint venture with a larger resource company to develop the property to the
production stage.





Implementation
and completion of the anticipated geophysical exploration work as part of our
exploration program are dependent on our obtaining funding through additional
debt or equity financing.  Our present funds have been used or
allocated for payment of filing fees to the BLM for a portion of our lode mining
claims in our Detrital Wash Property, for the recent assays submitted to Skyline
and for our general operating and compliance costs through the first quarter of
2009.  We continue to consider potential options to secure additional
capital through debt or equity financing to fund our future
operations.  Pending favorable results from the assays submitted to
Skyline, we may aggressively seek additional capital through potential joint
venture opportunities with a larger resource mining company or from other equity
investors to fund the planned phases of our exploration program and the
extraction of any reserves established.





We cannot
guarantee that the results of these assays will be favorable or that we will
obtain such financing on terms that will be favorable to us or at
all.  We also cannot assure, even if such financing is obtained, that
we will determine that mineral reserves exist on our properties or that we will
be able to commercially exploit any such reserves.  Our ability to
establish and exploit any reserves of precious or base minerals found on our
properties will depend, in part, on factors beyond our control, including
technological capabilities in the mining industry, current economic conditions
and the current market price of any minerals discovered.  Until such
funding is obtained, we are unable to continue our exploration
program.  See
“– GENERAL – Going Concern.”





Financing





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





On
December 3, 2007, we obtained a $500,000 revolving line of credit from
Kilpatrick’s Rose-Neath Funeral Homes, Crematorium and Cemeteries, Inc.
(“KRFH”).  This line of credit carries simple interest at the rate of
6% per annum.  All unpaid principal and accrued interest is due on
December 2, 2010 (the “Maturity Date”).  Until the Maturity Date, we
are only required to pay interest, with the first such payment due in arrears on
June 3, 2008, and then with additional payments every 90 days
thereafter.  At any time, KRFH can demand immediate repayment of the
outstanding balance on the line of credit with ten days notice.  Any
payments due from us that are not paid within ten days of the due date are
subject to late fee of 5%.  We have the right to prepay any amounts
due KRFH at any time without penalty.  As of December 31, 2008, we
have borrowed the entire amount of the line of credit, and we have paid a total
of $9,263 in interest toward this line of credit.  We used the
proceeds from the line of credit to partially fund our operating and compliance
costs during 2008.






16





The line
of credit is secured by a 51% interest in our Detrital Wash Property and Wikieup
Property and in any future claims acquired by us, as well as all proceeds and
products from such properties (collectively, the “Collateral”).  In
the event we default, KRFH may institute legal action against us and foreclose
against the Collateral.  In such event, KRFH would be entitled to its
collection costs, including attorney fees and courts costs.





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





During
third quarter of 2008, we raised $50,000 through the sale of our restricted
common stock and common stock warrants.  During the fourth quarter of
2008, we raised an additional $5,000 through the sale of our restricted common
stock and common stock warrants.  We also raised $3,375 during the
fourth quarter of 2008 through the sale of shares of our restricted common stock
upon exercise of stock warrants issued during the previous quarter; however,
because the stock certificates representing these shares were not issued until
2009, for accounting purposes, this amount has been recognized in the financial
statements included with this Annual Report as shareholder deposits rather than
as capital or as proceeds from the sale of common stock.  We believe
these issuances were exempt from registration under Rule 506 of Regulation D
under Section 4(2) of the Securities Act.  See “MARKET FOR REGISTRANT’S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS – Recent Sales of Unregistered
Securities.”  In addition to the $58,375 raised through the sale of
our restricted common stock and common stock warrants described above, we
received overpayments totaling $4,125 in connection with the above-described
exercises of stock warrants and in connection with stock warrants that were not
properly exercised.  These funds have been reimbursed to the
respective shareholders or, in the case of the improper exercise, have been held
by us at the request of the shareholder pending proper exercise of the
warrants.  We did not secure any additional funding through the
issuance of our common stock during 2008.





On
December 1, 2008, we obtained a short-term line of credit of up to $200,000 from
KRFH.  Funds advanced to us under the line of credit carry simple
interest at the rate of 10% per annum beginning on the date of each
advance.  All unpaid principal and accrued interest on funds advanced
under the line of credit is due on March 31, 2009 (the “2009 Maturity
Date”).  No payments on this line of credit are required until the
2009 Maturity Date.  However, for any principal amounts due from us
that are not paid within five days after the 2009 Maturity Date, the simple
interest rate will increase to 18% per annum effective as of the 2009 Maturity
Date.  We have the right to prepay any amounts owing under the line of
credit at any time without penalty.  We also have the right to pay the
amounts due, at our election, in the form of cash payment, issuance of shares of
our common stock, or any combination thereof.  As of December 31,
2008, we have borrowed $30,000 under this line of credit.





In the
event we default under the Loan Documents, KRFH may institute legal action
against us.  In such event, KRFH would be entitled to its collection
costs, including attorney fees and courts costs.  The line of credit
is unsecured.





We used
the proceeds from the sales of our equity securities in 2008 and the amount
borrowed from the short-term line of credit obtained in December 2008 to fund
the balance of our 2008 operating and compliance costs.  We plan to
use the remaining portion of the line of credit to fund our operating and
compliance costs during the first quarter of 2009.  We do not have any
revenues and continue to be dependent on debt and equity financing to meet our
immediate cash needs, and we do not anticipate achieving any revenues through
the first quarter of 2009.  Because it is unlikely we will achieve
sufficient revenues for the repayment of the short-term line of credit by the
2009 Maturity Date, we will be required to issue shares of our common stock to
KRFH unless we can raise the necessary funds through further debt or equity
financings.  We will also need to raise additional funds through debt
or equity financings to continue our operations.  We can provide no
assurance that we will be able to raise the funds necessary for the repayment of
the line of credit and for our continued operations on terms favorable to us or
at all.






17





During
our fiscal year ended December 31, 2007, we raised an aggregate of $210,000
through the private placement of our restricted common stock.  We
believe the issuances were exempt from registration under Section 4(2) of the
Securities Act.





Historically,
certain of our directors have from time to time advanced funds to our Company
for the payment of operating expenses.  These advances have been
repaid in cash and through the issuance of restricted shares of our common
stock.  There were no amounts owing to the Company’s directors at
December 31, 2008 or 2007, and during the year ended December 31, 2008, our
directors did not advance any funds to the Company.





