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EX-32.1 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 - Piedmont Mining Company, Inc.pied10k20091231ex32-1.htm
EX-31.1 - CERTIFICATION PURSUANT TO SECTION 302 - Piedmont Mining Company, Inc.pied10k20091231ex31-1.htm
EX-31.2 - CERTIFICATION PURSUANT TO SECTION 302 - Piedmont Mining Company, Inc.pied10k20091231ex31-2.htm
EX-32.2 - CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 - Piedmont Mining Company, Inc.pied10k20091231ex32-2.htm



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
 
 
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
For the Fiscal Year Ended December 31, 2009
 
OR
   
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File No. 001-34075

  PIEDMONT MINING COMPANY, INC. 
(Exact Name of Registrant as Specified in Its Charter)

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

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

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, no par value per share
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issue, as defined in Rule 405 of the Securities Act.
 
o Yes
    No x

Check by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.
 
o Yes
    No x

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 o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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 of this Form 10-K.    o

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-3 of the Exchange Act.  (Check one):

 
Large accelerated filer
o
Accelerated filer
o
 
Non-accelerated filer
o
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 o
    No x
 
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant was approximately $2,325,124.55 based on the average bid and asked price of the registrant’s common stock as reported on the OTC Bulletin Board under the symbol “PIED” as of June 30, 2009.
 
The number of shares of the issuer’s common stock outstanding as of March 15, 2010 was 71,623,643.

 
 

 

PIEDMONT MINING COMPANY, INC.

FORM 10-K INDEX

PART I
ITEM 1.
BUSINESS
3
ITEM 1A.
RISK FACTORS
6
ITEM 1B.
UNRESOLVED STAFF COMMENTS
15
ITEM 2.
PROPERTIES
15
ITEM 3.
LEGAL PROCEEDINGS
20
ITEM 4.
REMOVED AND RESERVED
20
     
   
PART II
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
20
ITEM 6.
SELECTED FINANCIAL DATA
22
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
22
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
29
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
29
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
30
ITEM 9A(T).
CONTROLS AND PROCEDURES
30
ITEM 9B.
OTHER INFORMATION
31
   
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
31
ITEM 11.
EXECUTIVE COMPENSATION
35
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
36
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
37
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
38
   
PART IV
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT AND SCHEDULES
39
 
SIGNATURES
41

 
 

 

PART I

ITEM 1.  BUSINESS

Forward-Looking Statements and Associated Risks.  This Report contains forward-looking statements.  Such forward-looking statements include statements regarding, among other things, (a) our estimates of mineral reserves and mineralized material, (b) our projected sales and profitability, (c) our growth strategies, (d) anticipated trends in our industry, (e) our future financing plans, (f) our anticipated needs for working capital, (g) our lack of operational experience and (h) the benefits related to ownership of our common stock. Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology.  This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements.  These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” as well as in this Report generally.  Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this Report generally.  In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Report will in fact occur as projected.

Overview of Business

Piedmont Mining Company, Inc. (herein after the “Company” or “Piedmont”) is a North Carolina corporation formed in 1983.  From our inception until mid-1992, we were engaged in the exploration for, and production of, gold and other precious metals and the evaluation of gold properties in North and South Carolina.  From 1983 we were engaged in exploration and from early 1985 until May 1992, we were also engaged in the mining and production of gold and silver at our Haile Mine Property near Kershaw, South Carolina.  In May 1992, we entered into a joint venture at our Haile Mine Property with Amax Gold Inc. (“AGI”).  Our activities 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 entered into agreements on ten (10) exploration properties in the state of Nevada, but six of them have subsequently been terminated.  The description of our current exploration properties are set forth under Item 2 of this Report. Our plan is to conduct exploration for gold and silver at these properties to assess whether they possess economic deposits of gold and/or silver, which could be recovered at a profit.  We do not intend to build an exploration staff, but rather to joint venture our projects with competent exploration groups who can manage the exploration activities with our funding, although in some cases we may conduct exploration on our own using contractors.  We do not know whether a commercially viable ore body will be located on any of our mineral claims or leased properties. Our current plans are limited to exploration in the state of Nevada which is dependent on us securing additional financing or seeking alternative sources of cash flow.  In 2009, we were also granted a carried interests in two small oil wells in the United States  to provide minor cash flow to fund some of our expenses.

Our directors and officers are individuals with prior experience in gold and silver exploration, development and operations.  Our directors and officers have in excess of 150 years of combined experience with gold and silver exploration, development and mining.  We believe that we have assembled a highly qualified group of individuals with extensive experience in this sector.

 
3

 
 
In the state of Nevada, there are five (5) types of land that can be available for exploration, development and mining: public lands, private fee lands, unpatented mining claims, patented mining claims, and tribal lands. The primary sources of land for exploration and mining activities are lands owned by the United States Federal government, through the Bureau of Land Management and the United States Forest Service, land owned by state governments, tribal governments and individuals, or land obtained from entities that currently hold title to or lease government and private lands.

If mineralized material is found on any of our exploration properties and production is warranted, but we do not have adequate working capital to do so, we may have to sell additional shares of Common Stock or borrow money to finance the cost of development. We may not have the working capital to maintain our interest in our current exploration properties or commence profitable mining operations on any of our properties if economically viable gold and/or silver reserves were located on them in the future, and equity or debt financings may not provide us with the additional working capital necessary to continue operations.

We maintain a worldwide web site at http://www.piedmontmining.com.  The reference to our worldwide web address does not constitute incorporation by reference into this report information contained at that site.

Competition

We compete with other mining and exploration companies, many of which possess greater financial resources and technical facilities than we do, in connection with the acquisition of suitable exploration properties and in connection with the engagement of qualified personnel. The gold and silver exploration and mining industry is fragmented, and we are a very small participant in this sector. Many of our competitors explore for a variety of minerals and control many different properties around the world. Many of them have been in business longer than we have and have established more strategic partnerships and relationships and have greater financial accessibility than we have.
 
There is significant competition for gold and silver exploration properties and, as a result, we may be unable to continue to acquire interests in attractive gold and silver mineral exploration properties on terms we consider acceptable.

While we compete with other exploration companies in acquiring suitable properties, we believe that there would be readily available purchasers of gold and/or silver and other precious metals if they were to be produced from any of our leased properties. The price of precious metals can be affected by a number of factors beyond our control, including:
 
 
·
fluctuations in the market prices for gold and silver;
 
·
fluctuating supplies of gold and silver;
 
·
fluctuating demand for gold and silver; and
 
·
mining activities of others.
 
If we find gold and/or silver mineralization that is determined to be of economic grade and in sufficient quantity to justify production, we may then seek additional capital through equity or debt financing to develop, mine and sell our production. Our production would probably be sold to a refiner that would in turn purify our material and then sell it on the open market or through its agents or dealers. In the event we should find economic concentrations of gold or silver mineralization and were able to commence production, we do not believe that we would have any difficulty selling the gold or silver we would produce.

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

 
4

 
 
Compliance with Government Regulations
 
Various levels of governmental controls and regulations address, among other things, the environmental impact of mineral exploration and mineral processing operations and establish requirements for decommissioning of mineral exploration properties after operations have ceased. With respect to the regulation of mineral exploration and processing, legislation and regulations in various jurisdictions establish performance standards, air and water quality emission standards and other design or operational requirements for various aspects of the operations, including health and safety standards. Legislation and regulations also establish requirements for decommissioning, reclamation and rehabilitation of mineral exploration properties following the cessation of operations and may require that some former mineral properties be managed for long periods of time.
 
Our exploration activities are subject to various levels of federal and state laws and regulations relating to protection of the environment, including requirements for closure and reclamation of mineral exploration properties. Some of the laws and regulations include the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Emergency Planning and Community Right-to-Know Act, the Endangered Species Act, the Federal Land Policy and Management Act, the National Environmental Policy Act, the Resource Conservation and Recovery Act, and all the related state laws in Nevada.
 
The state of Nevada adopted the Mined Land Reclamation Act (the “Nevada Act”) in 1989 that established design, operation, monitoring and closure requirements for all mining operations in the state. The Nevada Act has increased the cost of designing, operating, monitoring and closing new mining facilities and could affect the cost of operating, monitoring and closing existing mining facilities. New facilities are also required to provide a reclamation plan and financial assurance to ensure that the reclamation plan is implemented upon completion of operations. The Nevada Act also requires reclamation plans and permits for exploration projects that will result in more than five acres of surface disturbance.
 
We plan to secure all necessary permits for our exploration activities and we intend to file for the required permits to conduct our exploration programs as necessary. These permits are usually obtained from either the Bureau of Land Management or the United States Forest Service. Obtaining such permits usually requires the posting of small bonds for subsequent remediation of trenching, drilling and bulk-sampling.

We do not anticipate discharging water into active streams, creeks, rivers, lakes or any other bodies of water without an appropriate permit. We also do not anticipate disturbing any endangered species or archaeological sites or causing damage to our leased properties. Re-contouring and re-vegetation of disturbed surface areas will be completed pursuant to the applicable permits. The cost of remediation work varies according to the degree of physical disturbance. It is difficult to estimate the cost of compliance with environmental laws since the full nature and extent of our proposed activities cannot be determined at present.
 

 
5

 

Employees and Employment Agreements

We currently have no full-time employees or employment agreements.  We may attempt to engage qualified consultants or employees in the future, as needed, if when our activities grow.  We do not intend to build an exploration staff, but rather to joint venture our projects with competent exploration groups who can manage the exploration activities with our funding, although in some cases we may conduct exploration on our own using contractors.

Research and Development Expenditures

We are not currently conducting any research and development activities other than those relating to the possible acquisition of new gold and/or silver properties or projects. As we proceed with our exploration programs, we may need to engage additional contractors and consider the possibility of adding permanent employees, as well as the possible purchase or lease of equipment.

Subsidiaries

Piedmont Gold Company, Inc., a North Carolina corporation, and Net Colony LLC, are wholly-owned subsidiaries of the Company.

Patents/Trade Marks/Licenses/Franchises/Concessions/Royalty Agreements or Labor Contracts
 
We do not currently own any patents or trademarks. Also, we are not a party to any license or franchise agreements, concessions, royalty agreements or labor contracts arising from any patents or trademarks.

ITEM 1A.  RISK FACTORS

Investment in our Common Stock involves risk.  You should carefully consider the risks described below before deciding to invest. Our business, financial condition and results of operations could be affected materially and adversely by any of the risks discussed below and any others not foreseen.   The market price of our Common Stock could also decline due to any of these risks, in which case you could lose part or all of your investment.  In assessing these risks, you should also refer to the other information included in this Report, including our consolidated financial statements and the accompanying notes.  This discussion contains forward-looking statements.

Risks Associated With Our Business

We have experienced losses since fiscal year ended December 31, 1992, and we expect losses to continue for the foreseeable future.
 
We are in the exploration stage and to date has not yet generated any net revenues or cash flow from its activities since 1992, except for some minor cash flow from interests in two oil wells. We incurred operating losses of $545,737 and $1,435,532 in the years ended December 31, 2009 and 2008, respectively.  We had an accumulated deficit of $18,350,491 as of December 31, 2009.  We had a working capital deficit of $923,272 at December 31, 2009.  Revenues are not normally generated during the exploration stage of operations.  We do not anticipate generating revenues from exploration or production in the foreseeable future. Profitability will require the successful development of one or more of our leased properties or the joint venture or outright sale of one or more of our option rights to acquire an interest in the properties that we currently lease. We may not be able to successfully commercialize any of our mineral properties and thereby become profitable.

