Piedmont Mining 10-Q 2008 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended September 30, 2008

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 Of Incorporation or Organization)	(I.R.S. Employer Identification 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.

Yes x                                No ¨

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-3 of the Exchange Act.  (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)

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

Yes ¨                                No x

As of November 12, 2008, there were 68,615,130 outstanding shares of the issuer’s common stock.

1

PIEDMONT MINING COMPANY, INC.

FORM 10-Q INDEX

	Page Number
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets	3
Consolidated Statements of Loss	4
Consolidated Statements of Cash Flows	5
Notes to Consolidated Financial Statements	6
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operation	21
Item 3. Quantitative and Qualitative Disclosures About Market Risk	26
Item 4T. Controls and Procedures	26
PART II – OTHER INFORMATION
Item 1. Legal Proceedings	27
Item 1A. Risk Factors.	27
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3. Defaults Upon Senior Securities	27
Item 4. Submission of Matters to a Vote of Security Holders	28
Item 5. Other Information	28
Item 6. Exhibits	28
Signature Page	29

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

PIEDMONT MINING COMPANY, INC. (An Exploration Stage Company) CONSOLIDATED BALANCE SHEETS
	September 30,	December 31,
	2008 (unaudited)	2007 (audited)
	$	$
CURRENT ASSETS
Cash and cash equivalents	1,366		165,877
Prepaid expenses and other (Note 3)	68,417		21,168
Total current assets	69,783		187,045
MINERAL PROPERTIES (Note 3)	115,000		275,500
RECLAMATION BONDS (Note 3)	29,339		-
EQUIPMENT (Note 4)	281		929
Total Assets	214,403		463,474
CURRENT LIABILITIES
Accounts payable and accrued liabilities	396,074		322,149
Due to related parties (Note 4)	187,293		83,008
Total current liabilities	583,367		405,157
STOCKHOLDERS’ EQUITY (DEFICIENCY)
Capital Stock (Note 5)
Authorized:
50,000,000 Preferred stock $1.00 par value
200,000,000 Common stock no par value
Common stock issued and outstanding:
68,298,643  (2007 – 63,063,774) common shares	16,466,145		15,700,695
Additional paid-in capital	840,059		730,042
Deficit accumulated prior to the exploration stage	(12,564,287		(12,564,287	)
Deficit accumulated during exploration stage	(5,110,881)		(3,808,133	)
Total stockholders’ equity (deficiency)	(368,962)		58,317
Total liabilities and stockholders’ equity (deficiency)	214,405		463,474
The accompanying notes are an integral part of these financial statements.

3

PIEDMONT MINING COMPANY, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF LOSS

(unaudited)

	Three months Ended September 30, 2008			Three months Ended September 30, 2007			Nine months Ended September 30, 2008			Nine months Ended September 30, 2007			For the Period from January 1, 2002 (Date of Inception of Exploration Stage) to September 30, 2008
	$			$			$			$			$
EXPENSES
Depreciation		216			526			648			1,456			146,102
Exploration, geological and geophysical costs		242,126			70,346			433,069			176,649			2,235,324
General and administrative		54,664			44,598			181,847			109,006			869,341
Finance fees (Note 5)		100,000			-			100,000			-			100,000
Loss on abandoned properties (Note 3)		-			-			205,500			-			205,500
Management fees		49,500			76,489			235,617			258,000			773,288
Professional fees		43,330			58,525			149,265			172,405			745,961
		489,836			250,484			1,305,946			717,516			5,075,516
LOSS BEFORE OTHER ITEMS		(489,836	)		(250,484	)		(1,305,946	)		(717,516	)		(5,075,516	)
INTEREST INCOME		-			1,142			3,198			1,143			11,225
LOSS ON OTHER NON-OPERATING ACTIVITIES		-			-			-			-			(46,590	)
NET LOSS		(489,836	)		(249,342	)		(1,302,748	)		(716,373	)		(5,110,881	)
BASIC AND DILUTED LOSS PER SHARE		(0.007	)		(0.000	)		(0.020	)		(0.009	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING, BASIC AND DILUTED		67,920,382			59,100,816			65,484,769			56,346,937

The accompanying notes are an integral part of these financial statements.

4

PIEDMONT MINING COMPANY, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine Months Ended September 30,						For the Period from January 1, 2002 (Date of Inception of Exploration Stage) to
	2008			2007			September 30, 2008
	$			$			$
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		(1,302,748	)		(716,373	)		(5,110,881	)
Adjustments to reconcile net loss to net cash from operating activities:
Stock issued for finance fees		100,000			-			100,000
Warrants issued as finance fees		-			-			92,100
Loss on abandoned properties		205,500			-			205,500
Stock based compensation		110,017			176,300			376,884
Depreciation		648			1,456			146,102
Loss on other non-operating activities		-			-			(21,000	)
Changes in operating assets and liabilities:
Prepaid expenses and other		(47,247	)		(37,086)			(65,465	)
Related party advances (repayments)		118,113			(8.776	)		104,108
Accounts payable and accrued liabilities		60,095			(17,910)			425,795
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(755,624	)		(602,389	)		(3,746,857	)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of shares for cash, net of issuance costs		650,450			807,222			3,650,174
Convertible notes		-			-			291,145
NET CASH FLOWS FROM FINANCING ACTIVITIES		650,450			807,222			3,941,319
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment		-			(1,289)			(5,579	)
Proceeds from non-operating activities		-			-			97,125
Reclamation bonds		(29,339	)		-			(29,339	)
Mineral property costs		(30,000	)		(68,333	)		(256,000	)
NET CASH FLOWS USED IN INVESTING ACTIVITIES		(59,339	)		(69,622	)		(193,793	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(164,511	)		135,211			669
CASH AND CASH EQUIVALENTS, BEGINNING		165,877			17,222			697
CASH AND CASH EQUIVALENTS, ENDING		1,366			152,433			1,366
SUPPLEMENTAL CASH FLOW INFORMATION AND NON-CASH INVESTING AND FINANCING ACTIVITIES (Note 6)

The accompanying notes are an integral part of these financial statements

5

PIEDMONT MINING COMPANY, INC.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2008

(unaudited)

NOTE 1:                      NATURE OF OPERATIONS

Piedmont Mining Company, Inc. (the “Company”) was formed in 1983 under the laws of the State of North Carolina, USA, and is currently in the exploration stage, whereby the Company is primarily involved in the examination and exploration of mineral properties.  As a result, under Statement of Financial Accounting Standards No. 7 (SFAS) Accounting and Reporting by Development Stage Enterprises, the Company re-established itself as an exploration stage company in 2002 and began reporting under exploration stage guidelines.

