UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q
Amendment No. 1

(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, 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 NO. 0001419482

INTERNATIONAL SILVER, INC.
(Exact name of registrant as specified in its charter)

ARIZONA
 
86-0715596
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer Identification No.)

5210 East Williams Circle, Suite 700
 
85711
Tucson, Arizona
(Address of principal executive offices)
 
(Zip Code)

(520) 889-2040
(Registrant's telephone number, including area code)
 
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has 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 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.

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PROCEEDING 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 ISSURERS:

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 September 30, 2008
 
 
 
Common Stock, $0.0001 Par Value
 
15,011,753
 
Exhibit Index located at page 26

 
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
 
17
 
 
 
Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
27
 
 
 
Item 4T - CONTROLS AND PROCEDURES
 
27
 
 
 
Part II - OTHER INFORMATION
 
 
 
 
 
Item 1 - LEGAL PROCEEDINGS
 
27
 
 
 
Item 1A - RISK FACTORS
 
27
 
 
 
Item 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
30
 
 
 
Item 3 - DEFAULTS UPON SENIOR SECURITIES
 
30
 
 
 
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
30
 
 
 
Item 5 - OTHER INFORMATION
 
30
 
 
 
Item 6 - EXHIBITS
 
30
 
 
 
CERTIFICATIONS 31.1 & 31.2
 
 

2

PART I   FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

International Silver, Inc.
(An Exploration Stage Enterprise)
 
Consolidated Financial Statements

For The Nine Months Ended September 30, 2008
(Unaudited)

and

For the Year Ended December 31, 2007
(Audited)
 
Prepared on 10/24/08

3
 
International Silver, Inc.      
(An Exploration Stage Enterprise)      
Consolidated Balance Sheets      

   
As At
 
   
September 30, 
2008
 
December  31,
2007
 
           
   
(Unaudited)
 
(Audited)
 
   
 
 
(Restated)
 
ASSETS
             
               
CURRENT ASSETS
             
Cash
 
$
5,406
 
$
51,283
 
Accounts receivables, net
   
129,794
   
200,261
 
Prepaid expenses
   
1,730
   
1,012
 
Total Current Assets
 
$
136,930
 
$
252,556
 
               
PROPERTY AND EQUIPMENT-Note C
         
Land
 
$
90,000
 
$
90,000
 
Machinery and equipment
   
2,042
   
0
 
Furniture & fixtures
   
3,501
   
5,543
 
Vehicles
   
1,125
   
1,125
 
   
$
96,668
 
$
96,668
 
Less accumulated depreciation
   
(6,263
)
 
(5,981
)
Total Property and Equipment
 
$
90,405
 
$
90,687
 
               
OTHER ASSETS
             
Deferred financing costs – Note D
 
$
40,000
 
$
0
 
Non-refundable deposits – Note E
   
90,000
   
0
 
Deposits
   
6,335
   
6,335
 
Total Other Assets
 
$
136,335
 
$
6,335
 
               
TOTAL ASSETS
 
$
363,670
 
$
349,578
 

See accompanying notes to the consolidated financial statements

4

International Silver, Inc      
(An Exploration Stage Enterprise)      
Consolidated Balance Sheets      

   
As At
 
   
September 30, 
2008
 
December  31,
2007
 
           
   
(Unaudited)
 
(Audited)
 
   
 
 
(Restated)
 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY
             
               
CURRENT LIABILITIES
             
Accounts payable
 
$
33,126
 
$
18,512
 
Accrued expenses
   
78,375
   
104,338
 
Total Current Liabilities
 
$
111,501
 
$
122,850
 
 
           
SHAREHOLDERS’ EQUITY
             
Non-Controlling Interest
    $
(3,077
)
  $
(2,562
)
Common stock
         
authorized shares - 500,000,000
             
Par value $0.0001 per Share
             
issued & o/s – 12/31/07 14,526,186
       
1,452
 
issued & o/s – 09/30/08 15,011,753
   
1,501
       
Additional paid-in capital
   
808,978
   
692,048
 
Accumulated deficit during exploration stage
   
(555,233
)
 
(464,210
)
Total Shareholders’ Equity
 
$
252,169
 
$
226,728
 
           
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY
 
$
363,670
 
$
349,578
 
 
See accompanying notes to the consolidated financial statements

5

International Silver, Inc.          
(An Exploration Stage Enterprise)        
Consolidated Statements of Operations        

                   
Exploration 
Stage
 
   
Three Months Ended 
 
Nine Months Ended 
 
(June 1, 2006
 
   
 
 
 
 
 
 
 
 
Through
 
   
September  30,
2008
 
September  30,
2007
 
September  30,
2008
 
September  30,
2007
 
September 30, 
2008)
 
                       
REVENUES
                               
Consulting
 
$
31,912
 
$
29,760
 
$
86,100
 
$
87,690
 
$
207,928
 
Other
   
3
   
0
   
9,122
   
7,128
   
7,131
 
Total Revenues
 
$
31,915
 
$
29,760
 
$
95,222
 
$
94,818
 
$
215,059
 
 
                             
Operating Expenses
                             
Production Costs
 
$
0
 
$
0
 
$
0
 
$
0
 
$
0
 
Exploration costs
   
13,728
   
14,382
   
12,096
   
14,382
   
104,066
 
General and administration
   
60,616
   
58,217
   
168,978
   
132,062
   
474,721
 
Depreciation and depletion
   
94
   
250
   
188
   
188
   
470
 
Total operating expenses
 
$
74,438
 
$
72,849
 
$
181,262
 
$
146,632
 
$
579,257
 
                               
Operating Income/Loss
  $
(42,523
)
$ 
(43,089
)
$
(86,040
)
$
(51,814
)
$
(364,198
)
                               
OTHER INCOME (EXPENSES)
                         
Interest Expense
   
(2,488
)
 