LIQUIDITY





Liquidity
and Capital Resources




Year
      ended December 31,2008
            
            
            
            2007Net
      cash used in operating activities
            
            $
            (447,252
            )
            
            $
            (342,119
            )Net
      cash provided by investing activities
            
            
            —
            
            
            
            —Net
      cash provided by financing activities
            
            
            360,000
            
            
            
            435,000





General





Overall,
we had negative cash flows of $87,252 for the fiscal year ended December 31,
2008, resulting from $447,252 used in our operating activities and $360,000
provided by our financing activities.  No cash was provided by
investing activities during the fiscal year ended December 31,
2008.  For the fiscal year ended December 31, 2007, we had positive
cash flows of $92,881.  The decrease in cash flows for the year ended
December 31, 2008, over the year ended December 31, 2007, reflects a $105,133
increase in cash used for operating activities and a $75,000 decrease in cash
provided by financing activities during 2008 compared to the respective amounts
in 2007.





Cash
Used in Our Operating Activities





For the
year ended December 31, 2008, net cash used in our operating activities of
$447,252, an increase of $105,133, or 30.73%, from the year ended December 31,
2007.  This increase was due to the $140,878 increase in our net loss
for 2008 over 2007, which resulted primarily from the greater amounts expended
for our increased mineral exploration activity on our Detrital Wash
Property.  The effect of the greater net loss in 2008 on our cash
flows from operating activities was offset partially by other variables, most
notably a larger increase in accounts payable and accrued expenses during 2008
compared to 2007.  The larger increase in accounts payable and accrued
expenses was due to amounts owed at December 31, 2008, for consultant fees
related to our exploration program and legal fees related to our regulatory
compliance and the accrued interest on our December 2007 line of
credit.





Cash
Provided by Our Financing Activities





Net cash
provided by our financing activities of $360,000 during the year ended December
31, 2008, was comprised of $275,000 provided by proceeds from a line of credit
we obtained in December 2007, $55,000 provided by the sale of our common stock
and stock warrants in August, September and October 2008 (not including $3,375
provided by the exercise of stock warrants recognized as shareholder deposits in
the accompanying December 31, 2008, financial statements) and $30,000 provided
by proceeds from a short-term line of credit we obtained in December
2008.  See “–
GENERAL – Financing” and “MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS – Recent Sales of Unregistered Securities.”  This
reflects a decrease of $75,000 as compared to net cash provided by financing
activities during the year ended December 31, 2007.  This decrease is
due to fewer sales of the Company’s equity securities in 2008 and the
substantial line of credit proceeds borrowed in December 2007.  Net
cash provided by financing activities during 2007 resulted from proceeds from
the sale of our common stock and from the line of credit obtained in December
2007.






18





Internal
Sources of Liquidity





For the
fiscal year ended December 31, 2008, the funds generated from our operations
were insufficient to fund our daily operations.  We can provide no
assurance that funds from our operations will meet the requirements of our daily
operations in the future.  Unless and until funds from our operations
are sufficient to meet our operating requirements, we will continue to need to
seek other sources of financing to maintain liquidity.





External
Sources of Liquidity





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





On
December 3, 2007, we obtained a $500,000 revolving line of credit from
KRFH.  During the year ended December 31, 2008, we borrowed the full
remaining $275,000 available under the line of credit at December 31, 2007, to
fund our operating and compliance costs.  As of December 31, 2008, we
have used all of these funds to pay operating and compliance expenses in
2008.  See “–
GENERAL – Financing.”





During
the year ended December 31, 2008, we raised $58,375 through the sale of our
restricted common stock and common stock warrants, of which $55,000 has been
recognized as capital in our financial statements as of December 31,
2008.  See “MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS – Recent Sales of Unregistered Securities” and “– GENERAL –
Financing.”





Finally,
on December 1, 2008, we obtained a $200,000 short-term line of credit from
KRFH.  During December 2008, we borrowed $30,000 under this line of
credit to fund the remainder of our operating and compliance costs for
2008.  See “–
GENERAL – Financing.”  We intend to use the remaining amount available
under this short-term line of credit to fund our operating and compliance costs
for the first quarter of 2009.





Because
we presently do not have sufficient revenues to fund our operating and
compliance costs or to fund our repayment of these two lines of credit, we will
need to raise other funds in 2009 through debt and equity
financings.  We can provide no assurance that we will be able to raise
the necessary funds on terms favorable to us or at all.  See “– GENERAL – Going
Concern.”





Inflation





Management
believes that inflation has not had a material effect on our results of operations in 2007 and2008, and does not expect that it will in fiscal year 2009, except
that a return of higher fuel and energy prices similar to summer 2008 price
levels could materially and adversely impact the Company by increasing costs for
our exploration program.





Off-Balance
Sheet Arrangements





We do not
have any off-balance sheet arrangements.





ITEM
      7A.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
applicable.





ITEM
      8.
            FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA





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






19





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





None.





ITEM
      9A.
            CONTROLS
      AND PROCEDURES





(a) Disclosure
Controls and Procedures.





Our
President and our Treasurer/Chief Financial Officer evaluated the effectiveness
of our disclosure controls and procedures as of the end of the period covered by
this Annual Report on Form 10-K, December 31, 2008.  Based on this
evaluation, our President and our Treasurer/Chief Financial Officer have
concluded that our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period
covered by this report were effective in timely alerting management to material
information relating to us and required to be included in our periodic filings
with the SEC.





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





(b) Internal
Control over Financial Reporting





Management’s Annual Report
on Internal Control Over Financial Reporting





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





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





Our
management has assessed the effectiveness of our internal control over financial
reporting based on the criteria in Internal Control — Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission.  Based on our evaluation under the criteria in
Internal Control — Integrated
Framework, we concluded that there are material weaknesses in our
internal control over financial reporting as of December 31, 2008, with respect
to the lack of segregation of duties pertaining to our financial record keeping
responsibilities and our lack of an audit committee, both of which are due to
the small size of our Company.






20





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





Notwithstanding
these inherent internal control weaknesses due to our small size, management
believes that the Company’s limited resources and general lack of extensive or
complex business transactions partially mitigates the risk posed by these
weaknesses.  Management also believes that the Company’s records as of
December 31, 2008, fairly and accurately reflect the Company’s transactions and
dispositions of assets as necessary to permit the preparation of financial
statements in conformity with U.S. generally accepted accounting principles and
that our receipts and expenditures have been made only with proper
authorization.





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





Changes in Internal Control
Over Financial Reporting





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





ITEM
      9B.
            OTHER
      INFORMATION





None.