 
6

 

There is substantial doubt about our ability to continue as a going concern due to significant recurring losses from our operations, our accumulated deficit and our working capital deficit, all of which means that we will need to obtain additional funding in order to continue operations.

Our independent auditors have added an explanatory paragraph in their opinion issued in connection with our financial statements for the years ended December 31, 2009 and 2008 with respect to their substantial doubt about our ability to continue as a going concern.   We have been generating significant losses from our operations. Since our incorporation in July 1983, we have amassed an accumulated deficit of $18,350,491 as of December 31, 2009.  We also had a working capital deficit of $923,272 as of December 31, 2009, which raises substantial doubt about our ability to continue as a going concern. As discussed in Note 1 to our financial statements for the fiscal year ended December 31, 2009, we are dependent on the continued support of our  creditors and our  ability to raise further capital to fund ongoing expenditures for exploration and administration. In current market conditions there is uncertainty that the necessary funding can be obtained as needed raising substantial doubt as to the ability of the Company to continue operating as a going concern.

We may fail to secure additional financing to meet our future capital needs.

We need significant additional capital to conduct our planned exploration activities on all of our leased properties.   We will also need capital more rapidly than currently anticipated and/or we may incur higher than expected exploration expenses.  We may fail to secure additional debt or equity financing on terms acceptable to us, or at all, at times when we need such funding.  If we do raise funds by issuing additional equity or convertible debt securities, the ownership percentages of existing shareholders would be reduced and the securities that we issue may have rights, preferences or privileges senior to those of the current holders of our Common Stock.  Such securities may also be issued at a discount to the market price of our Common Stock, resulting in further dilution to our existing shareholders.  If we raise additional funds by issuing debt, we could be subject to debt covenants that could place limitations on our operations and financial flexibility.  Our inability to raise additional funds on a timely basis will make it difficult for us to achieve our business objectives and will have a negative impact on our business, financial condition, results of operations and the value of our Common Stock.

We may not be able to secure additional financing to meet our future capital needs due to changes in general economic conditions.

We will need significant capital to satisfy our current working capital requirements. Any sustained weakness in the general economic conditions and/or financial markets in the United States or globally could affect adversely our ability to raise capital on favorable terms or at all. We have relied, and may also rely in the future, on access to financial markets as a source of liquidity to satisfy working capital requirements and for general corporate purposes. We may be unable to secure additional debt or equity financing on terms acceptable to us, or at all, at the time when we need such funding.  If we do raise funds by issuing additional equity or convertible debt securities, the ownership percentages of existing shareholders would be reduced, and the securities that we issue may have rights, preferences or privileges senior to those of the holders of our common stock or may be issued at a discount to the market price of our common stock which would result in dilution to our existing shareholders.  If we raise additional funds by issuing debt, we may be subject to debt covenants, such as the debt covenants under our secured credit facility, which could place limitations on our operations including our ability to declare and pay dividends.  Our inability to raise additional funds on a timely basis would make it difficult for us to achieve our business objectives and would have a negative impact on our business.

 
7

 

We do not currently have sufficient funds to complete all of our proposed mineral exploration programs, and as a result we may have to suspend operations on, or terminate, some of them.

Our mineral exploration programs are limited and restricted by the amount of working capital that we have and are able to raise from financings. Since 2008, we have terminated our interests in six of our properties because of our inability to meet the capital requirements for such properties. We do not have sufficient funds to complete all of our proposed mineral exploration programs at present. As a result, unless we raise additional funds, we may have to suspend or terminate operations on certain exploration projects or sell one or more of our option rights to acquire an interest in the properties that we currently lease. We will need to obtain additional financing in order to complete our proposed mineral exploration programs. As of December 31, 2009, we only had cash in the amount of $16,466.  We currently have cash flow only from small carried interests in two small oil wells. For fiscal year 2009, we received approximately $3,000 from our carried interests.  Our exploration programs call for significant expenditures. We will also require additional financing if the costs of the proposed exploration programs are greater than anticipated. We may fail to secure additional financing to meet our future capital needs.  Obtaining additional financing would be subject to a number of factors, including the market prices for gold and silver, investor sentiment and investor acceptance of our exploration programs. These factors may make the timing, amount, terms or conditions of additional financing unacceptable or unavailable to us. The most likely source of future funding is through the sale of equity capital. Any sale of equity capital would result in dilution to our existing shareholders. The only other alternatives for the financing of further exploration would be the offering by us of an interest in one or more of our projects to another party or parties to carry out further exploration or the issuance of debt, neither of which is presently contemplated.

Our business is susceptible to uncontrollable and unpredictable outside developments and hazards that may affect our ability to carry out our operations.

Our business is vulnerable to many hazards and risks that are not presently foreseeable or predictable.  Floods or excessive snowfall could seriously impede or halt our operations resulting in unexpected costs and delays in our planned activities.  Earthquakes could result in serious damage or destruction to facilities, equipment and roadways.  Large volcanic eruptions, especially of the Long Valley Caldera, could cripple our operations.  Rapid and unexpected outbreaks of plagues and pestilence, such as ‘bird flu’ or ‘swine flu’, small pox and bubonic plague, could have serious negative consequences on our operations.  Acts of war or attacks by terrorists could also seriously disrupt our operations, adversely affecting our management and causing a significant or total loss of your investment. You should carefully consider the prospects and consequences of each of these unpredictable hazards before deciding whether or not to make your investment in our Common Stock.

The validity of our unpatented mining claims could be challenged, which could force us to curtail or cease our business operations.
 
A majority of our leased properties consist of unpatented mining claims. These claims are located on federal land and involve mineral rights that are subject to the claims procedures established by the General Mining Law of 1872, as amended.
 
We must make certain filings with the county in which the lands are situated and with the Bureau of Land Management and pay an annual holding fee of $140 per claim. If we fail to make the annual holding payments or to make the required filings, our mining claims could become invalid. Because mining claims are self-initiated and self-maintained rights, they are subject to unique vulnerabilities not associated with other types of properties. It is difficult to ascertain the validity of unpatented mining claims from public records and, therefore, it is difficult to confirm that a claimant has followed all of the requisite steps for the initiation and maintenance of a claim. No title insurance is available for mining claims. In the event we do not have acceptable title to our leased properties, we could be forced to curtail or cease our exploration activities.

 
8

 

We may not have access to the supplies and materials needed for exploration, which could cause delays or suspension of our operations.

Competitive demands for contractors and unforeseen shortages of supplies and/or equipment could result in the disruption of planned exploration activities.  Current demand for exploration drilling services, equipment and supplies is robust and could result in suitable equipment and skilled manpower being unavailable at scheduled times in our exploration program.   Furthermore, fuel prices are rising rapidly.  We will attempt to locate suitable equipment, materials, manpower and fuel if sufficient funds are available. If we cannot find the equipment and supplies needed for our various exploration programs, we may have to suspend some or all of them until equipment, supplies, funds and/or skilled manpower can be obtained.

We do not and cannot insure against all risks, and we may be unable to obtain or maintain adequate insurance to cover the risks associated with our exploration activities at economically acceptable premiums. Losses from uninsured events could cause us to incur significant liabilities and costs that could have material adverse consequences upon our financial condition.

Our insurance will not and cannot cover all the potential risks associated with our exploration activities. Cost prohibitive premiums may make it economically unfeasible to obtain or maintain insurance to cover many risks.  Insurance coverage may not be available or may not be adequate to cover any resulting liabilities. Moreover, insurance coverage against risks such as environmental pollution or other hazards as a result of exploration activities could be prohibitively expensive to obtain for a company of our size and financial means. We might also become subject to liabilities for air, water or ground pollution or other hazards which we may not be insured against or which we may elect not to insure against because of premium costs or other reasons. Losses from such events could cause us to incur significant costs and liabilities that could have a material adverse effect upon our financial condition and our exploration activities.

We have no known mineral reserves at present, and if we cannot find and develop any, we may have to cease operations.

We have no known mineral reserves at present.  If we cannot find reserves of gold, silver or other metals or if we cannot adequately explore and drill and prove up any mineral reserves, either because we do not have the money to do so, or because it would not be economically feasible to do so, or because it is determined that the property does not contain economic mineral reserves, we may have to cease operations which could seriously impair the value of your investment. Mineral exploration is highly speculative, involves many risks and is frequently unsuccessful.

In the event we were able to locate and prove up mineral reserves on our leased properties yet were unable to find a buyer for them, our capability to develop them and bring them into production could then be subject to further risks including:

 
·
costs of bringing the properties into production including further exploration work, preparation of feasibility studies, metallurgical test work and construction of production facilities, all of which we have not budgeted for;
 
·
obtaining the necessary permits required to commence production;
 
·
availability and cost of financing;
 
·
ongoing costs of production;
 
·
adverse changes in gold and silver prices; and
 
·
environmental regulations and constraints.
 
 
9

 

The marketability of any mineral may also be affected by numerous factors which are beyond our control and which cannot be accurately predicted, such as market price fluctuations, the lack of processing facilities and equipment, government regulations and restrictions, including regulations relating to allowable production, importing and exporting of minerals and mineral products and environmental protection.  Accordingly, funds expended on exploration may not be recovered.

Our business and operating results could be harmed if we fail to manage our growth or change.
 
Our business may experience periods of rapid change and/or growth that could place significant demands on our personnel and financial resources. To manage possible growth and change, we must continue to try to locate skilled geologists, mappers, drillers, engineers, technical personnel and adequate funds in a timely manner.

An unsuccessful material strategic transaction or relationship could result in operating difficulties and other harmful consequences to our business.
 
We have evaluated, and expect to continue to evaluate, a variety of potential strategic transactions and relationships with third parties.   From time to time, we may engage in discussions regarding potential acquisitions or joint ventures. Any of these transactions could be material to our financial condition and results of operations, and the failure of any of these material relationships and transactions may have a negative financial impact on our business.

Attraction and retention of qualified personnel is necessary to implement and conduct our mineral exploration programs.

Our future success will depend largely upon the continued services of our Board members, executive officers and other key personnel. Our success will also depend on our ability to continue to attract, retain and motivate other qualified personnel. Key personnel represent a significant asset for us, and the competition for qualified personnel is intense in the mineral exploration industry.
 
We may have particular difficulty attracting and retaining key personnel in the initial phases of our exploration programs. We do not have key-person life insurance coverage on any of our personnel. The loss of one or more of our key people or our inability to attract, retain and motivate other qualified personnel could negatively impact our ability to complete our exploration programs.
 
We are highly dependent upon Robert M. Shields, Jr., who is our Chairman of the Board of Directors, President, Chief Executive Officer and Chief Financial Officer and upon Lewis B. Gustafson, our Director and Vice President of Exploration and any loss of Messrs. Shields or Gustafson could have a material adverse effect upon our business and our ability to continue as a going concern.

Our success is highly dependent upon the key business relationships and expertise of Robert M. Shields, Jr., who is our Chairman of the Board of Directors, President, Chief Executive Officer and Chief Financial Officer, and Lewis B. Gustafson, our Director and Vice President of Exploration.    We do not have a succession plan in place.  We do not have employment agreements with Mr. Shields or Mr. Gustafson or any insurance to cover the loss of their services.  The loss of the services of Mr. Shields, our Chairman, President, Chief Executive Officer and Chief Financial Officer or the loss of Mr. Gustafson our Vice President of Exploration and Director, along with the loss of their numerous contacts and relationships and their extensive knowledge and experience in the industry, would have a material adverse effect on our business and on our ability to continue as a going concern.

