Piedmont Mining 424B3 Prospectus supplement

Prospectus Supplement No. 1 to
Prospectus dated September 20, 2006
Registration No. 333-135376
Filed pursuant to Rule 424(b)(3)

PIEDMONT MINING COMPANY, INC.

Supplement No. 1
To
Prospectus Dated September 20, 2006

This Prospectus Supplement supplements our Prospectus dated September 20, 2006, relates to the sale of up to 8,137,560 shares of our common stock, no par value, (“Common Stock”) by the Selling Stockholders listed under “Selling Stockholders” on page 14 of the Prospectus. This Prospectus also covers the sale of 4,693,667 shares of our Common Stock by the Selling Stockholders upon the exercise of outstanding warrants. This Supplement amends and supplements certain information contained in the Prospectus. We encourage you to read this Supplement carefully with the Prospectus.

Our Common Stock is not traded on any national securities exchange or on a NASDAQ Stock Market. Our Common Stock trades on the Pink Sheets’ Electronic Quotation System, under the symbol “PIED” or “PIED.PK.” On November 15, 2006, the last reported sale price for our Common Stock was $0.18. There is no public market for the warrants.

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE “RISK FACTORS” BEGINNING ON PAGE 5 OF THE PROSPECTUS.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Prospectus Supplement is November 16, 2006.

This Prospectus Supplement includes certain revisions to the unaudited financial statements for the fiscal quarters ended March 31, 2006 and June 30, 2006 correcting inadvertent errors that were discovered during the review of the Company’s unaudited financial statements for the fiscal quarter ended September 30, 2006.

I. Revisions to the Financial Statements and Notes for fiscal quarter ended March 31, 2006

As a result of an analysis performed after the unaudited financial statements for the fiscal quarter ended March 31, 2006 were issued, errors in various balance sheet and income statement accounts were discovered. As a result, professional, legal and accounting expenses were overstated for the quarter ended March 31, 2006. As of March 31, 2006, prepaid expenses and other current assets and deficit accumulated relating to exploration activities were each understated. There was no effect on earnings per share. The effect of the corrections on results of operations and financial position are as follows:


	As Previously						As
	Reported			Correction			Revised
On the consolidated balance sheet:
As of March 31, 2006
Prepaid expenses and other	$	12,605		$	6,690		$	19,295
Total Current Assets		65,612			6,690			72,302
Deficit accumulated during exploration stage		(1,094,658	)		6,690			(1,087,968	)
Total Stockholders’ Equity (Deficit)		162,346			(6,690	)		155,659
Total Liabilities and Stockholders Equity (Deficit)		167,528			6,690			174,218

On the consolidated statements of loss:
For the quarter ended March 31, 2006:
Professional, legal and accounting		42,457			(6,690	)		35,767
Loss from operations		(84,904	)		6,690			(78,214	)
Net loss		(85,675	)		6,690			(78,985	)

For the exploration stage period January 1, 2002 through March 31, 2006:
Professional, legal and accounting		285,218			(6,693	)		278,525
Exploration, geological and geophysical costs		234,559			3			234,562
Loss from operations		1,013,379			(6,690	)		1,006,689
Net Loss		1,094,058			(6,690	)		1,087,968

On the consolidated statements of stockholders’ deficit:
As of March 31, 2006
Net loss		(85,675	)		6,690			(78,985	)
Deficit accumulated during exploration stage		(1,094,658	)		6,690			(1,087,968	)
Total stockholders’ deficit		(162,349	)		6,690			(155,659	)

On the consolidated statements of cash flows:
For the three months ended March 31, 2006:
Net loss		(85,675	)		6,690			(78,985	)
Net cash used in operating activities		175,194			(6,690	)		168,504
Prepaid stock issuance costs		—			(6,690	)		(6,690	)
Net cash provided by financing activities		252,801			(6,690	)		246,111

For the exploration stage period January 1, 2002 through March 31, 2006:
Net loss		(1,094,658	)		6,690			(1,087,968	)
Net cash used in operating activities		791,696			(6,690	)		785,006
Prepaid stock issuance costs		—			(6,690	)		(6,690	)
Net cash provided by financing activities		825,881			(6,690	)		819,191

The following changes were made in the notes to the Financial Statements the fiscal quarter ended March 31, 2006:

Item 1 — Nature of Business and Significant Accounting Policies
Subsection h – Net Loss Per Shares

As Previously Reported

Net loss used in determining basic EPS was $(85,675) as of March 31, 2006 and $(58,602) as of March 31, 2005. The weighted average number of shares of common stock used in determining basic EPS was 45.07 million as of March 31, 2006 and 37.15 million as of March 31, 2005.

Net loss used in determining diluted EPS was $(85,675) as of March 31, 2006 and $(53,250) as of March 31, 2005. The weighted average number of shares of common stock used in determining diluted EPS was 48.44 million as of March 31, 2006 and 40.40 million as of March 31, 2005.

As Revised

Net loss used in determining basic EPS was $(78,985) as of March 31, 2006 and $(58,602) as of March 31, 2005. The weighted average number of shares of common stock used in determining basic EPS was 45.07 million as of March 31, 2006 and 37.15 million as of March 31, 2005.

Net loss used in determining diluted EPS was $(78,985) as of March 31, 2006 and $(53,250) as of March 31, 2005. The weighted average number of shares of common stock used in determining diluted EPS was 45.07 million as of March 31, 2006 and 37.15 million as of March 31, 2005.

Item 6 – Income Tax

As Previously Reported

Income taxes are paid only to the United States government and applicable state governments. The federal and state income tax expense (benefit) consists of the following:


	Quarters ended March 31,
	2006			2005
Current:
Federal	$	—		$	—
State		—			—

Total current		—			—

Deferred:
Federal		(29,933	)		(20,480	)
State		(5,986	)		(4,096	)

Total deferred		(35,919	)		(24,576	)

Less valuation allowance		35,919			24,576


Income tax expense	$	—		$	—

A reconciliation of the provision (benefit) for income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income before income taxes is as follows:


	Quarters ended March 31,
	2006			2005
Net loss before taxes	$	(85,675	)	$	(58,602	)
Statutory rate		42	%		42	%

Total computed tax expense (benefit)		(35,984	)		(24,613	)
(Decrease) increase in taxes resulting from:
Temporary Differences		65			37
Increase in valuation allowance		35,919			24,576


Income tax expense from continuing operations	$	—		$	—


Effective income tax rate		0	%		0	%

The deferred tax assets result from net operating loss carry-forwards. These assets will therefore reverse either upon their utilization against taxable income or upon their statutory expiration. Federal net operating loss carry-forwards of $12,396,580 and $ 5,000,862 remained at March 31, 2006 and 2005, respectively, and expire as follows:


Expiration	Net Operating Loss
2009	$	2,126,000
2010		1,695,000
2011		2,958,000
2012		1,300,000
2017		778,000
2018		573,000
2019		336,000
2020		1,368,000
2021		202,000
2022		179,000
2023		171,545
2024		161,755
2025		462,759
2026		85,521


	$	12,396,580

The Company’s deferred tax asset as March 31, 2006 and December 31, 2005 was $5,206,564 and $5,170,645, respectively. These were fully offset by valuation allowances, resulting in a net deferred tax asset of $0 for each period.

As Revised

Income taxes are paid only to the United States government and applicable state governments. The federal and state income tax expense (benefit) consists of the following:


	Quarters ended March 31,
	2006			2005
Current:
Federal	$	—		$	—
State		—			—

Total current		—			—

Deferred:
Federal		(27,545	)		(18,479	)
State		(5,509	)		(4,096	)

Total deferred		(33,054	)		(22,575	)

Less valuation allowance		33,054			22,575


Income tax expense	$	—		$	—

A reconciliation of the provision (benefit) for income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income before income taxes is as follows:


	Quarters ended March 31,
	2006			2005
Net loss before taxes	$	(78,985	)	$	(58,602	)
Statutory rate		42	%		42	%

Total computed tax expense (benefit)		(33,174	)		(24,613	)
(Decrease) increase in taxes resulting from:
Temporary Differences		120			2,038
Increase in valuation allowance		33,054			22,575


Income tax expense from continuing operations	$	—		$	—


Effective income tax rate		0	%		0	%

The deferred tax assets result from net operating loss carry-forwards. These assets will therefore reverse either upon their utilization against taxable income or upon their statutory expiration. Federal net operating loss carry-forwards of $12,180,387 remained at March 31, 2006 and expire as follows:


Expiration	Net Operating Loss
2009	$	2,126,000
2010		1,695,000
2011		2,958,000
2012		1,300,000
2017		778,000
2018		573,000
2019		336,000
2020		1,368,000
2021		202,000
2022		179,000
2023		171,545
2024		161,755
2025		271,586
2026		60,501


	$	12,180,387

The Company’s deferred tax asset as March 31, 2006 and December 31, 2005 was $5,203,699 and $5,170,645, respectively. These were fully offset by valuation allowances, resulting in a net deferred tax asset of $0 for each period.

PIEDMONT MINING COMPANY, INC.
AND SUBSIDIARIES
(An Exploration Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTER ENDED MARCH 31, 2006

PIEDMONT MINING COMPANY, INC.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2006 and DECEMBER 31, 2005


	March 31,			December 31,
	2006 (unaudited)			2005
	As Restated			(audited)
ASSETS
Current Assets
Cash and cash equivalents	$	53,007		$	400
Prepaid expenses and other		19,295			20,559


Total Current Assets		72,302			20,959

Long Lived Assets, net		1,416			1,667

Other Assets
Exploration projects		100,500			75,500


Total Assets	$	174,218		$	98,126


LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable	$	19,739		$	2,281
Bank overdraft		—			8,247
Accrued expenses		14,392			43,839
Accrued expenses – due to officers		181,756			264,234
Other liabilities		—			9,809
Due to directors		113,990			123,940
Convertible notes		—			27,000


Total Current Liabilities		329,877			479,350


Stockholders’ Equity (Deficit)
Preferred stock, $1.00 par value; 25,000,000 shares authorized; no shares issued or outstanding at March 31, 2006 and December 31, 2005		—			—
Common stock, no par value; 100,000,000 shares authorized; 46,184,707 shares issued and outstanding at March 31, 2006; 43,958,041 shares issued and outstanding at December 31, 2005		13,087,202			12,820,971
Contributed capital		371,075			371,075
Contributed capital – stock warrants		23,519			—
Contributed capital – stock options		14,800			—
Accumulated deficit		(12,564,287	)		(12,564,287	)
Deficit accumulated during exploration stage		(1,087,968	)		(1,008,983	)


Total Stockholders’ Equity (Deficit)		(155,659	)		(381,224	)


Total Liabilities and Stockholders’ Equity (Deficit)	$	174,218		$	98,126

See accompanying notes.

PIEDMONT MINING COMPANY, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF LOSS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
AND THE PERIOD JANUARY 1, 2002 TO MARCH 31, 2006


							Exploration
							Stage Period
	Quarter Ended						January 1, 2002
	March 31,			Quarter Ended			through
	2006			March 31,			March 31, 2006
	As Restated			2005			As Restated
Operating expenses
General and administrative	$	18,992		$	19,530		$	289,399
Professional, legal and accounting		35,767			20,109			278,525
Depreciation expense		250			250			142,387
Research and development		2,700			9,896			61,816
Exploration, geological and geophysical costs		20,505			3,471			234,562


Loss from operations		(78,214	)		(53,256	)		(1,006,689	)

Other income (expense)
Interest income		—			5			32
Interest expense		(771	)		(5,351	)		(34,721	)
Gain on sale of historic gold bar and mineral rights		—			—			46,410
Loss on legal and note receivable settlements		—			—			(93,000	)


Total other expense, net		(771	)		(5,346	)		(81,279	)


Net Loss	$	(78,985	)	$	(58,602	)	$	(1,087,968	)


Loss per share
Basic	$	(0.002	)	$	(0.002	)


Diluted	$	(0.002	)	$	(0.001	)

See accompanying notes.

PIEDMONT MINING COMPANY, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2006
FOR THE YEAR ENDED DECEMBER 31, 2005


														Deficit
														Accumulated
							Contributed		Contributed					During			Total
							Capital-		Capital-					Exploration			Shareholders’
	Common Stock				Contributed		Stock		Stock		Accumulated			Stage			Deficit
	No. of Shares		$		Capital		Warrants		Options		Deficit			As Restated			As Restated
Balance, December 31, 2004		37,152,646	$	12,335,434	$	371,075	$	—	$	—	$	(12,564,287	)	$	(546,094	)	$	(403,872	)
Stock issued upon conversion of debt		4,063,403		316,037		—		—		—		—			—			316,037
Sales of stock		2,441,992		145,000		—		—		—		—			—			145,000
Payments in stock on exploration projects		300,000		24,500		—		—		—					—			24,500
Net loss		—		—		—		—		—		—			(462,889	)		(462,889	)

Balance, December 31, 2005		43,958,041		12,820,971		371,075		—		—		(12,564,287	)		(1,008,983	)		(381,224	)
Stock issued upon conversion of debt		—		—		—		—		—		—			—			—
Sales of stock		2,226,666		266,231		—		—		—		—			—			266,231
Issuance of stock warrants		—		—		—		23,519		—		—			—			23,519
Issuance of stock-based compensation		—		—		—		—		14,800		—			—			14,800
Net loss		—		—		—		—		—		—			(78,985	)		(78,985	)

Balance, March 31, 2006		46,184,707	$	13,087,202	$	371,075	$	23,519	$	14,800	$	(12,564,287	)	$	(1,087,968	)	$	(155,659	)

See accompanying notes.

PIEDMONT MINING COMPANY, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
AND THE PERIOD JANUARY 1, 2002 TO MARCH 31, 2006


							Exploration Stage
							Period
	Quarter Ended			Quarter Ended			January 1, 2002
	March 31,			March 31,			through
	2006 (unaudited)			2005 (unaudited)			March 31, 2006
	As Restated			As Restated			As Restated
Cash Flows from Operating Activities:
Net loss	$	(78,985	)	$	(58,602	)	$	(1,087,968	)

Adjustments to reconcile net loss to net cash used in operating activities:
Gain on sale of mineral rights		—			—			(40,000	)
Loss on settlement of note receivable		—			—			19,000
Issuance of stock options		14,800			—			14,800
Depreciation		250			250			142,387
Changes due to (increase) decrease in operating assets:
Related party receivables		—			(139	)		—
Prepaid expenses and other		7,954			7,623			(9,656	)
Changes due to increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		(94,467	)		2,803			176,431
Bank overdraft		(8,247	)		—			—
Other liabilities		(9,809	)		(7,842	)		—


Net cash used in operating activities		(168,504	)		(55,907	)		(785,006	)


Cash Flows from Investing Activities:
Purchase of long lived assets		—			—			(3,000	)
Proceeds from note receivable		—			—			57,125
Proceeds from sale of mineral rights		—			—			40,000
Payments made on exploration projects		(25,000	)		(4,000	)		(76,000	)


Net cash provided by (used in) investing activities		(25,000	)		(4,000	)		18,125


Cash Flows from Financing Activities:
Sales of stock and warrants		289,750			—			434,750
Prepaid stock issuance costs		(6,690	)		—			(6,690	)
Payments on convertible debt		(27,000	)		—			(27,000	)
Proceeds on convertible debt		—			75,000			318,145
Proceeds from revolving note — due to officer and advances from directors		—			—			157,309
Payments on revolving note — due to officer and advances from directors		(9,949	)		—			(57,323	)


Net cash provided by financing activities		246,111			75,000			819,191


Net increase (decrease) in cash and cash equivalents		52,607			15,093			52,310
Cash and cash equivalents at beginning of period		400			1,041			697


Cash and cash equivalents at end of period	$	53,007		$	16,134		$	53,007

See accompanying notes.