The Company has entered into agreements on various exploration properties in the state of Nevada and may opt to acquire one or more of the properties that the Company currently leases pursuant to option and earn-in agreements. Management’s plan is to conduct exploration for gold and silver at these properties and at other properties it may enter into agreements on to assess whether they might possess economic deposits of gold and/or silver which could be recovered at a profit. The Company does not intend to build an exploration staff but rather to work with competent exploration groups who can manage the exploration activities on these properties with the Company’s funding.

The Company’s focus for the foreseeable future will be on the exploration of its properties.  Since April 2005, the Company has entered into agreements, directly and under options, for the purpose of exploring for economic deposits of gold and silver in the State of Nevada.  In April 2006 the Company commenced exploration on the Trinity Silver Project in Pershing County, Nevada. (Note 3)

Going Concern

These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America with the on-going assumption applicable to a going concern which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

The Company is in the exploration stage and to date has not yet generated any net revenues or cash flow from its activities. The Company has a history of losses and has a working capital deficit of $513,583 and an accumulated deficit of $17,675,166 at September 30, 2008.  The Company is dependent on raising further equity capital to fund ongoing losses and exploration programs. There is uncertainty that the necessary funding will we obtained as needed raising substantial doubt as to the ability  to continue operating as a going concern. These financial statements do not reflect any adjustments to the carrying values of assets that might result from the outcome of this uncertainty.

The Company intends to fund its ongoing operations by way of private placements of its securities as may be required.  Since 2002, private placements of stock with warrants and the exercise of some of those warrants have resulted in net cash proceeds of $3,650,174 through September 30, 2008.

Management believes these efforts will contribute toward funding the Company’s activities until appropriate levels of funding can be arranged and/or revenue can be earned from the properties either through production or sale.  The Company’s ability to meet its cash requirements in the next year is dependent upon its continuing to obtain financing and satisfying obligations when they come due, such as compensating its officers and consultants either through monetary means or the granting of stock options. 

6

PIEDMONT MINING COMPANY, INC.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2008

(unaudited)

NOTE 1:                      NATURE OF OPERATIONS (continued)

Unaudited Interim Financial Statements

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB of Regulation S-B. They may not include all information and footnotes required by United States generally accepted accounting principles for complete financial statement disclosure. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended December 31, 2007, included in the Company’s Form 10-KSB filed with the Securities and Exchange Commission on March 31, 2008. The unaudited interim consolidated financial statements should be read in conjunction with those financial statements included in the Form 10-KSB. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the nine months ended September 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.

NOTE 2:                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These financial statements are presented in United States dollars and have been prepared in accordance with accounting principals generally accepted in the United States of America.

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.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with an original maturity of three months or less at the time of issuance to be cash equivalents.

Comparative Figures

Certain comparative figures have been reclassified in order to conform to the current year’s financial statement presentation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period.  Actual results could differ from those estimates.  Significant areas requiring management’s estimates and assumptions are determining the fair value of shares of common stock, convertible debentures and financial instruments. Other areas requiring estimates include deferred tax balances, valuation allowances, allocations of expenditures to mineral property interests and asset impairment tests.

Equipment

Equipment is comprised of computer equipment that is recorded at cost and amortized over 3 years on a straight-line basis.

7

PIEDMONT MINING COMPANY, INC.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2008

(unaudited)

NOTE 2:                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Mineral Property Costs

The Company is primarily engaged in the acquisition, exploration and development of mineral properties.  Pursuant to Emerging Issues Task Force (EITF) 04-02, mineral rights are capitalized at cost. This includes lease payments under exploration agreements.  The projects are assessed for impairment when facts and circumstances indicate their carrying values exceed the 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

In the event that mineral property acquisition costs are paid or settled with Company shares, those shares are recorded at fair value at the time the shares are issued.

When it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves and pre-feasibility, the costs incurred to develop such property to production are capitalized.

Estimated future removal and site restoration costs, when determinable are provided over the life of proven reserves on a units-of-production basis.  Costs, which include production equipment removal and environmental remediation, are estimated each period by management based on current regulations, actual expenses incurred, and technology and industry standards.  Any charge is included in exploration expense or the provision for depletion and depreciation during the period and the actual restoration expenditures are charged to the accumulated provision amounts as incurred.

As of the date of these financial statements, all of the Company’s exploration costs have been expensed.

To date the Company has not established any proven or probable reserves on its mineral properties.

Asset Retirement Obligations

The Company has adopted the provisions of SFAS No. 143 "Accounting for Asset Retirement Obligations," which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets.  The adoption of this standard has had no effect on the Company's financial position or results of operations.  To September 30, 2008 any potential costs relating to the ultimate disposition of the Company's mineral property interests are not determinable.

Impairment of Long-Lived Assets

The Company reviews property and equipment and certain identifiable intangibles, excluding goodwill, for impairment in accordance with SFAS No. 144, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.  Recoverability of these assets is measured by comparison of its carrying amount to future undiscounted cash flows the assets are expected to generate.  If property, plant, and equipment and certain identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds fair market value.  .