 
10

 

Our officers and directors may have conflicts of interest in that they are officers and/or directors of other exploration or mining companies and that could prevent them from devoting the necessary time to our management and operations, which could materially affect our performance.

Certain directors could have conflicts of interest in that they are or become officers and/or directors of other exploration or mining companies.  This could impact or retard our operations and thereby adversely affect our performance.

Risks Associated With Our Industry

Due to the uncertain nature of exploration, there is a substantial risk that we may not find economically exploitable reserves of gold and/or silver.
 
The search for valuable minerals is an extremely risky business. We do not know whether the claims and properties that we have optioned contain commercially exploitable reserves of gold and/or silver. The likelihood of success must be considered in light of the costs, difficulties, complications, problems and delays encountered in connection with the exploration of mineral properties.  These potential problems include, but are not limited to, additional costs and unanticipated delays and expenses that may exceed current estimates.

Because of the inherent dangers involved in exploration, there is a risk that we may incur liabilities or damages as we conduct our business activities.

Exploration for minerals involves numerous hazards. As a result, we may become subject to hazards, such as pollution, cave-ins, faulting, slumping, flooding, excess moisture, dust, dangerous animals, snakes, sun stroke, heat exhaustion, fires, armed trespassers and other hazards which could result in damage to life or property, environmental damages and legal liabilities against which we cannot insure or may elect not to insure. At the present time we have no insurance coverage to insure ourselves against such hazards. Liability for such occurrences could result in our inability to complete our planned exploration programs and/or obtain additional financings to fund our exploration programs and could have a material adverse effect on our financial condition and value.

The gold and silver markets are volatile markets that have a direct impact on the value of resources or reserves, our ability to raise additional funds and our potential revenues and profits.  These market conditions may seriously affect whether or not we will be able to continue with our exploration programs.
 
The price of gold and silver are subject to price fluctuations.  Large participants in the market can cause significant prices changes very quickly and without warning and for no apparent reason.  In order to maintain profitable operations, an operating mine must sell its gold and silver for more than its cost of producing it. The lower the price of the metal, the more difficult it is to make a profit. While current prices are economically attractive, if gold and/or silver prices should decline significantly, this could have a significant adverse effect on our ability to raise funds and cause us to cease activities until the price of gold and/or silver increases or cease our operations all together. Because mining costs are relatively fixed, the lower the market price of gold and/or silver, the greater the chance that investors might be unwilling to provide us with necessary funds and that we would therefore have to cease our operations.

 
11

 

In recent decades, there have been periods of both worldwide overproduction and periods of worldwide underproduction of many mineral commodities.  A surplus or a shortage of any mineral can result in significant price change for that mineral commodity.  General downturns in the overall economy or currency fluctuations can also affect the price of any commodity.  Substantial adverse and ongoing economic, currency, governmental or political conditions and developments in various countries may also have a significant impact on our value and our ability to continue to fund our exploration activities.

We face significant competition in the mineral exploration industry.
 
We compete with other mining and exploration companies possessing greater financial resources and technical facilities than we do in connection with the acquisition of exploration properties and leases on prospects and properties and in connection with the recruitment and retention of qualified personnel. Such competition may result in our being unable to acquire interests in economically viable gold and silver exploration properties or qualified personnel.

Our applications for exploration permits may be delayed or may be denied in the future.

Exploration activities usually require the granting of permits from various governmental agencies.  For exploration drilling on unpatented mineral claims, a drilling plan must be filed with the Bureau of Land Management or the United States Forest Service, which may then take several months or more to grant the requested permit.  Depending on the size, location and scope of the exploration program, additional permits may also be required before exploration activities can be undertaken.  Prehistoric or Indian grave yards, threatened or endangered species, archeological sites or the possibility thereof, difficult access, excessive dust and important nearby water resources may all result in the need for additional permits before exploration activities can commence.  With all permitting processes, there is the risk that unexpected delays and excessive costs may be experienced in obtaining required permits or the refusal to grant required permits may not be granted at all, all of which may cause delays and unanticipated costs in conducting planned exploration activities. This could result in serious adverse consequences to the price of our stock and to the value of your investment.

Our operations are subject to environmental risks and environmental regulations. Our failure to manage such risks or comply with such regulations could potentially expose us to significant liabilities for which we may not be insured.

All phases of our operations are subject to federal, state and local environmental regulations. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid, liquid and hazardous wastes. Environmental legislation is evolving in a manner which could involve stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. Future changes in environmental regulations could adversely affect our activities. Environmental hazards may exist on properties which we hold or may acquire in the future that are unknown to us at present and that have been caused by previous or existing owners or operators of the properties.

Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing our operations to cease or be curtailed and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations or in exploration or development of mineral properties may be required to compensate those suffering loss or damage by reason of such activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations.

 
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Production, if any, from any of the properties that we hold or may acquire in the future could involve the use of hazardous materials. Should these materials leak or otherwise be discharged from their containment systems, we may become subject to liabilities for hazards or clean-up work that we may not be insured against.

Government regulations affecting the exploration and mining industry, such as those relating to exploration, mining, taxes, labor standards, occupational health and land use, may adversely affect our business and planned activities.

Exploration, development, mining and processing activities are subject to taxes and various laws and regulations governing labor standards and occupational health, mine safety, toxic substances, land use, water use, land claims of local people and other matters. New rules and regulations may be enacted or existing rules and regulations may be applied or changed in such a manner as to limit or curtail our exploration activities. Amendments to current laws and regulations governing exploration, development, and mining or more stringent implementation of these laws could have a material adverse impact upon our business and financial condition and cause increases in our exploration costs, capital expenditures or estimated production costs or a reduction in levels of production, assuming we achieve production, or require abandonment or delays in the exploration and development of new mineral properties.

During the past several years, the United States Congress considered a number of proposed amendments to the General Mining Law of 1872, which governs mining claims and related activities on federal lands. For example, a broad based bill to reform the General Mining Law of 1872, the Hardrock Mining and Reclamation Act of 2007 (H.R. 2262) was introduced in the U.S. House of Representatives on May 10, 2007 and was passed by the U.S. House of Representatives on November 1, 2007, but no new legislation  has been passed that we are aware of.

In 1992, a federal holding fee of $100 per claim was imposed upon unpatented mining claims located on federal lands. This fee was increased to $125 per claim in 2005 ($133.50 total with the accompanying County fees included) and then in 2009 increased again to $140 per claim. Beginning in October 1994, a moratorium on processing of new patent applications was approved. In addition, a variety of legislation over the years has been proposed by the United States Congress to further amend the General Mining Law. If any of this legislation is enacted, the proposed legislation would, among other things, change the current patenting procedures, limit the rights obtained in a patent, impose royalties on unpatented claims, and enact new reclamation, environmental controls and restoration requirements.

For example, The Hardrock Mining and Reclamation Act of 2007 (H.R. 2262), if enacted, would have several negative impacts on the Company including but not limited to: requiring royalty payments of 8% of gross income from mining a claim on Federal land, or 4% of claims on Federal land that existed prior to the passage of this act; and prohibition of certain areas from being open to the location of mining claims, including wilderness study areas, areas of critical environmental concern, areas included in the National Wild and Scenic Rivers System, and any area included in maps made for the Forest Service Roadless Area Conservation Final Environmental Impact Statement.

The extent of any such changes to the General Mining Law of 1872 that may be enacted is not presently known, and the potential impact on us as a result of future congressional action is difficult to predict. If enacted, the proposed legislation could adversely affect the economics of developing and operating our mines because many of our properties consist of unpatented mining claims on federal lands. Our financial performance could therefore be materially and adversely affected by passage of all or pertinent parts of the proposed legislation, which could force us to curtail or cease our business operations.

 
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Risks Associated With Our Common Stock
 
The market price of our Common Stock is volatile and may fluctuate significantly in response to a variety of external factors.

Stock markets in general, and in particular the stock prices of exploration companies, can experience extreme volatility, often unrelated to the operating performance of the company. The market price of our Common Stock has fluctuated in the past and will fluctuate in the future as well, especially if our common shares continue to be thinly traded. Factors that may have a significant impact on the market price of our Common Stock include:

 
·
actual or anticipated exploration results;
 
·
our ability or inability to raise additional funds;
 
·
increased competition in the exploration sector;
 
·
government regulations and changes or anticipated changes in government regulations;
 
·
conditions and developments in the mineral exploration industry;
 
·
property rights;
 
·
rumors or allegations regarding financial disclosures or reporting practices; and/or
 
·
volatility in the prices of gold and silver.

Our stock price may be impacted by factors that are unrelated or disproportionate to our performance, such as general economic, political and/or market conditions, recessions or the threat thereof, interest rate changes or international currency fluctuations, all of which may adversely affect the market price of our Common Stock.

We do not expect to pay any dividends in the foreseeable future.

We have never paid cash dividends on our Common Stock and have no plans to do so in the foreseeable future. We intend to retain our earnings, if any, to develop and expand our exploration activities.

Penny Stock Regulations Affect Our Stock Price, Which May Make It More Difficult For Investors To Sell Their Stock.

Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the SEC. Penny stocks generally are equity securities with a price per share of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. Our securities are subject to the penny stock rules, and investors may find it more difficult to sell their securities.

 
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ITEM 1B.  UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 2.  PROPERTIES

The following describes the properties in Nevada on which we signed agreements or letters of intent, six of which have been terminated as further described below.

1. Antelope Ridge Silver/Gold Project - Eureka County, Nevada

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 Company made lease and option payments totaling $68,500 and 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.

2. Dome - HiHo Gold Project - Lander County, Nevada

Effective in April 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 Company made lease and option payments totaling $137,000 and incurred $350,510 in exploration costs with respect to the Project.  In June, 2008, the Company terminated this agreement and recorded an impairment loss of $137,000

3. Trinity Silver Project - Pershing County, Nevada

The Trinity Silver Project (“Trinity Silver”) is located 16 miles northwest of the town of Lovelock in Pershing County, Nevada.  The property is accessed on the west side from a well-maintained dirt road off of state Highway 399. Heavy trucks can directly access the site by this route.

Trinity Silver consists of unpatented mining claims and about 5,000 acres of fee land, or about 5,800 acres in total, located in Pershing County, Nevada. AuEx, Inc. (“AuEx”), a wholly owned subsidiary of AuEx Ventures, Inc., leased this property package from Newmont Mining Corporation (“Newmont”) in late July 2005.

We entered into a five (5) year Exploration and Development Agreement with AuEx on September 16, 2005.  Upon executing the agreement, we made a cash payment to AuEx in the amount of $10,000.  We completed both the first and second year’s work commitment, and expended a total of more than $620,000 on the Trinity Silver Property.

The Company had made lease payments totaling $10,000 and incurred $619,408 in exploration and property maintenance costs with respect to the Trinity Silver Project as of August 2009.

This project was terminated in the third quarter of 2009 because the Company was unable to fund the forthcoming required exploration expenditure requirements and recorded an impairment loss of $10,000.

 
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4. Bullion Mountain Gold Project - Lander County, Nevada

The Bullion Mountain Gold Project (“Bullion Mountain”) is located approximately 21 miles southeast of the town of Battle Mountain and approximately 8 miles west-southwest of Crescent Valley in Lander County, Nevada.  The property is accessed on the west side from Battle Mountain via the Hilltop Road with four wheel drive trucks or on the east side from a well-maintained dirt road from Crescent Valley.

