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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C.
20549

FORM 10-K

X ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2008

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______to _________

Commission file number 000-31184

SHOSHONE SILVER MINING COMPANY(Name of registrant in its charter)

|Idaho                                                                | 82-0304993                          
|-------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification No.)
|                                                                     |                                     
|403 7thStreet, Suite 207, Wallace,
      Idaho                       | 83873                               
|(Address of principal executive offices)                             | (Zip Code)                          

Issuers telephone number (208) 752-1070

Securities registered under Section 12(b) of the Exchange
Act:

|Title of each class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|None                |                                          

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.10 (Title of Class)

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. YES[ ] NO[X]

Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. YES[ ] NO[X]

Check whether the issuer: (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES[X] NO[ ]

Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.

1

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|Large Accelerated Filer [ ] | Accelerated Filer [ ] | Non-accelerated Filer [ ] | Smaller reporting company [X]
|--------------------------- | --------------------- | ------------------------- | -----------------------------

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

The aggregate market value of the voting and non-voting common
equity held by non-affiliates of the registrant on June 30, 2008, the last
business day of the registrants most recently completed second quarter, based
on the last reported trading price of the registrants common stock on the Over
the Counter Bulletin Board was approximately $3,718,000.

There were 22,063,179 shares of the registrants $0.10 par value
common stock outstanding on December 18, 2008.

2

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FORM 10-KFor the Fiscal Year Ended September 30,
    2008

TABLE OF CONTENTS

|                                                                                                                           | Page #
|-------------------------------------------------------------------------------------------------------------------------- | ------
|PART I                                                                                                                     |       
|                                                                                                                           |       
|Item 1. Business                                                                                                           | 5     
|                                                                                                                           |       
|Item 1A. Risk Factors                                                                                                      | 27    
|                                                                                                                           |       
|Item 1B. Unresolved Staff
      Comments                                                                                   | 27    
|                                                                                                                           |       
|Item 2. Properties                                                                                                         | 27    
|                                                                                                                           |       
|Item 3. Legal Proceedings                                                                                                  | 27    
|                                                                                                                           |       
|Item 4: Submission of Matters
      to a Vote of Security Holders                                                          | 28    
|                                                                                                                           |       
|PART II                                                                                                                    |       
|                                                                                                                           |       
|Item 5. Market for Registrants Common
      Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 29    
|                                                                                                                           |       
|Item 6. Selected Financial Data                                                                                            | 30    
|                                                                                                                           |       
|Item 7. Managements Discussion and
      Analysis of Financial Condition and Results of Operations                        | 30    
|                                                                                                                           |       
|Item 7A. Quantitative and Qualitative Disclosures
      About Market Risk                                                  | 35    
|                                                                                                                           |       
|Item 8. Consolidated Financial Statements
      and Supplementary Data                                                     | 37    
|                                                                                                                           |       
|Item 9. Changes in and Disagreements with
      Accountants on Accounting and Financial Disclosure                         | 60    
|                                                                                                                           |       
|Item 9A(T). Controls and Procedures                                                                                        | 60    
|                                                                                                                           |       
|Item 9B. Other Information                                                                                                 | 61    

3

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|PART III                                                                                                      |   
|------------------------------------------------------------------------------------------------------------- | --
|                                                                                                              |   
|Item 10. Directors and Executive
      Officers of the Registrant                                             | 62
|                                                                                                              |   
|Item 11. Executive Compensation                                                                               | 62
|                                                                                                              |   
|Item 12. Security Ownership
      of Certain Beneficial Owners and Management and Related Stockholder Matters | 62
|                                                                                                              |   
|Item 13. Certain Relationships
      and Related Transactions                                                 | 63
|                                                                                                              |   
|Item 14. Principal Accounting
      Fees and Services                                                         | 63
|                                                                                                              |   
|                                                                                                              |   
|PART IV                                                                                                       |   
|                                                                                                              |   
|Item 15. Exhibits, Financial Statement Schedules                                                              | 64

4

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PART I

ITEM 1. BUSINESS

As used in this registration statement, "Shoshone Mining,"
"Shoshone," "our Company," "the Company, "we," and "our" refer to Shoshone
Silver Mining Company.

Overview

Shoshone Silver Mining Company is an Idaho corporation founded
as Sunrise Mining Company on August 4, 1969, and subsequently changed its name
to Shoshone Silver Mining Company on January 22. 1970. The Company was formed to
explore, develop and produce precious metals with a focus on northern Idaho and
Canada. In the late 1990's, the Company was unable to productively utilize its
Lakeview (Idaho) property and elected to concentrate its exploration activities
throughout Idaho and also increasingly in other western states and Mexico.

In 2004, we formed a wholly owned subsidiary in Mexico,
Shoshone Mexico, S.A. de C.V, for the purposes of facilitating our Mexico
property explorations and future operations. On August 11, 2008, we sold 100% of
the common stock of our wholly owned subsidiary to Xtierra Resources, Ltd. Our
four exploration mineral concessions covering 1,345 hectares located in
Zacatecas, Mexico were included in this sale.

We are an exploration stage company, and our activities have
been limited to exploring and acquiring rights to explore properties which we
believe are prospective for silver, gold, platinum group and base metals along
with uranium. We have identified and commenced prospecting efforts in several
areas in Idaho, Montana and Arizona. There can be no assurance that any of our
properties contain a commercially viable ore body or reserves. None of our
properties are in production, and consequently we have no operating income.

EXPLORATION PROPERTIES

|                            |  |                         |  |       |  | Claims   | 
|--------------------------- |  | ----------------------- |  | ----- |  | -------- | 
|Project                     |  | Location                |  | Acres |  | Patented | 
|                            |  |                         |  |       |  |          | 
|Idaho Lakeview District     |  | Bonner County, Idaho    |  |       |  |          | 
|Conjecture                  |  |                         |  | 380   |  | 6        | 
|Idaho Lakeview & Keep Cool  |  |                         |  | 640   |  | 15       | 
|Idaho Lakeview Millsite     |  |                         |  | 13    |  |          | 
|Auxer                       |  |                         |  | 40    |  | -        | 
|Talache                     |  |                         |  | 40    |  | -        | 
|Subtotal                    |  |                         |  | 1,113 |  | 21       | 
|                            |  |                         |  |       |  |          | 
|Silver Valley               |  | Shoshone County, Idaho  |  |       |  |          | 
|Shoshone                    |  |                         |  | 96    |  | 5        | 
|Bullion                     |  |                         |  | 138   |  | 7        | 
|North Osburn                |  |                         |  | 300   |  | -        | 
|Subtotal                    |  |                         |  | 534   |  | 12       | 
|                            |  |                         |  |       |  |          | 
|                            |  |                         |  |       |  |          | 
|North Idaho                 |  | Boundary County, Idaho  |  |       |  |          | 
|Montgomery                  |  |                         |  | 500   |  | -        | 
|Regal                       |  |                         |  | 80    |  | -        | 
|                            |  |                         |  | 580   |  | -        | 
|                            |  |                         |  |       |  |          | 
|Montana                     |  | Montana                 |  |       |  |          | 
|Stillwater Extension Claims |  | Stillwater County       |  | 200   |  | -        | 
|Princeton Gulch Group       |  | Granite County          |  | 120   |  | -        | 
|Subtotal                    |  |                         |  | 320   |  | -        | 
|                            |  |                         |  |       |  |          | 
|Arizona Gold                |  | Arizona                 |  |       |  |          | 
|Arizona Goldfield           |  | Mohave County           |  | 240   |  | -        | 
|Western Gold                |  | Mohave County           |  | 320   |  | -        | 
|Cerro Colorado              |  | Pima County             |  | 60    |  | -        | 
|Subtotal                    |  |                         |  | 620   |  | -        | 
|                            |  |                         |  |       |  |          | 
|Mexico Properties           |  | Mexico                  |  |       |  |          | 
|Other Mexican Properties    |  | State of Sonora, Mexico |  | N/A   |  | N/A      | 

5

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Idaho Lakeview District Holdings

The Company has a group of patented and unpatented properties
located in Bonner County near the Shoshone milling facility commonly referred to
as the Idaho Lakeview District Properties. This group includes the Conjecture,
Idaho Lakeview, Weber, Keep Cool, Auxer and Talache properties.

Conjecture (formerly known as Confed Claims Lease)

The Company has leased from Chester Mining a group of patented
and unpatented properties commonly referred to as the Conjecture Group that
surround the Conjecture Mine located in Bonner County, Idaho near the Shoshone
milling facility. The 25 year lease, with a 25 year extension option, was
obtained on March 25, 2004, for consideration of 1,000,000 shares of Shoshone
stock.

Effective March 1, 2008, the terms of the Conjecture Lease were
  renegotiated to obtain more favorable terms for the Company. Beginning March
  1, 2008 the Company will be required to:

- annually deliver 50,000 shares of Shoshone restricted common shares to Chester
    Mining;
- pay to Chester Mining an advance royalty of $125.00 per month until such
    time as net smelter returns (NSR) are payable; and
- pay net smelter returns to Chester Mining equal to a sliding percentage
    of total NSR received during that calendar quarter from the operations on
    the property, subject to minimum royalty provisions.
- The rate of NSR shall be (all at Handy & Harman, NY spot price):
- 1.5% with silver under $8.00 per ounce;
- 2.4% with silver between $8.00 and $9.99 per ounce; and
- 2.5% with silver $10.00 and above.

Details of the original lease agreement may be found in the
exhibit 10.2 which was filed as an exhibit to the Companys Annual Report on
Form 10-KSB filed with the Commission on August 3, 2006. An additional seven
unpatented lode mining claims were staked by the Company in 2007.

Location and Access:

The claims are in Section 15 of Township 53 North, Range 1
West. From the city of Coeur d'Alene, Idaho, the claims can be reached via 36
miles of paved and well-graded gravel roads. Approximately 16 miles north of
Coeur d'Alene near the town of Athol on U.S. Highway 95 is the intersection with
Bunco Road, which becomes U.S. Forest Service Road #332. Bunco Road traverses
the Lakeview Mining District 18-22 miles from the highway. Many secondary roads
lead from Bunco Road to the mines and prospects of the Lakeview Mining District.
Commercial electrical power is available on the property. Water supply is
unknown.

A map showing the Conjecture Mine Claims may be found in
Exhibit 99.1 which was filed as an exhibit to the Companys Annual Report on
Form 10-KSB/A filed with the Commission on December 3, 2007, File
No.000-31184.

6

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Land Status:

The Conjecture Group consists of 6 patented and 13 unpatented
lode claims totaling 380 acres. The bulk of the holding (240 acres including all
patented lode claims) were obtained under a lease with Chester Mining Company.
Rights to the property are maintained by making payments as stipulated in the
lease. In 2007, the Company added an additional seven unpatented lode claims
totaling 140 acres to the Conjecture Group.

Improvements to the property include the Conjecture Mines
hoist house, a concrete structure that has not been updated by Shoshone. Both
the primary shaft and secondary shaft, usable as a secondary escape way, are
open as far as may be seen from the surface. The status of underground workings
is not known.

During 2007, reclamation work conducted under the direction of
the EPA led to the destruction of the hoist house, and the filling of both the
primary and secondary shafts. The Company is currently assessing the economic
damage arising from the loss of improvements to the property. The Company
believes that, as a lessee of the property, it will not be liable for any
possible future costs associated with the reclamation work.

In order to retain title to the unpatented claims added to the
Conjecture Group in 2007, the company must pay annual Bureau of Land Management
Maintenance Fees totaling $875 ($125 per claim, for the 7 unpatented
claims).

Geology:

The Conjecture Group lies within the Lakeview Mining District.
The Lakeview mining district is predominantly underlain by Precambrian
metasedimentary rocks of the Belt Super-group represented by the Wallace
Formation. The Wallace formation consists of black or grey, very thinly
laminated argillites and siltites containing interbedded blue-grey dolomite or
limestone horizons. Total thickness of the Wallace formation is in excess of
5,000 ft. The Conjecture Mine is hosted by the Calcareous member of the
PreCambrian  Lower Wallace Formation. Exploration work during the midtolate
1950s revealed that rocks of the St. Regis Formation were also found.
Lead-zinc-silver mineralization occurs, in shoots, along the Conjecture Shear
Zone, the main structural feature in the mine. It is a zone of variable width
trending approximately N30°E and dips about 65°NW. Mineralization consists of
galena, tetrahedrite, rhodochrosite, pyrite, arsenopyrite and quartz that fill
fractures in the brecciated, host rocks. The North-South trending Spider Fault
offsets the Conjecture Shear Zone and Lamprophyre dikes were seen during
exploration of the lowest level.

The property currently is without known reserves and the
proposed program, as described below, is exploratory in nature.

Exploration History:

In the late 1950s and early 1960s, Federal Resources, a
previous owner, extended the Conjecture Mines incline shaft to the 700-foot
level, added a 200 foot vertical shaft, and developed the 700, 1000, 1600 and
2000-foot levels along 2500 feet of strike, totaling over 13,000 feet of
workings. The Sunshine Mining Company unitized the Lakeview District during the
1970s and conducted further exploratory drilling and development work within
the Conjecture Mine and associated Confed property currently under Shoshones
control.

Exploration Plans:

The company intends to conduct geophysics followed by
exploration drilling from the surface in 2009.

Impairment:

The acquisition costs of the property of $350,000 were included
in exploration expenses in a prior year.

7

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Idaho Lakeview, Keep Cool and Weber

The Idaho Lakeview, Weber and Keep Cool groups are located
contiguously around an area of Bonner County near Shoshones Idaho Lakeview
Mill.

Location and Access:

The claims are in Sections 15, 22, 26, 27, 28, 29, 32, 33, 34,
and 35 of Township 53 North, Range 1 West. From the city of Coeur d'Alene,
Idaho, the claims can be reached via 36 miles of paved and well-graded gravel
roads. Approximately 16 miles north of Coeur d'Alene near the town of Athol on
U.S. Highway 95 is the intersection with Bunco Road, which becomes U.S. Forest
Service Road #332. Bunco Road traverses the Lakeview Mining District 18-22 miles
from the highway. Many secondary roads lead from Bunco Road to the mines and
prospects of the Lakeview Mining District. Commercial electricity is available
on the property. Water is supplied via wells and through water rights to a
nearby creek.

A map of the Idaho Lakeview, Keep Cool and Weber properties is
contained in Exhibit 99.1 which was filed as an exhibit to the Companys Annual
Report on Form 10-KSB/A filed with the Commission on December 3, 2007, File
No.000-31184.

Land Status:

The Idaho Lakeview and Keep Cool Groups comprise 9 patented and
7 unpatented lode mining claims. The Weber Group is comprised of 6 patented and
10 unpatented lode mining claims. The Idaho Lakeview Millsite consists of a mill
and water treatment facility on 12.5 patented acres.

In order to retain title to the Idaho Lakeview, Weber and Keep
Cool, the company must pay annually assessed property taxes to Bonner County,
Idaho on the 4 patented claims within the group and annual Bureau of Land
Management Maintenance Fees totaling $2,125 ($125 per claim, for the 17
unpatented claims).

Geology:

These properties lie within the Lakeview Mining District. The
Lakeview mining district is predominantly underlain by Precambrian
metasedimentary rocks of the Belt Super-group represented by the Wallace
Formation. The Wallace formation consists of black or grey, very thinly
laminated argillites and siltites containing interbedded blue-grey dolomite or
limestone horizons. Total thickness of the Wallace formation is in excess of
5,000 ft.

The property currently is without known reserves.

Exploration History:

Initial discoveries of mineralization in the Lakeview District
were made in 1888 near the site of the Weber Mine. Additional discoveries were
made throughout the Pend Oreille Lake region and the Lakeview District was at
that time included in the Pend Oreille Mining district, and so early production
records are unknown.

In 1924, the Venezwela Group of claims was taken over by the
Hewer Mining Company and became what is now known as the Lakeview Mine. An
internal shaft was eventually sunk to the 1,400 ft level and between 1923 and
1943 the Lakeview mine produced 24,500 tons of ore.

In 1962, Sunshine Mining Company became interested in the
district, and signed an agreement with Idaho Lakeview Mines, the successor to
Hewer Mining Company, and acquired a 50% interest in the Keep Cool and Idaho
Lakeview mines. The combined properties became the Lakeview Consolidated Silver
Mines, Inc.

Sunshine, in order to maintain its interest, conducted
assessment work on the properties, including surface excavations, drill holes
and underground work.

In 1978, a bulldozer trenching discovered another surface zone
of mineralization 2,000 ft northeast of the Weber Pit. It exposed a vein 10-12
ft wide and 135 ft long. This vein was mined during the early 1980s.

8

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In 1987, Shoshone rehabilitated the Keep Cool Mine, and drove
200 ft of new workings towards a vein drilled by Sunshine Mining Company in
1970.

A limited amount of material was removed from the Weber Pit in
the late 1970s, early 1980s. Exact quantities are unknown.

Development Activities:

Effective September 30, 2008, the Company completed the
refurbishment of the Lakeview Mill. The mill is processing previously mined and
stockpiled mineralized material. Concentrates from milling activities are being
stored at the mill facility. This refurbishment included repairs and updates to
the existing equipment and electrical infrastructure and installation of a new
water management system.

Exploration and Development Plans:

During 2008, the Company conducted trenching and sampling on a
portion of the Weber Shear between the Weber and Keep Cool Mines. Also, during
2008, the Company conducted exploration drilling from the surface over a portion
of the properties. During 2009, the Company plans to perform renewed exploration
activities on its Idaho Lakeview, Keep Cool and Weber properties.

Production Plans:

The Company will continue milling previously mined and
stockpiled mineralized materials in 2009 when snow no longer makes the roads
impassable. Additionally, Shoshone plans to engage in limited surface mining in
the Weber shear as it extends from the Weber to the Keep Cool on its patented
ground provided initial drilling substantiates the continued mineralization of
the shear at or near the surface.

Mineralized material that may be obtained from this mining
activity will be processed at the Lakeview Mill. The company will be stockpiling
concentrates from milling at its facilities until a sufficient quantity of
concentrates are held to make shipping and smelting economically advantageous.
Planned production activities will continue while roads are passable by heavy
equipment.

Impairment:

During 2006, the Company paid fees to make improvements to the
land to be more accessible as well as usable. The total amount of $68,472 was
capitalized.

The Company believes that, when compared to the market value of
the property, the deferred costs of $334,690 have not suffered impairment.
Accordingly, at September 30, 2008, the Company did not consider a write-down to
the carrying cost necessary.

Auxer Group

The Auxer Mine is a formerly producing precious metal mine
located in Bonner County, Idaho.

Location and Access:

The Auxer Mine property is located in Bonner County, Idaho,
about 3.5 miles northeast of East Hope, Idaho and about 10 miles north of Clark
Fork, Idaho within Sections 20, 29, Township 57 North, Range 02 East.

The property can be accessed by logging roads leading north
from Clark Fork, Idaho along Lightning Creek for 11 miles; then by four miles of
logging roads and mine access road to the headwaters of Wellington Creek. The
property can also be accessed by five miles of gravel roads leading north from
East Hope, Idaho along Strong Creek. The current electrical and water supply to
the land are unknown.

9

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A map showing the Auxer Property may be found in Exhibit 99.3
which was filed as an exhibit to the Companys Annual Report on Form 10-KSB/A
filed with the Commission on December 3, 2007, File No.000-31184.

Land Status:

The area covered by the Auxer claims is under Bureau of Land
Management (BLM) jurisdiction. The Auxer property consists of two contiguous
unpatented mining claims covering 40 acres. Title to the property is maintained
by annual payment of BLM Maintenance Fees of $250. The Company has not made
improvements to the property.

Geology:

The Auxer Mines area is located on the north slope of the Auxer
Basin, a glacial cirque, at elevations that range from 5,200 to 6,000 feet above
sea-level. Vegetation consists of dense stands of conifers, with areas of talus
cover on the northwesterly portions of the claim area. Soil depth on the
property ranges from bedrock exposure to roughly ten inches deep.

Argillaceous quartzites of the Pre-Cambrian Belt Series
intruded by granodiorite underlie the claims. The Prichard formation is exposed
in talus material along the northwesterly boundary of the claims.

There are two main gold bearing quartz veins, the Boston and
Chicago Veins. The Boston Vein can be traced for several thousand feet on the
surface. It is a 14-15 foot wide shear zone at the surface, but widens to 25
feet at a depth of 200 feet. The quartz vein contains gold, associated with the
pyrite.

The Chicago Vein is located 500 feet south of the Boston Shaft
and occurs within a shear zone parallel to the Boston Vein. The vein is of the
same character as the Boston Vein, but has not been explored on the surface. A
40 inch wide channel sample was taken on the surface by John Plats in 1936,
assaying 0.60 oz/t gold.

The property is currently without known reserves and the
proposed program, as defined below, is exploratory in nature.

Exploration History:

E.U. Philbrick staked the main Auxer claims in 1905. In 1925,
Auxer Gold Mines was organized, and by 1933 most of the Auxer claims were deeded
to Auxer Gold Mines.

In 1968, Auxer Gold Mines was purchased by Spokane National
Mines, Inc. In 1972, the property was sold to Idora Silver Mines, Inc. and later
relinquished its interest. Ashington Mining Company staked two claims in
1999.

In September 2003, the Company acquired the property from
Ashington Mining Company for $7,500.

Exploration Plans:

The following are recommended for the exploration of the Auxer
claims:

- Surface geological mapping of surface exposure of veins;
- Geochemical sampling of surface and underground vein exposures;
- Underground geological mapping of mine workings (if accessible);
- Systematic sampling of underground vein exposures (if accessible); and
- Location of surface and underground drill sites.

No timetable for exploration has been set and costs for the
recommended exploration have not been determined.

Impairment:

The Company believes that, when compared to the market value of
the property, the deferred costs of $7,500 have not suffered impairment.
Accordingly, at September 30, 2008, the Company did not consider a write-down to
the carrying cost necessary.

10

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Talache Group (formerly known as the Lucky Joe)

Location and Access:

The Talache silver-gold property is located in Bonner County,
in Sections 1 and 6, Township 55 North, Range 1 West. These holdings are located
approximately 1 mile northwest of Talache Landing, and 12 miles southeast of
Sandpoint, via U.S. Highway 95 and Mirror Lake Road. The current status of
electric and water supply to the property are unknown.