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








21




PART
III





ITEM
      10.
            DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE





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





Name
            
            Age
            
            Position(s)
      Held
            
            Date
      Service BeganVirginia
      K. Shehee
            
            85
            
            Chairman
      of the Board of Directors
            
            January
      2005Sterling
      M. Redfern
            
            75
            
            President,
      Director
            
            December
      2007Jacqulyn
      B. Wine
            
            65
            
            Secretary,
      Treasurer / Chief Financial Officer, Director
            
            January
      2007





Ms. Virginia K. Sheheehas
served as the Chairman of our Board of Directors since May 2005 and as a
director of the Company since January 2005.  Ms. Shehee concurrently
serves as Chairman of the Board of Kilpatrick Life Insurance Company, a major
shareholder of our Company, and Kilpatrick’s Rose-Neath Funeral Homes and
Cemeteries, Inc.  Ms. Shehee served as the President and Chief
Executive Officer of Kilpatrick Life Insurance Company and Kilpatrick’s
Rose-Neath Funeral Homes, Crematorium and Cemeteries, Inc. from October 1971 to
July 2008.  Ms. Shehee is a former State Senator of Louisiana and has
served on the Forum 500 Board of Governors and on the Committee on Committees of
the American Council of Life Insurance (ACLI).  She has also served on
the Board of Directors and on the Taxation Steering Committee of the
ACLI.  In addition, Ms. Shehee is Chairman Emeritus of the Biomedical
Research Foundation of Northwest Louisiana, for which she has previously served
as the President and Chairman of its board of directors.  Ms. Shehee
is a director of the Louisiana Insurers’ Conference and has previously served in
various executive capacities for the Life Insurers Conference.  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.





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





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





Term
of Office





Our
directors are elected for a one-year term to hold office until the next annual
meeting of our shareholders, or until removed from office in accordance with our
bylaws and applicable law.  Our officers are appointed by our Board of
Directors and hold office until the earlier of their resignation or removal by
the Board, except for our President, Sterling Redfern.  On March 19,
2008, the Company entered into a formal employment agreement with Mr. Redfern,
effective as of April 1, 2008.  Under the agreement, Mr. Redfern will
serve as our President for a term of one year, after which he may continue to
serve at the will of the parties.  See “EXECUTIVE COMPENSATION –
Employment Agreements.”






22





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
      within two years prior to that
time;





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





(3)
            was
      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 SEC,
      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.





Director
Nomination Procedures





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





Section
16 Beneficial Ownership Reporting Compliance





Section
16(a) of the Exchange Act requires our executive officers and directors, and
persons who beneficially own more than ten percent of our equity securities, to
file reports of ownership and changes in ownership with the SEC on Forms 3, 4
and 5.  Officers, directors and greater than ten percent shareholders
are required by SEC regulation to furnish us with copies of all Section 16(a)
forms they file.  Based solely upon review of the copies of such
reports furnished to us during, and with respect to, the fiscal year ended
December 31, 2008, 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, 2008, all Section 16(a) filing requirements applicable to our
reporting persons were met except for as follows:  One of our
directors, Joe Rice, who resigned from our Board effective January 2, 2009,
inadvertently failed to timely file a Form 3.  Jacqulyn Wine, our
Secretary and Treasurer/Chief Financial Officer, filed an amended Form 3 to
disclose shares owned by her husband inadvertently omitted from her Form 3 filed
in 2007.





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
our Annual Report on Form 10-KSB for the fiscal year ended December 31,
2005.  In addition, a copy of our code of ethics can be obtained without chargeby
writing our Company at P.O. Box 7202, Shreveport, Louisiana 71137.






23





Audit
Committee and Financial Expert Disclosures





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





As of
December 31, 2008, and as of the date of filing of this report, we have not
created any standing committees of the Board of Directors, including an audit
committee.  Accordingly, our entire Board of Directors serves as our
audit committee.





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





ITEM
      11.
            EXECUTIVE
      COMPENSATION





Summary Compensation Table





The
following table sets forth information concerning the compensation of our
executive officers during the fiscal years ended December 31, 2008 and
2007:





Summary
Compensation Table





Name
      and principal position
            
            Year
            
            Salary
            
            Bonus
            
            Stock
      awards
            
            Option
      awards
            
            Non-equity
      incentive plan compensation
            
            Change
      in pension value and non-qualified deferred compensation
      earnings
            
            All
      other
                compensation
            
            TotalSterling
      M. Redfern, President(1)
            
            2008
              2007
            
            $39,600
              2,700
            
            --
              --
            
            $3,900(2)
              1,300(3)
            
            --
              --
            
            --
              --
            
            --
              --
            
            --
              $10,000(4)
            
            $43,500
              14,000Jacqulyn
      B. Wine,
              Secretary
      and Treasurer / Chief Financial Officer(5)
            
            2008
              2007
            
            --
              --
            
            --
              --
            
            --
              --
            
            --
              --
            
            --
              --
            
            --
              --
            
            --
              --
            
            --
              --











(1)
            Mr.
      Redfern was appointed President of the Company by our Board of Directors
      on December 6, 2007.




(2)
            Represents
      300,000 shares of our common stock issued on April 30, 2008, valued based
      upon the closing price of our common stock on the date of issuance of
      $0.013 per share.  These shares were issued to Mr. Redfern for
      his services to the Company during the months of January through March
      2008.




(3)
            Represents
      100,000 shares of our common stock issued on April 30, 2008, valued based
      upon the closing price of our common stock on the date of issuance of
      $0.013 per share.  These shares were issued to Mr. Redfern for
      his services to the Company during the month of December
    2007.




(4)
            Includes
      $10,000 in fees paid to Mr. Redfern as compensation for consulting
      services provided to the Company by Mr. Redfern from August 2007 to
      November 2007 prior to his appointment as our
  President.




(5)
            Ms.
      Wine was appointed Secretary and Treasurer/Chief Financial Officer by our
      Board of Directors on May 19, 2008.  She was appointed Acting
      Secretary by our Board of Directors on January 16, 2007, and Acting
      Treasurer/Chief Financial Officer on August 16, 2007.  She did
      not receive compensation for her services as an officer of the Company
      during 2008 or 2007.






24





Employment
Agreements





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





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





Prior to
Mr. Redfern’s appointment as our President, he served as a consultant to the
Company from August 2007 to November 2007.  During that time, the
Company paid Mr. Redfern an aggregate of $10,000 in fees for his consulting
services.





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





Stock
Option and Stock Award Grants





No stock
options were granted to our executive officers or directors during the year
ended December 31, 2008.





On April
30, 2008, we issued to our President, Sterling M. Redfern, 400,000 shares of our
common stock as compensation for his services as an officer of the Company
during the months of December 2007 through March 2008.  See “– Employment
Agreements.”