Bullion Mountain consists of the 17 unpatented ‘Bully’ claims, plus an additional 4 claims staked in late 2006, on Bullion Mountain in the northern Shoshone Range and in the Battle Mountain - Cortez trend. This property is located approximately 30 miles southeast of our Dome-HiHo property. The Shoshone Range is underlain by siliceous and volcanic rocks of Ordovician and Devonian age, in a complex array of fault slices in the upper plate of the Roberts Mountain Thrust. These sequences were subsequently intruded by an approximately 38 million year old (Eocene) granodiorite and overlain by Miocene basalts and andesites.

The Company entered into a ten-year Lease Agreement with Option to Purchase with Nevada Eagle Resources (“NER”) on March 1, 2006, effective November 11, 2005.  Upon executing the agreement, we made a cash payment to NER in the amount of $5,000 and also reimbursed NER for $2,274 of claims holding fees.   Work commitment expenditures were $20,000 during the first lease year and $50,000 in the second lease year, and in addition the Company is required to pay all property maintenance costs while the agreement is in effect. The first year’s work commitment was completed.  

On September 12, 2007, a ‘First Amendment to Mining Lease’ was signed extending the time for completing the required work obligation indefinitely to accommodate the Company’s efforts to consolidate its property position with those of adjacent property owners

As of December 31, 2009, the Company had made lease payments totaling $23,000 and had incurred $27,305 in exploration costs.

This agreement was terminated in the first quarter of 2010 and an impairment loss of $27,000 was recorded at December 31, 2009.

5. Pasco Canyon Gold Project - Nye County, Nevada

The Pasco Canyon Gold Project (“Pasco Canyon”) is located approximately 55 miles north of the town of Tonopah, Nevada. This property is located in Nye County, Nevada, and consists of 24 contiguous unpatented mining claims.  The property is accessed from state Highway 82 on the east side from a well-maintained dirt road.  Heavy trucks can access the site by way of state Highway 82, which connects to U. S. Highway 50.

This property is located at the junction of two calderas, within the Toquima Caldera Complex.  No claims had ever been filed on this property prior to its staking by AuEx in 2003.  Two (2) holes were drilled by NDT Ventures, Ltd. in 2004, but they tested only the most accessible east fringe of the property to a depth of only about 600 feet.  We completed detailed geologic mapping and submitted to the United States Forest Service a plan for road building and drilling.  

We entered into a five (5) year Option Agreement with AuEx on February 14, 2006.  Upon executing the agreement, we made a cash payment to AuEx in the amount of $10,000.  We paid all required claims maintenance fees through September 2009 and expended $60, 971 in required exploration expenditures on the property.
In December 2009, this Option Agreement was terminated because the Company was unable to fund the required work commitment expenditure requirements. The Company recorded an impairment loss of $10,000 at December 31, 2009.

 
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6. Dutch Flat Gold Project – Humboldt County, Nevada

The Dutch Flat gold project is located 19 miles northeast of the town of Winnemucca and 15 miles north of Golconda in Humboldt County, Nevada (“Dutch Flat”).  The property is accessed on the west side from Dutch Flat Road, a well maintained paved/dirt road.  Heavy trucks can access the site by Dutch Flat Road, which connects to state Highway 95 and to U.S. Interstate Highway I-80 at Winnemucca.

Dutch Flat consists of 114 unpatented mining claims that are located at the northern end of the Battle Mountain – Eureka Trend and, at the southwest end of the Hot Springs Range.  The host rocks are shales and feldspathic sandstones of the Cambrian Harmony Formation, which have been intruded by a younger, possibly Cretaceous age, granodiorite stock.  The sedimentary rocks have been metamorphosed to hornfels with quartz veinlets at the contact with the intrusive.

Gold production of $211,276 is recorded from this district prior to 1950.  Mercury production from 1936 to 1957 is recorded at 1,098 flasks.  AGI explored this district from 1982 to 1988.  They drilled 49 rotary holes totaling 14,381 feet with Brican Resources Ltd. between 1985 and 1988 and discovered a low-grade gold resource in the property.

Cordex Exploration Co. (“Cordex”) and Columbus Gold (U.S.) Corporation (“Columbus”) have consolidated and extended this claim position in recent years.  They have also completed geologic mapping and sampling of the property and assembled the data and reports from previous exploration. A ground magnetic survey of the property has been completed and a shallow reverse circulation drilling program of about 2,550 feet was conducted on the property last fall.  Based on the results of this shallow drilling program, a second drilling program consisting of 24 angled reverse circulation drill holes totaling 10,280 feet was conducted in October 2007.  These holes were drilled to depths of from 245 to 820 feet.  All but 4 of these holes encountered at least 10 feet of low grade gold.  The two best intercepts were 145 feet averaging 0.021 ounces of gold per ton and 160 feet averaging 0.011 ounces of gold per ton.  The mineralization is still open to the north and to the south.  As of December 31, 2008, the Company had made the initial payment of $35,000 and incurred $508,516 in exploration costs with respect to this property.

We entered into a five (5) year Exploration Agreement With Option To Form Joint Venture with Columbus on July 2, 2006.  Upon executing the agreement, we made a cash payment of $35,000.  In accordance with the agreement we must expend at least $200,000 in exploration expenditures during the first year; $300,000 during the second year; and $500,000 during each of the third, fourth and fifth years of the agreement.  Except for the initial $35,000 cash payment, all payments made by us for the benefit of the project shall be credited towards the work expenditure requirements, including payment of the annual claims maintenance fees.  More than $525,677 has been incurred by the Company on exploration at Dutch Flat to date.  We shall have the right to appoint the operator of the exploration work program at the commencement of each agreement year.  Upon completion of the $2,000,000 in exploration expenditures over the five (5) year period, we shall have earned a 51% interest in the property.  We can then elect to (i) earn an additional 19% interest by funding a positive feasibility study for the project, or (ii) form a 51% joint venture with Columbus.  We would be the operator of the joint venture.  We may terminate this agreement at any time after the first year upon 30 days notice.

Six (6) of the claims are subject to a one and one half percent (1.5%) Net Smelter Returns royalty.  An Area of Interest extending two (2) miles from the exterior boundaries of the property has been established by the parties.  Also, one (1) of our current directors has an interest in a company that holds a one percent (1%) Net Smelter Returns royalty on 16 of the claims as well as additional claims located within a portion of the Area of Interest.

 
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We do not know whether we will succeed in locating an economic mineral deposit on this property. As of December 31, 2009, the Company has made the initial payment of $35,000 and has incurred $525,677 in exploration costs with respect to the Dutch Flat Gold Project.

The Company has not been able to meet its work expenditure requirements in a timely manner due to lack of adequate funding but is planning to do further exploration work when funds become available.  As a result, the Company has written down the carrying value of this project to $1.00.

7. PPM Gold Project – Humboldt County, Nevada

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.

The PPM Gold Project is located at the north end of the Battle Mountain-Eureka gold trend on the west flank of the Hot Springs mountains and about 30 miles north of the town of Winnemucca. It is about 12 miles northwest of the Twin Creeks, Turquoise Ridge and Pinson gold deposits where past production and current resources now exceed 23 million ounces of gold. This property now consists of 81 unpatented claims.  The property overlies a northeast striking fault system that intersects biogeochemical gold-in sagebrush anomalies near the margin of an inferred buried intrusive and adjacent to a sediment hosted mercury district. Such mercury occurrences are frequently closely associated with sediment hosted gold systems in Nevada.  Further gold and mercury in sagebrush surveys were conducted in late 2007 and have further refined drill targets.  Current plans are to conduct the first drill program as soon as funding becomes available.

Under the terms of the Exploration Agreement, the Company has an option to earn a 55% interest in 44 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 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 will enter into a joint venture with 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 of December 31, 2009, the Company has incurred $151,127, which includes an initial payment of $25,000 on signing and a reclamation bond of $11,566 on this property.  The Company has not been able to meet its work expenditure requirements in a timely manner but is planning to do further exploration work when funds become available.  As a result, the Company has written down the carrying value of this project to $1.00.

 
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8. Willow Creek Gold Project - Elko County, Nevada

On June 16, 2008, the Company entered into an Exploration Agreement with Option to Form a Joint Venture with Carlin Gold Corporation (“Carlin”).  A Letter of Intent was signed with Carlin Gold Corporation 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.
 
As of December 31 2009, the Company had expended $300,000 in exploration costs including the cost of a reclamation bond of $17,733.  During the fourth quarter of the year ended December 31, 2009 this agreement was terminated and as a result the Company recorded an impairment loss of $15,000 at December 31, 2009.  In addition, the Company has written off a reclamation bond in the amount of $15,976, net of recoveries, due to the uncertainty of recovery.
 
The Company was advised by its attorneys that Carlin claims a balance of $87,372 for the uncompleted first year’s work expenditure requirement is owing to them under the above agreement.  The Company believes this claim is without foundation or merit and is disputing the amount.  The Company has not recorded a liability in relation to the foregoing matters as the amount and likelihood of loss, if any, cannot be determined at this time.

9. Morgan Pass Project - Elko County, Nevada

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 time 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 of December 31, 2009, the Company had incurred $17,666 in exploration costs, and the property is still classified as a “wilderness study area.”

 
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10.  Argentite Gold Property – Esmeralda County, Nevada
 
On March 10, 2009, upon paying $2,500, the Company signed a Letter of Intent to enter into an Exploration Agreement with Option to form a Joint Venture on the Argentite gold property in western Nevada.  The Agreement has not been prepared or signed.  On signing a formal agreement, the Company would pay $8,000 and would then undertake a work commitment of $750,000 over a 5 year period to earn a 51% interest in the property and the project, or up to a 70% interest upon completion of a bankable feasibility study.  In addition, the Company would make annual payments of $10,000 by the first anniversary of the agreement, $15,000 on the second anniversary, $20,000 by the third anniversary and $25,000 by the fourth anniversary, all of which would be creditable against the work commitment. Claims maintenance fees were paid through August 31, 2010. The Option and Earn-In Agreement was not signed at December 31, 2009 and the Company has written off the $2,500.
 
ITEM 3.  LEGAL PROCEEDINGS

We were advised by our attorneys that Carlin claims a balance of $87,372 for the uncompleted first year’s work expenditure requirement is owing to them under the above Willow Creek agreement.  We believe this claim is without foundation or merit and is disputing the amount.  We have not recorded a liability in relation to the foregoing matters as the amount and likelihood of loss, if any, cannot be determined at this time.  There is no formal legal proceeding at this time.

We are not aware of any other pending or threatened material legal proceedings against us.

ITEM 4.  REMOVED AND RESERVED

PART II

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

Our common stock has been publicly traded since September 18, 1987. It is traded on the over-the-counter market, and quoted on the NASDAQ Electronic Bulletin Board (“Bulletin Board”) under the symbol “PIED.” The following table sets forth for the periods indicated the range of high and low closing bid quotations per share as reported by the over-the-counter market for the past two (2) years. These quotations represent inter-dealer prices, without retail markups, markdowns or commissions and may not necessarily represent actual transactions.

Year 2009
High
Low
First Quarter
$0.08
$0.03
Second Quarter
$0.06
$0.024
Third Quarter
$0.08
$0.023
Fourth Quarter
$0.049
$0.013
     
Year 2008
   
First Quarter
$0.33
$0.15
Second Quarter
$0.21
$0.11
Third Quarter
$0.16
$0.10
Fourth Quarter
$0.12
$0.01
 
 
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On December 31, 2009, the closing price of our common stock as reported on the Bulletin Board was $0.022 per share.

As of February 19, 2010, we had 326 registered shareholders, not including beneficial owners whose shares are held by banks, brokers or other nominees.