(219
)
 
(5,498
)
 
(9,009
)
$ 
(20,138
)
Total other income/(expense)
  $
(2,488
)
$
(219
)
$
(5,498
)
$
(9,009
)
$ 
(20,138
)
 
                         
NET INCOME/(LOSS)
  $
(45,011
)
$ 
(43,308
)
$ 
(91,538
)
$ 
(60,823
)
$
(384,336
)
 
                         
Less: Non-Controlling Interest
   
158
   
970
   
515
   
1,713
 
$
3,271
 
                               
Net Income/(Loss)-Parent
  $ 
(44,853
)
$ 
(42,338
)
$ 
(91,023
)
$ 
(59,110
)
$ 
(381,065
)
                               
Accumulated Deficit                                
Beginning of Period
  $ 
(510,380
)
$ 
(356,294
)
$ 
(464,210
)
$ 
(339,522
)
   
                               
End of Period
  $ 
(555,233
)
$ 
(398,632
)
$ 
(555,233
)
$ 
(398,632
)
   
                                 
Basic and Diluted Income/(Loss) per Share
  $ 
(0.003
)
$ 
(0.003
)
$ 
(0.006
)
$ 
(0.004
)
     
                               
Weighted Average Shares Outstanding
   
14,843,970
   
14,076,186
   
14,768,970
   
13,853,093
       
 
See accompanying notes to the consolidated financial statements

6
 
International Silver, Inc.        
(An Exploration Stage Enterprise)        
Consolidated Statements of Cash Flows        

   
Nine Months Ended
 
Exploration Stage
 
   
 
     
(Inception to
 
   
September 30
2008
 
September 30
2007
 
September 30,
2008)
 
               
CASH FLOWS FROM OPERATING ACTIVITIES
                   
Net Income/(Loss)
  $ 
(91,023
)
$ 
(59,110
)
$ 
(381,065
)
Adjustments used to reconcile net (loss)
                 
to net cash (used) by operating activities:
                   
Non-controlling Interest in Subsidiary
   
(515
)
 
(1,713
)
 
(3,077
)
Depreciation and depletion
   
188
   
188
   
375
 
Adjustment - Depreciation
   
94
   
0
     
Issuance of common stock
                 
For cash
   
0
   
5,000
   
80,000
 
In exchange for land
   
0
   
0
   
30,000
 
In exchange for services
   
20,000
   
21,500
   
41,500
 
In exchange for exploration costs
   
0
   
0
   
55,385
 
Changes in operating assets and liabilities
                 
Decrease/(Increase) in accounts receivable
   
70,467
   
108,634
   
114,691
 
Decrease/(Increase) in prepaid expenses
   
(718
)
 
(6,637
)
 
1,794
 
(Decrease)/Increase in accounts payable
   
21,593
   
13,350
   
5,613
 
(Decrease)/Increase in accrued expenses
   
(25,963
)
 
10,558
   
22,248
 
Net Cash Flows (used by) Operating Activities
  $ 
(5,877
)
$
91,770
  $ 
(32,536
)
                   
CASH FLOW FROM INVESTMENT ACTIVITIES
                 
Purchase of equipment
 
$
0
 
$
0
  $ 
(6,668
)
Deferred financing cost
   
(40,000
)
 
0
   
(40,000
)
Purchase option on land
   
(90,000
)
 
0
   
(90,000
)
Purchase of land
   
0
   
(90,000
)
 
(90,000
)
Net Cash Flows from Investment Activities
  $ 
(130,000
)
$ 
(90,000
)
$ 
(226,668
)
                   
CASH FLOWS FROM FINANCING ACTIVITIES
                 
Net Proceeds from stock issuance
   
0
   
5,000
 
$
80,000
 
Borrowings/repayments from related parties
   
90,000
   
0
   
152,980
 
Net Cash Flows from Financing Activities
 
$
90,000
 
$
5,000
 
$
232,980
 
                   
Net (Decrease) in Cash
  $ 
(45,877
)
$
6,770
  $ 
(26,224
)
 
                 
Beginning Cash Balance
 
$
51,283
 
$
2,042
 
$
31,630
 
                   
Ending Cash Balance
 
$
5,406
 
$
8,812
 
$
5,406
 
       
See accompanying notes to the consolidated financial statements

7

International Silver, Inc.        
(An Exploration Stage Enterprise)        
Consolidated Statements of Cash Flows        

       
Exploration Stage
 
   
Nine Months Ended
 
(Inception to
 
   
September 30,
 
September 30,
 
September 30,
 
   
2008
 
2007
 
2008
 
               
Supplemental disclosures on non-cash financing activities:
           
                     
Issuance of common stock
                 
                     
For services rendered:
             
Director services
 
$
0
 
$
4,000
 
$
4,000
 
Legal and professional services
   
20,000
   
0
   
20,000
 
Stock transfer agent services
   
0
   
5,500
   
5,500
 
Accounting services
   
0
   
4,000
   
4,000
 
Geology and engineering
   
0
   
8,000
   
8,000
 
                   
Sub-total
 
$
20,000
 
$
21,500
 
$
41,500
 
                     
For land
 
$
0
 
$
0
 
$
30,000
 
                   
For exploration costs
 
$
0
 
$
0
 
$
55,385
 
                     
Debt exchange for contributed capital
  $ 
(96,979
)
$ 
(168,093
)
$ 
(265,072
)
                     
Total non-cash financing activities
  $ 
(76,979
)
$ 
(146,593
)
$ 
(138,187
)

See accompanying notes to the consolidated financial statements

8


International Silver, Inc.
(An Exploration Stage Enterprise)
Consolidated Statement of
Shareholders' Equity
 
 
 
 
     
Additional
         
   
Common Stock  
 
Paid-In
 
Accumulated
     
   
Shares
 
Amount
 
Capital
 
Deficit
 
Total
 
               
(Restated)
   
 
                                 
For the Nine Months Ended September 30, 2007
                             
                               
At January 1, 2007
   
13,430,000
 
$
1,343
 
$
422,564
  $
(339,522
)
$
84,385
 
                                 
First Quarter, 2007
                               
Net Income/(Loss)
                               
Parent Co.
                     