A map showing the Talache Group may be found in Exhibit 99.4
which was filed as an exhibit to the Companys Annual Report on Form 10-KSB/A
filed with the Commission on December 3, 2007, File No.000-31184.

Land Status:

The property consists of 2 unpatented mining claims covering 40
acres of Bureau of Land Management (BLM) land. Title to the property is
maintained by annual payment of BLM Maintenance Fees of $250. The Company has
not improved the property.

Geology:

Steep slopes that are heavily timbered characterize the
topography of the area. Altitudes vary from 2,060 feet on the shore of Pend
Oreille Lake to more than 4,100 feet in the northwestern portion of the
property. The property is dominated by coniferous forest, with large areas of
open meadow grassland in areas where soil cover is too thin to support conifer
trees.

The rocks exposed in the vicinity of the property consist of
argillites, silites, and quartizes of the Precambrian Belt Super-group. In the
vicinity of the Talache Group property, the rocks display an overall tendency to
become less calcareous and more clastic with depth. The property is situated on
the west limb of a syncline whose axis strikes nearly due north. Two prominent
fracture directions are observed within the property boundaries. These include a
set that strikes nearly north-south and dips from 80 degrees west to 45 degrees
east and a set which strikes approximately east-west and dips from 45 degrees
south to 45 degrees north. Most of the prominent mineralization in the area
follows north-striking fractures.

Mineralization of economic significance occurs as veins
contained in numerous faults and shear zones within the area. The veins occur as
lenses and pipes that shoot within the faults and vary considerably in size,
grade, and continuity. They improve in width and grade where they are cut and
offset by east-west striking cross faults.

Exploration History:

The first claims were staked in the area in the early 1890s.
In 1922, the Talache Mine was developed and production was initiated and
continued until late 1926. Although no accurate record exists of total
production, it has been estimated that the Talache Mine produced approximately
two million ounces of silver and some gold, lead, and copper. Zinc, although
present, was not recovered. The operation may have ceased due to the decreasing
silver price and the fact that the mineralized zone was found to extend off of
the Talache property along strike.

In 1964, the Silver Butte Mining Co. was formed to explore the
Talache area, and approximately 2,300 feet of drifting and cross-cutting and
2,400 feet of diamond drilling were carried out approximately 1 mile to the
north of the current Talache Group Claims.

In 1969, Silver Butte and Imperial Silver leased the property
to Cominco American, Inc. Cominco held the properties through 1971 and completed
approximately 5,000 feet of diamond drilling. Subsequently all claims were
dropped.

In 1999, two claims covering 40 acres were staked for Ashington
Mining Corporation.

In 2003, the Company acquired the property from Ashington for
$22,500.

11

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The property is currently without known reserves and the
proposed program is exploratory in nature.

Exploration Plans:

The following are recommended actions for the Talache
Property:

- Rehabilitate the Talache 400 level portal;
- Conduct systematic channel sampling of vein exposures on the Talache 400
  level;
- Underground geological mapping of the Talache 400 level;
- Surface geological mapping to identify surface expression of faults and
  veins;
- Surface sampling of vein and fault exposures to extend laterally the
  mineralization; and
- Locate potential reverse circulation and diamond drill hole locations for
  surface drilling.

No timetable for exploration has been set and costs for the
recommended exploration have not been determined.

Impairment:

The Company believes that, when compared to the market value of
the property, the deferred costs of $22,500 have not suffered impairment.
Accordingly, at September 30, 2008, the Company did not consider a write-down to
the carrying cost necessary.

Silver Valley Holdings

Shoshone has three holdings in Idahos Silver Valley: the
Shoshone, Bullion and North Osburn Groups.

Shoshone Group

The Company has a group of patented lode claims commonly
referred to as the Shoshone Group located contiguously around an area within the
St. Joe Mining District in Shoshone County, Idaho.

Location and Access:

The claims are in Sections 13, 14, and 15 of Township 47 North,
Range 5 East. From the city of Coeur d'Alene, Idaho, travel approximately 45
miles East on Interstate 90, to Exit # 63. Turn south onto Willow Creek Road.
Travel south of Willow Creek Road for 1 mile. Several secondary roads access
this property. Commercial power is available on Willow Creek Road. The current
status of the water supply is unknown.

A map showing the Shoshone Group may be found in Exhibit 99.2
which was filed as an exhibit to the Companys Annual Report on Form 10-KSB/A
filed with the Commission on December 3, 2007, File No.000-31184.

Land Status:

The Shoshone Group consists of 5 patented lode claims totaling
96.9acres in the St. Joe Mining District. Title to the property is maintained by
payment of annually assessed property taxes to Shoshone County, Idaho. During
2007, the Company paid $93 in property taxes on this property. The Company has
not made improvements to the property.

Geology:

The rocks in the claim group belong to the Precambrian lower
Wallace formation, consisting of light-grey dolomitic quartzite inter-bedded
with greenish-grey argillites. Ripple marks and mud cracks are visible on
bedding surfaces. The rocks are intruded by Tertiary aged diabase dikes.

The claim group is located within a fault block bounded by the
Osburn Fault to the north and the Placer Creek Fault to the south, and covers
three vein structures known as the Champion, Helena and Link Veins.

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The Champion Vein extends from the Springfield Mine to the
Bullion Mine six miles to the east, passing through both the Shoshone and
Bullion properties.

Exploration History:

The Shoshone Group is located in the St. Joe Mining District of
eastern Shoshone County, along the Montana border. This property covers several
prospect pits and other historic mine workings.

The Shoshone Group was the subject of considerable interest and
speculation in the early 1980s as Anaconda Minerals drilled the property.
Surface outcrop, including a vein structure 7,000 feet long and up to 80 feet
wide, along with enormous geological anomalies shown in soil and vegetation
sampling by the USGS, led geologists to believe that substantial silver
mineralization might be found at depth.

Anaconda drilled four exploratory holes near the property
boundary shared with Stevens Peak Mining, in an effort to locate a site for
deeper drilling. One of the holes was sufficiently encouraging to justify its
continuation and was planned to extend to depths reaching 6,000 feet, targeting
the Champion Vein, deep in the Revett formation. However, the planned hole was
collared at just over 3,000 feet and although core samples confirmed earlier
projections about geology and structure at depth, the program was never
completed.

Bear Creek Mining Company leased the Shoshone Group in 1981.
The Company conducted surface geological and geo-chemical surveying.

The property is currently without known reserves and the
proposed program is exploratory in nature.

Exploration Plans:

There are currently no plans to conduct exploration on the
Companys Shoshone properties.

Impairment:

The deferred costs of this property totaled $17,500, which was
written-off in prior years as an exploration expense.

Bullion Group

The Company has a group of patented properties commonly
referred to as the Bullion Group located contiguously within the St. Joe Mining
District in eastern Shoshone County, Idaho.

Location and Access:

The claims are in Sections 20 and 21 of Township 47 North,
Range 6 East. From the city of Coeur d'Alene, Idaho, travel approximately 50
miles east on Interstate 90, to Exit # 1 (TAFT Exit). Turn onto USFS Road 507,
following it for 7 miles. The Bullion Group is accessed by newly cut logging
roads from USFS Road 507. Current electrical and water supplies are unknown. A
map showing the Bullion Group may be found in Exhibit 99.2 which was filed as an
exhibit to the Companys Annual Report on Form 10-KSB/A filed with the
Commission on December 3, 2007, File No.000-31184.

Land Status:

The Bullion Group consists of 7 patented lode claims totaling
132.5 acres. Title to the property is maintained by payment of annually assessed
property taxes to Shoshone County, Idaho. During 2008, the Company paid $93 in
property taxes on this property. The Company has not made improvements to the
property.

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Geology:

The rocks in the Bullion Group are the same geologic setting as
for the Shoshone Group of claims belonging to the Precambrian lower Wallace
formation.

The Bullion Group, as is the case of the Shoshone Group, is
located within a fault block bounded by the Osburn Fault to the north and the
Placer Creek Fault to the south, and covers three vein structures known as the
Champion, Helena and Link Veins.

The Bullion Group covers the Bullion Mine workings located on
the Champion Vein.

Exploration History:

The Bullion Group is located in the St. Joe Mining District of
eastern Shoshone County, along the Montana Border. The two unpatented Bullion
Group claims totaling 40 acres have been leased to Sterling Mining Company.
Lease terms stipulate a 4 year exploration program commencing within five years
of the lease date. Shoshone will receive 10% net profit from any mined
minerals.

This lease agreement may be found in Exhibit 10.4 which was
filed as an exhibit to the Companys Annual Report on Form 10-KSB filed with the
Commission on December 4, 2006.

Bear Creek Mining Company leased the Bullion Group in 1981. The
company conducted surface geological and geochemical surveying.

The property is currently without known reserves and the
proposed program is exploratory in nature.

Exploration Plans:

There are no plans to conduct exploration on the Shoshones
Bullion Group until a due diligence study is completed.

Impairment:

This property was acquired as part of a settlement of a
promissory note owed to the Company. The value of the property was included as
an exploration expense in a prior year.

North Osburn Group

The Company has a group of unpatented properties known as the
North Osburn Group located within the Silver Valley in Shoshone County,
Idaho.

Location and Access:

The claims are in Sections 28, 48, 30, 31, 32 and 36 of
Township 49 North, Range 3 and 4 East. From the city of Coeur d'Alene, Idaho,
travel approximately 40 miles east on Interstate 90, to Exit # 54 (Big Creek
Exit). Turn north from I-90, then turn west on the access road and travel half a
mile. Turn north on Forest Road 1599 then travel northeast for 3 miles. The road
ends at the north end of the North Osburn Group.

A map showing the North Osburn Group is contained in Exhibit
99.13 which was filed as an exhibit to the Companys Annual Report on Form 10-K
filed with the Commission on April 14, 2008, File No.000-31184.

Land Status:

The North Osburn Group consists of 15 unpatented lode claims
totaling approximately 300 acres. Title to the property is maintained by annual
payment of BLM fees in the amount of $1,875.00. The Company has not made
improvements to the property. The current electrical and water supply to the
property is unknown.

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Geology:

The claims are located on rocks of the Belt metasediments,
which includes the Revett, Burke and Prichard Formations. The Revett Formation
consists of vitreous pure quartzite beds ranging from one to six feet in
thickness. Fine dark laminae are common in some of the quartzite beds. The Burke
Formation consists of interbedded impure to pure quartzite, siliceous argillite
and minor amounts of argillite. The most prevalent variety is a greenish-grey
quartzite that is generally formed in beds less than six inches thick. The
Prichard Formation consists of a succession of medium to dark-gray quartzose
argillite that grade into similar appearing impure quartzite. Pyrite is found
concentrated within the darker laminae or along bedding planes or argillitic
rocks and irregular grains about one millimeter in size.

Exploration History:

Although the property is located in the heart of the Silver
Valley, this area has seen only modest exploration. The Burke-Prichard
Transition Zone is a favorable host for silver-bearing base metal ores elsewhere
in the district, and should be thoroughly tested in the North Osburn area.

The property is currently without known reserves and the
proposed program is exploratory in nature.

Exploration Plans:

There are no current plans to conduct exploration on the
Shoshones North Osburn Group.

Impairment:

The cost to acquire this property of $1,875 was expensed during
2007.

North Idaho Holdings

The Company has two holdings in Boundary County, Idaho: the
Regal and Montgomery Mines.

Regal Mine

The Regal Mine is a formerly producing base and precious metal
mine located in the Moyie-Yaak Mining District, Boundary County, Idaho.

Location and Access:

The Regal Mine property is located 10 miles north of Bonners
Ferry, Idaho, and 0.5 miles northeast of Camp Nine on Meadow Creek, Section 31,
64N, R2E, Boise Meridian.

The property can be accessed by traveling 7.5 miles north on
Highway 95 from Bonners Ferry, then taking USFS Road 397 six miles to an access
road that leads to the mine. The property is accessible year round. The current
electrical and water supply to the property is unknown.

A map showing the Regal Mine may be found in Exhibit 99.5 which
was filed as an exhibit to the Companys Annual Report on Form 10-KSB/A filed
with the Commission on December 3, 2007, File No.000-31184.

Land Status:

The Regal property consists of four contiguous unpatented
mining claims that cover 80 acres of BLM property in the Moyie-Yaak Mining
District, Boundary County, Idaho. Title to the property is maintained by annual
payment of BLM Maintenance Fees of $500. The company has made no improvements to
the property, and the state of historic underground workings is unknown.

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Geology:

The Regal Mine is located on the west slope of Wall Mountain
(elevation 5,160 feet). The topography is mountainous with steep sided valleys.
Elevations within the property range from 3,500 to 4,400 feet above sea-level.
The property is largely covered by coniferous forest, with large areas of meadow
grassland. Soil depth on the property ranges from bedrock exposure to roughly
ten inches deep.

The Regal property is underlain by the Pre-cambrian Belt Group,
which is intruded by a series of dioritic sills. Both the sills and the Belt
rocks have been folded and faulted and subsequently intruded by granites of the
Nelson Batholith of British Columbia. The Regal gold-silver-lead-zinc veins are
exposed in granite rocks of the Nelson Batholith, which is locally fractured by
regional structures.

There are two parallel N 60-70 degrees E striking veins on the
Regal property, the North Vein and the South Vein. Both veins dip between 50-60
degrees southeasterly. Vein minerals are galena, sphalerite, pyrite,
arsenopyrite, siderite and quartz. The gold mineralization appears to be
associated with pyrite and arsenopyrite. The mineralization resembles
lead-zinc-siderite veins of the Coeur dAlene Mining District; the main
difference is that the Regal Mine veins also contain considerable arsenopyrite
with important gold values introduced during the later stages of mineralization.
The Regal Mine is developed on 3 main levels connected by a vertical shaft. The
upper most levels (No. 1 and No. 2) are accessible from the surface. Total
development exceeds 3,800 feet. There is no indication of mining below the
lowermost (No. 3) level. However, old mine maps indicate that both the north and
south mineral zones continue to depth.

The property is currently without known reserves and the
proposed program is exploratory in nature.

Exploration History:

The Regal Mine was known as the Commercial Mine until 1935 when
it was leased to Silver Crescent Mining Company. Silver Crescent performed
exploration and development work on the property through 1945, including
construction of a 100 ton per day flotation mill that was subsequently sold in
1948.

In 1968, an unknown amount of ore was sent to the Bunker Hill
Smelter. The assay results indicated 0.47 oz/t gold, 15.51 oz/t silver, 32.5%
lead, 29.8% zinc, and 0.42% copper.

In 1971, Silver Dollar Mining Company submitted a 39.8 - ton
(wet weight) shipment to the East Helena Smelter, Montana. The concentrate
sample assayed 0.41 oz/t gold, 4.8 oz/t silver, 6.6% lead, and 6.7% zinc. The
property has been largely inactive since that time except for a widening of the
Number 2 adit level and re-timbering of the portal in the early 1990s.

Shoshone Silver Mining Company acquired the claims in 2003 from
Ashington Mining Company for $15,000.

Exploration Plans:

The Regal Mine has the potential to host economically
extractable ore containing gold, silver, lead and zinc on a modest scale.
Historical mine maps indicate high-grade mineralization continuing below the
Number 3 level. Surface geological mapping will identify any lateral extent of
the mineralization, and if there are any parallel mineralized structures.

The following are recommended actions for the rehabilitation of
the Regal Mine:

- Rehabilitate the surface shaft opening and cover all open workings to
  prevent water access;
- Rehabilitate Number 2 level portal to drain the number 2 level workings;
- Stabilize mine workings with rock bolting and roof support in essential
  areas;
- Conduct systematic channel sampling of vein exposures on the Number 1 and
  2 levels (if accessible);
- Perform underground geological mapping of the Number 2 level;
- Perform surface geological mapping to identify surface expression of
  faults and veins;
- Conduct surface stream sediment sampling program to identify additional
  areas of mineralization;
- Conduct ground magnetic survey to identify possible veins and structures;

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- Stake additional claims to cover lateral extensions of mineralized
  structures;
- Locate potential RC and diamond drill-hole locations for surface drilling;
  and
- Reconnaissance work on prospects located along strike of the structures
  controlling mineralization in the Regal Mine.

No timetable for exploration has been set and costs for the
recommended exploration have not been determined.

Impairment:

The Company believes that when compared to the market value of
the property, the deferred costs of $15,000 have not suffered impairment.
Accordingly, at September 30, 2008, the Company did not consider a write-down to
the carrying cost necessary.

Montgomery Mine Group

The company controls unpatented claims that cover and surround
the Montgomery Mine near Copeland in Boundary County, Idaho.

Location and Access:

The claims are in Section 30, Township 65 North, Range 1 East.
A geographic reference point for the claims is 48°57 19 North and 116° 23 02
West.

The property is reached via 2 miles of access road from County
Road 49 3.7 miles north on State Highway 1 from the intersection of State
Highway 1 and U.S. Highway 95, approximately 12 miles north of Bonners Ferry,
Idaho. The Montgomery Mine is accessible year round.

A map showing the Montgomery Mine may be found in Exhibit 99.7
which was filed as an exhibit to the Companys Annual Report on Form 10-KSB/A
filed with the Commission on December 3, 2007, File No.000-31184.

Land Status:

Montgomery Mine claim group consists of 25 unpatented lode claims
  covering 500 acres of BLM land. The claims are located on the southwest slope
  of Hall Mountain with approximately 1,800 feet of relief in the claim group.
  No additional claims are staked in the area. The claims are maintained by annual
  payment of BLM Maintenance Fees of $3,125. The Company has not made improvements
  to the property. Commercial power is available on County Road 49. Water access
  is unknown.

Geology:

The area is underlain by the Prichard and Allrich formations of
the lower Belt series. The quartzites and impure quartzites of the Prichard and
Allrich formations have been locally intruded by diorite sills. These sills
strike northwest across the property and dip gently to the northeast.

The Diorite sills exhibit anomalous Platinum Group Metals (PGM)
values that may have economic potential. The sills also host prominent quartz
veins that exhibit significant copper, lead, silver, and gold values that
provide an additional economic potential to the property.

The property is currently without known reserves and the
proposed program is exploratory in nature.

Exploration History:

The property has been explored by means of approximately 3,500
feet of drift development in 3 primary tunnels and 4 smaller tunnels. This
development appears to establish lateral continuity of the sills and veins. In
addition to drifting there have been several diamond drill holes completed and
at least one surface geophysics survey has been run on the property.

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Records from this historic work are incomplete or unavailable,
therefore results from this work are considered unreliable for resource analysis
or interpretation.

Exploration Plans:

These claims require the rehabilitation of the 3 primary
tunnels. The current condition of these tunnels is unknown. Once access is
available the sills and veins will be mapped and sampled underground. In
addition the property should have a new surface geophysics survey performed.

Results from these efforts will be analyzed and used to develop
a comprehensive drill program. Completion of these activities could produce a
mineralized material resource that can then be subjected to a feasibility study
prior to production development.

No timetable for exploration has been set and costs of the
recommended exploration have not been determined.

Impairment:

The deferred costs of $43,557 were included in exploration
expenses in a prior year.

Montana Holdings

Shoshone has two property groups in Montana: the Stillwater
Extension Claims and the Princeton Gulch Group.

Stillwater Extension Claims

The Stillwater Extension property consists of 10 unpatented
lode claims covering 200 acres of the Stillwater Complex of south central
Montana. The Stillwater Complex is a mafic-ultramafic layered intrusive that
includes the 28-mile long J-M Reef, which hosts Platinum Group Metals (PGM).

Location and Access:

The Stillwater Extension claims are located approximately five
miles southeast of the Stillwater Mine and cover a projected eastern extension
of J-M Reef. The claims are located in Sections 2, 3, 11, T6S, R16E.

A map showing the Stillwater Extension Claims may be found in
Exhibit 99.6 which was filed as an exhibit to the Companys Annual Report on
Form 10-KSB/A filed with the Commission on December 3, 2007, File
No.000-31184.

Land Status:

In 2003, Shoshone Silver Mining Company purchased the
Stillwater Claims for $15,000. The Company controls 10 unpatented lode claims
covering 200 acres. The claims are maintained by annual payment of BLM
Maintenance Fees of $1,250. The company has made no improvements to the
property. Power and water status are unknown.

Geology:

The Stillwater Extension Claims are located within the
Stillwater mafic-ultramafic layered intrusive complex. The uniquely PGM-enriched
J-M Reef and its characteristic host rock package represent one such layer in
the sequence. The PGM in the J-M Reef consist primarily of palladium, platinum
and a minor amount of rhodium. The reef also contains approximately 3 percent
iron, copper and nickel sulfides, plus trace amounts of gold and silver.

The property currently is without known reserves and the
proposed program is exploratory in nature.

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Exploration History:

The Johns Manville Corporation discovered palladium and
platinum along the J-M Reef of the Stillwater Complex in the early 1970s. In
1979, a Manville subsidiary partnered with Chevron to develop the property.
Underground operations at the Stillwater Mine commenced in 1986.

Exploration Plans:

The Company plans an evaluation program including geologic
mapping, rock chip and soil geochemical surveys, and interpretation of public
domain geophysical data. The program will be conducted to determine the
suitability of a joint venture partner. No timetable for exploration has been
set and costs for the recommended evaluation program have not been
determined.

Impairment:

The deferred costs of $15,000 were included in exploration
expenses in a prior year.

Princeton Gulch Group

The Company controls unpatented claims that cover and surround
the Princeton Gulch placer in Granite County in south central Montana.

Location and Access:

The Princeton Gulch claims are located in Sections 20 & 21
of Township 8 North, Range 12 West, 7 miles northeast of the town of Maxville,
Montana. Access is provided by county roads east of State Highway 10A at
Maxville, Montana. Turn east on the Maxville/Princeton Road at Maxville for 4.5
miles. Turn northeast on County Road 1500 for 2.5 miles. The claim group
occupies the mountain valley running to the east from this point.

A map showing the Princeton Gulch Group may be found in Exhibit
99.10 which was filed as an exhibit to the Companys Annual Report on Form
10-KSB/A filed with the Commission on December 3, 2007, File No.000-31184.