Nature of Business and Significant Accounting Policies

	a.		Nature of Business — Piedmont Mining Company, Inc. (the Company) was incorporated in 1983 under the laws of North Carolina and is an exploration stage company engaged in the exploration for gold and silver. All properties currently under exploration are located in Nevada.

	b.		Basis of Presentation — The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

	c.		Basis of Consolidation — The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, NetColony, LLC and Piedmont Gold Company, Inc. Neither subsidiary has material operations, tangible assets or liabilities. All significant intercompany accounts and transactions, if any, have been eliminated in consolidation.

	d.		Use of Estimates — The 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 certain reported amounts and disclosures, such as the allowance for doubtful accounts and various accruals. Accordingly, actual results could differ from those estimates.

	e.		Long Lived Assets — Long lived assets are comprised of websites. They are recorded at cost and depreciated using the straight-line basis over 3 years. Depreciation expense for the quarters ended March 31, 2006 and 2005 was $250.

	f.		Cash and Cash Equivalents — For purposes of the statement of cash flows, the Company considers all holdings of highly liquid investments with original maturities of three months or less and investments in money market funds to be cash equivalents.

	g.		Research and Development Costs and Exploration Projects — Pursuant toEmerging Issues Task Force 04-02, mineral rights are capitalized at cost. This includes lease payments under exploration agreements. The projects are assessed for write-off when facts and circumstances indicate their carrying values exceed their recoverable values, such as failure to discover mineable ore. If a mineable ore body is found, these costs will be amortized when production begins using a units-of-production method. These costs are recorded to exploration projects on the consolidated balance sheets. Other exploration, geological costs and research and development costs are expensed as incurred.

	h.		Net Loss Per Share — In accordance with Statement of Financial Accounting Standard (SFAS) No. 128,Earnings Per Share,and SEC Staff Accounting Bulletin No. 98, basic earnings/loss per common share (EPS) is computed by dividing net loss for the period by the weighted average number of common shares outstanding during the period. Under SFAS 128, diluted earnings/loss per share is computed by dividing the net loss for the period, with interest expense added back, by the weighted average number of common and common equivalent shares, such as stock options and warrants, outstanding during the period.

			Net loss used in determining basic EPS was $(78,985) as of March 31, 2006 and $(58,602) as of March 31, 2005. The weighted average number of shares of common stock used in determining basic EPS was 45.07 million as of March 31, 2006 and 37.15 million as of March 31, 2005.

			Net loss used in determining diluted EPS was $(78,985) as of March 31, 2006 and $(53,250) as of March 31, 2005. The weighted average number of shares of common stock used in determining diluted EPS was 45.07 million as of March 31, 2006 and 37.15 million as of March 31, 2005.

Nature of business and accounting policies — continued

	i.		Income Taxes -The Company provides for income taxes under SFAS 109, “Accounting for Income Taxes,” which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities using the enacted income tax rate expected to apply to taxable income in the period in which the deferred tax liability or asset is expected to be settled or realized. SFAS 109 requires that a valuation allowance be established if necessary, to reduce the deferred tax assets to the amount that management believes is more likely than not to be realized. The provision for federal income tax differs from that computed by applying federal statutory rates to income before federal income tax expense mainly due to expenses that are not deductible and income that is not taxable for federal income taxes, including permanent differences such as non-deductible meals and entertainment.

	j.		Stock Options — Prior to January 1, 2006, the Company followed Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25), and related interpretations in accounting for stock options issued to employees and directors. Under APB 25, when the exercise price of stock options equals or is less than the fair market value of the underlying stock of the date of grant, no compensation expense is recognized. For options issued to service providers, the Company follows SFAS No. 123,Accounting for Stock-Based Compensation, which requires recording the options at the fair value of the service provided.

			Beginning January 1, 2006, the Company adopted SFAS 123(R),Share-Based Payment, which calls for recording stock-based compensation under the fair value method for stock options awarded to employees.

2.		Going Concern -The Company has had no revenues or cash flow from operations in the recent past and has liabilities exceeding its assets. This is because the Company is an exploration stage company, exploring mineral properties but not yet generating any revenue from those properties. These factors create an uncertainty as to how the Company will fund its operations and maintain sufficient cash flow to operate as a going concern.

		In response to these adverse conditions, management is continuing to look for financing from various sources, including private placements from investors and institutions. Management believes these efforts will contribute toward funding the Company’s activities until revenue can be earned from the properties or a sale can be consummated. The Company’s ability to meet its cash requirements in the next year is dependent upon obtaining this financing and satisfying certain obligations, such as compensating its officers and consultants through non-cash means including the issuance of stock options. If this is not achieved, the Company may be unable to obtain sufficient cash flow to fund its operations and obligations, and therefore, may be unable to continue as a going concern.

		The accompanying consolidated financial statements have been prepared on a going concern basis, and accordingly, do not include any adjustments relating to the recoverability and classification of recorded asset amounts nor do they include adjustments to the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence or be required to sell its assets.

3.		Exploration Stage Company — As discussed in Note 1, the Company was formed in 1983. However, significant changes to the Company’s business and operations occurred from 1983 through 2002. The Company is currently in an exploration stage, which is characterized by significant expenditures for the examination and development of exploration opportunities. The Company’s focus for the foreseeable future will continue to be on exploration of various existing mineral properties and exploration of new properties.

4.		Convertible Promissory Notes — During 2003, the Company issued $85,000 of convertible promissory notes bearing interest at 5% per annum and maturing at various dates. During 2004, the Company issued an additional $158,145 of convertible promissory notes bearing interest at 5% per annum. During 2005, the Company issued $75,000 of convertible promissory notes, also bearing interest at 5% per annum. During 2005, most of these notes and the related accrued interest of $24,892 were converted into 4,063,403 shares of common stock. Conversion prices varied per agreement. One $27,000 convertible note remained unconverted at December 31, 2005 and was repaid in February 2006.

		Two of the converted notes were with related parties. One of the Company’s directors held a note totaling $15,000 which converted into 170,156 shares. Also, this director is the chief operating officer of a company which held a note totaling $40,000 that converted into 656,298 shares.

5.		Related Party Transactions — The unpaid portion of the annual compensation of the Company’s President is included in accrued liabilities in the accompanying consolidated balance sheets. The unpaid amount included in accrued liabilities is $15,000 for the three months ending March 31, 2006 and $14,500 for the year ending December 31, 2005. From time to time, the Company’s officers and directors advance monies to the Company under an unwritten arrangement accruing 5% interest annually. The unpaid interest related to these advances at March 31, 2006 and December 31, 2005 was $1,392 and $1,405, respectively.

		Various other related party transactions are disclosed in other notes.

6.		Income Taxes — Income taxes are paid only to the United States government and applicable state governments. The federal and state income tax expense (benefit) consists of the following:


	Quarters ended March 31,
	2006			2005
Current:
Federal	$	—		$	—
State		—			—

Total current		—			—

Deferred:
Federal		(27,545	)		(18,479	)
State		(5,509	)		(4,096	)

Total deferred		(33,054	)		(22,575	)

Less valuation allowance		33,054			22,575


Income tax expense	$	—		$	—

6.		Income Taxes — continued

		A reconciliation of the provision (benefit) for income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income before income taxes is as follows:


	Quarters ended March 31,
	2006			2005
Net loss before taxes	$	(78,985	)	$	(58,602	)
Statutory rate		42	%		42	%

Total computed tax expense (benefit)		(33,174	)		(24,613	)
(Decrease) increase in taxes resulting from:
Temporary Differences		120			2,038
Increase in valuation allowance		33,054			22,575


Income tax expense from continuing operations	$	—		$	—


Effective income tax rate		0	%		0	%

The deferred tax assets result from net operating loss carry-forwards. These assets will therefore reverse either upon their utilization against taxable income or upon their statutory expiration. Federal net operating loss carry-forwards of $12,180,387 remained at March 31, 2006 and expire as follows:


	Net Operating
Expiration	Loss
2009	$	2,126,000
2010		1,695,000
2011		2,958,000
2012		1,300,000
2017		778,000
2018		573,000
2019		336,000
2020		1,368,000
2021		202,000
2022		179,000
2023		171,545
2024		161,755
2025		271,586
2026		60,501


	$	12,180,387

7.		Supplemental Cash Flow Information — The Company paid no cash for income taxes or interest for the three months ended March 31, 2006 or 2005. The Company awarded non-cash compensation in the form of stock options. See footnote 8 for further discussion.

8.		Stock Based Compensation and Other Equity Transactions — The Company does not have a stock based compensation plan in place. The Company’s Compensation Committee makes recommendations to the Board of Directors for the granting of awards of stock options to its officers and directors on a case-by-case basis. Prior to January 1, 2006, the Company accounted for this plan in accordance with APB 25. Therefore, no stock-based employee compensation expense for stock options was reflected in the income for the three months ended March 31, 2005. Had compensation cost been recorded based on the fair value at grant date, the effect on net loss would have been immaterial. In making this determination, the Company estimated the fair market value of the options issued during the three months ended March 31, 2005, using the Black-Scholes option pricing model with the following assumptions:


Risk-free interest rate	2.54	%
Volatility factor	17.00	%
Contractual life of options, in years	5 to 7

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R),Share-Based Payments. The fair value was determined using the Black-Scholes option pricing model with the following assumptions:


Risk-free interest rates	4.43% and 4.51		%
Volatility factor		26.00	%
Contractual life of options, in years		5
Service period in years		3
Weighted average calculated value of options granted	$	0.037

Of those granted during the three months ended March 31, 2006, 400,000 of the 1,200,000 vested immediately while one-half of the remainder vests one year later and the second half two years later. The terms of these awards are five years. Total shares able to be purchased, as they vest, is 1,200,000. If employment is terminated, the employee may exercise within 90 days only those options that vested. The fair value of these options was $44,400 at the grant date. Total compensation expense for the quarter ended March 31, 2006 equaled $14,800, which corresponds to the vesting schedule. Of those granted during the three months ended March 31, 2005, 1,241,667 of the 2,925,000 vested immediately; 841,667 will vest on the first anniversary date; 841,667 will vest on the second anniversary date. The terms of these awards range from five to seven years. Total shares able to be purchased, as they vest, is 3,425,000. The fair value of these options was immaterial at the grant date. No cash was received in exchange for any of the options awarded. Since no options have been exercised, no proceeds have been received for the quarters ended March 31, 2006 and 2005. Below is a summary of the stock option activity for the three months ended March 31, 2006 and 2005:

Stock Based Compensation and Other Equity Transactions — continued


	Number of
	Shares		Weighted
	Subject to		Average
	Options		Exercise Price
Outstanding, December 31, 2004		500,000	$	0.300
Granted, February 3, 2005		2,925,000	$	0.226

Outstanding, March 31, 2005		3,425,000	$	0.236


Outstanding, December 31, 2005		3,425,000	$	0.236
Granted, February 8, 2006		1,200,000	$	0.230

Outstanding, March 31, 2006		4,625,000	$	0.235


				Weighted
				Average
	Nonvested			Fair
	Options			Value
Nonvested Options
Nonvested options, December 31, 2005		1,683,333		$	—
Granted, February 8, 2006		1,200,000		$	0.037
Vested		(1,241,667	)	$	0.012

Nonvested options, March 31, 2006		1,641,666		$	0.018

		If the options are exercised, the Company will issue stock from shares authorized but unissued. There is no policy for reserving shares to be issued upon exercise, nor is there a policy for repurchasing shares issued.

		The following tables summarize information and terms of the options outstanding and exercisable:

		As of March 31, 2005:

Options Outstanding

Options Exercisable

Weighted

Average Remaining

Weighted

Average Remaining

Weighted

Range of

Number

Contractual

Average

Number

Contractual

Average

Exercise Prices

of Shares

Life (in years)

Exercise Price

of Shares

Life (in years)

Exercise Price

$0.20-0.30

3,425,000

4.42

0.236

1,741,667

3.867

0.243

8.		Stock Based Compensation and Other Equity Transactions — continued

		As of March 31, 2006:

Options Outstanding

Options Exercisable

Weighted

Average Remaining

Weighted

Average Remaining

Weighted

Range of

Number

Contractual

Average

Number

Contractual

Average

Exercise Prices

of Shares

Life (in years)

Exercise Price

of Shares

Life (in years)

Exercise Price

$0.20-0.30

4,625,000

4.33

0.235

2,983,333

2.142

0.238

		Warrants — No warrants were issued during the three months ended March 31, 2005. During the three months ended March 31, 2006, the Company issued warrants granting holders the right to purchase 2,226,666 shares of common stock. These warrants were issued with the common stock sold during the three months ended March 31, 2006. The Company estimates the total fair market value of these warrants to be $36,407 at the date of grant, using the same methods and assumptions employed above in valuing the stock options. Outstanding total warrants at March 31, 2006 were 5,324,956. The exercise prices on all warrants range from $.08 to $.20 per share. The warrants are exercisable immediately upon issuance and the expiration dates range between one year and two years after issuance.

		Common Stock — The holders of the Company’s common stock are entitled to one vote for each share held of record on all matters submitted to a vote of shareholders. Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available.

		The Company did not declare or pay any cash dividends during the past two years. The Company has no present plan for the payment of any dividends.

9.		Long Lived Assets — Long lived assets are comprised of the following at March 31, 2006 and December 31, 2005:


	2006			2005
Websites	$	190,738		$	190,738
Accumulated depreciation		(189,322	)		(189,071	)


Total long lived assets	$	1,416		$	1,667

10.		Disclosure About Fair Value of Financial Instruments by a Nonfinancial Entity -

		Accounts payable and accrued expenses — The carrying value of accounts payable and accrued expenses approximates fair value due to the short-term nature of the obligations.

		Due to directors — The carrying value of due to directors approximates fair value due to the short term nature of the obligations.

10.		Disclosure About Fair Value of Financial Instruments by a Nonfinancial Entity - continued

		Convertible notes — The carrying amounts approximate fair value based on current market rates for notes with similar maturities and terms.

		The estimated fair values of the Company’s financial instruments are as follows as of March 31, 2006 and December 31, 2005:


	2006				2005
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Cash and cash equivalents	$	53,007	$	53,007	$	400	$	400
Accounts payable and bank overdraft	$	19,739	$	19,739	$	10,528	$	10,528
Accrued expenses	$	14,392	$	14,392	$	43,839	$	43,839
Accrued expenses — due to officers	$	181,756	$	181,756	$	264,234	$	264,234
Other liabilities	$	—	$	—	$	9,809	$	9,809
Due to directors	$	113,990	$	113,990	$	123,940	$	123,940
Convertible notes		—		—	$	27,000	$	27,000

		The Company determined the estimated fair value amounts by using available market information and commonly accepted valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company or holders of the instruments could realize in a current market exchange. The use of different assumptions and estimation methodologies may have a material effect on the estimated fair values.

11.		Commitments — The Company entered into various property agreements during 2005. These include:

		Antelope Ridge Project — On April 26, 2005, the Company entered into a ten year mining lease with an option to purchase this property. The Company must pay annual lease and option payments as follows:


By April 26, 2006:		$10,000 plus $10,000 worth of Common Stock
By April 26, 2007:		$15,000 plus $15,000 worth of Common Stock
On each subsequent anniversary date:		$20,000 and $20,000 worth of Common Stock.

In addition, the Company is required to spend the following amounts on exploration and maintenance of the property as follows::


By April 26, 2006:	$	20,000
By April 26, 2007:	$	100,000
By April 26, 2008:	$	100,000

The Company may purchase this property for $1,000,000, subject to a 3% net smelter returns royalty on production from the property. The purchase option must be exercised prior to the commencement of production from the property. The Company has the right to terminate this agreement on 60 days notice to the lessor.