(5,121
)
 
(5,121
)
Non-controlling Interest
   
 
   
 
   
 
   
(322
)
 
(322
)
At March 31, 2007
   
13,430,000
 
$
1,343
 
$
422,564
  $
(344,965
)
$
78,942
 
                         
Second Quarter, 2007
                               
Shares issued for cash
   
10,000
   
   
5,000
         
5,000
 
Shares issued for services
   
100,000
   
10
   
5,490
         
5,500
 
Shares exchanged for debt
   
336,186
   
34
   
168,059
         
168,093
 
Net Income/(Loss)
                               
Parent Co.
                     
(11,651
)
 
(11,651
)
Non-controlling Interest
   
 
   
 
   
 
   
(421
)
 
(421
)
At June 30, 2007
   
13,876,186
 
$
1,387
 
$
601,113
  $
(357,037
)
$
245,463
 
                               
Third Quarter, 2007
                               
Shares issued for services
   
400,000
   
40
   
15,960
         
16,000
 
Net Income/(Loss)
                               
Parent Co.
                     
(42,338
)
 
(42,338
)
Non-controlling Interest
   
 
   
 
   
 
   
(970
)
 
(970
)
At September 30, 2007
   
14,276,186
 
$
1,427
 
$
617,073
  $
(400,345
)
$
218,155
 
                                 
For the Nine Months Ended September 30, 2008
                               
                               
At January 1, 2008
   
14,526,186
 
$
1,452
 
$
692,048
   
(466,772
)
 
226,728
 
                             
First Quarter, 2008
                               
Net Income/(Loss)
                               
Parent Co.
                     
(25,111
)
 
(25,111
)
Non-controlling Interest
   
 
   
 
   
 
   
(194
)
 
(194
)
At March 31, 2008
   
14,526,186
 
$
1,452
 
$
692,048
  $
(492,077
)
$
201,423
 
                                 
Second Quarter, 2008
                               
Stock Issued for services
   
150,000
   
15
   
19,985
         
20,000
 
Net Income/(Loss):
                               
Parent Co.
                     
(21,059
)
 
(21,059
)
Non-controlling Interest
   
 
   
 
   
 
   
(163
)
 
(163
)
At June 30, 2008
   
14,676,186
 
$
1,467
 
$
712,033
  $
(513,299
)
$
200,201
 
                                 
Third Quarter, 2008
                               
Shares exchanged for debt
   
335,567
   
34
   
96,945
         
96,979
 
Net Income/(Loss):
                               
Parent Co.
                     
(44,853
)
 
(44,853
)
Non-controlling Interest
   
 
   
 
   
 
   
(158
)
 
(158
)
                       
       
At September 30, 2008
   
15,011,753
 
$
1,501
 
$
808,978
  $
(558,310
)
$
252,169
 

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 Statement of Financial Accounting Standards, “SFAS” No. 7, Accounting and Reporting by Development Stage Enterprises” 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, 2008 and December 31, 2007 and results of operations and cash flows for the comparative periods at September 30, 2008 and September 30, 2007.

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, 2007 audited financial statements. The results of operations for the period ended September 30, 2008 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.

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 to FAS 52. 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.

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
Trade receivables are stated, net of an allowance for uncollectible accounts, based on prior experience.

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, 2008 and December 31, 2007 there were no inventories on hand.

In November 2004, the FASB issued SFAS No. 151, which revised ARB No. 43, relating to inventory costs. This revision is to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage). This Statement requires that these items be recognized as a current period charge regardless of whether they meet the criterion specified in ARB 43. In addition, this Statement requires the allocation of fixed production overheads to the costs of conversion be based on normal capacity of the production facilities. This Statement is effective for financial statements for fiscal years beginning after June 15, 2005.

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
 

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.


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, 2008 and December 31, 2007, all mineral interests were in the exploration stage.

Impairment of Long-Lived Assets
The company adheres to the Statement of Financial Standard ("SFAS") No. 144, "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, 2008 and December 31, 2007, no assets were impaired.

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, 2008 and December 31, 2007, there had been no production from any of the Company's properties.

Reclamation and Remediation Costs (Asset Retirement Obligations)
The Company has adopted SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 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 SFAS No. 143 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, 2008 and December 31, 2007.

Income Taxes
The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes” (“SFAS 109”). SFAS 109 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, SFAS 109 generally considers all expected future events other than enactments of changes in the tax law or rates.

13

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.

Statement of Cash Flows Information and Supplemental Non-Cash Financing Activities
Non-cash investing and financing transactions during the reported periods related primarily to the issuance of common stock in exchange for debt reduction and legal and consulting services as disclosed in Notes F and G.

Certain Equity Instruments
In June 2003, the FASB approved Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity" (“ SFAS No. 150”). SFAS 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. At September 30, 2008 and December 31, 2007, the Company is not impacted by this requirement.

Comprehensive Income
Standards of Financial Accounting Standards No. 130 (“SFAS 130”), "Reporting 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 periods ended September 30, 2008 and December 31, 2007, the Company did not have any material items of comprehensive income.

Derivative Instruments
In June 1998, the FASB issued SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”. This statement as amended by SFAS No. 137 is effective for fiscal years beginning after June 15, 2000. Currently, the Company does not have any derivative financial instruments and does not participate in hedging activities. Therefore, SFAS No. 133 did not have an impact on its financial position or results of operations for the periods ended September 30, 2008 and December 31, 2007.