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, 2008, nor have any stock options been exercised by our named
executive officers since December 31, 2008, through and including the filing
date of this report.





No
unexercised stock options or unvested stock awards were outstanding as of
December 31, 2008.





Pension
and Other Benefits





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






25





Nonqualified
Deferred Compensation





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





Payments
Upon Termination or Change-In-Control





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





Compensation
of Directors





Our
directors did not receive any fees or other compensation for the services they
provided to the Company as directors during 2008.  We do not
anticipate providing any such fees to our directors for their service during
2009.





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





Security
Ownership of Certain Beneficial Owners and Management





The
following table sets forth certain information concerning the number of shares
of our common stock owned beneficially as of March 1, 2008, by: (i) each person
(including any group) known to us to own more than five percent (5%) of any
class of our voting securities; (ii) each of our directors and named executive
officers; and (iii) all of our officers and directors as a
group.  Except as otherwise indicated, all stockholders have sole
voting and investment power with respect to the shares listed as beneficially
owned by them, subject to the rights of spouses under applicable community
property laws.





Name
      of Beneficial Owner
            
            Amount
      and Nature of Beneficial Ownership
            
            
            Percent
      of Shares Outstanding (1)5%
      or greater holders:Kilpatrick
      Life Insurance Company
            
            
            52,351,682
            
            
            
            18.60
            %Kamal
      Alawas (2)
            
            
            27,964,524
            
            
            
            9.93
            %Directors
      and executive officers:Sterling
      M. Redfern
            
            
            400,000
            
            
            
            *Virginia
      K. Shehee (3)
            
            
            61,022,590
            
            
            
            21.68
            %Jacqulyn
      B. Wine (4)
            
            
            311,667
            
            
            
            *All
      directors and executive officers as a group (4 persons)
            
            
            61,734,257
            
            
            
            21.93
            %









*
            Less
      than 1%.




(1)
            The
      percentage of our common stock beneficially owned was calculated based on
      281,512,274 shares of our common stock outstanding as of March 1,
      2009.




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




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




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






26





Securities
Authorized For Issuance Under Equity Compensation Plans





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





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





Certain
Relationships and Related Transactions





Except
for the transactions described below, during 2008 and 2007, 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





During
2007, we paid $10,000 in consulting fees to Sterling M. Redfern for services he
provided to the Company from August 2007 to November 2007.  Mr.
Redfern was appointed as our President on December 6, 2007.  We paid
$8,500 in consulting fees during 2007 to Dorothy Wommack, who served as our
Secretary and Treasurer/Chief Financial Officer until her removal by the Board
of Directors on January 16, 2007, for temporary assistance she provided to our
Acting Secretary following Ms. Wommack’s removal as an officer of the
Company.





Transactions with Other
Related Parties





As
discussed above, on December 3, 2007, we obtained a $500,000 revolving line of
credit from Kilpatrick’s Rose-Neath Funeral Homes, Crematorium and Cemeteries,
Inc. (“KRFH”).  The line of credit carries simple interest at the rate
of 6% per annum.  All unpaid principal and accrued interest is due on
December 2, 2010 (the “Maturity Date”).  Until the Maturity Date, we
are only required to pay interest, with the first such payment due in arrears on
June 3, 2007, and then with additional payments every 90 days
thereafter.  At any time, KRFH can demand immediate repayment of the
outstanding balance on the line of credit with ten days notice.  Any
payments due from us that are not paid within ten days of the due date are
subject to late fee of 5%.  We have the right to prepay any amounts
due KRFH at any time without penalty.  As of December 31, 2008, we
have borrowed $500,000 under this line of credit, and we have paid a total of
$9,263 in interest toward this line of credit.





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





Additionally,
on December 1, 2008, we obtained a short-term line of credit of up to $200,000
from KRFH.  Funds advanced to us under the line of credit carry simple
interest at the rate of 10% per annum beginning on the date of each
advance.  All unpaid principal and accrued interest on funds advanced
under the line of credit is due on March 31, 2009 (the “2009 Maturity
Date”).  No payments on this line of credit are required until the
2009 Maturity Date.  However, for any principal amounts due from us
that are not paid within five days after the 2009 Maturity Date, the simple
interest rate will increase to 18% per annum effective as of the 2009 Maturity
Date.  We have the right to prepay any amounts owing under the line of
credit at any time without penalty.  We also have the right to pay the
amounts due, at our election, in the form of cash payment, issuance of shares of
our common stock, or any combination thereof.  As of December 31,
2008, we have borrowed $30,000 under this line of credit.  We have not
made any payments of interest or principal on this line of credit.






27





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





Director
Independence





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





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,
2008 and 2007.  The following table represents aggregate fees billed
for professional audit services rendered by Madsen to provide the audit of our
annual financial statements for the years ended December 31, 2008, and December
31, 2007, respectively:





2008
            
            
            2007Audit
      fees
            
            $
            20,920
            
            
            $
            21,013Audit-related
      fees
            
            
            --
            
            
            
            --Tax
      fees
            
            
            --
            
            
            
            --All
      other fees
            
            
            --
            
            
            
            --





Audit
Fees





Audit
Fees consist of fees billed for professional services rendered for auditing our
annual financial statements, reviews of our interim financial statements
included in our quarterly reports and services performed in connection with
other filings with the SEC.  We incurred audit fees from Madsen of
$20,920 during 2008 and $21,013 during 2007.





Audit
Related Fees





Audit
Related Fees may consist of fees billed for professional services rendered in
connection with comfort letters and other services that are normally provided by
our independent auditors in connection with statutory and regulatory filings or
engagements.  We did not incur any audit related fees from Madsen
during 2008 or 2007.





Tax
Fees





Tax Fees
may consist of fees for professional services for tax compliance, tax advice and
tax planning.  These services include assistance regarding federal,
state and local tax compliance and consultation in connection with various
transactions and acquisitions.  We did not incur any tax fees from
Madsen during 2008 or 2007.





All
Other Fees





We did
not incur any other fees from Madsen during 2008 or 2007.






28




ITEM
      15.
            EXHIBITS
      AND FINANCIAL STATEMENT SCHEDULES





Exhibit
Index





Exhibit
      No.
            