Land Status:

This claim group consists of 4 unpatented placer claims
covering 80 acres and 2 unpatented load claims covering 40 acres, for a total of
120 acres. The claims are maintained by annual payment of BLM Maintenance Fees
of $750.00. The company has not improved the property. Electrical status is
unknown. Water is available via streams running through the property. Three
holding/settling ponds, approved by the State of Montana as harmless to Bull
Trout found in the area, have been constructed.

Geology:

This claim group lies in mountainous terrain on the east slope
of the Deerlodge Range. The country rocks are folded and faulted marbles,
phyllites and quartzites of Jurassic/Cretaceous age. The Royal stock outcrops
less than 1 mile east of this claim group. The metamorphism is a result of the
emplacement of the Royal stock and other nearby stocks and batholiths.

The claims host placer deposits within 18 of bedrock along the
floor of the gulch. The load claims could potentially host fissure veins found
and exploited on adjacent claims and properties; however, there are no reports
of veining on this property.

The property is currently without known reserves and the
proposed program is exploratory in nature.

Exploration History:

The claims have been worked sporadically by small scale
owner/operators for a number of years. The claims have only been placer mined in
the valley bottom. No additional exploration work has been done. The Princeton
Mining District has had several past producers, both lode and placer in the late
1800s and first half of the 1900s.

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Exploration Plans:

The claim group will benefit from detailed geologic mapping,
sampling and trenching. Beyond this basic exploration, modern geophysics and
remote sensing should be applied to the claim group. No timetable for
exploration has been set and costs of the recommended exploration have not been
determined.

Impairment:

The deferred purchase cost of $20,000 was included in the
exploration expenses for the year ending December 31, 2006.

Arizona Gold Holdings

The Company holds two claim groups in the Oatman Mining
District: the Western Gold and Gold Road Claims along with the Cerro Colorado
Group in Pima County, AZ.

Western Gold (formerly Arizona Goldfield) Claims

The Western Gold property consists of thirteen unpatented lode
claims covering 240 acres within the Oatman Mining District of Mohave County,
Arizona.

Location and Access:

The Western Gold claims are located approximately 1 mile West
of Gold Road Mine & 1 mile North of United Western Mine.

A map showing the Western Gold Claims may be found in Exhibit
99.8 which was filed as an exhibit to the Companys Annual Report on Form
10-KSB/A filed with the Commission on December 3, 2007, File No.000-31184.

Land Status:

The Oatman District lies on the western flank of the Black
Mountains, a fault-bounded tertiary volcanic series. In 2003, the Company
acquired the Western Gold Claims for $15,000. The claims are maintained by
annual payment of BLM Maintenance Fees of $1,625. The Company has made no
improvements to the property. Power and water sources are unknown.

Geology:

Gold deposition appears to be a late feature associated with
the Moss porphyry intrusion. The gold bearing ore bodies of the Oatman District
are located along northwest trending veins and faults. The main mineralized
structures within the property are the United and Middle veins. These veins were
mined at the United Western and United Eastern Mines.

Electrum is the predominant ore mineral. Gangue minerals
include quartz, calcite, adularia, minor fluorite, and trace amounts of pyrite,
marcasite, and chalcopyrite.

The property is currently without known reserves and the
proposed program is exploratory in nature.

Exploration History:

Gold was first discovered in the Oatman District in 1863.
Between 1897 and 1942, the Oatman District produced 2.2 million ounces of gold
and 800,000 ounces of silver at an average grade of 0.58 opt gold and 0.17 opt
silver.

From 1979 to 1982, Hecla Mining Company and Canadian Natural
Resources conducted exploration. Extensive geological mapping and diamond
drilling was conducted on the Tom Reed Vein System before the project was terminated in 1982.

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Exploration Plans:

The exploration plans for the Arizona Project are to conduct
surface geological mapping, surface soil and rock sampling programs and conduct
IP and magnetic surveys of the claim areas to identify orientation of the
sub-surface United Western Vein.

No timetable for exploration has been set and costs of the
recommended exploration have not been determined.

Impairment:

The deferred costs of $15,000 were included in exploration
expenses in a prior year.

Gold Road Claims

The Arizona property consists of 16 unpatented lode claims
located in Mohave County, Arizona covering 320 acres of the Oatman mining
district of northwest Arizona.

Location and Access:

The Gold Road claims are divided into two groups. The KO group
of 7 claims is located in S14 T19N R20W approximately 3000 ft southwest of the
Western Gold claims, approximately 0.9 miles west of the Gold Road Mine and 0.8
miles north of the United Western Mine. The TS group of 9 claims is located in
S12 T19N R20W approximately 6000 ft east of the Arizona Gold field claims and
5000 feet east northeast of the KO group of claims. County Hwy 10 travels
through the TS group.

A map showing the Western Gold Claims may be found in Exhibit
99.8 which was filed as an exhibit to the Companys Annual Report on Form
10-KSB/A filed with the Commission on December 3, 2007, File No.000-31184.

Land Status:

In 2003, Shoshone Silver Mining Company acquired the Arizona
Claims for $1,500. The claims are maintained by annual payment of BLM
Maintenance Fees of $2,000. The company has not improved the property. Power and
water sources are unknown.

Geology:

The KO group follows the easterly trend of the Mallory Fault
line and covers the down dip extension of the Kokomo vein. The TS group follows
the southeasterly extension of the Gold Ore Vein.

The property is currently without known reserves and the
proposed program is exploratory in nature.

Exploration Plans:

The Company anticipates developing exploration plans in fiscal
2009.

Impairment:

The deferred costs of $1,500 were included in exploration
expenses in a prior year.

Cerro Colorado Group

The company controls 3 unpatented claims in the Cerro Colorado
Mining District 35 miles southwest of Tucson, Arizona.

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Location and Access:

From Tucson take I-19 south towards Nogales approximately 33
miles to Exit 48. The claim group is 15 miles west on Arivaca Rd from Exit 48.
The claims are in Section 22, Township 20S, Range 10E. A geographic reference
point for the claims is 31°39'32"North, 111°16'19"West.

A map of the property may be found in Exhibit 99.11 which was
filed as an exhibit to the Companys Annual Report on Form 10-KSB/A filed with
the Commission on December 3, 2007, File No.000-31184.

Land Status:

Cerro Colorado claim group consists of 3 unpatented lode claims
covering 60 acres. The claim group is located in the Cerro Colorado mining
district in the Cerro Colorado Mountains of Southwest Arizona. The claims are
maintained by annual payment of BLM Maintenance Fees of $375. The Company has
not improved the property. Power and water sources are unknown.

Geology:

Mineralization in the district is epithermal quartz-fissure
veins with minor base metal sulfides and mercury-bearing tetrahedrite. Silver
and gold enrichment occur in oxidized zones. Host rocks are a complex of
Cretaceous quartz latite and andesite porphyry flows and tuff with some
interbedded sedimentary beds, invaded by Laramide andesite porphyry, rhyolite
and dioritic plugs and dikes.

The property is currently without known reserves and the
proposed program is exploratory in nature.

Exploration History:

This mining district is one of the oldest producing areas in
Arizona with scattered small, and relatively shallow, mines and prospects active
intermittently from at least the 1770's to about 1950. Total estimated and
recorded production has been some 4,500 tons of ore containing approximately
376,000 ounces silver, 460 ounces gold and small amounts of copper and lead.

Exploration Plans:

These claims and the area around them will be geologically
mapped. This mapping will emphasize vein intensity, rock type, and alteration.
In addition to the mapping, limited ground magnetic surveys should be run to
help identify any geophysical anomalies. The results of this initial work will
guide follow up geophysics and/or drilling.

No timetable for exploration has been set and costs of the
recommended exploration have not been determined.

Impairment:

The deferred costs of $1,500 were included in exploration
expenses in a prior year.

California Creek Uranium

On July 24, 2008, we entered into an agreement to acquire
200,000 shares of common stock of Bayswater Uranium Corporation, a Canadian
company (Bayswater), in exchange for our 43 unpatented mining claims in Elko
County, Nevada. This exchange was valued at $60,000 based on the market price of
Bayswaters common stock on July 24, 2008.

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Mexico Properties

Bilbao

On August 11, 2008, we sold 100% of the common stock of our wholly
  owned subsidiary in Mexico, Shoshone Mexico, S.A. de C.V, to Xtierra Resources,
  Ltd (Xtierra). Shoshones interest in the Bilbao concessions
  in Zacatecas, Mexico was included in this sale. In exchange for our interest
  in the Bilbao concessions we received net proceeds of $2,497,990 and a note
  receivable (net of discount) for $1,865,363.

The note does not bear interest and stipulates that a payment
of $500,000 is due on August 11, 2009. The remaining balance of $2,000,000 is to
be paid in four consecutive equal installments to begin at the time of the
commencement of construction of any mine developed on the Bilbao concessions but
in any event will be due and payable no later than August 11, 2019. Since the
note does not bear interest, the Company imputed interest at a rate of 5%.
Accordingly the Company recorded a note discount of $634,637. During fiscal
2008, $7,773 of interest income was realized through the amortization of this
note discount.

Other Mexican Exploration Properties

Shoshone has an interest in several other Mexican exploration
projects which the Company does not currently consider to be material.

La Vibora

La Vibora is a gold-silver prospect in which Shoshone acquired
a 25% interest in the property in the year 2000. No exploration has been
conducted on the property since the Companys acquisition. The property is
located seven miles west of Mexican Highway 17, approximately 22 miles south of
the city of Esquida. The Company has made no improvements to the property. Power
and water status is unknown.

Geology:

The project area is underlain by granodiorites and quartz
monzonites of upper Cretaceous age. Mineralization is associated with the
granites.

The property covers three sub-parallel veins that have an
apparent length of approximately 1,000 ft. The veins are fracture-filling,
dipping approximately 70 degrees to the SW and are characterized by the presence
of sulfides (dominantly pyrite) that have been locally oxidized. Gangue is
dominated by quartz and calcite.

Sampling conducted in 1994 reported a 75 foot wide bulk sample
that had an average grade of 0.20 oz/t gold. Four samples that were taken on the
No. 1 vein, over a 5 foot (adjusted) width averaged 0.29 oz/t gold.

The property is currently without known reserves and the
proposed program is exploratory in nature.

Exploration Plans:

The Company currently has no exploration plans for La
Vibora.

The La Morena Placer

The property is located adjacent to the La Vibora prospect
south of the city of Esquida in the State of Sonora. The property is a gold
silver placer deposit. There has been no systematic exploration of the La Morena
Placer. Shoshone acquired a 25% interest in the property in 2000. The Company
has not made improvements to the property. Power and water supplies are
unknown.

Exploration History:

Distal from the La Vibora property is the La Morena Placer.
This property has had limited auger and assaying returning average grades of
0.03 oz/t gold. No resource estimate has been completed and the property is
currently without known reserves.

23

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Exploration Plans:

The Company currently has no exploration plans for La Morena
Placer.

OUR EXPLORATION PROCESS

Our exploration program is designed to acquire, explore and
evaluate exploration properties in an economically efficient manner. We have not
at this time identified or delineated any metals reserves on any of our
properties.

Our current focus is primarily on the acquisition of additional
exploration properties. Subject to our ability to raise the necessary funds, we
intend to implement an exploration program that may cover some or all of our
other properties at various times as we deem prudent.

We expect our exploration work on a given property to proceed
generally in three phases.

The first phase is intended to determine whether a prospect
warrants further exploration and involves:

- researching the available geologic literature;
- interviewing geologists, mining engineers and others familiar with the
  prospect sites;
- conducting geologic mapping, geophysical testing and geochemical testing;
- examining any existing workings, such as trenches, prospect pits, shafts
  or tunnels;
- digging 150 foot long and 10-to-20 foot wide trenches that allow for an
  examination of surface vein structure as well as for efficient reclamation,
  re-contouring and re-seeding of disturbed areas; and
- analyzing samples for minerals that are known to have occurred in the test
  area.

Subject to obtaining the necessary permits in a timely manner,
the first phase can typically be completed on an individual property in several
months at a cost of less than $200,000. We have completed research on and
examination of each of our properties, and have commenced geophysical work and
sampling on some of our properties.

The second phase is intended to identify any mineral deposits
of potential economic importance and would involve:

- examining underground characteristics of mineralization that were
  previously identified;
- conducting more detailed geologic mapping;
- conducting more advanced geochemical and geophysical surveys;
- conducting more extensive trenching; and
- conducting exploratory drilling.

Subject to obtaining the necessary permits in a timely manner,
the second phase can typically be completed on an individual property in six to
nine months at a cost of less than $1 million. None of our properties has
reached the second phase.

The third phase is intended to precisely define depth, width,
length, tonnage and value per ton of any deposit that has been identified and
would involve:

- drilling to develop the mining site;
- conducting metallurgical testing; and
- obtaining other pertinent technical information required to define an ore
  reserve and complete a feasibility study.

Depending upon the nature of the particular deposit, the third
phase on any one property could take one to five years or more and cost up to
$20,000,000 or more. None of our properties has reached the third phase.

24

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We intend to explore and develop our properties ourselves,
although our plans could change depending on the terms and availability of
financing and the terms or merits of any joint venture proposals.

ENVIRONMENTAL COMPLIANCE

Our primary cost of complying with applicable environmental
laws during exploration is likely to arise in connection with the reclamation of
drill holes and access roads. Drill holes typically can be reclaimed for nominal
costs, although the BLM recently promulgated new surface management regulations
which may significantly increase those costs on BLM lands. Access road
reclamation may cost up to $50,000 to $100,000 if road building has been done,
and those costs, too, are likely to increase as the result of the new BLM
regulations. As we are currently in the exploration stage on all of our
properties, reclamation costs have not yet been incurred.

EMPLOYEES

The Company currently has 12 employees, 3 of whom are both
officers and directors and one of which is a director.

GLOSSARY OF TERMS

AMPHIBOLITE: granular metamorphic rocks.

ANOMALY: a deviation from uniformity or regularity in
geophysical or geochemical quantities.

ANTICLINE: layered rock formations structurally folded into a
convex structure with a core that hosts the oldest rocks.

ARCHEAN: geologic age older than 2,500,000 years.

BATHOLITH: a large emplacement of igneous intrusive or plutonic
rock that forms from cooled magma within the Earth's crust.

BLEBS: a vesicle, blister or bubble.

BRECCIA: rock in which angular fragments are surrounded by a
mass of fine-grained minerals.

CHALCOPYRITE: the main copper ore, which is widely occurring
and found mainly in veins.

CIRCULATION DRILL: a rotary drill or rotary percussion drill in
which the drilling fluid and cuttings return to the surface through the drill
pipe, minimizing contamination.

CRETACEOUS AGE: the geologic age period dating from
approximately 68 million years to 142 million years.

CROSS CUTS: a horizontal opening driven from a shaft and (or
near) right angles to the strike of a vein or other ore body.

DIAMOND DRILL: a type of rotary drill in which the cutting is
done by abrasion rather than by percussion. The hollow bit of the drill cuts a
core of rock, which is recovered in long cylindrical sections.

DISSEMINATED: fine particles of mineral dispensed through the
enclosing rock.

DEVELOPMENT: work carried out for the purpose of opening up a
mineral deposit and making the actual extraction possible.

DIKES: a tabular igneous intrusion that cuts across the
structures of surrounding rock.

25

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DIP: the angle at which a vein, structure or rock bed is
inclined from the horizontal as measured at right angles to the strike.

DRIFTS: a horizontal passage underground that follows along the
length of a vein or mineralized rock formation.

EXPLORATION: work involved in searching for ore by geological
mapping, geochemistry, geophysics, drilling and other methods.

GABBRO: Dark colored basic intrusive rocks. Intrusive
equivalent of volcanic basalt.

GEOCHEMISTRY: study of variation of chemical elements in rocks
or soils.

GEOPHYSICS: study of the earth by quantitative physical
methods.

GNEISS: a layered or banded crystalline metamorphic rock the
grains of which are aligned or elongated into a roughly parallel
arrangement.

HYDROTHERMAL: pertaining to hot water, especially with respect
to its action in dissolving, re-depositing, and otherwise producing mineral
changes within the earth's crust.

INTRUSION/INTRUSIVE: a volume of igneous rock that was
injected, while still molten, into the earth's crust or other rocks.

LITHOLOGY: The character of a rock described in terms of its
structure, color, mineral composition, grain size and arrangement of its
component parts.

MAFIC: Pertaining to or composed dominantly of the
ferromagnesian rock-forming silicates; used to describe some igneous rocks and
their constituent minerals.

METAMORPHISM: The mineralogical and structural changes in solid
rock that have been caused by heat and pressure at depth over time.

MINERALIZATION: the concentration of metals and their compounds
in rocks, and the processes involved therein.

NORITE: a course grained igneous rock formed at great
depth.

ORE: material that can be economically mined and processed.

ORE BODY: a continuous, well-defined mass of material of
sufficient ore content to make extraction economically feasible.

OUTCROP: the part of a rock formation that appears at the
earth's surface, often protruding above the surrounding ground.

PYRITE: the most widespread sulfide mineral.

PYROXENITE: any group of minerals.

QUARTZITE: a sedimentary rock consisting mostly of silica sand
grains that have been welded together by heat and compaction.

RECLAMATION: the restoration of a site after exploration
activity or mining is completed.

SCHIST: a foliated metamorphic rock the grains of which have a
roughly parallel arrangement.

26

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SEDIMENTARY ROCKS/SEDIMENTS: rocks resulting from the
consolidation of loose sediments of older rock transported from its source and
deposited.

SHEAR OR SHEARING: The deformation of rocks by lateral movement
along numerous parallel planes, generally resulting from pressure and producing
such metamorphic structures as cleavage and schistosity.

SILLS: a near horizontal flat-bedded stratum of intrusive
rock.

SKARN: the formation resulting from the reaction of two
adjacent rock types exchanging elements and fluids during regional and/or
contact metamorphosis.

SULFIDE: a metallic mineral containing reduced sulphur.

STRIKE: the course or bearing of a vein or a layer of rock.

ULTRAMAFIC: said of an igneous rock composed chiefly of mafic
materials.

UNPATENTED MINING CLAIM: a parcel of property located on
federal lands pursuant to the U.S. General Mining Law of 1872 and the
requirements of the state in which the unpatented claim is located, the
paramount title of which remains with the federal government. The holder of a
valid, unpatented lode mining claim is granted certain rights including the
right to explore and mine such claim.

VEIN: an epigenetic mineral filling the fault or other
fracture, in tabular or sheet like form, often with associated replacement of
the host rock, or a mineral deposit of this form or origin.

ITEM 1A. RISK FACTORS

Not Applicable.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 2. PROPERTIES

The Companys interests in its exploration properties are
described in Item 1.

On September 10, 2008, the Company acquired for $150,000 a 50%
interest in a commercial office building in Coeur dAlene, Idaho. The Company
paid $100,000 at the signing of the purchase agreement and paid the remaining
$50,000 in October 2008.

Effective September 30, 2008, the Companys refurbished
Lakeview Mill with a cost of $499,681 was placed into service and will begin to
be depreciated over 31.5 years starting on October 1, 2008.

The Companys executive offices are located at 403 Seventh
Street, Wallace, Idaho, 83873, and its telephone number is (208) 752-1070. The
Company leases its office space under a year-to-year lease for monthly rent
payments of $550.00.

ITEM 3. LEGAL PROCEEDINGS

We are, from time to time, involved in various legal
proceedings incidental to the conduct of business. In the opinion of management,
our gross liability, if any, and without any consideration given to the
availability of insurance or other

27

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indemnification, under any pending litigation or administrative
proceedings, including that discussed below, would not materially affect our
consolidated financial position, results of operations or cash flows.

On November 17, 2008, the United States Environmental
Protection Agency (EPA) filed a civil action against us in the United States
District Court for the District of Idaho. The civil action seeks recovery of
funds paid by the EPA in response to alleged releases of hazardous substances at
our Idaho Lakeview mine and mill site in Bonner County, Idaho. Currently, we do
not believe that the resolution of this civil action will materially affect our
consolidated financial position, results of operations or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS

None.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth information concerning the
Companys directors and executive officers.

|NAME            | AGE | POSITION              
|--------------- | --- | ----------------------
|Lex Smith       | 56  | President and Director
|Carol Stephan   | 67  | Secretary and Director
|Melanie Farrand | 53  | Treasurer and Director
|Sharon Jacobs   | 51  | Director              

Set forth below is certain additional information with respect
to the directors and executive officers.

Lex Smith holds a BA in political science from
Drake University, an associate degree in business systems management and an
associate degree in paralegal studies. Additionally, for the last 13 years, he
has been a business consultant and project manager in the United States for the
Lehman, Lee & Xu Law Firm in Beijing, China, and has served as a consultant
to the Firms Mining Law Department for the past 2 years. Mr. Smith entered the
mining business in 1993 as the field manager and owner of multiple mining claims
in Montana and has subsequently been closely involved with several mining
companies and mining projects in the Pacific Northwest. Further, Mr. Smith has
served as the President of the Silver Valley Mining Association since 2003, and
currently also serves as President of Natural Resources Education Outreach, an
Idaho non-profit corporation.

Carol Stephan has over 30 years of experience in
the mining and timber industries. Additionally, she is currently serving as a
Director of Sterling Mining Company, an Officer of Merger Mines Corporation, a
Director and Secretary of Shoshone Silver Mining Company and as a Director and
Officer of Gold Crest Mines. Her extensive experience in the administration and
management of mining companies has been gleaned from the many years she has
worked with and managed mining and timber companies in the western United
States. In addition, Ms. Stephan currently owns and operates several successful
businesses in Idaho.

Melanie Farrand has been working in the mining
industry for the past six years as an administrative secretary and bookkeeper.
She also serves on the Board of Directors of several mining companies.
Previously she was the office manager for a Land Surveying company for ten
years, responsible for payroll, bookkeeping and research. Ms. Farrand is
currently serving as a Director and Officer of Shoshone Silver Mining
Company.

Sharon Jacobswas elected to the Board of
Directors in 2006. She has been the Office Manager for Silver Valley Capital, a
Wallace, Idaho real estate development firm, since 2004. Prior to her employment
with Silver Valley

28

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Capital, Sharon was an Appraiser for the Shoshone County
Assessor for 18 years. Sharon retired from Shoshone County in 2003 as the Chief
Deputy Treasurer after 25 years of combined employment.

