Attached files
file | filename |
---|---|
EX-32.1 - INTERNATIONAL SILVER INC | v167469_ex32-1.htm |
EX-31.1 - INTERNATIONAL SILVER INC | v167469_ex31-1.htm |
EX-31.2 - INTERNATIONAL SILVER INC | v167469_ex31-2.htm |
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10 – Q
(MARK
ONE)
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 for the quarterly period ended September 30, 2009,
OR
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE TRANSITION PERIOD FROM _______ TO
_______.
|
INTERNATIONAL
SILVER, INC.
|
(Exact
name of registrant as specified in its
charter)
|
Arizona
|
(State or other jurisdiction of incorporation or
organization)
|
0001419482
|
86-0715596
|
|
(Commission
File Number)
|
(IRS
Employer Identification
Number)
|
5210
E. Williams Circle, Suite 700
|
Tucson,
Arizona 85711
|
(Address of principal executive offices including
zip code)
|
(520)
889-2040
|
(Registrant's
telephone number, including area
code)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act 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 whether the registrant has submitted electronically or posted on
its Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (Paragraph 232.405 of this
chapter) during the preceding 12 months ( or for such shorter period that the
registrant was required to submit and post such files).
Yes
o No 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 "small
reporting company" in Rule 12b-2 of the Exchange Act.
Large
accelerated filer o
Accelerated filer o
Non-accelerated filer o Smaller reporting
company x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
Yes o No x
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE
YEARS.
Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12,13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed by a
court.
Yes
o No o
APPLICABLE
ONLY TO CORPORATE ISSUERS:
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
Class
|
Shares Outstanding at November
23, 2009
|
|
Common Stock, $0.0001 Par Value
|
18,561,753
|
Exhibit
Index located at page 36
TABLE OF
CONTENTS
Page
|
||
Part 1 - FINANCIAL
INFORMATION
|
||
Item
1 - FINANCIAL STATEMENTS
|
3
|
|
Consolidated
Financial Statements:
|
3
|
|
Balance
Sheets
|
4
|
|
Statement
of Operations
|
6
|
|
Statement
of Cash Flows
|
7
|
|
Statement
of Shareholders’ Equity
|
9
|
|
Notes
To The Financial Statements
|
10
|
|
Item
2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN
OF OPERATIONS
|
18
|
|
Item
3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
29
|
|
Item
4T - CONTROLS AND PROCEDURES
|
29
|
|
Part II - OTHER INFORMATION
|
||
Item
1 - LEGAL PROCEEDINGS
|
29
|
|
Item
1A - RISK FACTORS
|
30
|
|
Item
2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
31
|
|
Item
3 - DEFAULTS UPON SENIOR SECURITIES
|
31
|
|
Item
4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
32
|
|
Item
5 - OTHER INFORMATION
|
32
|
|
Item
6 – EXHIBITS
|
32
|
|
CERTIFICATIONS
31.1 & 31.2
|
2
PART 1 – FINANCIAL
INFORMATION
ITEM 1 – FINANCIAL
STATEMENTS
International
Silver, Inc.
(An
Exploration Stage Company)
Consolidated
Financial Statements
For
the Nine Months Ended September 30, 2009
(Unaudited)
and
For
the Year Ended December 31, 2008
(Audited)
3
International
Silver, Inc.
(An
Exploration Stage Company)
Consolidated
Balance Sheets
As
At
|
||||||||
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
|
$ | 44,936 | $ | 50,274 | ||||
Accounts
receivables - Note B
|
29,509 | 150 | ||||||
Due
from related parties - Note H
|
8,049 | 12,565 | ||||||
Employee
advances
|
354 | 2,317 | ||||||
Prepaid
expenses
|
228 | 1,005 | ||||||
Total
Current Assets
|
$ | 83,076 | $ | 66,311 | ||||
PROPERTY
AND EQUIPMENT-Note C
|
||||||||
Land
|
$ | 0 | $ | 0 | ||||
Machinery
and equipment
|
2,042 | 2,042 | ||||||
Furniture
& fixtures
|
3,500 | 3,500 | ||||||
Vehicles
|
0 | 1,125 | ||||||
$ | 5,542 | $ | 6,667 | |||||
Less
accumulated depreciation
|
(5,542 | ) | (6,355 | ) | ||||
Total
Property and Equipment
|
$ | 0 | $ | 312 | ||||
OTHER
ASSETS
|
||||||||
Deferred
financing costs - Note D
|
$ | 0 | $ | 40,000 | ||||
Investment
in securities - Note E
|
16,750 | 25,000 | ||||||
Total
Other Assets
|
$ | 16,750 | $ | 65,000 | ||||
TOTAL
ASSETS
|
$ | 99,826 | $ | 131,623 |
See
accompanying notes to the consolidated financial statements
4
International
Silver, Inc
(An
Exploration Stage Company)
Consolidated
Balance Sheets
As At
|
||||||||
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable
|
$ | 439 | $ | 1,423 | ||||
Payroll
taxes payable
|
$ | 381 | $ | 233 | ||||
Accrued
expenses
|
36,282 | 2,900 | ||||||
Due
to related parties - Note H
|
95,652 | 80,824 | ||||||
Total
Current Liabilities
|
$ | 132,754 | $ | 85,380 | ||||
N0N-CONTROLLING
INTEREST
|
$ | (3,530 | ) | $ | (3,255 | ) | ||
SHAREHOLDERS'
EQUITY
|
||||||||
Common
stock
authorized
shares - 500,000,000
Par
value $0.0001 per Share
issued
& o/s at 12/31/08 - 15,011,753
issued
& o/s at 09/30/09 - 15,011,753
|
1,501 | 1,501 | ||||||
Additional
paid-in capital
|
808,978 | 808,978 | ||||||
Less:
Treasury Stock - 30,000 shares
|
(30,000 | ) | (30,000 | ) | ||||
Gain/Loss
on Sale of Securities
|
(8,250 | ) | 0 | |||||
Accumulated
deficit during exploration stage
|
(801,627 | ) | (730,981 | ) | ||||
Total
Shareholders' Equity
|
$ | (29,398 | ) | $ | 49,498 | |||
TOTAL
LIABILITIES & SHAREHOLDERS' EQUITY
|
$ | 99,826 | $ | 131,623 |
See
accompanying notes to the consolidated financial statements
5
International
Silver, Inc.
(An
Exploration Stage Company)
Consolidated
Statements of Operations
Exploration
Stage
(June
16, 2006
|
||||||||||||||||||||
Three
Months Ended
|
Nine
Months Ended
|
(through
|
||||||||||||||||||
September 30,
|
September 30,
|
September 30,
|
September 30,
|
September
30,
|
||||||||||||||||
2009
|
2008
|
2009
|
2008
|
2009)
|
||||||||||||||||
(Restated)
|
(Restated)
|
|||||||||||||||||||
REVENUES
|
||||||||||||||||||||
Consulting-third
parties
|
$ | 25,169 | $ | 0 | $ | 44,199 | $ | 0 | $ | 44,199 | ||||||||||
Consulting-related
parties
|
25,800 | 28,230 | 77,220 | 86,100 | 320,262 | |||||||||||||||
Other
|
1,195 | 3,685 | 1,371 | 9,121 | 17,636 | |||||||||||||||
Total
Revenues
|
$ | 52,164 | $ | 31,915 | $ | 122,790 | $ | 95,221 | $ | 382,097 | ||||||||||
Operating
Expenses
|
||||||||||||||||||||
Production
costs
|
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
Exploration
costs
|
11,320 | 27,828 | 17,983 | 43,176 | 265,799 | |||||||||||||||
General
and administration
|
||||||||||||||||||||
Consulting
fees
|
30,950 | 10,000 | 38,540 | 12,322 | 82,960 | |||||||||||||||
Professional
fees
|
4,150 | 2,000 | 19,560 | 25,738 | 130,404 | |||||||||||||||
Rent
|
1,500 | 6,642 | 4,500 | 8,610 | 72,705 | |||||||||||||||
All
other general & administrative
|
23,571 | 27,874 | 72,922 | 91,135 | 360,107 | |||||||||||||||
Depreciation
and depletion
|
0 | 94 | 97 | 280 | 752 | |||||||||||||||
Total
operating expenses
|
$ | 71,491 | $ | 74,438 | $ | 153,602 | $ | 181,261 | $ | 912,727 | ||||||||||
Operating
Income/(Loss)
|
$ | (19,327 | ) | $ | (42,523 | ) | $ | (30,812 | ) | $ | (86,040 | ) | $ | (530,630 | ) | |||||
OTHER
INCOME (EXPENSES)
|
||||||||||||||||||||
Impairment
Loss
|
$ | (40,000 | ) | $ | 0 | $ | (40,000 | ) | $ | 0 | $ | (40,000 | ) | |||||||
Interest
expense
|
0 | (2,488 | ) | (109 | ) | (5,498 | ) | (22,607 | ) | |||||||||||
Total
other income/(expense)
|
$ | (40,000 | ) | $ | (2,488 | ) | $ | (40,109 | ) | $ | (5,498 | ) | $ | (62,607 | ) | |||||
Less: Non-Controlling
Interest
|
$ | 0 | $ | 158 | $ | 275 | $ | 515 | $ | 3,724 | ||||||||||
PROVISION
FOR INCOME TAXES
|
||||||||||||||||||||
Income
tax benefit
|
$ | 165,028 | $ | 71,851 | $ | 165,028 | $ | 71,851 | $ | 165,028 | ||||||||||
Tax
valuation allowance
|
(165,028 | ) | (71,851 | ) | (165,028 | ) | (71,851 | ) | (165,028 | ) | ||||||||||
$ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||
NET
INCOME/(LOSS)
|
$ | (59,327 | ) | $ | (44,853 | ) | $ | (70,646 | ) | $ | (91,023 | ) | $ | (589,513 | ) | |||||
Accumulated Deficit | ||||||||||||||||||||
Beginning
of period
|
$ | (742,300 | ) | $ | (529,353 | ) | $ | (730,981 | ) | $ | (483,183 | ) | ||||||||
End
of period
|
$ | (801,627 | ) | $ | (574,206 | ) | $ | (801,627 | ) | $ | (574,206 | ) | ||||||||
Basic
and Diluted
|
||||||||||||||||||||
Income/(Loss)
per Share
|
$ | (0.004 | ) | $ | (0.003 | ) | $ | (0.005 | ) | $ | (0.006 | ) | ||||||||
Weighted
Average Shares Outstanding
|
15,011,753 | 14,843,970 | 15,011,753 | 14,768,970 |
See
accompanying notes to the consolidated financial statements
6
International
Silver, Inc.