Dividends

We have not paid any dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. We intend to retain any earnings to finance the growth of the business. We cannot assure you that we will ever pay cash dividends.

Stock Option Plans

There are no stock option plans.

Recent Sales Of Unregistered Securities

In January, 2009, the Company completed a private placement offering of 125,000 Units, consisting of one share of Common Stock and one Common Stock Purchase Warrant at a price of $0.04 per Unit for proceeds of $5,000.  The Warrants are exercisable for a period of two years and entitle the holder to purchase one share of Common Stock for $0.10 per Share.

In March, 2009, the Company completed a private placement offering of 100,000 Units, consisting of one share of Common Stock and one Common Stock Purchase Warrant at a price of $0.05 per Unit for proceeds of $5,000.  The Warrants are exercisable for a period of two years and entitle the holder to purchase one share of Common Stock for $0.15 per Share.

In March, 2009, the Company completed a private placement offering of 200,000 Units, consisting of one share of Common Stock and one Common Stock Purchase Warrant at a price of $0.05 per Unit for proceeds of $10,000.  The Warrants are exercisable for a period of two years and entitle the holder to purchase one share of Common Stock for $0.10 per Share

In March, 2009, the Company issued 500,000 shares of Common Stock with a fair value of $0.05 per share or $25,000, pursuant to a letter agreement, as partial satisfaction of outstanding debt.

In May, 2009, the Company completed a private placement offering of 500,000 Units, consisting of one share of Common Stock and one Common Stock Purchase Warrant at a price of $0.03 per Unit for proceeds of $15,000.  The Warrants are exercisable for a period of three years and entitle the holder to purchase one share of Common Stock for $0.05 per Share.

In July, 2009, the Company completed a private placement offering of 83,333 Units, consisting of one share of Common Stock and one Common Stock Purchase Warrant at a price of $0.06 per Unit for proceeds of $5,000.  The Warrants are exercisable for a period of two years and entitle the holder to purchase one share of Common Stock for $0.10 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.  
 
 
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Repurchase of Equity Securities

We did not repurchase any shares of our common stock during the year ended December 31, 2009.

ITEM 6.  SELECTED FINANCIAL DATA

Not Applicable.

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

Our actual results could differ materially from those reflected in these forward-looking statements as a result of certain factors that include, but are not limited to, the risks discussed in the Section entitled “Risk Factors”. Please see the statements contained under the Section entitled “Forward-Looking Statements.”

Except for historical information, the following Management’s Discussion and Analysis contains forward-looking statements based upon current expectations that involve certain risks and uncertainties. Such forward-looking statements include statements regarding, among other things, (a) our estimates of mineral reserves and mineralized material, (b) our projected sales and profitability, (c) our growth strategies, (d) anticipated trends in our industry, (e) our future financing plans, (f) our anticipated needs for working capital, (g) our lack of operational experience and (h) the benefits related to ownership of our common stock. Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” as well as in this Annual Report generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this Annual Report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this Annual Report will in fact occur as projected.

Overview of Business

We are a North Carolina corporation formed in 1983. From our inception until mid-1992, we were engaged in the exploration for, and production of, gold and other precious metals and the evaluation of gold properties in North and South Carolina. From 1983 we were engaged in exploration and from early 1985 until May 1992, we were also engaged in the mining and production of gold and silver at our Haile Mine Property near Kershaw, South Carolina. In May 1992, we entered into a joint venture at our Haile Mine Property with Amax Gold Inc. 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 entered into option and earn-in agreements and letter of intent on exploration properties in the state of Nevada. Our plan is to conduct exploration for gold and silver at each of these properties to assess whether they possess economic deposits of gold and/or silver that can be recovered at a profit. We do not intend to build an exploration staff, but rather to joint venture our projects with competent exploration groups who can manage the exploration activities with our funding, although in some cases we may conduct exploration on our own using contractors. We do not know whether a commercially viable ore body will be located on any of our mineral claims or properties. Our current plans are limited to evaluation and exploration of mineral properties in the state of Nevada.  Our focus for the foreseeable future will be on the exploration of gold and silver mineral properties in Nevada  and also the acquisition of interests in producing oil and gas properties.

 
22

 

Recent Events

Since the end of the fiscal year 2009, the following events have occurred:

In January, 2010, the Company completed a private placement offering of 1,000,000 Units, consisting of one share of Common Stock and one Common Stock Purchase Warrant at a price of $0.016 per Unit for proceeds of $16,000.  The Warrants are exercisable for a period of three years and entitle the holder to purchase one share of Common Stock for $0.03 per Share.

In February, 2010, the Company completed a private placement offering of 500,000 units, consisting of one share of Common Stock and one common stock purchase warrant at a price of $0.02 per unit for proceeds of $10,000.  The warrants are exercisable for a period of three years and entitle the holder to purchase one share of common stock for $0.04 per share.

Going Concern

The report of our independent auditors in our December 31, 2009 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 $18,350,491 and a working capital deficit of $923,272 at December 31, 2009. Our ability to continue as a going concern will be determined by our ability to raise adequate funds and conduct one or more successful exploration programs. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Critical Accounting Policies

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

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 stock based transactions and financial instruments. Impairment provisions and fair value considerations for mineral properties involve subjective considerations and fair value methodologies primarily dependant on management inputs and not on active trading market indicators. Other areas requiring estimates include deferred tax balances, valuation allowances, allocations of expenditures to mineral property interests and related impairment tests.

 
23

 

Mineral Property Costs

The Company is primarily engaged in the acquisition, exploration and development of mineral properties. The acquisition costs of mineral rights are capitalized. These include lease and option payments under exploration agreements. The projects are assessed for impairment when facts and circumstances indicate their carrying values exceed the recoverable values. Such factors include poor exploration results or 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 and geophysical 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 with pre-feasibility studies, the costs incurred after such determination to develop a 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.

Financial Instruments

The fair value of the Company’s financial instruments, consisting of cash, accounts payable 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 4) is not determinable at the current stage of the Company’s exploration program.  Accordingly, no value has been assigned by management.

Asset Retirement Obligations

The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs an obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. The estimated fair value of the asset retirement obligation is based on the current cost escalated at an inflation rate and discounted at a credit adjusted risk-free rate.  This liability is capitalized as part of the cost of the related asset and amortized over its useful life.  The liability accretes until the Company settles the obligation.  To December 31, 2009 any potential costs relating to the ultimate disposition of the Company's mineral property interests are not determinable.

 
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Impairment of Long-Lived Assets

The Company reviews property and equipment and certain identifiable intangibles, excluding goodwill, for impairment.  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 the carrying amount to management’s estimates of 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.

Revenue Recognition

Oil revenues are recorded using the sales method whereby the company recognizes oil revenue based on the amount of oil sold to purchasers when title passes, the amount is determinable and collection is reasonably assured. Actual sales are based on sales, net of the associated volume charges for processing fees and for costs associated with delivery, transportation, marketing, and royalties in accordance with industry standards.

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 reflect 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 as the effect would be anti-dilutive.

Foreign Currency Translation

The financial statements are presented in United States dollars.  Foreign denominated monetary assets and liabilities are translated to their United States dollar equivalents using foreign exchange rates 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 December 31, 2009, 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.

 
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Stock-Based Compensation

The Company records stock-based compensation using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

New Accounting Pronouncements

In June 2009, the Company adopted ASC 105, Generally Accepted Accounting Principles (“ASC 105”). ASC 105 defines the new hierarchy for U.S. GAAP and supersedes all accounting standards in U.S. GAAP, aside from those issued by the Securities and Exchange Commission. The Codification was effective for financial statements issued for reporting periods ending after September 15, 2009. The adoption of the Codification did not result in any overall changes to the accounting principles utilized and accordingly did not have a material impact on financial position, results of operations or cash flows.

In June 2009, the Company adopted ASC 855, Subsequent Events (“ASC 855”), which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The new standard was effective for the Company for the quarter ended June 30, 2009. The adoption of this guidance did not have a material impact on the Company’s results of operations and financial position.

In August 2009, the Company adopted ASC 820, Fair Value Measurements and Disclosures – Measuring Liabilities at Fair Value (“ASC 820”), which provides additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. This also includes guidance on identifying circumstances that indicate a transaction is not orderly. This requires the disclosure of the inputs and valuation technique(s) used to measure fair value and a discussion of changes in valuation techniques and related inputs, if any, during the period. The adoption of this statement did not have a material impact on the Company’s results of operations and financial position.

Recent Accounting Guidance Not Yet Adopted

In June 2009, the FASB issued authoritative guidance on the consolidation of variable interest entities, which is effective for the Company beginning January 1, 2010. The new guidance requires revised evaluations of whether entities represent variable interest entities, ongoing assessments of control over such entities, and additional disclosures for variable interests. We believe adoption of this new guidance will not have a material impact on our financial statements.

Certain other recent accounting pronouncements have not been disclosed as they are not applicable to the Company.

Results Of Operations For The Fiscal Year Ended December 31, 2009 Compared To Fiscal Year Ended December 31, 2008.

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

 
·
locate one or more economic mineral deposits which could then be put into production, from which we would then be able to extract gold or silver at a profit; or
 
·
enter into a joint venture arrangement on one or more of our leased properties; or
 
·
consummate a merger or acquisition with another company.
 
 
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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 Year Ended December 31, 2009 Compared to December 31, 2008

Exploration, geological and geophysical costs decreased by $382,965, or 85.083%, to $67,144 for the year ended December 31, 2009 as compared to $450,109 for the year ended December 31, 2008.  The principal reason for this decrease was that sufficient funds were not available to continue exploration operations.

Management fees decreased by $93,233, or 32.69%, to $191,984 for the year ended December 31, 2009 as compared to $285,217 for the year ended December 31, 2008.  The principal reason for this decrease was due to the final expensing of stock options.

Professional fees decreased by $95,200, or 52.72%, to $85,383 for the year ended December 31, 2009 as compared to $180,583 for the year ended December 31, 2008.  The principal reason for this change was due to a decrease in legal fees as no new ventures or significant transactions were entered into.

General and administrative expenses decreased by $124,239 or 58.26% to $89,020 for the year ended December 31, 2009 as compared to $213,259 for the year ended December 31, 2008.  The principal reasons for this change were reductions in activities related to investor relations, public reporting, advertising and insurance. Interest expense increased due to interest bearing advances made to the Company by certain of its directors.

Impairment of mineral properties decreased by $69,026 or 33.59% to $136,474 for the year ended December 31, 2009 as compared to $205,500 for the year ended December 31, 2008. The reason for this change was due to the abandonment of certain mineral properties in 2009 that were still being explored for potential revenue producing reserves in 2008.

There were no finance fees for the year ended December 31, 2009 as compared to $100,000 for the year ended December 31, 2008. In 2008, the Company issued common shares with a market value of $100,000 in lieu of cash for private placement efforts.

Depreciation expense decreased by $799 or 92.48%, to $65 for the year ended December 31, 2009 as compared to $864 for the year ended December 31, 2008.  The principal reason for this decrease was that certain equipment was fully depreciated in 2009.
 
 
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Liquidity And Capital Resources
 
Cash and Working Capital
 
We had an increase of $300,918 in our working capital deficit at December 31, 2009 as compared to the working capital deficit at December 31, 2008, due to a decrease in current assets of $16,547 and an increase in current liabilities of $284,371.  We had an accumulated deficit of $18,350,491 from our inception in 1983 to December 31, 2009. We have no contingencies or long-term obligations except for our work commitments under our option and earn-in agreements.  These agreements can be terminated by us upon either 30 or 60 days notice.
 