8

PIEDMONT MINING COMPANY, INC.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2008

(unaudited)

NOTE 2:                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial Instruments

The fair values of cash and cash equivalents, accounts payable and accrued liabilities and amounts due to related parties were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments.  The fair value of the Company’s net smelter royalty obligations (refer to Note 3) is not determinable at the current stage of the Company’s exploration programs.  Accordingly, no value has been assigned by management.   The Company’s operations and financing activities are conducted primarily in United States dollars, and as a result the Company is not subject to significant exposure to market risks from changes in foreign currency rates.  Management has determined that the Company is not exposed to significant credit risk.

Loss per Common Share

Basic loss per share (“LPS”) includes no dilution and is computed by dividing loss attributable to common stockholders by the weighted average number of common shares outstanding for the period.  Diluted earnings per share reflects the potential dilution of securities that could share in the earnings (loss) of the Company.  The common shares potentially issuable upon exercise of stock options and warrants were not included in the calculation of weighted average number of shares outstanding because the effect would be anti-dilutive.

Net loss used in determining basic LPS for the nine months ended September 30, 2008 and 2007 was ($1,302,748) and ($716,373), respectively. The weighted average number of shares of common stock used in determining basic LPS for the nine months ended September 30, 2008 and 2007 was 65,484,769 and 54,947,175, respectively.

Foreign Currency Translation

The financial statements are presented in United States dollars.  In accordance with SFAS No. 52, “Foreign Currency Translation”, foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates which prevailed at the balance sheet date.  Revenue and expenses are translated at average rates of exchange during the year. Related translation adjustments are reported as a separate component of stockholders’ equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations.

Income Taxes

The Company follows the liability method of accounting for income taxes.  Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances.  Deferred tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment.  As at September 30, 2008, the Company had net operating loss carry forwards; however, due to the uncertainty of realization, the Company has provided a full valuation allowance for the potential deferred tax assets resulting from these losses carry forwards.

Stock-Based Compensation

On January 1, 2006, the Company adopted SFAS No. 123 (revised 2004) (SFAS No. 123R), Share-Based Payment, which addresses the accounting for stock-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments.  In January 2005, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 107, which provides supplemental implementation guidance for SFAS No. 123R. SFAS No. 123R eliminates the ability to account for stock-based compensation transactions using the intrinsic value method under Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and instead generally requires that such transactions be accounted for using a fair-value-based method.  The Company uses the Black-Scholes-Merton (“BSM”) option-pricing model to determine the fair-value of stock-based awards under SFAS No. 123R, consistent with that used for proforma disclosures under SFAS No. 123, Accounting for Stock-Based Compensation.  The Company has elected the modified prospective transition method as permitted by SFAS No. 123R and accordingly prior periods have not been restated to reflect the impact of SFAS No. 123R.  The modified prospective transition method requires that stock-based compensation expense be recorded for all new and unvested stock options, restricted stock, restricted stock units, and employee stock purchase plan shares that are ultimately expected to vest as the requisite service is rendered beginning on January 1, 2006 the first day of the Company’s fiscal year 2006.  Stock-based compensation expense for awards granted prior to January 1, 2006 is based on the grant date fair-value as determined under the pro forma provisions of SFAS No. 123.

9

PIEDMONT MINING COMPANY, INC.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2008

(unaudited)

NOTE 2:                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recent Accounting Pronouncements

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities ("SFAS 161"). SFAS 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. SFAS 161 achieves these improvements by requiring disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information about an entity's liquidity by requiring disclosure of derivative features that are credit risk-related. Finally, it requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative instruments. SFAS 161 will be effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, and will be adopted by the Company beginning in the first quarter of fiscal 2009. The Company does not expect there to be any significant impact of adopting SFAS 161 on its financial position, cash flows and results of operations.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS No. 162”). SFAS No. 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles for nongovernmental entities. SFAS No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.

10

PIEDMONT MINING COMPANY, INC.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2008

(unaudited)

NOTE 3:                      MINERAL PROPERTIES

A summary of capitalized costs is as follows:

	Balance as at December 31, 2007		Incurred during the period		Impairment			Balance as at September 30, 2008
	$		$		$			$
Antelope Ridge		68,500		-		(68,500	)		-
Bullion Mountain		20,000		-		-			20,000
Dome Hi-Ho		107,000		30,000		(137,000	)		-
Dutch Flat		35,000		-		-			35,000
Pasco Canyon		10,000		-		-			10,000
Trinity Silver		10,000		-		-			10,000
PPM Gold		25,000		-		-			25,000
Willow Creek		-		15,000		-			15,000
		275,500		45,000		(205,500	)		115,000

A.           Antelope Ridge Project

The Company entered into a 10 year Mining Lease with Option to Purchase dated April 26, 2005 on 50 claims in the Fish Creek Mining District, Eureka County, Nevada (the “Antelope Ridge Project”).  The Company had made lease and option payments totaling $68,500 and had incurred $189,746 in exploration costs with respect to this Project.  In June, 2008, the Company terminated this agreement and recorded an impairment loss of $68,500.

B.           Bullion Mountain Project

Effective November 11, 2005, the Company entered into a ten year Mining Lease with Option to Purchase on 17 claims in Lander County, Nevada (the ‘Bullion Mountain Project’) pursuant to the following terms:

1.	Lease payments required:
	a)	On signing:	$5,000 plus $2,274 for claims fees reimbursement was paid
	b)	First anniversary:	$5,000 was paid
	c)	Second anniversary:	$10,000 was paid
	d)	Third anniversary and each anniversary thereafter:	$15,000
2.	The Company must expend the following additional amounts in exploration and maintenance of the property during the first two years of the agreement:
	a)	By November 2006:	$20,000 (incurred)
	b)	By November 2007:	$50,000
	In September, 2007, this agreement was amended and the time for completing the remaining work obligation was extended indefinitely.
3.	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 the purchase price.
4.	Upon exercise of the purchase option, the Company would be required to pay a 3% net smelter returns royalty on production from the property.
5.	The Company has the right to terminate this agreement at any time by giving 60 days prior written notice.

