Shoshone Silver/Gold Mining (SHSH) 10-Q 2011 Q3 Quarterly report

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   JUNE 30, 2011

 [  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                                TO                                .

Commission File Number 000-31184

SHOSHONE SILVER MINING COMPANY
(Exact name of registrant as specified in its charter)

Idaho	82-0304993
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

3714 W Industrial Loop., Coeur d’Alene, ID 83815
(Address of principal executive offices) (Zip Code)

(208) 664-0620
(Registrant’s telephone number, including area code)

Check whether the issuer: (1) filed all reports required to be filed by section 13 or 15(d) of the Exchange Act during the past 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  [  ]

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 [  ]	Accelerated filer  [  ]
Non-accelerated filer [  ]  (Do not check if a smaller reporting company)	Smaller reporting company  [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  [  ]   No  [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

Class	Outstanding as of July 26, 2011
Common Stock ($0.10 par value)	43,531,037

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SHOSHONE SILVER MINING COMPANY

FORM 10-Q
For the Quarter Ended June 30, 2011

TABLE OF CONTENTS

PART I - Financial Information
	Item 1	Consolidated Financial Statements (Unaudited)	4
		Consolidated Balance Sheets	5
		Consolidated Statements of Operations and Comprehensive Income (Loss)	6
		Consolidated Statements of Cash Flows	7
		Notes to Consolidated Financial Statements	8
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	21
	Item 4	Controls and Procedures	21
PART II - Other Information			21
	Item 1	Legal Proceedings	21
	Item 1A	Risk Factors	21
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	21
	Item 3	Defaults Upon Senior Securities	21
	Item 4	Submission of Matters to a Vote of Security Holders	22
	Item 5	Other Information	22
	Item 6	Exhibits	23
Signatures			24

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PART I – FINANCIAL INFORMATION

- 4 -

SHOSHONE SILVER MINING COMPANY
(an Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS

		June 30,			September 30,
		2011			2010
		(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	9,791		$	55,853
Deposits and prepaids		25,000			3,616
Supplies inventory		1,840			1,957
Total Current Assets		36,631			61,426
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment		3,280,511			3,459,443
Accumulated depreciation		(1,670,544	)		(1,553,772	)
Total Property Plant and Equipment		1,609,967			1,905,671
MINERAL AND MINING PROPERTIES		2,381,369			2,196,369
OTHER ASSETS
Notes receivable (net of discount)		1,595,378			1,537,944
Investments		107,707			132,430
Total Other Assets		1,703,085			1,670,374
TOTAL ASSETS	$	5,731,052		$	5,833,840
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	233,956		$	242,915
Accrued expenses		-			13,022
Notes payable - current portion		-			4,279
Total Current Liabilities		233,956			260,216
COMMITMENTS AND CONTINGENCIES		-			-
STOCKHOLDERS' EQUITY
Common stock, 200,000,000 shares authorized, $0.10 par value;
43,531,037 and 42,659,037 shares issued and outstanding		4,353,104			4,265,904
Additional paid-in capital		4,176,444			4,148,550
Treasury stock		(201,853	)		(206,253	)
Accumulated deficit in exploration stage		(1,152,689	)		(916,042	)
Accumulated deficit prior to exploration stage		(1,667,482	)		(1,667,482	)
Accumulated other comprehensive loss		(10,428	)		(51,053	)
Total Stockholders' Equity		5,497,096			5,573,624
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	5,731,052		$	5,833,840

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SHOSHONE SILVER MINING COMPANY
(an Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(unaudited)