Stock-Based Compensation
In December 2004, the Financial Accounting Standards Board, or FASB, issued SFAS No. 123R "Share-Based Payment," a revision to FASB No. 123. SFAS No. 123R replaces existing requirements under SFAS No. 123 and APB Opinion No. 25, and 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. SFAS No. 123R 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, SFAS No.123R is effective for interim periods beginning after December 15, 2005.

14

Non-Monetary Exchanges
In December 2004, the FASB issued SFAS No. 153. This Statement addresses the measurement of exchanges of non-monetary assets. The guidance in APB Opinion No. 29, Accounting for 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. The guidance in that Opinion, however, included certain exceptions to that principle. This Statement amends APB No. Opinion 29 to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. 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.

Note C – Property, Plant and Equipment

Property, plant and equipment are comprised of the following:

   
At September 30
 
At December 31
 
   
2008
 
2007
 
           
Land, including mineral rights
 
$
90,000
 
$
90,000
 
Machinery and equipment
   
2,042
   
2,042
 
Office equipment and computers
   
3,501
   
3,501
 
Vehicles
   
1,125
   
1,125
 
Less: accumulated depreciation
   
( 6,263
)   
 
( 5,981
)
               
Net Total
 
$
90,405
 
$
90,687
 

Note D – Deferred Financing Costs
 
On August 21, 2008, the Company contracted DME Capital, LLC for the purpose of obtaining venture capital and/or a joint venture agreement on the Langtry Property. The Company paid DME Capital, LLC a due diligence fee of $40,000.

Note E – Non-Refundable Deposits

On September 7, 2007, the Company negotiated for the purchase of vacant land (Vacant Land Purchase Agreement) in the amount of $8,000,000 by making an initial option payment of $10,000. This was followed by a payment of $90,000 to extend the purchase option. The $90,000 extension payment is non-refundable, if the Company does not close on this purchase; otherwise this payment will be applied to reduce the purchase price. On September 11, 2008, the Company re-negotiated the terms of the Langtry Property purchase.

Previously, the Langtry property purchase terms provided for an $8.0 million payment for the acquisition of a 100% undivided interest. These acquisition terms have now been modified to provide for an initial $2.0 million payment by December 5, 2008, with the balance financed over a fifteen-year period at an interest rate of six (6%) percent per annum.


Note F – Shareholders’ Equity

At September 30, 2008, the Company had authorized 500,000,000 shares of common stock and 15,011,753 shares had been issued and are outstanding. During the third quarter ended September, 30, 2008, the Company issued 335,567 shares of its common stock, in exchange for debt reduction, owed to a shareholder/officer, as disclosed in Note G.

Note G - Related Party Transactions
 
On March 3, 2008, a shareholder/officer loan of $90,000, with interest payable at 10% per annum, was made to the Company. The principal portion of the note including reimbursable company-related expenses paid by the shareholder/officer, were exchanged for 335,567 shares of common stock in the Company on September 8, 2008 valued at $96,979.

Revenues earned in the amount of $86,100 during the period ended September 30, 2008 have been for engineering consulting services for an affiliate, Atlas Precious Metals Inc.
 
Note H - Litigation

At September 30, 2008 there were no outstanding legal issues.

Note I – Subsequent Events

Effective October 1, 2008, The Company has moved its administrative offices to a more central business location in Tucson, Arizona. The Company is subleasing from a related company, Atlas Precious Metals Inc. based on a one-year lease, renewable at the Company’s option.

16

 
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATIONS
 
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, including the risk factors contained herein as well as our Form S-1 Registration Statement, which may be reviewed at www.sec.gov.  
 
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. We have generated no significant revenues since approximately mid-2006, when we discontinued providing engineering services and commenced with our strategy of exploring for mineralized properties. Exploration activities have been limited to the exploration and purchasing of mineral interests in the United States and Mexico.

Financial Condition and Changes in Financial Condition

At September 30, 2008, we had cash of $5,406 and receivables of $129,794, which (assuming we can convert our receivables into cash) is sufficient to conduct our exploration activities and meet our maturing obligations for only two months. . Our financial condition as of September 30, 2008, as compared to December 31, 2007, is detailed below:
 

Assets

As of September 30, 2008, we had total assets of $363,670 compared to total assets of $349,578 as of December 31, 2007, representing an increase of 4% or $14,092. Current assets primarily consist of $129,794 of accounts receivable; other assets consist of $90,000 of land, $40,000 of deferred financing costs, representing a due diligence fee to procure funds for our operations, and a non-refundable deposit of $90,000 made on the Langtry mineralized property.

   
At September
30, 2008
 
At December 31, 2007
 
Net Incr./(Decr.)
 
Current Assets :
   
   
   
 
Cash 
 
$
5,406
 
$
51,283
 
$
(45,877
)
Accounts Receivable 
   
129,794
   
200,261
   
(70,467
)
Prepaid Expenses 
   
1,730
   
1,012
   
718
 
   
 
$
136,930
 
$
252,556
 
$
(115,626
)
Other Assets :
   
226,740
   
97,0225
   
129,718
 
   
$
363,670
 
$
349,578
 
$
14,092
 
 
17
Cash decreased by 89% or $45,877 primarily due to continued exploration activities. Receivables decreased by 35% or $70,467 as a result of collections on prior receivables.

Other assets increased by approximately $130,000 due to deferred financing of $40,000 and a $90,000 non-refundable deposit placed on the Langtry mineral property in California.
 
Liabilities and Shareholders’ Equity

 
 
At September
30, 2008
 
At December 31, 2007
 
Net Incr./(Decr.)
 