11.		Commitments — continued

		Bullion Mountain Project — Effective November 11, 2005, the Company entered into a ten year mining lease with option to purchase. Upon signing the final agreement in 2006, the Company will be required to pay the property owner $7,300. Payments required on each anniversary date are as follows:


2006:	$	5,000
2007:	$	10,000
2008 and thereafter:	$	15,000

In addition, the Company is required to spend the following amounts on exploration and maintenance of the property:


By November 11, 2006:	$	20,000
By November 11, 2007:	$	50,000

		The Company has the option to purchase this property at any time for $500,000, which must be exercised before production can commence. All lease, work requirement and property maintenance payments made up to this point would be deducted from this price. Also, upon exercise of the purchase option, the Company would be required to pay a 3% net smelter returns royalty on production from the property. The Company has the right to terminate this agreement at any time by giving 60 days prior written notice.

		Dome-Hi-Ho Project — On April 26, 2005, the Company entered into a five year exploration agreement with an option to enter into a joint venture agreement. The agreement requires the Company to complete $180,000 in drilling and exploration expenditures by March 1, 2006. The Company may then terminate the agreement upon 60 days written notice to the owner. It must elect by April 13, 2006, to exercise the underlying option on 20 of the claims by paying $200,000. Subsequent annual exploration and development requirements will be:


By March 1, 2007:	$	180,000
By March 1, 2008:	$	400,000
By March 1, 2009:	$	500,000
By March 1, 2010:	$	540,000

In addition, the Company will be required to pay the property owner the following amounts:


By March 1, 2006:	$	10,000
By March 1, 2007:	$	10,000
By March 1, 2008:	$	10,000
By March 1, 2009:	$	10,000

Upon performance of the above requirements, the Company will be granted a 51% interest in the property. In addition, the Company is obligated to pay the underlying claims maintenance and property holding costs as well as annual rental payments under a preexisting lease agreement with a third party. The term of this lease is twenty years, beginning July 21, 2003. The Company will therefore be required to pay the following lease amounts:

11.

Commitments — continued


2006	$	6,667
2007	$	8,333

		After the 2007 anniversary date, the annual rental amount will be increased based on the Consumer Price Index. Also, the Company would be required to pay royalties based on a graduated scale, ranging from 3.0% to 4.0% should production occur on the property.

		Trinity Silver Project — The Company entered into this agreement in September 2005. In order to earn an initial 25% interest in the property, the Company must spend a total of $1,000,000 on or for the benefit of the property prior to September 2008. $75,000 of this must be spent within the first year of the agreement and not less than $125,000 during the second year. In order to earn an additional 26% interest in the property, the Company must spend an additional $1,000,000 prior to September 2010. This would bring the Company’s total interest to 51%. In order to earn an additional 9% interest in the property (for a total of 60%), the Company must spend an additional $2,000,000 prior to September 2013. The Company may terminate this agreement at any time upon 30 days written notice, whereupon the Company would have no further obligations or liabilities under this agreement except for certain fees.

		Pasco Canyon Project — On February 14, 2006, the Company entered into a five year exploration agreement with an option to enter into a joint venture agreement with the property owner. The agreement required a one-time payment of $10,000 to the property owner. In addition, the agreement requires the Company to complete $1,000,000 in exploration and development costs over a five year period as follows:


Year 1	$	50,000
Year 2	$	100,000
Year 3	$	200,000
Year 4	$	200,000
Year 5	$	450,000

		Upon completion of the required expenditures the Company will have acquired a 60% undivided interest in the property. Furthermore, a formal join venture agreement will be entered into by the Company and the owner of the property recognizes the Company as the operator of the joint venture. The Company has the right to terminate this agreement at any time, subsequent to the first year’s expenditure requirement of $50,000, by giving 30 days prior written notice.

12.		Restatement of Consolidated Financial Statements -

		As a result of analyses performed after the reviewed financial statements were issued, errors in various balance sheet and income statement accounts were discovered, affecting 2006. As a result, professional, legal and accounting expenses and were overstated for the quarter ended March 31, 2006. As of March 31, 2006, prepaid expenses and other current assets and deficit accumulated during exploration state were each understated. There was no effect on earnings per share. The effect of the restatement on results of operations and financial position are as follows:

12.

Restatement of Consolidated Financial Statements — continued


	As Previously						As
	Reported			Correction			Restated

As of March 31, 2006:
Prepaid expenses and other	$	12,605		$	6,690		$	19,295
Deficit accumulated during exploration stage		(1,094,658	)		6,690			(1,087,968	)

For the quarter ended March 31, 2006:
Professional, legal and accounting		42,457			(6,690	)		35,767
Net loss		(85,675	)		6,690			(78,985	)

On the consolidated statements of stockholders’ deficit:
As of March 31, 2006
Net loss		(85,675	)		6,690			(78,985	)
Deficit accumulated during exploration stage		(1,094,658	)		6,690			(1,087,968	)
Total stockholders’ deficit		(162,349	)		6,690			(155,659	)

On the consolidated statements of cash flows:
For the three months ended March 31, 2006:
Net loss		(85,675	)		6,690			(78,985	)
Prepaid stock issuance costs		—			(6,690	)		(6,690	)

For the exploration stage period January 1, 2002 through March 31, 2006:
Net loss		(1,094,658	)		6,690			(1,087,968	)
Prepaid stock issuance costs		—			(6,690	)		(6,690	)

13.

Subsequent Events

	•		On May 31, 2006, the compensation committee voted to award stock options to various parties. 1,000,000 will be awarded to the President, 100,000 to the Vice President, and 50,000 to a consultant.

	•		During April and May, 2006, the Company sold 7,378,333 shares of common stock for $1,106,750. Accompanying these shares were 3,689,167 warrants to purchase common stock. These warrants have varying exercise prices and expiration dates. No expiration date is later than May 2008. In addition, the Company issued 737,833 warrants and paid $50,400 as commission to the agent who brokered some of the stock sales.

	•		On April 21, 2006, 43,478 shares were issued in payment on an exploration project.

	•		The Dome-Hi-Ho Project was amended on April 3, 2006: In April 2006, the underlying option to purchase the 20 unpatented HiHo claims was amended and extended for an additional 3 years. Instead of making the required payment of $200,000 to exercise the option by April 13, 2006, the underlying optionee was paid $10,000 in April, 2006. In order to maintain this option in good standing, the optionee must be paid an additional $10,000 by April 13, 2007 and then an additional $20,000 by April 13, 2008. These payments are creditable against the option exercise price of $200,000. This amendment also grants the underlying optionee a 1% net smelter return royalty on the 24 Dome claims. Upon the acquisition of the 100% interest described above, the Company will grant to the optionee a 2% net smelter returns royalty on the property, of which one of the 2 percentage points could be repurchased for $1,000,000, subject to adjustment for the consumer price index.

	•		Drilling commenced at the Trinity project in April 2006.

II. Revisions to Financial Statements and Notes for fiscal quarter ended June 30, 2006

As a result of an analysis performed after the unaudited financial statements for the fiscal quarter ended June 30, 2006 were issued, errors in various balance sheet and income statement accounts were discovered. As a result, geological and geophysical costs, general and administrative expense, compensation, professional, legal and accounting expense, and net loss were overstated for the three months and six months ended June 30, 2006. Also, exploration projects were understated and common stock and deficit accumulated during relating to exploration activities were overstated as of June 30, 2006. Diluted earnings per share was adjusted to remove the effect of dilutive shares. The effect of the corrections on results of operations and financial position are as follows:


	As Previously						As
	Reported			Correction			Revised

On the consolidated balance sheet:
As of June 30, 2006:
Exploration projects	$	120,500		$	10,000		$	130,500
Total Assets		772,406			10,000			782,406
Deficit accumulated during exploration stage		(1,702,156	)		149,656			(1,552,500	)
Total Stockholders’ Equity (Deficit)		412,029			13,000			429,029
Total Liabilities and Stockholders’ Equity (Deficit)		772,406			10,000			782,406

On the consolidated statements of loss:
For the three months ended June 30, 2006:
General and administrative expense		144,609			(121,583	)		23,026
Compensation, professional, legal and accounting		106,664			(11,200	)		95,464
Exploration, geological and geophysical costs		351,969			(10,000	)		341,969
Loss from operations		(609,360	)		202,783			(406,577	)
Net Loss		(607,498	)		142,783			(464,715	)
Loss per share — basic		(0.012	)		0.003			(0.009	)
Loss per share — diluted		(0.010	)		0.001			(0.009	)

For the six months ended June 30, 2006:
General and administrative expense		163,784			(121,766	)		42,018
Compensation, professional, legal and accounting		149,121			(17,890	)		131,231
Exploration, geological and geophysical costs		372,474			(10,000	)		362,474
Loss from operations		(694,447	)		149,656			(544,791	)
Net Loss		(693,173	)		149,656			(543,517	)
Loss per share — basic		(0.014	)		0.003			(0.011	)
Loss per share — diluted		(0.013	)		0.002			(0.011	)

For the six months ended June 30, 2005:
Earnings per share — diluted		(0.003	)		(0.001	)		(0.004	)

For the exploration stage period January 1, 2002 through March 31, 2006:
General and administrative expense		434,191			(121,766	)		312,425
Compensation, professional, legal and accounting		391,879			(17,890	)		373,989
Exploration, geological and geophysical costs		586,531			(10,000	)		576,531
Loss from operations		(1,622,922	)		149,656			(1,473,266	)
Net Loss		(1,702,156	)		149,656			(1,552,500	)


	As Previously						As
	Reported			Correction			Revised

On the consolidated statements of stockholders’ deficit:
As of June 30, 2006
Sales of stock, net of issuance costs		1,341,945			(139,656	)		1,202,289
Common Stock balance at June 30, 2006		14,162,916			(139,656) 1			4,023,260
Net Loss		(693,173	)		149,656			(543,517	)
Deficit Accumulated During Exploration Stage balance at June 30, 2006		(1,702,156	)		149,656			(1,552,500	)
Total Shareholders’ Deficit		412,029			10,000			422,029

On the consolidated statements of cash flows:
For the six months ended June 30, 2006:
Net Loss		(693,173	)		149,656			(543,517	)
Net cash used in operating activities		(660,848	)		149,656			(511,192	)
Payments made on exploration projects		(35,000	)		(10,000	)		(45,000	)
Net cash used in investing activities		(36,290	)		(10,000	)		(46,290	)
Sales of stock and warrants		1,451,726			(139,656	)		1,312,070
Net cash provided by financing activities		1,341,536			(139,728	)		1,201,808

For the exploration stage period January 1, 2002 through June 30, 2006:
Net Loss		(1,702,156	)		149,656			(1,552,500	)
Net cash used in operating activities		(1,277,350	)		149,656			(1,127,694	)
Payments made on exploration projects		(86,000	)		(10,000	)		(96,000	)
Net cash used in investing activities		6,835			(10,000	)		(3,165	)
Sales of stock and warrants		1,596,726			(139,656	)		1,457,070
Net cash provided by financing activities		1,774,960			139,728			1,914,616

The following changes were made in the notes to the Financial Statements the fiscal quarter ended June 30, 2006:

Item 1 — Nature of Business and Significant Accounting Policies
Subsection h — Net Loss Per Shares

		As Previously Reported

		Net loss used in determining basic EPS was ($607,498) and ($693,173) for the three and six months ended June 30, 2006 and ($84,216) and ($142,818) for the three and six months ended June 30, 2005. The weighted average number of shares of common stock used in determining basic EPS was 51.77 and 48.44 million for the three and six months ended June 30, 2006 and 37.22 and 37.19 million for the three and six months ended June 30, 2005.

		Net loss used in determining diluted EPS was ($607,498) and ($693,173) for the three and six months ended June 30, 2006 and ($78,756) and ($132,006) for the three and six months ended June 30, 2005. The weighted average number of shares of common stock used in determining diluted EPS was 59.48 and 54.56 million for the three and six months ended June 30, 2006 and 40.47 and 40.43 million for the three and six months ended June 30, 2005.

		As Revised

		Net loss used in determining basic EPS was ($464,715) and ($543,517) for the three and six months ended June 30, 2006 and ($84,216) and ($142,818) for the three and six months ended June 30, 2005. The weighted average number of shares of common stock used in determining basic EPS was 51.77 and 48.44 million for the three and six months ended June 30, 2006 and 37.23 and 37.19 million for the three and six months ended June 30, 2005.

		Net loss used in determining diluted EPS was ($464,715) and ($543,517) for the three and six months ended June 30, 2006 and ($78,756) and ($132,006) for the three and six months ended June 30, 2005. The weighted average number of shares of common stock used in determining diluted EPS was 51.77 and 48.44 million for the three and six months ended June 30, 2006 and 37.23 and 37.19 million for the three and six months ended June 30, 2005.

Item 6 — Income Tax

		As Previously Reported

		Income taxes are paid only to the United States government and applicable state governments. The federal and state income tax expense (benefit) consists of the following:


	Six months ended June 30,
	2006			2005
Current:
Federal	$	—		$	—
State		—			—

Total current		—			—

Deferred:
Federal		(242,464	)		(49,921	)
State		(48,493	)		(9,984	)

Total deferred		(290,957	)		(59,905	)

Less valuation allowance		290,957			59,905


Income tax expense	$	—		$	—

A reconciliation of the provision (benefit) for income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income before income taxes is as follows:


	Six months ended June 30,
	2006			2005
Net loss before taxes	$	(693,173	)	$	(142,818	)
Statutory rate		42	%		42	%

Total computed tax expense (benefit)		(291,133	)		(59,984	)
(Decrease) increase in taxes resulting from:
Temporary differences		176			79
Increase in valuation allowance		290,957			59,905


Income tax expense from continuing operations	$	—		$	—


Effective income tax rate		0	%		0	%

The deferred tax assets result from net operating loss carry-forwards. These assets will therefore reverse either upon their utilization against taxable income or upon their statutory expiration. Federal net operating loss carry-forwards of $13,004,003 and $11,990,932 remained at June 30, 2006 and 2005, respectively, and expire as follows:


	Net Operating
Expiration	Loss
2009	$	2,126,000
2010		1,695,000
2011		2,958,000
2012		1,300,000
2017		778,000
2018		573,000
2019		336,000
2020		1,368,000
2021		202,000
2022		179,000
2023		171,545
2024		161,755
2025		462,759
2026		692,944


	$	13,004,003

The Company’s deferred tax asset as June 30, 2006 and December 31, 2005 was $5,461,692 and $5,170,645, respectively. These were fully offset by valuation allowances, resulting in a net deferred tax asset of $0 for each period.

As Revised

Income taxes are paid only to the United States government and applicable state governments. The federal and state income tax expense (benefit) consists of the following:


	Six months ended June 30,
	2006			2005
Current:
Federal	$	—		$	—
State		—			—

Total current		—			—

Deferred:
Federal		(190,039	)		(47,920	)
State		(38,008	)		(9,984	)

Total deferred		(228,047	)		(57,904	)

Less valuation allowance		228,047			57,904


Income tax expense	$	—		$	—

A reconciliation of the provision (benefit) for income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income before income taxes is as follows:


	Six months ended June 30,
	2006			2005
Net loss before taxes	$	(543,517	)	$	(142,818	)
Statutory rate		42	%		42	%

Total computed tax expense (benefit)		(228,277	)		(59,984	)
(Decrease) increase in taxes resulting from:
Temporary differences		230			2,080
Increase in valuation allowance		228,047			57,904


Income tax expense from continuing operations	$	—		$	—


Effective income tax rate		0	%		0	%

The deferred tax assets result from net operating loss carry-forwards. These assets will therefore reverse either upon their utilization against taxable income or upon their statutory expiration. Federal net operating loss carry-forwards of $12,369,862 and $11,952,084 remained at June 30, 2006 and 2005, respectively, and expire as follows:


	Net Operating
Expiration	Loss
2009	$	2,126,000
2010		1,695,000
2011		2,958,000
2012		1,300,000
2017		778,000
2018		573,000
2019		336,000
2020		1,368,000
2021		202,000
2022		179,000
2023		171,545
2024		161,755
2025		271,586
2026		249,976


	$	12,369,862

The Company’s deferred tax asset as June 30, 2006 and December 31, 2005 was $5,398,692 and $5,170,645, respectively. These were fully offset by valuation allowances, resulting in a net deferred tax asset of $0 for each period.