														Period from
														January 1, 2000
		Three-Month Period Ended						Nine-Month Period Ended						(beginning of
		June 30,			June 30,			June 30,			June 30,			exploration stage)
		2011			2010			2011			2010			to June 30, 2011
REVENUES	$	28,885		$	14,000		$	47,885		$	14,000		$	209,585
COST OF REVENUES		-			-			-			-			228,828
GROSS PROFIT		28,885			14,000			47,885			14,000			(19,243	)
OPERATING EXPENSES
General and administrative		15,441			273,569			141,107			381,035			1,352,225
Professional fees		10,826			18,610			62,717			105,052			1,245,027
Depreciation		43,493			44,376			134,682			133,234			777,525
Mining and exploration expenses		21,046			36,691			113,821			217,532			4,349,553
Net gain on sale of load claim		-			(175,000	)		-			(175,000	)		(368,907	)
Total Operating Expenses		90,806			198,246			452,327			661,853			7,355,423
LOSS FROM OPERATIONS		(61,921	)		(184,246	)		(404,442	)		(647,853	)		(7,374,666	)
OTHER INCOME (EXPENSES)
Bad debt recovery		-			-			-			-			47,008
Cancellation of debt income		-			-			-			-			69,418
Dividend and interest income		19,146			18,233			57,500			54,875			337,289
Gain on sale of fixed assets		-			-			13,751			-			30,951
Gain on sale of Mexican mining concession		-			-			-			-			4,363,353
Gain on settlement of note receivable		-			-			-			-			64,206
Interest expense		(14	)		(488	)		(76	)		(1,460	)		(11,624	)
Lease income		-			-			-			-			444,044
Loss on abandonment of asset		-			-			-			-			(20,000	)
Net gain on settlement of lease dispute		-			-			85,000			-			85,000
Net (loss) gain on sale of investments		(12,743	)		-			11,620			(590	)		1,145,089
Other income/(expense)		-			-			-			142			197,349
Other-than-temporary impairment of investments		-			-			-			-			(149,279	)
Unrealized holding loss on marketable securities		-			-			-			-			(380,827	)
Total Other Income (Expenses)		6,389			17,745			167,795			52,967			6,221,977
INCOME (LOSS) BEFORE INCOME TAXES		(55,532	)		(166,501	)		(236,647	)		(594,886	)		(1,152,689	)
INCOME TAXES		-			-			-			-			124,826
DEFERRED TAX GAIN		-			-			-			-			(124,826	)
NET INCOME (LOSS)		(55,532	)		(166,501	)		(236,647	)		(594,886	)		(1,152,689	)
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized holding gain (loss) on investments		1,153			(6,188	)		40,625			(64,716	)		(10,428	)
NET COMPREHENSIVE INCOME (LOSS)	$	(54,379	)	$	(172,689	)	$	(196,022	)	$	(659,602	)	$	(1,163,117	)
NET INCOME (LOSS) PER COMMON SHARE, BASIC	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.02	)
NET INCOME (LOSS) PER COMMON SHARE, DILUTED	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.02	)
WEIGHTED AVERAGE NUMBER OF       COMMON STOCK SHARES OUTSTANDING, BASIC		43,486,593			39,480,329			43,197,486			37,738,427
WEIGHTED AVERAGE NUMBER OF       COMMON STOCK SHARES OUTSTANDING, DILUTED		43,486,593			39,480,329			43,197,486			37,738,427

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								Period from
								January 1, 2000
								(beginning of
		Nine-Month Period Ended June 30,						exploration stage)
		2011			2010			to June 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(236,647	)	$	(594,885	)	$	(1,152,689	)
Adjustments to reconcile net income (loss) to net cash used by operations:
Adjustment to balance of note receivable		-			-			(766	)
Amortization of note receivable discount		(57,434	)		(54,699	)		(230,015	)
Available-for-sale securities issued in exchange for services		-			-			135,140
Available-for-sale silver investment issued in exchange for services		-			-			3,560
Bad debt expense		-			-			9,624
Cancellation of debt income		-			-			(69,418	)
Common stock issued for mining and exploration expenses		13,600			9,000			308,100
Common stock issued for services		54,200			200,900			458,686
Common stock issued in settlement of agreement with former CEO		-			-			20,000
Depreciation and amortization expense		143,298			150,264			808,594
Discount given on early payment on note receivable		-			-			50,000
Gain on sale of fixed assets		(13,751	)		-			(30,951	)
Gain on settlement of note receivable		-			-			(64,206	)
Impairment of mining expenses		-			-			413,000
Loss on abandonment of investment		-			-			20,000
Loss recognized on other-than-termporary impairment of investments		-			-			149,279
Net (gain) loss on sale of investments		(11,620	)		589			(1,145,089	)
Net gain on sale of lode claim		-			(175,000	)		(368,907	)
Net gain on sale of Mexican mining concession		-			-			(4,363,353	)
Treasury stock issued for services		-			26,100			53,420
Unrealized holding loss on marketable securities		-			-			380,827
Changes in assets and liabilities:
Change in accounts payable		(18,959	)		(82,670	)		142,710
Change in accrued interest receivable		-			-			(20,255	)
Change in accrued liabilities		(13,022	)		(8,966	)		(3,984	)
Change in deposits and prepaids		(10,000	)		(5,761	)		11,248
Change in other current assets		-			-			(14,443	)
Change in stock to issue		-			-			230,680
Change in supplies inventory		117			111			10,892
Net cash used in operating activities		(150,218	)		(535,017	)		(4,258,316	)
CASH FLOWS FROM INVESTING ACTIVITIES		��
Advances on notes receivable		-			-			(111,022	)
Advances to related party		-			-			(395,000	)
Issuance of note receviable from related party		-			-			(243,000	)
Payments received on notes receivable		-			-			582,846
Payments received on notes receivable from related party		-			-			332,498
Proceeds from sale of fixed assets		800			-			18,000
Proceeds from sale of investments		76,968			44,585			4,704,453
Proceeds from sale of lode claim		-			175,000			188,907
Proceeds from sale of Mexican mining concession		-			-			2,497,990
Proceeds from short-term loans		-			-			160,760
Purchase of fixed assets		(1,027	)		(37,709	)		(1,081,509	)
Purchase of mineral and mining properties		-			-			(76,472	)
Purchases of investments		-			-			(4,059,939	)
Net cash provided by investing activities		76,741			181,876			2,518,512
CASH FLOWS FROM FINANCING ACTIVITIES
Common shares repurchased for treasury		-			-			(41,220	)
Net proceeds from sale of common stock		26,000			704,155			1,973,725
Payment made on long-term note payable		(4,279	)		(22,272	)		(268,818	)
Payment of common stock subscriptions		-			-			20,225
Proceeds from sale of treasury stock		5,694			-			5,694
Net cash (used in) provided by financing activities		27,415			681,883			1,689,606
Net increase (decrease) in cash		(46,062	)		328,742			(50,198	)
Cash, beginning of period		55,853			23,566			59,989
Cash, end of period	$	9,791		$	352,308		$	9,791
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest expense paid	$	-		$	1,461		$	10,080
Income taxes paid	$	-		$	-		$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Accounts payable issued in exchange for partial payment on office building and prepaid expense	$	10,000		$	-		$	60,000
Common stock issued for purchase of equipment, mining properties and prepaid expense	$	20,000		$	-		$	160,340
Common stock issued for services, accounts payable, finder's fee and mining & exploration expenses	$	-		$	-		$	539,333
Deposit utilized to purchase fixed asset	$	-		$	-		$	5,000
Equipment received in exchange for settlement of note recievable	$	-		$	-		$	4,139
Marketable securities received in lieu of note receivable	$	-		$	-		$	104,273
Mill building acquired in exchange for common stock and other consideration	$	-		$	-		$	224,475
Mineral properties acquired in exchange for common stock, office building and other consideration	$	175,000		$	-		$	1,852,126
Mineral property reacquired upon default	$	-		$	-		$	131,553
Mining equipment acquired in exchange for common stock and other consideration	$	-		$	-		$	260,000
Note issued in exchanged for vehicle, equipment and prepaid asset	$	-		$	15,933		$	1,865,363
Note receivable (net of discount) in connection with sale of Mexcian Mining Concession	$	-		$	-		$	120,000
Note receivable in connection with sale of lode claim	$	-		$	-		$	108,156
Office equipment acquired in exchange for common stock and other consideration	$	-		$	-		$	15,525
Stock received in exchange for lode claim	$	-		$	-		$	60,000
Treasury stock acquired through sale of investment	$	-		$	-		$	296,296
Treasury stock issued in exchange for fixed asset	$	-		$	-		$	7,500

