UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)




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




For the
Quarterly Period Ended September 30, 2008




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




For the
transition period from _____ to _____.








Commission
File No.  333-135376





PIEDMONT
MINING COMPANY, INC.


(Exact
Name of Registrant as Specified in Its Charter)





North
      Carolina
            
            56-1378516(State
      or Other Jurisdiction
              Of
      Incorporation or Organization)
            (I.R.S.
      Employer Identification
              Number)18124
      Wedge Parkway, Suite 214
              Reno,
      Nevada
            89511(Address
      of Principal Executive Offices)
            (Zip
      Code)





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




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports); and (2) has been subject to such filing requirements for
the past 90 days.


Yes x                                No
 ̈





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





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





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


Yes  ̈                                No
x





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














1





PIEDMONT
MINING COMPANY, INC.





FORM
10-Q INDEX





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





2





PART I – FINANCIAL INFORMATION





Item
1. Financial Statements





PIEDMONT
      MINING COMPANY, INC.
              (An
      Exploration Stage Company)
              CONSOLIDATED
      BALANCE SHEETSSeptember
      30,
            
            December
      31,2008
              (unaudited)
            
            2007
              (audited)$
            
            $CURRENT
      ASSETSCash
      and cash equivalents
            1,366
            
            
            165,877Prepaid
      expenses and other (Note 3)
            68,417
            
            
            21,168Total
      current assets
            69,783
            
            
            187,045MINERAL
      PROPERTIES (Note 3)
            115,000
            
            
            275,500RECLAMATION
      BONDS (Note 3)
            29,339
            
            
            -EQUIPMENT
      (Note 4)
            281
            
            
            929Total
      Assets
            214,403
            
            
            463,474CURRENT
      LIABILITIESAccounts
      payable and accrued liabilities
            396,074
            
            
            322,149Due
      to related parties (Note 4)
            187,293
            
            
            83,008Total
      current liabilities
            583,367
            
            
            405,157STOCKHOLDERS’
      EQUITY (DEFICIENCY)Capital
      Stock (Note 5)Authorized:50,000,000
      Preferred stock $1.00 par value200,000,000
      Common stock no par valueCommon
      stock issued and outstanding:68,298,643  (2007
      – 63,063,774) common shares
            16,466,145
            
            
            15,700,695Additional
      paid-in capital
            840,059
            
            
            730,042Deficit
      accumulated prior to the exploration stage
            (12,564,287
            
            
            (12,564,287
            )Deficit
      accumulated during exploration stage
            (5,110,881)
            
            
            (3,808,133
            )Total
      stockholders’ equity (deficiency)
            (368,962)
            
            
            58,317Total
      liabilities and stockholders’ equity (deficiency)
            214,405
            
            
            463,474The
      accompanying notes are an integral part of these financial
      statements.







3





PIEDMONT MINING COMPANY, INC.


(An
Exploration Stage Company)


CONSOLIDATED
STATEMENTS OF LOSS


(unaudited)





Three
      months
              Ended
              September
      30, 2008
            
            
            Three
      months
              Ended
              September 30,
      2007
            
            
            Nine
      months
              Ended
              September
      30, 2008
            
            
            Nine months
              Ended
              September
      30, 2007
            
            
            For
      the Period from January 1, 2002 (Date of Inception of Exploration Stage)
      to
              September 30,
      2008$
            
            
            
            $
            
            
            
            $
            
            
            
            $
            
            
            
            $EXPENSESDepreciation
            
            
            216
            
            
            
            526
            
            
            
            648
            
            
            
            1,456
            
            
            
            146,102Exploration,
      geological and geophysical costs
            
            
            242,126
            
            
            
            70,346
            
            
            
            433,069
            
            
            
            176,649
            
            
            
            2,235,324General
      and administrative
            
            
            54,664
            
            
            
            44,598
            
            
            
            181,847
            
            
            
            109,006
            
            
            
            869,341Finance
      fees (Note 5)
            
            
            100,000
            
            
            
            -
            
            
            
            100,000
            
            
            
            -
            
            
            