            Description2.1
            
            Acquisition
      Agreement and Plan of Reorganization dated November 15, 2002, by and among
      the Company, Pita King Bakeries and the Shareholders of Pita King
      (incorporated by reference to Exhibit 2.1 to the Company’s Current Report
      on Form 8-K filed on November 19, 2002)3.1
            
            Articles
      of Incorporation of the Company dated October 26, 1993 (incorporated by
      reference to Exhibit 3.(I) to the Company’s registration statement on Form
      10-SB filed on January 12, 2000)3.2
            
            Certificate
      of Amendment to Articles of Incorporation, as filed with the Nevada
      Secretary of State on January 22, 1997 (incorporated by reference to
      Exhibit 3.(i) to the Company’s Annual Report on Form 10-KSB, as amended,
      for the year ended December 31, 2005, filed on August 18,
      2006)3.3
            
            Certificate
      of Amendment to Articles of Incorporation, as filed with the Nevada
      Secretary of State on February 18, 1997 (incorporated by reference to
      Exhibit 3.(i) to the Company’s Annual Report on Form 10-KSB, as amended,
      for the year ended December 31, 2005, filed on August 18,
      2006)3.4
            
            Certificate
      of Amendment to Articles of Incorporation, as filed with the Nevada
      Secretary of State on April 30, 1997 (incorporated by reference to Exhibit
      3.(i) to the Company’s Annual Report on Form 10-KSB, as amended, for the
      year ended December 31, 2005, filed on August 18, 2006)3.5
            
            Certificate
      of Amendment to Articles of Incorporation, as filed with the Nevada
      Secretary of State on April 30, 1997 (incorporated by reference to Exhibit
      3.(i) to the Company’s Annual Report on Form 10-KSB, as amended, for the
      year ended December 31, 2005, filed on August 18, 2006)3.6
            
            Certificate
      of Amendment to Articles of Incorporation, as filed with the Nevada
      Secretary of State on December 21, 2004 (incorporated by reference to
      Exhibit 3.(i) to the Company’s Annual Report on Form 10-KSB, as amended,
      for the year ended December 31, 2005, filed on August 18,
      2006)3.7
            
            Bylaws
      of the Company, as amended (incorporated by reference to Exhibit 3.7 to
      the Company’s Annual Report on Form 10-KSB for the year ended December 31,
      2007, filed on March 31, 2008)4.1
            
            Form
      of 2006 Stock Option Plan (incorporated by reference to Exhibit A to the
      Company’s Proxy Statement for the Annual Meeting of Shareholders filed on
      November 13, 2006)10.1
            
            Mining
      Property Lease Agreement dated March 2, 1998, between the Company and
      James R. Ardoin (incorporated by reference to Exhibit 10.1 to the
      Company’s Annual Report on Form 10-KSB for the year ended December 31,
      2002, filed on July 22, 2004)10.2
            
            Exploration
      Rights Agreement dated February 13, 2004, between the Company and
      Associated Placer Group (incorporated by reference to Exhibit 10.1 to the
      Company’s Quarterly Report on Form 10-QSB for the quarter ended March 31,
      2004, filed on July 30, 2004)10.4
            
            Joint
      Venture Agreement dated January 10, 2006, between the Company and Resolve
      Capital Funding Corporation, Inc. (incorporated by reference to Exhibit
      10.5 to the Company’s Current Report on Form 8-K filed on January 17,
      2006)








29




10.5
            
            Agreement
      dated September 23, 2000, between the Company, Gold Standard Mines, Inc.
      and Howard Sadlier (incorporated by reference to Exhibit 10.6 to the
      Company’s Annual Report on Form 10-KSB for the year ended December 31,
      2005, filed on April 14, 2006)10.6
            
            Assignment
      of Rights to Proprietary Formula dated March 21, 2001, between the
      Company, Gold Standard Mines, Inc. and Howard Sadlier (incorporated by
      reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-KSB
      for the year ended December 31, 2005, filed on April 14,
    2006)10.7
            
            Mutual
      Agreement to Dissolve Business Relationships with an effective date of
      January 1, 2004, between the Company Pita King Bakeries International,
      Inc. (incorporated by reference to Exhibit 10.9 to the Company’s Annual
      Report on Form 10-KSB for the year ended December 31, 2005, filed on April
      14, 2006)10.8
            
            Subscription
      Agreement dated January 12, 2007, between the Company and John E. Tuma
      (incorporated by reference to Exhibit 10.15 to the Company’s Annual Report
      on Form 10-KSB for the year ended December 31, 2007, filed on March 31,
      2008)10.9
            
            Subscription
      Agreement dated January 15, 2007, between the Company and RMRB, LLC
      (Kenneth Rodney Reeves) (incorporated by reference to Exhibit 10.16 to the
      Company’s Annual Report on Form 10-KSB for the year ended December 31,
      2007, filed on March 31, 2008)10.10
            
            Subscription
      Agreement dated January 18, 2007, between the Company and John E. Tuma
      (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report
      on Form 10-KSB for the year ended December 31, 2007, filed on March 31,
      2008)10.11
            
            Subscription
      Agreement dated January 24, 2007, between the Company and Snyder Land
      Management, LLC (incorporated by reference to Exhibit 10.18 to the
      Company’s Annual Report on Form 10-KSB for the year ended December 31,
      2007, filed on March 31, 2008)10.12
            
            Subscription
      Agreement dated April 9, 2007, between the Company and Kenneth Rodney
      Reeves (incorporated by reference to Exhibit 10.19 to the Company’s Annual
      Report on Form 10-KSB for the year ended December 31, 2007, filed on March
      31, 2008)10.13
            
            Subscription
      Agreement dated April 17, 2007, between the Company and MoMe Investments,
      LLC (incorporated by reference to Exhibit 10.20 to the Company’s Annual
      Report on Form 10-KSB for the year ended December 31, 2007, filed on March
      31, 2008)10.14
            
            Subscription
      Agreement dated April 17, 2007, between the Company and Jill W. Folks
      (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report
      on Form 10-KSB for the year ended December 31, 2007, filed on March 31,
      2008)10.15
            
            Subscription
      Agreement dated April 17, 2007, between the Company and Kenneth Rodney
      Reeves (incorporated by reference to Exhibit 10.22 to the Company’s Annual
      Report on Form 10-KSB for the year ended December 31, 2007, filed on March
      31, 2008)10.16
            
            Corporate
      Loan Agreement, entered into on December 3, 2007, by Kilpatrick’s
      Rose-Neath Funeral Homes, Crematorium and Cemeteries, Inc. and the Company
      (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
      on Form 8-K filed on December 26, 2007)10.17
            
            Corporate
      Promissory Note, dated December 3, 2007, and issued by the Company to
      Kilpatrick’s Rose-Neath Funeral Homes, Crematorium and Cemeteries, Inc.
      (incorporated by reference to Exhibit 10.2 to the Company’s Current Report
      on Form 8-K filed on December 26, 2007)10.18
            