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Shoshone Silver Mining Company (an Exploration Stage Company)
Condensed Notes to the Interim Financial Statements
June 30, 2011

NOTE 1: DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

Shoshone Silver Mining Company (an Exploration Stage Company) (“the Company” or “Shoshone”) was incorporated under the laws of the State of Idaho on August 4, 1969, under the name of Sunrise Mining Company and was engaged in the business of mining.  On January 22, 1970, the Company's name was changed to Shoshone Silver Mining Company.   During 2003, the Company’s focus broadened to include resource management and sales of mineral and timber interests. 

Beginning in fiscal 2000, the Company entered into an exploration stage.  The Company has acquired several mining properties since entering the exploration stage. 

The Company’s year-end is September 30^th.

Basis of Presentation

The foregoing unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim consolidated financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X as promulgated by the Securities and Exchange Commission.  Accordingly, these financial statements do not include all of the disclosures required by accounting principles generally accepted in the United States of America for complete financial statements.  These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended September 30, 2010, included in the Company’s Annual Report on Form 10-K which was filed with the SEC on December 27, 2010. 

In the opinion of management, the unaudited interim consolidated financial statements furnished herein include all adjustments (consisting of only normal recurring adjustments) necessary for a fair statement of the results for the interim periods presented.  Operating results for the three- and nine-month periods ended June 30, 2011, are not necessarily indicative of the results that may be expected for the year ending September 30, 2011.

NOTE 2:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies is presented to assist in understanding the financial statements.  The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity.  These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements. 

Fair Value Measurements

Topic 820 in the Accounting Standards Codification (ASC 820) defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. ASC 820 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. In this standard, the FASB clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, ASC 820 establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy is as follows:

- 8 -

• Level 1 inputs — Unadjusted quoted process in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date.

• Level 2 inputs — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.

• Level 3 inputs — Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Investments in available-for-sale securities and investments in silver coins and bars are reported at fair value utilizing Level 1 inputs. For these investments, the Company obtains fair value from active markets.

The Company’s Note Receivable (net of discount) is reported at fair value utilizing Level 2 inputs.  The discounting of this note receivable utilized interest rates.  See Note 4.

The following table presents information about the Company’s assets measured at fair value on a recurring basis as of June 30, 2011, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.