As at September 30, 2008, the Company has made lease payments totaling $20,000 and has incurred $27,265 in exploration costs.

11

PIEDMONT MINING COMPANY, INC.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2008

(unaudited)

NOTE 3:                      MINERAL PROPERTIES (continued)

C.           Dome-Hi-Ho Project

Effective on April 26, 2005, the Company entered into a five year Exploration and Option to Enter Into a Joint Venture Agreement on 44 claims in Lander County, Nevada (the ‘Dome HiHo Project’.  The Company had made lease and option payments totaling $137,000 and had incurred $350,510 in exploration costs with respect to this Project.  In June, 2008, the Company terminated this agreement and recorded an impairment loss of $137,000.

D.            Trinity Silver Project

Effective on September 15, 2005, the Company entered into an Exploration and Development Agreement on the Trinity Silver Project (‘TSP’) in Pershing County, Nevada.  The TSP consists of 40 claims, 1,280 acres of fee land and 2,560 acres of sub-leased fee land. Pursuant to the terms of the Agreement:

1.         Lease and option payments required:

a)           On signing:    $10,000 was paid.

2.         Required expenditures for exploration and property maintenance:

a)           In year 1:      $75,000 (completed).

b)           In year 2:      $125,000 (completed).

c)           Prior to September 15, 2008: a total of $1,000,000 in order to earn an initial 25% interest in the TSP.

d) Prior to September 15, 2010: an additional $1,000,000, in order to earn an additional 26% interest (51% in total) in the TSP.

e) Prior to September 15, 2013: an additional $2,000,000 in order to earn an additional 9% interest (for a total of 60%) in the TSP.

3. Upon achieving its 51% or its 60% interest, the Company may then elect to form a joint venture, and the Company would be the operator of the joint venture.

4.         The Company may terminate this agreement at any time upon 30 days written notice.

As at September 30, 2008, the Company has made lease payments totaling $10,000 and has incurred $618,443 in exploration and property maintenance costs with respect to the Trinity Silver Project.

E.            Pasco Canyon Project

On February 14, 2006, the Company entered into a five year Option Agreement (the ‘Agreement’) on 24 claims in Nye County, Nevada (the ‘Pasco Canyon Project’), pursuant to the following terms:

1.	Option payment required: On signing: $10,000 (paid).
2.	The Company is required to expend the following sums on exploration and maintenance of the property during the term of the Agreement:
	Year 1	$  50,000
	Year 2	$100,000
	Year 3	$200,000
	Year 4	$200,000
	Year 5	$450,000
3.	Upon completion of the required expenditures, the Company will have acquired a 60% undivided interest in the property. At that point, a formal joint venture agreement will be entered into by the Company with the Company being the operator of the joint venture.
4.	The Company has the right to terminate this agreement at any time, subsequent to the first year’s expenditure requirement of $50,000, upon 30 days prior written notice.

12

PIEDMONT MINING COMPANY, INC.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2008

(unaudited)

NOTE 3:                      MINERAL PROPERTIES (continued)

E.            Pasco Canyon Project (continued)

As at September 30, 2008, the Company has made lease payments totaling $10,000 and has incurred $46,905 in exploration costs with respect to the Pasco Canyon Project. As of September 30, 2008 the Company has not completed all of the prescribed exploration expenditures because a drilling permit has not yet been granted by the U.S. Forest Service.  However, on September 17, 2007, the Company was granted an ‘Agreement for Extension’ to complete the work obligation.  Based on recent meetings with the U.S. Forest Service, it is currently anticipated that the required permit may be obtained by year end.  A drilling program has been planned and these costs would be funded by the sale of common stock and warrants.

F.           Dutch Flat Gold Project

On July 2, 2006, the Company entered into a five year Exploration Agreement with Option to Form Joint Venture (the ‘Agreement’), on 114 claims in Humboldt County, Nevada (the Dutch Flat Project) pursuant to the following terms:

1.	Payment upon signing:   $35,000
2.	The Company shall expend the following sums on exploration and maintenance of the property during the first 5 years of the Agreement:
	Year 1         $200,000 Year 2         $300,000 Year 3         $500,000 Year 4         $500,000 Year 5         $500,000
3.	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 would own 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.
4.	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.
5.	The Company may terminate this Agreement at any time after the first year on 30 days notice.

As at September 30, 2008, the Company has made lease payments totaling $35,000 and has incurred $508,516 in exploration costs.

13

PIEDMONT MINING COMPANY, INC.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2008

(unaudited)

NOTE 3:                      MINERAL PROPERTIES (continued)

G.           PPM Gold Project

In April, 2007, the Company signed an “Exploration Agreement with Option to Form Joint Venture” (the “Exploration Agreement”) with Miranda US, Inc., a wholly-owned subsidiary of Miranda Gold Corp. (“Miranda”), a Canadian corporation listed on the TSX Venture Exchange.

Under the terms of the Exploration Agreement, Piedmont has an option to earn a 55% interest in 102 mining claims, located in Humboldt County, Nevada by incurring $1,750,000 in exploration work during a five year period as follows:

(i)	paying  $25,000 to Miranda within 30 days of the effective date of the Exploration Agreement (paid);
(ii)	incurring at least $175,000 in exploration work during the first year of the Exploration Agreement;
(iii)	incurring an additional $200,000 in exploration work during the second year;
(iv)	incurring an additional $300,000 in exploration work during the third year;
(v)	incurring an additional $425,000 in exploration work during the fourth year; and
(vi)	incurring an additional $650,000 in exploration work during the fifth year.

Upon completing the total $1,750,000 work expenditure requirement, the Company will have earned a 55% interest in the property and the project.  At that point, the Company may enter into a joint venture with PPM Miranda, with the Company being the operator.  After the first year of the agreement, the Company may terminate the agreement at any time on 30 days written notice. The Company must pay all claims maintenance fees, which will be creditable against the work commitment expenditure requirement.