            100,000Loss
      on abandoned properties (Note 3)
            
            
            -
            
            
            
            -
            
            
            
            205,500
            
            
            
            -
            
            
            
            205,500Management
      fees
            
            
            49,500
            
            
            
            76,489
            
            
            
            235,617
            
            
            
            258,000
            
            
            
            773,288Professional
      fees
            
            
            43,330
            
            
            
            58,525
            
            
            
            149,265
            
            
            
            172,405
            
            
            
            745,961489,836
            
            
            
            250,484
            
            
            
            1,305,946
            
            
            
            717,516
            
            
            
            5,075,516LOSS
      BEFORE OTHER ITEMS
            
            
            (489,836
            )
            
            
            (250,484
            )
            
            
            (1,305,946
            )
            
            
            (717,516
            )
            
            
            (5,075,516
            )INTEREST
      INCOME
            
            
            -
            
            
            
            1,142
            
            
            
            3,198
            
            
            
            1,143
            
            
            
            11,225LOSS
      ON OTHER NON-OPERATING ACTIVITIES
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (46,590
            )NET
      LOSS
            
            
            (489,836
            )
            
            
            (249,342
            )
            
            
            (1,302,748
            )
            
            
            (716,373
            )
            
            
            (5,110,881
            )BASIC
      AND DILUTEDLOSS PER SHARE
            
            
            (0.007
            )
            
            
            (0.000
            )
            
            
            (0.020
            )
            
            
            (0.009
            )WEIGHTED
      AVERAGE COMMONSHARES
      OUTSTANDING, BASIC AND DILUTED
            
            
            67,920,382
            
            
            
            59,100,816
            
            
            
            65,484,769
            
            
            
            56,346,937




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







4





PIEDMONT MINING COMPANY, INC.


(An
Exploration Stage Company)


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(unaudited)


Nine
      Months Ended
              September
      30,
            
            
            For
      the Period from January 1, 2002 (Date of Inception of Exploration Stage)
      to2008
            
            
            2007
            
            
            September
      30, 2008$
            
            
            
            $
            
            
            
            $CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
            
            
            (1,302,748
            )
            
            
            (716,373
            )
            
            
            (5,110,881
            )Adjustments
      to reconcile net loss to net cash from operating
    activities:Stock
      issued for finance fees
            
            
            100,000
            
            
            
            -
            
            
            
            100,000Warrants
      issued as finance fees
            
            
            -
            
            
            
            -
            
            
            
            92,100Loss
      on abandoned properties
            
            
            205,500
            
            
            
            -
            
            
            
            205,500Stock
      based compensation
            
            
            110,017
            
            
            
            176,300
            
            
            
            376,884Depreciation
            
            
            648
            
            
            
            1,456
            
            
            
            146,102Loss
      on other non-operating activities
            
            
            -
            
            
            
            -
            
            
            
            (21,000
            )Changes
      in operating assets and liabilities:Prepaid
      expenses and other
            
            
            (47,247
            )
            
            
            (37,086)
            
            
            
            (65,465
            )Related
      party advances (repayments)
            
            
            118,113
            
            
            
            (8.776
            )
            
            
            104,108Accounts
      payable and accrued liabilities
            
            
            60,095
            
            
            
            (17,910)
            
            
            
            425,795NET
      CASH FLOWS USED INOPERATING
      ACTIVITIES
            
            
            (755,624
            )
            
            
            (602,389
            )
            
            
            (3,746,857
            )CASH
      FLOWS FROM FINANCING ACTIVITIESIssuance
      of shares for cash, net of issuance costs
            
            
            650,450
            
            
            
            807,222
            
            
            
            3,650,174Convertible
      notes
            
            
            -
            
            
            
            -
            
            
            
            291,145NET
      CASH FLOWS FROMFINANCING
      ACTIVITIES
            
            
            650,450
            
            
            
            807,222
            
            
            
            3,941,319CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of equipment
            
            
            -
            
            
            
            (1,289)
            
            
            
            (5,579
            )Proceeds
      from non-operating activities
            
            
            -
            
            
            