				Fair Value Measurements
				At June 30, 2011, Using
				Quoted Prices
				In Active		Other		Significant
				Markets for		Observable		Unobservable
		Fair Value		Identical Assets		Inputs		Inputs
Description		June 30, 2011		(Level 1)		(Level 2)		(Level 3)
Investments	$	107,707	$	107,707	$	-	$	-
Note Receivable (net of discount)		1,595,378		-		1,595,378		-
Total Assets Measured at Fair Value	$	1,703,085	$	107,707		$    1,595,378	$	-

Going Concern

As shown in the accompanying financial statements, the Company has limited cash and limited revenues and incurred an accumulated deficit of $2,820,171 from inception through June 30, 2011.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  Management intends to seek additional capital from new equity securities offerings that will provide funds needed to increase liquidity and fully implement its business plan.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

- 9 -

Historically, the Company has generally funded its operations with proceeds from the sale of marketable securities, royalty and option agreement payments, and from the sale of the Company’s common stock.  Should the Company be unable to raise capital through any of these avenues, its business, financial position, results of operations and cash flow will likely be materially adversely impacted.  As such, substantial doubt as to the Company’s ability to continue as a going concern remains as of the date of these financial statements.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.  An estimated $2,000,000 is believed necessary to continue operations and increase development through the next twelve months. Currently, the Company anticipates raising the majority of the $2,000,000 through the issuance of common stock to private investors.  The timing and amount of capital requirements will depend on a number of factors, including demand for products and services, capital expenditures and revenues generated. 

Notes Receivable

The Company’s policy for notes receivable is to continue accruing interest income until it becomes likely that the note is uncollectible.  At that time, an allowance for bad debt would be established and interest would stop accruing. 

Principles of Consolidation

The Company’s consolidated financial statements include the accounts of the Company and its one wholly owned subsidiary, Lakeview Consolidated Silver Mines, Inc.  The inter-company accounts and transactions are eliminated upon consolidation. 

Reclassifications

Certain previously reported amounts have been reclassified to conform to the current presentation.  In particular, expenses totaling approximately $90,000 that were previously classified as general and administrative expenses on the Consolidated Statement of Operations for the second quarter of fiscal 2010 have been reclassified as mining and exploration expenses and professional fees.  This reclassification was done to align the Company’s external reporting with its internal reporting.

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period.  Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company’s financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of Shoshone’s financial position and results of operations.

NOTE 3: PROPERTY, PLANT & EQUIPMENT

Property and equipment are stated at cost.  Depreciation begins on the date an asset is placed in service using the straight-line method over the asset’s estimated useful life.

The useful lives of property, plant and equipment for purposes of computing depreciation are three to thirty-one and one-half years. The following is a summary of property, equipment, and accumulated depreciation at June 30, 2011 and September 30, 2010:

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		June 30,			September 30,
		2011			2010
Administrative:
Building	$	-		$	167,129
Equipment		651,327			652,156
Furniture		-			12,000
		651,327			831,285
Lakeview:
Building		56,255			56,255
Equipment		393,687			393,687
Mill		1,539,282			1,539,282
		1,989,224			1,989,224
Warren:
Building		379,960			378,934
Equipment		260,000			260,000
		639,960			638,934
Total		3,280,511			3,459,443
Less:  Accumulated Depreciation		(1,670,544	)		(1,553,772	)
Property, Plant & Equipment, net	$	1,609,967		$	1,905,671

Depreciation expense was $43,493 for the three-month period ended June 30, 2011 and $44,376 for the comparable period last year. 

Depreciation expense was $134,682 for the nine-month period ended June 30, 2011 and $133,234 for the comparable period last year. 

During the second quarter of fiscal 2011, the Company exchanged its 50% unencumbered interest in a commercial building in Coeur d’Alene, Idaho for certain patented lode mining claims located in the Silver Valley, Idaho.  This non-monetary exchange was valued at $175,000.  See Note 9.

During the second quarter of fiscal 2011, the Company sold for $800 a vehicle with a net book value of $524 for a gain of $276.

The Company evaluates the recoverability of property and equipment when events and circumstances indicate that such assets might be impaired.  The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by these assets to their respective carrying amounts. 

Maintenance and repairs are expensed as incurred.  Replacements and betterments are capitalized.  The cost and related reserves of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in results of operations.

NOTE 4: NOTES RECEIVABLE

Mexican Concessions

On August 11, 2008, the Company sold 100% of the common stock of its wholly owned subsidiary in Mexico, Shoshone Mexico, S.A. de C.V, to Xtierra Resources, Ltd (“Xtierra”).  The Company’s interest in the Bilbao concessions in Zacatecas, Mexico was included in this sale.   In exchange for its interest in the Bilbao concessions the Company received net proceeds of $2,497,990 and a non-interest bearing note receivable for $2,500,000. 

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The note does not bear interest and a discounted payment of $450,000 was made in July 2009.   The remaining balance of $2,000,000 is to be paid in four consecutive equal annual installments to begin at the time of the commencement of construction of any mine developed on the Bilbao concessions but in any event will be due and payable no later than August 11, 2019. 

Since the note does not bear interest, the Company imputed interest at a rate of 5%.  Accordingly the Company recorded a note discount of $634,637.  During the three and nine-month periods ended June 30, 2011, $19,145 and $57,434, respectively, of interest income was realized through the amortization of this note discount. 