(An
Exploration Stage Company)
Consolidated
Statements of Cash Flows
Nine
Months Ended
|
Exploration
Stage
|
|||||||||||
September
30,
|
September
30,
|
(June 16, 2006 through
|
||||||||||
2009
|
2008
|
September 30, 2008)
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||
(Restated)
|
(Restated)
|
|||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
Net
Income/(Loss)
|
$ | (70,646 | ) | $ | (91,023 | ) | (589,513 | ) | ||||
Adjustments
used to reconcile net (loss) to net cash (used) by operating
activities:
|
||||||||||||
Non-controlling
Interest in subsidiary
|
(275 | ) | (515 | ) | (3,530 | ) | ||||||
Depreciation
and depletion
|
97 | 280 | 909 | |||||||||
Impairment
Loss on Financing cost
|
40,000 | 0 | 40,000 | |||||||||
Issuance
of common stock
|
||||||||||||
In
exchange for land
|
0 | 0 | 30,000 | |||||||||
In
exchange for services
|
0 | 20,000 | 121,500 | |||||||||
In
exchange for exploration costs
|
0 | 0 | 55,385 | |||||||||
Changes
in operating assets and liabilities
|
||||||||||||
Decrease/(Increase)
in accounts receivable
|
(24,843 | ) | 56,370 | 159,341 | ||||||||
Decrease/(Increase)
in employee receivable
|
1,962 | 0 | 1,962 | |||||||||
Decrease/(Increase)
in prepaid expenses
|
777 | (718 | ) | 9,631 | ||||||||
(Decrease)/Increase
in accounts payable
|
13,991 | 35,692 | (10,790 | ) | ||||||||
(Decrease)/Increase
in accrued expenses
|
33,381 | (25,963 | ) | 59,902 | ||||||||
Net
Cash Flows (used by) Operating Activities
|
$ | (5,556 | ) | $ | (5,877 | ) | $ | (125,203 | ) | |||
CASH
FLOW FROM INVESTMENT ACTIVITIES
|
||||||||||||
Purchase
of equipment
|
$ | 0 | $ | 0 | $ | (6,668 | ) | |||||
Deferred
financing cost
|
0 | (40,000 | ) | (40,000 | ) | |||||||
Purchase
option on land
|
0 | (90,000 | ) | (90,000 | ) | |||||||
Purchase
of land
|
0 | 0 | (90,000 | ) | ||||||||
Net
Cash Flows from Investment Activities
|
$ | 0 | $ | (130,000 | ) | $ | (226,668 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
Issuance
of Common Stock:
|
||||||||||||
Cancellation
of Debt
|
$ | 0 | $ | 0 | $ | (168,093 | ) | |||||
Recharacterization
of debt to equity
|
0 | 0 | 265,072 | |||||||||
Net
Proceeds from stock issuance
|
0 | 0 | 80,000 | |||||||||
Sale
of mining property
|
||||||||||||
For
treasury stock
|
0 | 0 | (30,000 | ) | ||||||||
Exchange
for marketable securities
|
0 | 0 | (25,000 | ) | ||||||||
Return
of deed of trust - mining property
|
0 | 0 | 90,000 | |||||||||
Disposal
of vehicle
|
218 | 0 | 218 | |||||||||
Borrowings
from related parties
|
0 | 90,000 | 152,980 | |||||||||
Net
Cash Flows from Financing Activities
|
$ | 218 | $ | 90,000 | $ | 365,177 | ||||||
Net
(Decrease) in Cash
|
$ | (5,338 | ) | $ | (45,877 | ) | $ | 13,306 | ||||
Beginning
Cash Balance
|
$ | 50,274 | $ | 51,283 | $ | 31,630 | ||||||
Ending
Cash Balance
|
$ | 44,936 | $ | 5,406 | $ | 44,936 |
See
accompanying notes to the consolidated financial statements
7
International
Silver, Inc.
(An
Exploration Stage Company)
Consolidated
Statements of Cash Flows
Nine
Months Ended
|
Exploration
Stage
(June
16, 2006
|
|||||||||||
September
30,
|
September 30,
|
through
September 30,
|
||||||||||
2009
|
2008
|
2009)
|
||||||||||
Supplemental
disclosures on non-cash financing activities:
|
||||||||||||
The Company issued shares of its common stock in
exchange for the following:
|
||||||||||||
For
services rendered:
|
||||||||||||
Director
services
|
$ | 3,000 | $ | 0 | $ | 12,000 | ||||||
Legal
and professional services
|
30,350 | 20,000 | 125,350 | |||||||||
Stock
transfer agent services
|
0 | 0 | 5,500 | |||||||||
Accounting
services
|
2,150 | 0 | 6,150 | |||||||||
Geology
and engineering
|
0 | 0 | 8,000 | |||||||||
Sub-total
|
$ | 35,500 | $ | 20,000 | $ | 157,000 | ||||||
For
land
|
0 | 0 | 30,000 | |||||||||
For
exploration costs
|
0 | 0 | 55,385 | |||||||||
For
contributed capital
|
0 | 0 | 265,072 | |||||||||
Total
non-cash issuances of stock
|
$ | 35,500 | $ | 20,000 | $ | 507,457 | ||||||
The Company relinquished its mining property in
exchange for the following:
|
||||||||||||
For
repurchase of its common stock
|
0 | 0 | (30,000 | ) | ||||||||
For
marketable securities in another company
|
0 | 0 | (25,000 | ) | ||||||||
For
deed of trust in the mining property
|
0 | 0 | 90,000 |
See
accompanying notes to the consolidated financial statements
8
International
Silver, Inc.
(An
Exploration Stage Enterprise)
Consolidated
Statement of
Shareholders'
Equity
Accumulated
|
||||||||||||||||||||||||||||||||
Deficit
|
||||||||||||||||||||||||||||||||
Additional
|
Other
|
During
|
||||||||||||||||||||||||||||||
Common
Stock
|
TreasuryStock
|
Paid-In
|
Comprehensive
|
Exploration
|
||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Income
|
Stage
|
Total
|
|||||||||||||||||||||||||
At
June 16, 2006
|
12,000,000 | $ | 1,200 | $ | 257,322 | $ | 0 | $ | (266,414 | ) | $ | (7,892 | ) | |||||||||||||||||||
Shares
issued for cash
|
1,100,000 | 110 | 79,890 | 80,000 | ||||||||||||||||||||||||||||
Shares
issued for services
|
30,000 | 3 | 29,997 | 30,000 | ||||||||||||||||||||||||||||
Shares
exchanged for debt
|
300,000 | 30 | 55,355 | 55,385 | ||||||||||||||||||||||||||||
Parent
Co.
|
(72,844 | ) | (72,844 | ) | ||||||||||||||||||||||||||||
Non-controlling
Interest
|
(296 | ) | (296 | ) | ||||||||||||||||||||||||||||
At
December 31, 2006
|
13,430,000 | $ | 1,343 | $ | 422,564 | $ | 0 | $ | (339,554 | ) | $ | 84,353 | ||||||||||||||||||||
Shares
issued for cash
|
260,000 | 26 | 79,974 | 80,000 | ||||||||||||||||||||||||||||
Shares
issued for services
|
500,000 | 50 | 21,450 | 21,500 | ||||||||||||||||||||||||||||
Shares
exchanged for debt
|
336,186 | 33 | 168,060 | 168,093 | ||||||||||||||||||||||||||||
Net
Income/(Loss)
|
||||||||||||||||||||||||||||||||
Parent
Co.
|
(143,925 | ) | (143,925 | ) | ||||||||||||||||||||||||||||
Non-controlling
Interest
|
(2,266 | ) | (2,266 | ) | ||||||||||||||||||||||||||||
At December
31, 2007
|
14,526,186 | $ | 1,452 | $ | 692,048 | $ | 0 | $ | (485,745 | ) | $ | 207,755 | ||||||||||||||||||||
Shares
issued for services
|
150,000 | 15 | 19,985 | 20,000 | ||||||||||||||||||||||||||||
Shares
exchanged for debt
|
335,567 | 34 | 96,945 | 96,979 | ||||||||||||||||||||||||||||
Shares
repurchased
|
(30,000 | ) | (30,000 | ) | (30,000 | ) | ||||||||||||||||||||||||||
Net
Income/(Loss)
|
||||||||||||||||||||||||||||||||
Parent
Co.
|
(247,798 | ) | (247,798 | ) | ||||||||||||||||||||||||||||
Non-controlling
Interest
|
(693 | ) | (693 | ) | ||||||||||||||||||||||||||||
At
December 31, 2008
|
15,011,753 | $ | 1,501 | (30,000 | ) | $ | (30,000 | ) | $ | 808,978 | $ | 0 | $ | (734,236 | ) | $ | 46,243 | |||||||||||||||
Net
Income/(Loss)
|
||||||||||||||||||||||||||||||||
Parent
Co.
|
(526 | ) | (526 | ) | ||||||||||||||||||||||||||||
Non-controlling
Interest
|
(107 | ) | (107 | ) | ||||||||||||||||||||||||||||
At
March 31, 2009
|
15,011,753 | $ | 1,501 | (30,000 | ) | $ | (30,000 | ) | $ | 808,978 | $ | 0 | (734,869 | ) | 45,610 | |||||||||||||||||
Net
Income/(Loss)
|
||||||||||||||||||||||||||||||||
Parent
Co.
|
(10,793 | ) | (10,793 | ) | ||||||||||||||||||||||||||||
Non-controlling
Interest
|
(168 | ) | (168 | ) | ||||||||||||||||||||||||||||
At
June 30, 2009
|
15,011,753 | $ | 1,501 | (30,000 | ) | $ | (30,000 | ) | $ | 808,978 | $ | 0 | $ | (745,830 | ) | $ | 34,649 | |||||||||||||||
Unrealized
Losses on of available for sale assets
|
(8,250 | ) | (8,250 | ) | ||||||||||||||||||||||||||||
Net
Income/(Loss)
|
||||||||||||||||||||||||||||||||
Parent
Co.
|
(59,327 | ) | (59,327 | ) | ||||||||||||||||||||||||||||
Non-controlling
Interest
|
0 | 0 | ||||||||||||||||||||||||||||||
At
September 30, 2009
|
15,011,753 | $ | 1,501 | (30,000 | ) | $ | (30,000 | ) | $ | 808,978 | $ | (8,250 | ) | $ | (805,157 | ) | $ | (32,928 | ) |
See
accompanying notes to the consolidated financial statements
9
International
Silver, Inc.