Subject to the availability of funds, we were and are committed to making certain exploration work expenditures, lease and option payments, and claims maintenance payments on the following current properties in the forthcoming 12 months period:
 
Dutch Flat Project:
 
 
·
Required work expenditure: $1,000,000 by 12/31/09 and $1,500,000 by 12/31/10, of which $525,677 was completed by 12/31/09; Further work will depend upon the amount and timing of funding received.
 
·
Annual claims maintenance:  $14,250; claims maintenance fees have been paid through August 31, 2010.
 
·
Annual payments:  $0.
 
PPM Gold Project:
 
·
Required work expenditure:  $375,000 through 12/31/09, and $675,000 through 12/31/10, of which $151,127 was completed by 12/31/09; Further work will depend upon the timing and amount of funds received.
 
·
Annual claims maintenance:  $10,980.  Claims maintenance fees have been paid through August 31, 2010.
 
·
Annual payments:  $0

As of December 31, 2009, no annual payments were required for the Dutch Flat or PPM Gold projects or the Morgan Pass or the Argentite projects.  As of the date of this report, the claims maintenance fees for 2010 for the aforementioned projects are not due until July at the earliest.
 
We had a cash balance of $16,466 on December 31, 2009.  For the year ended December 31, 2009 we had a net cash outflow of $15,884.
 
During the twelve months ended December 31, 2009, we raised approximately $40,000, net of issuance costs, from the sale of common stock and warrants. These funds were used primarily for exploration activities, general and administrative including salaries, and to pay attorney’s and auditor’s fees in connection with the preparation of audited financial statements, and the preparation and filing of reports to the Securities and Exchange Commission.

Internal and External Sources of Liquidity
 
As of December 31, 2009, we had current assets of $16,466 compared to $33,013 at December 31, 2008. This decrease was due to the use of cash proceeds from the sale of our Common Stock for exploration activities and operating expenses. Current liabilities at December 31, 2009 of $939,738 were higher than the December 31, 2008 balance of $655,367 as additional funds were advanced by the Company’s directors. This resulted in a working capital deficit of $923,272 and $622,354 as of December 31, 2009 and 2008, respectively. Due to the sale of shares of our Common Stock, we were able to generate cash that was used to partially meet our working capital needs. In addition, shares were issued to a Joint Venture partner in lieu of cash in partial settlement of exploration costs paid. As a result of the additional issuances of our shares of Common Stock, any net income per share would be lower in future periods.

 
28

 
 
As discussed in this Report, for the remainder of the fiscal year 2010 we will need to raise additional funds to satisfy our work commitments on our exploration properties and pay for ongoing general and administrative expenses.  We intend to raise additional funds through the sale of our securities, consisting of common stock and warrants attempt to seek other alternative sources of cash flow. We  believe continued efforts to sell stock and warrants as well as advances from management will contribute toward funding our  activities until appropriate levels of funding can be arranged and/or revenue can be earned from the properties either through production or sale.  The global financial situation in 2008 and 2009 and the ensuing downturn in the economy and in the mineral exploration industry have severely restricted the ability of many junior resource companies to raise equity financing. Accordingly, we cannot assure that additional capital required to finance our operations will be available on acceptable terms, if at all. Any failure to secure additional financing may force us to modify our business plan and our exploration activity will continue to be postponed until market conditions improve.
 
In the event we are able to fund our working capital needs through the issuance of equity, our existing and future shareholders will be diluted and any net income per share would be lower in future periods.
 
In addition, we may enter into a joint venture arrangement on one or more of our leased properties. In the event our exploration is successful and mining eventually commences on one or more of our leased properties, we could then commence receiving revenues from the sale of gold and/or silver produced on these properties.  In addition, we cannot be assured of profitability in the future.  We continue to investigate other potential financing sources, including additional cash flow from small oil wells and to entertain potential joint venture partners.
 
We plan to continue doing some research and development with regard to investigating possible new exploration properties or new ventures.
 
At this time, we do not expect to purchase or sell any property or equipment over the next 12 months.
 
The Company does not currently expect a significant change in the number of its employees over the next 12 months.
 
Off-Balance Sheet Arrangement
 
At December 31, 2009, we were not a party to any transactions, obligations or relationships that could be considered off-balance sheet arrangements.
 
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Not applicable.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements appear beginning at page F-1.

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

None.

ITEM 9A(T).  CONTROLS AND PROCEDURES

The management of the Company is responsible for establishing and maintaining adequate internal controls over financial reporting, as required by Sarbanes-Oxley (SOX) Section 404 A. The Company’s internal controls over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer 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 U.S. generally accepted accounting principles.

As of December 31, 2009, management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments.  Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures could have been more effective in detecting inappropriate application of US GAAP rules as more fully described below if the Company had had more financial resources and personnel.

The matters involving internal controls and procedures that the Company’s management identified as material weaknesses under COSO and SEC rules were: (1) inadequate segregation of duties consistent with control objectives; (2) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (3) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by the Company's Chief Financial Officer (who is also its Chief Executive Officer and Corporate Secretary) in connection with the preparation of our financial statements as of December 31, 2009 and communicated the matters to our Board of Directors.

Management believes that the material weaknesses set forth above did not have an effect on the Company's financial results. However, management believes that the lack of a well functioning audit committee may have resulted in ineffective oversight in the establishment and monitoring of certain internal controls and procedures, which could impact the Company's financial statements in future years.

We are committed to improving our financial controls. As part of this commitment, we plan to create a position to  segregate duties consistent with control objectives and plan to increase our personnel resources and technical accounting expertise within the accounting function when funds become available to the Company: i) Appointing additional outside directors to our Board of Directors who shall be appointed to the audit committee of the Company resulting in a fully functioning audit committee who would undertake the oversight in the establishment and monitoring of required internal controls and procedures; and ii) Preparing and implementing sufficient written policies and checklists which will set forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.

Management believes that the appointment of additional directors, who could be appointed to a fully functioning audit committee, would remedy the lack of a functioning audit committee. In addition, management believes that preparing and implementing sufficient written policies would remedy the following material weaknesses (i) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements; and (ii) ineffective controls over period end financial close and reporting processes. Further, management believes that when funds become available the hiring of additional personnel who have the technical expertise and knowledge would result in proper segregation of duties and provide more checks and balances. Additional personnel would also provide the cross training needed to support the Company if personnel turn over occurs. This coupled with the appointment of additional outside directors would greatly decrease any control and procedure issues the company might encounter in the future.

 
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We will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds permit.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during the small business issuer's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 ITEM 9B.  OTHER INFORMATION

None.

PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors, Executive Officers and Significant Employees

The following table sets forth the names and ages of our current directors, executive officers, significant employees, the principal offices and positions with us held by each person and the date such person became our director, executive officer or significant employee.  Our executive officers are appointed by our Board of Directors.  Our directors serve until the earlier occurrence of the appointment of his or her successor at the next meeting of shareholders, death, resignation or removal by the Board of Directors.  There are no family relationships among our directors, executive officers, director nominees or significant employees.

Name
 
Age
 
Position
R Robert M. Shields, Jr.
 
71
 
Chief Executive Officer, President, Chief Financial Officer and Director, since 1983
Lewis B. Gustafson
 
76
 
Vice President of Exploration and Director, since 2005 and 2004 respectively
Ian C. MacDonald
 
63
 
Director, since 2007
John P. Ingersoll
 
79
 
Director, since 2004
Ralph W. Kettell, II
 
50
 
Director, since 2004

Biographies

Robert M. Shields, Jr.  Mr. Shields has been Chairman of the Board of Directors, Chief Executive Officer, Chief Financial Officer and Treasurer of Piedmont since 1983. Mr. Shields has over 25 years of experience in the exploration and mining industry and has over 35 years of business experience. He founded Piedmont Mining Company, Inc. in 1983. In April 1985 Piedmont put into production the first operating gold mine in the eastern United States since 1942 at its Haile Mine property in South Carolina.

 
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Mr. Shields was an Associate with Morgan Stanley & Co. in corporate finance in the early 1970s and a security analyst with Paine, Webber, Jackson and Curtis in the mid-1960s. He is a member of the American Geophysical Union, the M.I.T. Enterprise Forum of New York City, the Society of Economic Geologists, the Geological Society of Nevada, the New York Academy of Sciences and the New York Section of The Society of Mining Engineers.

He graduated Cum Laude and with high distinction in Geology from Dartmouth College in 1960 and received a PhD in Geochemistry from the Massachusetts Institute of Technology in 1965, where he was elected to Sigma Xi, Honorary Scientific Society, and Phi Lambda Upsilon, Honorary Chemical Society. He also received an MBA from the Stanford University Graduate School of Business Administration in 1971. He was an officer in the US Army Corps of Engineers from 1967 to 1969 and was honorably discharged with the rank of Captain.

Lewis B. Gustafson.  Mr. Gustafson has been a Director of Piedmont since November 2004 and its Vice President-Exploration since March 2005. Mr. Gustafson has over 35 years of experience in exploration and economic geology.  He began his career as a geologist with The Anaconda Company. He spent seven years at the El Salvador mine in Chile, and then six years in Arizona where he became Chief Geologist in 1975. He then was Professor of Economic Geology for six years at the Australian National University in Canberra, Australia. From 1982 to 1986 he was Senior Staff Geologist and then Chief Research Geologist at Freeport Exploration Company in Reno, Nevada. From 1986 to 1991 he was a General Partner in Annapurna Exploration and a Vice President of REX Resources, Inc. Since 1986 he has been an Independent Geological Consultant to numerous international mining companies.

Mr. Gustafson has authored or co-authored seventeen publications in economic and exploration geology. He is a member of the Geological Society of America, the Society of Economic Geologists, the Society of Mining Engineers, the Geological Society of Nevada and the Nevada Petroleum Society and is a frequent lecturer at exploration and mining meetings.

From the Society of Economic Geologists Mr. Gustafson received the Lindgren Award in 1962 and was a member of their Editorial Board from 1970 to 1980. From 1973 to 1974 he was their Thayer Lindsey Visiting Lecturer, their Distinguished Lecturer in Applied Geology in 1989, Chairman of their Ad Hoc Committee on Geologic Mapping from 1989 to 1993 and a Trustee of the SEG Foundation from 1996 to 2001. From 1981 to 1984 and from 1997 to 2000 he was a member of their Research Committee and Chairman of it in 1984. He was also a Councilor of the Australian Mineral Foundation from 1977 to 1979 and is currently on the Advisory Committee of the Nevada Bureau of Mines and Geology.

Mr. Gustafson received a B.S.E degree from Princeton University, an M.S. degree from the California Institute of Technology and a Ph.D. degree from Harvard University.

Ian C. MacDonald.  Mr. MacDonald has been a director since 2007.  Mr. MacDonald has over thirty years of experience in precious metals trading and investment banking. From 2007 to 2009 Mr. MacDonald has served as Executive Director of the Gold and Precious Metals Division of the Dubai Multi Commodities Centre (the “DMCC”).  The DMCC was created by the Dubai government to establish a commodity market place in Dubai.  Since 2004 he has operated his own precious metals advisory service, Ian C. MacDonald, LLC. From 1999 to 2004 he was Vice President and Manager of the Global Precious Metals department of Commerzbank AG in New York, where he managed their precious metals operations and dealings with central banks, mines, funds and industrial users of precious metals. He was then Executive Vice President of MKS Finance (USA) Inc., a Geneva based corporation providing advice to their precious metals clients. From 1988 to 2003 he was a director of The Gold Institute in Washington, DC. From 1982 to 1998 Mr. MacDonald was the founder and Manager of Credit Suisse’s Precious Metals Divisions. From 1969 to 1979 he was a director of Billiton (UK) Ltd. Mr. MacDonald was a director of the COMEX Division of the New York Mercantile Exchange for twenty years where he served on the advisory committee.