Liabilities 
 
     
 
     
 
     
 
Accounts Payable
 
$
33,126
 
$
18,512
 
$
14,614
 
Accrued Expenses
   
78,375
   
104,338
   
(25,963
)
               
Total Liabilities
 
$
111,501
 
$
122,850
 
$
(11,349
)
 
             
Shareholders’ Equity
             
Capital Stock
 
$
810,479
 
$
693,500
 
$
116,979
 
Minority Interest
   
(3,077
)
 
(2,562
)
 
(515
)
Accum.Deficit
   
(555,233
)
 
(464,210
)
 
(91,023
)
Total Equity
 
$
252,169
 
$
226,728
 
$
25,441
 
 
 
$
363,670
 
$
349,578
 
$
14,092
 

Current liabilities decreased by 9% or $11,349 to $111,501 at September 30, 2008, as compared to $122,850 at December 31, 2007. This decrease is primarily a result of reduced accrued expenses, namely office rent.
 
Shareholders’ equity increased by 11% or $25,441 at September 30, 2008 to $252,169 as compared to $226,728 at December 31, 2007. This increase is a result of stock issuances of $116,979, offset by a loss on operations of ($91,538) due to continued administrative and exploration costs.

Liquidity and Capital Resources
 
At September 30, 2008, we had working capital of $25,429, compared to $129,706 at December 31, 2007. This $104,277 working capital decrease represents a reduction of $51,283 of cash resources on hand at the beginning of the year, compared to cash of $5,506 at September 30, 2008 and cash realized from accounts receivables collections, the funds of which were used to fund our on-going administrative and exploration costs.

Net cash outflows from operating activities increased by 93% or $75,868 to ($5,877) at September 30, 2008, compared to ($81,745) at September 30, 2007. This increase is primarily due to collections on prior receivables, net of increased administrative and exploration costs.

18

Investment activities for the nine months ended September 30, 2008 included a purchase-option payment of $90,000 for a mineral property (non-producing) in California and a deferred expenditure in the form of a $40,000 due diligence fee in order to obtain funding for our development of mineral resources and the purchase and construction of planned production facilities. During the comparable time period ended September 30, 2007, we spent $90,000 towards the purchase of the Tecoma mineral rights properties in Utah.

Cash flows from financing activities at September 30, 2008 were $90,000, compared to $5,000 at September 30, 2007. In March, 2008, we obtained a $90,000 loan from a shareholder/officer, which we used as a purchase option on the Langtry property. During the first nine months of 2007, we raised $5,000 from sale of our restricted shares of common stock. Additionally, non-cash financing activities included stock issuances for services valued at $21,500 and in exchange for debt in the amount of $168,093.

Our business plan does not reflect, nor do we anticipate, any revenues during the exploration phase, apart from on-going engineering consulting services rendered to an affiliate company. We do not anticipate earning any significant revenues from operations until we complete the purchase of the Langtry property, confirm previously demonstrated mineralization, obtain operating permits and construct mining and processing facilities. At the same time, we must complete similar actions at our Tecoma properties and our Mexican properties. If we are unable to obtain sufficient financing to accomplish any one or a combination of these objectives, we will be unable to proceed with some or all of our planned activities
 
Our auditors have issued a going-concern statement pertaining to their review of our financial statements as of September 30, 2008 and a going-concern opinion on our audited financial statements for the fiscal year ended December 31, 2007 since we have an accumulated deficit as of December 31, 2007 and September 30, 2008 of $464,210 and $555,233, respectively. These and other matters raise substantial doubt about our ability to continue as a going concern. To satisfy our ongoing cash requirements for the immediate future and thereafter, we will require equity funding or a joint venture arrangement. We anticipate total spending requirements of approximately $13,000,000 pending adequate financing over the next eighteen months, in the following areas:
 
 
·
$2,000,000 representing a partial payment for the acquisition of the Langtry property;
 
·
$8,986,500 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
 
·
$1,300,000 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 approximately $13,000,000 of financing to accomplish our operational plan:
 
 
·
Negotiate with broker dealers to acting as an underwriter to conduct a public offering of our common stock sufficient to raise approximately $13,000,000;
 
·
Contact other companies with sufficient financial resources to fund our operational activities through a joint venture arrangement or a merger transaction where we would combine our business interests and objectives with another company;
 
·
Contact hedge fund and/or mutual fund managers or other possible funding sources to determine whether they wish to invest in our common stock; and
 
·
Obtain financing through a private placement of our common stock.
 
19


We incurred losses of $44,853 during the quarter ending September 30, 2008, representing a increase of 5% or $2,515 as compared to losses of $42,338 for the quarter ending September 30, 2007. This increase is due to increased general administrative costs.

An analysis of the major components of the results of operations is as follows:
 
Revenues. During the quarter ended September 30, 2008, we recognized revenues of $31,192, as compared to $29,760 for the quarter ended September 30, 2007. This $1,432 revenues increase is the result of an increase in engineering consulting services rendered. These revenues are unrelated to exploration activities.

Operating Loss.  Operating losses decreased by 1% or $566 to $42,523 for the quarter ended September 30, 2008, as compared to a loss of $43,089 for the quarter ended September 30, 2007.  The decrease in operating losses is primarily a result of slightly higher revenues.
 
Exploration Expenses . Exploration costs decreased by 5% or $654 to $13,728 for the quarter ended September 30, 2008, from $14,382 for the comparable 2007 period.  Exploration costs decreased as a result of lower administrative costs at our exploration offices.
 
General & Administrative Expenses. General and administrative expense increased by 4% or $2,399 to $60,616 for the quarter ended September 30, 2008 from $58,217 during the quarter ended September 30, 2007.  The increase in our general administrative expense is primarily attributable to increased exploration activities and costs incurred for funding procurement, such as consulting fees, legal and travel costs.
 
Depreciation and Depletion Expenses .  Depreciation expense was $94 for the quarter ended September 30, 2008; we incurred depreciation expense of $250 for the quarter ended September 30, 2007. 
 