The balance on this note receivable (net of discount) was $1,595,378 at June 30, 2011.

NOTE 5: INVESTMENTS

The Company has invested in various privately and publicly held companies and silver coins and bars.  At this time, the Company holds securities classified as available for sale.  Amounts are reported at fair value as determined by quoted market prices, with unrealized gains and losses excluded from earnings and reported separately as a component of stockholders’ equity. The cost of securities sold is based on the specific identification method.

Unrealized gains and losses are recorded on the statements of operations as other comprehensive income (loss) and on the balance sheet as other accumulated comprehensive income.

The following summarizes the investments at June 30, 2011:

					Market
Investment	Quantity		Cost		Value
Available for Sale Securities:
Gold Crest Mines	550,100	$	713	$	7,151
Lucky Friday Extension	5,000		250		350
Merger Mines	729,299		103,885		87,516
New Jersey Mining	52,857		12,686		10,572
Subtotal	1,337,256		117,534		105,588
Silver Coins & Bars	61		735		2,118
Total at June 30, 2011	1,337,317	$	118,269	$	107,707

The Company had an unrealized holding gain during the three-month period ended June 30, 2011 of $1,153 compared with a loss of $6,188 in the same period last year.

The Company had an unrealized holding gain during the nine-month period ended June 30, 2011 of $40,625 compared with a loss of $64,716 in the same period last year.

Unrealized holding gains and losses are recorded on the statements of operations as other comprehensive income (loss) and included on the balance sheet in other accumulated comprehensive income.

- 12 -

During the three-month period ended June 30, 2011, the Company recognized $12,743 of net loss on the sale of available-for-sale securities and silver coins and bars previously included in accumulated other comprehensive income as compared with zero net gain or loss during the same period last year.

During the nine-month period ended June 30, 2011, the Company recognized $11,620 of net gain on the sale of available-for-sale securities and silver coins and bars previously included in accumulated other comprehensive income as compared with a net loss of $590 during the same period last year.

The following summarizes the investments at September 30, 2010:

					Market
Investment	Quantity		Cost		Value
Available for Sale Securities:
Bayswater Uranium Corporation	20,000	$	12,200	$	12,200
Chester Mining Company	2,500		1,125		1,850
Gold Crest Mines	567,600		975		9,649
Lucky Friday Extension	5,000		250		250
Merger Mines	729,299		103,885		36,465
Metropolitan Mines Limited	6,000		360		720
New Jersey Mining	142,875		34,290		32,861
Vindicator Mines	88,000		17,600		10,560
Subtotal	1,561,274		170,685		104,555
Silver Coins & Bars	1,267		12,936		27,875
Total at September 30, 2010	1,562,541	$	183,621	$	132,430

The Company had an unrealized holding loss during the fiscal year ended September 30, 2010 of $87,640.  This is recorded on the statements of operations as other comprehensive income (loss) and included on the balance sheet in other accumulated comprehensive income.

The Company recognized $1,036 of net gain previously included in accumulated other comprehensive income on the sale of investments during the fiscal year ended September 30, 2010.

NOTE 6:  COMMON STOCK

The Company is authorized to issue 200,000,000 shares of $0.10 par value common stock.  All shares have equal voting rights, are non-assessable and have one vote per share.  Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company.

During the fiscal 2011 first quarter, the Company issued 90,000 shares of common in exchange for services valued at $18,000. 

During the fiscal 2011 first quarter, the Company issued 176,000 shares of common stock to five of its directors in exchange for services valued at $35,200.

- 13 -

During the fiscal 2011 first quarter, the Company issued 250,000 shares of common stock to two investors for a total of $25,000 in cash.  For every share purchased, each investor received one warrant to purchase one share of common stock.  The warrants are exercisable at $0.20 per share and expire on March 20, 2012.

During the fiscal 2011 second quarter, the Company issued a total of 146,000 shares of common stock to various vendors in exchange for exploration expenses valued at $14,600.

During the fiscal 2011 second quarter, the Company issued 100,000 shares of common stock in exchange for mineral properties valued at $10,000.

During the fiscal 2011 second quarter, the Company issued 10,000 shares of common stock to one investor for $1,000 in cash.  For every share purchased, the investor received one warrant to purchase one share of common stock.  The warrants are exercisable at $0.20 per share and expire on March 20, 2012.

During the fiscal 2011 second quarter, the Company issued 100,000 shares of common stock in exchange for exploration expenses valued at $10,000.

NOTE 7:  TREASURY STOCK

The Company held 778,986 and 818,986 shares of treasury stock at June 30, 2011 and September 30, 2010, respectively.

During the three-month period ended December 31, 2010, the Company sold 40,000 treasury shares for cash of $5,694.  The treasury shares had a cost of $0.11 per share.

