Convertible Note Payable (Tables)

3 Months Ended

Mar. 31, 2013

The following table summarizes the net carrying value, after the discount on the notes resulting from the issuance of warrants:

	March 31, 2013			December 31, 2012
Convertible Notes Payable – ISLV Partners, LLC:
Issued February 6, 2012	$	600,000		$	600,000
Issued May 17, 2012		130,000			130,000
Issued May 25, 2012		1,870,000			1,870,000
Issued February 21, 2013		1,000,000			0
Total	$	3,600,000		$	2,600,000
Discount on Notes Payable		(504,762	)		(460,734)
Net Carrying Value	$	3,095,238		$	2,139,266

Warrants Issued February 6, 2012 [Member]

Warrants

Warrants Issued February 6, 2012

On February 6, 2012, the Company, in conjunction with the issuance of the initial convertible note in the amount of $600,000, issued a total of 3,000,000 “detachable” warrants to ISLV Partners, LLC for an option to purchase additional shares of common stock of the Company, at an exercise price of $0.40 per share. The number of such warrants issued equals the number of shares into which the applicable Lender’s note is convertible. The beneficial conversion option was derived as follows:

	Allocation		Relative
	of Proceeds		Value

Face Value of Convertible Note	$	600,000
No. of Common Shares		3,000,000
Current Market Value
Market Share price at Feb. 6, 2012	$	0.200
Market Value of Stock, if converted	$	600,000	$	533,333

Fair Value - Warrants - At Time of Issuance - Feb 6, 2012
No. of Warrants Issued		3,000,000
Exercise Price	$	0.400
Fair Value - Based on Black-Scholes Method
Black-Scholes Value	$	0.025
Fair Value of Warrants	$	75,000	$	66,667

Total/Relative Value	$	675,000	$	600,000

Beneficial Conversion Option Calculation
Relative Note Value			$	533,333

Face value of Note			$	600,000

Market price of stock			$	0.200000
Intrinsic Conversion price/share			$	0.177778
Difference in price/share			$	0.022222
Number of shares convertible				3,000,000
Beneficial Conversion Option for fully converted note			$	66,667

Warrants Issued May 25, 2012 [Member]

Warrants

Warrants Issued May 25, 2012

On May 25, 2012, the Company, in conjunction with the issuance of the two additional convertible notes in the amount of $130,000 and $1,870,000, issued a total of 10,000,000 “detachable” warrants to ISLV Partners, LLC for an option to purchase additional shares of common stock of the Company, at an exercise price of $0.40 per share. The number of such warrants issued equals the number of shares into which the applicable Lender’s note is convertible. The beneficial conversion option was derived as follows:

	Allocation		Relative
	of Proceeds		Value

Face Value of Convertible Notes	$	2,000,000
No. of Common Shares		10,000,000
Current Market Value
Market Share price at May 25, 2012	$	0.200
Market Value of Stock, if converted	$	2,000,000	$	1,777,778

Fair Value - Warrants - At Time of Issuance – May 25, 2012
No. of Warrants Issued		10,000,000
Exercise Price	$	0.400
Fair Value - Based on Black-Scholes Method
Black-Scholes Value	$	0.0250
Fair Value of Warrants	$	250,000	$	222,222

Total/Relative Value	$	2,250,000	$	2,000,000

Beneficial Conversion Option Calculation
Relative Note Value			$	1,777,778

Face value of Note			$	2,000,000

Market value of stock			$	0.200000
Intrinsic conversion price/share			$	0.177778
Difference in price/share			$	0.022222
Number of shares convertible				10,000,000
Beneficial Conversion Option for fully converted note			$	222,222

Warrants Issued on February 21, 2013 [Member]

Warrants

Warrants Issued on February 21, 2013

On February 21, 2013, the Company, in conjunction with the issuance of the an additional convertible note in the amount of $1,000,000, issued a total of 5,000,000 “detachable” warrants to ISLV Partners, LLC for an option to purchase additional shares of common stock of the Company, at an exercise price of $0.40 per share. The number of such warrants issued equals the number of shares into which the applicable Lender’s note is convertible. The beneficial conversion option was derived as follows:

	Allocation		Relative
	of Proceeds		Value

Face Value of Convertible Notes	$	1,000,000
No. of Common Shares		5,000,000
Current Market Value
Market Share price at February 21, 2013	$	0.35
Market Value of Stock, if converted	$	1,750,000	$	916,230


Fair Value - Warrants - At Time of Issuance – February 21, 2013
No. of Warrants Issued		5,000,000
Exercise Price	$	0.400
Fair Value - Based on Black-Scholes Method
Black-Scholes Value	$	0.032
Fair Value of Warrants	$	160,000	$	83,770

Total/Relative Value	$	1,910,000	$	1,000,000

Beneficial Conversion Option Calculation
Relative Note Value			$	916,230

Face value of Note			$	1,000,000

Market value of stock			$	0.200
Intrinsic conversion price/share			$	0.183
Beneficial Conversion Option for fully converted note			$	833,770

- Definition

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

+ References+ Details

INTERNATIONAL SILVER INC 10-Q