Notes
to Consolidated Financial Statements
Note A - Organization and
Business
General
International
Silver, Inc., an exploration stage company, as set forth in FASB ASC 915 –
Development Stage Entities and “Industry Guide 7” of the Securities
and Exchange Commission’s Guides for the Preparation of Registration Statements
and with the Society for Mining, Metallurgy and Exploration’s “Guide for
Reporting Exploration Information, Mineral Resources, and Mineral Reserves”
dated March 1, 1999. The Company’s strategy consists of acquiring and
exploring high-grade silver properties throughout North and South
America.
Condensed Financial
Statements
The
accompanying financial statements have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position for the periods ended September 30, 2009 and December 31, 2008 and
results of operations and cash flows for the comparative periods at September
30, 2009 and September 30, 2008 and for the comparative periods September 30,
2009 and September 30, 2008 have been made.
Certain
information and footnote disclosure normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted. It is
suggested that these condensed financial statements be read in conjunction with
the financial statements and notes thereto included in the Company’s December
31, 2008 audited financial statements. The results of operations for
the period ended September 30, 2009 are not necessarily indicative of the
operating results for the full year.
Going
Concern
The
Company’s financial statements are prepared using accounting principles
generally accepted in the United States of America applicable to a going
concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has not yet
established an ongoing source of revenues sufficient to cover its operating
costs and allow it to continue as a going concern. The ability of the
Company to continue as a going concern is dependent on the Company obtaining
adequate capital to fund operating losses until it becomes
profitable. If the Company is unable to obtain adequate capital, it
could be forced to cease operations.
In
order to continue as a going concern, the company will need, among other things,
additional capital resources. Management’s plans to obtain such
resources for the Company include (1) obtaining capital from management and
significant shareholders sufficient to meet its minimal operating expenses, and
(2) initiating an initial public offering.
The
ability of the Company to continue as a going concern is dependent upon its
ability to successfully accomplish the plans described in the preceding
paragraph and eventually secure other resources of financing and attain
profitable operations. The accompanying financial statements do not
include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
10
Note B - Summary of
Significant Accounting Policies
Principles of
Consolidation
The
financial statements include the accounts of International Silver, Inc. and its
subsidiary Metals Preciosos Atlas, S.A. de C.V., Mexico. The
Company’s financial condition and results of operations are based upon its
consolidated financial statements, which have been prepared in accordance with
generally accepted accounting principles in the United States
(GAAP). The Company has elected to adopt U.S. currency as the
functional currency for the accounting of its Mexican subsidiary. All
inter-company transactions and balances have been eliminated.
Recently Enacted Accounting
Standards
In June
2009 the FASB established the Accounting Standards Codification ("Codification"
or "ASC") as the source of authoritative accounting principles recognized by the
FASB to be applied by nongovernmental entities in the preparation of financial
statements in accordance with generally accepted accounting principles in the
United States ("GAAP"). Rules and interpretive releases of the Securities and
Exchange Commission ("SEC") issued under authority of federal securities laws
are also sources of GAAP for SEC registrants. Existing GAAP was not intended to
be changed as a result of the Codification, and accordingly the change did not
impact our financial statements. The ASC does change the way the guidance is
organized and presented.
Use of
Estimates
Preparation
of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Significant areas requiring the use of management estimates
include the determination of mineral ore quantities and the depletion expense
calculation, if applicable, useful lives of property and equipment for
depreciation, impairment valuations and calculation of any deferred taxes.
Actual results may differ from those estimates, and such differences may be
material to the financial statements.
Foreign
Currency
The
functional currency for our foreign subsidiary is U.S. dollars. The Company has
elected to use the “remeasurement method”, also referred to as the
“monetary/nonmonetary method” pursuant ASC 830-10. This method
translates monetary assets at the current rate, while nonmonetary assets,
liabilities and equity are translated at their appropriate historical
rates. Where the local currency is used to record transactions, any
material currency translation gains or losses would be included as an element of
comprehensive income in the statement of operations and in the equity section of
the balance sheet.
Concentration of Credit
Risk
Our
cash equivalents and prepaid expenses (and trade receivables when recorded) are
exposed to concentrations of credit risk. We manage and control risk by
maintaining cash with major financial institutions. Management believes that the
financial institutions are financially sound and the risk of loss is
low.
Concentrations and Economic
Vulnerability
Concentrations
and economic vulnerability include reliance on several areas containing our
mining prospects in isolated regions of Mexico, limited financial capacity of
related parties and/or others to continue funding operations.
Fair Value of Financial
Instruments
Due
to their short-term nature, the carrying value of our current financial assets
and liabilities approximates their fair values. The fair value of our
borrowings, if recalculated based on current interest rates, would not
significantly differ from the recorded amounts.
11
Cash and Cash
Equivalents
For
the statement of cash flows, any liquid investments with a maturity of three
months or less at the time of acquisition are considered to be cash
equivalents.
Accounts
Receivables
Accounts
receivables are stated, net of an allowance for uncollectible accounts, based on
prior experience. At September 30, 2009 net account receivables were
$37,558. The allowance for uncollectible accounts was $2,760. At
December 31, 2008, net accounts receivables were $12,715. The allowance for
uncollectible accounts was $2,760. Included in the total receivables,
are related party receivables at September 30, 2009 of $8,049 and at December
31, 2008 of $12,565 (Refer to Note H).
Inventories
In-process
inventories represent ore that is currently in the process of being converted to
a saleable product. In-process inventories, if any, are valued at the
lower of average production cost or net realizable value. At September 30, 2009
there were no inventories on hand.
FASB
ASC 330-10-30 – Inventory-Overall-Initial Measurement, requires that the
accounting for abnormal amounts of idle facility expense, freight, handling
costs and wasted material (spoilage) be recognized as a current period charge.
It also requires, the allocation of fixed production overheads to the costs of
conversion be based on normal capacity of the production
facilities.
Property and
Equipment
Property
and equipment are recorded at cost. Maintenance and repair costs are charged to
expense as incurred, and renewals and improvements that extend the useful life
of assets are capitalized. Depreciation on property and equipment is computed
using the straight-line method over the assets' estimated useful lives as
follows:
Mining
equipment
|
7
years
|
Vehicles
|
3
years
|
Office
equipment
|
5
years
|
No
depreciation expense was recorded for the three-month period ended September 30,
2009. For the nine-month period ended September 30, 2009,
depreciation expense was $97. For the twelve-month period ended
December 31, 2008, depreciation expense was $374.
Mineral
Development
Costs
associated with the acquisition of mineral interests, in the exploration stage,
are “expensed”. Mineral exploration costs are also “expensed” as incurred. Mine
infrastructure development costs incurred prior to establishing proven and
probable reserves are expensed. When it otherwise becomes probable that
infrastructure costs will not be recoverable, they are impaired. When it has
been determined that a mineral property can be economically developed, the costs
incurred to develop such property, including costs to further delineate the ore
body and remove overburden to initially expose the ore body, are capitalized as
incurred. These costs will then be amortized using the units-of-production
method over the estimated life of the ore body based on estimated recoverable
ounces of proven and probable reserves.
To
the extent that any development costs benefit an entire mineralized property,
they are amortized over the estimated life of the property. The specific
capitalized cost bases subject to depletion are calculated on a formula based on
the number of tons of ore that are expected to be mined divided by the total
tons in proven and probable reserves in the property. To date, no development
has occurred, nor has depletion has been taken, since production has not
commenced.
Mineral Interests and
Property
Mineral
interests include the costs of acquired mineral rights and royalty interests in
production, development and exploration stage properties.
Production
stage mineral interests represent interests in operating properties that contain
proven and probable reserves. Development stage mineral interests represent
interests in properties under development that contain proven and probable
reserves. Exploration stage mineral interests represent interests in properties
that are believed to potentially contain mineralized material.
12
Mineral
interests related to mining properties in the production stage are amortized
over the life of the related property using the Units of Production method in
order to match the amortization with the expected underlying future cash flows.
Development stage mineral interests are not amortized until such time as the
underlying property is converted to the production stage. At September 30, 2009,
all mineral interests were in the exploration stage.
Impairment of Long-Lived
Assets
The
company adheres to ASC 360-10-20, "Accounting for the Impairment and Disposal of
Long-Lived Assets," which requires that long-lived assets to be held and used be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. An impairment loss
would be recognized when the estimated future cash flows are less than the
carrying amount of the asset and would be calculated based on discounted cash
flows. At September 30, 2009, there was an impairment financing costs
in the amount of $40,000. Refer to Note D.
Revenue Recognition and
Production Costs
Revenue
is recognized when the price is determinable, upon delivery and transfer of
title of product to the customer and when the collection of sales proceeds is
assured. Production costs of silver, gold and other precious metals
sold include labor and related direct and indirect costs of mine and plant
operations. Production costs are charged to operations as
incurred. At September 30, 2009, there had been no production from
any of the Company's properties.