NOTE 8: NET GAIN ON SETTLEMENT OF LEASE DISPUTE

During the first quarter of fiscal 2011, the Company was awarded a total of $100,000 as settlement of a claim the Company had filed in the Chapter 11 bankruptcy proceeds of an unrelated company.  The claim asserted that the Company, as lessor, was owed compensation for the failure of the lessee to maintain proper title to the Bullion Claims with the Bureau of Land Management.  During the first quarter of fiscal 2011, the Company assigned the rights to this settlement to an investment firm for net proceeds of $85,000.  The net proceeds of $85,000 are presented on the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) under the caption “Net gain on settlement of lease dispute”.

NOTE 9: NON-MONETARY EXCHANGE

During the second quarter of fiscal 2011, the Company exchanged its 50% unencumbered interest in a commercial building in Coeur d’Alene, Idaho for certain patented lode mining claims located in the Silver Valley, Idaho.  This non-monetary exchange was valued at $175,000 and the Company recorded a gain of $13,476 related to this exchange.  See Note 3.

NOTE 10: COMMITMENTS AND CONTINGENCIES

Environmental Issues

The Company is engaged in mineral mining and may become subject to certain liabilities as they relate to environmental cleanup of mining sites or other environmental restoration. Although the minerals exploration and mining industries are inherently speculative and subject to complex environmental regulations, the Company is unaware of any pending litigation or of any specific past or prospective matters which could impair the value of its mining claims.

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NOTE 11: SUBSEQUENT EVENTS

Subsequent events have been evaluated through the date that the consolidated financial statements were available to be issued and management has determined that there have not been any events that have occurred that would require adjustments to the unaudited financial statements.

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Item 2 - Management’s Discussion and Analysis or Plan of Operation

This report contains forward-looking statements

From time to time, Shoshone and its senior managers have made and will make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements are contained in this report and may be contained in other documents that Shoshone files with the Securities and Exchange Commission.  Such statements may also be made by Shoshone and its senior managers in oral or written presentations to analysts, investors, the media and others.  Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts.  Also, forward-looking statements can generally be identified by words such as “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “seek,” “expect,” “intend,” “plan” and similar expressions.

Forward-looking statements provide our expectations or predictions of future conditions, events or results.  They are not guarantees of future performance.  By their nature, forward-looking statements are subject to risks and uncertainties.  As such, our actual future results, performance or achievements may differ materially from the results expressed in, or implied by, our forward-looking statements.

Our forward-looking statements speak only as of the date they are made.  We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were made. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Consolidated Financial Statements and Notes presented elsewhere in this report.

Plan of Operation

Lakeview Property

During 2010, we entered into an agreement to sell silver concentrate produced at our Lakeview property to a smelter for refining.  During the prior fiscal year, our test runs generated revenues of $20,111 from the sale of concentrate to the smelter and generated $47,885 during the first nine months of fiscal 2011.  Our long-term goal is to mine and mill silver at our Lakeview property. 

Rescue Mine Property

Our first priority has been the upgrading and renovating the mill at the Rescue Mine Property.  Once this work is completed, test runs on stockpiled ore will be conducted. 

Mine development will require some ground support, general clean up, the installation of a refuge station and the addition of air and water lines.  A new decline portal has been planned to access the Rescue vein 1,000 feet east of the mill.  Road work, site preparation and collaring off for the new decline portal will be accomplished next summer.  This new decline portal will provide access to un-mined portions of the Rescue vein and, when completed, will serve as the secondary escape-way from the mine as well as the exhaust ventilation.  At this time, we are setting up to complete a five-hole drilling program to establish a more detailed plan of operation.

Electrical work, which included installation of electrical panels, lights and power outlets, was completed in the large staging building, which was erected next to the Rescue Mill portal last summer to service operations in the Rescue Mine.   The new building is fully MSHA compliant.  Additionally, a diesel generator was installed to provide power to the Rescue Mine as part of our ongoing preparations to bring the Rescue Mine and mill back into full operation.

Please refer to our discussion regarding our ability to continue as a going concern below for further details.

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Going Concern

As shown in the accompanying financial statements, we have had limited revenues and incurred an accumulated deficit of $2,820,171 from inception through June 30, 2011.  These factors raise substantial doubt about our ability to continue as a going concern.  We intend to seek additional capital from new equity securities offerings that will provide funds needed to increase liquidity and fully implement our business plan.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event we cannot continue in existence.

Historically, we have generally funded our operations with proceeds from the sale of “available-for-sale” investments, royalty and option agreement payments, and from the sale of our common stock.  Should we be unsuccessful in any of the initiatives or matters discussed above and unable to raise capital through future private placements, our business, and, as a result, our financial position, results of operations and cash flow will likely be materially adversely impacted.  As such, substantial doubt as to our ability to continue as a going concern remains as of the date of these financial statements.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event we cannot continue in existence.  An estimated $2,000,000 is believed necessary to continue operations and increase development through the next twelve months. Currently, we anticipate raising the majority of the $2,000,000 through the issuance of common stock to private investors.  The timing and amount of capital requirements will depend on a number of factors, including demand for products and services. 