As at September 30, 2008, the Company has expended $142,440, which includes an initial payment of $25,000 on signing and a reclamation bond of $11,566 on this property.

H.            Willow Creek Project

On June 16, 2008, the Company entered into an Exploration Agreement with Option to Form a Joint Venture with Carlin Gold Corporation (“Carlin”) on the Willow Creek property, Elko County, Nevada. An initial payment of $10,000 was made in November, 2007, and $300,000 was advanced to Carlin on signing the agreement, to cover the first year’s work commitment. In addition, 100,000 common shares valued at $15,000 were issued to Carlin on July 8, 2008 to acquire the option interest which was capitalized as a mineral property acquisition cost.

This Agreement grants to the Company the exclusive right to earn a 51% interest in the property by completing expenditures of $3,500,000 over a five year period as follows:

Year 1	$  300,000 (paid)
Year 2	500,000
Year 3	700,000
Year 4	1,000,000
Year 5	1,000,000
Total	$3,500,000

The Company can terminate this Agreement at any time after completion of the first year’s work requirement. The Company will be required to make all property maintenance payments and pay $10,000 to Carlin Gold on each anniversary date of the agreement.  Upon earning a 51% interest, the parties would enter into a joint venture agreement.

As at September 30, 2008, the Company has incurred $258,883 in exploration costs, including a reclamation bond of $17,773, under the first year’s work commitment.  A balance of $41,117 is recorded in prepaid expenses, which is related to the remaining work commitment monies advanced.

14

PIEDMONT MINING COMPANY, INC.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2008

(unaudited)

NOTE 3:                      MINERAL PROPERTIES (continued)

I.           Morgan Pass Project

On May 20, 2008, the Company signed a Letter of Intent with Nevada Eagle Resources LLC, a wholly owned subsidiary of Gryphon Gold Corporation on the Morgan Pass property in Elko County, Nevada.  The Letter of Intent is effective for five years, during which the parties will negotiate an “Exploration Agreement with Option to Form Joint Venture” at such time as the property is released into “multiple use” from a “wilderness study area”.  During this time the Company must:

- Pay for staking and registration of initial claims.

- Commencing with the 2008-2009 assessment year, pay all maintenance requirements.

- Pay $20,000 upon release of the properties into “multiple use” classification.

- Upon release of the properties into “multiple use”, a five year option and earn in agreement would be signed and a work program totaling $750,000 over a five year period would commence beginning from the date of the signing of the formal agreement.

As at September 30, 2008, the Company had incurred $14,116 in exploration costs.

NOTE 4:                      DUE TO RELATED PARTIES AND RELATED PARTY TRANSACTIONS

The Board of Directors has authorized a monthly management fee of $10,000 to the Company’s President and CEO, which was increased to $14,000 per month, effective February 1, 2008. The unpaid portion of the monthly management fees at September 30, 2008 and December 31, 2007 was $110,000 and $82,000, respectively.  Unreimbursed administrative expenses incurred by the President and CEO at September 30, 2008 and December 31, 2007 were $5,429 and $0, respectively. The Company reimburses the President for office rent, which totaled $14,400 for the nine months ended September 30, 2008, and $11,600 for the nine months ended September 30, 2007.  The President advanced funds to the Company in the third quarter totaling $4,500, which remain unpaid and have accrued interest at 5%  of $30, in accordance with Company policy.

The unpaid portion of exploration costs incurred by the Company’s Vice-President at September 30, 2008 and December 31, 2007 were $65,935 and $1,621, respectively, which includes his compensation of $21,880 and $950, respectively, for services relating to the various exploration projects and research and development.

The directors receive a fee of $200 per meeting for participating in Board meetings and Compensation and Audit Committee meetings. The Chairmen of these Committeesreceive $300 per meeting. 

From time to time, the Company’s officers and directors advance monies to the Company. These loans bear interest at 5% per annum. These loans are unsecured and have no fixed repayment terms. The unpaid balances related to these advances at September 30, 2008 and December 31, 2007 were $4,530 and $nil, respectively.

No stock options were granted to its officers or directors by the Company for the nine months ended September 30, 2008.

All related party transactions involving provision of services or transfer of tangible assets in the normal course of business were recorded at the exchange amount, which is the value established and agreed to by the related parties reflecting arms length consideration payable for similar services or transfers.  (Other related party transactions are disclosed in Note 5.)

15

PIEDMONT MINING COMPANY, INC.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2008

(unaudited)

NOTE 5:                      CAPITAL STOCK

Share Capital

The Company’s capitalization is 50,000,000 authorized preferred shares with a par value of $1.00 per share and 200,000,000 common shares with no par value.

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 plans for the payment of any dividends.

Common Share Transactions

During the nine months ended September 30, 2008, the Company completed the following equity transactions:

In February, 2008, the Company completed a private placement offering of 74,967 Units, consisting of one share of Common Stock (the “Shares”) and one share of a Common Stock Purchase Warrant (the “Warrants”) at a price of $0.30 per Unit for proceeds of $22,490.  The Warrants are exercisable for a period of two years and shall entitle the holder to purchase one share of Common Stock (the “Warrant Shares”) for $0.60 per Warrant Share.

In March, 2008, the Company completed a private placement offering of 53,571 Units, consisting of one share of Common Stock (the “Shares”) and one share of a Common Stock Purchase Warrant (the “Warrants”) at a price of $0.28 per Unit for proceeds of $15,000.  The Warrants are exercisable for a period of two years and entitle the holder to purchase one share of Common Stock (the “Warrant Shares”) for $0.50 per Warrant Share.

In April, 2008, the Company completed a private placement offering of 86,000 Units, consisting of one share of Common Stock and one Common Stock Purchase Warrant at a price of $0.175 per Unit for proceeds of $15,050.  The Warrants are exercisable for a period of two years and entitle the holder to purchase one share of Common Stock for $0.27 per Share.