Reclamation and Remediation
Costs (Asset Retirement Obligations)
The
Company has adopted ASC 410-20 - Asset Retirement Obligation which addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. Since the Company’s activities are in the exploration and feasibility
stage, there is no legal or contractual obligation for reclamation or
remediation of our mines or mining interests. As a result, the
adoption of ASC 410-20 does not currently have a material impact on our
financial position, results of operations or cash flows.
Earnings (Loss) Per
Share
Basic
income (loss) per share is computed by dividing income (loss) attributable to
the common shareholders by the weighted-average number of common shares
outstanding for the reporting period. Diluted net income per share reflects the
potential dilution that could occur if dilutive securities and other contracts
to issue common stock were exercised or converted into common stock or resulted
in the issuance of common stock that then shared in the earnings of the Company,
unless the effect is to reduce a loss or increase earnings per
share. The Company has no potential common stock instruments, which
would result in diluted income (loss) per share as of September 30, 2009 and
September 30, 2008.
Income
Taxes
The
Company accounts for income taxes under ASC 740-10-30 - Accounting for Income
Taxes. ASC 740-10-30 is 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, ASC
740-10-35 generally considers all expected future events other than enactments
of changes in the tax law or rates. Income tax information is
disclosed in Note F to the consolidated financial statements.
Deferred
taxes are provided on a liability method whereby deferred tax assets are
recognized for deductible temporary differences and operating loss and tax
credit carry forwards and deferred tax assets are recognized for taxable
temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax
basis. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion
or all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment. The total deferred tax asset is 35%
of the cumulative net operating loss.
13
Net
deferred tax assets consists of the following components:
September
30
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Deferred
Tax Asset
|
$ | 165,028 | $ | 150,621 | ||||
Valuation
Account
|
(165,028 | ) | (150,621 | ) | ||||
Net
Deferred Tax Asset
|
$ | 0 | $ | 0 |
At
December 31, 2008, The company had a net operating loss carry-forward of
$427,527 for federal income tax purposes that may be offset against future
taxable income from years 2009 through 2027. No tax benefit has been
reported in the September 30, 2009 consolidated financial statements since the
potential tax benefit is offset by a valuation allowance of the same
amount.
Due
to the change in ownership provisions of the Tax Reform Act of 1986, net
operating loss carry forwards for federal income tax reporting purposes are
subject to annual limitations. Should a change in ownership occur,
net operating loss carry forwards may be limited as to use in future
years.
Statement of Cash Flows
Information and Supplemental Non-Cash Financing Activities
There
were minimal interest payments during the nine-month period ended
September 30, 2009 and for the year ended December 31,
2008. “Non-cash" investing and financing transactions during
the reported periods related primarily to the issuance of common stock in
exchange for legal and other professional services and for mineral interests and
stock issued to a related party for cancellation of indebtedness, as disclosed
in Note G.
Certain Equity
Instruments
In
June 2003, the FASB approved ASC 480-10-25-4 – Distinguishing Liabilities From
Equity – Overall Recognition. ASC 480-10-25-4 establishes standards
for how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. At September 30,
2009, the Company is not impacted by this requirement.
Comprehensive
Income
ASC
220-10-55-2 - Comprehensive Income, requires companies to classify items of
other comprehensive income by their nature in a financial statement and display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. For the period ended September 30, 2009, the
Company recorded an unrealized loss on “available for sale” securities under
Other Comprehensive Income. On September 30, 2008, the
Company did not have any material items of comprehensive income.
Derivative
Instruments
In
June 1998, the FASB issued ASC 815-10 - Accounting for Derivative Instruments
and Hedging Activities. Currently, the Company does not
have any derivative financial instruments and does not participate in hedging
activities. Therefore, ASC 815-10 did not have an impact on its
financial position or results of operations for the periods ended September 30,
2009 and December 31, 2008.
Stock-Based
Compensation
In
December 2004, the Financial Accounting Standards Board, issued ASC 718 -
Share-Based Payment, requires “public” companies to recognize the cost of
employee services received in exchange for equity instruments, based on the
grant-date fair value of those instruments, with limited exceptions. ASC 718
also affects the pattern in which compensation cost is recognized, the
accounting for employee share purchase plans, and the accounting for income tax
effects of share-based payment transactions. For small-business filers, ASC 718
is effective for interim periods beginning after December 15,
2005.
14
Non-Monetary
Exchanges
In
December 2004, the FASB issued ASC 845 – Nonmonetary
Transactions. This Statement addresses the measurement of exchanges
of non-monetary assets. The guidance in ASC 845,Non-monetary
Transactions, is based on the principle that exchanges of non-monetary assets
should be measured based on the fair value of the assets exchanged. A
non-monetary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the
exchange. This Statement is effective for financial statements for
fiscal years beginning after June 15, 2005. Earlier application is permitted for
non-monetary asset exchanges incurred during fiscal years beginning after the
date that this Statement was issued. The exchange of the Company’s
common stock for a 98% interest in Metales Preciosos Atlas, S.A. de C.V. is
covered under Note G.
Note C – Property, Plant and
Equipment
Property,
plant and equipment, exclusive of mineral interests which are reported under
Note J - Exploration Costs, as required by Industry Guide 7, are comprised of
the following:
September
30,
2009
|
December
31,
2008
|
|||||||
Office
equipment and computers
|
$ | 5,542 | $ | 5,542 | ||||
Vehicles
|
0 | 1,125 | ||||||
Less:
accumulated depreciation
|
( 5,542 | ) | ( 6,355 | ) | ||||
Net
Total
|
$ | 0 | $ | 312 |
Note D – Deferred Financing
Costs
On
August 31, 2008, the Company contracted DME Capital, LLC for the purpose of
obtaining venture capital and/or a joint venture agreement. The
Company paid DME Capital, LLC a due diligence fee of $40,000. At
September
30, 2009, although the Company had resurrected looking for financing options, an
impairment loss was recognized, as no results had been achieved over the past
fiscal year.
Note E – Investment in
Securities
During
2008, the Company relinquished its holdings in the Tecoma Mining District back
to the original seller, in return for the shares in common stock that were part
of the consideration given on the original purchase of the
property As a result, the Company obtained 25,000 shares of the
common stock of Atlas Precious Metals Inc., a privately-held and related company
to International Silver, Inc. These shares were originally held by
the Company’s shareholder/officer, who transferred these shares to the seller of
the Tecoma Mining District property, in exchange for a note from the Company
(Refer to Note H) . At September 30, 2009, the fair value of these
securities were estimated at $0.50/share or $16,750, net of taxes.
Note F - Income
Taxes
The
Company has reported (for income tax purposes) net operating losses for 2008,
2007 and prior years as follows:
Net
Operating Loss carry-forward to FYE 12/31/99
|
$ | 171,725 | ||
Net
Operating Income - Year 2000 (Applied)
|
( 63,853 | ) | ||
Net
Operating Loss carry-forward to Year 2001
|
107,872 | |||
Net
Operating Loss - Year 2001
|
179,246 | |||
Net
Operating Loss carry-forward to Year 2002
|
287,118 | |||
Net
Operating Loss - Year 2002
|
25,497 | |||
Net
Operating Loss carry-forward to Year 2003
|
312,615 | |||
Net
Operating Income - Year 2003 (Applied)
|
(172,247 | ) | ||
Net
Operating Loss carry-forward to Year 2004
|
140,368 | |||
Net
Operating Income - Year 2004
|
( 37,634 | ) | ||
Net
Operating Loss carry-forward to Year 2005
|
102,734 | |||
Net
Operating Loss - Year 2005
|
3,774 | |||
Net
Operating Loss carry-forward to Year 2006
|
106,508 | |||
Net
Operating Income - Year 2006 (Applied)
|
( 4,693 | ) | ||
Net
Operating Loss carry-forward to Year 2007
|
101,815 | |||
Net
Operating Loss - Year 2007
|
111,921 | |||
Net
Operating Loss carry-forward to Year 2008
|
213,736 | |||
Net
Operating Loss - Year 2008
|
213,791 | |||
Net
Operating Loss carry-forward to Year 2009
|
$ | 427,527 |
15
Pursuant
to the provisions of the Internal Revenue Code, the Company has elected to
forego the carry-back provisions, allowable under the IRS regulations, for the
stated accounting periods.
At
September 30, the Company recorded a deferred tax benefit of $165,028, but due
to a going-concern issue, Management made an allowance for a provision of an
equal amount, should the Company not be able to avail itself of that tax
benefit. No permanent or temporary timing differences between book
and tax income have occurred through September 30, 2009.
Note G – Shareholders’
Equity
The
Company was incorporated on September 4, 1992 with the initial issuance of 1,000
shares of common stock at a par value of $1.00 per share. On June,
2006 the Board of Directors adopted a new business strategy to change its
emphasis from providing engineering services to conducting mine exploration and
development. As a result, the Board of Directors amended its Articles
of Incorporation to authorize 500,000,000 shares of common stock, at a par value
of $0.0001 to allow for equity financing. Additionally, the
Board of Directors passed a resolution to effectuate a stock split of 12,000 to
1. On July 24, 2006, the shareholders of record (3) were given their
new share distribution of 4,000,000 shares each.
Also
during 2006, additional shares of common stock were issued in exchange for
services (1,100,000), in exchange for land (30,000) and in exchange for 98%
interest in the holdings of Metales Preciosos Atlas, S.A. de C.V., a Mexican
subsidiary (300,000 shares).
During
2007, the Company conducted a private placement with an additional 260,000
shares of common stock issued at $0.50 per share to various individuals for
cash, 500,000 shares of common stock for services rendered and also issued
336,186 shares, at $0.50 per share, to cancel Company indebtedness, as explained
in Note G.