 
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Mr. MacDonald holds a BA degree in Business (Marketing) from Highbury College in England. He is also a graduate of the Royal Marines Officer Training School in England and served more than three years in the Royal Marine Commandos.

John Phelps “Pete” Ingersoll Jr.  Mr. Ingersoll has been a director of Piedmont since 2004. Mr. Ingersoll has had more than 47 years of experience as a financial analyst in the metals and mining industry. Since July 2001, he has been a Director of Concentric Energy Corp., a natural resource company specializing in uranium and other mineral resources.  Since 1999, he has been a Director of E-VAT INC., a private research and development company developing an electrochemical process for recovering gold without the use of cyanide. He was a financial analyst in the mining industry with Salomon Brothers from 1982 to 1987, and then with Lehman Brothers from 1987 to 1992.

Mr. Ingersoll was a Director of Getchell Gold Corporation (formerly FirstMiss Gold Inc.), a mid-sized Nevada gold producer, from 1994 to 1999 when it was acquired by Placer Dome Inc. He was a Director of Stillwater Mining Company, a Montana producer of platinum and palladium, from May 1997 to December 1998.

Mr. Ingersoll is a Chartered Financial Analyst, a member of the New York Society of Security Analysts, the American Institute of Mining Engineers and a past President and retired member of the Nonferrous Metals Analysts of New York. He received a BA degree from Williams College in 1952 and an MBA degree from the Harvard University Graduate School of Business Administration in 1957.

Ralph W. Kettell, II.  Mr. Kettell has been a director of Piedmont since 2004. Mr. Kettell has held a variety of positions in high-tech engineering design, commercial real estate and exploration for precious and energy related minerals.  Since 2005, Mr. Kettell has acted as the President and Chief Executive Officer for Nevada Fluorspar, Inc., a privately held natural resource company focused on resources related to the steel industry.  In 2003, he founded Concentric Energy Corp., a privately held natural resource company specializing in energy and industrial mineral resources.  Mr. Kettell served as the President and CEO of Concentric Energy Corp., from June 2003 until December 2005, and as Chairman and CEO from January 2006 until December 2006.  In 2003, Mr. Kettell co-founded AuEx, Inc., a Nevada based exploration company with properties in Nevada.  Mr. Kettell was also a director of AuEx, Inc. from 2003 until November 2005.  From September 2003 until May 2005, he was the Marketing Director of 321gold.com, a gold website on the Internet.  From 1990 to 2003, Mr. Kettell was the Vice President of Engineering of Lark Enterprises, Ltd., a high-tech R&D start-up.  Mr. Kettell holds a BS degree and an MS degree in Electrical Engineering from Lehigh University.  He was certified as a Professional Engineer in New York in 1985.

There are no family relationships among the directors of our Company or any executive officers of the Company.

Committees of the Board of Directors

The Board has set up three committees as part of the compliance with new reporting regulations that were enacted during 2002 under the Sarbanes-Oxley Act. The following is a list of committees that are presently active and staffed by independent directors of the Company.

 
33

 

   Committee  
 
   Chairman  
 
   Members
Audit Committee
 
John P. Ingersoll
 
Ian C. MacDonald, Ralph W. Kettell, II
Compensation Committee
 
John P. Ingersoll
 
Ian C. MacDonald, Ralph W. Kettell, II
Governance Committee
 
Ian C. MacDonald
 
Pete Ingersoll, Ralph W. Kettell, II

Audit Committee and Audit Committee Financial Expert

The Audit Committee of the Board of Directors makes recommendations regarding the retention of the independent registered public accounting firm, reviews the scope of the annual audit undertaken by our independent registered public accounting firm and the progress and results of their work, reviews our financial statements, and oversees the internal controls over financial reporting and corporate programs to ensure compliance with applicable laws. The Audit Committee reviews the services performed by the independent registered public accounting firm and determines whether they are compatible with maintaining the registered public accounting firm’s independence. The Audit Committee consists of three independent directors: Mr. Ingersoll (Audit Committee Chairman), Mr. MacDonald  and Mr. Kettell.

Our Board of Directors has not made a determination whether a director on the audit committee qualifies as an “audit committee financial expert.” Our Board of Director plans to make this determination in the near future.

In fulfilling its oversight responsibilities, the Audit Committee has reviewed and discussed the audited financial statements with management and discussed with the independent auditors the matters required to be discussed by SAS 90. Management is responsible for the financial statements and the reporting process, including the system of internal controls. The independent auditors are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles.

The Audit Committee discussed with the independent auditors, the auditors' independence from the management of the Company and received written disclosures and the letter from the independent accountants required by Independence Standards Board Standard No. 1.
 
After review and discussions, the Audit Committee recommended to the Board that the audited financial statements be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2009.

Compensation Committee

The Compensation Committee has not adopted a formal charter.  The Compensation Committee reviews and approves executive compensation policies and practices, reviews compensation for our officers, and considers other matters as may, from time to time, be referred to them by the Board of Directors.  The Compensation Committee consists of three independent directors: Mr. Ingersoll (Compensation Committee Chairman), Mr. Kettell and Mr. MacDonald.

Governance Committee and Nominations to the Board of Directors

There were no material changes to the procedures by which security holders may recommend nominees to our Board of Directors.

 
34

 

Code of Ethics

Our Board of Directors have not adopted a code of ethics.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities and Exchange Act of 1934, as amended, requires our officers and directors and persons who own more than 10% of a registered class of our securities to file reports of change of ownership with the SEC.  Officers, directors and greater than 10% beneficial owners are required by SEC regulation to furnish us with copies of all 16(a) forms they file.

Based solely on our review of the copies of such forms that we received, or written representations from certain reporting persons that no forms were required for those persons, we believe that during fiscal year 2009 all filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with by such persons in a timely manner except for Mr. MacDonald.  Mr. Shields and Mr. Kettell each filed Forms 4 during the year for voluntary transactions that otherwise would have been required to be filed on Forms 5. Accordingly, they are not deemed “late” under voluntary provisions.

ITEM 11.  EXECUTIVE COMPENSATION

The following table summarizes all compensation paid to our Chief Executive Officer, President and Chief Financial Officer, and our Vice President of Exploration (the “Named Executive Officers”) for services rendered in all capacities for the years ended December 31, 2008 and 2009.

Summary of Paid Compensation Table*
 
Name and
Principal Position
 
Year
   
Salary
   
Bonus
   
Stock
Awards
   
Option
Awards
   
Non-Equity
Incentive Plan
Compensation
   
Non-Qualified
Deferred
Compensation
on Earnings
   
All
Other
Compensation
   
Total
 
                                                       
Robert M. Shields, Jr.
   
2009
   
$
0
   
$
0
     
0
     
0
     
0
   
$
0
   
$
0
   
$
0
 
CEO, CFO
   
2008
   
$
98,750
   
$
0
     
0
     
 0
     
0
   
$
0
   
$
0
   
$
98,750
 
                                                                         
Lewis B. Gustafson
   
2009
   
$
0
   
$
0
     
0
     
0
     
0
   
$
0
   
$
0
   
$
0
 
Vice President
   
2008
   
$
5,950
   
$
 0
     
 0
     
0
     
 0
   
$
 0
   
$
 0
   
$
5,950
 


*Table does not reflect all accrued and unpaid managements fees earned by  Mr. Shields and Mr. Gustafson during 2008 and 2009, which are disclosed under  Item 12 of this report.

 
35

 

Outstanding Equity Awards at Fiscal Year-End

Option Awards
Name
 
Number of Securities Underlying Unexercised Options (#) Exercisable
   
Number of Securities Underlying Unexercised Options (#) Unexercisable
   
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)
   
Option
Exercise
Price ($)
 
Option
Expiration
Date
(a)
 
(b)
   
(c)
   
(d)
   
(e)
 
(f)
                           
Robert M. Shields, Jr.
   
1,500,000
     
0
     
0
   
$
0.25
 
02/03/2012
Robert M. Shields, Jr.
   
500,000
     
0
     
0
   
$
0.23
 
02/28/2011
Robert M. Shields, Jr.
   
1,000,000
     
0
     
0
   
$
0.25
 
06/16/2011
                                   
Lewis B. Gustafson
   
250,000
     
0
     
0
   
$
0.20
 
02/03/2010
Lewis B. Gustafson
   
700,000
     
0
     
0
   
$
0.23
 
02/28/2011
Lewis B. Gustafson
   
100,000
     
0
     
0
   
$
0.25
 
06/16/2011
Lewis B. Gustafson
   
100,000
     
0
     
0
   
$
0.25
 
07/03/2010
                                   
John P. Ingersoll
   
250,000
     
0
     
0
   
$
0.20
 
02/03/2010
John P. Ingersoll
   
100,000
     
0
     
0
   
$
0.25
 
07/03/2010
                                   
Ralph W. Kettell, II
   
250,000
     
0
     
0
   
$
0.20
 
02/03/2010
                                   
Ian C. MacDonald
   
250,000
     
0
     
0
   
$
0.25
 
03/29/2012


Columns (g) through (j) have been omitted since the Company has not granted any stock awards in the year ended December 31, 2009.

Compensation of Directors

Reasonable expenses related to the performance of duties as a director are reimbursed upon submission of evidence for payment there from.  No compensation was  paid or accrued to the Company’s directors for the fiscal year ended December 31, 2009.  The Company did not grant any stock awards in 2009.

Employment Agreements

We have no employment agreements.

Stock Option Plans

There are no stock option plans.

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

The following table presents certain information regarding the beneficial ownership of all shares of common stock at February 19, 2010 for each executive officer and director of our Company and for each person known to us who owns beneficially more than five percent (5%) of the outstanding shares of our common stock.  Beneficial ownership is calculated based upon 71,123,643 issued and outstanding as of February 19, 2010.

 
36

 

   
Common
Shares
Owned
   
Exercisable
Options and
Warrants
   
Total
   
Percentage
                         
Robert M. Shields, Jr.
   
3,056,006
     
3,000,000
     
6,056,006
     
8.17
%
                                 
Lewis B. Gustafson
   
100,000
     
900,000
     
1,000,000
     
1.39
%
                                 
John P. Ingersoll
   
50,000
     
100,000
     
150,000
     
*
 
                                 
Ralph W. Kettell II
   
972,578
     
0
     
972,578
     
1.37
%
                                 
Ian MacDonald
   
35,000
     
250,000
     
285,000
     
*
 
                                 
All directors and officers as a group (5 persons)
   
4,213,584
     
4,250,000
     
8,463,584
     
11.23
%
                                 
Frank G. Diegmann
   
4,231,949
     
0
     
4,231,949
     
5.95
%
                                 
Stephen Jones
   
5,448,864
     
1,812,500
     
7,261,364
     
9.96
%


*Less than one percent 1%

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Related Transactions

During the year ended December 31, 2009 the Company incurred management fees of $168,000 (2008: $164,000) to the Company’s President and CEO. In addition, the Company reimburses the President for office rent which totaled $19,200 for the year ended December 31, 2009 (2008: $19,200).  At December 31, 2009 a balance of $366,957 (2008: $166,316) was owing to the President and CEO for unpaid management fees, rent and expense reimbursements.