In April 2008, the Company completed a private placement offering of 312,500 Units, consisting of one share of Common Stock and one Common Stock Purchase Warrant at a price of $0.16 per Unit for proceeds of $50,000.  The Warrants are exercisable for a period of two years and entitle the holder to purchase one share of Common Stock for $0.25 per Share.

In April, 2008, 737,833 shares of Common Stock were issued upon the exercise of certain warrants. The exercise price of the warrants was $0.15, which resulted in gross proceeds in the amount of $110,675.

In May, 2008 a private placement offering of 3,203,331 Units, consisting of one share of Common Stock (the “Shares”) and one share of a Common Stock Purchase Warrant (the “Warrants”) at a price of $0.15 per Unit for proceeds of $480,500 less broker commission of $43,245 for net proceeds of $437,255.  The Warrants are exercisable for a period of two years and shall entitle the holder to purchase one share of Common Stock (the “Warrant Shares”) for $0.26 per Warrant Share. In addition to the cash commission, the broker received a warrant exercisable for a period of two years which shall entitle the broker to purchase 320,333 shares of Common Stock for $0.15 per Warrant Share.

16

PIEDMONT MINING COMPANY, INC.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2008

(unaudited)

NOTE 5:                      CAPITAL STOCK (continued)

In July, 2008, 100,000 shares of Common Stock were issued on signing a 5 year option and earn in agreement on the Willow Creek property. The shares were valued at $15,000, using the Company’s stock closing price of $0.15 at the date of issuance.

In August, 2008, 666,667 shares of Common Stock were issued in lieu of cash pursuant to two Engagement Letters with funding groups. The shares were valued at $0.15 per share at the time of signing for a total of $100,000.  Both engagements were subsequently terminated as no funds had been raised and as a result the $100,000 has been fully expensed.

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.

For options issued to service providers, the Company follows SFAS No. 123(R), Accounting for Stock-Based Compensation, which requires that such transactions be accounted for using a fair-value-based method. The Company uses the Black-Scholes-Merton (“BSM”) option-pricing model to determine the fair-value of stock-based awards under SFAS No. 123(R).

At the time of issuance, the exercise price of all options granted was in excess of the market price of the stock.

In February, 2008 a director retired from the Company’s Board and his vested options expired unexercised.

On April 9, 2008 150,000 stock options were granted to a consultant, of which 75,000 vest immediately and 75,000 vest on the first anniversary in 2009. The term of this award is three years.  The Company estimated the fair value of these options to be $18,700 at the date of grant, using the BSM pricing model using an expected life of 3 years, a risk-free interest rate of 4.45% and an expected volatility of 109%.

Of the 450,000 stock options granted during the year ended December 31, 2007, 150,000 vested in 2007; 150,000 vest in 2008; and the remainder vest in 2009. The terms of these awards are three to five years. The fair value of these options was $43,900 at the 2007 grant date.

Total compensation expense for the nine months ended September 30, 2008 was $110,017 (September 30, 2007: $173,300), which corresponds to the vesting schedule.  As of September 30, 2008, the total compensation expense related to non-vested awards to be recognized in future periods is $32,584.  This expense will be recognized ratably as the stock options vest during 2008 and 2009.

17

PIEDMONT MINING COMPANY, INC.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2008

(unaudited)

NOTE 5:                      CAPITAL STOCK (continued)

 Below is a summary of the stock option activity for the nine months ended September 30, 2008:

				Weighted
				Average
	Number			Exercise Price
				$
Outstanding, December 31, 2007		5,975,000			0.235
Expired March 4, 2008		(400,000	)		0.200
Granted April 9, 2008		150,000			0.280
Outstanding, September 30, 2008		5,725,000			0.239
				Weighted
	Nonvested			Average
	Options			Fair Value
Nonvested Options				$
Nonvested options, December 31, 2007		1,150,000			0.11
Granted April 9, 2008		150,000			0.12
Vested		(991,667	)		0.11
Nonvested options September 30, 2008		308,333			0.11

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

Options Outstanding at September 30, 2008				Options Exercisable at September 30, 2008
		Weighted			Weighted
		Average			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 – 0.28	5,725,000	0..248	$      0.239	5,416,667	2.357	$     0.224

Options Outstanding at December 31, 2007				Options Exercisable at December 31, 2007
		Weighted			Weighted
		Average			Average
Range of		Remaining	Weighted		Remaining	Weighted
Exercise	Number	Contractual	Average	Number	Contractual	Average
Prices	Of Shares	Life (in years)	Exercise Price	of Shares	Life (in years)	Exercise Price
$ 0.20 – 0.27	5,975,000	3.15	$      0.235	4,825,000	2.531	$     0.233

The outstanding and exercisable stock options had no intrinsic value at September 30, 2008.

18

PIEDMONT MINING COMPANY, INC.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2008

(unaudited)

NOTE 5:                      CAPITAL STOCK (continued)

Common Stock Purchase Warrants

Outstanding warrants at September 30, 2008 were 10,320,702.  The exercise prices on all warrants range from $0.16 to $0.60 per share. The warrants are exercisable immediately upon issuance and the expiration dates range between one year and three years after the date of issuance.

During the nine months ended September 30, 2008, the Company issued warrants relating to unit private placements granting holders the right purchase 4,050,702 shares of common stock.  The exercise prices on these warrants range from $0.25 to $0.60 per share. The warrants were exercisable immediately upon issuance and the expiration dates are two years after issuance.  The Company estimated the total fair market value of these warrants to be $144,800 at the date of grant, using the BSM pricing model using an expected life of one year, a risk-free interest rate of 4.45% and an expected volatility of 109%.  The fair value of the warrants has been included in capital stock.

During the year ended December 31, 2007, the Company issued warrants relating to unit private placements granting holders the right purchase 4,932,500 shares of common stock.  The Company estimated the total fair market value of these warrants to be $210,300 at the date of grant, using the same methods and assumptions employed above in valuing the stock options. The exercise prices on these warrants range from $0.16 to $0.60 per share. The warrants were exercisable immediately upon issuance and the expiration dates range between one year and five years after issuance.