            -
            
            
            
            97,125Reclamation
      bonds
            
            
            (29,339
            )
            
            
            -
            
            
            
            (29,339
            )Mineral
      property costs
            
            
            (30,000
            )
            
            
            (68,333
            )
            
            
            (256,000
            )NET
      CASH FLOWS USED ININVESTING
      ACTIVITIES
            
            
            (59,339
            )
            
            
            (69,622
            )
            
            
            (193,793
            )INCREASE
      (DECREASE) IN CASH ANDCASH
      EQUIVALENTS
            
            
            (164,511
            )
            
            
            135,211
            
            
            
            669CASH
      AND CASH EQUIVALENTS, BEGINNING
            
            
            165,877
            
            
            
            17,222
            
            
            
            697CASH AND CASH EQUIVALENTS,
      ENDING
            
            
            1,366
            
            
            
            152,433
            
            
            
            1,366SUPPLEMENTAL
      CASH FLOW INFORMATION AND
              NON-CASH INVESTING AND
      FINANCING ACTIVITIES (Note 6)





The
accompanying notes are an integral part of these financial
statements





5









PIEDMONT
MINING COMPANY, INC.


(An
Exploration Stage Company)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER
30, 2008


(unaudited)











NOTE
1:                      NATURE
OF OPERATIONS









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





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





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





Going
Concern


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





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





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





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





6







PIEDMONT
MINING COMPANY, INC.


(An
Exploration Stage Company)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (unaudited)
   
  NOTE
1:                      NATURE
OF OPERATIONS (continued)




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




NOTE
2:                      SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES





Basis
of Presentation


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





Basis
of Consolidation


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





Cash
and Cash Equivalents


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





Comparative
Figures


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





Use
of Estimates


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





Equipment


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








7




PIEDMONT
MINING COMPANY, INC.
 (An
Exploration Stage Company)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (unaudited)


NOTE
2:                      SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)




Mineral
Property Costs


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





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





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





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





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





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





Asset
Retirement Obligations


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





Impairment
of Long-Lived Assets


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








8






PIEDMONT
MINING COMPANY, INC.
 (An
Exploration Stage Company)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (unaudited)
 NOTE
2:                      SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)


Financial
Instruments


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





Loss
per Common Share


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





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





Foreign
Currency Translation


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





Income
Taxes


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





Stock-Based
Compensation


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


9
 PIEDMONT
MINING COMPANY, INC.
 (An
Exploration Stage Company)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (unaudited)
 NOTE
2:                      SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  Recent
Accounting Pronouncements


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





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








10






PIEDMONT
MINING COMPANY, INC.
 (An
Exploration Stage Company)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (unaudited)
 NOTE
3:                      MINERAL
PROPERTIES


A summary
of capitalized costs is as follows:




Balance
      as at
              December
      31, 2007
            
            
            Incurred
      during
              the
      period
            
            
            Impairment
            
            
            Balance
      as at
              September
      30, 2008$
            
            
            
            $
            
            
            
            $
            
            
            
            $Antelope
      Ridge
            
            
            68,500
            
            
            
            -
            
            
            
            (68,500
            )
            
            
            -Bullion
      Mountain
            
            
            20,000
            
            
            
            -
            
            
            
            -
            
            
            
            20,000Dome
      Hi-Ho
            
            
            107,000
            
            
            
            30,000
            
            
            
            (137,000
            )
            
            
            -Dutch
      Flat
            
            
            35,000
            
            
            
            -
            
            
            
            -
            
            
            
            35,000Pasco
      Canyon
            
            
            10,000
            
            
            
            -
            
            
            
            -
            
            
            
            10,000Trinity
      Silver
            
            
            10,000
            
            
            
            -
            
            
            
            -
            
            
            
            10,000PPM
      Gold
            
            
            25,000
            
            
            
            -
            
            
            
            -
            
            
            
            25,000Willow
      Creek
            
            
            -
            
            
            
            15,000
            
            
            
            -
            
            
            
            15,000275,500
            
            
            
            45,000
            
            
            
            (205,500
            )
            