            Security
      Agreement, entered into on December 3, 2007, by Kilpatrick’s Rose-Neath
      Funeral Homes, Crematorium and Cemeteries, Inc. and the Company
      (incorporated by reference to Exhibit 10.3 to the Company’s Current Report
      on Form 8-K filed on December 26,
2007)






30




10.19
            
            Officer
      Employment Agreement between International Star, Inc. and Sterling M.
      Redfern, as amended on August 13, 2008 (incorporated by reference to
      Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on August
      14, 2008)10.20*
            
            Subscription
      Agreement dated August 22, 2008, between the Company and Plaut Holdings
      J10.21*
            
            Subscription
      Agreement dated August 22, 2008, between the Company and Plaut Holdings
      GE10.22*
            
            Subscription
      Agreement dated September 30, 2008, between the Company and J. Joseph
      Burk10.23*
            
            Subscription
      Agreement dated September 30, 2008, between the Company and Harold and
      Paula Taub10.24*
            
            Subscription
      Agreement dated September 30, 2008, between the Company and Tim
      Harts10.25
            
            Corporate
      Loan Agreement, entered into on December 1, 2008, by Kilpatrick’s
      Rose-Neath Funeral Homes, Crematorium and Cemeteries, Inc. and the Company
      (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
      on Form 8-K filed on December 5, 2008)10.26
            
            Corporate
      Promissory Note, dated December 1, 2008, and issued by the Company to
      Kilpatrick’s Rose-Neath Funeral Homes, Crematorium and Cemeteries, Inc.
      (incorporated by reference to Exhibit 10.2 to the Company’s Current Report
      on Form 8-K filed on December 5, 2008)14.1
            
            Code
      of Ethics for Principal Executive Officers and Senior Financial Officers
      of the Company (incorporated by reference to Exhibit 14.1 to the Company’s
      Annual Report on Form 10-KSB for the year ended December 31, 2005, filed
      on April 14, 2006)21.1*
            
            List
      of Subsidiaries of the Company31.1*
            
            Certification
      of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      200231.2*
            
            Certification
      of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232.1*
            
            Certification
      of Chief Executive Officer pursuant to pursuant to 18 U.S.C. Section 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      200232.2*
            
            Certification
      of Chief Financial Officer pursuant to pursuant to 18 U.S.C. Section 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002


_________________________________




* Filed
herewith





Financial
Statements


PageReport
      of Independent Registered Accounting Firm
            F-1Balance
      Sheet as of December 31, 2008
            F-2Statement
      of Operations for the years ended December 31, 2008 and
    2007
            F-3Statement
      of Cash Flows for the years ended December 31, 2008 and
    2007
            F-4Statement
      of Stockholders’ Equity for the years ended December 31, 2008 and
      2007
            F-5Notes
      to Financial Statements for the years ended December 31, 2008 and
      2007
            F-9





Financial Statement
Schedules





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






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.Date:  March
      31, 2009
              By:
              /s/ Sterling
      M. RedfernSterling
      M. RedfernPresident
      and Director


In
accordance with the Securities Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.





Signature
            
            Title
            
            Date/s/
      Sterling M. Redfern
            
            President
      and Director (Principal
            
            March
      31, 2009Sterling
      M. Redfern
            
            Executive Officer)/s/ Virginia K.
      Shehee
            
            Chairman
      of the Board of Directors
            
            March
      31, 2009Virginia
      K. Shehee/s/ Jacqulyn B.
      Wine
            
            Secretary,
      Treasurer/Chief Financial Officer
            
            March
      31, 2009Jacqulyn
      B. Wine
            
            and
      Director (Principal Financial Officer
              and
      Principal Accounting Officer)








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, 2008 and the
consolidated statements of operations, stockholders’ equity and cash flows for
the years ended December 31, 2008 and 2007, and for the period from inception of
exploration stage (January 1, 2004) through December 31, 2008.  These
consolidated financial statements are the responsibility of the Company’s
management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.





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





In our
opinion, these consolidated financial statements referred to above present
fairly, in all material aspects, the consolidated financial position of the
Company as of December 31, 2008, and the consolidated results of its operations
and cash flows for the years ended December 31, 2008 and 2007, and for the
period from inception of exploration stage (January 1, 2004) through December
31, 2008, in conformity with accounting principles generally accepted in the
United States of America.





The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  The Company does not have the
necessary working capital to service its debt and for its planned activity,
which raises substantial doubt about its ability to continue as a going
concern.  Management’s plans in regard to these matters are described
in Note F 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.


March 13,
2009


Salt Lake
City, Utah







F-1





INTERNATIONAL
STAR, INC.


AND
SUBSIDIARIES


(An
Exploration Stage Company)


BALANCE
SHEETS











ASSETS
            
            December
      31,
            
            
            December
      31,2008
            
            
            2007Current
      Assets:Cash
            
            $
            8,889
            
            
            $
            96,141Prepaid
Expenses
            
            
            11,388
            
            
            
            --Total Current
      Assets
            
            
            20,277
            
            
            
            96,141Property
      and Equipment (Net of accumulated depreciation)
            
            
            9,136
            
            
            
            12,535Total
      Assets
            
            $
            29,413
            
            
            $
            108,676LIABILITIES
      AND STOCKHOLDERS’ DEFICIENCYCurrent
      Liabilities:Accounts
payable
            
            $
            366,847
            
            
            $
            296,358Accrued
expenses
            
            
            22,590
            
            
            
            2,625Note payable – related
      party
            
            
            30,000
            
            
            
            --Shareholder
      deposits
            
            
            7,500
            
            
            
            --Total Current
      Liabilities
            
            
            426,937
            
            
            
            298,983Long
      Term Note Payable – Related Party
            
            
            500,000
            
            
            
            225,000Total
      Liabilities
            
            
            929,937
            
            
            
            523,983Stockholders’
      Deficiency:Preferred Stock20,000,000 shares
      authorized,Undesignated par value – none
      issued
            
            
            --
            
            
            
            --Common Stock780,000,000 shares authorized, at
      $.001 par value;279,262,274 and 273,362,274
      shares issued andoutstanding at December 31, 2008
      and 2007, respectively
            
            
            279,262
            
            
            
            273,362Capital in excess of par
      value
            
            
            4,429,759
            
            
            
            4,376,659Deficit accumulated during the
      exploration stage
            
            
            (5,606,546
            )
            
            
            (5,065,328
            )Total Stockholders’
      Deficiency
            
            
            (897,525
            )
            
            
            (415,307
            )Total
      Liabilities and Stockholders’ Deficiency
            
            $
            29,413
            
            
            $
            108,676


See
accompanying notes to the financial statements.