PIEDMONT MINING COMPANY, INC.
AND SUBSIDIARIES
(An Exploration Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2006

PIEDMONT MINING COMPANY, INC.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2006 and DECEMBER 31, 2005


	June 30,
	2006			December 31,
	(unaudited)			2005
	As Restated			(audited)
ASSETS
Current Assets
Cash and cash equivalents	$	644,798		$	400
Prepaid expenses and other		4,651			20,559

Total Current Assets		649,449			20,959


Long Lived Assets, net		2,457			1,667

Other Assets
Exploration projects		130,500			75,500


Total Assets	$	782,406		$	98,126


LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accounts payable	$	140,850		$	2,281
Bank overdraft		—			8,247
Accrued expenses		56,372			43,839
Accrued expenses — due to officers		122,405			264,234
Other liabilities		—			9,809
Due to directors		40,750			123,940
Convertible notes		—			27,000

Total Current Liabilities		360,377			479,350


Stockholders’ Equity (Deficit)
Preferred stock, $1.00 par value; 25,000,000 shares authorized; no shares issued or outstanding at June 30, 2006 and December 31, 2005		—			—
Common stock, no par value; 100,000,000 shares authorized; 53,606,517 shares issued and outstanding at June 30, 2006; 43,958,041 shares issued and outstanding at December 31, 2005		14,162,916			12,820,971
Contributed capital		371,075			371,075
Contributed capital — stock warrants		119,781			—
Contributed capital — stock options		24,700			—
Accumulated deficit		(12,564,287	)		(12,564,287	)
Deficit accumulated during exploration stage		(1,552,500	)		(1,008,983	)


Total Stockholders’ Equity (Deficit)		422,029			(381,224	)


Total Liabilities and Stockholders’ Equity (Deficit)	$	782,406		$	98,126

See accompanying notes.

PIEDMONT MINING COMPANY, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF LOSS (UNAUDITED)
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2006 AND 2005
AND THE PERIOD JANUARY 1, 2002 TO JUNE 30, 2006


													Exploration
													Stage Period
	Three Months Ended						Six Months Ended						January 1, 2002
	June 30,						June 30,						through
	2006 (unaudited)			2005 (unaudited)			2006 (unaudited)			2005 (unaudited)			June 30, 2006
	As Restated						As Restated			As Restated			As Restated
Operating Expenses
General and administrative	$	23,026		$	13,266		$	42,018		$	32,796		$	312,425
Compensation, professional, legal and accounting		95,464			31,671			131,231			51,780			373,989
Depreciation expense		250			250			500			500			142,637
Research and development		5,868			6,395			8,568			16,291			67,684
Exploration, geological and geophysical costs		341,969			29,471			362,474			32,942			576,531


Loss from operations		(406,577	)		(81,053	)		(544,791	)		(134,309	)		(1,473,266	)

Other Income (Expense)
Interest income		3,548			17			3,548			22			3,580
Interest expense		(1,722	)		(6,349	)		(2,493	)		(11,700	)		(36,443	)
Other income		36			3,169			219			3,169			219
Gain on sale of historic gold bar and mineral rights		—			—			—			—			46,410
Loss on legal and note receivable settlements		—			—			—			—			(93,000	)


Total other income, net		1,862			(3,163	)		1,274			(8,509	)		(79,234	)


Net Loss	$	(464,715	)	$	(84,216	)	$	(543,517	)	$	(142,818	)	$	(1,552,500	)


Loss per share
Basic	$	(0.009	)	$	(0.002	)	$	(0.011	)	$	(0.004	)

Diluted	$	(0.009	)	$	(0.002	)	$	(0.011	)	$	(0.004	)

See accompanying notes.

PIEDMONT MINING COMPANY, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2006
FOR THE YEAR ENDED DECEMBER 31, 2005


														Deficit
														Accumulated
									Contributed					During			Total
	Common Stock						Contributed		Capital-					Exploration			Shareholders
			$		Contributed		Capital-		Stock		Accumulated			Stage			Deficit
	No. of Shares		As Restated		Capital		Stock Warrants		Options		Deficit			As Restated			As Restated
Balance, December 31, 2004		37,152,646	$	12,335,434	$	371,075	$	—	$	—	$	(12,564,287	)	$	(546,094	)	$	(403,872	)
Stock issued upon conversion of debt		4,063,403		316,037		—		—		—		—			—			316,037
Sales of stock		2,441,992		145,000		—		—		—		—			—			145,000
Payments in stock on exploration projects		300,000		24,500		—		—		—		—			—			24,500
Net loss		—		—		—		—		—		—			(462,889	)		(462,889	)

Balance, December 31, 2005		43,958,041		12,820,971		371,075		—		—		(12,564,287	)		(1,008,983	)		(381,224	)
Sales of stock, net of issuance costs		9,648,476		1,202,289		—		—		—		—			—			1,202,289
Issuance of stock warrants		—		—		—		119,781		—		—			—			119,781
Issuance of stock options		—		—		—		—		24,700		—			—			24,700
Net loss		—		—		—		—		—		—			(543,517	)		(543,517	)

Balance, June 30, 2006		53,606,517	$	14,023,260	$	371,075	$	119,781	$	24,700	$	(12,564,287	)	$	(1,552,500	)	$	422,029

See accompanying notes.

PIEDMONT MINING COMPANY, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005
AND THE PERIOD JANUARY 1, 2002 TO JUNE 30, 2006


							Exploration Stage
							Period
	Six Months Ended						January 1, 2002
	June 30,						through
	2006 (unaudited)			2005			June 30, 2006
	As Restated			(unaudited)			As Restated
Cash Flows from Operating Activities:
Net loss	$	(543,517	)	$	(142,818	)	$	(1,552,500	)

Adjustments to reconcile net loss to net cash used in operating activities:
Gain on sale of mineral rights		—			—			(40,000	)
Loss on settlement of note receivable		—			—			19,000
Issuance of stock options		24,700			—			24,700
Depreciation		500			500			142,637
Changes due to (increase) decrease in operating assets:
Related party receivables		—			2,500			—
Prepaid expenses and other		15,908			13,888			(1,702	)
Changes due to increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		9,273			64,876			280,171
Bank overdraft		(8,247	)		—			—
Other liabilities		(9,809	)		(9,567	)		—


Net cash used in operating activities		(511,192	)		(70,621	)		(1,127,694	)


Cash Flows from Investing Activities:
Purchase of long lived assets		(1,290	)		—			(4,290	)
Proceeds from note receivable		—			—			57,125
Proceeds from sale of mineral rights		—			—			40,000
Payments made on exploration projects		(45,000	)		(28,500	)		(96,000	)


Net cash used in investing activities		(46,290	)		(28,500	)		(3,165	)


Cash Flows from Financing Activities:
Sales of stock and warrants		1,312,070			8,501			1,457,070
Payments on convertible debt		(46,290	)		—			(27,000	)
Proceeds on convertible debt		—			75,000			318,145
Proceeds from revolving note — due to officer and advances from directors		—			—			157,309
Payments on revolving note — due to officer and advances from directors		(83,190	)		15,000			(130,564	)


Net cash provided by financing activities		1,201,880			98,501			1,774,960


Net increase (decrease) in cash and cash equivalents		644,398			(620	)		644,101
Cash and cash equivalents at beginning of period		400			1,041			697


Cash and cash equivalents at end of period	$	644,798		$	421		$	644,798

See accompanying notes.

Nature of Business and Significant Accounting Policies

	a.		Nature of Business – Piedmont Mining Company, Inc. (the Company) was incorporated in 1983 under the laws of North Carolina and is an exploration stage company engaged in the exploration for gold and silver. All properties currently under exploration are located in Nevada.

	b.		Basis of Presentation – The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

	c.		Basis of Consolidation – The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, NetColony, LLC and Piedmont Gold Company, Inc. Neither subsidiary has material operations, tangible assets or liabilities. All significant intercompany accounts and transactions, if any, have been eliminated in consolidation.

	d.		Use of Estimates – The 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 certain reported amounts and disclosures, such as the allowance for doubtful accounts and various accruals. Accordingly, actual results could differ from those estimates.

	e.		Long Lived Assets – Long lived assets are comprised of websites and equipment. They are recorded at cost and depreciated using the straight-line basis over their useful lives. Depreciation expense for the quarters ended June 30, 2006 and 2005 was $500 and $500, respectively.

	f.		Cash and Cash Equivalents – For purposes of the statement of cash flows, the Company considers all holdings of highly liquid investments with original maturities of three months or less and investments in money market funds to be cash equivalents. At June 30, 2006, the Company’s cash in bank balances exceeded the federally insured limits. At June 30, 2006, the Company’s uninsured cash balances totaled $549,654.

	g.		Research and Development Costs and Exploration Projects – Pursuant toEmerging Issues Task Force 04-02, mineral rights are capitalized at cost. This includes lease payments under exploration agreements. The projects are assessed for write-off when facts and circumstances indicate their carrying values exceed their recoverable values, such as failure to discover mineable ore. If a mineable ore body is found, these costs will be amortized when production begins using a units-of-production method. These costs are recorded to exploration projects on the consolidated balance sheets. Other exploration, geological costs and research and development costs are expensed as incurred.

	h.		Net Loss Per Share – In accordance with Statement of Financial Accounting Standard (SFAS) No. 128,Earnings Per Share,and SEC Staff Accounting Bulletin No. 98, basic earnings/loss per common share (EPS) is computed by dividing net loss for the period by the weighted average number of common shares outstanding during the period. Under SFAS 128, diluted earnings/loss per share is computed by dividing the net loss for the period, with interest expense added back, by the weighted average number of common and common equivalent shares, such as stock options and warrants, outstanding during the period.

			Net loss used in determining basic EPS was ($464,715) and ($543,517) for the three and six months ended June 30, 2006 and ($84,216) and ($142,818) for the three and six months ended June 30, 2005. The weighted average number of shares of common stock used in determining basic EPS was 51.77 and 48.44 million for the three and six months ended June 30, 2006 and 37.23 and 37.19 million for the three and six months ended June 30, 2005. Net loss used in determining diluted EPS was ($464,715) and ($543,517) for the three and six months ended June 30, 2006 and ($78,756) and ($132,006) for the three and six months ended June 30, 2005. The weighted average number of shares of common stock used in determining diluted EPS was 51.77 and 48.44 million for the three and six months ended June 30, 2006 and 37.23 and 37.19 million for the three and six months ended June 30, 2005.

Nature of Business and Significant Accounting Policies -continued

	i.		Income Taxes –The Company provides for income taxes under SFAS 109, “Accounting for Income Taxes,” which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities using the enacted income tax rate expected to apply to taxable income in the period in which the deferred tax liability or asset is expected to be settled or realized. SFAS 109 requires that a valuation allowance be established if necessary, to reduce the deferred tax assets to the amount that management believes is more likely than not to be realized. The provision for federal income tax differs from that computed by applying federal statutory rates to income before federal income tax expense mainly due to expenses that are not deductible and income that is not taxable for federal income taxes, including permanent differences such as non-deductible meals and entertainment.

	j.		Stock Options – Prior to January 1, 2006, the Company followed Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25), and related interpretations in accounting for stock options issued to employees and directors. Under APB 25, when the exercise price of stock options equals or is less than the fair market value of the underlying stock of the date of grant, no compensation expense is recognized. For options issued to service providers, the Company follows SFAS No. 123,Accounting for Stock-Based Compensation, which requires recording the options at the fair value of the service provided.

			Beginning January 1, 2006, the Company adopted SFAS 123(R),Share-Based Payment, which calls for recording stock-based compensation under the fair value method for stock options awarded to employees.

		2.Going Concern –The Company has had no revenues or cash flow from operations. This is because the Company is an exploration stage company, exploring mineral properties but not yet generating any revenue from those properties. These factors create an uncertainty as to how the Company will fund its operations and maintain sufficient cash flow to operate as a going concern.

		In response to these adverse conditions, management is continuing to look for financing from various sources, including private placements from investors and institutions. Management believes these efforts will contribute toward funding the Company’s activities until revenue can be earned from the properties or a sale can be consummated. The Company’s ability to meet its cash requirements in the next year is dependent upon obtaining this financing and satisfying certain obligations, such as compensating its officers and consultants through non-cash means including the issuance of stock options. If this is not achieved, the Company may be unable to obtain sufficient cash flow to fund its operations and obligations, and therefore, may be unable to continue as a going concern.

		The accompanying consolidated financial statements have been prepared on a going concern basis, and accordingly, do not include any adjustments relating to the recoverability and classification of recorded asset amounts nor do they include adjustments to the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence or be required to sell its assets.

Exploration Stage Company – As discussed in Note 1, the Company was formed in 1983. However, significant changes to the Company’s business and operations occurred from 1983 through 2002. The Company is currently in an exploration stage, which is characterized by significant expenditures for the examination and development of exploration opportunities. The Company’s focus for the foreseeable future will continue to be on exploration of various existing mineral properties and exploration of new properties.

4.		Convertible Promissory Notes – During 2003, the Company issued $85,000 of convertible promissory notes bearing interest at 5% per annum and maturing at various dates. During 2004, the Company issued an additional $158,145 of convertible promissory notes bearing interest at 5% per annum. During 2005, the Company issued $75,000 of convertible promissory notes, also bearing interest at 5% per annum. During 2005, most of these notes and the related accrued interest of $24,892 were converted into 4,063,403 shares of common stock. Conversion prices varied per agreement. One $27,000 convertible note remained unconverted at December 31, 2005 and was repaid in February 2006.

		Two of the converted notes were with related parties. One of the Company’s directors held a note totaling $15,000 which converted into 170,156 shares. Also, this director is the chief operating officer of a company which held a note totaling $40,000 that converted into 656,298 shares.

5.		Related Party Transactions – The unpaid portion of the annual compensation of the Company’s President is included in accrued liabilities in the accompanying consolidated balance sheets. The unpaid amount included in accrued liabilities is $118,000 for the six months ending June 30, 2006 and $14,500 for the year ending December 31, 2005. From time to time, the Company’s officers and directors advance monies to the Company under an unwritten arrangement accruing 5% interest annually. The unpaid balances related to these advances at June 30, 2006 and December 31, 2005 are $40,750 and $123,940, respectively. The unpaid interest related to these advances at June 30, 2006 and December 31, 2005 was $1,016 and $1,405, respectively.

		Various other related party transactions are disclosed in other notes.