PART II

ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSER PURCHASES OF EQUITY SECURITIES

The Companys shares are traded on the OTC Pink Sheets operated
by the National Association of Securities Dealers, Inc. (NASD) under the trading
symbol SHSH.OB. Summary trading by quarter for fiscal 2008 and 2007 are as
follows:

|Fiscal
      Quarter |   | High (b) |  |   | Low (b) | 
|-------------------- | - | -------- |  | - | ------- | 
|                     |   |          |  |   |         | 
|2007                 |   |          |  |   |         | 
|Fourth Quarter (a)   | $ | -        |  | $ | -       | 
|Third Quarter        | $ | 0.20     |  | $ | 0.10    | 
|Second Quarter       | $ | 0.23     |  | $ | 0.13    | 
|First Quarter        | $ | 0.32     |  | $ | 0.19    | 
|                     |   |          |  |   |         | 
|2007                 |   |          |  |   |         | 
|Fourth Quarter       | $ | 0.43     |  | $ | 0.21    | 
|Third Quarter        | $ | 0.31     |  | $ | 0.21    | 
|Second Quarter       | $ | 0.35     |  | $ | 0.24    | 
|First Quarter        | $ | 0.40     |  | $ | 0.23    | 

(a) On September 29, 2008, the Companys board of directors
approved a change in the Companys fiscal year end from December 31st
to September 30th, effective on September 30, 2008. This report
covers the nine-month transition period of January 1, 2008 through September 30,
2008.

(b) These quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commissions and may not represent actual
transactions.

As of September 30, 2008, the Company had approximately 1,589
holders of record of our common stock.

The Company has not paid any dividends since our inception and
do not anticipate paying any dividends on its common stock in the foreseeable
future. There are no restrictions which preclude the payment of dividends.

The Company has no equity compensation plan or plans.

Unregistered Sales of Equity
Securities

During the three-month period ended September 30, 2008, the
Company sold 500,000 shares of common stock at a price per share of $0.20 to two
accredited investors for gross proceeds of $100,000. For every two shares
purchased, the investor received one warrant to purchase one share of common
stock. The warrants are exercisable at $0.40 per share and expire on June 9,
2009. This sale was made under the exemption from registration provided by
Regulation D, Rule 506. The Company paid commissions totaling $4,016 for this
equity transaction.

Purchases of Equity Securities by the
Issuer

On September 17, 2008, the Company acquired 126,000 shares of
its common stock at a price of $0.12 per share.

29

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On September 18, 2008, the Company acquired 6,100 shares of its
common stock at a price of $0.12 per share.

ITEM 6. SELECTED FINANCIAL DATA

Not Applicable.

ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

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

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

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

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

Fiscal Year End Change
  References to a fiscal year refer to the calendar year in which
such fiscal year commences. Historically, our fiscal year ended on December
31st. However, on September 29, 2008, our board of directors approved
a change in our fiscal year end from December 31st to September
30th, effective on September 30, 2008. This report covers the
nine-month transition period of January 1, 2008 through September 30, 2008.

Plan of Operation
  On August 11, 2008, we sold 100% of the common stock of our
wholly owned subsidiary in Mexico, Shoshone Mexico, S.A. de C.V, to Xtierra
Resources, Ltd (Xtierra). Our interest in the Bilbao concessions in Zacatecas,
Mexico was included in this sale. In exchange for our interest in the Bilbao
concessions we received net proceeds of 2,498,490 and a note receivable for
$2,500,000.

The note does not bear interest and stipulates that a payment
of $500,000 is due on August 11, 2009. The remaining balance of $2,000,000 is to
be paid in four consecutive equal installments to begin at the time of the
commencement of construction of any mine developed on the Bilbao concessions but
in any event will be due and payable no later than August 11, 2019. Since the
note does not bear interest, we imputed interest at a rate of 5%. Accordingly we
recorded a note discount of $634,637. During fiscal 2008, $7,773 of interest
income was realized through the amortization of this note discount.

30

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Effective September 30, 2008, we completed the refurbishment of
the mill at our Lakeview property. The total capitalized cost of this
refurbishment was $499,681 which began depreciating on October 1, 2008. During
2009, we plan to conduct geologic assessments of our Lakeview Property.
We began the milling of previously stockpiled material in the fall of 2007 and
we plan to continue this into 2009. After that, we anticipate conducting surface
mining at the Weber property and the milling of ores obtained from those efforts
at the Lakeview Mill. We intend to use the proceeds from the sale of our Bilbao
concessions to finance these plans.

Comparison of the Nine Months Ended September 30, 2008
and the Twelve Months Ended December 31, 2007:

Results of Operations

Please note that the following discussions compare a nine-month
fiscal year 2008 with a twelve-month fiscal year 2007. Fiscal year 2008 is a
nine-month transition period attributable to the change in our fiscal year end.
On September 29, 2008, our board of directors approved a change in our fiscal
year end from December 31st to September 30th, effective on September 30,
2008.

The following table sets forth certain information regarding
the components of our Consolidated Statements of Operations for the year ended
September 30, 2008 compared with the fiscal year ended December 31, 2007. This
table is provided to assist in assessing differences in our overall
performance:

|                                      |   | Fiscal Year Ended |   |   |          |   |   |           |  
|------------------------------------- | - | ----------------- | - | - | -------- | - | - | --------- | -
|                                      |   | 2008              |   |   | 2007     |   |   | $ Change  |  
|                                      |   |                   |   |   |          |   |   |           |  
|REVENUES                              | $ | 240               |   | $ | 941      |   | $ | (701      | )
|COST OF REVENUES                      |   | 127               |   |   | 562      |   |   | (435      | )
|GROSS PROFIT                          |   | 113               |   |   | 379      |   |   | (266      | )
|General and administrative            |   | 490,770           |   |   | 368,230  |   |   | 122,540   |  
|Professional fees                     |   | 189,342           |   |   | 144,488  |   |   | 44,854    |  
|Depreciation                          |   | 44,392            |   |   | 43,612   |   |   | 780       |  
|Mining and exploration
      expenses |   | 68,404            |   |   | 136,695  |   |   | (68,291   | )
|Net gain on sale of load claim        |   | (60,000           | ) |   | -        |   |   | (60,000   | )
|Total Operating Expenses              |   | 732,908           |   |   | 693,025  |   |   | 39,883    |  
|LOSS FROM OPERATIONS                  |   | (732,795          | ) |   | (692,646 | ) |   | (40,149   | )
|Lease income                          |   | -                 |   |   | 2,514    |   |   | (2,514    | )
|Net gain on sale of securities        |   | (7,840            | ) |   | 385,913  |   |   | (393,753  | )
|Dividend and interest
      income    |   | 22,637            |   |   | 29,807   |   |   | (7,170    | )
|Net gain on the sale of Mexican       |   |                   |   |   |          |   |   |           |  
|mining concession                     |   | 4,363,353         |   |   | -        |   |   | 4,363,353 |  
|Interest expense                      |   | (3,250            | ) |   | (1,170   | ) |   | (2,080    | )
|Other income                          |   | 3,253             |   |   | 2,728    |   |   | 525       |  
|Total Other Income                    |   | 4,378,153         |   |   | 419,792  |   |   | 3,958,361 |  
|NET (LOSS) INCOME                     | $ | 3,645,358         |   | $ | (272,854 | ) | $ | 3,918,212 |  

The following table, which sets forth our unaudited results of
operations for the three-months ended December 31, 2007, is provided to assist
the reader in assessing the differences in our overall fiscal 2008 and 2007
performance.

31

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|                                             |   | Three-Month               |  
|-------------------------------------------- | - | ------------------------- | -
|                                             |   | Period Ended              |  
|                                             |   | December
        31, 2007 |  
|                                             |   | (unaudited)               |  
|Revenues                                     | $ | 180                       |  
|Cost of Revenue                              |   | 96                        |  
|Gross Profit                                 |   | 84                        |  
|                                             |   |                           |  
|Operating Expenses                           |   |                           |  
|General and administrative                   |   | 91,661                    |  
|Professional fees                            |   | 54,775                    |  
|Depreciation                                 |   | 12,642                    |  
|Mining and exploration
        expenses      |   | 19,307                    |  
|Total Operating
        Expenses             |   | 178,385                   |  
|                                             |   |                           |  
|Loss From Operations                         |   | (178,301                  | )
|                                             |   |                           |  
|Other Income (Expenses)                      |   |                           |  
|Net gain on sale of securities               |   | 41,424                    |  
|Lease income                                 |   | 2,514                     |  
|Other income                                 |   | 1,407                     |  
|Dividend and interest income                 |   | 6,005                     |  
|Interest expense                             |   | (479                      | )
|Total Other Income                           |   | 50,871                    |  
|                                             |   |                           |  
|Net Loss Before Income Taxes                 | $ | (127,430                  | )
|                                             |   |                           |  
|Net Loss Per Common Share, Basic and Diluted | $ | (0.01                     | )

Overview of Operating Results

The increase in net income during fiscal 2008 from fiscal 2007
was primarily the result of a net gain on the sale of our interest in the Bilbao
concessions in Zacatecas, Mexico. In exchange for our interest in the Bilbao
concessions we received net proceeds of $2,497,990 and a non-interest bearing
note receivable (net of discount) for $1,865,363. The deferred costs of $80,000
related to these concessions were included in exploration expenses in a prior
year.

Since the note does not bear interest, the Company imputed
interest at a rate of 5%. Accordingly the Company recorded a note discount of
$634,637. During fiscal 2008, $7,773 of interest income was realized through the
amortization of this note discount.

This positive impact was partially offset primarily by a net
loss on the sale of available-for-sale securities of $7,840 realized during the
nine-month fiscal 2008 compared with a net gain of $385,913 realized during the
twelve-month fiscal 2007.

Operating Expenses

Operating expenses increased during nine-month fiscal 2008
compared with twelve-month fiscal 2007. The increase between these two periods
is larger than it appears also due to the $178,301 loss from operations incurred
during the three-month period ended December 31, 2007.

The increase in operating expenses during fiscal 2008 was
primarily attributable to $78,500 in compensation expense associated with a
settlement agreement entered into by the Company with its former Chief Executive
Officer. Also contributing to the increase, although to a lesser extent, in were
incremental salary expenses related to the hiring of six new employees during
fiscal 2008 and increased legal and accounting fees associated with the sale of
our Mexican mining concession. See Note 12. Accounts Payable -
Settlement Agreement with Former Chief Executive Officer to our
consolidated financial statements for further details.

32

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Partially offsetting these negative impacts was a net gain on
the sale of a lode claim of $60,000 realized during fiscal 2008. On July 24,
2008, we acquired 200,000 shares of common stock of Bayswater Uranium
Corporation, a Canadian company (Bayswater), in exchange for our 43 unpatented
mining claims in Elko County, Nevada. This exchange was valued at $60,000 based
on the market price of Bayswaters common stock on July 24, 2008. The Company
did not realize a gain on the sale of a lode claim during fiscal 2007.

Other Income (Expenses)

The increase in other income during fiscal 2008 from fiscal
2007 was primarily due to a net gain of $4,997,990 on the sale of our interest
in the Bilbao concessions in Zacatecas, Mexico. In exchange for our interest in
the Bilbao concessions we received net proceeds of 2,497,990 and a non-interest
bearing note receivable, net of discount, for $1,865,363. The deferred costs of
$80,000 related to these concessions were included in exploration expenses in a
prior year.

Since the note does not bear interest, the Company imputed
interest at a rate of 5%. Accordingly the Company recorded a note discount of
$634,637. During fiscal 2008, $7,773 of interest income was realized through the
amortization of this note discount.

This positive impact was partially offset primarily by a net
loss on the sale of available-for-sale securities of $7,840 realized during the
nine-month fiscal 2008 compared with a net gain of $385,913 realized during the
twelve-month fiscal 2007. A net gain from the sale of available-for-dale
securities of $41,424 was realized during the three-month period ended December
31, 2007 accounts for a portion of the decrease in this account. The remaining
decrease is due to fewer available-for-sale securities being sold at reduced
market values.

Overview of Financial Position

At September 30, 2008, we had cash of $1,507,066 and total
liabilities of $211,199. During 2008, we received net proceeds of $2,497,990
from the sale of our interest in the Bilbao concessions in Zacatecas, Mexico,
$295,984 from the issuance of 1,550,000 shares of common stock to ten investors,
and $13,450 from the from the sale of available-for-sale securities. These
proceeds were utilized to complete the refurbishment of the Companys Lakeview
mining property and will be used to finance our expanding operations.

Property, Plant and Equipment

At September 30, 2008, property, plant and equipment before
accumulated depreciation totaled $2,585,095, an increase of $431,879 from
$2,153,216 from the balance at December 31, 2007. The following contributed to
this increase:

|1. | We expended $114,511 during fiscal 2008 to complete the
      refurbishment of the mill at our Lakeview property;                                                                                                                   
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2. | We expended $167,368 during fiscal 2008 to acquire
      equipment primarily related to the operations at our Lakeview
    property;                                                                                                
|3. | We issued 454,000 shares of common stock on June 6, 2008,
      in exchange for three pieces of heavy equipment. The transaction was
      valued at $95,340 based on a stock price of $0.21 per common share on June
      6, 2008.
|4. | We acquired for $150,000 on September 10, 2008, a 50%
      interest in a commercial office building in Coeur dAlene,
  Idaho.                                                                                                     

See Note 7. Property, Plant and Equipment to our consolidated
financial statements for further details.

33

---

Notes Receivable

On September 30, 2008, we had current and long-term notes
receivable, net of discount, of $2,194,307 compared with $118,363 at December
31, 2008.

This increase is primarily due the sale of our interest in the
Bilbao concessions in Zacatecas, Mexico. In exchange for this we received net
proceeds of 2,497,990 and a non-interest bearing note receivable, net of
discount, for $1,865,363. The note does not bear interest and stipulates that a
payment of $500,000 is due on August 11, 2009. The remaining balance of
$2,000,000 is to be paid in four consecutive equal installments to begin at the
time of the commencement of construction of any mine developed on the Bilbao
concessions but in any event will be due and payable no later than August 11,
2019.

Since the note does not bear interest, the Company imputed
interest at a rate of 5%. Accordingly the Company recorded a note discount of
$634,637. During fiscal 2008, $7,773 of interest income was realized through the
amortization of this note discount.

Additionally, in connection with a letter-of-intent entered
into with Kimberly Gold Mines, Inc. (Kimberly), on August 29, 2008, we advanced
Kimberly $200,000 in exchange for a promissory note to reduce their outstanding
obligations. The note bears interest at 6.0% per annum and is payable on demand
at any time. Further, until the principal and accrued interest are paid, the
note is secured by sufficient shares of Kimberly common stock at an agreed value
of $0.06 per share.

See Note 10. Notes Receivable to our consolidated financial
statements for further details.

Investments

Shoshones investment portfolio at September 30, 2008 was
$356,823, an increase of $98,619 from the December 31, 2007 balance of $258,204.
This increase was primarily a result of the acquisition of 1,266,013 shares of
common stock in various companies. Partially offsetting this positive impact was
decreased per share values. See Note 11: Investments to our consolidated
financial statements for further details.

Accounts Payable and Accrued Expenses

Our accounts payable were $195,507 at September 30, 2008, which
included $48,500 in compensation expense associated with a settlement agreement
entered into by the Company with its former Chief Executive Officer, and
included $50,000 associated with our acquisition of a 50% interest in a
commercial office building in Coeur dAlene, Idaho. Our accounts payable were
$54,106 at December 31, 2007, which included $37,874 in legal expenses and
$9,597 in expenditures associated with the Companys Lakeview mining
property.

Notes Payable

During 2006, we acquired a vehicle for $19,782 by paying $9,000
cash and signing a note for the remaining $10,781. The note has a term of 30
months, bears interest at 8.99% annually and stipulates that payments of $499 be
made monthly. The outstanding balance on this note payable was $1,136 at
September 30, 2008 and is payable within twelve months.

During the third quarter of 2007, we acquired equipment for
$55,000 by paying $27,500 cash and signing a note for the remaining $27,500. The
note has a term of 24 months, bears interest at 8.50% annually and stipulates
that payments of $1,250 be made monthly. The outstanding balance on this note
payable was $13,183 at June 30, 2008. Of this amount $14,032 is payable within
twelve months.

In December 2007, we purchased for $21,335 a one-year liability
insurance policy covering its Lakeview mill (the Policy). The Policy was
purchased with a cash payment of $5,709 with the balance of $15,626 was settled
with a promissory note. We recorded prepaid insurance of $19,557 and a related
entry to record a $15,626 note payable. The note has a term of nine months, bears interest at 11.4%
annually and stipulates that payments of $1,820 be made monthly. The outstanding
balance on this note payable was $0 at September 30, 2008.

34

---

In December 2007, we purchased equipment for $15,377 in
exchange for a note. The note has a term of 43 months, bears interest at 3.90%
annually and stipulates that payments of $384 be made monthly. The lender has
the right to increase the interest rate to 19.8% in the event of a violation of
the terms of the loan agreement. The outstanding balance on this note payable
was $12,328 at September, 2008. Of this amount $4,207 is payable within twelve
months.

See Note 13. Notes Payable to our consolidated financial
statements for further details.

Stockholders Equity

Shoshones total stockholders equity was $5,641,020 at
September 30, 2008, an increase of $3,976,885 from $1,781,271 at December 31,
2007. The increase in total stockholders equity was primarily due to net income
of $3,645,358 realized during fiscal 2008. Also contributing to this increase
was the issuance of 1,550,000 shares of common stock for net proceeds of
$295,985, as well as the issuance of 454,000 shares of common stock in exchange
for three pieces of heavy equipment. See Note 7: Property, Plant and Equipment
and Note 14: Common Stock to our consolidated financial statements for further
details.

Partially offsetting this increase in total stockholders
equity was a decrease of $200,113 in accumulated other comprehensive income.
Fluctuations in prevailing market values continue to cause volatility in the
Companys accumulated comprehensive income or loss in stockholders equity and
may continue to do so in future periods. See Note 11: Investments to our
consolidated financial statements for further details.

Liquidity and Capital Resources

Operating Activities
  During fiscal 2008 and fiscal 2007, our operating activities
used $605,015 and used $552,117, respectively. This increase was primarily the
result of a $4,363,353 net gain on the sale of our Mexican mining concession.
Partially offsetting this impact was a gain on the sale of investments of
$385,913 included in the prior fiscal year results compared with a non-cash loss
on the sales of investments of $7,840 during the current fiscal year.

Investing Activities
  Our investing activities provided $1,989,426 and $37,511 during
fiscal 2008 and fiscal 2007, respectively, on increase of $1,951,915. This
increase was primarily the result of net proceeds of $2,497,990 received in
connection with the sale of our Mexican mining concession. Partially offsetting
this were proceeds from the sale of investments of $481,285 received during
fiscal 2007 compared with only $13,450 during fiscal 2008. Also partially
offsetting this was the purchase of $260,023 of investments during fiscal 2008
compared with $31,121 during fiscal 2007.

Financing Activities
  Our financing activities contributed $171,623and $334,999
during fiscal 2008 and fiscal 2007, respectively, a decrease of $163,376. This
decrease is primarily due our advancing Kimberly $200,000 in exchange for a
promissory note to reduce their outstanding obligations. Partially offsetting
this was a payment of $120,000 received from Silver Valley Capital on a note
receivable. Also partially offsetting this were net proceeds of $295,985 from
the issuance of 1,550,000 shares of common stock during fiscal 2008 compared
with the net proceeds of $252,000 from issuance of $1,450,000 shares of common
stock during fiscal 2007.

Off-Balance Sheet Arrangements

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

35

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

Not applicable



36

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

To the Board of Directors and Stockholders of 
  Shoshone Silver Mining Company

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have audited the accompanying balance sheets of Shoshone Silver
  Mining Company as of September 30, 2008, and December 31, 2007, and the related
  statements of operations, stockholders equity and cash flows for the period
  and year then ended, and for the period from January 1, 2000 (inception of exploration
  stage) to September 30, 2008. These financial statements are the responsibility
  of the Companys management. Our responsibility is to express an opinion
  on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the
  Public Company Accounting Oversight Board (United States). Those standards require
  that we plan and perform the audit to obtain reasonable assurance about whether
  the financial statements are free of material misstatement. The Company is not
  required to have, nor were we engaged to perform, an audit of its internal control
  over financial reporting. Our audit included consideration of internal control
  over financial reporting as a basis for designing audit procedures that are
  appropriate in the circumstances, but not for the purpose of expressing an opinion
  on the effectiveness of the Companys internal control over financial reporting.
  Accordingly, we express no such opinion. An audit also includes examining, on
  a test basis, evidence supporting the amounts and disclosures in the financial
  statements, assessing the accounting principles used and significant estimates
  made by management, as well as evaluating the overall financial statement presentation.
  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
  fairly, in all material respects, the financial position of Shoshone Silver
  Mining Company as of September 30, 2008 and December 31, 2007 and the results
  of its operations, stockholders equity and its cash flows for the period and
  the year then ended, and for the period from January 1, 2000 (inception of exploration
  stage) to September 30, 2008, in conformity with accounting principles generally
  accepted in the United States of America.