Exploration Costs – Inception to Date
 
Since we converted our business plan in June 2006 to 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 and option to purchase mineralized property:
 
a) Purchased the Tecoma Mine (fee simple) located in Utah 
 
$
90,000
 
 
     
b) Purchased BLM mineral claims - Calico District 
 
$
12,770
 
   
       
c) Made option payment towards purchase price of $8 million of Langtry property 
 
$
100,000
 
 
     
d) 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
 
 
     
e) General Administrative Costs 
 
$
13,308
 
   
       
Total acquisitions and costs 
 
$
270,338
 

20

During our early stage of exploration activities, from June 1, 2006 through September 30, 2008, we have incurred an additional $474,721 in general and administration expenses comprised primarily of salaries, rent, consulting fees, interest and travel expenditures.
 
Accumulated losses of $381,065, which have been incurred from the inception of our “exploration phase” account for approximately 69% of the accumulated deficit of $555,233 reflected in the Shareholders’ Equity section. Our prior activities as an engineering services company account for the other portion of the deficit.
 
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;
 
·
Our Mexican properties being subject to foreign risk, such as passage of onerous regulatory exploration and mining requirements and availability of materials and supplies; and
  ·  
The current depressed state of the U.S. economy, including instability in and the depressed state of the U.S. credit and securities markets.

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.

21

Tecoma Property in Box Elder County Utah
We will explore the Tacoma Property underground for silver, lead, and zinc at a total cost of $1,188,000, as follows:

Plan of Operations Step
 
Time Period
to Complete
Task
 
Cost
 
Hire Field geologist to set up exploration activities, manage exploration activities and supervise workers
   
18 months
 
$
75,000.00
 
Field geologist hires four workers to perform or assist in the tasks described below
   
12 months
 
$
170,000.00
 
Workers will clean and repair existing adits in order that underground sampling may occur
   
4 months
 
$
20,000.00
 
Our Project Geologist using two laborers will systematically conduct underground hammer and chisel chip sampling to identify the mineralized areas in order that we may properly determine the locations of our underground drilling
   
3 months
 
$
40,000.00
 
Our Project Geologist will hire a Drilling Contractor who will conduct underground drilling of 1000 meters at the various underground drill locations
   
5 months
 
$
300,000.00
 
Purchase of Exploration Equipment
             
·   1.5 yard Scoop Tram (Used)
   
3 months
 
$
75,000.00
 
·   Cat 950 equivalent Loader (Used)
   
2 months
 
$
120,000.00
 
·   Five Yard Dump Truck (Used)
   
2 months
 
$
50,000,00
 
·   Light Duty Grader (Used)
   
2 months
 
$
35,000.00
 
·   Office Building/Shop/Core Preparation/Storage
   
6 months
 
$
100,000.00
 
·   Miscellaneous small tools and equipment
   
3 months
 
$
50,000.00
 
·   20 KWH Generator
   
3 months
 
$
30,000.00
 
·   High Pressure Air Compressor
   
2 months
 
$
18,000.00
 
Assay Services-Contract Laboratory
   
4 months
 
$
20,000.00
 
Our Project Geologist will conduct required permitting using consultants
   
12 months
 
$
50,000.00
 
Our Project Geologist will contract drilling of a water well, pipe to mine
   
3 months
 
$
15,000.00
 
Our Consulting Geologist and Field Geologist will interpret the drill results in conjunction with the reserve mapping to determine ore tonnage and grade
   
4 months
 
$
20,000.00
 
 
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 $1,178,000.

Step 
 
Time Period
to Complete
Task
 
Cost
 
Hire Field Geologist to manage exploration activities and manage workers.
   
18 months
 
$
65,000.00
 
Hire four workers to perform or assist in the tasks described below.
   
12 months
 
$
50,000.00
 
Administrative costs of Hermosillo Office, Administrative Manager and secretary, rent, accounting and auditing
   
18 months
 
$
85,000.00
 
Equipment Rentals with operators, supervised by our Field Geologist.
   
18 months
 
$
75,000.00
 
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
 
$
50,000.00
 
We will cut trenches perpendicular across the veins by bulldozing and excavating to prepare to sample the veins at the surface expressions
   
3 months
 
$
75,000.00
 
Our Field Geologist will supervise sampling of trenches using the four helpers hired above
   
2 months
 
$
25,000.00
 
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
 
$
35,000.00
 
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
 
$
25,000.00
 
Based on the above step, our Field Geologist will determine the location of underground drill stations.
   
0.5 months
 
$
0
 
Our Consulting Geologist will supervise a Contract Miner who will excavate the underground drill stations by mining an area adjacent to the veins sufficiently large to set up an underground drill.
   
4 months
 
$
75,000.00
 
Conduct underground drilling at 1000 meters
   
3 months
 
$
200,000.00
 
Assay all samples, including trench samples, underground adit samples and drill core samples using a contract laboratory.
   
3 months
 
$
30,000.00
 
Conduct reserve mapping based on drill and assay reports to estimate the tonnage and grades contained in the four primary veins on the El Cumbro and El Cusito properties and computerize the mine planning
   
2 months
 
$
30,000.00
 
Purchase of Exploration Equipment
       
$
358,000.00
 
·  Back Hoe Tractor with Excavator, Used
       
$
85,000.00
 
·  20 yard Dump Truck, Used
       
$
60,000.00
 
·  Equipment Trailer, Used
       
$
10,000.00
 
·  20 KWH Generator
       
$
30,000.00
 
·  Air Compressor
       
$
15,000.00
 
·  Office Trailer, Used
       
$
20,000.00
 
·  Sample Preparation and Storage, Portable Building, Used
       
$
25,000.00
 
·  Fuel Tank, Portable, Used
       
$
5,000.00
 
·  Water Tank, Portable, Used
       
$
8,000.00
 
·  Misc. Tools
       
$
40,000.00
 
·  Light Duty Transportation, Van and Pick-up and one all terrain vehicle
   
2 months
 
$
60,000.00
 

22

B. The La Moneda property
 
We will explore the La Moneda property for gold and silver at a total cost of $160,500. 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
 
Our Field Geologist will hire a Project Geologist to supervise the contract IP
surveys, trench excavations sampling and sample preparation
   
12 months
 
$
36,000.00
 
Conduct Induce Polarization Survey to identify potential areas of mineralization Our Field Geologist will supervise a Contractor who will conduct the Survey, which detects the presence of unusual sub-surface areas through the introduction of electrical fields in the ground.
   