Income Taxes – Income taxes are paid only to the United States government and applicable state governments. The federal and state income tax expense (benefit) consists of the following:


	Six months ended June 30,
	2006			2005
Current:
Federal	$	—		$	—
State		—			—

Total current		—			—

Deferred:
Federal		(190,039	)		(47,920	)
State		(38,008	)		(9,984	)

Total deferred		(228,047	)		(57,904	)

Less valuation allowance		228,047			57,904


Income tax expense	$	—		$	—

A reconciliation of the provision (benefit) for income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income before income taxes is as follows:


	Six months ended June 30,
	2006			2005
Net loss before taxes	$	(543,517	)	$	(142,818	)
Statutory rate		42	%		42	%

Total computed tax expense (benefit)		(228,277	)		(59,984	)
(Decrease) increase in taxes resulting from:
Temporary differences		230			2,080
Increase in valuation allowance		228,047			57,904


Income tax expense from continuing operations	$	—		$	—


Effective income tax rate		0	%		0	%

Income Taxes – continued - The deferred tax assets result from net operating loss carry-forwards. These assets will therefore reverse either upon their utilization against taxable income or upon their statutory expiration. Federal net operating loss carry-forwards of $12,369,862 and $11,952,084 remained at June 30, 2006 and 2005, respectively, and expire as follows:


	Net Operating
Expiration	Loss
2009	$	2,126,000
2010		1,695,000
2011		2,958,000
2012		1,300,000
2017		778,000
2018		573,000
2019		336,000
2020		1,368,000
2021		202,000
2022		179,000
2023		171,545
2024		161,755
2025		271,586
2026		249,976


	$	12,369,862

Supplemental Cash Flow Information – The Company paid no cash for income taxes or interest for the three and six months ended June 30, 2006 or 2005. The Company paid $10,000 in common stock pursuant to the terms of the Antelope Ridge property agreement during the three and six months ended June 30, 2006. The Company awarded non-cash compensation in the form of stock options. See footnote 8 for further discussion.

Stock Based Compensation and Other Equity Transactions – The Company does not have a stock based compensation plan in place. The Company’s compensation committee makes recommendations to the Board of Directors for the granting of awards of stock options to its officers and directors on a case-by-case basis. Prior to January 1, 2006, the Company accounted for this plan in accordance with APB 25. Therefore, no stock-based employee compensation expense for stock options was reflected in the income for the three and six months ended June 30, 2005. Had compensation cost been recorded based on the fair value at grant date, the effect on net loss would have been immaterial. In making this determination, the Company estimated the fair market value of the options issued during the three and six months ended June 30, 2005, using the Black-Scholes option pricing model with the following assumptions:


Risk-free interest rate	2.54	%
Volatility factor	17.00	%
Contractual life of options, in years	5 to 7

Stock Based Compensation and Other Equity Transactions – continued

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R),Share-Based Payments. The fair value of options issued during the three and six months ended June 30, 2006 was determined using the Black-Scholes option pricing model with the following assumptions:


	Three months ended			Six months ended
	June 30, 2006			June 30, 2006
Risk-free interest rates		4.79	%	4.43% to 4.79%
Volatility factor		22	%	22% to 26%
Contractual life of options, in years		5			5
Service period in years		1 to 3			1 to 3
Weighted average calculated value of options granted	$	0.027		$	0.032

Of those granted during the six months ended June 30, 2006, 766,667 of the 2,350,000 vested immediately; 816,667 vest in 2007; and the remainder vest in 2008. The terms of these awards are five years. Total shares able to be purchased, as they vest, is 2,350,000. If employment is terminated, the employee may exercise within 90 days only those options that vested. The fair value of these options was $75,450 at the grant date. The weighted average fair value was $11,633 at grant date. Total compensation expense for the three and six months ended June 30, 2006 equaled $9,900 and $24,700 respectively, which corresponds to the vesting schedule. As of June 30, 2006, the total compensation expense related to nonvested awards to be recognized in future periods is $50,750. It will be recognized equally as it vests on the anniversary dates of the grants during 2007 and 2008. Of those granted during the six months ended June 30, 2005, 1,241,666 of the 2,925,000 vested immediately; 841,667 will vest on the first anniversary date; 841,667 will vest on the second anniversary date. The terms of these awards range from five to seven years. Total shares able to be purchased, as they vest, is 3,425,000. The fair value of these options was immaterial at the grant date. No cash was received in exchange for any of the options awarded. Since no options have been exercised, no proceeds have been received for the six months ended June 30, 2006 and 2005. Below is a summary of the stock option activity for the six months ended June 30, 2006 and 2005:

Stock Based Compensation and Other Equity Transactions – continued


	Number of
	Shares			Weighted
	Subject to			Average
	Options			Exercise Price
Outstanding, December 31, 2004		500,000		$	0.300
Granted, February 3, 2005		2,925,000		$	0.226

Outstanding, June 30, 2005		3,425,000		$	0.236


Outstanding, December 31, 2005		3,425,000		$	0.236
Granted, February 8, 2006		1,200,000		$	0.230
Expired, April 13, 2006		(500,000	)	$	0.300
Granted, June 16, 2006		1,150,000		$	0.250

Outstanding, June 30, 2006		5,275,000		$	0.232


				Weighted
				Average
	Nonvested			Fair
	Options			Value
Nonvested Options
Nonvested options, December 31, 2005		1,683,333		$	—
Granted, February 8, 2006		1,200,000		$	0.037
Granted, June 16, 2006		1,150,000		$	0.027
Vested		(1,608,333	)	$	0.015

Nonvested options, June 30, 2006		2,425,000		$	0.019

If the options are exercised, the Company will issue stock from shares authorized but unissued. There is no policy for reserving shares to be issued upon exercise, nor is there a policy for repurchasing shares issued.

The following tables summarize information and terms of the options outstanding and exercisable:

As of June 30, 2005:

Options Outstanding

Options Exercisable

Weighted

Average

Remaining

Weighted

Remaining

Weighted

Range of

Number

Contractual

Average

Number

Contractual

Average

Exercise Prices

of Shares

Life (in years)

Exercise Price

of Shares

Life (in years)

Exercise Price

$0.20-0.30

3,425,000

4.42

0.236

1,741,667

4.093

0.243

8.		Stock Based Compensation and Other Equity Transactions – continued

		As of June 30, 2006:

Options Outstanding

Options Exercisable

Weighted

Average

Remaining

Weighted

Remaining

Weighted

Range of

Number

Contractual

Average

Number

Contractual

Average

Exercise Prices

of Shares

Life (in years)

Exercise Price

of Shares

Life (in years)

Exercise Price

$0.20-0.25

5,275,000

4.68

0.232

2,850,000

4.602

0.228

Warrants – No warrants were issued during the six months ended June 30, 2005. During the six months ended June 30, 2006, the Company issued warrants granting holders the right to purchase 6,653,666 shares of common stock. These warrants were issued with the common stock sold during that time. Other warrants were issued as independent equity instruments in lieu of cash payment for commission fees for the stock placement. The Company estimates the total fair market value of these warrants to be $151,043 at the date of grant, using the same methods and assumptions employed above in valuing the stock options. This differs from the amount reflected in the consolidated balance sheet and statement of stockholders’ deficit of $119,781 due to the allocation of the sales proceeds for the warrants sold with common stock. These proceeds were allocated based on the fair value of the stock and warrants:


Fair value of warrants issued as a unit with shares of common stock	$	95,817
Fair value of warrants issued independent of other equity instruments		55,226

Fair value as stated above	$	151,043


Fair value of stock sold in units	$	1,955,033
Fair value of warrants sold in units		95,817

Total fair value of units sold	$	2,050,850


Total proceeds received for units sold	$	1,396,500
Amount allocated to stock based on proportional method		(1,331,945	)

Amount allocated to warrants based on proportional method	$	64,555


Fair value of warrants issued independent of equity instruments	$	55,226
Amount allocated to warrants sold in units		64,555

Total value of stock warrants as stated on balance sheet	$	119,781

Outstanding total warrants at June 30, 2006 were 9,751,956. The exercise prices on all warrants range from $.08 to $.26 per share. The warrants are exercisable immediately upon issuance and the expiration dates range between one year and two years after issuance.

8.		Stock Based Compensation and Other Equity Transactions – continued

		Common Stock – The holders of the Company’s common stock are entitled to one vote for each share held of record on all matters submitted to a vote of shareholders. Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available.

		The Company did not declare or pay any cash dividends during the past two years. The Company has no present plan for the payment of any dividends.

9.		Long Lived Assets – Long lived assets are comprised of the following at June 30, 2006 and December 31, 2005:


	2006			2005
Websites	$	190,738		$	190,738
Computer equipment		1,290			—
Accumulated depreciation		(189,571	)		(189,071	)


Total long lived assets	$	2,457		$	1,667

10.		Disclosure About Fair Value of Financial Instruments by a Nonfinancial Entity –

		Accounts payable and accrued expenses — The carrying value of accounts payable and accrued expenses approximates fair value due to the short-term nature of the obligations.

		Due to directors — The carrying value of amounts due to directors approximates fair value due to the short term nature of the obligations.

		Convertible notes — The carrying amounts approximate fair value based on current market rates for notes with similar maturities and terms.

		The estimated fair values of the Company’s financial instruments are as follows as of June 30, 2006 and December 31, 2005:


	2006				2005
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Cash and cash equivalents	$	644,798	$	644,798	$	400	$	400
Accounts payable and bank overdraft	$	140,850	$	140,850	$	10,528	$	10,528
Accrued expenses	$	56,372	$	56,372	$	43,839	$	43,839
Accrued expenses — due to officers	$	122,405	$	122,405	$	264,234	$	264,234
Other liabilities	$	—	$	—	$	9,809	$	9,809
Due to directors	$	40,750	$	40,750	$	123,940	$	123,940
Convertible notes		—		—	$	27,000	$	27,000

10.		Disclosure About Fair Value of Financial Instruments by a Nonfinancial Entity – continued

		The Company determined the estimated fair value amounts by using available market information and commonly accepted valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company or holders of the instruments could realize in a current market exchange. The use of different assumptions and estimation methodologies may have a material effect on the estimated fair values.

11.		Commitments – The Company entered into various property agreements during the six months ended 2006 and the year ended 2005. These include:

		Antelope Ridge Project – On April 26, 2005, the Company entered into a ten year mining lease with an option to purchase this property. The Company must pay annual lease and option payments as follows:

By April 26, 2007: $15,000 plus $15,000 worth of Common Stock
On each subsequent anniversary date: $20,000 and $20,000 worth of Common Stock.

In addition, the Company is required to spend the following amounts on exploration and maintenance of the property as follows:


By April 26, 2007:	$	100,000
By April 26, 2008:	$	100,000

Bullion Mountain Project – Effective November 11, 2005, the Company entered into a ten year mining lease with option to purchase. Payments required on each anniversary date are as follows:


2006:	$	5,000
2007:	$	10,000
2008 and thereafter:	$	15,000

In addition, the Company is required to spend the following amounts on exploration and maintenance of the property:


By November 11, 2006:	$	20,000
By November 11, 2007:	$	50,000

The Company has the option to purchase this property at any time for $500,000, which must be exercised before production can commence. All lease, work requirement and property maintenance payments made up to this point would be deducted from this price. Also, upon exercise of the purchase option, the Company would be required to pay a 3% net smelter returns royalty on production from the property. The Company has the right to terminate this agreement at any time by giving 60 days prior written notice.

11.		Commitments – continued

		Dome-Hi-Ho Project – On April 26, 2005, the Company entered into a five year exploration agreement with an option to enter into a joint venture agreement. The agreement was amended on April 3, 2006. The Company must elect by April 26, 2011 to exercise the underlying option on 20 of the claims by paying $200,000. Subsequent annual exploration and development requirements will be:


By March 1, 2007:	$	180,000
By March 1, 2008:	$	400,000
By March 1, 2009:	$	500,000
By March 1, 2010:	$	540,000

The company is required to make the following additional payments, which are creditable against the option exercise price of $200,000:


By April 13, 2007:	$	10,000
By April 13, 2008:	$	20,000


2007		$	8,333

After the 2007 anniversary date, the annual rental amount will be increased based on the Consumer Price Index. Also, the Company would be required to pay royalties based on a graduated scale, ranging from 3.0% to 4.0% should production occur on the property.

Trinity Silver Project — The Company entered into this agreement in September 2005. In order to earn an initial 25% interest in the property, the Company must spend a total of $1,000,000 on or for the benefit of the property prior to September 2008. Not less than $125,000 of this must be spent during the second year. In order to earn an additional 26% interest in the property, the Company must spend an additional $1,000,000 prior to September 2010. This would bring the Company’s total interest to 51%. In order to earn an additional 9% interest in the property (for a total of 60%), the Company must spend an additional $2,000,000 prior to September 2013. The Company may terminate this agreement at any time upon 30 days written notice, whereupon the Company would have no further obligations or liabilities under this agreement except for certain fees. Drilling began on this project in April 2006.

Pasco Canyon Project – On February 14, 2006, the Company entered into a five year exploration agreement with an option to enter into a joint venture agreement with the property owner. The agreement requires the Company to complete $1,000,000 in exploration and development costs over a five year period as follows:


Year 1	$	50,000
Year 2	$	100,000
Year 3	$	200,000
Year 4	$	200,000
Year 5	$	450,000

11.		Commitments – continued

		Upon completion of the required expenditures the Company will have acquired a 60% undivided interest in the property. Furthermore, a formal joint venture agreement will be entered into by the Company and the owner of the property recognizes the Company as the operator of the joint venture. The Company has the right to terminate this agreement at any time, subsequent to the first year’s expenditure requirement of $50,000, by giving 30 days prior written notice.

12.		Restatement of Consolidated Financial Statements – As a result of analysis performed after the reviewed financial statements were issued, errors in various balance sheet and income statement accounts were discovered, affecting 2006 and 2005. As a result, geological and geophysical costs, general and administrative expense, compensation, professional, legal and accounting expense, and net loss were overstated for the three months and six months ended June 30, 2006. Also, exploration projects were understated and common stock and deficit accumulated during exploration stage was overstated as of June 30, 2006. Diluted earnings per share was adjusted to remove the effect of dilutive shares. The effect of the restatement on results of operations and financial position are as follows:


	As Previously						As
	Reported			Correction			Restated
As of June 30, 2006:
Exploration projects	$	120,500		$	10,000		$	130,500
Common Stock		14,162,916			(139,656	)		14,023,260
Deficit accumulated during exploration stage		(1,702,156	)		149,656			(1,552,500	)

For the three months ended June 30, 2006:
Geological and geophysical costs		351,969			(10,000	)		341,969
General and administrative expense		144,609			(121,583	)		23,026
Compensation, professional, legal and accounting		106,664			(11,200	)		95,464
Net loss		(607,498	)		142,783			(464,715	)
Earnings per share — basic		(0.012	)		0.003			(0.009	)
Earnings per share — diluted		(0.010	)		0.001			(0.009	)

For the six months ended June 30, 2006:
Geological and geophysical costs		372,474			(10,000	)		362,474
General and administrative expense		163,784			(121,766	)		42,018
Compensation, professional, legal and accounting		149,121			(17,890	)		131,231
Net loss		(693,173	)		149,656			(543,517	)
Earnings per share — basic		(0.014	)		0.003			(0.011	)
Earnings per share — diluted		(0.013	)		0.002			(0.011	)

For the six months ended June 30, 2005:
Earnings per share — diluted		(0.003	)		(0.001	)		(0.004	)


	As Previously						As
	Reported			Correction			Restated
On the consolidated statements of stockholders’ deficit:
As of June 30, 2006
Common Stock		14,162,916			(139,656	)		14,023,260
Net loss		(693,173	)		149,656			(543,517	)
Deficit Accumulated During Exploration Stage		(1,702,156	)		149,656			(1,552,500	)
Total Shareholders’ Deficit		412,029			10,000			422,029

On the consolidated statements of cash flows:
For the six months ended June 30, 2006:
Net loss		(693,173	)		149,656			(543,517	)
Payments made on exploration projects		(35,000	)		(10,000	)		(45,000	)
Sales of stock and warrants		1,451,726			(139,656	)		1,312,070

For the exploration stage period January 1, 2002 through June 30, 2006:
Net loss		(1,702,156	)		149,656			(1,552,500	)
Payments made on exploration projects		(86,000	)		(10,000	)		(96,000	)
Sales of stock and warrants		1,596,726			(139,656	)		1,457,070

13.