Comparison of the Three- and Nine-Month Periods Ended June 30, 2011 and 2010:

Results of Operations

The following table set forth certain information regarding the components of our Consolidated Statements of Operations for the three- and nine-month periods ended June 30, 2011, compared with the same periods in the prior year.  These tables are provided to assist in assessing differences in our overall performance:

		Three-Month Period Ended
		June 30,			June 30,
		2011			2010			$ Change		% Change
Revenues	$	28,885		$	14,000		$	14,885		106.32%
Cost of Revenues		-			-			-		0.00%
Gross Profit		28,885			14,000			14,885		106.32%
General and administrative		15,441			273,569			(258,128	)	-94.36%
��     Professional fees		10,826			18,610			(7,784	)	-41.83%
Depreciation		43,493			44,376			(883	)	-1.99%
Mining and exploration expenses		21,046			36,691			(15,645	)	-42.64%
Net gain on sale of load claim		-			(175,000	)		175,000		-100.00%
Total Operating Expenses		90,806			198,246			(107,440	)	-54.20%
Loss from Operations		(61,921	)		(184,246	)		122,325		-66.39%
Other Income (Expense)
Dividend and interest income		19,146			18,233			913		5.01%
Interest expense		(14	)		(488	)		474		-97.13%
Net gain (loss) on sale of securities		(12,743	)		-			(12,743	)	0.00%
Total Other Income (Expense)		6,389			17,745			(11,356	)	-64.00%
Net (Loss) Income	$	(55,532	)	$	(166,501	)	$	110,969		-66.65%

- 17 -

		Nine-Month Period Ended
		June 30,			June 30,
		2011			2010			$ Change		% Change
Revenues	$	47,885		$	14,000		$	33,885		242.04%
Cost of Revenues		-			-			-		0.00%
Gross Profit		47,885			14,000			33,885		0.00%
General and administrative		141,107			381,035			(239,928	)	-62.97%
Professional fees		62,717			105,052			(42,335	)	-40.30%
Depreciation		134,682			133,234			1,448		1.09%
Mining and exploration expenses		113,821			217,532			(103,711	)	-47.68%
Net gain on sale of load claim		-			(175,000	)		175,000		-100.00%
Total Operating Expenses		452,327			661,853			(209,526	)	-31.66%
Loss from Operations		(404,442	)		(647,853	)		243,411		-37.57%
Other Income (Expense)
Dividend and interest income		57,500			54,875			2,625		4.78%
Gain on sale of fixed assets		13,751			-			13,751		100.00%
Interest expense		(76	)		1,460			(1,536	)	-105.21%
Net gain on settlement of lease dispute		85,000			-			85,000		100.00%
Net gain (loss) on sale of securities		11,620			(590	)		12,210		-2069.49%
Other income (expense)		-			142			(142	)	-100.00%
Total Other Income (Expense)		167,795			55,887			111,908		200.24%
Net (Loss) Income	$	(236,647	)	$	(591,966	)	$	355,319		-60.02%

Overview of Operating Results

The decrease in net loss during the three- and nine-month periods ended June 30, 2011, were primarily attributable to decreases in professional fees and exploration expenses as we continued to align our expenditures with our capital resources.  The results of the nine-month period ended June 30, 2011, were also positively impacted by the receipt of $85,000 from the settlement of a lease dispute. 

Operating Expenses

The decrease in our operating expenses primarily reflects our continuing efforts to control costs and improve efficiencies.  For example, we had five employees by the end of the first quarter of fiscal 2011 compared with eight at the end of the same quarter last year.  We had no employees on payroll during either the second or third quarters of 2011 compared with five and four during the second and third quarters of fiscal 2010, respectively.

Also contributing to the improvement during the three- and nine-month periods ended June 30, 2011, was the issuance of 1,250,000 common shares in the third quarter of fiscal 2010 to four directors in exchange for services valued at $200,000.  There was no comparable issuance in the fiscal 2011 year-to-date period.

- 18 -

Other Income (Expenses)

The decrease in other income (expense) during the fiscal 2011 third quarter was primarily due to the realization of a net loss of $12,743 on the sale of investments.  There was no comparable net loss or gain in the fiscal 2010 third quarter.

The increase in other income (expense) during the nine-month period ended June 30, 2011, was primarily due to our receipt of $85,000 in connection with the settlement of a lease. During the first quarter of fiscal 2011, we were awarded a total of $100,000 as settlement of a claim we had filed in the Chapter 11 bankruptcy proceeds of an unrelated company.  During the first quarter of fiscal 2011, we assigned the rights to this settlement to an investment firm for net proceeds of $85,000. 

Also contributing to this increase during the nine-month period ended June 30, 2011, was the net gain on the sale of fixed assets of $13,751.  During the second quarter of fiscal 2011, we exchanged our 50% unencumbered interest in a commercial building in Coeur d’Alene, Idaho for certain patented lode mining claims located in the Silver Valley, Idaho.  This non-monetary exchange was valued at $175,000.