            
            115,000





A.           Antelope
Ridge Project


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





B.           Bullion
Mountain Project


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





1.
            Lease
      payments required:a)
            On
      signing:
            $5,000
      plus $2,274 for claims fees reimbursement was paidb)
            First
      anniversary:
            $5,000
      was paidc)
            Second
      anniversary:
            $10,000
      was paidd)
            Third
      anniversary and each anniversary thereafter:
            $15,0002.
            The
      Company must expend the following additional amounts in exploration and
      maintenance of the property during the first two years of the
      agreement:a)
            By
      November 2006:
            $20,000
      (incurred)b)
            By
      November 2007:
            $50,000In
      September, 2007, this agreement was amended and the time for completing
      the remaining work obligation was extended
indefinitely.3.
            The
      Company has the option to purchase this property at any time for $500,000,
      which must be exercised before production can commence. All lease, work
      requirement and property maintenance payments made up to this point would
      be deducted from the purchase price.4.
            Upon
      exercise of the purchase option, the Company would be required to pay a 3%
      net smelter returns royalty on production from the
    property.5.
            The
      Company has the right to terminate this agreement at any time by giving 60
      days prior written notice.





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





11




PIEDMONT
MINING COMPANY, INC.
 (An
Exploration Stage Company)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (unaudited)
 NOTE
3:                      MINERAL
PROPERTIES (continued)


C.           Dome-Hi-Ho
Project


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





D.            Trinity
Silver Project


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





1.         Lease
and option payments required:


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


2.         Required
expenditures for exploration and property maintenance:


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


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


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


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


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


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


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





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





E.            Pasco
Canyon Project


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





1.
            Option
      payment required: On signing: $10,000 (paid).2.
            The
      Company is required to expend the following sums on exploration and
      maintenance of the property during the term of the
    Agreement:Year
      1
            $  50,000Year
      2
            $100,000Year
      3
            $200,000Year
      4
            $200,000Year
      5
            $450,0003.
            Upon
      completion of the required expenditures, the Company will have acquired a
      60% undivided interest in the property. At that point, a formal joint
      venture agreement will be entered into by the Company with the Company
      being the operator of the joint venture.4.
            The
      Company has the right to terminate this agreement at any time, subsequent
      to the first year’s expenditure requirement of $50,000, upon 30 days prior
      written notice.








12






PIEDMONT
MINING COMPANY, INC.
 (An
Exploration Stage Company)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (unaudited)
 NOTE
3:                      MINERAL
PROPERTIES (continued)


E.            Pasco
Canyon Project (continued)





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




F.           Dutch
Flat Gold Project


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





1.
            Payment
      upon signing:   $35,0002.
            The
      Company shall expend the following sums on exploration and maintenance of
      the property during the first 5 years of the Agreement:Year
      1         $200,000
              Year
      2         $300,000
              Year
      3         $500,000
              Year
      4         $500,000
              Year
      5         $500,0003.
            Upon
      completion of the $2,000,000 in exploration expenditures over the 5-year
      period, the Company shall have earned a 51% interest in the property and
      can then elect to either 1) form a joint venture at that point whereby the
      Company would own 51%, or 2) earn an additional 19% interest in property
      by funding a positive feasibility study and then form a joint
      venture.  The Company would be the operator of the joint
      venture.4.
            Six
      of these claims are subject to a 1.5% net smelter returns
      royalty.  Another company, in which one of the Company’s
      Directors has an interest, holds a 1% net smelter returns royalty on
      another sixteen of these claims.5.
            The
      Company may terminate this Agreement at any time after the first year on
      30 days notice.