During
2008, the Company issued 150,000 shares of common stock for services and an
additional 335,567 shares of common stock to cancel Company
indebtedness. In addition, the Company repurchased 30,000 of its own
shares in common stock upon relinquishing its holdings in the Tecoma Mining
District. These shares are being held in Treasury as of June 30,
2009.
No
activity has occurred during the nine-months ended September 30,
2009. At September 30, 2009, the Company had authorized 500,000,000
shares of common stock and 15,011,753 shares had been issued and are
outstanding.
On
October 6, 2009, the company issued 3,550,000 shares of common stock to its
directors, officers and select consultants for services
rendered. At September 30, 2009, compensation costs were
recognized for these shares issued (Refer to Note L).
Note H - Related Party
Transactions
Amounts
due from and to related parties, are receivable from or payable to entities
controlled by the shareholders, officers, or directors of the Company (“Related
Entities”). The underlying transactions are with these Related
Parties. These amounts are unsecured and not subject to specific
terms of repayment.
At
September 30,
|
At
December 31,
|
|||||||
2009
|
2008
|
|||||||
Receivable
from Related Entities
|
$ | 8,049 | $ | 12,565 | ||||
$ | 8,049 | $ | 12,565 | |||||
Payable
to Director or Officer
|
$ | 86,589 | $ | 80,824 | ||||
Payable
to Related Entities
|
9,063 | 2,900 | ||||||
$ | 95,652 | $ | 83,724 |
16
Prior
to 2008, various loans were made by a shareholder/officer and in 2007, the
“principal” portion of the loans were paid off, leaving only the accrued
interest due the shareholder/officer. In 2008, a shareholder loan of $90,000 was
made to the Company so it could avail itself of an option to purchase mineral
properties in the state of California. The principal part of this
loan was also cancelled upon the receipt of an equivalent value in shares of
common stock in the Company.
Note I -
Litigation
At
September 30, 2009 there were no outstanding legal issues.
Note J- Office
Leases
The
Company rents (subleases) its administrative offices from an affiliate in
Tucson, Arizona and is billed an allocated portion ($500 per month), commencing
October 1, 2008 based on percentage of floor space occupied. The
foreign exploration office located in Hermosillo, Sonora, Mexico has no lease
and is rented on a month-to-month basis at $500 per month. Rental
expense for all administrative offices for the period ended September 30, 2009
was $4,500 and for the period ended December 31, 2008 was $4,496.
Note K – Exploration
Costs
Acquired
mineral interests are presented as “exploration costs” as required by Industry
Guide 7. Exploration costs incurred since inception as of September 30, 2009 are
$265,799. Exploration costs incurred for the nine months ended
September 30, 2009 and September 30, 2008 are $17,983 and $43,176,
respectively.
Note L – Subsequent
Events
On
September 23, 2009, the board of directors passed a resolution for the issuance
of 3,550,000 shares of common stock to its directors, officers and certain
consultants for services rendered. The share certificates, which are
“restricted” pursuant to Rule 144 of the Securities Act of 1934, were not issued
until October, 2009. Compensation costs of $35,500 were accrued at
September 30, 2009.
17
ITEM 2 – MANAGEMENT
DISCUSSION’S AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
Management
Discussion and Analysis Section
Forward-Looking
Statements
This
Management’s Discussion and Analysis should be read in conjunction with our
financial statements and its related notes. The terms “we,” “our” or “us” refer
to International Silver, Inc. This discussion contains forward-looking
statements based on our current expectations, assumptions, and estimates. The
words or phrases “believe,” “expect,” “may,” “anticipates,” or similar
expressions are intended to identify “forward-looking statements.” The results
shown herein are not necessarily indicative of the results to be expected in any
future periods. Actual results could differ materially from those projected in
the forward-looking statements as a result of a number of risks and
uncertainties pertaining to our business, included the risk factors contained
herein.
We are an
exploration stage company that engages in minerals exploration activities in the
United States and Mexico involving silver, gold, zinc, copper and other
minerals. To-date, we have not generated any revenues from any of these
activities since approximately June, 2006, when we switched our emphasis in our
business plan and commenced our mineral exploration business. To date, our
exploration activities have been limited to the exploration and purchasing of
mineral interests in the United States and Mexico.
18
Financial Condition and
Changes in Financial Condition
At
September 30, 2009, we had cash resources of $44,936 and receivables of $37,558,
which along with revenues generated from engineering consultation, is sufficient
to continue our exploration activities to meet our maturing
obligations. Our continued activities, long-term, are dependent on
obtaining adequate financing as explained below. Our financial condition as of
September 30, 2009, as compared to December 31, 2008 is summarized as
follows:
Assets
As of
September 30, 2009, we had total assets of $99,826 compared to total assets of
$131,623 as of December 31, 2008, representing an decrease of 24% or
$31,797. Current assets comprise primarily of accounts receivables
due from third parties and related entities, while other assets are comprised of
an investment in securities classified as “available-for-sale” in the
amount of $16,750.
|
|
At September 30,
2009
|
|
At December 31,
2008
|
|
|
Net Incr./(Decr.)
|
|
||||
Current
Assets :
|
||||||||||||
Cash
|
$
|
44,936
|
$
|
50,274
|
$
|
(5,338
|
)
|
|||||
Accounts Receivable
|
29,509
|
150
|
29,359
|
|||||||||
Due
From Related Parties
|
8,049
|
12,565
|
(4,516)
|
)
|
||||||||
Employee
Advance
|
354
|
2,317
|
( 1,963
|
)
|
||||||||
Prepaid
Expenses
|
228
|
1,005
|
(777
|
)
|
||||||||
Current
Assets
|
$
|
83,076
|
$
|
66,311
|
$
|
16,765
|
||||||
Property,
Plant & Equip.
|
$
|
0
|
$
|
312
|
$
|
(312
|
)
|
|||||
Other
Assets
|
16,750
|
65,000
|
(48,250
|
)
|
||||||||
Total
Assets
|
$
|
99,826
|
$
|
131,623
|
$
|
(31,797
|
)
|
Cash
decreased by 11% or $5,338 to $44,936 at September 30, 2009, compared to $50,274
at December 31, 2008. This decrease is attributable to administrative
expenses and exploration costs related to on-going exploration
activities.
Accounts
Receivable, including Due From Related Parties increased by 195% or $24,843 to
$37,558 at September 30, 2009, compared to $12,715 at December 31,
2008. The bulk of the change was an increase of $29,359 in
third-party receivables, as a result of a new engineering contractual
arrangement. Related party receivables decreased slightly by
$4,516.
19
Liabilities and
Shareholders’ Equity
|
|
At September 30,
2009
|
|
|
At December 31,
2008
|
|
|
Net Incr./(Decr.)
|
|
|||
Liabilities
|
|
|
|
|
||||||||
Accounts
Payable
|
$
|
820
|
$
|
1,656
|
$
|
(836
|
)
|
|||||
Due
To Related Parties
|
95,652
|
80,824
|
14,828
|
|||||||||
Accrued
Expenses
|
36,282
|
2,900
|
33,382
|
|||||||||
Total
Liabilities
|
$
|
132,754
|
$
|
85,380
|
$
|
47,374
|
||||||
Non-Controlling
Interest
|
(3,530
|
)
|
(3,255
|
)
|
(275
|
)
|
||||||
|
||||||||||||
Shareholders’ Equity
|
||||||||||||
Capital
Stock
|
$
|
810,479
|
$
|
810,479
|
$
|
0
|
||||||
Accumulated
Deficit
|
(801,627
|
)
|
(730,981
|
)
|
(70,646
|
)
|
||||||
Treasury
Stock
|
(30,000
|
)
|
(30,000)
|
0
|
||||||||
Unrealized
Loss on Sale of Securities
|
(8,250)
|
0
|
(8,250
|
)
|
||||||||
Shareholder’s
Equity
|
$
|
(29,398
|
)
|
$
|
49,498
|
$
|
(78,896
|
)
|
||||
Total
Liabilities
|
$
|
99,826
|
$
|
131,623
|
$
|
(31,797
|
)
|
Total
liabilities increased by 55% or $47,374 to $132,754 at September 30, 2009,
compared to $85,380 at December 31, 2008. This increase is due to additional
payables of $13,992 and increased accrued expenses of $33,382, primarily a
result of the accrual of compensation for services rendered as of September 30,
2009.
Shareholders’
Equity decreased by $78,896 to $29,398 as of September 30, 2009, compared to
$49,498 as of December 31, 2008. This decrease represents the loss
from operations of $70,646 and unrealized losses of $8,250 on “available for
sale” securities during the nine months ended September 30,
2009.
Liquidity and Capital
Resources
Working
capital decreased by $30,609 to $(49,678) at September 30, 2009, compared to
$(19,069) at December 31, 2008. Recognition of accrued compensation
for services rendered were the primary reason for the net change in working
capital.
Net cash
flows from operating activities increased by 5% or $321 to ($5,556) for the nine
months ended September 30, 2009 as compared to ($5,877) for the comparative nine
months ended September 30, 2008. Although overall there was a slight
increase, there were substantial changes in operating
activities. There was an increase in receivables of $81,826, a net
decrease in payables of $21,701 and the issuance of stock for services of
$20,000, net of increased income of $20,377, and accrued expenses of $59,344 and
an impairment loss of $40,000 for the comparable period ended September 30,
2008.
No
investment or financing activities occurred during the nine months ended
September 30, 2009. For the nine months ended September 30, 2008, we
borrowed $90,000 from a related party (shareholder/officer) so that the Company
could place an option towards the purchase of mining property, resulting in no
cash flow.
20
Our
business plan does not reflect, nor do we anticipate, any revenues during our
exploration phase, aside from ongoing engineering services rendered to an
affiliate and others. We do not anticipate any other type of revenue
until we confirm previously demonstrated mineralization, obtain operating
permits, and construct mining and processing facilities at either our US or
Mexican properties or both.