Overview of Financial Position

At June 30, 2011, we had cash of $9,791 and total liabilities of $233,956.  During the first nine months of fiscal 2011, we raised $26,000 in net proceeds from the issuance of 260,000 shares of our common stock.  Also, we received $85,000 in lease income as a settlement from a mining company that had filed for relief under Chapter 11 of the United States Bankruptcy Code.  These proceeds were used primarily to continue limited activities at our Lakeview property, to continue refining our milling process at that same location and to continue refurbishing our newly acquired mill building at our Rescue mine. 

Property, Plant and Equipment

At June 30, 2011, property, plant and equipment before accumulated depreciation totaled $3,280,511, a decrease of $178,932, from $3,459,443 at September 30, 2010.  This decrease was primarily related to the exchange of our 50% unencumbered interest in a commercial building in Coeur d’Alene, Idaho for certain patented lode mining claims.  This non-monetary exchange was valued at $175,000.

See “Note 3. Property, Plant and Equipment” to our consolidated financial statements for further details.

Notes Receivable

On June 30, 2011, we had notes receivable, net of discount, of $1,595,378 compared with $1,537,944 at September 30, 2010.  The increase related entirely to the amortization of the discount into interest income.

See “Note 4. Notes Receivable” to our consolidated financial statements for further details.

Investments

Our investment portfolio at June 30, 2011, was $107,707, a decrease of $24,723 from the September 30, 2010, balance of $132,430.  This decrease was primarily due to the sale of 224,000 shares of common stock and 1,195 ounces of silver during the first nine months of fiscal 2011. 

See “Note 5:  Investments” to our consolidated financial statements for further details.

- 19 -

Stockholders’ Equity

Our total stockholders’ equity was $5,497,096 at June 30, 2011, a decrease of $76,528 from $5,573,624 at September 30, 2010.  The decrease in total stockholders’ equity was primarily due to a net loss from operations of $236,647 realized during the first nine months of fiscal 2011.  This was partially offset by an unrealized holding gain of $40,625 on our investments and, to a lesser extent, the issuance of 260,000 common shares for $26,000 in cash. 

See “Note 5: Investments” to our consolidated financial statements for further details. 

Liquidity and Capital Resources

Operating Activities

During the nine-month period ended June 30, 2011, our operating activities used $150,218 and used $535,017 during the same period last year.  This improvement was primarily the result of the realization of a net loss of $236,647 during the current nine-month period compared with a net loss of $594,885 last year.

Investing Activities

During the nine-month period ended June 30, 2011, our investing activities provided $76,741 and provided $181,876 during the same period last year.  This increase was primarily due to proceeds from the sale of lode claim of $175,000 in the fiscal 2010 first nine-month period compared with none during the same period in fiscal 2011.  This was negative impact was partially offset by our spending only $1,027 on fixed assets during the current nine-month period compared with $37,709 last year.

Financing Activities

During the nine-month period ended June 30, 2011, our financing activities provided $27,415 and provided 681,883 during the same period last year.  This decrease was primarily net proceeds from the sale of stock of $26,000 received during the current six-month period compared with $704,155 last year.

Off-Balance Sheet Arrangements

The Company is not currently a party to any off-balance sheet arrangements as they are defined in the regulations promulgated by the Securities and Exchange Commission.

- 20 -

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4 – Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this quarterly report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the Principal Executive Officer and the Principal Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”) as of June 30, 2011.  Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

Based on that evaluation, the Company’s management concluded, as of the end of the period covered by this report, that the Company’s disclosure controls and procedures were effective in recording, processing, summarizing, and reporting information required to be disclosed within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Control Over Financial Reporting

As of the end of the period covered by this report, there have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended June 30, 2011, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1 - Legal Proceedings

We are, from time to time, involved in various legal proceedings incidental to the conduct of business. In the opinion of management, our gross liability, if any, and without any consideration given to the availability of insurance or other indemnification, under any pending litigation or administrative proceedings, including that discussed below, would not materially affect our consolidated financial position, results of operations or cash flows.

Item 1A – Risk Factors

We are a smaller reporting company as defined by the Exchange Act and are not required to provide the information required under this item.

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3 - Defaults Upon Senior Securities

None.

- 21 -

Item 4 - Submission of Matters to a Vote of Security Holders

None.

Item 5 - Other Information

None.

- 22 -

Item 6 - Exhibits

(a)	Exhibit No.	Description of Document
	31.1	Certification of Principal Executive Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of Principal Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	Certification of Principal Executive Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	Certification of Principal Financial Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

- 23 -

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.

	SHOSHONE SILVER MINING COMPANY
		(Registrant)
August 11, 2011	By:	/s/ Lex Smith
Date		Lex Smith
		President and Principal Executive Officer
August 11, 2011	By:	/s/ Melanie Farrand
Date		Melanie Farrand
		Treasurer and Principal Financial Officer