Williams & Webster, P.S.Certified Public AccountantsSpokane, Washington 
  January 12, 2009

37

---

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

|                                                              |   | September 30, |   |   | December 31, |  
|------------------------------------------------------------- | - | ------------- | - | - | ------------ | -
|                                                              |   | 2008          |   |   | 2007         |  
|                                                              |   |               |   |   |              |  
|ASSETS                                                        |   |               |   |   |              |  
|                                                              |   |               |   |   |              |  
|CURRENT ASSETS                                                |   |               |   |   |              |  
|Cash and cash equivalents                                     | $ | 1,570,066     |   | $ | 14,032       |  
|Note
      receivable (net of discount) - current portion     |   | 422,277       |   |   | -            |  
|Receivables from related parties                              |   | 9,624         |   |   | 9,624        |  
|Deposits
      and prepaids                                   |   | 4,806         |   |   | 19,886       |  
|Supplies inventory                                            |   | 2,821         |   |   | 2,948        |  
|Total Current Assets                                          |   | 2,009,594     |   |   | 46,490       |  
|                                                              |   |               |   |   |              |  
|PROPERTY, PLANT AND EQUIPMENT                                 |   |               |   |   |              |  
|Property, plant and equipment                                 |   | 2,585,095     |   |   | 2,153,216    |  
|Accumulated
      depreciation                                |   | (1,244,225    | ) |   | (1,199,833   | )
|Total Property Plant and Equipment                            |   | 1,340,870     |   |   | 953,383      |  
|                                                              |   |               |   |   |              |  
|MINERAL AND MINING
      PROPERTIES                           |   | 379,690       |   |   | 379,690      |  
|                                                              |   |               |   |   |              |  
|OTHER ASSETS                                                  |   |               |   |   |              |  
|Notes
      receivable from related parties                   |   | 3,716         |   |   | 136,180      |  
|Notes receivable (net of discount)                            |   | 1,772,030     |   |   | 118,363      |  
|Accrued
      interest receivable                             |   | 10,739        |   |   | 4,267        |  
|Investments                                                   |   | 356,823       |   |   | 258,204      |  
|Total Other Assets                                            |   | 2,143,308     |   |   | 517,014      |  
|                                                              |   |               |   |   |              |  
|TOTAL ASSETS                                                  | $ | 5,873,462     |   | $ | 1,896,577    |  
|                                                              |   |               |   |   |              |  
|                                                              |   |               |   |   |              |  
|LIABILITIES AND STOCKHOLDERS'
        EQUITY                  |   |               |   |   |              |  
|                                                              |   |               |   |   |              |  
|CURRENT LIABILITIES                                           |   |               |   |   |              |  
|Accounts
      payable                                        | $ | 195,507       |   | $ | 54,106       |  
|Accrued expenses                                              |   | 10,288        |   |   | 1,755        |  
|Notes
      payable - current portion                         |   | 18,526        |   |   | 37,292       |  
|Total Current Liabilities                                     |   | 224,321       |   |   | 93,153       |  
|                                                              |   |               |   |   |              |  
|Note payable - noncurrent portion                             |   | 8,121         |   |   | 22,153       |  
|Total Liabilities                                             |   | 232,442       |   |   | 115,306      |  
|                                                              |   |               |   |   |              |  
|COMMITMENTS AND CONTINGENCIES                                 |   | -             |   |   | -            |  
|                                                              |   |               |   |   |              |  
|STOCKHOLDERS' EQUITY                                          |   |               |   |   |              |  
|Common stock, 80,000,000 shares authorized, $0.10 par value;  |   |               |   |   |              |  
|22,063,179
      and 19,847,179 shares issued and outstanding |   | 2,206,318     |   |   | 1,984,718    |  
|Additional paid-in capital                                    |   | 3,522,385     |   |   | 3,308,261    |  
|Treasury
      stock                                          |   | (309,853      | ) |   | (288,633     | )
|Stock options                                                 |   | -             |   |   | -            |  
|Subscriptions
      receivable                                |   | -             |   |   | -            |  
|Accumulated deficit in exploration stage                      |   | 1,906,423     |   |   | (1,738,935   | )
|Accumulated
      deficit prior to exploration stage          |   | (1,667,482    | ) |   | (1,667,482   | )
|Accumulated other comprehensive income                        |   | (16,771       | ) |   | 183,342      |  
|Total Stockholders' Equity                                    |   | 5,641,020     |   |   | 1,781,271    |  
|                                                              |   |               |   |   |              |  
|TOTAL LIABILITIES AND STOCKHOLDERS'                           |   |               |   |   |              |  
|**EQUITY**                                                    | $ | 5,873,462     |   | $ | 1,896,577    |  

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

38

---

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

|                                                 |   |                   |   |   |               |   |   | Period from           |  
|------------------------------------------------ | - | ----------------- | - | - | ------------- | - | - | --------------------- | -
|                                                 |   |                   |   |   |               |   |   | January 1, 2000       |  
|                                                 |   | Fiscal Year Ended |   |   | (beginning of |  
|                                                 |   | September 30,     |   |   | December 31,  |   |   | development stage)    |  
|                                                 |   | **2008 (a)** **** |   |   | 2007          |   |   | to September 30, 2008 |  
|                                                 |   |                   |   |   |               |   |   |                       |  
|                                                 |   |                   |   |   |               |   |   |                       |  
|REVENUES                                         | $ | 240               |   | $ | 941           |   | $ | 377,638               |  
|                                                 |   |                   |   |   |               |   |   |                       |  
|COST OF REVENUES                                 |   | 127               |   |   | 562           |   |   | 230,260               |  
|                                                 |   |                   |   |   |               |   |   |                       |  
|GROSS PROFIT                                     |   | 113               |   |   | 379           |   |   | 147,378               |  
|                                                 |   |                   |   |   |               |   |   |                       |  
|OPERATING EXPENSES                               |   |                   |   |   |               |   |   |                       |  
|General and administrative                       |   | 490,770           |   |   | 362,190       |   |   | 1,471,194             |  
|Professional fees                                |   | 189,342           |   |   | 144,488       |   |   | 640,482               |  
|Consulting fees                                  |   | -                 |   |   | -             |   |   | 135,140               |  
|Depreciation                                     |   | 44,392            |   |   | 43,612        |   |   | 333,296               |  
|Mining and exploration expenses                  |   | 68,404            |   |   | 142,735       |   |   | 1,560,307             |  
|Net gain on sale of load claim                   |   | (60,000           | ) |   | -             |   |   | (193,907              | )
|Total Operating
        Expenses                 |   | 732,908           |   |   | 693,025       |   |   | 3,946,512             |  
|                                                 |   |                   |   |   |               |   |   |                       |  
|LOSS FROM OPERATIONS                             |   | (732,795          | ) |   | (692,646      | ) |   | (3,799,134            | )
|                                                 |   |                   |   |   |               |   |   |                       |  
|OTHER INCOME (EXPENSES)                          |   |                   |   |   |               |   |   |                       |  
|Lease income                                     |   | -                 |   |   | 2,514         |   |   | 444,044               |  
|Net gain on sale of securities                   |   | (7,840            | ) |   | 385,913       |   |   | 1,130,208             |  
|Dividend and interest income                     |   | 22,637            |   |   | 29,807        |   |   | 91,300                |  
|Loss on abandonment of asset                     |   | -                 |   |   | -             |   |   | (20,000               | )
|Gain on sale of fixed asset                      |   | -                 |   |   | -             |   |   | 12,200                |  
|Unrealized holding loss on marketable securities |   | -                 |   |   | -             |   |   | (380,827              | )
|Gain on settlement of note receivable            |   | -                 |   |   | -             |   |   | 64,206                |  
|Gain on sale of Mexican mining concession        |   | 4,363,353         |   |   |               |   |   | 4,363,353             |  
|Interest expense                                 |   | (3,250            | ) |   | (1,170        | ) |   | (4,908                | )
|Other income                                     |   | 3,253             |   |   | 2,728         |   |   | 5,981                 |  
|Total Other Income (Expenses)                    |   | 4,378,153         |   |   | 419,792       |   |   | 5,705,557             |  
|                                                 |   |                   |   |   |               |   |   |                       |  
|INCOME (LOSS) BEFORE INCOME TAXES                |   | 3,645,358         |   |   | (272,854      | ) |   | 1,906,423             |  
|                                                 |   |                   |   |   |               |   |   |                       |  
|INCOME TAXES                                     |   | -                 |   |   | -             |   |   | 124,826               |  
|DEFERRED TAX GAIN                                |   | -                 |   |   | -             |   |   | (124,826              | )
|                                                 |   |                   |   |   |               |   |   |                       |  
|NET INCOME (LOSS)                                |   | 3,645,358         |   |   | (272,854      | ) |   | 1,906,423             |  
|                                                 |   |                   |   |   |               |   |   |                       |  
|OTHER COMPREHENSIVE INCOME (LOSS)                |   |                   |   |   |               |   |   |                       |  
|Unrealized holding gain (loss) on investments    |   | (207,954          | ) |   | (33,570       | ) |   | 502,451               |  
|                                                 |   |                   |   |   |               |   |   |                       |  
|NET COMPREHENSIVE INCOME (LOSS)                  | $ | 3,437,404         |   | $ | (306,424      | ) | $ | 2,408,874             |  
|                                                 |   |                   |   |   |               |   |   |                       |  
|                                                 |   |                   |   |   |               |   |   |                       |  
|NET INCOME (LOSS) PER COMMON SHARE, BASIC        | $ | 0.17              |   | $ | (0.01         | ) |   |                       |  
|                                                 |   |                   |   |   |               |   |   |                       |  
|NET INCOME (LOSS) PER COMMON SHARE, DILUTED      | $ | 0.17              |   | $ | (0.01         | ) |   |                       |  
|                                                 |   |                   |   |   |               |   |   |                       |  
|WEIGHTED AVERAGE NUMBER OF                       |   |                   |   |   |               |   |   |                       |  
|COMMON STOCK SHARES OUTSTANDING, BASIC           |   | 20,935,677        |   |   | 18,733,009    |   |   |                       |  
|                                                 |   |                   |   |   |               |   |   |                       |  
|WEIGHTED AVERAGE NUMBER OF                       |   |                   |   |   |               |   |   |                       |  
|COMMON STOCK SHARES OUTSTANDING, DILUTED         |   | 20,935,677        |   |   | 18,733,009    |   |   |                       |  

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

39

---

|SHOSHONE SILVER MINING COMPANY                
|----------------------------------------------
|(an Exploration Stage Company)                
|CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

|                                                                               |              |  |   |            |  |   |           |  |   |          |   |   |         |   |   |               |   |   |             |   |   | Accumulated   |   |   |               |  
|------------------------------------------------------------------------------ | ------------ |  | - | ---------- |  | - | --------- |  | - | -------- | - | - | ------- | - | - | ------------- | - | - | ----------- | - | - | ------------- | - | - | ------------- | -
|                                                                               | Common Stock |  |   | Additional |  |   |           |  |   |          |   |   |         |   |   |               |   |   | Other       |   |   | Total         |  
|                                                                               | Number       |  |   |            |  |   | Paid-in   |  |   | Treasury |   |   | Stock   |   |   | Subscriptions |   |   | Accumulated |   |   | Comprehensive |   |   | Stockholders' |  
|                                                                               | of Shares    |  |   | Amount     |  |   | Capital   |  |   | Stock    |   |   | Options |   |   | Receivable    |   |   | Deficit     |   |   | Income        |   |   | Equity        |  
|Balance, December 31, 2006                                                     | 18,243,797   |  | $ | 1,824,380  |  | $ | 3,151,143 |  | $ | (270,696 | ) | $ | 12,221  |   | $ | (18,844       | ) | $ | (3,133,563  | ) | $ | 602,825       |   | $ | 2,167,465     |  
|Expiration of stock options                                                    | -            |  |   | -          |  |   | 12,221    |  |   | -        |   |   | (12,221 | ) |   | -             |   |   | -           |   |   | -             |   |   | -             |  
|Stock issued for cash at $0.18 per share,
      net of costs                   |              |  |   |            |  |   |           |  |   |          |   |   |         |   |   |               |   |   |             |   |   |               |   |   |               |  
|of $18,000                                                                     | 1,000,000    |  |   | 100,000    |  |   | 62,000    |  |   | -        |   |   | -       |   |   | -             |   |   | -           |   |   | -             |   |   | 162,000       |  
|Stock issued for cash at $0.20 per share                                       | 200,000      |  |   | 20,000     |  |   | 20,000    |  |   | -        |   |   | -       |   |   | -             |   |   | -           |   |   | -             |   |   | 40,000        |  
|Stock issued for cash at $0.20 per share                                       | 250,000      |  |   | 25,000     |  |   | 25,000    |  |   | -        |   |   | -       |   |   | -             |   |   | -           |   |   | -             |   |   | 50,000        |  
|Issuance of stock for exploration expenses
      at a price                    |              |  |   |            |  |   |           |  |   |          |   |   |         |   |   |               |   |   |             |   |   |               |   |   |               |  
|of $0.27 per share                                                             | 100,000      |  |   | 10,000     |  |   | 17,000    |  |   | -        |   |   | -       |   |   | -             |   |   | -           |   |   | -             |   |   | 27,000        |  
|Issuance of stock in exchange for services                                     | 6,000        |  |   | 600        |  |   | 1,320     |  |   | -        |   |   | -       |   |   | -             |   |   | -           |   |   | -             |   |   | 1,920         |  
|Adjustments to common stock and treasury stock to                              |              |  |   |            |  |   |           |  |   |          |   |   |         |   |   |               |   |   |             |   |   |               |   |   |               |  
|adjust to actual. See Note 2.                                                  | 47,382       |  |   | 4,739      |  |   | 16,388    |  |   | (21,127  | ) |   | -       |   |   | -             |   |   | -           |   |   | -             |   |   | -             |  
|Receipt of subscription receivable                                             | -            |  |   | -          |  |   | -         |  |   | -        |   |   | -       |   |   | 18,844        |   |   | -           |   |   | -             |   |   | 18,844        |  
|Issuance of treasury stock for expenses incurred
      in                      |              |  |   |            |  |   |           |  |   |          |   |   |         |   |   |               |   |   |             |   |   |               |   |   |               |  
|the prior year                                                                 | -            |  |   | -          |  |   | 3,190     |  |   | 3,190    |   |   | -       |   |   | -             |   |   | -           |   |   | -             |   |   | 6,380         |  
|Unrealized holding gain on investments                                         | -            |  |   | -          |  |   | -         |  |   | -        |   |   | -       |   |   | -             |   |   | -           |   |   | (419,483      | ) |   | (419,483      | )
|Net income for the year ending December 31, 2007                               | -            |  |   | -          |  |   | -         |  |   | -        |   |   | -       |   |   | -             |   |   | (272,854    | ) |   | -             |   |   | (272,854      | )
|Balance, December 31, 2007                                                     | 19,847,179   |  | $ | 1,984,719  |  | $ | 3,308,262 |  | $ | (288,633 | ) | $ | -       |   | $ | -             |   | $ | (3,406,417  | ) | $ | 183,342       |   | $ | 1,781,272     |  
|Issuance of stock in exchange for services                                     | 12,000       |  |   | 1,200      |  |   | 1,200     |  |   | -        |   |   | -       |   |   | -             |   |   | -           |   |   | -             |   |   | 2,400         |  
|Stock issued for cash at $0.20 per share,
      net of costs of $10,000        | 350,000      |  |   | 35,000     |  |   | 25,000    |  |   | -        |   |   | -       |   |   | -             |   |   | -           |   |   | -             |   |   | 60,000        |  
|Unrealized holding gain on investments                                         | -            |  |   | -          |  |   | -         |  |   | -        |   |   | -       |   |   | -             |   |   | -           |   |   | -             |   |   | -             |  
|Stock issued for cash at $0.20 per share,
      net of costs of $4,016         | 450,000      |  |   | 45,000     |  |   | 40,984    |  |   | -        |   |   | -       |   |   | -             |   |   | -           |   |   | -             |   |   | 85,984        |  
|Stock issued for cash at $0.20 per share                                       | 250,000      |  |   | 25,000     |  |   | 25,000    |  |   | -        |   |   | -       |   |   | -             |   |   | -           |   |   | -             |   |   | 50,000        |  
|Issuance of stock for exploration expenses
      at a price                    |              |  |   |            |  |   |           |  |   |          |   |   |         |   |   |               |   |   |             |   |   |               |   |   |               |  
|of $0.22 per share                                                             | 100,000      |  |   | 10,000     |  |   | 12,000    |  |   | -        |   |   | -       |   |   | -             |   |   | -           |   |   | -             |   |   | 22,000        |  
|Stock issued in exchange for heavy equipement                                  | 454,000      |  |   | 45,400     |  |   | 49,940    |  |   | -        |   |   | -       |   |   | -             |   |   | -           |   |   | -             |   |   | 95,340        |  
|Stock issued for cash at $0.20 per share                                       | 250,000      |  |   | 25,000     |  |   | 25,000    |  |   |          |   |   |         |   |   |               |   |   |             |   |   |               |   |   | 50,000        |  
|Stock issued for cash at $0.20 per share                                       | 250,000      |  |   | 25,000     |  |   | 25,000    |  |   |          |   |   |         |   |   |               |   |   |             |   |   |               |   |   | 50,000        |  
|Stock issued in settlement of an agreement with the
      Company's former CEO | 100,000      |  |   | 10,000     |  |   | 10,000    |  |   |          |   |   |         |   |   |               |   |   |             |   |   |               |   |   | 20,000        |  
|Acquisition of 50,000 shares of treasury
      stock at $0.12 per share        |              |  |   |            |  |   |           |  |   | (6,100   | ) |   |         |   |   |               |   |   |             |   |   |               |   |   | (6,100        | )
|Acquisition of 126,000 shares of treasury stock at
      $0.12 per share       |              |  |   |            |  |   |           |  |   | (15,120  | ) |   |         |   |   |               |   |   |             |   |   |               |   |   | (15,120       | )
|Unrealized holding gain on investments                                         | -            |  |   | -          |  |   | -         |  |   | -        |   |   | -       |   |   | -             |   |   | -           |   |   | (200,114      | ) |   | (200,114      | )
|Net income for nine-month period ended September 30, 2008                      | -            |  |   | -          |  |   | -         |  |   | -        |   |   | -       |   |   | -             |   |   | 3,645,358   |   |   | -             |   |   | 3,645,358     |  
|                                                                               | 22,063,179   |  |   | 2,206,319  |  |   | 3,522,386 |  |   | (309,853 | ) |   | -       |   |   | -             |   |   | 238,941     |   |   | (16,772       | ) |   | 5,641,020     |  