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








13




PIEDMONT
MINING COMPANY, INC.
 (An
Exploration Stage Company)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (unaudited)
 NOTE
3:                      MINERAL
PROPERTIES (continued)


G.           PPM
Gold Project


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





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


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





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





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





H.            Willow
Creek Project


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





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




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





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





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





14




PIEDMONT
MINING COMPANY, INC.
 (An
Exploration Stage Company)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (unaudited)
 NOTE
3:                      MINERAL
PROPERTIES (continued)


I.           Morgan
Pass Project


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


-
            Pay
      for staking and registration of initial claims.-
            Commencing
      with the 2008-2009 assessment year, pay all maintenance
      requirements.-
            Pay
      $20,000 upon release of the properties into “multiple use”
      classification.-
            Upon
      release of the properties into “multiple use”, a five year option and earn
      in agreement would be signed and a work program totaling $750,000 over a
      five year period would commence beginning from the date of the signing of
      the formal agreement.





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





NOTE
4:                      DUE
TO RELATED PARTIES AND RELATED PARTY TRANSACTIONS





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





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





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





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





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





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








15




PIEDMONT
MINING COMPANY, INC.
 (An
Exploration Stage Company)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (unaudited)
 NOTE
5:                      CAPITAL
STOCK





Share
Capital


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





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





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




Common
Share Transactions


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





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





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





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





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





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





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







16




PIEDMONT
MINING COMPANY, INC.
 (An
Exploration Stage Company)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (unaudited)
 NOTE
5:                      CAPITAL
STOCK (continued)


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





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








Stock-Based
Compensation and Other Equity Transactions


The
Company does not have a stock-based compensation plan in place.  The
Company’s compensation committee makes recommendations to the Board of Directors
for the granting of awards of stock options to its officers and directors on a
case-by-case basis.





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





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





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





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





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





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







17


PIEDMONT
MINING COMPANY, INC.
 (An
Exploration Stage Company)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (unaudited)
 NOTE
5:                      CAPITAL
STOCK (continued)




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





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





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





Options
      Outstanding at September 30, 2008
            Options
      Exercisable at September 30, 2008Weighted
            
            
            WeightedAverage
            
            
            AverageRemaining
            Weighted
            
            Remaining
            WeightedRange
      of
            Number
            Contractual
            Average
            Number
            Contractual
            AverageExercise
      Prices
            of
      Shares
            Life
      (in years)
            Exercise
      Price
            of
      Shares
            Life
      (in years)
            Exercise
      Price$
      0.20 – 0.28
            5,725,000
            0..248
            $      0.239
            5,416,667
            2.357
            $     0.224





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





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





18


PIEDMONT
MINING COMPANY, INC.
 (An
Exploration Stage Company)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (unaudited)
 NOTE
5:                      CAPITAL
STOCK (continued)








Common Stock Purchase
Warrants


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





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





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





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





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





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







NOTE
6:    SUPPLEMENTAL CASH
FLOW INFORMATION AND


NONCASH
INVESTING AND FINANCING ACTIVITIES




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





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


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





19


PIEDMONT
MINING COMPANY, INC.
 (An
Exploration Stage Company)
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER
30, 2008
 (unaudited)
 NOTE
7:                      SUBSEQUENT
EVENTS









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





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








20





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





Forward-Looking
Statements and Associated Risks.





Except for statements of historical
facts, this report contains forward-looking statements involving risks and
uncertainties. You can identify these statements by forward-looking words
including “believes,” “considers,” “intends,”  “expects,” “may,”
“will,” “should,” “forecast, “ or “anticipates,” or the equivalents of those
words or comparable terminology, and by discussions of strategies that involve
risks and uncertainties. Forward-looking statements are not guarantees of our
future performance or results, and our actual results could differ materially
from those anticipated in these forward-looking statements. We wish to caution
readers to consider the important factors, among others, that in some cases have
affected, and in the future could affect our actual results and could cause
actual consolidated results for future fiscal years to differ materially from
those expressed in any forward-looking statements made by us or on our behalf.
These factors include without limitation, our ability to obtain capital and
other financing in the amounts and at the times needed, identification of
suitable exploration properties for acquisition, the successful discovery of
gold, silver or other precious metals in quantities economically feasible for
profitable production, changes in gold and silver prices, changes in the
political climate for gold and silver exploration, and other risk factors listed
from time to time in our Securities and Exchange Commission reports, including
in particular the factors and discussions under the heading “Risk Factors” in
the Annual Report on Form 10-KSB for the year ended December 31,
2007  that was filed with the Securities and Exchange Commission on
March 31, 2008.