Our
auditors have issued a going concern opinion on our audited financial statements
for the nine months ended September 30, 2009, as we have an accumulated deficit
of $801,627. These and other matters raise substantial doubt about our ability
to continue as a going concern. We will have to supplement our currently
available funds to satisfy our cash requirements for the immediate months by the
continuation of providing engineering services and raising funds through an
equity funding. We anticipate total spending requirements of approximately
$9,289,500 pending adequate financing over the next twelve months, in the
following areas:
|
·
|
$5,000,000 for property
acquisitions;
|
|
·
|
$3,089,500 to proceed with the
exploration of our properties and claims to determine whether there are
commercially exploitable reserves of silver, gold, barite, lead, and
zinc
|
|
·
|
$500,000 for working
capital;
|
|
·
|
$200,000 for legal and accounting
expenses; and
|
|
·
|
$500,000 for general and
administrative expenses
|
We plan
to undertake the following steps in our attempt to overcome our going concern
qualification and our need for $9,289,500 of financing to accomplish our
operational plan:
|
·
|
Contact broker-dealers to discuss
and negotiate a broker dealer acting as an underwriter to conduct a public
offering of our common stock sufficient to raise $10.0
million;
|
|
·
|
Contact other companies with
sufficient financial resources to fund our operational activities to
discuss and negotiate a joint venture arrangement or a merger transaction
where we would combine our business interests and
objectives;
|
|
·
|
Contact the fund managers of
hedge funds and mutual funds to determine whether their interest in
investing in our common stock sufficient to obtain adequate financing;
and
|
|
·
|
Raise financing through a private
placement of our common
stock
|
21
Results of
Operations
We
incurred a loss $59,327 for the quarter ended September 30, 2009, compared to a
loss of $44,853 for the quarter ended September 30, 2008, an increase of
$14,474. The increase in losses is due primarily to an
impairment loss of $40,000 taken on financing costs, net of increased revenue
from engineering consulting services ($22,739) and decreased general and
administrative expenses of $2,787.
An
analysis of the major components of our results of operations is, as
follows:
Revenues. During the
quarter ended September 30, 2009 and September 30, 2008, we had revenues of
$52,164 and $31,915, respectively. Revenues increased by 63% or $20,249,
attributable to increased engineering services rendered to a third-party. No
revenue is being currently being generated from mineral extraction activities,
as we are still in the exploration stage.
Operating Loss.
Operating losses decreased by 55% or $23,196 to ($19,327) for the
quarter ended September 30, 2009, from ($42,523) for the quarter ended September
30, 2008. This decrease is primarily due to increased revenues, with a
slight decrease in operating expenses.
Exploration Expenses
. Exploration costs decreased by $16,508 to $11,320 for the quarter ended
September 30, 2009, from $27,828 for the comparable 2008 period. This
decrease is due to a reduction in exploration activity.
Depreciation and Depletion
Expenses . There was no depreciation expense for the quarter ended
September 30, 2009, as the only depreciable asset was disposed. Depreciation for
the quarter ended September 30, 2008 was $94.
Interest Expense.
There was no interest expense for the quarter ended September 30,
2009 as compared to $2,488 for the quarter ended June 30, 2008.
Exploration Costs –
Inception to Date
On June
16, 2006, our Board of Directors passed a resolution to change the nature of its
operations from an engineering services company to an exploration company. Since
converting our business plan to conducting exploration activities, we have
engaged in the following exploration activities and incurred the following
costs:
1) Hired
a geotechnical consultant to assist launching an exploration
program;
|
||||
2) Commenced
the development of an exploration plan;
|
||||
3) Actively
sought mineral interests containing precious metals; and
|
||||
4) Acquired
the following minerals interests:
|
||||
a)
Purchased BLM mineral claims – Calico District
|
$
|
12,770
|
||
b)
Made option payment towards purchase price of $8 million
of Langtry property
|
$
|
100,000
|
||
c)
Acquired a 98% interest in Metales Preciosos, S.A. de C.V.,
a Mexican company, whose mineralized interests
are:
|
||||
1)
El Cumbro property
|
$
|
14,260
|
||
2)
El Cusito property
|
$
|
15,000
|
||
3)
Canada de Oro property
|
$
|
15,000
|
||
4)
La Moneda property
|
$
|
10,000
|
||
5) Exploration
costs
|
$
|
86,249
|
||
Total
acquisitions and exploration costs
|
$
|
253,279
|
Since the
commencement of exploration activities, June 16, 2006 through September 30,
2009, we have incurred a total of $589,513 in expenditures, including general
& administrative expenses comprised of salaries, rent, consulting fees,
interest and travel expenditures. These expenditures account for approximately
74% of the accumulated deficit of $801,627 reflected in the Shareholders’ Equity
section. Engineering activities prior to June 16, 2006 accounts for the other
portion of the deficit.
22
Uncertainties and
Trends
Our operations,
potential funding, and potential revenues are dependent now, and in the
future, upon the following factors:
·
|
Price volatility in worldwide
commodity prices, including silver, gold, and other minerals, which is
affected by: (a) sale or purchase of silver by central banks and financial
institutions; (b) interest rates; (c) currency exchange rates; (d)
inflation or deflation; (e) speculation; and (f) fluctuating prices in
worldwide and local commodities for petroleum-related products, chemicals,
and solvents,
|
|
·
|
Global and regional supply and
demand of silver, gold, and other minerals, including investment,
industrial and jewelry
demand;
|
|
·
|
Political and economic conditions
of major silver, gold or other mineral-producing
countries;
|
|
·
|
Threatened changes to the U.S.
Mining Law that may cause increasing federal land royalties, or other
unanticipated consequences and related increased costs of conduct in
mining operations in the United States;
and
|
|
·
|
Our Mexican properties are
subject to foreign risk, such as passage of onerous regulatory exploration
and mining requirements and availability of materials and
supplies.
|
Off-Balance Sheet
Arrangements
We have
not entered into any transaction, agreement or other contractual arrangement
with an entity unconsolidated with us under whom we have:
|
·
|
an obligation under a guarantee
contract,
|
|
·
|
a retained or contingent interest
in assets transferred to the unconsolidated entity or similar arrangement
that serves as credit, liquidity or market risk support to such entity for
such assets,
|
|
·
|
any obligation, including a
contingent obligation, under a contract that would be accounted for as a
derivative instrument, or
|
|
·
|
any obligation, including a
contingent obligation, arising out of a variable interest in an
unconsolidated entity that is held by us and material to us where such
entity provides financing, liquidity, market risk or credit risk support
to, or engages in leasing, hedging or research and development services
with us.
|
We do not
have any off-balance sheet arrangements or commitments that have a current or
future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures, or
capital resources that is material.
Changes in Accounting
Policies
The
significant accounting policies outlined within our Consolidated Financial
Statements for the quarter ended September 30, 2009 have been applied
consistently with the year ended December 31, 2008.
23
Recent Accounting
Pronouncements
In June
2009, the FASB issued ASC 860, “Accounting for Transfers and Servicing of
Financial Assets” The provisions of ASC 860, amend the derecognition
guidance, eliminate the exemption from consolidation for qualifying
special-purpose entities and require additional disclosures. ASC 860 is
effective for financial asset transfers occurring after the beginning of an
entity’s first fiscal year that begins after November 15, 2009. The Company does
not expect the provisions of ASC 860 to have a material effect on the financial
position, results of operations or cash flows of the Company.
In June
2009, the FASB issued ASC 815-10, “Variable Interests Entities”, which provides
consolidation guidance applicable to variable interest entities. ASC
815-10 is effective as of the beginning of the first fiscal year that begins
after November 15, 2009. ASC 815-10 does not apply to the
Company.
In June
2009, the FASB issued ASC 105-10-05, “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles. Under
ASC 105-10-05, the “FASB Accounting Standards Codification” (“Codification”)
will become the source of authoritative U. S. GAAP to be applied by
nongovernmental entities. Rules and interpretive releases of the
Securities and Exchange Commission (“SEC”) under authority of federal securities
laws are also sources of authoritative GAAP for SEC registrants. ASC 105-10-05
is effective for financial statements issued for interim and annual periods
ending after September 15, 2009. On the effective date, the
Codification will supersede all then-existing non-SEC accounting and reporting
standards. All other non-grandfathered non-SEC accounting literature not
included in the Codification will become non-authoritative. ASC 105-10-05 is
effective for the Company’s interim quarterly period beginning July 1, 2009. The
Company does not expect the adoption of ASC 105-10-05 to have an impact on the
financial statements.
In April
2009, the FASB issued ASC 825-10-50-10, Interim Disclosures about Fair Value of
Financial Instruments. This ASC requires disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This ASC also requires those
disclosures in summarized financial information at interim reporting periods.
ASC 825-10-50-10 shall be effective for interim reporting periods ending after
June 15, 2009. The Company does not have any fair value of financial instruments
to disclose.
In April
2009, the FASB issued ASC 320, Recognition and Presentation of
Other-Than-Temporary Impairments. This ASC relates to debt securities to make
the guidance more operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities in the financial
statements. ASC 320 shall be effective for interim and annual reporting periods
ending after June 15, 2009. The Company currently does not have any financial
assets that are other-than-temporarily impaired.
24
In April
2009, the FASB issued ASC 805, Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies, to address some
of the application issues. ASC 805 deals with the initial recognition and
measurement of an asset acquired or a liability assumed in a business
combination that arises from a contingency provided the asset or liability’s
fair value on the date of acquisition can be determined. When the fair value
can-not be determined, ASC 805 requires using the guidance under ASC
450-20-25-2, Accounting for Contingencies. and ASC 450-20-30, Reasonable
Estimation of the Amount of a Loss.
This ASC
was effective for assets or liabilities arising from contingencies in business
combinations for which the acquisition date is on or after January 1, 2009. The
adoption of this ASC does not have a material impact on our financial position,
results of operations, or cash flows.
In April
2009, the FASB issued ASC 820, Fair Value Measurements and Disclosures, which
guidance on estimating fair value when market activity has decreased and on
identifying transactions that are not orderly. Additionally, entities
are required to disclose in interim and annual periods the inputs and valuation
techniques used to measure fair value. This ASC is effective for
interim and annual periods ending after June 15, 2009. The Company
does not expect the adoption of ASC 820 will have a material impact on its
financial condition or results of operation.