3 months
 
$
50,000.00
 
Transportation costs between El Cumbro, Hermosillo and La Moneda for our Field Geologist and the La Moneda Project Geologist
   
12 months
 
$
16,000.00
 
Rental of portable trailer for field office
   
12 months
 
$
6,000.00
 
Excavator rental for digging sample trenches on known mineralized veins
   
1 month
 
$
10,000.00
 
Our Project Geologist will hire two temporary helpers to do hammer and chisel chip samplings
   
2 months
 
$
3,000.00
 
Purchase of Exploration Equipment
   
1 month
 
$
39,500.00
 
·  All Terrain Vehicle for rough terrain
       
$
7,000.00
 
·  10 KWH Generator
       
$
7,500.00
 
·  Miscellaneous Tools
       
$
5,000.00
 
·  Project Geologist Pick-up
       
$
20,000.00
 

23

The Langtry property in San Bernardino County, California
Our Langtry property Plan of Operations is contingent upon closing on the purchase of the property, for which there is no assurance whatsoever that we will obtain sufficient financing. In September 2008, we re-negotiated the terms on the purchase of the Langtry property, which requires a $2,000,000 installment payment by December 5, 2008, with the remaining purchase price financed over a fifteen-year period.

We will explore the Langtry property for silver and barite at a total cost of $ 4,570,000. Our Plan of Operations regarding the Langtry Property is interfaced with and has been formulated in conjunction with the exploration activities conducted by Superior Oil from 1971 to 1974, which are supported by drill reports, assay results, mapping, grade and tonnage calculations, all of which we possess. Our exploration activities will be geared toward comparing our test results against the Superior Oil’s prior drilling activities and results to confirm the grade and tonnage calculations, and thus re-classify the reserves to the proven category, if any. This will entail 10,000 meters of new drilling, sample splitting and preparation, assaying, reserve calculations, mine planning, metallurgical testing and mill design, final feasibility studies and permitting.

Step  
 
Time Period
to Complete
Task
 
Cost
 
Hire Project Geologist to manage exploration, sampling and sample preparation activities and workers 
   
18 months
 
$
90,000.00
 
Our Project Geologist will hire 4 workers who will conduct sampling, drill core handling and cataloging, splitting and general sample preparation  
   
12 months
 
$
144,000.00
 
Our Project Geologist will plan the drilling program using the Superior Oil drilling as a starting point and will plan fill-in drilling as well as confirmatory drilling, including purchase of computer hardware and software for mine planning  
   
6 months
 
$
20,000.00
 
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
 
$
100,000.00
 
Our Project Geologist will supervise the contract drilling program that will consist of 10,000 meters of drilling, split between 5,000 meters of core drilling and 5,000 meters of reverse circulation drilling  
   
12 months
 
$
2,000,000.00
 
Our Project Geologist will supervise the drill sample handling, logging, preparation, splitting and half sample storage in preparation for assay 
   
12 months
 
$
50,000.00
 
Assaying by a contract assay laboratory  
   
12 months
 
$
150,000.00
 
Mine planning will be conducted by an Independent Mining Engineer who will use the results of the drilling and assay program to produce an open pit mine design 
   
6 months
 
$
200,000.00
 
Metallurgical Testing will be conducted by an independent metallurgical laboratory 
   
6 months
 
$
250,000.00
 
Our Project Geologist will contract an independent environmental engineering firm to conduct fauna, archeological, wildlife and background studies and prepare permit applications to the various government agencies 
   
6 months
 
$
350,000.00
 
Our Project Geologist will contract a hydrology engineering firm to produce a hydrology study of the project area, including monitor wells 
   
6 months
 
$
225,000.00
 
An independent engineering firm will be contracted to design the metallurgical processing facilities and to produce a Final Feasibility Study for the Project 
   
6 months
 
$
500,000.00
 
Our Project Geologist will contract a local well drilling company to drill a water well and pipe water to the project area, including pump purchase and booster 
   
3 months
 
$
65,000.00
 
Exploration Equipment Purchases
       
$
426,000.00
 
·  Light Duty Transportation, 2 Pick-ups and 1 van
   
1 month
 
$
100,000.00
 
·  Office Trailer, rental
   
24 months
 
$
18,000.00
 
·  Purchase steel building for sample preparation and storage
   
6 months
 
$
125,000.00
 
·  Purchase two core splitters
   
3 months
 
$
30,000.00
 
·  Purchase shelving for sample storage
   
2 months
 
$
25,000.00
 
·  Purchase diesel fuel tank
   
1 month
 
$
8,000.00
 
·  Purchase 20,000 gallon water head tank, Used
   
1 month
 
$
20,000.00
 
·  Purchase office furniture and equipment, including computers
   
1 month
 
$
30,000.00
 
·   Purchase a 20 kwh generator for water pumping and a 10kwh generator for project power
   
1 month
 
$
30,000.00
 
·  Portable X-ray device for field assaying
   
1 month
 
$
40,000.00
 

24

The Leviathan property in San Bernardino County, California

We will explore the Leviathan property for silver and barite at a total cost of $1,890,000. We will use the same Field Geologist, workers and infrastructure from the Langtry property for our Leviathan property. The ore developed on the Leviathan property will be processed in the Langtry concentrator. We will use the same equipment described above in the Langtry property plan to conduct the Leviathan exploration program.
 