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

40

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|SHOSHONE SILVER MINING COMPANY       
|-------------------------------------
|(an Exploration Stage Company)       
|CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                 |   |               |   |   |               |   |   | Period from           |  
|-------------------------------------------------------------------------------- | - | ------------- | - | - | ------------- | - | - | --------------------- | -
|                                                                                 |   | Nine Months   |   |   | Twelve Months |   |   | January 1, 2000       |  
|                                                                                 |   | Ended         |   |   | Ended         |   |   | (beginning of         |  
|                                                                                 |   | September 30, |   |   | December 31,  |   |   | development stage)    |  
|                                                                                 |   | 2008          |   |   | 2007          |   |   | to September 30, 2008 |  
|                                                                                 |   |               |   |   |               |   |   |                       |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                             |   |               |   |   |               |   |   |                       |  
|Net income (loss)                                                                | $ | 3,645,358     |   | $ | (272,854      | ) | $ | 1,906,423             |  
|Adjustments to reconcile net income (loss) to
      net                          |   |               |   |   |               |   |   |                       |  
|cash used
      by operations:                                                   |   |               |   |   |               |   |   |                       |  
|Depreciation and amortization
      expense                                      |   | 44,392        |   |   | 43,612        |   |   | 333,296               |  
|Amortization
      of note receivable discount                                   |   | (7,773        | ) |   | -             |   |   | (7,773                | )
|Common stock issued for services                                                 |   | 2,400         |   |   | 1,919         |   |   | 193,686               |  
|Common stock
      issued for mining and exploration expenses                    |   | 22,000        |   |   | 27,000        |   |   | 285,500               |  
|Common stock issued in settlement
      of agreement with former CEO             |   | 20,000        |   |   | -             |   |   | 20,000                |  
|Treasury
      stock issued for services                                         |   | -             |   |   | -             |   |   | 20,320                |  
|Net gain on sale of lode
      claim                                             |   | (60,000       | ) |   | -             |   |   | (193,907              | )
|Net gain
      on sale of Mexican mining concession                              |   | (4,363,353    | ) |   | -             |   |   | (4,363,353            | )
|Net loss (gain) on sale of
      investments                                     |   | 7,840         |   |   | (385,913      | ) |   | (1,130,208            | )
|Available
      for sale securities issued in exchange for services              |   | -             |   |   | -             |   |   | 135,140               |  
|Unrealized holding loss on
      marketable securities                           |   | -             |   |   | -             |   |   | 380,827               |  
|Gain on settlement
      of note receivable                                      |   | -             |   |   | -             |   |   | (64,206               | )
|Gain on sale of fixed asset                                                      |   | -             |   |   | -             |   |   | (12,200               | )
|Impairment
      of mining expenses                                              |   | -             |   |   | -             |   |   | 413,000               |  
|Loss on abandonment of investment                                                |   | -             |   |   | -             |   |   | 20,000                |  
|Changes in assets and liabilities:                                               |   |               |   |   |               |   |   |                       |  
|Change in receivable from
      related party                                    |   | -             |   |   | 1,000         |   |   | (9,624                | )
|Change in
      other current assets                                             |   | -             |   |   | -             |   |   | (4,819                | )
|Change in deposits and prepaids                                                  |   | 15,080        |   |   | 3,389         |   |   | 10,639                |  
|Change in
      supplies inventory                                               |   | 127           |   |   | 1,040         |   |   | 9,911                 |  
|Change in accrued interest
      receivable                                      |   | (6,472        | ) |   | 5,256         |   |   | (10,739               | )
|Change in
      accrued liabilities                                              |   | 8,533         |   |   | (599          | ) |   | 6,304                 |  
|Change in accounts payable                                                       |   | 66,853        |   |   | 24,033        |   |   | 106,915               |  
|Change in
      stock to issue                                                   |   | -             |   |   | -             |   |   | 230,680               |  
|Net cash used in operating
      activities                                      |   | (605,015      | ) |   | (552,117      | ) |   | (1,724,188            | )
|                                                                                 |   |               |   |   |               |   |   |                       |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                             |   |               |   |   |               |   |   |                       |  
|Purchases
      of investments                                                   |   | (260,023      | ) |   | (31,121       | ) |   | (4,007,170            | )
|Proceeds from sale of investments                                                |   | 13,450        |   |   | 481,285       |   |   | 4,572,218             |  
|Purchase
      of mineral and mining properties                                  |   | -             |   |   | -             |   |   | (68,472               | )
|Proceeds from sale of lode
      claim                                           |   | -             |   |   | -             |   |   | 13,907                |  
|Proceeds
      from sale of Mexican mining concession                            |   | 2,497,990     |   |   | -             |   |   | 2,497,990             |  
|Purchase of fixed assets                                                         |   | (261,991      | ) |   | (412,653      | ) |   | (713,958              | )
|Proceeds
      from sale of fixed assets                                         |   | -             |   |   | -             |   |   | 12,200                |  
|Net cash provided by investing
      activities                                  |   | 1,989,426     |   |   | 37,511        |   |   | 2,306,715             |  
|                                                                                 |   |               |   |   |               |   |   |                       |  
|CASH FLOWS FROM FINANCING ACTIVITIES                                             |   |               |   |   |               |   |   |                       |  
|Net proceeds
      from sale of common stock                                     |   | 295,985       |   |   | 252,000       |   |   | 1,242,570             |  
|Common shares repurchased
      for treasury                                     |   | (21,220       | ) |   | -             |   |   | (21,220               | )
|Advances
      on notes receivable                                               |   | (202,808      | ) |   | -             |   |   | (296,022              | )
|Advances to related party                                                        |   | -             |   |   | -             |   |   | (195,000              | )
|Issuance
      of note receviable from related party                             |   | -             |   |   | -             |   |   | (243,000              | )
|Payments received on notes
      receivable from related party                   |   | 132,464       |   |   | 71,125        |   |   | 332,498               |  
|Payments
      received on notes receivable                                      |   | -             |   |   | 1,001         |   |   | 130,038               |  
|Payment of common stock subscriptions                                            |   | -             |   |   | 18,844        |   |   | 20,225                |  
|Payment made
      on long-term note payable                                     |   | (32,798       | ) |   | (7,971        | ) |   | (203,299              | )
|Proceeds from short-term
      loans                                             |   | -             |   |   | -             |   |   | 160,760               |  
|Net cash
      (used in) provided by financing activities                        |   | 171,623       |   |   | 334,999       |   |   | 927,550               |  
|                                                                                 |   |               |   |   |               |   |   |                       |  
|Net increase (decrease) in cash                                                  |   | 1,556,034     |   |   | (179,607      | ) |   | 1,510,077             |  
|                                                                                 |   |               |   |   |               |   |   |                       |  
|Cash, beginning of period                                                        |   | 14,032        |   |   | 193,639       |   |   | 59,989                |  
|                                                                                 |   |               |   |   |               |   |   |                       |  
|Cash, end of period                                                              | $ | 1,570,066     |   | $ | 14,032        |   | $ | 1,570,066             |  
|                                                                                 |   |               |   |   |               |   |   |                       |  
|                                                                                 |   |               |   |   |               |   |   |                       |  
|SUPPLEMENTAL CASH FLOW DISCLOSURES:                                              |   |               |   |   |               |   |   |                       |  
|Interest expense paid                                                            | $ | 3,250         |   | $ | 1,170         |   | $ | 4,908                 |  
|Income taxes paid                                                                | $ | -             |   | $ | -             |   | $ | -                     |  
|                                                                                 |   |               |   |   |               |   |   |                       |  
|NON-CASH INVESTING AND FINANCING ACTIVITIES:                                     |   |               |   |   |               |   |   |                       |  
|Deposit utilized to purchase fixed
      asset                                   | $ | -             |   | $ | 5,000         |   | $ | 5,000                 |  
|Note payable issued in exchange for prepaid asset                                | $ | -             |   | $ | -             |   | $ | 15,626                |  
|Accounts payable issued in exchange
      for partial payment on office building | $ | 50,000        |   | $ | -             |   | $ | 50,000                |  
|Common stock issued for accounts payable                                         | $ | -             |   | $ | -             |   | $ | 227,500               |  
|Stock received in exchange for
      lode claim                                  | $ | 60,000        |   | $ | -             |   | $ | 60,000                |  
|Note receivable in connection with sale of lode
      claim                      | $ | -             |   | $ | -             |   | $ | 120,000               |  
|Note receivable (net of discount)
      in connection with sale of lode claim    | $ | 1,865,363     |   | $ | -             |   | $ | 1,865,363             |  
|Note issued in exchanged for vehicle                                             | $ | -             |   | $ | -             |   | $ | 53,658                |  
|Treasury stock acquired through
      sale of investment                         | $ | -             |   | $ | -             |   | $ | 296,296               |  
|Common stock issued for purchase of equipment                                    | $ | 95,340        |   | $ | -             |   | $ | 95,340                |  
|Common stock issued for purchase
      of mining properties                      | $ | -             |   | $ | -             |   | $ | 45,000                |  
|Common stock issued for mining and exploration
      expenses                    | $ | -             |   | $ | -             |   | $ | 222,500               |  
|Common Stock issued for services                                                 | $ | -             |   | $ | -             |   | $ | 88,333                |  
|Common stock issued for finders' fee                                             | $ | -             |   | $ | -             |   | $ | 1,000                 |  
|Marketable securities received
      in lieu of note receivable                  | $ | -             |   | $ | -             |   | $ | 104,273               |  

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

41

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NOTE 1: ORGANIZATION AND DESCRIPTION OF BUSINESS

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

Beginning in fiscal 2000, the Company entered an exploration
stage. The Company has acquired several mining properties since entering the
exploration stage. During 2008, the Company completed the refurbishment of the
mill at our Lakeview property. During 2009, the Company plans to conduct
geologic assessments of its Lakeview Property. The Company began the milling of
previously stockpiled material in the fall of 2007 and it plans to continue this
into 2009. After that, the Company anticipates conducting surface mining at the
Weber property and the milling of ores obtained from those efforts at the
Lakeview Mill.

In 2004, the Company incorporated a wholly owned subsidiary in
Mexico, Shoshone Mexico, S.A. de C.V, for the purposes of facilitating its
Mexico property explorations and future operations. On August 11, 2008, the
Company sold 100% of the common stock of its wholly owned subsidiary to Xtierra
Resources, Ltd. The Companys four exploration mineral concessions covering
1,345 hectares located in Zacatecas, Mexico were included in this sale. See Note
11 and Note 19.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Accounting Methods

The Companys financial statements are prepared using the
accrual basis of accounting in accordance with accounting principles generally
accepted in the United States of America.

Fiscal Periods

References to a fiscal year refer to the calendar year in which
such fiscal year commences. Historically, the Companys fiscal year ended on
December 31st. However, on September 29, 2008, the Companys board of
directors approved a change in the Companys fiscal year end from December
31st to September 30th, effective on September 30, 2008.
This report covers the nine-month transition period of January 1, 2008 through
September 30, 2008.

Recently Adopted Accounting Pronouncements

Effective January 1, 2008, the Company adopted SFAS No. 157
(SFAS 157), Fair Value Measurements. SFAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles and expands disclosures about fair value measurements.
SFAS 157 applies whenever other standards require (or permit) assets or
liabilities to be measured at fair value but does not expand the use of fair
value in any new circumstances. In this standard, the FASB clarifies the
principle that fair value should be based on the assumptions market participants
would use when pricing the asset or liability. In support of this principle,
SFAS 157 establishes a fair value hierarchy that prioritizes the information
used to develop those assumptions. The fair value hierarchy is as follows:

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

42

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

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

Securities classified as available for sale are reported at
fair value utilizing Level 1 inputs. For these securities, the Company obtains
fair value from active markets.

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

The following table presents information about the Companys
assets measured at fair value on a recurring basis as of September 30, 2008, and
indicates the fair value hierarchy of the valuation techniques utilized by the
Company to determine such fair value.

|                                    |  |   |               |  |   | Fair Value Measurements      | 
|----------------------------------- |  | - | ------------- |  | - | ---------------------------- | 
|                                    |  |   |               |  |   | At September 30, 2008, Using | 
|                                    |  |   |               |  |   | Quoted Prices                | 
|                                    |  |   |               |  |   | In Active                    | 
|                                    |  |   | Fair Value    |  |   | Markets for                  | 
|                                    |  |   | September 30, |  |   | Identical Assets             | 
|Description                         |  |   | 2008          |  |   | (Level 1)                    | 
|Available-for-Sale Securities       |  | $ | 356,823       |  | $ | 356,823                      | 
|                                    |  |   |               |  |   |                              | 
|Note Receivable (net of discount)   |  |   | 1,873,135     |  |   | -                            | 
|                                    |  |   |               |  |   |                              | 
|Total Assets Measured at Fair Value |  | $ | 2,229,958     |  | $ | 356,823                      | 

In February 2007, the FASB issued Statement of Financial
Accounting Standards No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities Including an Amendment of FASB Statement No. 115 (SFAS
159). SFAS 159 permits entities to measure many financial instruments and
certain other assets and liabilities at fair value on an
instrument-by-instrument basis under a fair value option. SFAS 159 is effective
for fiscal years beginning after November 15, 2007. Accordingly, the Company
adopted SFAS No. 159 effective January 1, 2008, with no significant effect on
its financial position or results of operation.

New Accounting Pronouncements

In May 2008, the FASB issued Statement of Financial Accounting
Standards No. 162, The Hierarchy of Generally accepted Accounting Principles
("SFAS 162"). SFAS 162 identifies 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 non-governmental entities. SFAS 162 is effective 60 days
following the Securities and Exchange Commission's approval of the Public
Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of
Presenting Fairly in Conformity with Generally Accepted Accounting Principles."
The Company is assessing the impact of the adoption of SFAS 162 and believes
there will be no material impact on its consolidated financial statements

Cash and Cash Equivalents

For purposes of its statements of cash flows, the Company
considers all highly liquid investments with original maturities of three months
or less to be cash equivalents. Cash equivalents also include money market
accounts.

43

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Concentration of Credit Risk

The Company maintains its cash in several commercial accounts
at major financial institutions and brokerage houses. The brokerage accounts
contain cash and securities. Balances are insured up to $500,000 (with a limit
of $100,000 for cash) by the Securities Investor Protection Corporation (SIPC).
Although the financial institutions are considered creditworthy and have not
experienced any losses on their deposits, at September 30, 2008 and December 31,
2007, the Companys cash balance exceeded Federal Deposit Insurance Corporation
(FDIC) and SIPC limits by $1,296,921 and $0, respectively.

Earnings Per Share

On January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 128, which provides for calculation of "basic" and
"diluted" earnings per share. Basic earnings per share includes no dilution and
is computed by dividing net income (loss) available to common shareholders by
the weighted average common shares outstanding for the period. Diluted earnings
per share reflect the potential dilution of securities that could share in the
earnings of an entity similar to fully diluted earnings per share.

At September 30, 2008, there were 1,500,000 common stock
warrants outstanding which were not included in the calculation of earnings
(loss) per share at September 30, 2008, because they would have been
anti-dilutive.

At December 31, 2007, there were 725,000 common stock warrants
outstanding which were not included in the calculation of earnings (loss) per
share at December 31, 2007 because they would have been anti-dilutive.

Fair Value of Financial Instruments

The Company's financial instruments as defined by Statement of
Financial Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments," include cash and cash equivalents, accounts receivable,
deposits and prepaids, inventory, investment in available-for-sale securities,
accounts payable and short-term borrowings. All instruments other than the
investment in available-for-sale securities are accounted for on an historical
cost basis, which, due to the short maturity of these financial instruments,
approximates fair value at the reporting dates. Investments in
available-for-sale securities are recorded at fair value at the reporting dates
in accordance with SFAS 115.

Marketable Securities

The Company accounts for marketable securities in accordance
with the provisions of Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities (SFAS No.
115). Under SFAS No. 115, debt securities and equity securities that have
readily determinable fair values are to be classified in three categories:

Held to Maturity  the positive intent and ability to hold to
maturity. Amounts are reported at amortized cost, adjusted for amortization of
premiums and accretion of discounts.

Trading Securities  bought principally for purpose of selling
them in the near term. Amounts are reported at fair value, with unrealized gains
and losses included in earnings.

Available for Sale  not classified in one of the above
categories. Amounts are reported at fair value, with unrealized gains and losses
excluded from earnings and reported separately as a component of stockholders
equity.

At this time, the Company holds securities classified as
available for sale. See Note 10: Investments for further details.

44

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Mining Properties, Land and Water Rights

Costs of acquiring and developing mining properties, land and
water rights are capitalized as appropriate by project area. Exploration and
related costs and costs to maintain mining properties, land and water rights are
expensed as incurred while the property is in the exploration and evaluation
stage. Development and related costs and costs to maintain mining properties,
land and water rights are capitalized as incurred while the property is in the
development. When a property reaches the production stage, the related
capitalized costs are amortized using the units-of-production basis over proven
and probable reserves. Mining properties, land and water rights are periodically
assessed for impairment of value, and any subsequent losses are charged to
operations at the time of impairment. If a property is abandoned or sold, a gain
or loss is recognized and included in the consolidated statement of operations.
See Note 7.

Mineral Exploration and Development Costs

All exploration expenditures are expensed as incurred.
Significant property acquisition payments for active exploration properties are
capitalized. If no economic ore body is discovered, previously capitalized costs
are expensed in the period the property is abandoned. Expenditures to develop
new mines, to define further mineralization in existing ore bodies, and to
expand the capacity of operating mines, are capitalized and amortized on a
units-of-production basis over proven and probable reserves.

Should a property be abandoned, its capitalized costs are
charged to operations. The Company charges to the consolidated statement of
operations the allocable portion of capitalized costs attributable to properties
sold. Capitalized costs are allocated to properties sold based on the proportion
of claims sold to the claims remaining within the project area. See Note 7.

Notes Receivable

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

Principles of Consolidation

Historically, the Companys consolidated financial statements
have included the accounts of the Company and its wholly owned subsidiary,
Shoshone Mexico, S.A. de C.V. The inter-company accounts and transactions were
eliminated upon consolidation. However, on September 2, 2008, the Company sold
all of the common stock of its wholly owned subsidiary to Xtierra Resources,
Ltd. See Note 11 and 19.

Property and Equipment

Property and equipment are stated at cost. Depreciation of
property and equipment begins on the date the asset is place in service and is
calculated using the straight-line method over the estimated useful lives of the
assets, which range from three to thirty-one and one half years. See Note 7.

Provision for Taxes

In June 2006, the Financial Accounting Standards Board issued
  FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes
   an interpretation of FASB Statement No. 109 (FIN 48),
  which prescribes a recognition threshold and measurement attribute for the financial
  statement recognition and measurement of a tax position taken or expected to
  be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification,
  interest and penalties, accounting in interim periods, disclosure and transition.
  FIN 48 became effective for fiscal years beginning after December 15, 2006 and
  was adopted in 2007 with no impact.

Income taxes are provided for based upon the liability method
  of accounting pursuant to Statement of Financial Accounting Standards No. 109
  Accounting for Income Taxes (SFAS No. 109). Under this
  approach, deferred income taxes are recorded to reflect the tax consequences
  on future years of differences between the tax basis of assets and liabilities
  and their financial reporting amounts at each year-end. A valuation allowance
  is recorded against deferred tax assets if management does not believe the Company
  has met the more likely than not standard imposed by SFAS No. 109
  to allow recognition of such an asset.

45

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The significant components of the deferred tax assets at September
  30, 2008 and December 31, 2007 were as follows:

|                                      |   | September 30, |   |   | December 31, |  
|------------------------------------- | - | ------------- | - | - | ------------ | -
|                                      |   | 2008          |   |   | 2007         |  
|Deferred Tax Assets                   |   |               |   |   |              |  
|                                      |   |               |   |   |              |  
|Net operating loss carryforward       | $ | 47,924        |   | $ | 643,000      |  
|Imputed interest                      |   | 107,322       |   |   | -            |  
|Deferred
          tax assets         |   | 155,246       |   |   | 643,000      |  
|                                      |   |               |   |   |              |  
|Deferred Tax Liabilities              |   |               |   |   |              |  
|Installment income                    |   | (744,188      | ) |   | -            |  
|Depreciation                          |   | (7,611        | ) |   | -            |  
|Deferred tax liabilities              |   | (751,799      | ) |   | -            |  
|                                      |   |               |   |   |              |  
|Net deferred tax (liabilities) assets | $ | (596,553      | ) | $ | 643,000      |  
|                                      |   |               |   |   |              |  
|Valuation Allowance                   | $ | 596,553       |   | $ | (643,000     | )
|                                      |   |               |   |   |              |  
|Net deferred tax (liabilities) assets | $ | -             |   | $ | -            |  

As management of the Company cannot determine that it is more
  likely than not that the Company will realize the cost of the deferred tax liability,
  valuation allowances equal to both the deferred tax liability and deferred tax
  asset have been established at September 30, 2008. At September 30, 2008 and
  December 31, 2007, the Company had net operating loss carry-forwards of approximately
  $141,000 and $1,890,000, respectively, which expire in the years 2022 through
  2028.

The Company has a total deferred tax liability of $751,799. Of
  this amount $744,188 represents the total estimated taxes payable on the income
  from the note receivable on the sale of Bilbao concessions (see note 10) that
  is recognized under the full accrual method for financial statement purposes
  and the installment sale method for income tax purposes.

The Company has a total deferred tax asset of $155,246. Of
  this amount $107,322 represents the imputed interest that will be recognized
  for financial statement purposes while income will be recognized under the installment
  method for tax purposes. The remaining $47,924 relates to the Companys
  net operating loss carryforward of $141,000.

Reclamation and Remediation

Expenditures for ongoing compliance with environmental
regulations that relate to current operations are expensed or capitalized as
appropriate. Expenditures resulting from the remediation of existing conditions
caused by past operations that do not contribute to future revenue generations
are expensed. Liabilities are recognized when environmental assessments indicate
that remediation efforts are probable and the costs can be reasonably
estimated.

Estimates of such liabilities are based upon currently
available facts, existing technology and presently enacted laws and regulations
taking into consideration the likely effects of inflation and other societal and
economic factors, and include estimates of associated legal costs. These amounts
also reflect prior experience in remediating contaminated sites, other
companies clean-up experience and data released by The Environmental Protection
Agency or other organizations. Such estimates are by their nature imprecise and
can be expected to be revised over time because of changes in government
regulations, operations, technology and inflation. Recoveries are evaluated
separately from the liability and, when recovery is assured, the Company records
and reports an asset separately from the associated liability.

46

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Revenue Recognition and Cost of Sales

The Company generates revenue from two sources: timber sales
  and sales of silver medallions. The Company recognizes revenue from sales at
  the time payment for the timber is received. Sales in both fiscal 2007 and 2008
  are primarily from the sale of medallions which are recorded when the coins
  are shipped to the customer. The Company has no revenues from its mineral exploration
  activities.

Treasury Stock

The Company accounts for its treasury stock under the cost
method. Under the cost method, the gross cost of the shares reacquired is
charged to a contra equity account (i.e., treasury stock). The equity accounts
that were credited for the original share issuance (i.e., common stock,
additional paid-in capital, etc.) remain intact. When the treasury shares are
reissued, proceeds in excess of cost are credited to a paid-in capital account.
See Note 15.

Use of Estimates

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

NOTE 3: FISCAL YEAR CHANGE

On September 29, 2008, the Companys board of directors
approved a change in the Companys fiscal year end from December 31st
to September 30th, effective on September 30, 2008. The table below
summarizes selected unaudited financial data for the three-month period ended
December 31, 2007.

|                                             |   | Three-Month       |  
|-------------------------------------------- | - | ----------------- | -
|                                             |   | Period Ended      |  
|                                             |   | December 31, 2007 |  
|                                             |   | (unaudited)       |  
|Revenues                                     | $ | 180               |  
|Cost of Revenue                              |   | 96                |  
|Gross Profit                                 |   | 84                |  
|                                             |   |                   |  
|Operating Expenses                           |   |                   |  
|General and administrative                   |   | 91,661            |  
|Professional fees                            |   | 54,775            |  
|Depreciation                                 |   | 12,642            |  
|Mining and exploration
      expenses        |   | 19,307            |  
|Total Operating Expenses                     |   | 178,385           |  
|                                             |   |                   |  
|Loss From Operations                         |   | (178,301          | )
|                                             |   |                   |  
|Other Income (Expenses)                      |   |                   |  
|Net gain on sale of
      securities         |   | 41,424            |  
|Lease income                                 |   | 2,514             |  
|Other income                                 |   | 1,407             |  
|Dividend and interest income                 |   | 6,005             |  
|Interest expense                             |   | (479              | )
|Total Other Income                           |   | 50,871            |  
|                                             |   |                   |  
|Net Loss Before Income Taxes                 | $ | (127,430          | )
|                                             |   |                   |  
|Net Loss Per Common Share, Basic and Diluted | $ | (0.01             | )

47

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NOTE 4: ACCOUNTS RECEIVABLE FROM RELATED PARTY

During the year ended December 31, 2005, the Company prepaid
$11,624 to a related party for certain administrative services. During fiscal
2005, the Company ceased its business relationship with the related party and
has requested a refund of the entire prepaid amount. As of September 30, 2008, a
total of $2,000 had been received. The Company has evaluated the credit risk
associated with this related party receivable to determine if a reserve is
necessary. At September 30, 2008, no reserve was deemed necessary.

NOTE 5: DEPOSITS AND PREPAID EXPENSES

In December 2007, the Company purchased for $21,335 a one-year
liability insurance policy covering its Lakeview mill (the Policy). The Policy
was purchased with a cash payment of $5,709 with the balance of $15,626 settled
with a promissory note. The Company recorded prepaid insurance of $21,335 and a
related entry to record a $15,626 note payable. During fiscal 2008, $16,001 of
the prepaid insurance was amortized into General & Administrative Expenses.
See Note 13.

On August 27, 2008, the Company amended a lease agreement with
Chester Mining Company originally entered into on March 25, 2004 (the Amended
Lease). The Amended Lease includes a provision that requires the Company to pay
a royalty of $125 per month until net smelter returns (as defined in the
Amended Lease) are payable. The Company paid Chester Mining Company $1,500 as an
advance royalty payment. At September 30, 2008, the unamortized balance of this
advance royalty payment was $1,250.

NOTE 6: SUPPLIES INVENTORY

During 2004, the Company purchased 500 one troy ounce silver
medallions with the Companys logo for $5,303. This purchase was recorded as
supplies inventory and the medallions are expected to be used substantially for
marketing purposes.

During fiscal 2008, the Company sold 12 medallions at a total
cost of $127 and revenue of $240. At September 30, 2008, the Company had 266
coins remaining in inventory with an historical cost basis of $2,821.