In
October 2008, the FASB issued ASC 820-10, “Determining the Fair Value of a
Financial Asset When the Market for That Asset is Not Active,” which
clarifies application of ASC 820-10 in a market that is not
active. ASC 820-10 was effective upon issuance, including prior
periods for which financial statements have not been issued. The
adoption of ASC 820-10 had no impact on the Company’s results of operations,
financial condition or cash flows.
In
December 2008, the FASB issued ASC 810-10, “Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests in Variable
Interest Entities.” This disclosure-only ASC improves the
transparency of transfers of financial assets and an enterprise’s involvement
with variable interest entities, including qualifying special-purpose
entities. This ASC is effective for the first reporting period
(interim or annual) ending after December 15, 2008, with earlier application
encouraged. The Company adopted this ASC effective January 1,
2009. The adoption of the ASC had no impact on the Company’s
results of operations, financial condition or cash flows.
In
December 2008, the FASB issued ASC 715-20, “Employers’ Disclosures about
Postretirement Benefit Plan Assets”. ASC 715.20 requires additional
fair value disclosures about employers’ pension and postretirement benefit plan
assets consistent with guidance contained in ASC
820-10. Specifically, employers will be required to disclose
information about how investment allocation decisions are made, the fair value
of each major category of plan assets and information about the inputs and
valuation techniques used to develop the fair value measurements of plan assets.
This ASC is effective for fiscal years ending after December 15,
2009. The Company does not expect the adoption of ASC 715.20 will
have a material impact on its financial condition or results of
operation.
In
September 2008, the FASB issued exposure drafts that eliminate qualifying
special purpose entities from the guidance of ASC 860-10, “Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities”. While the proposed revised pronouncements have not been
finalized and the proposals are subject to further public comment, the Company
anticipates the changes will not have a significant impact on the Company’s
financial statements. The changes would be effective March 1, 2010,
on a prospective basis.
In
June 2008, the FASB issued ASC 260-10-45, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities”. This
ASC addresses whether instruments granted in share-based payment transactions
are participating securities prior to vesting, and therefore need to be included
in the computation of earnings per share under the two-class method
ASC
260-10-45 is effective for financial statements issued for fiscal years
beginning on or after December 15, 2008 and earlier adoption is prohibited.
We are not required to adopt ASC 260-10-45; neither do we believe that ASC
260-10-45 would have material effect on our consolidated financial position and
results of operations if adopted.
In
May 2008, the FASB issued ASC 944-20, “Accounting for Financial Guarantee
Insurance Contracts”. ASC 944-20 clarifies application of financial
guarantee insurance contracts, including the recognition and measurement of
premium revenue and claims liabilities. This ASC also requires expanded
disclosures about financial guarantee insurance contracts. ASC
944-20 is effective for fiscal years beginning on or after December 15, 2008,
and interim periods within those years. ASC 944-20 has no effect on the
Company’s financial position, statements of operations, or cash flows at this
time.
In March
2008, the FASB, issued ASC 815-10, Disclosures about Derivative Instruments and
Hedging Activities This standard requires companies to provide
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under ASC 815-10 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. This Statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. The Company has not yet
adopted the provisions of ASC 815-10, but does not expect it to have a material
impact on its consolidated financial position, results of operations or cash
flows.
25
PLAN OF
OPERATIONS
Our Plan
of Operations has been organized for each of our properties and claims to
account for the similarities and differences in the location, geology, the
prospective metals that may be hosted by each property or claim, and the current
stage of exploration of each property and claim; accordingly, we have several
Plans of Operations to account for those similarities and differences among our
various properties and claims. Our Plans of Operations represent our Phase I
exploration activities and are for a period of eighteen months. Based upon our
analysis of the test results and feasibility studies, we will determine whether
to proceed with Phase II exploration and development, which will consist of
expanding identified ore blocks to the proven classification, permitting, and
development. We cannot determine, predict, or assure whether we will be able to
proceed with Phase II exploration and development activities regarding any of
our properties or claims. Our exploration activities will be conducted under the
overall direction of our Consulting Geologist, but each Plan of Operations
described below will be directly managed and supervised by a Field Geologist
that we hire.
Mexico
Properties
A. The
El Cumbro, El Cusito, and Canada de Oro Properties
We will
explore the El Cumbro, El Cusito, and Canada de Oro Properties for silver, gold,
lead, zinc, and copper at a total cost of $518,000.
Step
|
Time Period
to Complete
Task
|
|
Cost
|
|
||
Staffing:
|
|
|||||
Hire
Field Geologist to manage exploration activities and manage
workers.
|
12
months
|
$
|
65,000
|
|||
Hire
four workers to perform or assist in the tasks described
below.
|
12
months
|
$
|
50,000
|
|||
Administrative
costs of Hermosillo Office, Administrative Manager and Secretary, rent,
accounting and auditing
|
12
months
|
$
|
55,000
|
|||
Exploration Phase I:
|
||||||
Repair
obstructed access to the properties through bulldozing and grading in
order that equipment and personnel will have full access to the property
using a road contractor under the supervision of our Field
Geologist.
|
1
month
|
$
|
50,000
|
|||
We
will cut trenches perpendicular across the veins by bulldozing and
excavating to prepare to sample the veins at the surface
expressions
|
3
months
|
$
|
0
|
|||
Our
Field Geologist will supervise sampling of trenches using the four helpers
hired above
|
2
months
|
$
|
0
|
|||
Our
Field Geologist will supervise cleaning and repairing of existing adits to
remove debris and permit unobstructed access for the purpose of conducting
underground sampling
|
3
months
|
$
|
0
|
|||
Our
Field Geologist will supervise our helpers who will systematically sample
the underground workings to determine mineralized areas using hammers and
chisels to cut slots on five-foot centers.
|
2
months
|
$
|
0
|
|||
Assay
all samples, including trench samples, underground adit samples using a
contract laboratory
|
3
months
|
$
|
10,000
|
|||
Based
on the above steps, our Field Geologist will generate a report with
recommendations.
|
0.5
months
|
$
|
0
|
|||
Sub-Total
|
$
|
230,000
|
||||
Purchase of Exploration
Equipment:
|
||||||
Back
Hoe Tractor with Excavator, Used
|
$
|
85,000
|
||||
20-yard
Dump Truck, Used
|
$
|
60,000
|
||||
Equipment
Trailer, Used
|
$
|
10,000
|
||||
20
KWH Generator
|
$
|
20,000
|
||||
Air
Compressor
|
$
|
10,000
|
||||
Office
Trailer, Used
|
$
|
10,000
|
||||
Sample
Preparation and Storage, Portable Building, Used Container
|
$
|
5,000
|
||||
Fuel
Tank, Portable, Used
|
$
|
5,000
|
||||
Water
Tank, Portable, Used
|
$
|
8,000
|
||||
Misc.
Tools
|
$
|
25,000
|
||||
Light
Duty Transportation, Van and Pick-up and one all terrain
vehicle
|
$
|
50,000
|
||||
Sub-total
|
$
|
288,000
|
||||
Total
|
$
|
518,000
|
26
B. The
La Moneda property
We will
explore the La Moneda property for gold and silver at a total cost of $44,500.
We will contract a Project Geologist who will supervise all work at the project
and will use two temporary workers in the local area to assist with manual
sampling for two months. At the end of the La Moneda sampling program, the
Project Geologist will transfer to El Cumbro/El Cusito/Canada del Oro projects
as Assistant to the Field Geologist. La Moneda is a second priority project and
will be evaluated to determine if there is potential for future gold
production.
Step
|
Time Period
to Complete
Task
|
|
Cost
|
|
||
Exploration Phase I:
|
||||||
Project
Geologist to supervise trench excavations, sampling and sample
reparation
|
2
months
|
$
|
6,000
|
|||
Our
Project Geologist will hire two temporary helpers to do hammer and chisel
chip samplings
|
2
months
|
$
|
3,000
|
|||
Purchase of Exploration
Equipment:
|
||||||
All
Terrain Vehicle for rough terrain
|
$
|
7,000
|
||||
10
KWH Generator
|
$
|
7,500
|
||||
Miscellaneous
Tools
|
$
|
5,000
|
||||
Project
Geologist Pick-up
|
$
|
10,000
|
||||
Trailer
for Field Office
|
$
|
6,000
|
||||
Sub-Total
|
$
|
44,500
|
27
The Leviathon property in
San Bernardino County, California
We will
explore the Leviathon property for silver and barite at a total cost of
$2,527,000. We will use one Field Geologist, four workers and infrastructure for
our Leviathon property. Equipment to be used to conduct the Leviathon
exploration program is shown below:
Step
|
Time Period
to Complete
Task
|
|
Cost
|
|
||
Exploration Phase I:
|
||||||
Hire
Project Geologist to manage exploration, sampling and sample preparation
activities and workers
|
18
months
|
$
|
75,000
|
|||
Our
Project Geologist will hire 4 workers who will conduct sampling, drill
core handling and cataloging, splitting and general sample preparation
|
12
months
|
$
|
144,000
|
|||
Our
Project Geologist will contract a local construction company to prepare
access roads and drill pads in preparation for drilling and will supervise
the work
|
2
months
|
$
|
50,000
|
|||
Our
Field Geologist will map the mineralized structures, which are visible at
surface, to determine the strike and dip of the ore bodies, and based on
this, will design our drilling program for the property. Since Leviathan
is a series of wide veins, drilling will be designed to intercept the ore
bodies from the surface by angling the holes.
|
3
months
|
$
|
0
|
|||
Our
Project Geologist will hire a drilling contractor to drill 5,000 meters at
determined drill stations, probably split evenly between core and reverse
circulation drilling.