Step 
 
Time Period
to Complete
Task
 
Cost
 
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. Our Project Geologist is budgeted under the Langtry section
   
3 months
 
$
20,000.00
 
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. The same contractor that drills Langtry will probably move the drills to Leviathan when Langtry is completed
   
3 months
 
$
1,000,000.00
 
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 same storage building as the Langtry samples
   
4 months
 
$
20,000.00
 
Our Project Geologist will arrange contract assaying with an independent assay laboratory
   
4 months
 
$
100,000.00
 
Our Project Geologist will hire an independent mining engineer to design the mine based on the results of our drilling program
   
3 months
 
$
150,000.00
 
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
 
$
250,000.00
 
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. We anticipate that the ore from Leviathan will be processed in the Langtry concentrator to optimize possible profitability from the two projects and minimize capital investment
   
12 months
 
$
350,000.00
 

25

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, 2008 have been applied consistently with the quarter ended September 30, 2008.
 
Recent Accounting Pronouncements
 
In February 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No.155, Accounting for Certain Hybrid Financial Instruments an Amendment of FASB Statements No. 133 and 140. This statement amends FASB No. 133, Accounting for Derivative Instruments and Hedging Activities and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This statement resolves issues addressed in Statement 133 Implementation Issued No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.” The adoption of SFAS No. 155 did not have an impact on our consolidated financial statements.
 
In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets and Amendment of FASB Statement 140. This statement amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, regarding the accounting for separately recognized servicing assets and servicing liabilities. The adoption of SFAS No. 156 did not have an impact on our consolidated financial statements.
 
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those years. The adoption of SFAS 157 did not have an impact on our consolidated financial statements
 
In September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans and Amendment of FASB Statements No 87, 88, 106 and 132(R). This statement improves financial reporting by requiring an employer to recognize the over funded or under funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not for profit organization. The adoption of SFAS No. 158 did not have an impact on our consolidated financial statements.

26

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 effective, as of the end of the first quarter ending March 31, 2008, 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, 2008.  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, 2008 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
 
ITEM 1A RISK FACTORS

Forward-Looking Statements.

This Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this Quarterly Report regarding our financial position, business strategy, plans and objectives of our management for future operations and capital expenditures, and other matters, other than historical facts, are forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements and the assumptions upon which the forward-looking statements are based are reasonable, we can give no assurance that such expectations will prove to have been correct.

27

Additional statements concerning important factors that could cause actual results to differ materially from our expectations are disclosed in the following "Risk Factors" section and elsewhere in this Quarterly Report. In addition, the words "believe", "may", "will", "when", "estimate", "continue", "anticipate", "intend", "expect" and similar expressions, as they relate to us, our business, or our management, are intended to identify forward-looking statements. All written and oral forward-looking statements attributable to us or persons acting on our behalf after to the date of this Quarterly Report are expressly qualified in their entirety by the following Risk Factors.
 
Available Information.
 
We are an Arizona corporation with our principal executive offices located at 5210 East Williams Circle, Suite 700, Tucson Arizona 85711. Our telephone number is (520) 889-2040. Our fax number is: (520) 889-2733. Our website address is www.internationalsilverinc.com. We file our annual, quarterly, and current reports with the Securities and Exchange Commission (SEC), copies of which are available on our website or from the SEC free of charge at www.sec.gov. The public may also read and copy any materials, which we have filed with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the Public Reference Room may be obtained by calling: 1-800-SEC-0330. Our Code of Business Conduct and Ethics is also available free of charge on our website or by faxing a request to us at: (520) 889-2733.
 
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 our December 31, 2007 year-end and as of September 30, 2008, we have an accumulated deficit of $464,210 and $555,233, respectively. 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 $13,000,000 of financing, we will have to curtail or terminate our planned business operations , 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.

28

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.
 
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.

29

If we fail to make the next installment payment of $2,000,000 due December 5, 2008 for our purchase of the Langtry property, we will lose our right to purchase the Langtry property.
 
To complete the purchase of the Langtry property we are required to pay a $2,000,000 installment payment by December 5, 2008, with the remaining $5,900,000 obligation financed over a 15 year period. If we are unable to purchase the Langtry property our operational plan will be significantly impacted.
 
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On or about September 8, 2008, we issued 335,567 shares of our restricted common stock to a shareholder/officer to extinguish $96,979 we owed the shareholder/officer consisting of the principal portion of a $90,000 March 3, 2008 loan he made to us and $6,979 of company-related expenses paid by the shareholder officer on our behalf.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5 OTHER INFORMATION

Effective October 1, 2008, we moved our offices from 8040 South Kolb Road, Tucson, Arizona 85706 to a more central business location at 5210 East Williams Circle, Suite 700, Tucson, Arizona 85711. We sub-lease our offices from an affiliate, Atlas Precious Metals, Inc. We pay Atlas Precious Metals a monthly payment of $500. We occupy two offices. We have a one-year sub-lease agreement with Atlas Precious Metals, Inc. and our lease may be renewable for an additional year at $600 per month.

ITEM 6 EXHIBITS
 
See Exhibit Index
 
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 12, 2008

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.

30


Signature  
 
Title
 
Date
   
 
 
 
 
/s/ Harold R. Shipes  
 
Chairman of the Board/Director
 
November 12, 2008
Harold R. Shipes  
 
Chief Executive Officer
 
 
   
 
(Principal Executive Officer)
 
 
 
 
 
 
 
/s/John A. McKinney  
 
Chief Financial Officer
 
November 12, 2008
John A. McKinney  
 
Executive Vice President
 
 
 
 
(Principal Financial Officer)
 
 

EXHIBIT INDEX

EXHIBIT NO.
 
DESCRIPTION
 
PAGE
 
 
 
 
 
31.
 
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
 
 

31
 
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