The warrants exercisable at September 30, 2008 had no intrinsic value.

A summary of the Company’s stock purchase warrants is presented below:

	Number of Warrants			Weighted average exercise price		Weighted average remaining life (years)
						$
Balance, December 31, 2007		10,697,000			0.31		1.24
Exercised		(737,833	)
Expired		(3,689,167	)
Issued		4,050,702			0.269		2.0
Balance, September 30, 2008		10,320,702			0.323		1.26

NOTE 6:   SUPPLEMENTAL CASH FLOW INFORMATION AND

 NONCASH INVESTING AND FINANCING ACTIVITIES

In July, 2008, 100,000 shares of Common Stock valued at $15,000 were issued on signing an agreement on the Willow Creek property.

In August, 2008, 666,667 shares of Common Stock valued at $100,000 were issued in lieu of cash pursuant to two engagement letters with funding groups.

	Nine months  ended September 30, 2008		Nine months  ended September 30, 2007
	$		$
Interest paid		-		-
Income taxes paid		-		-

19

PIEDMONT MINING COMPANY, INC.

(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2008

(unaudited)

NOTE 7:                      SUBSEQUENT EVENTS

1-   On October 24, 2008, the Company completed a private placement of 166,667 Units at a price of $.06 per unit, with each Unit consisting of one share of Common Stock and one half of a two year warrant, for proceeds of $10,000.  Each warrant is exercisable at $0.15.

2- On October 28, 2008, the Company completed a private placement of 150,000 Units at a price of $.06 per unit, each Unit consisting of one share of Common Stock and one half of a two year warrant, for proceeds of $9,000.  Each warrant is exercisable at $0.15.

20

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 Annual Report on Form 10-KSB for the year ended December 31, 2007  that was filed with the Securities and Exchange Commission on March 31, 2008.

Overview of Business

We are a North Carolina corporation formed in 1983. From our inception until 1992, we were engaged in the exploration for, and production of, gold and other precious metals and the evaluation of gold properties in North Carolina 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. 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 seven option and earn-in agreements on seven different exploration properties in the state of Nevada. Our plan is to conduct exploration for gold and silver at each of these properties and at other properties we may enter into agreements on 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 work 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 limited to research and exploration in the state of Nevada.

During the period ended September 30, 2008, we abandoned two projects: Antelope Ridge Project and the Dome Hi-Ho Project.  We decided to discontinue the two projects because the drilling results did not warrant continuing with the projects.

Going Concern

The report of our independent auditors in our December 31, 2007 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 $16,372,420 and a working capital deficit of $218,116 at December 31, 2007. 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.

21

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 2 of the Notes to the Financial Statements.

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

 There is no guarantee 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 Nine Month Period ending September 30, 2008 vs. September 30, 2007

Expenses for the Three Month Period ending September 30, 2008 vs. September 30, 2007

22

Exploration, geological and geophysical costs increased by $171,780, or 244.19% to $242,126 for the three months ended September 30, 2008 as compared to $70,346 for the three months ended September 30, 2007.  The principal reason for this increase was due to an increase in exploration activity on various properties, most notably the commencement of the Willow Creek project. 

Exploration, geological and geophysical costs increased by $256,420, or 145.16%  to $433,069 for the nine months ended September 30, 2008 as compared to $176,649 for the nine months ended September 30, 2007.  The principal reason for this increase was due to an increase of $256,420 in exploration activity on various properties most notably the commencement of the Willow Creek project  and a write-off of the lease payments on abandoned projects of $205,500.  The Antelope Ridge and Dome HiHo projects were abandoned during the second quarter because the exploration results to date were not sufficiently encouraging to warrant further drilling and exploration.

Management fees decreased by $26,989, or (35.28)%, to $49,500 for the three months ended September 30, 2008 as compared to $76,489 for the three months ended September 30, 2007.  The principal reason for this change for the three month period was due to an increase of $14,000 in management fees due to an increase in the monthly fees paid to the president, and a decrease of $39,489 in recording the expense of vested options.

Management fees decreased by $22,383, or (8.68)%, to $235,617 for the nine months ended September 30, 2008 as compared to $258,000 for the nine months ended September 30, 2007.  The principal reason for this change for the nine month period was due to an increase of $47,000 in management fees paid to the president, $2,600 paid to directors for meetings, and a decrease of $66,283 in recording the expense of fully vested options.

For the three months ended September 30, 2008, professional fees decreased $15,195, or (25.96)%,  to $43,330 as compared to $58,525 for the three months ended September 30, 2007.  This change for the three month period is due to increased efficiencies in processing the quarterly 10Q.

            For the nine months ended September 30, 2008, professional fees decreased $23,139, or (13.42)%,  to $149,265 as compared to $172,405 for the nine months ended September 30, 2007.  This change for the nine month period is due to increased efficiencies in processing the quarterly 10Q.

Depreciation expense decreased by $310, or (58.94%), to $216 for the three months ended September 30, 2008 as compared to $526 for the three months ended September 30, 2007.  The principal reason for this change is attributable to some equipment becoming fully depreciated.

Depreciation expense decreased by $808, or (55.5%), to $648 for the nine months ended September 30, 2008 as compared to $1,456 for the nine months ended September 30, 2007.  The principal reason for this change is attributable to some equipment becoming fully depreciated.

Liquidity and Financial Condition  

Cash and Working Capital

We had an accumulated deficit of ($16,372,420) from our inception in 1983 to December 31, 2007, and an accumulated deficit of ($17,675,168) at September 30, 2008. We have no contingencies or long-term obligations except for our work commitments described under our seven (7) property 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 $165,877 on December 31, 2007 and a cash balance of $1,366 on September 30, 2008.  For the nine months period ending September 30, 2008, we had net cash outflows of $164,511.