F-2




INTERNATIONAL
STAR, INC.


AND
SUBSIDIARIES


(An
Exploration Stage Company)


STATEMENT
OF OPERATIONS





Year
      Ended December 31,
            
            
            January
      1,
              2004
      (date of
              inception
      of
              exploration
              stage)
      to
              December
      31,2008
            
            
            2007
            
            
            
            2008Revenue:Total Revenue
            
            $
            --
            
            
            $
            --
            
            
            $
            --Expenses:Mineral exploration
      costs
            
            
            257,898
            
            
            
            44,737
            
            
            
            838,638Professional
    fees
            
            
            166,240
            
            
            
            251,119
            
            
            
            640,208Compensation & management
      fees
            
            
            31,326
            
            
            
            36,500
            
            
            
            1,411,735Depreciation &
      amortization
            
            
            3,400
            
            
            
            3,400
            
            
            
            14,673General &
      administrative
            
            
            57,431
            
            
            
            53,442
            
            
            
            458,847Total Operating
      Expenses
            
            
            516,295
            
            
            
            389,198
            
            
            
            3,364,101Net
      (Loss) from Operations
            
            $
            (516,295
            )
            
            $
            (389,198
            )
            
            $
            (3,364,101
            )Other
      Income and ExpensesInterest income
            
            
            327
            
            
            
            2,612
            
            
            
            2,939Interest
expense
            
            
            (25,249
            )
            
            
            (1,125
            )
            
            
            (79,402
            )Loss on disposal of
      assets
            
            
            --
            
            
            
            (12,629
            )
            
            
            (12,629
            )Loss on divestiture of
      subsidiary
            
            
            --
            
            
            
            --
            
            
            
            (99,472
            )Total Other
      Expenses
            
            
            (24,922
            )
            
            
            (11,142
            )
            
            
            (188,564
            )Net
      (Loss)
            
            $
            (541,218
            )
            
            $
            (400,340
            )
            
            $
            (3,552,665
            )Weighted
      Average SharesCommon Stock
      Outstanding
            
            
            279,262,274
            
            
            
            273,362,274Net
      Loss Per Common Share(Basic and
      dilutive)
            
            $
            (0.00
            )
            
            $
            (0.00
            )




See
the accompanying notes to the financial statements.


F-3





INTERNATIONAL
STAR, INC.


AND
SUBSIDIARIES


(An
Exploration Stage Company)


STATEMENT
OF CASH FLOWS




Year
      Ended December 31,
            
            
            January
      1,
              2004
      (date of
              inception
      of
              exploration
              stage)
      to
              December
      31,2008
            
            
            2007
            
            
            2008Cash
      flows from operating activities:Net (loss)
            
            $
            (541,218
            )
            
            $
            (400,340
            )
            
            $
            (3,552,665
            )Adjustments to reconcile net
      loss to cash used in operating activities:Depreciation &
      amortization
            
            
            3,400
            
            
            
            3,400
            
            
            
            14,673Loss on disposal of
      assets
            
            
            --
            
            
            
            12,629
            
            
            
            12,629Loss on divestiture of
      subsidiary
            
            
            --
            
            
            
            --
            
            
            
            99,472Common stock issued for
      services
            
            
            4,000
            
            
            
            --
            
            
            
            211,500Changes in operating assets and
      liabilities:Accounts receivable and
      prepaids
            
            
            (11,388
            )
            
            
            --
            
            
            
            68,407Inventories
            
            
            --
            
            
            
            --
            
            
            
            63,812Other assets
            
            
            --
            
            
            
            --
            
            
            
            95,474Accounts payables and accrued
      interest
            
            
            90,454
            
            
            
            42,192
            
            
            
            340,870Shareholder
      deposits
            
            
            7,500
            
            
            
            --
            
            
            
            7,500Net cash used in operating
      activities
            
            
            (447,252
            )
            
            
            (342,119
            )
            
            
            (2,638,328
            )Cash
      flows from investing activities:Purchase of fixed
      assets
            
            
            --
            
            
            
            --
            
            
            
            (29,355
            )Net cash provided by investing
      activities
            
            
            --
            
            
            
            --
            
            
            
            (29,355
            )Cash
      flows from financing activities:Proceeds from
      deposit
            
            
            --
            
            
            
            --
            
            
            
            --Repayments of long term
      borrowings
            
            
            --
            
            
            
            (25,000
            )
            
            
            (25,000
            )Proceeds from long term
      borrowings
            
            
            305,000
            
            
            
            250,000
            
            
            
            555,000Proceeds from sale of common
      stock
            
            
            55,000
            
            
            
            210,000
            
            
            
            1,782,426Net cash provided by financing
      activities
            
            
            360,000
            
            
            
            435,000
            
            
            
            2,312,426Net
      increase (decrease) in cash and cash equivalents
            
            
            (87,252
            )
            
            
            92,881
            
            
            
            (355,257
            )Cash
      and cash equivalents, beginning of period
            
            
            96,141
            
            
            
            3,260
            
            
            
            364,146Cash
      and cash equivalents, end of period
            
            $
            8,889
            
            
            $
            96,141
            
            
            $
            8,889Supplemental
      non-cash financing activities:Cash
      paid for interest
            
            $
            9,263
            
            
            $
            --
            
            
            $
            9,263Common
      stock issued for deposit
            
            $
            --
            
            
            $
            20,000
            
            
            $
            20,000Common
      stock issued for payment of notes payable and accrued
    interest
            
            $
            --
            
            
            $
            --
            
            
            $
            278,875Common
      stock issued for accrued compensation
            
            $
            --
            
            
            $
            --
            
            
            $
            57,500Capital
      contributed for payment of loans, cash advances and
    interest
            
            $
            --
            
            
            $
            --
            
            
            $
            202,159


See
the accompanying notes to the financial statements.






F-4





INTERNATIONAL
STAR, INC.


AND
SUBSIDIARIES


STATEMENT
OF STOCKHOLDERS’ EQUITY




Cumulative
from Inception of Exploration Stage (January 1, 2004) through December 31,
2008




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






F-5





INTERNATIONAL
STAR, INC.


AND
SUBSIDIARIES


STATEMENT
OF STOCKHOLDERS’ EQUITY


(CONTINUED)




Cumulative
from Inception of Exploration Stage (January 1, 2004) through December 31,
2008




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






F-6




INTERNATIONAL
STAR, INC.