NOTE 7: PROPERTY AND EQUIPMENT

On June 6, 2008, the Company issued 454,000 shares of common
stock in exchange for three pieces of heavy equipment. The transaction was
valued at $95,340 based on a stock price of $0.21 per common share on June 6,
2008. See Note 14.

48

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On September 10, 2008, the Company acquired for $150,000 a 50%
interest in a commercial office building in Coeur dAlene, Idaho. The Company
paid $100,000 at the signing of the purchase agreement and paid the remaining
$50,000 in October 2008. See Note 21.

Effective September 30, 2008, the Companys Refurbished
Lakeview Mill was placed into service and will begin to be depreciated over 31.5
years starting on October 1, 2008.

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

The useful lives of property, plant and equipment for purposes
of computing depreciation are three to thirty-one and one-half years. The
following is a summary of property, equipment, and accumulated depreciation at
September 30, 2008 and December 31, 2007:

|                                 |   | September 30, 2008 |   |   | December 31, 2007 |  
|-------------------------------- | - | ------------------ | - | - | ----------------- | -
|Equipment                        | $ | 882,638            |   | $ | 715,270           |  
|Construction in Progress         |   | -                  |   |   | 385,170           |  
|Refurbished Lakeview Mill        |   | 499,681            |   |   | -                 |  
|Office Building                  |   | 150,000            |   |   | -                 |  
|Property & Mill                  |   | 1,052,776          |   |   | 1,052,776         |  
|                                 |   | 2,585,095          |   |   | 2,153,216         |  
|Less accumulated depreciation    |   | (1,244,225         | ) |   | (1,199,833        | )
|Property, Plant & Equipment, net | $ | 1,340,870          |   | $ | 953,383           |  

Depreciation expense was $44,392 for the nine-month fiscal year
ended September 30, 2008, and $43,612 for the twelve-month fiscal year ended
December 31, 2007.

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

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

NOTE 8: MINERAL AND MINING PROPERTIES

Northwestern United States

Silver Valley, Idaho

Shoshone Group
  This mineral property grouping owned by the Company consists of
five patented lode mining claims situated in the St. Joe Mining District,
Shoshone County, Idaho. The five patented claims were acquired in 1970 from an
outside party for $2,500 in cash and 100,000 shares of common stock. The cost of
the property, $17,500, was expensed in prior years as an exploration
expense.

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Bullion Group
  This mineral property group owned by the Company consists of
seven patented mining claims were acquired in 1998. The cost of the property was
included as an exploration expense in a prior year.

North Osburn
  The Company has a group of 15 unpatented properties known as
the North Osburn Group located within the Silver Valley in Shoshone County,
Idaho.

Lakeview District, Idaho

Idaho Lakeview, Keep Cool Group and Weber Group
  The Company acquired the Lakeview and Keep Cool mining
properties consisting of 9 patented and 17unpatented lode claims through the
issuance of 3,126,700 shares of its common stock during 1985. The total cost of
the properties, $334,690, is included in the financial statements under mining
properties.

During 2006, the Company made make improvements to the land to
be more accessible as well as usable. The total cost of the $68,472 was
capitalized. This amount is a component of the total cost of the properties of
$334,690 discussed above.

The Company acquired, for 100,000 shares of its common stock, 6
patented and 5 unpatented lode mining claims located in the Lakeview Mining
District, Bonner County, Idaho in 1999. In addition, $125 cash was paid and 100
shares of common stock were issued to acquire a pit fraction within the same
location. The cost of the property, $125,000, was expensed in prior years as an
exploration expense. The Company acquired an additional seven unpatented claims
during 2007.

Auxer Mine
  The Auxer Mine, consisting of 2 unpatented claims covering 40
acres, was acquired by the Company in 2003 for 50,000 shares of common stock.
The cost of the property, $7,500, is included in the financial statements under
mining properties until such time as the Companys outside study on the
propertys reserves, if any, is completed.

Talache Group (formerly known as Lucky Joe)
  The Company acquired, for 150,000 shares of its common stock,
two unpatented lode mining claim during 2003. The cost of the former mining
property, $22,500, is included in the financial statements under Mining
Properties until such time as the Companys outside study on the related
propertys reserves, if any, is completed.

Regal Mine
  The Company acquired, for 100,000 shares of its common stock,
four contiguous unpatented lode mining claims covering 80 acres located in the
Moyie-Yaak Mining District of Boundary County, Idaho during 2003. The cost of
the former mining property, $15,000, is included in the financial statements
under Mining Properties until such time as the Companys outside study on the
related propertys reserves, if any, is completed.

Conjecture (formerly known as Confed Claims Lease)
  The Company leased, for 1,000,000 shares of its common stock,
13 unpatented lode mining claims and six patented lode mining claims located in
Shoshone County, Idaho during 2004. The lease allows the Company exclusive
rights to explore, develop and mine the property; to extract, mill, and market
ore or concentrates.

During fiscal 2008, the Company issued 100,000 shares valued at
$22,000 ($0.22 per share) for the 2008 lease payment.

During fiscal 2007, the Company issued 100,000 shares valued at
$27,000 ($0.27 per share) for the 2007 lease payment. See Note 12 and Note
14.

Effective March 1, 2008, the terms of the Conjecture Lease were
renegotiated to obtain more favorable terms for the Company. Beginning March 1,
2008 the Company will be required to:

- annually deliver 50,000 shares of Shoshone restricted common shares to
  Chester Mining;
- pay to Chester Mining an advance royalty of $125.00 per month until such
  time as net smelter returns (NSR) are payable; and

50

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- pay net smelter returns to Chester Mining equal to a sliding percentage
    of total NSR received during that calendar quarter from the operations on
    the property, subject to minimum royalty provisions.
- 
- 1.5% with silver under $8.00 per ounce;
- 2.4% with silver between $8.00 and $9.99 per ounce; and
- 2.5% with silver $10.00 and above.

Other North Idaho and Montana

Montgomery Mine Group
  During the fiscal year ended December 31, 2005, the Company
acquired, for $43,557 in cash, 25 unpatented lode mining claims located in
Boundary County, Idaho. The cost of the properties was expensed in prior years
as an exploration expense.

Stillwater Extension Claims
  The Company acquired, for 100,000 shares of its common stock,
ten unpatented lode mining claims located along the J-M Reef of the Stillwater
Complex of south central Montana during 2003. The cost of the properties,
$15,000, has been expensed in prior years as an exploration expense.

Princeton Gulch Claims
  During 2006, the Company made a partial payment of $13,000
toward the purchase of four unpatented placer claims and two unpatented lode
claims. These claims in aggregate cover 120 acres and are located in Granite
County, Montana. The payment of $13,000 was included in exploration expenses
during 2006.

Drumheller Group
  The Company owned six patented claims consisting of 110.82
acres which are adjoining and lying south of the Idaho Lakeview claims on an
extension of the Hewer vein. The Company issued 109,141 shares of its common
stock to acquire these claims in February 1984.

During 2006, the Company sold the Drumheller Group of claims
for $150,000 to an unrelated party. The cost of the property, $218,282, was
expensed in prior years as an exploration expense. Consequently, the Company had
no basis in the property but did incur selling expenses of $16,093 in connection
with this sale. See Note 9 and 21.

Southwestern United States

Western Gold (formerly known as Arizona Gold Field)
  The Company acquired, for 100,000 shares of stock, thirteen
unpatented lode mining claims located in the Oatman Mining District of Mojave
County, Arizona during 2003. The cost of the properties, $15,000, has been
expensed in prior years as an exploration expense.

Gold Road Claims
  The Company acquired, for 10,000 shares of stock, 16 unpatented
lode mining claims located in Mohave County, Arizona during 2003. The cost of
the properties, $1,500, has been expensed in prior years as an exploration
expense.

Cerro Colorado Group
  During 2004, the Company acquired three unpatented lode claims
covering 60 acres located in the Cerro Colorado Mining District of Pima County,
Arizona. The cost of the properties, $1,500, has been expensed in prior years as
an exploration expense.

California Creek Properties
  During 2005, the Company acquired, for $2,970, 18 unpatented
lode claims located near Elko, Nevada. The cost of the properties was expensed
in 2005 as an exploration expense. During 2007, the Company acquired an
additional 25 unpatented lode claims.

51

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In 2005, the Company entered into a Letter of Intent with
International Arimex Resouces, Inc. (Arimex) that would allow Arimex to earn
up to 100% interest in these properties. During 2007, the California Creek
Option Agreement terminated due to lack of performance by the unrelated party.
See Note 19.

On July 24, 2008, the Company entered into an agreement to sell
these 43 unpatented lode claims to Bayswater Uranium Corporation, a Canadian
Company (Bayswater). In exchange for these claims, the Company received
200,000 shares of Bayswater common stock which is traded on the Toronto Stock
Exchange. July 24, 2008, this transaction was valued at $60,000 based on the
then market value of Bayswater stock of $0.30 per share.

Mexico Properties

Bilbao-Mexico Property
  The Company acquired, for $80,000 cash, four exploration
mineral concessions covering 1,345 hectares located in Zacatecas, Mexico during
2004. The cost of the former mining property was included in exploration expense
in the financial statements for 2004. Additional expenses of $13,000 and $25,220
were included in exploration expense in the financial statements for 2006 and
2005, respectively. No exploration expenses were incurred in 2007 related to
this property.

On February 22, 2006, the Company entered into an option
agreement with Minco, PLC, under which the unrelated party may earn up to a 75%
interest in the Companys Bilbao-Mexico Property. In connection with this
agreement, the Company received $100,000 on March 17, 2006 and $300,000 on
August 17, 2006, as consideration for allowing Minco, PLC, to conduct
exploration activities on the property. The Company received $0 during 2007
related to this option agreement.

On August 11, 2008, the Company sold 100% of the common stock
of its wholly owned subsidiary in Mexico, Shoshone Mexico, S.A. de C.V, to
Xtierra Resources, Ltd (Xtierra). The Companys interest in the Bilbao
concessions in Zacatecas, Mexico was included in this sale. In exchange for its
interest in the Bilbao concessions the Company received net proceeds of
2,497,990 and a non-interest bearing note receivable, net of discount, for
$1,865,363.

The note does not bear interest and stipulates that a payment
of $500,000 is due on August 11, 2009. The remaining balance of $2,000,000 is to
be paid in four consecutive equal installments to begin at the time of the
commencement of construction of any mine developed on the Bilbao concessions but
in any event will be due and payable no later than August 11, 2019.

Since the note does not bear interest, the Company imputed
interest at a rate of 5%. Accordingly the Company recorded a note discount of
$634,637. During fiscal 2008, $7,773 of interest income was realized through the
amortization of this note discount.

Sonora Mexico Mining Properties
  Shoshone has an interest in several other Mexican exploration
projects which the Company does not currently consider to be material.

NOTE 9: NOTES RECEIVABLE FROM RELATED PARTIES

Silver Valley Capital

On September 1, 2006, the Company loaned Silver Valley Capital,
LLC $168,000 in exchange for a promissory note. The Companys President and its
Secretary are both members of Silver Valley Capital, LLC. Both these individuals
abstained from voting on the respective companies Board of Directors
Resolutions approving this loan. The note bore interest at 10.0% per annum and
stipulated that monthly payments of $822 were to be made until February 1, 2007.
On February 1, 2007, the remaining principal plus accrued interest was to become
due and payable.

52

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On July 26, 2007, the Company entered into a new loan agreement
with Silver Valley Capital, LLC. The note bears interest at 10.0% per annum and
stipulates that monthly payments of $822 are to be made until the due date. The
due date was changed to February 1, 2008 from February 1, 2007. The Company is
currently working with Silver Valley Capital, LLC to renegotiate a revised due
date.

During fiscal 2008, payments totaling $140,000 were received on
this note of which $132,464 was applied to principal and $7,536 was applied to
accrued interest receivable. Interest income of $6,432 was accrued during fiscal
2008. The balance remaining on this note at September 30, 2008, was $3,716.

NOTE 10: NOTES RECEIVABLE

Sale of Lode Claim
  During the first quarter of fiscal 2006, the Company accepted
cash of $30,000 and a promissory note for $120,000 from an unrelated party
related to the sale of a lode claim for $150,000. The promissory note bears
interest at 7.0% per annum and stipulates that payments of $5,089 are to be paid
semi-annually until January 23, 2011. On January 11, 2011, the remaining
principal plus accrued interest becomes due and payable in full.

During fiscal 2008, the Company received no payments on this
note receivable. During fiscal 2008, interest income of $6,517 was accrued. On
December 17, 2008, the terms of this note were modified. Based on these
modifications, no reserve was deemed necessary at September 30, 2008. See Note
21.

Mexican Concessions
  On August 11, 2008, the Company sold 100% of the common stock
of its wholly owned subsidiary in Mexico, Shoshone Mexico, S.A. de C.V, to
Xtierra Resources, Ltd (Xtierra). The Companys interest in the Bilbao
concessions in Zacatecas, Mexico was included in this sale. In exchange for its
interest in the Bilbao concessions the Company received net proceeds of
2,497,990 and a non-interest bearing note receivable, net of discount, for
$1,865,363.

The note does not bear interest and stipulates that a payment
of $500,000 is due on August 11, 2009. The remaining balance of $2,000,000 is to
be paid in four consecutive equal installments to begin at the time of the
commencement of construction of any mine developed on the Bilbao concessions but
in any event will be due and payable no later than August 11, 2019.

Since the note does not bear interest, the Company imputed
interest at a rate of 5%. Accordingly the Company recorded a note discount of
$634,637. During fiscal 2008, $7,773 of interest income was realized through the
amortization of this note discount.

Kimberly Gold Mines
  On August 29, 2008, the Company entered into a letter-of-intent
with Kimberly Gold Mines, Inc. (Kimberly). The letter-of-intent concerns the
acquisition by the Company of 100% of Kimberlys issued and outstanding common
shares. Under the terms of this letter-of-intent, the Company has offered one
share of its common stock for every two shares of Kimberlys common stock.

In connection with this letter-of-intent, the Company advanced
Kimberly $200,000 in exchange for a promissory note to reduce their outstanding
obligations. The note bears interest at 6.0% per annum and is payable on demand
at any time. Further, until the principal and accrued interest are paid, the
note is secured by sufficient shares of Kimberly common stock at an agreed value
of $0.06 per share. Interest income of $1,000 was accrued during fiscal
2008.

Signal Silver-Gold, Inc.
  On August 27, 2008, the Company advanced Signal Silver-Gold,
Inc. (Signal) $2,808 in exchange for a promissory note. The note bears
interest at 6% per annum and is payable on demand at any time. Interest income
of $59 was accrued during fiscal 2008.

53

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NOTE 11: INVESTMENTS

The Company has invested in various privately and publicly held
companies. At this time, the Company holds securities classified as available
for sale. Amounts are reported at fair value, with unrealized gains and losses
excluded from earnings and reported separately as a component of stockholders
equity.

Unrealized gains and losses are recorded on the income
statement as other comprehensive income (loss) and also on the balance sheet as
other accumulated comprehensive income.

The following summarizes the securities available for sale at
September 30, 2008:

|                              |  | # of      |  |   |         |  |   | Market  | 
|----------------------------- |  | --------- |  | - | ------- |  | - | ------- | 
|Security                      |  | Shares    |  |   | Cost    |  |   | Value   | 
|Chester Mining Company        |  | 2,500     |  | $ | 12,567  |  | $ | 550     | 
|Bayswater Uranium Corporation |  | 200,000   |  |   | 60,000  |  |   | 28,000  | 
|Gold Crest Mines              |  | 617,600   |  |   | 3,900   |  |   | 21,516  | 
|Kimberly Gold Mines           |  | 321,500   |  |   | 38,035  |  |   | 23,275  | 
|Lucky Friday Extension        |  | 5,000     |  |   | 1,100   |  |   | 1,200   | 
|Merger Mines                  |  | 840,138   |  |   | 202,233 |  |   | 226,837 | 
|Metropolitan Mines Limited    |  | 6,000     |  |   | 2,008   |  |   | 1,200   | 
|New Jersey Mining             |  | 142,875   |  |   | 34,290  |  |   | 51,435  | 
|Sterling Mining               |  | 5,000     |  |   | 2,000   |  |   | 1,050   | 
|Vindicator Mines              |  | 88,000    |  |   | 17,600  |  |   | 1,760   | 
|                              |  |           |  |   |         |  |   |         | 
|Balance, September 30, 2008   |  | 2,228,613 |  | $ | 373,733 |  | $ | 356,823 | 

The Company had an unrealized holding loss during the fiscal
year ended September 30, 2008 $(207,954). This is recorded on the income
statement as other comprehensive income (loss) and included on the balance sheet
in other accumulated comprehensive income.

The Company recognized $7,840 of loss previously included in
accumulated other comprehensive income on the sale of investments in 2008.

On July 24, 2008, the Company entered into an agreement to
acquire 200,000 shares of common stock of Bayswater Uranium Corporation, a
Canadian company (Bayswater), in exchange for the Companys 43 unpatented
mining claims in Elko County, Nevada. This exchange was valued at $60,000 based
on the market price of Bayswaters common stock on July 24, 2008.

The following summarizes the securities available for sale at
December 31, 2007:

|                                  |  | # of    |  |   |        |  |   | Market  | 
|--------------------------------- |  | ------- |  | - | ------ |  | - | ------- | 
|Security                          |  | Shares  |  |   | Cost   |  |   | Value   | 
|Chester Mining Company            |  | 2,500   |  | $ | 12,567 |  | $ | 5,000   | 
|Gold Crest Mines                  |  | 642,600 |  |   | 3,900  |  |   | 154,124 | 
|Kimberly Gold Mines               |  | 301,500 |  |   | 49,504 |  |   | 90,450  | 
|Merger Mines Corp                 |  | 5,000   |  |   | 3,153  |  |   | 4,500   | 
|Metropolitan Mines Limited        |  | 6,000   |  |   | 2,008  |  |   | 2,880   | 
|Mineral Mountain Mining & Milling |  | 5,000   |  |   | 3,866  |  |   | 1,250   | 
|                                  |  |         |  |   |        |  |   |         | 
|Balance, December 31, 2007        |  | 962,600 |  | $ | 74,998 |  | $ | 258,204 | 

54

---

The Company had an unrealized holding loss during the year
ended December 31, 2007 of $(33,570). This is recorded on the income statement
as other comprehensive income (loss) and included on the balance sheet in other
accumulated comprehensive income.

The Company recognized $385,913 of income previously included
in accumulated other comprehensive income on the sale of investments in
2008.

NOTE 12: ACCOUNTS PAYABLE

Settlement Agreement with Former Chief Executive
Officer
On June 12, 2008, the Company entered into a settlement
agreement with its former Chief Executive Officer, Conrad Houser. The terms of
the agreement required the Company to pay Mr. Houser $10,000 on June 12, 2008,
the date of the agreement. The agreement also requires the Company to pay an
additional $48,500 on or before December 31, 2008. The $48,500 is included under
the caption Accounts Payable on the Companys Consolidated Balance Sheets.
Further, the agreement requires the Company to issue 100,000 shares of common
stock to Mr. Houser by July 12, 2008. These shares were issued to Mr. Houser on
July 3, 2008. See Note 14.

Commercial Office Building
  On September 10, 2008, the Company acquired for $150,000 a 50%
interest in a commercial office building in Coeur dAlene, Idaho. The Company
paid $100,000 at the signing of the purchase agreement and agreed to pay the
remaining $50,000 in October 2008. At September 30, 2008, the $50,000 is
included under the caption Accounts Payable on the Companys Consolidated
Balance Sheets. See Note 21.

NOTE 13: NOTES PAYABLE

During 2006, the Company acquired a vehicle for $19,782 by
paying $9,000 cash and signing a note for the remaining $10,781. The note has a
term of 30 months, bears interest at 8.99% annually and stipulates that payments
of $499 be made monthly. The outstanding balance on this note payable was $1,136
at September 30, 2008 and is payable within twelve months.

During the third quarter of 2007, the Company acquired
equipment for $55,000 by paying $27,500 cash and signing a note for the
remaining $27,500. The note has a term of 24 months, bears interest at 8.50%
annually and stipulates that payments of $1,250 be made monthly. The outstanding
balance on this note payable was $13,183 at June 30, 2008. Of this amount
$14,032 is payable within twelve months.

In December 2007, the Company purchased for $21,335 a one-year
liability insurance policy covering its Lakeview mill (the Policy). The Policy
was purchased with a cash payment of $5,709 with the balance of $15,626 was
settled with a promissory note. The Company recorded prepaid insurance of
$19,557 and a related entry to record a $15,626 note payable. The note has a
term of nine months, bears interest at 11.4% annually and stipulates that
payments of $1,820 be made monthly. The outstanding balance on this note payable
was $0 at September 30, 2008. See Note 5.

In December 2007, the Company purchased equipment for $15,377
in exchange for a note. The note has a term of 43 months, bears interest at
3.90% annually and stipulates that payments of $384 be made monthly. The lender
has the right to increase the interest rate to 19.8% in the event of a violation
of the terms of the loan agreement. The outstanding balance on this note payable
was $12,328 at September, 2008. Of this amount $4,207 is payable within twelve
months.

NOTE 14: COMMON STOCK

On August 29, 2007, the shareholders of the Company approved an
amendment to the Companys Articles of Incorporation to increase the number of authorized shares from
20,000,000 to 80,000,000.

55

---

The Company is authorized to issue 80,000,000 shares of $0.10
par value common stock. All shares have equal voting rights, are non-assessable
and have one vote per share. Voting rights are not cumulative and, therefore,
the holders of more than 50% of the common stock could, if they choose to do so,
elect all of the directors of the Company.

Fiscal 2007 Issuances

During fiscal 2007, the Company issued 100,000 shares of common
stock for the leasing of a mining property valued at $27,000.

During fiscal 2007, the Company issued 6,000 shares in exchange
for the services of its Board of Directors.

During fiscal 2007, the Company made certain adjustments to its
common stock and treasury stock balances with corresponding adjustments to
additional paid in capital. These adjustments were made to reconcile the
Companys balances to the subsidiary records maintained by the transfer agent.
The adjustment was considered immaterial to the period and, therefore, the
treatment of this correction as a prior period adjustment was not required by
accounting principles generally accepted in the United States.