23

The cash flows used in operations for the nine month period ended September 30, 2008 were $755,624 compared with $602,389 for the same period in 2007.  Cash flows used in operations for the nine month period ended September 30, 2008 consisted primarily of a net loss of $1,302,748 including stock based compensation of  $110,017, non cash finance fees of $100,000 and the write-off of leases on abandoned projects of $205,500, with changes in working capital assets and liabilities consisting of a net decrease in prepaid expenses of $47,247, an  increase in accounts payable and accrued liabilities of $60,095 and an increase of $118,113 to accrued expenses for amounts unpaid to related parties..

The cash flows used in investing activities for the nine month period ended September 30, 2008 were $59,339 compared to $69,622 for the same period in 2007. Cash flows used in investing activities consisted of a lease payment of $30,000 and the purchase of reclamation bonds of $29,339 on the Company’s mineral properties.

Net cash flows provided by equity financing activities were $650,450 versus $807,222 during the same period in 2007.  

Internal and External Sources of Liquidity

During the forthcoming 12 months period, we plan to fund our operations through issuances of Common Stock or Common Stock with warrants.  However, there is no guarantee or assurance that this will be achieved. In the event, we are unable to raise additional capital, we may not be able to meet our obligations and may be required to curtail or terminate some of our planned exploration programs

Contractual Obligations

We have no commitments for capital expenditures.

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

We are committed to making certain exploration work expenditures, lease and option payments, and claims maintenance payments on properties signed at September 30, 2008 over the forthcoming 12 months period.

Bullion Mountain Project:

· Required work expenditure by September 30, 2008; $20,000 of which $27,265 has already been expended; In September, 2007, this agreement was amended and the time for completing the remaining work obligation was extended indefinitely.

· Claims maintenance: $8,651 has been paid through September 30, 2008.

· Annual payments:  $10,000 was paid in November, 2007.

Trinity Silver Project:

· Required work expenditure: $200,000, of which $628,443 has already been expended.

· Claims maintenance:  $21,579 has been paid by September 30, 2008/

· Annual payments:  $0.

24

Pasco Canyon Gold Project:

· Required work expenditure:  $56,905 has already been completed. Further work postponed pending receipt of drill permit from U.S. Forest Service.

· Claims maintenance: $9,416 has been paid through September 30, 2008.

· Annual payments; $0.

Dutch Flat Gold Project:

· Required work expenditure:  $500,000 by September 30, 2008, of which $543,516 was expended at September 30, 2008.

· Claims maintenance; $15,451 has been paid through September 30, 2008.

· Annual payments; $0.

PPM Miranda Gold Project:

· Required work expenditure for first year; $175,000, of which $142,440 has been expended.  The difference will be incurred in the next quarter using funds which have been and will be received subsequent to the September 30.  Both parties wish to continue with the planned exploration program for the property.

· Current claims maintenance:  $28,781 has been paid through September 30, 2008.

· Annual payments; $0.

Willow Creek Project:

· Option and Earn-in Agreement was signed Initial signing fee of $10,000 was paid in December, 2007.  A cash advance of $300,000 was deposited for the first year’s exploration costs. In addition, 100,000 common shares were issued in July, 2008 valued at $15,000 in accordance with the Earn-in Agreement. As at September 30, 2008, the cash on deposit was $41,117, and $258,883 of those funds had been expended along with an additional $11,864 for a total expenditure of $270,747.  

Morgan Pass Project:

· On May 20, 2008, a Letter of Intent was signed on the Morgan Pass Project.  The option and earn in agreement will not be signed until the property is released in to ‘multiple use’. Funds of $14,116 have been expended to date.

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.

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Item 3. Quantitative and Qualitative Disclosure About Market Risks

Not Appilcable.

Item 4T. 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.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk factors

Not Applicable.

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

2008:

During the three months ended September 30, 2008, the Company completed the following equity transactions:

In July 2008, 100,000 shares of Common Stock were issued upon entering into a five year option and earn-in agreement on the Willow Creek property. The shares were valued at $15,000 in the aggregate, using the closing price of the Company’s common stock of $0.15 at the date of issuance.

In August, 2008, we issued 666,667 shares of Common Stock to unrelated parties as consideration for services rendered in connection with proposed financing.  The shares were valued at $0.15 per share.

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.  

Item 3. Defaults Upon Senior Securities

None.

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

Our  annual meeting of stockholders was held on August 25, 2008. The stockholders voted, either in person or by proxy, on the following proposals. The nominees presented for election as the directors of the Company were elected and the independent registered public accounting firm appointed for the 2008 fiscal year was ratified and approved, while the proposal to reincorporate the Company from North Carolina to Nevada, pursuant to an Agreement and Plan of Merger, did not receive the requisite amount of votes, such required vote being approval by at least 662/3% of the outstanding shares entitled to vote.

The results of the stockholder voting follows:

Proposal 1. To elect the following five directors to hold office for one-year terms or until their successors are duly elected and qualified:

	Votes For	Votes Against Or Withheld	Total Voted
Robert M. Shields, Jr.	42,015,627	204,331	42,219,958
Ian C. MacDonald	42,135,627	84,331	42,219,958
Lewis B Gustafson	42,015,627	204,331	42,219,958
John P. Ingersoll	42,125,627	94,331	42,219,958
Ralph W. Kettell, II	42,135,627	84,331	42,219,958

Proposal 2. To approve an Agreement and Plan of Merger pursuant to which the Company will reincorporate from the State of North Carolina to the State of Nevada.

For	19,561,672
Against	226,249
Abstain	6,800
Broker Non-Vote	22,425,237

Proposal 3. To ratify and approve the Board of Directors appointment of Dale Matheson Carr-Hilton LaBonte LLP as the Company’s independent registered public accounting firm for the 2008 fiscal year.

For	42,058,224
Against	139,989
Abstain	21,745

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit No.	Description	Location
31.1	Certification Pursuant to Section 302	Provided herewith
32.1	Certification Pursuant to 18 U.S.C. Section 1350	Provided herewith

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SIGNATURES

Pursuant to the requirements 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: November 13, 2008	/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)

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