Subsequent Events

•

Dutch Flat Gold Project– The Company entered into an exploration agreement with an option to form a joint venture on July 2, 2006 on 114 unpatented claims in Humboldt County, Nevada. Upon signing, the agreement required a one-time payment of $35,000. The agreement requires the Company to fund $2,000,000 in exploration costs over a five year period as follows:

Year 1 $200,000
Year 2 $300,000
Year 3 $500,000
Year 4 $500,000
Year 5 $500,000

Upon completion of the first year’s work requirement, the Company may terminate this agreement at any time on 30 days notice. Upon completion of the $2,000,000 in exploration expenditures over the 5-year period, the Company shall have earned a 51% interest in the property and can then elect to either 1) form a joint venture at that point whereby the Company owns 51%, or 2) earn an additional 19% interest in property by funding a positive feasibility study and then form a joint venture. The Company would be the operator of the joint venture. Six of these claims are subject to a 1.5% net smelter returns royalty. Another company, in which one of the Company’s Directors has an interest, holds a 1% net smelter returns royalty on another sixteen of these claims.

Current Reports on Form 8-K

On November 3, 2006, we filed a Current Report on Form 8-K disclosing the resignation of Pratt-Thomas & Gumb, CPAs as our independent auditor effective November 1, 2006 and the appointment of Dale Matheson Carr-Hilton Labonte, Chartered Accountants as our independent auditor effective November 1, 2006.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 31, 2006

PIEDMONT MINING COMPANY, INC.

(Exact name of registrant as specified in its charter)


North Carolina	333-135376	56-1378516
(State or other jurisdiction of	(Commission File No.)	(IRS Employer Identification No.)
incorporation)

18124 Wedge Parkway, Suite 214
Reno, NV 89511

(Address and telephone number of principal executive offices) (Zip Code)

(212)734-9848

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o		Soliciting material pursuant to Rule 4a-12 under the Exchange Act (17 CFR 240.14a-12)

o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 4 – Matters Related to Accountants and Financial Statements

Item 4.01.Changes in Registrant’s Certifying Accountant

(a) Previous Independent Accountants

On October 31, 2006, Piedmont Mining Company, Inc. (the “Company”) received written notice of Pratt-Thomas & Gumb, CPAs (“Pratt-Thomas”) that it would be resigning as the Company’s independent accountant following Pratt-Thomas’ review for the quarter ended September 30, 2006.

Pratt-Thomas’ report on the Company’s consolidated financial statements for the fiscal year ended December 31, 2004 and December 31, 2005, and further through the subsequent interim periods ended March 31, 2006, June 30, 2006 and September 30, 2006 did not contain an adverse opinion or disclaimer of opinion, or was modified as to uncertainty, audit scope or accounting principles, however, they were modified to include an explanatory paragraph wherein they expressed substantial doubt about the Registrant’s ability to continue as a going concern.

During the period from May 2005 through fiscal year ended December 31, 2005, and further through the subsequent interim periods ended March 31, 2006, June 30, 2006 and September 30, 2006, there have been no disagreements with Pratt-Thomas on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement if not resolved to the satisfaction of Pratt-Thomas, would have caused them to make reference to the subject matter of the disagreement(s) in connection with their report.

During the period May 2005 through fiscal year ended December 31, 2005, and further through the subsequent interim periods ended March 31, 2006, June 30, 2006 and September 30, 2006, Pratt-Thomas did not advise the Company on any matter set forth in Item 304(a)(1)(iv)(B) of Regulation S-B.

The Company requested that Pratt-Thomas furnish it with a letter addressed to the SEC stating whether or not it agrees with the above statements. A copy of such letter is filed as Exhibit 16.1 to this Form 8-K.

(b) New Independent Accountants

On November 1, 2006, the Company engaged Dale Matheson Carr-Hilton Labonte, Chartered Accountants to audit its financial statements for the year ended December 31, 2006. During the two most recent fiscal years end December 31, 2004 and December 31, 2005, and through November 1, 2006, the Company did not consult with Dale Matheson Carr-Hilton Labonte, Chartered Accountants regarding (i) the application of accounting principles to a specific transaction, either completed or contemplated transaction, or the type of audit opinion that might be rendered on the Company’s financial statements, and no written report or oral advice was provided to the Company by concluding there was an important factor to be considered by the Company in reaching a decision as to an accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement, as that term is defined in Item 304 (a)(1)(iv)(A) of Regulation S-B or an event, as that term is defined in Item 304 (a)(1)(iv)(B) of Regulation S-B.

Section 9 – Financial Statements and Exhibits

Item 9.01.Financial Statements and Exhibits


Exhibit		Description

16.1		Letter from Pratt-Thomas & Gumb, CPAs

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


		PIEDMONT MINING COMPANY, INC., a North Carolina Corporation

Dated: November 2, 2006		/s/ Robert M. Shields, Jr.
		Robert M. Shields, Jr.
		Chief Executive Officer, Chief Financial Officer,
		President, Director, Chairman of the Board of Directors

EXHIBIT INDEX


Exhibit No.		Exhibit Description

16.1		Letter from Pratt-Thomas & Gumb, CPAs

Exhibit 16.1

October 31, 2006

Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549


Re:		Form 8-K dated October 31, 2006
		Filed by Piedmont Mining Company, Inc.

Ladies and Gentlemen:

We have read the disclosure entitled “Changes in Registrant’s Certifying Accountants” included Piedmont Mining Company, Inc.’s Form 8-K dated October 31, 2006, and we agree with the statements made in the that disclosure.

Very truly yours,

/s/ Pratt-Thomas & Gumb, CPAs

Pratt-Thomas & Gumb, CPAs

Charleston, South Carolina

Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2006

On October 31, 2006, we filed the Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2006.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2006


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. 333-135376

PIEDMONT MINING COMPANY, INC.

(Exact Name of Registrant as Specified in Its Charter)


North Carolina		56-1378516

(State or Other Jurisdiction		(I.R.S. Employer Identification
Of Incorporation or Organization)		Number)

18124 Wedge Parkway, Suite 214
Reno, Nevada		89511

(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code(212) 734-9848

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. Yesþ Noo

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

As of October 26, 2006, there were 53,963,660 outstanding shares of the issuer’s common stock.

Transitional Small Business Disclosure Format (Check one): Yeso Noþ

PIEDMONT MINING COMPANY, INC.

FORM 10-QSB INDEX


	Page Number

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 2006 (Unaudited) and December 31, 2005		3
Consolidated Statements of Loss (Unaudited) for the Nine and Three Months Ended September 30, 2006 and 2005		4
Consolidated Statements of Stockholders’ Deficit (Unaudited) For the Nine Months Ended September 30, 2006 For the Year Ended December 31, 2005		5
Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2006 and 2005		6
Notes to Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis or Plan of Operation		20
Item 3. Controls and Procedures		24

PART II — OTHER INFORMATION
Item 1. Legal Proceedings		25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		25
Item 3. Defaults Upon Senior Securities		25
Item 4. Submission of Matters to a Vote of Security Holders		25
Item 5. Other Information		25
Item 6. Exhibits		26
Signature Page		27

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

PIEDMONT MINING COMPANY, INC.
(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2006 (UNAUDITED) and DECEMBER 31, 2005


	September 30,			December 31,
	2006			2005
	(unaudited)			(audited)

ASSETS
Current Assets
Cash and cash equivalents	$	123,209		$	400
Prepaid expenses and other		31,942			20,559


Total Current Assets		155,151			20,959


Long Lived Assets, net		1,992			1,667

Other Assets
Exploration projects		172,167			75,500


Total Assets	$	329,310		$	98,126

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current Liabilities
Accounts payable	$	19,001		$	2,281
Bank overdraft		—			8,247
Accrued expenses		51,504			43,839
Accrued expenses — due to officers		107,164			264,234
Other liabilities		—			9,809
Due to directors		—			123,940
Convertible notes		—			27,000


Total Current Liabilities		177,669			479,350


Stockholders’ Deficit
Preferred stock, $1.00 par value; 25,000,000 shares authorized; no shares issued or outstanding at September 30, 2006 and December 31, 2005		—			—
Common stock, no par value; 100,000,000 shares authorized; 53,963,660 shares issued and outstanding at September 30, 2006; 43,958,041 shares issued and outstanding at December 31, 2005		14,057,188			12,820,971
Contributed capital		371,075			371,075
Contributed capital — stock warrants		119,781			—
Contributed capital — stock options		24,700			—
Accumulated deficit		(12,564,287	)		(12,564,287	)
Deficit accumulated during exploration stage		(1,856,816	)		(1,008,983	)


Total Stockholders’ Equity (Deficit)		151,641			(381,224	)


Total Liabilities and Stockholders’ Equity (Deficit)	$	329,310		$	98,126

See accompanying notes.

PIEDMONT MINING COMPANY, INC.
(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF LOSS (UNAUDITED)

FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005


													Exploration
													Stage Period
	Three Months Ended						Nine Months Ended						January 1, 2002
	September 30,						September 30,						through
	2006 (unaudited)			2005 (unaudited)			2006 (unaudited)			2005 (unaudited)			September 30, 2006
Operating Expenses
General and administrative	$	22,735		$	10,900		$	64,753		$	43,696		$	335,160
Compensation, professional, legal and accounting		108,442			25,346			239,673			77,126			482,431
Depreciation expense		465			250			965			750			143,102
Research and development		2,313			3,550			10,881			19,841			69,997
Exploration, geological and geophysical costs		171,760			92,812			534,234			125,754			748,291


Loss from operations		(305,715	)		(132,858	)		(850,506	)		(267,167	)		(1,778,981	)

Other Income (Expense)
Interest income		2,039			—			5,587			22			5,619
Interest expense		(690	)		(6,935	)		(3,183	)		(18,635	)		(37,133	)
Other income		50			472			269			3,641			269
Gain on sale of historic gold bar and mineral rights		—			—			—			—			46,410
Loss on legal and note receivable settlements		—			—			—			—			(93,000	)


Total other income, net		1,399			(6,463	)		2,673			(14,972	)		(77,835	)


Net Loss	$	(304,316	)	$	(139,321	)	$	(847,833	)	$	(282,139	)	$	(1,856,816	)


Loss per share
Basic	$	(0.006	)	$	(0.004	)	$	(0.017	)	$	(0.007	)

Diluted	$	(0.006	)	$	(0.004	)	$	(0.017	)	$	(0.007	)

See accompanying notes.

PIEDMONT MINING COMPANY, INC.
(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006

FOR THE YEAR ENDED DECEMBER 31, 2005


														Deficit
							Contributed		Contributed					Accumulated
							Capital-		Capital-					During			Total
	Common Stock				Contributed		Stock		Stock		Accumulated			Exploration			Shareholders
	No. of Shares		$		Capital		Warrants		Options		Deficit			Stage			Deficit
Balance, December 31, 2004		37,152,646	$	12,335,434	$	371,075	$	—	$	—	$	(12,564,287	)	$	(546,094	)	$	(403,872	)
Stock issued upon conversion of debt		4,063,403		316,037		—		—		—		—			—			316,037
Sales of stock		2,441,992		145,000		—		—		—		—			—			145,000
Payments in stock on exploration projects		300,000		24,500		—		—		—		—			—			24,500
Net loss		—		—		—		—		—		—			(462,889	)		(462,889	)

Balance, December 31, 2005		43,958,041		12,820,971		371,075		—		—		(12,564,287	)		(1,008,983	)		(381,224	)
Sales of stock, net of issuance costs		10,005,619		1,236,217		—		—		—		—			—			1,236,217
Issuance of stock warrants		—		—		—		119,781		—		—			—			119,781
Stock-based compensation		—		—		—		—		24,700		—			—			24,700
Net loss		—		—		—		—		—		—			(847,833	)		(847,833	)


Balance, September 30, 2006		53,963,660	$	14,057,188	$	371,075	$	119,781	$	24,700	$	(12,564,287	)	$	(1,856,816	)	$	151,641

See accompanying notes.

PIEDMONT MINING COMPANY, INC.
(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005


								Exploration Stage
								Period January 1,
	Nine Months Ended							2002
	September 30,							through
	2006				2005			September 30, 2006
Cash Flows from Operating Activities:
Net loss	$	(847,833	)	��	$	(282,139	)	$	(1,856,816	)

Adjustments to reconcile net loss to net cash used in operating activities:
Gain on sale of mineral rights		—				—			(40,000	)
Loss on settlement of note receivable		—				—			19,000
Stock-based compensation		24,700				—			24,700
Depreciation		965				750			143,102
Changes due to (increase) decrease in operating assets:
Prepaid expenses and other		(11,383	)			(7,600	)		(28,993	)
Changes due to increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		(132,685	)			100,719			138,213
Bank overdraft		(8,247	)			—			—
Other liabilities		(9,809	)			(9,563	)		—


Net cash used in operating activities		(984,292	)			(197,833	)		(1,600,794	)

Cash Flows from Investing Activities:
Purchase of long lived assets		(1,290	)			—			(4,290	)
Proceeds from note receivable		—				—			57,125
Proceeds from sale of mineral rights		—				—			40,000
Payments made on exploration projects		(86,667	)			(51,000	)		(137,667	)


Net cash used in investing activities		(87,957	)			(51,000	)		(44,832	)

Cash Flows from Financing Activities:
Sales of stock and warrants, net of issuance costs		1,345,998				125,000			1,490,998
Payments on convertible debt		(27,000	)			—			(27,000	)
Proceeds on convertible debt		—				75,000			318,145
Proceeds from revolving note — due to officer and advances from directors		—				54,500			157,309
Payments on revolving note — due to officer and advances from directors		(123,940	)			—			(171,314	)


Net cash provided by financing activities		1,195,058				254,500			1,768,138


Net increase in cash and cash equivalents		122,809				5,667			122,512
Cash and cash equivalents at beginning of period		400				1,041			697


Cash and cash equivalents at end of period	$	123,209			$	6,708		$	123,209

See accompanying notes.

Nature of Business and Significant Accounting Policies

	a.		Nature of Business — Piedmont Mining Company, Inc. (the Company) was incorporated in 1983 under the laws of North Carolina and is an exploration stage company engaged in the exploration for gold and silver. All properties currently under exploration are located in Nevada.

	b.		Basis of Presentation — The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

	c.		Basis of Consolidation — The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, NetColony, LLC and Piedmont Gold Company, Inc. Neither subsidiary has material operations, tangible assets or liabilities. All significant intercompany accounts and transactions, if any, have been eliminated in consolidation.

	d.		Use of Estimates — The 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 certain reported amounts and disclosures, such as the allowance for doubtful accounts and various accruals. Accordingly, actual results could differ from those estimates.

	e.		Long Lived Assets — Long lived assets are comprised of websites and equipment. They are recorded at cost and depreciated using the straight-line basis over their useful lives. Depreciation expense for the three and nine months ended September 30, 2006 was $465 and $965, respectively. Depreciation expense for the three and nine months ended September 30, 2005 was $250 and $750, respectively.

	f.		Cash and Cash Equivalents — For purposes of the statement of cash flows, the Company considers all holdings of highly liquid investments with original maturities of three months or less and investments in money market funds to be cash equivalents. At September 30, 2006, the Company’s cash in bank balances exceeded the federally insured limits by $35,291.

	g.		Advertising —The Company expenses advertising costs as they are incurred. Advertising expenses for the three and nine months ended September 30, 2006 were $4,985 and $11,453 respectively. No advertising expenses were incurred during the three and nine months ended September 30, 2005.

	h.		Research and Development Costs and Exploration Projects — Pursuant toEmerging Issues Task Force (EITF) 04-02 mineral rights are capitalized at cost. This includes lease payments under exploration agreements. The projects are assessed for write-off when facts and circumstances indicate their carrying values exceed their recoverable values, such as failure to discover mineable ore. If a mineable ore body is found, these costs will be amortized when production begins using a units-of-production method. These costs are recorded to exploration projects on the consolidated balance sheets. Other exploration and geological costs and research and development costs are expensed as incurred.

	i.		Net Loss Per Share — In accordance with Statement of Financial Accounting Standard (SFAS) No. 128,Earnings Per Share,and SEC Staff Accounting Bulletin No. 98, basic earnings/loss per common share (EPS) is computed by dividing net loss for the period by the weighted average number of common shares outstanding during the period. Under SFAS 128, diluted earnings/loss per share is computed by dividing the net loss for the period, with interest expense added back, by the weighted average number of common and common equivalent shares, such as stock options and warrants, outstanding during the period.