During fiscal 2007, the Company issued 1,450,000 shares of
common stock to three investors for a total of $270,000 in cash. For every two
shares purchased the investor received one warrant to purchase one share of
common stock. The warrants are exercisable at $0.50 per share and expire on
December 31, 2009. The Company incurred $18,000 in issuance costs in connection
with these private placements. These costs were recorded as a reduction to
additional-paid-in-capital.

Fiscal 2008 Issuances

During fiscal 2008, the Company issued 8,000 common shares in
exchange for the services of its Board of Directors. These services were valued
at $0.20 per share, or $1,600.

During fiscal 2008, the Company issued 4,000 common shares in
exchange for consulting services. These services were valued at $0.20 per share,
or $800.

During fiscal 2008, the Company issued 100,000 shares of the
common stock in settlement of the $22,000 the Company had accrued during the
2008 first quarter for the leasing of a mining property.

During fiscal 2008, the Company issued 454,000 shares of common
stock in exchange for three pieces of heavy equipment. The transaction was
valued at $95,340 based on a stock price of $0.21 per common share on June 6,
2008. See Note 7.

During fiscal 2008, the Company entered into a settlement
agreement with its former Chief Executive Officer, Conrad Houser. The terms of
the agreement included the requirement that the Company issue to Mr. Houser
100,000 shares of common stock by July 12, 2008. On July 3, 2008, the Company
issued 100,000 to Mr. Houser in satisfaction of its obligation under the
settlement agreement. The Company may be required to repurchase the stock at a
price of $0.20 per share from Mr. Houser at Mr. Housers sole discretion if the
common stock is tendered for sale between December 15, 2008 and December 31,
2008. See Note 12.

During fiscal 2008, the Company issued 1,050,000 shares of
common stock to eight investors for a total of $210,000. For every two shares
purchased the investor received one warrant to purchase one share of common
stock. The warrants are exercisable at $0.40 per share and expire on January 26,
2009. The Company incurred $14,016 in issuance costs in connection with these
private placements. These costs were recorded as a reduction to
additional-paid-in-capital.

56

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During fiscal 2008, the Company issued 500,000 shares of common
stock to two investors for a total of $100,000. For every two shares purchased the investor received one warrant to
purchase one share of common stock. The warrants are exercisable at $0.40 per
share and expire on June 9, 2009. The Company did not incurred issuance costs in
connection with these private placements.

NOTE 15: TREASURY STOCK

The Company held 1,058,986 and 1,008,986 shares of treasury
stock at September 30, 2008 and December 31, 2007, respectively.

During 2007, the Company issued 29,000 shares of treasury stock
for the payment of services incurred during fiscal 2006 totaling $6,380.

During 2008, the Company repurchased for treasury 176,000
shares of treasury stock at a price of $0.12 per share for a total cost of $21,
220.

NOTE 16: STOCK OPTIONS AND WARRANTS

On September 29, 1999, the Company granted stock options to its
attorney enabling him to purchase up to 100,000 shares of common stock at a
price of $0.01 per share. During fiscal 2001, the Company recorded $12,221 for
these options. These options expired on December 31, 2007. No stock options were
issued during the fiscal years ended September 30, 2008 and December 31,
2007.

During fiscal 2007, the Company issued 725,000 warrants in
connection with the issuance of 1,450,000 shares in private placements. The
warrants are exercisable at $0.50 per share and expire on December 31, 2009. See
Note 14.

During fiscal 2008, the Company issued 775,000 warrants in
connection with the issuance of 1,550,000 shares in private placements. The
warrants are exercisable at $0.40 per share. 525,000 of these warrants expire on
January 26, 2009, and 250,000 expire on June 9, 2009. See Note 14.

NOTE 17: SUBSCRIPTIONS RECEIVABLE

In fiscal 2004, the Company issued 101,123 shares of treasury
stock for subscriptions of $20,225. These subscriptions bore interest of 7% per
year until their due date in 2009. On April 30, 2007, the Company received a
final payment of $21,102 in full satisfaction of its subscription receivable.
The payment consisted of principal of $18,844 and accrued interest income of
$2,259.

NOTE 18  REVENUES

Sales in both fiscal 2008 and fiscal 2007 were primarily from
the sale of medallions which are recorded when the coins are shipped to the
customer. The Company has no revenues from its mineral exploration activities.
The revenues for the fiscal years ended September 30, 2008 and December 31, 2007
were $240 and $941, respectively.

NOTE 19: OPTION AGREEMENTS

Minco PLC
  On February 22, 2006, the Company entered into an option
agreement with Minco, PLC, under which the unrelated party may earn up to a 75%
interest in the Companys Bilbao-Mexico Property.

On August 11, 2008, the Company sold 100% of the common stock
of its wholly owned subsidiary in Mexico, Shoshone Mexico, S.A. de C.V, to
Xtierra Resources, Ltd (Xtierra). The Companys interest in the Bilbao
concessions in Zacatecas, Mexico was included in this sale. In exchange for its
interest in the Bilbao concessions the Company received net proceeds of 2,497,990 and a non-interest
bearing note receivable, net of discount for $1,865,633. See Note 8.

57

---

California Creek Properties
  On November 9, 2005, the Company entered into an option
agreement with an unrelated party under which the unrelated party may earn a
100% interest in the Companys California Creek Property (the California Creek
Option Agreement). During 2007, the California Creek Option Agreement
terminated due to lack of performance by the unrelated party.

On July 24, 2008, the Company acquired 200,000 shares of common
stock of Bayswater Uranium Corporation, a Canadian company (Bayswater), in
exchange for the Companys 43 unpatented mining claims in Elko County, Nevada.
This exchange was valued at $60,000 based on the market price of Bayswaters
common stock on July 24, 2008. See Note 11.

NOTE 20  COMMITMENTS & CONTINGENCIES

Environmental Issues
  The Company is engaged in mineral mining and may become subject
to certain liabilities as they relate to environmental cleanup of mining sites
or other environmental restoration.

Although the minerals exploration and mining industries are
inherently speculative and subject to complex environmental regulations, the
Company is unaware of any pending litigation or of any specific past or
prospective matters which could impair the value of its mining claims.

Office Building Lease
  On November 1, 2006, the Company entered into a one-year lease
for office space located in Wallace, Idaho at the rate of $550 per month. The
Company has the option to renew the lease for one additional year.

Chester Mining Company Lease
  During 2004, the Company entered into a 25-year lease agreement
for a mining property in Shoshone County. The leases terms call for a first
year payment of 1,000,000 shares of common stock, which the Company valued at
the fair market value of $350,000.

Yearly lease payments on the property were 100,000 shares of
common stock valued at the current market value of the Companys common stock,
would be approximately $30,000 per year. The valuation of these payments may
fluctuate each year with the change in the fair market value of the Companys
trading stock. The amounts expensed in fiscal 2008 and fiscal 2007 under this
agreement were $22,000 and $27,000, respectively.

On August 27, 2008, the Company amended a lease agreement with
Chester Mining Company originally entered into on March 25, 2004 (the Amended
Lease). The Amended Lease includes a provision that changes the number of
shares to be payable each year to 50,000 from 100,000.

Bullion Group Claims Lease
  Additionally, the two unpatented Bullion Group claims totaling
40 acres have been leased to Sterling Mining Company. Lease terms stipulate a 4
year exploration program commencing within 5 years of the lease date. Shoshone
will receive 10% net profit from any mined minerals. This lease agreement may be
found in Exhibit 10.4 which was filed as an exhibit to the Companys Annual
Report on Form 10-KSB filed with the Commission on December 4, 2006.

Certain Annual Fees
  The Company incurs certain annual fees, which may vary,
associated with maintaining its various claims and properties as follows:

58

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|                                  |   | Claim  |  |   | Property |  |   | Lease    |  |           
|--------------------------------- | - | ------ |  | - | -------- |  | - | -------- |  | ----------
|Property                          |   | Fees   |  |   | Taxes    |  |   | Payments |  |           
|                                  |   |        |  |   |          |  |   |          |  |           
|Conjecture                        | $ | 1,625  |  | $ | -        |  | $ | 22,000   |  | (1
      )
|Idaho Lakeview, Weber & Keep Cool |   | 2,125  |  |   | 6,387    |  |   | -        |  |           
|Auxer                             |   | 250    |  |   | -        |  |   | -        |  |           
|Talache                           |   | 250    |  |   | -        |  |   | -        |  |           
|Shoshone                          |   | -      |  |   | 56       |  |   | -        |  |           
|Bullion                           |   | -      |  |   | 93       |  |   | -        |  |           
|North Osburn                      |   | 1,875  |  |   | -        |  |   | -        |  |           
|Montgomery                        |   | 3,125  |  |   | -        |  |   | -        |  |           
|Regal                             |   | 500    |  |   | -        |  |   | -        |  |           
|Stillwater Extension Claims       |   | 1,250  |  |   | -        |  |   | -        |  |           
|Princeton Gulch Group             |   | 750    |  |   | -        |  |   | -        |  |           
|Western Gold                      |   | 1,625  |  |   | -        |  |   | -        |  |           
|Gold Road                         |   | 2,000  |  |   | -        |  |   | -        |  |           
|Cerro Colorado                    |   | 375    |  |   | -        |  |   | -        |  |           
|California Creek Uranium          |   | 5,375  |  |   | -        |  |   | -        |  |           
|                                  | $ | 21,125 |  | $ | 6,536    |  | $ | 22,000   |  |           

|(1) | - The Company has historically issued 100,000 each year
      for the leasing of a mining property. The $22,000 represents the issuance
      of the shares at the stock price at March 31, 2008 of $0.22 Effective
      March 1, 2008, the terms of the lease were renegotiated to require
      Shoshone to annually deliver 50,000 shares of Shoshone shares to Chester
      Mining.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 21  SUBSEQUENT EVENTS

Modification of Note Receivable
  During the first quarter of fiscal 2006, the Company accepted
cash of $30,000 and a promissory note for $120,000 from an unrelated party for
the sale of a lode claim in the amount of $150,000. On December 17, 2008, the
terms of this note were modified. The modifications, among other items,
stipulated that:

- a third party would become a guarantor of the obligation to the Company;
  and
- a sum of $5,089 will be paid on or before February 10, 2009; and
- annual payments in the amount of $5,089 will be made beginning in July
  2009. See Note 10.

Commercial Office Building
  On October 3, 2008, the Company made the final payment of
$50,000 towards its purchase of a 50% interest in a commercial office building
in Coeur dAlene, Idaho. See Note 12.

Civil Action Filed
  On November 17, 2008, the United States Environmental
Protection Agency (EPA) filed a civil action against the Company in the United
States District Court for the District of Idaho. The civil action seeks recovery
of funds paid by the EPA in response to alleged releases of hazardous substances
at the Companys Idaho Lakeview mine and mill site in Bonner County, Idaho.
Currently, the Company does not believe that the resolution of this civil action
will materially affect its consolidated financial position, results of
operations or cash flows.

59

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANICAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and
Procedures

In connection with the preparation of this annual report on
Form 10-K, an evaluation was carried out by the Companys management, with the
participation of the Principal Executive Officer and the Principal Financial
Officer, of the effectiveness of the Companys disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (Exchange Act) as of September 30, 2008. Disclosure
controls and procedures are designed to ensure that information required to be
disclosed in reports filed or submitted under the Exchange Act is recorded,
processed, summarized, and reported within the time periods specified in the SEC
rules and forms and that such information is accumulated and communicated to
management, including the Principal Executive Officer and the Principal
Financial Officer, to allow timely decisions regarding required disclosures.

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

Managements Report on Internal Control Over Financial
Reporting

The Companys management is responsible for establishing and
maintaining adequate internal control over financial reporting. The Companys
internal control over financial reporting is a process, under the supervision of
the Principal Executive Officer and the Principal Financial Officer, designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of the Companys financial statements for external purposes
in accordance with United States generally accepted accounting principles
(GAAP). Internal control over financial reporting includes those policies and
procedures that:

- Pertain to the maintenance of records that in reasonable detail accurately
  and fairly reflect the transactions and dispositions of the Companys assets;
- Provide reasonable assurance that transactions are recorded as necessary
  to permit preparation of the financial statements in accordance with generally
  accepted accounting principles, and that receipts and expenditures are being
  made only in accordance with authorizations of management and the Board of
  Directors; and
- Provide reasonable assurance regarding prevention or timely detection of
  unauthorized acquisition, use, or disposition of the Companys assets that
  could have a material effect on the financial statements.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions or that the
degree of compliance with the policies or procedures may deteriorate.

The Companys management conducted an assessment of the
effectiveness of the Companys internal control over financial reporting as of
September 30, 2008, based on criteria established in Internal Control 
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). As a result of this assessment, management
identified a material weakness in internal control over financial reporting.

60

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A material weakness is a control deficiency, or a combination
of deficiencies, in internal control over financial reporting such that there is
a reasonable possibility that a material misstatement of the Companys annual or
interim financial statements will not be prevented or detected on a timely
basis.

The material weakness is identified as:

Lack of Rigor in Application of Accounting Principles to
Material, Unusual Transactions. During the year ended September 30, 2008, the
Company executed a material, unusual transaction related to the sale of property
and a foreign subsidiary to a third party. The Companys management failed to
appropriately identify and evaluate the technical accounting implications of the
transaction, resulting in a required material adjustment to the financial
statements identified by the auditors.

As a result of the material weaknesses in internal control over
financial reporting described above, the Companys management has concluded
that, as of September 30, 2008,, the Companys internal control over financial
reporting was not effective based on the criteria in Internal Control 
Integrated Framework issued by the COSO.

This annual report does not include an attestation report of
our independent registered public accounting firm regarding internal control
over financial reporting. We were not required to have, nor have we, engaged our
independent registered public accounting firm to perform an audit of internal
control over financial reporting pursuant to the rules of the Securities and
Exchange Commission that permit us to provide only managements report in this
annual report.

Remediation of Material Weakness in Internal Control Over
Financial Reporting

The Company is actively remedying the material weakness
identified above by instituting additional review procedures over the financial
reporting function.

Changes in Internal Control Over Financial
Reporting

As of the end of the period covered by this report, there have
been no changes in internal control over financial reporting (as defined in Rule
13a-15(f) of the Exchange Act) during the quarter ended September 30, 2008, that
materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

61

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT

For information with respect to the executive officers and
directors of the Registrant, See Item 4Directors and Executive Officers at
the end of Part I of this report.

ITEM 11. EXECUTIVE COMPENSATION

During the nine-month fiscal 2008, we paid our principal
executive officer $24,400. No other executive officers were paid in excess of
$100,000.

During the nine-month fiscal 2008, our four directors each
received 2,000 shares of our common stock as compensation for their service.
These shares were valued at the market price of $0.20 per share on March 31,
2008, the date of issuance.

The Company has no stock option plans and has not issued any
options or warrants to any of its employees or directors. The Company has no
employment agreements with any of its officers.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth as of September 30, 2008, the
common stock ownership of the directors, executive officers and each person
known by us to be the beneficial owner of five percent or more of our common
stock. The percentage of ownership is based on 22,063,179 shares of our common
stock outstanding as of September 30, 2008.

|                                                          |  | Number of    |  |  |            | 
|--------------------------------------------------------- |  | ------------ |  |  | ---------- | 
|                                                          |  | Shares of    |  |  |            | 
|Name and                                                  |  | Common       |  |  |            | 
|Address                                                   |  | Stock        |  |  |            | 
|of Beneficial                                             |  | Beneficially |  |  | Percentage | 
|Owner                                                     |  | Owned        |  |  | of Shares  | 
|                                                          |  |              |  |  |            | 
|Lex Smith                                                 |  | 80,000       |  |  | 0.36%      | 
|C/o Shoshone Silver Mining Company                        |  |              |  |  |            | 
|P.O. Box 2011                                             |  |              |  |  |            | 
|Coeur d'Alene, ID 83816                                   |  |              |  |  |            | 
|                                                          |  |              |  |  |            | 
|                                                          |  |              |  |  |            | 
|Carol Stephan                                             |  | 663,856      |  |  | 3.01%      | 
|C/o Shoshone Silver Mining Company                        |  |              |  |  |            | 
|P.O. Box 2011                                             |  |              |  |  |            | 
|Coeur d'Alene, ID 83816                                   |  |              |  |  |            | 
|                                                          |  |              |  |  |            | 
|                                                          |  |              |  |  |            | 
|Melanie Farrand                                           |  | 59,000       |  |  | 0.27%      | 
|C/o Shoshone Silver Mining Company                        |  |              |  |  |            | 
|P.O. Box 2011                                             |  |              |  |  |            | 
|Coeur d'Alene, ID 83816                                   |  |              |  |  |            | 
|                                                          |  |              |  |  |            | 
|                                                          |  |              |  |  |            | 
|Sharon Jacobs                                             |  | 6,000        |  |  | 0.03%      | 
|C/o Shoshone Silver Mining Company                        |  |              |  |  |            | 
|P.O. Box 2011                                             |  |              |  |  |            | 
|Coeur d'Alene, ID 83816                                   |  |              |  |  |            | 
|                                                          |  |              |  |  |            | 
|                                                          |  |              |  |  |            | 
|All officers and directors as a group (4
        persons) |  | 808,856      |  |  | 3.67%      | 

62

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS

During the previous two fiscal years there have been no
transactions between us, or the Companys subsidiary on the one hand, and any
officer, director or principal shareholder on the other.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The Company paid $48,435 and $11,000 in audit and review fees
to Williams & Webster for fiscal 2008 and 2007, respectively.

63

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(A) Documents filed as part of this report are as follows:

1. Financial Statements.

See listing of financial statements
included as part of this Form 10-K in Item 8 of Part II.

2. Financial Statement Schedules:

Financial statement schedules are
omitted because they are not applicable or the required information is shown in
the consolidated financial statements or notes thereto.

3. Exhibits:

The following list of exhibits
includes exhibits submitted with this Form 10-K as filed with the SEC and those
incorporated by reference to other filings.

|2.1.1 | Articles of Incorporation. (*)                                                                                                                           
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1.2 | Certificate of Amendment of Articles of Incorporation
        dated January 21, 1970 (*)                                                                 
|2.1.3 | Certificate of Amendment of Articles
        of Incorporation dated November 17, 1969 (*)                                                                
|2.1.4 | Articles of Amendment to the Articles of Incorporation
        dated August 28, 1983 (*)                                                                 
|2.1.5 | Articles of Amendment to the Articles
        of Incorporation dated May 15, 1998 (*)                                                                    
|2.2   | Bylaws. (*)                                                                                                                                              
|10.1  | Office Lease between the Company and
        Shoshone Business Center, Inc. dated November 1, 2004. ($)                                                  
|10.2  | Mining Lease and Agreement between the Company and Chester
        Mining Company, Inc. dated March 25, 2004. ($)                                        
|10.3  | Martin Sutti declaration of conditional
        transfer of certain mining concessions dated May 12, 2004. ($)                                           
|10.4  | Mining Lease and Agreement between the Company and Sterling
        Mining Company dated January 19, 2004 #                                              
|10.5  | Bilbao Indemnity
        and Guarantee Agreement+                                                                                                        
|10.6  | Bilbao Stock Purchase Agreement+                                                                                                                         
|31.1  | Certification
        of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of
        the Securities Exchange Act of 1934, as amended. (+)
|31.2  | Certification of Principal
        Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities
        Exchange Act of 1934, as amended. (+)
|32.1  | Certification
        of the Principal Executive Officer Pursuant to 18 U.S.C. Section 1350.
        (+)                                                 
|32.2  | Certification of the Principal
        Financial Officer Pursuant to 18 U.S.C. Section 1350. (+)                                                         
|99.1  | Map of Lakeview Group ^                                                                                                                                  
|99.2  | Map of Shoshone Group and Bullion Group ^                                                                                                                
|99.3  | Map of Auxer Property ^                                                                                                                                  
|99.4  | Map of Lucky Joe Property ^                                                                                                                              
|99.5  | Map of Regal Mine ^                                                                                                                                      
|99.6  | Map of Stillwater Extension Claims ^                                                                                                                     
|99.7  | Map of Montgomery Mine ^                                                                                                                                 
|99.8  | Map of Arizona Gold Fields Claims ^                                                                                                                      
|99.9  | Map of California Creek Property ^                                                                                                                       
|99.10 | Map of Princeton Gulch Group ^                                                                                                                           
|99.11 | Map of Cerro Colorado Group ^                                                                                                                            
|99.12 | Map of Bilbao-Mexico Property ^                                                                                                                          
|99.13 | Map of North Osburn Property >                                                                                                                           

64

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|* | Incorporated by reference to the Companys
      Registration Statement on Form 10-SB, filed with the Commission on
      February 15, 2001, File No. 000-31965.   
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|$ | Incorporated by reference to the Companys
      Annual Report on Form 10-KSB, filed with the Commission on August 3, 2006,
      File No. 000-31184               
|+ | Filed herewith.                                                                                                                                                    
|# | Incorporated by reference to the Companys
      Annual Report on Form 10-KSB, filed with the Commission on December 4,
      2006, File No.000-31184              
|^ | Incorporated by reference to the Companys
      Annual Report on Form 10-KSB/A Amendment 1,filed with the Commission on
      December 3, 2007, File No. 000-31184
|> | Incorporated by reference to the Companys
      Annual Report on Form 10-K, filed with the Commission on April 14, 2008,
      File No.000-31184.                 

65

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SIGNATURES

In accordance with Section 13 or
15 (d) of the Exchange Act, the registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

|                        | SHOSHONE SILVER MINING COMPANY
|----------------------- | ------------------------------
|                        |                               
|                        |                               
|                        |                               
|Dated: January 13, 2009 | By:                           
|                        |                               
|                        |                               

In accordance with the Exchange Act, this report has been
signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

| | By: | /s/ Lex Smith                            
| | --- | -----------------------------------------
| |     | Lex Smith                                
| |     | President and Principal Executive Officer
| |     |                                          
| |     |                                          
| | By: | /s/
      Melanie Farrand                
| |     | Melanie Farrand                          
| |     | Treasurer and Principal Financial Officer

66

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