AND
SUBSIDIARIES


STATEMENT
OF STOCKHOLDERS’ EQUITY


(CONTINUED)




Cumulative
from Inception of Exploration Stage (January 1, 2004) through December 31,
2008





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






F-7





INTERNATIONAL
STAR, INC.


AND
SUBSIDIARIES


STATEMENT
OF STOCKHOLDERS’ EQUITY


(CONTINUED)




Cumulative
from Inception of Exploration Stage (January 1, 2004) through December 31,
2008





Common
            
            
            CommonStock
            
            
            Stock
            
            
            Paid-In
            
            
            Accumulated
            
            
            TotalShares
            
            
            Amount
            
            
            Capital
            
            
            Deficit
            
            
            EquityCommon
      stock issued for deposit, January 13, 2007Valued
      at $ .018 per share
            
            
            1,064,595
            
            
            $
            1,064
            
            
            $
            18,936
            
            
            
            
            
            $
            20,000Common
      stock issued for cash, January 15, 2007Valued
      at $ .015 per share
            
            
            4,166,666
            
            
            $
            4,167
            
            
            $
            45,833
            
            
            
            
            
            $
            50,000Common
      stock issued for cash, January 18, 2007Valued
      at $ .012 per share
            
            
            833,334
            
            
            $
            833
            
            
            $
            9,167
            
            
            
            
            
            $
            10,000Common
      stock issued for cash, January 24, 2007Valued
      at $ .013 per share
            
            
            7,692,308
            
            
            $
            7,692
            
            
            $
            92,308
            
            
            
            
            
            $
            100,000Common
      stock issued for cash, April 9, 2007Valued
      at $ .013 per share
            
            
            769,232
            
            
            $
            769
            
            
            $
            9,231
            
            
            
            
            
            $
            10,000Common
      stock issued for cash, April 17, 2007Valued
      at $ .035 per share
            
            
            1,142,847
            
            
            $
            1,142
            
            
            $
            38,857
            
            
            
            
            
            $
            40,000Net
      (loss) for year ended December 31, 2007
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (400,340
            )
            
            $
            (400,340
            )Balances
      at December 31, 2007
            
            
            273,362,274
            
            
            $
            273,362
            
            
            $
            4,376,659
            
            
            $
            (5,065,328
            )
            
            $
            (415,307
            )Common
      stock issued for services, April 30, 2008Valued
      at $ .01 per share
            
            
            400,000
            
            
            $
            400
            
            
            $
            3,600
            
            
            
            
            
            
            $
            4,000Common
      stock issued for cash, August 22, 2008Valued
      at $ .01 per share
            
            
            3,500,000
            
            
            $
            3,500
            
            
            $
            31,500
            
            
            
            
            
            
            $
            35,000Common
      stock issued for cash, September 30, 2008Valued
      at $ .01 per share
            
            
            1,500,000
            
            
            $
            1,500
            
            
            $
            13,500
            
            
            
            
            
            
            $
            15,000Common
      stock issued for cash, October 10, 2008Valued
      at $ .01 per share
            
            
            500,000
            
            
            $
            500
            
            
            $
            4,500
            
            
            
            
            
            
            $
            5,000Net
      (loss) for year ended December 31, 2008
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (541,218
            )
            
            $
            (541,218
            )Balances
      at December 31, 2008
            
            
            279,262,274
            
            
            $
            279,262
            
            
            $
            4,429,659
            
            
            $
            (5,606,546
            )
            
            $
            (897,525
            )


See
accompanying notes to financial statements.







F-8





INTERNATIONAL
STAR, INC.


AND
SUBSIDIARIES





NOTES
TO FINANCIAL STATEMENTS





DECEMBER
31, 2008





A.      ORGANIZATION
AND HISTORY





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





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





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





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




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





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





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





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






F-9





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





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





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





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





B.      SIGNIFICANT
ACCOUNTING POLICIES





1.  Principles of
Consolidation and Accounting Methods





These
consolidated financial statements include the accounts of International Star,
Inc., and Qwik Track, Inc. (a wholly owned subsidiary) for the fiscal year ended
December 31, 2008.  Qwik Track, Inc. has no assets and has not had any
operations during the previous three years.





2.  Use of
Estimates





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





3.  Dividend
Policy





The
Company did not declare or pay any dividends during the years ended December 31,
2008 and 2007.  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
incomes (loss) per share amounts are computed based on the weighted average
number of shares actively outstanding in accordance with SFAS NO. 128 “Earnings
Per Share.”  Diluted net income (loss) per share amounts are computed
using the weighted average number of common shares and common equivalent shares
outstanding as if shares had been issued on the exercise of any common share
rights unless the exercise becomes anti-dilutive and then only the basic per
share amounts are shown in the report. At December 31, 2008, the Company had no
common equivalent shares of stock outstanding.






F-10





6.  Comprehensive
Income





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





7.  Stock Based
Compensation





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





8.  Income Taxes





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





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





9.  Fair Value of Financial
Instruments





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





10.  Recent Accounting
Pronouncements





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





11.  Revenue
Recognition





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





12.  Statement of Cash
Flows





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





13.  Financial and
Concentration Risk





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






F-11





C.      DIVESTITURE
OF PITA KING BAKERIES INTERNATIONAL, INC.





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





D.      COMMON
STOCK





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





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





E.      LONG
TERM NOTE PAYABLE – RELATED PARTY





The
Company entered into a loan agreement with Kilpatrick’s Rose-Neath Funeral
Homes, Crematorium and Cemeteries, Inc.on December 3, 2007.  This
Company is controlled through ownership by a shareholder/director of
International Star, Inc.  Under terms of the agreement, the Company
has an available credit line balance of $500,000 with interest accruing at 6%
per annum.  The interest is due and payable on a quarterly basis
(every three months).  The loan is  collateralized by a
security interest to the above mentioned lender in the amount of 51% interest in
the mineral rights of all mining claims owned by or having an interest in now or
in the future in the Detrital Wash and Wickieup properties located in Mohave
County, Arizona along with any future claims acquired by the
Company.  At December 31, 2008, the Company had borrowed $500,000
under the terms of this loan agreement.  The principal amount
borrowed, together with accrued interest, is due and payable on December 3,
2010.





The
Company entered into another loan agreement with Kilpatrick’s Rose-Neath Funeral
Homes, Crematorium and Cemeteries, Inc.on December 1, 2008.  Under
terms of the agreement, the Company has an available credit line balance of
$200,000 with interest accruing at 10% per annum.  Both the principal
and interest are due on March 31, 2009.





F.      GOING
CONCERN





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







F-12