Nature of Business and Significant Accounting Policies — continued

	i.		Net Loss Per Share — continued — Net loss used in determining basic EPS was ($304,316) and ($847,833) for the three and nine months ended September 30, 2006 and ($139,321) and ($282,139) for the three and nine months ended September 30, 2005. The weighted average number of shares of common stock used in determining basic EPS was 53.62 and 50.18 million for the three and nine months ended September 30, 2006 and 38.47 and 37.62 million for the three and nine months ended September 30, 2005.

			Net loss used in determining diluted EPS was ($304,316) and ($847,833) for the three and nine months ended September 30, 2006 and ($136,675) and ($275,611) for the three and nine months ended September 30, 2005. The weighted average number of shares of common stock used in determining diluted EPS was 53.62 and 50.18 million for the three and nine months ended September 30, 2006 and 38.47 and 37.62 million for the three and nine months ended September 30, 2005.

	j.		Income Taxes — The Company provides for income taxes under SFAS 109, “Accounting for Income Taxes,” which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities using the enacted income tax rate expected to apply to taxable income in the period in which the deferred tax liability or asset is expected to be settled or realized. SFAS 109 requires that a valuation allowance be established if necessary, to reduce the deferred tax assets to the amount that management believes is more likely than not to be realized. The provision for federal income tax differs from that computed by applying federal statutory rates to income before federal income tax expense mainly due to expenses that are not deductible and income that is not taxable for federal income taxes, including permanent differences such as non-deductible meals and entertainment.

	k.		Stock Options — Prior to January 1, 2006, the Company followed Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25), and related interpretations in accounting for stock options issued to employees and directors. Under APB 25, when the exercise price of stock options equals or is less than the fair market value of the underlying stock of the date of grant, no compensation expense is recognized. For options issued to service providers, the Company follows SFAS No. 123,Accounting for Stock-Based Compensation, which requires recording the options at the fair value of the service provided.

			Beginning January 1, 2006, the Company adopted SFAS 123(R),Share-Based Payment, which calls for recording stock-based compensation under the fair value method for stock options awarded to employees.

2.		Going Concern — The Company has had no revenues or cash flow from operations. This is because the Company is an exploration stage company, exploring mineral properties but not yet generating any revenue from those properties. These factors create an uncertainty as to how the Company will fund its operations and maintain sufficient cash flow to operate as a going concern.

		In response to these adverse conditions, management is continuing to look for financing from various sources, including private placements from investors and institutions. Management believes these efforts will contribute toward funding the Company’s activities until revenue can be earned from the properties or a sale can be consummated. The Company’s ability to meet its cash requirements in the next year is dependent upon obtaining this financing and satisfying certain obligations, such as compensating its officers and consultants through non-cash means including the issuance of stock options. If this is not achieved, the Company may be unable to obtain sufficient cash flow to fund its operations and obligations, and therefore, may be unable to continue as a going concern.

2.		Going Concern —continued

		The accompanying consolidated financial statements have been prepared on a going concern basis, and accordingly, do not include any adjustments relating to the recoverability and classification of recorded asset amounts nor do they include adjustments to the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence or be required to sell its assets.

3.		Exploration Stage Company — As discussed in Note 1, the Company was formed in 1983. However, significant changes to the Company’s business and operations occurred from 1983 through 2002. The Company is currently in an exploration stage, which is characterized by significant expenditures for the examination and development of exploration opportunities. The Company’s focus for the foreseeable future will continue to be on exploration of various existing mineral properties and exploration of new properties.

4.		Convertible Promissory Notes — During 2003, the Company issued $85,000 of convertible promissory notes bearing interest at 5% per annum and maturing at various dates. During 2004, the Company issued an additional $158,145 of convertible promissory notes bearing interest at 5% per annum. During 2005, the Company issued $75,000 of convertible promissory notes, also bearing interest at 5% per annum. During 2005, most of these notes and the related accrued interest of $24,892 were converted into 4,063,403 shares of common stock. Conversion prices varied per agreement. One $27,000 convertible note remained unconverted at December 31, 2005 and was repaid in February 2006.

		Two of the converted notes were with related parties. One of the Company’s directors held a note totaling $15,000 which converted into 170,156 shares. Also, this director is the chief operating officer of a company which held a note totaling $40,000 that converted into 656,298 shares.

5.		Related Party Transactions — The unpaid portion of the annual compensation of the Company’s President is included in accrued liabilities in the accompanying consolidated balance sheets. The unpaid amount included in accrued liabilities is $105,000 at September 30, 2006 and $14,500 at December 31, 2005. From time to time, the Company’s officers and directors advance monies to the Company under an unwritten arrangement accruing 5% interest annually. The unpaid balances related to these advances at September 30, 2006 and December 31, 2005 are $0 and $123,940, respectively. The unpaid interest related to these advances at September 30, 2006 and December 31, 2005 was $0 and $1,405, respectively. The Company pays rent for office space to the President, which totaled $3,600 and $10,400 for the three and nine months ended September 30, 2006 and $3,000 and $9,000 for the three and nine months ended September 30, 2005.

		Various other related party transactions are disclosed in other notes.

Income Taxes — Income taxes are paid only to the United States government and applicable state governments. The federal and state income tax expense (benefit) consists of the following:


	Nine months ended September 30,
	2006			2005
Current:
Federal	$	—		$	—
State		—			—

Total current		—			—

Deferred:
Federal		(363,489	)		(58,374	)
State		(72,698	)		(11,675	)

Total deferred		(436,187	)		(70,049	)

Less valuation allowance		436,187			70,049


Income tax expense	$	—		$	—

A reconciliation of the provision (benefit) for income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income before income taxes is as follows:


	Nine months ended September 30,
	2006			2005
Net loss before taxes	$	(847,833	)	$	(281,758	)
Statutory rate		42	%		42	%

Total computed tax expense (benefit)		(356,090	)		(118,338	)
(Decrease) increase in taxes resulting from:
Temporary differences		(80,097	)		48,289
Increase in valuation allowance		436,187			70,049


Income tax expense from continuing operations	$	—		$	—


Effective income tax rate		0	%		0	%

Income Taxes — continued — The deferred tax assets result from net operating loss carry-forwards. These assets will therefore reverse either upon their utilization against taxable income or upon their statutory expiration. Federal net operating loss carry-forwards of $12,536,743 remained at September 30, 2006, and expire as follows:


	Net Operating
Expiration	Loss
2009	$	2,126,000
2010		1,695,000
2011		2,958,000
2012		1,300,000
2017		778,000
2018		573,000
2019		336,000
2020		1,368,000
2021		202,000
2022		179,000
2023		171,545
2024		161,755
2025		271,586
2026		416,857


	$	12,536,743

		The Company’s deferred tax asset as of September 30, 2006 and December 31, 2005 was $5,526,539 and $5,094,585, respectively. These were fully offset by valuation allowances, resulting in a net deferred tax asset of $0 for each period.

7.		Supplemental Cash Flow Information — The Company paid no cash for income taxes or interest for the three and nine months ended September 30, 2006 or 2005. The Company paid $10,000 in common stock pursuant to the terms of the Antelope Ridge property agreement during the three and nine months ended September 30, 2006 and $24,500 in common stock pursuant to the terms of various other property agreements during the nine months ended September 30, 2005. The Company converted promissory notes totaling $172,285 in principal and interest to common stock during the nine months ended September 30, 2005. The Company awarded non-cash compensation in the form of stock options. See footnote 8 for further discussion.

Stock Based Compensation and Other Equity Transactions — The Company does not have a stock based compensation plan in place. The Company’s compensation committee makes recommendations to the Board of Directors for the granting of awards of stock options to its officers and directors on a case-by-case basis. Prior to January 1, 2006, the Company accounted for this plan in accordance with APB 25. Therefore, no stock-based employee compensation expense for stock options was reflected in the income for the three and nine months ended September 30, 2005. Had compensation cost been recorded based on the fair value at grant date, the effect on net loss would have been immaterial. In making this determination, the Company estimated the fair market value of the options issued during the three and nine months ended September 30, 2005, using the Black-Scholes option pricing model with the following assumptions:

8. Stock Based Compensation and Other Equity Transactions — continued


Risk-free interest rate	2.54	%
Volatility factor	17.00	%
Contractual life of options, in years	5 to 7

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R),Share-Based Payments. The fair value of options issued during the three and nine months ended September 30, 2006 was determined using the Black-Scholes option pricing model with the following assumptions:


	Three months			Nine months
	ended			ended
	September 30, 2006			September 30, 2006
Risk-free interest rates		4.79	%	4.43% to 4.79%
Volatility factor		22	%	22% to 26%
Contractual life of options, in years		5			5
Service period in years		1 to 3			1 to 3
Weighted average calculated
value of options granted	$	0.027		$	0.032

Of those granted during the nine months ended September 30, 2006, 766,667 of the 2,350,000 vested immediately; 816,667 vest in 2007; and the remainder vest in 2008. The terms of these awards are five years. Total shares able to be purchased, as they vest, is 2,350,000. If employment is terminated, the employee may exercise within 90 days only those options that vested. The fair value of these options was $75,450 at the grant date. Total compensation expense for the three and nine months ended September 30, 2006 equaled $9,900 and $24,700 respectively, which corresponds to the vesting schedule. As of September 30, 2006, the total compensation expense related to nonvested awards to be recognized in future periods is $50,750. It will be recognized equally as it vests on the anniversary dates of the grants during 2007 and 2008. Of those granted during the nine months ended September 30, 2005, 1,241,666 of the 2,925,000 vested immediately; 841,667 will vest on the first anniversary date; 841,667 will vest on the second anniversary date. The terms of these awards range from five to seven years. Total shares able to be purchased, as they vest, is 3,425,000. The fair value of these options was immaterial at the grant date. No cash was received in exchange for any of the options awarded. Since no options have been exercised, no proceeds have been received for the nine months ended September 30, 2006 and 2005. Below is a summary of the stock option activity for the nine months ended September 30, 2006 and 2005:

Stock Based Compensation and Other Equity Transactions — continued


	Number of
	Shares			Weighted
	Subject to			Average
	Options			Exercise Price
Outstanding, December 31, 2004		500,000		$	0.300
Granted, February 3, 2005		2,925,000		$	0.226

Outstanding, September 30, 2005		3,425,000		$	0.236


Outstanding, December 31, 2005		3,425,000		$	0.236
Granted, February 8, 2006		1,200,000		$	0.230
Expired, April 13, 2006		(500,000	)	$	0.300
Granted, June 16, 2006		1,150,000		$	0.250

Outstanding, September 30, 2006		5,275,000		$	0.232


				Weighted
				Average
	Nonvested			Fair
	Options			Value
Nonvested Options
Nonvested options, December 31, 2005		1,683,333		$	—
Granted, February 8, 2006		1,200,000		$	0.037
Granted, June 16, 2006		1,150,000		$	0.027
Vested		(1,608,333	)	$	0.015

Nonvested options, September 30, 2006		2,425,000		$	0.019

The following tables summarize information and terms of the options outstanding and exercisable:

As of September 30, 2005:

Options Outstanding

Options Exercisable

Weighted

Average

Remaining

Weighted

Remaining

Weighted

Range of

Number

Contractual

Average

Number

Contractual

Average

Exercise Prices

of Shares

Life (in years)

Exercise Price

of Shares

Life (in years)

Exercise Price

$0.20-0.30

3,425,000

4.42

0.236

1,741,667

4.093

0.243

8.		Stock Based Compensation and Other Equity Transactions — continued

		As of September 30, 2006:

Options Outstanding

Options Exercisable

Weighted

Average

Remaining

Weighted

Remaining

Weighted

Range of

Number

Contractual

Average

Number

Contractual

Average

Exercise Prices

of Shares

Life (in years)

Exercise Price

of Shares

Life (in years)

Exercise Price

$0.20-0.25

5,275,000

4.68

0.232

2,850,000

4.602

0.228

Warrants — Warrants granting holders the right to purchase 2,175,325 shares were issued during the nine months ended September 30, 2005. The company estimated the total fair market value of these warrants to be immaterial at the date of grant, using the assumptions employed above in valuing the stock options. No warrants were exercised during the nine months ended September 30, 2005. During the nine months ended September 30, 2006, the Company issued warrants granting holders the right to purchase 6,653,666 shares of common stock. These warrants were issued with the common stock sold during that time. Other warrants were issued as independent equity instruments in lieu of cash payment for commission fees for the stock placement. The Company estimates the total fair market value of these warrants to be $151,043 at the date of grant, using the same methods and assumptions employed above in valuing the stock options. This differs from the amount reflected in the consolidated balance sheet and statement of stockholders’ deficit of $119,781 due to the allocation of the sales proceeds for the warrants sold with common stock. These proceeds were allocated based on the fair value of the stock and warrants:


Fair value of warrants issued as a unit with shares of common stock	$	95,817
Fair value of warrants issued independent of other equity instruments		55,226

Fair value as stated above	$	151,043


Fair value of stock sold in units	$	1,955,033
Fair value of warrants sold in units		95,817

Total fair value of units sold	$	2,050,850


Total proceeds received for units sold	$	1,396,500
Amount allocated to stock based on proportional method		1,331,945

Amount allocated to warrants based on proportional method	$	64,555


Fair value of warrants issued independent of equity instruments	$	55,226
Amount allocated to warrants sold in units		64,555

Total value of stock warrants as stated on balance sheet	$	119,781

Stock Based Compensation and Other Equity Transactions — continued

During the nine months ended September 30, 2006, holders exercised warrants totaling 357,143 shares at an exercise price of $0.095 per share. Outstanding total warrants at September 30, 2006 were 9,394,813. The exercise prices on all warrants range from $.08 to $.26 per share. The warrants are exercisable immediately upon issuance and the expiration dates range between one year and two years after issuance.

		Common Stock — The holders of the Company’s common stock are entitled to one vote for each share held of record on all matters submitted to a vote of shareholders. Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors out of funds legally available.

		The Company did not declare or pay any cash dividends during the past two years. The Company has no present plan for the payment of any dividends.

9.		Long Lived Assets — Long lived assets are comprised of the following at September 30, 2006 and December 31, 2005:


	2006			2005
Websites	$	190,738		$	190,738
Computer equipment		1,290			—
Accumulated depreciation		(190,036	)		(189,071	)


Long lived assets, net	$	1,992		$	1,667

10.		Disclosure About Fair Value of Financial Instruments by a Nonfinancial Entity —

		Accounts payable and accrued expenses — The carrying value of accounts payable and accrued expenses approximates fair value due to the short-term nature of the obligations.

		Due to directors — The carrying value of amounts due to directors approximates fair value due to the short term nature of the obligations.

		Convertible notes — The carrying amounts approximate fair value based on current market rates for notes with similar maturities and terms.

		The estimated fair values of the Company’s financial instruments are as follows as of September 30, 2006 and December 31, 2005:


	2006				2005
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Cash and cash equivalents	$	123,209	$	123,209	$	400	$	400
Accounts payable and bank overdraft	$	19,001	$	19,001	$	10,528	$	10,528
Accrued expenses	$	51,504	$	51,504	$	43,839	$	43,839
Accrued expenses — due to officers	$	107,164	$	107,164	$	264,234	$	264,234
Other liabilities	$	—	$	—	$	9,809	$	9,809
Due to directors	$	—	$	—	$	123,940	$	123,940
Convertible notes	$	—	$	—	$	27,000	$	27,000

		The Company determined the estimated fair value amounts by using available market information and commonly accepted valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company or holders of the instruments could realize in a current market exchange. The use of different assumptions and estimation methodologies may have a material effect on the estimated fair values.