|
3
months
|
$
|
1,000,000
|
|||
Our
Project Geologist will collect the drill samples, log and catalog them,
and send them for sample preparation in anticipation of assaying. The
samples will be split, with half stored in the storage
building
|
4
months
|
$
|
20,000
|
|||
Our
Project Geologist will arrange contract assaying with an independent assay
laboratory
|
4
months
|
$
|
100,000
|
|||
Our
Project Geologist will hire an independent mining engineer to design the
mine based on the results of our drilling program
|
3
months
|
$
|
150,000
|
|||
Our
Project Geologist will hire an independent research firm to conduct
metallurgical testing of the samples to determine the optimal recovery
strategy and equipment
|
4
months
|
$
|
250,000
|
|||
Our
Project Geologist will hire an independent environmental engineering firm
to conduct fauna, archeological, wild life, hydrology and base line
studies to complete and submit project permit requests.
|
12
months
|
$
|
350,000
|
|||
Sub-total
|
$
|
2,139,000
|
||||
Exploration Equipment
Purchases:
|
||||||
Light
Duty Transportation, 2 Pick-ups and 1 van
|
1
month
|
$
|
65,000
|
|||
Office
Trailer, used
|
12
months
|
$
|
15,000
|
|||
Purchase
steel building for sample preparation and storage
|
6
months
|
$
|
125,000
|
|||
Purchase
two core splitters
|
3
months
|
$
|
30,000
|
|||
Purchase
shelving for sample storage
|
2
months
|
$
|
25,000
|
|||
Purchase
diesel fuel tank
|
1
month
|
$
|
8,000
|
|||
Purchase
20,000 gallon water head tank, Used
|
1
month
|
$
|
20,000
|
|||
Purchase
office furniture and equipment, including computers
|
1
month
|
$
|
30,000
|
|||
Purchase
a 20 kwh generator for water pumping and a 10 kwh generator for project
power
|
1
month
|
$
|
30,000
|
|||
Portable
X-ray device for field assaying
|
1
month
|
$
|
40,000
|
|||
Sub-Total
|
$
|
388,000
|
||||
Total
|
$
|
2,527,000
|
28
ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None
ITEM 4T. - CONTROLS AND
PROCEDURES
Evaluation
of Disclosure Controls and Procedures
Our
management is responsible for establishing and maintaining a system of
disclosure controls and procedures as defined in Rule 13a-15(e)) under the
Securities Exchange Act of 1934, as amended ("Exchange Act") that is
designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time 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 by
an issuer in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the issuer's management, including its principal
executive officer or officers and principal financial officer or officers, or
persons performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
In
accordance with Exchange Act Rule 13a-15(b), our management, under the
supervision and with the participation of our Chief Executive Officer and Chief
Financial Officer, performed an evaluation of the effectiveness of our
disclosure controls and procedures as of the end of the fiscal quarter covered
by this Quarterly Report. Based on that evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures were ineffective, as of the end of the third quarter ending September
30, 2009, to provide reasonable assurance that information required to be
disclosed in our reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Commission's rules and forms.
Changes
in internal controls
Our
management, with the participation our Chief Executive Officer and Chief
Financial Officer, performed an evaluation as to whether any change in our
internal controls over financial reporting occurred during the financial
quarter ending September 30, 2009. Based on that evaluation, our Chief
Executive Officer and our Chief Financial Officer concluded that no change
occurred in our internal controls over financial reporting during the financial
quarter ending September 30, 2009 that has materially affected, or is reasonably
likely to materially affect, our internal controls over financial
reporting.
PART II - OTHER
INFORMATION
ITEM 1 - LEGAL
PROCEEDINGS
None
29
ITEM 1A - RISK
FACTORS
Risk
Factors
In
addition to the other information provided in this Form 10-Q, you should
carefully consider the following risk factors (and others in our S-1
Registration Statement, which may be accessed at: www.sec.gov/Archives/edgar/data/1419482/000114420408011274/v104636_s1a.htmn
) in evaluating our business before purchasing our common stock. Our
exploration activities are highly risky and speculative; accordingly, an
investment in our common stock shares involves a high degree of risk. You should
not invest in our common stock if you cannot afford to lose your entire
investment. In considering an investment in our common shares, you should
carefully consider the following risk factors together with all of the other
information contained in our filings with the Securities and Exchange
Commission, including our S-1 Registration Statement. Any of the following
(along with other risk factors that are discussed in our S-1 Registration
Statement, and which includes more expansive risk factor discussions pertaining
to the risk factors discussed below), may cause our exploration activities,
prospects, financial condition or results of operations to be negatively
impacted, which may lead to the loss of all or part of your
investment.
Risks Related to our Business
Activities .
Our
financial condition raises substantial doubt about our ability to continue as a
going concern.
As of
September 30, 2009, we have an accumulated deficit of $801,627. Our auditor has
issued a going concern opinion that there is substantial doubt whether we can
continue as an ongoing business. If we fail to obtain
approximately $10 million of financing, we will be unable to pursue our planned
business operations and will have to be curtailed or terminated, in which case
you will lose part or all of your investment in our common stock.
Because our properties or claims may
never have reserves or be profitable, your investment in our common shares may
be negatively impacted.
None of
the properties or claims on which we have the right to explore for silver and
other precious metals is known to have any confirmed commercially mineable
deposits of silver or other metals that may be mined at a profit. We may be
unable to develop our properties at a profit, either because:
|
·
|
the deposits are not of the
quality or size that would enable us to make a profit from actual mining
activities; or
|
|
·
|
because it may not be
economically feasible to extract metals from the
deposits.
|
In either
case, you may lose part or all of you entire investment.
Because we are an exploration stage
company, we have no mining operations, and our future operations are subject to
substantial risks, we may never be successful in conducting any future mining
operations .
We are
not a mining company, but rather a beginning stage exploration stage. We will be
unable to generate revenues or make profits, unless we actually mine deposits,
if any actually exist.
We lack
an operating history in our current business plan and we have losses, which make
it difficult for you to evaluate whether we will be able to continue our
operations or ever be profitable.
In June
2006, we began our current business plan of conducting exploration for silver
and other minerals — our short operating history has consisted of preliminary
exploration activities and non-income-producing activities. Accordingly, we have
no adequate operating history for you to evaluate our future success or
failure.
30
Our
management has conflicts of interest that may favor the interests of our
management, but to the detriment of our minority shareholders’
interests.
Our
officers and directors also serve as officers and/or directors of other mining
exploration companies and are related by family relations to one another. As a
result, their personal interests and those of the companies that they are
affiliated with may come into conflict with our interests and those of our
minority stockholders. We as well as the other companies that our officers and
directors are affiliated with may present our officers and directors with
business opportunities that are simultaneously desired. Additionally, we may
compete with these other companies for investment capital, technical resources,
key personnel and other things. You should carefully consider these potential
conflicts of interest before deciding whether to invest in our shares of our
common stock. We have not yet adopted a policy for resolving such conflicts of
interests. Because the interests of our officers and the companies that they are
affiliated with may disfavor our own interests and those of our minority
stockholders, you should carefully consider these conflicts of interest before
purchasing shares of our common stock.
The
services of our President and Chief Executive Officer, Executive Vice
President/Chief Financial Officer, Consulting Geologist, and our Vice President
of Administration and Logistics, are essential to the success of our business;
the loss of any of these personnel will adversely affect our
business.
Our
business depends upon the continued involvement of our officers, directors, and
consulting geologist, each of whom have mining experience from 9 to 35 years.
The loss, individually or cumulatively, of these personnel would adversely
affect our business, prospects, and our ability to successfully conduct our
exploration activities. Before you decide whether to invest in our common stock,
you should carefully consider that the loss of their expertise, may negatively
impact your investment in our common stock.
We
may be denied the government licenses and permits or otherwise fail to comply
with federal and state requirements for our exploration activities.
Our
future exploration activities will require licenses, permits, or compliance with
other state and federal requirements regarding prospecting, exports, taxes,
labor standards, occupational health, waste disposal, toxic substances, land
use, environmental protection, mine safety and other matters. Delays or failures
to acquire required licenses or permits or successfully comply with the
pertinent federal and state regulations will negatively impact our
operations.
We
do not carry any property or casualty insurance and do not intend to carry such
insurance in the near future which may expose us to liabilities that will
negatively affect our financial condition.
The
search for valuable minerals exposes us to numerous hazards. As a result, we may
become subject to liability for such hazards, including environmental pollution,
cave-ins, unusual or unexpected geological conditions, ground or slope failures,
cave-ins, changes in the regulatory environment and natural phenomena such as
inclement weather conditions, floods and earthquakes or other hazards that we
cannot insure against or which we may elect not to insure. At the present time
we have no coverage to insure against these hazards, should we incur liabilities
involving these hazards that may have a material adverse effect on our financial
condition.
ITEM 2 - UNREGISTERED SALES
OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3 - DEFAULTS UPON
SENIOR SECURITIES
None
31
ITEM 4 - SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER
INFORMATION
None
ITEM 6 -
EXHIBITS
See
Exhibit Index
32
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
INTERNATIONAL
SILVER, INC.
/s/Harold
R Shipes
|
Harold R. Shipes, Chief Executive Officer/Chairman of the Board
|
Dated:
November 23, 2009
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities indicated.
Signature
|
Title
|
Date
|
||
|
||||
/s/ Harold R. Shipes
|
Chairman of the Board/Director
|
November
23, 2009
|
||
Harold R. Shipes
|
Chief Executive Officer
|
|||
|
(Principal Executive Officer)
|
|||
/s/John A. McKinney
|
Chief Financial Officer
|
November
23, 2009
|
||
John A. McKinney
|
Executive Vice President
|
|||
(Principal Financial Officer)
|
33
EXHIBIT
INDEX
EXHIBIT NO.
|
DESCRIPTION
|
PAGE
|
||
31.1
|
Certification
Pursuant to Rule 13a-14(a) under the Exchange Act
|
|||
31.2
|
Certification
Pursuant to Rule 13a-14(a) under the Exchange Act
|
|||
32.1
|
Certifications
of the Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley act of 2002
|
34