Overview
of Business





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





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




Going
Concern





The report of our independent auditors
in our December 31, 2007 financial statements includes an explanatory paragraph
indicating that there is substantial doubt about our ability to continue as a
going concern due to recurring losses from operations, an accumulated deficit of
$16,372,420 and a working capital deficit of $218,116 at December 31, 2007. Our
ability to continue as a going concern will be determined by our ability to
raise adequate funds and conduct one or more successful exploration programs.
Our financial statements do not include any adjustments that might result from
the outcome of this uncertainty.





21




Critical
Accounting Policies




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





Results
of Operations




Discussion
of Revenues




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




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




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




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




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








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







22





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




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




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




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




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




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




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





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





Liquidity and Financial Condition




Cash
and Working Capital




We had an accumulated deficit of
($16,372,420) from our inception in 1983 to December 31, 2007, and an
accumulated deficit of ($17,675,168) at September 30, 2008. We have no
contingencies or long-term obligations except for our work commitments described
under our seven (7) property agreements on our leased properties. All of these
agreements can be terminated by us upon either 30 or 60 days
notice.




We had a
cash balance of $165,877 on December 31, 2007 and a cash balance of $1,366 on
September 30, 2008.  For the nine months period ending September 30,
2008, we had net cash outflows of $164,511.




23


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





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





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







Internal
and External Sources of Liquidity




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





Contractual
Obligations




We have
no commitments for capital expenditures.





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




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




Bullion
Mountain Project:




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




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




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




Trinity Silver
Project:




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




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




·
            Annual
      payments:  $0.








24





Pasco
Canyon Gold Project:




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




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




·
            Annual
      payments; $0.





Dutch
Flat Gold Project:




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




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




·
            Annual
      payments; $0.




PPM
Miranda Gold Project:




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




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




·
            Annual
      payments; $0.




Willow
Creek Project:




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


Morgan
Pass Project:




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




All of these property agreements can be
terminated on 30 to 60 days advance notice.




Off-Balance
Sheet Arrangements




We have no off-balance sheet
arrangements.







25





Item 3. Quantitative and Qualitative Disclosure About Market
Risks





Not Appilcable.





Item 4T. Controls And Procedures





(A)            Evaluation
of Disclosure Controls and Procedures





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





We carried out an evaluation, under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this report. Based upon and as
of the date of that evaluation, our principal executive officer and financial
officers concluded that there were material weaknesses in our internal controls,
including those which relate to the review, approval and reconciliation of
accounting data and entries. We are addressing these issues by reviewing and
revising our internal accounting policies and procedures.





(B)            Changes
in Internal Controls





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





26





PART
II – OTHER INFORMATION




Item 1. Legal Proceedings





None.





Item 1A. Risk factors





Not
Applicable.





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





2008:





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





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





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





The issuances of Common Stock was made
by us in reliance upon the exemptions from registration provided under Section
4(2) and 4(6) of the Securities Act and Rule 506 of Regulation D, promulgated by
the SEC under federal securities laws and comparable exemptions for sales to
“accredited” investors under state securities laws.





Item 3. Defaults Upon Senior Securities





None.





27




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





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





The
results of the stockholder voting follows:





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





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





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





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





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





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





Item 5. Other Information





None.





Item 6. Exhibits





Exhibit
      No.
            Description
            Location31.1
            Certification Pursuant to Section
      302
            Provided
      herewith32.1
            Certification Pursuant to 18 U.S.C.
      Section 1350
            Provided
      herewith











28





SIGNATURES





Pursuant to the requirements of the
Securities and Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned  thereunto duly
authorized.





PIEDMONT
      MINING COMPANY, INC.,
              a
      North Carolina CorporationDated:
      November 13, 2008
            /s/ Robert M. Shields, Jr.By:  Robert
      M. Shields, Jr.
              Its:  Chief
      Executive Officer (Principal
              Executive
      Officer) and Chief Financial Officer
              (Principal
      Financial Officer and Principal Accounting
  Officer)








29