11.		Commitments — The Company entered into various property agreements during the nine months ended September 30, 2006 and the year ended 2005. These include:

		Antelope Ridge Project — On April 26, 2005, the Company entered into a ten year mining lease with an option to purchase this property. The Company must pay annual lease and option payments as follows:

By April 26, 2007: $15,000 plus $15,000 worth of Common Stock
On each subsequent anniversary date: $20,000 and $20,000 worth of Common Stock.

In addition, the Company is required to spend the following amounts on exploration and maintenance of the property as follows:


By April 26, 2007:	$	100,000
By April 26, 2008:	$	100,000

11.

Commitments — continued

Bullion Mountain Project — Effective November 11, 2005, the Company entered into a ten year mining lease with option to purchase. Payments required on each anniversary date are as follows:


2006:	$	5,000
2007:	$	10,000
2008 and thereafter:	$	15,000

In addition, the Company is required to spend the following amounts on exploration and maintenance of the property:


By November 11, 2006:	$	20,000
By November 11, 2007:	$	50,000

Dome-Hi-Ho Project — On April 26, 2005, the Company entered into a five year exploration agreement with an option to enter into a joint venture agreement. The agreement was amended on April 3, 2006. The Company must elect by April 26, 2011 to exercise the underlying option on 20 of the claims by paying $200,000. Subsequent annual exploration and development requirements will be:


By March 1, 2007:	$	180,000
By March 1, 2008:	$	400,000
By March 1, 2009:	$	500,000
By March 1, 2010:	$	540,000

The Company is required to make the following additional payments, which are creditable against the option exercise price of $200,000:


By April 13, 2007:	$	10,000
By April 13, 2008:	$	20,000

11.		Commitments — continued

		Upon performance of the above requirements, the Company will be granted a 51% interest in the property. In addition, the Company is obligated to pay the underlying claims maintenance and property holding costs as well as annual rental payments under a pre-existing lease agreement with a third party. The term of this lease is twenty years, beginning July 21, 2003. The Company will therefore be required to pay the following lease amounts:


2007		$	8,333

Pasco Canyon Project — On February 14, 2006, the Company entered into a five year exploration agreement with an option to enter into a joint venture agreement with the property owner. The agreement requires the Company to complete $1,000,000 in exploration and development costs over a five year period as follows:


Year 1	$	50,000
Year 2	$	100,000
Year 3	$	200,000
Year 4	$	200,000
Year 5	$	450,000

Upon completion of the required expenditures the Company will have acquired a 60% undivided interest in the property. Furthermore, a formal joint venture agreement will be entered into by the Company and the owner of the property recognizes the Company as the operator of the joint venture. The Company has the right to terminate this agreement at any time, subsequent to the first year’s expenditure requirement of $50,000, by giving 30 days prior written notice.

Dutch Flat Gold Project— The Company entered into an exploration agreement with an option to form a joint venture on July 2, 2006, on 114 unpatented claims in Humboldt County, Nevada. Upon signing, the agreement required a one-time payment of $35,000. The agreement requires the Company to fund $2,000,000 in exploration costs over a five year period as follows:


Year 1	$	200,000
Year 2	$	300,000
Year 3	$	500,000

11. Commitments — continued


Year 5	$	500,000
Year 4	$	500,000

Item 2. Management’s Discussion And Analysis Or Plan Of Operation

Forward-Looking Statements and Associated Risks.Except for statements of historical facts, this report contains forward-looking statements involving risks and uncertainties. You can identify these statements by forward-looking words including “believes,” “considers,” “intends,” “expects,” “may,” “will,” “should,” “forecast, “ or “anticipates,” or the equivalents of those words or comparable terminology, and by discussions of strategies that involve risks and uncertainties. Forward-looking statements are not guarantees of our future performance or results, and our actual results could differ materially from those anticipated in these forward-looking statements. We wish to caution readers to consider the important factors, among others, that in some cases have affected, and in the future could affect, our actual results and could cause actual consolidated results for future fiscal years to differ materially from those expressed in any forward-looking statements made by us or on our behalf. These factors include without limitation, our ability to obtain capital and other financing in the amounts and at the times needed, identification of suitable exploration properties for acquisition, the successful discovery of gold, silver or other precious metals in quantities economically feasible for profitable production, changes in gold and silver prices, changes in the political climate for gold and silver exploration, and other risk factors listed from time to time in our Securities and Exchange Commission reports, including in particular the factors and discussions under the heading “Risk Factors” in the SB-2/A filed with the Securities and Exchange Commission on September 14, 2006.

Overview of Business

We are a North Carolina corporation formed in 1983. From our inception until mid-1992, we were engaged in the exploration for, and production of, gold and other precious metals and the evaluation of gold properties in North and South Carolina. From 1983 we were engaged in exploration and from early 1985 until May 1992, we were also engaged in the mining and production of gold and silver at our Haile Mine Property near Kershaw, South Carolina. In May 1992, we entered into a joint venture at our Haile Mine Property with AGI. Our operations ceased at the Haile Mine Property in 1994 and litigation commenced between us and AGI in 1995. This litigation was settled in March 1999. We did not again become engaged in exploration activities until 2004, when we relocated our principal place of business to Reno, Nevada. Since October 2003, we have been an exploration stage company engaged in the acquisition and exploration of mineral properties. We have now entered into option and earn-in agreements on five different exploration properties in the state of Nevada. Our plan is to conduct exploration for gold and silver at each of these properties to assess whether they possess economic deposits of gold and/or silver, which can be recovered at a profit. We do not intend to build an exploration staff, but rather to joint venture our projects with competent exploration groups who can manage the exploration activities with our funding, although in some cases we may conduct exploration on our own using contractors. We do not know whether a commercially viable ore body will be located on any of our mineral claims or leased properties. Our current plans are strictly limited to research and exploration in the state of Nevada.

Going Concern

The report of our independent auditors in our December 31, 2005 financial statements includes an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern due to recurring losses from operations, an accumulated deficit of $13,573,270 and a working capital deficit of $458,391 at December 31, 2005. Our ability to continue as a going concern will be determined by our ability to raise adequate funds and conduct one or more successful exploration programs. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make a wide variety of estimates and assumptions that affect: (1) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and (2) the reported amounts of revenues and expenses during the reporting periods covered by the financial statements. Our management routinely makes judgments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the future resolution of the uncertainties increases, these judgments become even more subjective and complex. We have identified certain accounting policies that are most important to the portrayal of our current financial condition and results of operations. Our significant accounting policies are disclosed in Note 1 of the Notes to the Financial Statements.

Several of those critical accounting policies are as follows. Please refer to Note 1, Nature of Business and Significant Accounting Policies, including Note 1b, Basis of Presentation; Note 1d, Use of Estimates; Note 1h, Research and Development Costs and Exploration Projects; and Note 1j, Income Taxes.

Results of Operations

Discussion of Revenues

We have no revenues at this time and have not had any revenues in recent years, because we are an exploration company. We do not anticipate that significant revenues will be achieved until we either:

	•		locate one or more economic mineral deposits which could then be put into production, from which we would then be able to extract gold or silver at a profit; or

	•		enter into a joint venture arrangement on one or more of our leased properties; or

	•		consummate a merger or acquisition with another company.

There is no guaranty that our exploration activities will locate viable gold and/or silver reserves, or if an economic mineral deposit were discovered that we would be able to commence commercial production, or that if we do locate viable mineralization that we would be able to secure the funding necessary to proceed with the mining and production of the ore.

Expenses for the Three and Nine Months Periods ending September 30, 2006 vs September 30, 2005

The following table presents our consolidated statements of income (loss), as a percentage of loss, for the periods indicated.


	For the three months ended						For the nine months ended
	September 30,						September 30,
	2006			2005			2006			2005
REVENUE	Nil			Nil			Nil			Nil
OPERATING EXPENSES
General and administrative		7.5	%		7.8	%		7.6	%		15.5	%
Compensation, professional, legal and accounting		35.6	%		18.2	%		28.3	%		27.3	%
Depreciation expense		0.2	%		0.2	%		0.1	%		0.3	%
Research and development		0.8	%		2.5	%		1.3	%		7.0	%
Exploration, geological and geophysical costs		56.4	%		66.6	%		63.0	%		44.6	%

TOTAL OPERATING EXPENSES		100.5	%		95.3	%		100.3	%		94.7	%

INCOME (LOSS) FROM OPERATIONS		100.5	%		95.3	%		100.3	%		94.7	%

Other income (expense)		-0.5	%		4.7	%		-0.3	%		5.3	%

INCOME (LOSS) BEFORE INCOME TAXES		100.0	%		100.0	%		100.0	%		100.0	%
Income tax benefit (expense)		0	%		0	%		0	%		0	%

NET INCOME (LOSS)		100.0	%		100.0	%		100.0	%		100.0	%

General and administrative expenses increased by $11,835, or 109%, to $22,735 for the three months ended September 30, 2006 as compared to $10,900 for the three months ended September 30, 2005. The principal reason for this increase was due to increased insurance and advertising costs.

For the nine months ended September 30, 2006, general and administrative expenses increased $21,057, or 48%, to $64,753 as compared to $43,696 for the nine months ended September 30, 2005. This increase for the nine month period was due to primarily to increased advertising and an overall increase in operations.

Compensation, professional, legal and accounting expenses increased by $83,096, or 328%, to $108,442 for the three months ended September 30, 2006 as compared to $25,346 for the three months ended September 30, 2005. The principal reason for this increase was due to increased accounting, legal and consulting fees.

For the nine months ended September 30, 2006, compensation, professional, legal and accounting expenses increased $162,547, or 211%, to $239,673 as compared to $77,126 for the nine months ended September 30, 2005. This increase for the nine month period is due to increased legal, accounting and consulting fees.

Depreciation expense increased by $215, or 86%, to $465 for the three months ended September 30, 2006 as compared to $250 for the three months ended September 30, 2005. The principal reason for this increase was increased office equipment.

For the nine months ended September 30, 2006, depreciation expense increased $215, or 29%, to $965 as compared to $750 for the nine months ended September 30, 2005. This increase for the nine month period is as discussed above.

Research and development expenses decreased by $1,237, or 35%, to $2,313 for the three months ended September 30, 2006 as compared to $3,550 for the three months ended September 30, 2005. The principal reason for this decrease was that research costs were assigned to specific exploration projects.

For the nine months ended September 30, 2006, research and development expenses decreased by $8,960, or 45%, to $10,881, as compared to $19,841 for the nine months ended September 30, 2005. This decrease for the nine month period is as discussed above.

Exploration, geological and geophysical costs increased by $78,948, or 85%, to $171,760 for the three months ended September 30, 2006 as compared to $92,812 for the three months ended September 30, 2005. The principal reason for this increase was that exploration and drilling began on leased properties.

For the nine months ended September 30, 2006, exploration, geological and geophysical costs increased by $408,480, or 325%, to $534,234 as compared to $125,754 for the nine months ended September 30, 2005. This principal reason for this increase for the nine month period is as discussed above.

Liquidity and Financial Condition

Cash and Working Capital

We had a decrease in working capital of $51,852 from December 31, 2004 to December 31, 2005, due to a decrease in current assets of $995 and an increase in current liabilities of $50,857. We had an accumulated deficit of $13,573,270 from our inception in 1983 to December 31, 2005, and an accumulated deficit of $14,421,103 at September 30, 2006. We have no contingencies or long-term obligations except for our work commitments under our six (6) option and earn-in agreements on our leased properties. All of these agreements can be terminated by us upon either 30 or 60 days notice.

We had a cash balance of $400 on December 31, 2005 and a cash balance of $123,209 on September 30, 2006. For the nine months period ending September 30, 2006, we had a net cash inflow of $122,809.

Internal and External Sources of Liquidity

Over the next 12 months period, we plan to fund our operations through issuances of Common Stock or Common Stock with warrants. We could enter into a joint venture arrangement on one or more of our leased properties. In the event our exploration is successful and mining eventually commences on one or more of our leased properties, we could then commence receiving revenues from the sale of gold and/or silver produced on these properties.

Contractual Obligations

We have no commitments for capital expenditures.

We do not engage in hedging transactions and we have no hedged mineral resources.

We were and are committed to making certain exploration work expenditures, lease and option payments, and claims maintenance payments on properties signed at December 31, 2005 over the forthcoming 12 months period:

Bullion Mountain Project:

	•		Required work expenditure by 12/31/06: $20,000, of which $18,871 has already been completed;

	•		Claims maintenance: $2,273;

	•		Annual payment: $5,000;

Antelope Ridge:

	•		Required work expenditure by 12/31/06: $120,000, of which $105,446 has already been completed;

	•		Claims maintenance: $6,679;

	•		Annual payments: $10,000 cash and $10,000 in Common Stock;

Dome HiHo Project:

	•		Required work expenditure by 12/31/06: $180,000, of which $94,244 has already been completed;

	•		Claims maintenance: $5,878;

	•		Annual payments: $25,500,

Trinity Silver Project:

	•		Required work expenditure: $75,000, of which $331,048 has already been completed, which more than completes our work requirement for the first two years;

	•		Claims maintenance: $5,478;

	•		Annual payments: $0.

As of the date of this report, the annual payments for Antelope Ridge and the Dome HiHo Project have been made. As of the date of this report, the claims maintenance fees for all of the aforementioned projects have been paid. All of these property agreements can be terminated on 30 to 60 days advance notice.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements. We do not engage in hedging transactions andwe have no hedged resources.

Item 3. Controls And Procedures

(A) Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure.

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon and as of the date of that evaluation, our principal executive officer and financial officers concluded that there were material weaknesses in our internal controls, including those

which relate to the review, approval and reconciliation of accounting data and entries. We are addressing these issues by reviewing and revising our internal accounting policies and procedures.

(B) Changes in Internal Controls

There were no changes in our internal controls or in other factors that could have significantly affected those controls subsequent to the date of our most recent evaluation.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

None.

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

On September 27, 2006, we issued 357,143 shares of our Common Stock upon the exercise of certain warrants issued as part of a private placement transaction on September 27, 2005. The exercise price of the warrants was $0.095, which resulted in gross proceeds to us in the amount of $33,928.59. The issuances of Common Stock was made by us in reliance upon the exemptions from registration provided under Section 4(2) and 4(6) of the Securities Act and Rule 506 of Regulation D, promulgated by the SEC under federal securities laws and comparable exemptions for sales to “accredited” investors under state securities laws. The original sale of the Warrants in the private placement was made to accredited investors as defined in Rule 501(a) under the Securities Act, no general solicitation was made by us or any person acting on our behalf; the securities sold were subject to transfer restrictions, and the certificates for those shares contain an appropriate legend stating that they have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption there from.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission Of Matters To A Vote Of Security Holders

None.

Item 5. Other Information

None.

Item 6. Exhibits


Exhibit No.	Description	Location
31.1	Certification Pursuant to Section 302	Provided herewith

31.2	Certification Pursuant to Section 302	Provided herewith

32.1	Certification Pursuant to 18 U.S.C. Section 1350	Provided herewith

32.2	Certification Pursuant to 18 U.S.C. Section 1350	Provided herewith

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	PIEDMONT MINING COMPANY, INC., a North Carolina Corporation
Dated: October 31, 2006	/s/ Robert M. Shields, Jr.
	By: Robert M. Shields, Jr.
	Its: Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Piedmont Mining Inactive 424B3Prospectus supplement