During the year ended December 31, 2009 the Company incurred exploration costs and fees of $4,984 (2008: $28,270) to the Company’s Vice-President.  At December 31, 2009 a balance of $33,254 (2008: $28,270) was owing to the Vice-President for unpaid fees, exploration costs and expense reimbursements.

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 relating to these advances, which include accrued interest, at December 31, 2009 and 2008 were $138,513 and $57,943 respectively.

No stock options were granted to its officers or directors by the Company for the year ended December 31, 2009.  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.

 
37

 

Director Independence

It is the current policy of the Board that a majority of its members be independent of the Company’s management.  A Director is considered independent if the Board affirmatively determines that the Director (or an immediate family member) does not have any direct or indirect material relationship with the Company or its affiliates or any member of senior management of the Company or his or her affiliates.  The term “affiliate” means any corporation or other entity that controls, is controlled by, or under common control with the Company, evidenced by the power to elect a majority of the Board of Directors or comparable governing body of such entity.  The term “immediate family member” means spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in law, brothers- and sisters-in-laws and anyone (other than domestic employees) sharing the Director’s home.

In accordance with these guidelines, the Board has determined that Ian C. MacDonald, John P. Ingersoll and Ralph W. Kettell, II are independent directors.

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

At the meeting of stockholders in August 2008 the stockholders approved the engagement Dale Matheson Carr-Hilton LaBonte LLP as our independent accountant to audit our financial statements for the fiscal year ending December 31, 2008 and our interim statements for 2009.

Our Audit Committee and has unanimously approved all audit and non-audit services provided by the independent auditors. The independent accountants and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent accountants, and the fees for the services performed to date.

Audit Fees

For the fiscal years ended 2009 and 2008, the aggregate fees billed for services rendered for the audits of the annual financial statements and the review of the financial statements included in the quarterly reports on Form 10-Q and the services provided in connection with the statutory and regulatory filings or engagements for those fiscal years and registration statements filed with the SEC was $32,000 and $38,500, respectively.

Audit-Related Fees

For the fiscal years ended December 31, 2009 and 2008, there were no fees billed for the audit or review of the financial statements that are not reported above under Audit Fees.

Tax Fees

For the fiscal years ended December 31, 2009 and 2008, there were no fees billed for tax services.
 
All Other Fees

For the fiscal years ended December 31, 2009 and 2008 there were no fees billed for services other than services described above.

 
38

 

PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES

(a)(1)  
Financial Statements. Consolidated balance sheet as of December 31, 2009 and December 31, 2008, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the 2 year period ended December 31, 2009.
   
(a)(2)  
Schedules.  All schedule have been omitted because they are not required, not applicable, or the information is otherwise set forth in the consolidated financial statements or the notes thereto.
   
(a)(3)  
Exhibits.
 
Exhibit No.
Description
313.1
Articles of Incorporation of Piedmont Mining Company, Inc., filed July 25, 1983(1)
233.2
Amendment to Articles of Incorporation, filed August 1, 1983(1)
 3.3.3
Amendment to Articles of Incorporation, filed June 11, 1984(1)
  33.4
Amendment to Articles of Incorporation, filed June 24, 1984(1)
  33.5
Amendment to Articles of Incorporation, filed July 23, 1987(1)
  33.6
Amendment to Articles of Incorporation, filed September 2, 1987(1)
333.7
Amendment to Articles of Incorporation, filed June 7, 1988(1)
3  3.8
Amendment to Articles of Incorporation, filed June 15, 1994(1)
    3.9
Amended and Restated Articles of Incorporation, filed December 17, 2007(2)
    3.10
Bylaws of Piedmont Mining Company, Inc.(1)
    3.11
Amendment to Bylaws adopted June 25, 1984(1)
    3.12
Amendment to Bylaws adopted in 1988(1)
    3.13
Amendment to Bylaws adopted May 17, 1988(1)
    3.14
Amendment to Bylaws adopted May 17, 1988(1)
    3.15
Amendment to Bylaws adopted April 7, 1989(1)
    3.16
Amendment to Bylaws adopted March 14, 1990(1)
    3.17
Amendment to Bylaws adopted September 26, 1990(1)
4  4.1
Form of Stock Specimen(3)
    4.2
Form of Subscription Agreement(3)
    4.3
Form of Warrant Agreement(3)
    4.4
Form of Registration Rights Agreement(3)
4.5
Form of Investor Warrant(4)
4.6
Form of Placement Agent Warrant for Units(4)
4.7
Form of Subscription Agreement with Registration Rights(4)
4.8
Form of Subscription Agreement with Piggy Back Registration Right(4)
10.1
Mining Lease with Option to Purchase by and between Nevada Eagle Resources LLC and Piedmont Mining Company, Inc. dated as of November 11, 2005(3)
10.2
Exploration Agreement With Option to Form Joint Venture by and between Piedmont Mining Company, Inc. and Columbus Gold (U.S.) Corporation dated as of July 2, 2006(5)
10.3
Exploration Agreement with Option to Form a Joint Venture by and between Piedmont Mining Company, Inc. and Miranda U.S.A., Inc., dated April 17, 2007(7)
10.4
Services Agreement by and between Piedmont Mining Company, Inc. and Miranda Gold U.S.A., dated April 17, 2007(7)
10.5
Non-Qualified Stock Option Agreement by and between Piedmont Mining Company, Inc. and V. Richard Rabbito, dated April 9, 2008(8)
10.6
Services Agreement by and between Piedmont Mining Company, Inc. and Carlin Gold US, Inc., dated June 16, 2008(10)
10.7
Exploration Agreement with Option to Form Joint Venture by and between Piedmont Mining Company, Inc. and Carlin Gold US Inc., effective June 16, 2008 (10)
10.8
Letter of Intent by and between Piedmont Mining Company, Inc. and Nevada Eagle Resources LLC, dated March 10, 2009(11)
2121
Subsidiaries of Piedmont Mining Company, Inc.(3)
3132.1
Certification Pursuant to Section 302*
3132.2
Certification Pursuant to Section 302*
3232.1
Certification Pursuant to 18 U.S.C. Section 1350*
3232.2
Certification Pursuant to 18 U.S.C. Section 1350*
______________________________________
* filed with this Form 10-K

 
39

 

(1)
Incorporated by reference to Company’s Form 10-KSB (File No. 333-135376) filed with the Securities and Exchange Commission on March 31, 2008.
(2)
Incorporated by reference to Company’s Form 8-K (File No. 333-135376) filed with the Securities and Exchange Commission on December 20, 2007.
(3)
Incorporated by reference to Company’s Form SB-2 (File No. 333-135376) filed with the Securities and Exchange Commission on June 27, 2006.
(4)
Incorporated by reference to Company’s Form 8-K (File No. 333-135376) filed with the Securities and Exchange Commission on July 26, 2007.
(5)
Incorporated by reference to Company’s SB-2/A (File No. 333-135376) filed with the Securities and Exchange Commission on August 16, 2006.
(6)
Incorporated by reference to Company’s Form 8-K (File No. 333-135376) filed with the Securities and Exchange Commission on March 23, 2007.
(7)
Incorporated by reference to Company’s Form 8-K (File No. 333-135376) filed with the Securities and Exchange Commission on April 23, 2007.
(8)
Incorporated by reference to Company’s Form 8-K (File No. 333-135376) filed with the Securities and Exchange Commission on April 15, 2008.
(9)
Incorporated by reference to Company’s Form 8-K (File No. 001-34075) filed with the Securities and Exchange Commission on May 27, 2008.
(10)
Incorporated by reference to Company’s Form 8-K (File No. 001-34075) filed with the Securities and Exchange Commission on June 23, 2008.
(11)
Incorporated by reference to Company’s Form 8-K (File No. 001-34075) filed with the Securities and Exchange Commission on March 16, 2009.
 

 
 
40

 

SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereto duly authorized.

 
PIEDMONT MINING COMPANY, INC.
     
     
Date:   March 31, 2010
By:
 /s/ Robert M. Shields, Jr.                                                             
   
Name: Robert M. Shields, Jr.
   
Title: Chief Executive Officer (Principal Executive
   
Officer) and Chief Financial Officer (Principal
   
Financial Officer and Principal Accounting Officer),
   
President, Director, Chairman of the Board of
   
Directors


Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE
 
TITLE
 
 
DATE
/s/ Robert M. Shields, Jr.
 
Chief Executive Officer (Principal
Executive Officer) and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), President, Director, Chairman of the Board of Directors
 
  March 31, 2010
Robert M. Shields, Jr.
       
         
         
/s/ Lewis B. Gustafson  
Director and Vice President of Explorations
 
  March 31, 2010
Lewis B. Gustafson
       
         
         
/s/ John Phelps “Pete” Ingersoll  
Director
 
  March 31, 2010
John Phelps “Pete” Ingersoll
       
         
         
 /s/ Ian C. MacDonald 
 
Director
 
  March 31, 2010
Ian C. MacDonald
       
         
         
   
Director
 
  March 31, 2010
Ralph W. Kettell, II
       


 
41

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

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2009


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
F-2
   
CONSOLIDATED BALANCE SHEETS
F-3
   
CONSOLIDATED STATEMENTS OF OPERATIONS
F-4
   
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
F-5
   
CONSOLIDATED STATEMENTS OF CASH FLOWS
F-7
   
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-8

 



 
F-1

 



 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Piedmont Mining Company, Inc. (an Exploration Stage Company)

We have audited the accompanying consolidated balance sheets of Piedmont Mining Company, Inc. (an Exploration Stage Company) as of December 31, 2009 and 2008 and the consolidated statements of operations, stockholders’ deficit and cash flows for the years then ended and the period from January 1, 2002 (Date of Inception of Exploration Stage) to December 31, 2009.  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 an audit to obtain reasonable assurance 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 audits 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 and includes 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, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2009 and 2008 and the results of its operations and its cash flows and the changes in stockholders’ deficit for the years then ended and the period from January 1, 2002 (Date of Inception of Exploration Stage) to December 31, 2009 in accordance with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company is in the exploration stage and  has not generated revenues since inception, has incurred losses in developing its business, and further losses are anticipated.  The Company has a working capital deficiency of $923,272 at December 31, 2009 and requires additional funds to meet its obligations and the costs of its operations.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in this regard are described in Note 1.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 
/s/ DMCL
 
DALE MATHESON CARR-HILTON LABONTE LLP
 
CHARTERED ACCOUNTANTS
Vancouver, Canada
March 23, 2010







 
F-2

 

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


             
   
December 31,
   
December 31,
 
   
2009
   
2008
 
ASSETS
  $     $  
                 
CURRENT ASSETS
               
Cash
    16,466       582  
Prepaid expenses and other
    -       32,431  
      16,466       33,013  
                 
MINERAL PROPERTIES (Note 3)
    2       122,000  
RECLAMATION BONDS (Note 3)
    11,565       29,339  
INTEREST IN OIL LEASES (Note 4)
    2       -  
PROPERTY AND EQUIPMENT (Note 5)
    -       65  
                 
TOTAL ASSETS
    28,035       184,417  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
               
                 
CURRENT LIABILITIES
               
Accounts payable
    401,014       401,438  
Due to related parties (Note 6)
    538,724       253,929  
                 
TOTAL LIABILITIES
    939,738       655,367  
                 
CONTINGENCIES AND COMMITMENTS (Notes 1 and 4)
               
                 
STOCKHOLDERS' DEFICIT
               
Capital stock (Note 7)
               
    Authorized:
           50,000,000 Preferred stock $1.00 par value
           200,000,000 Common stock no par value
           Common stock issued and outstanding:
                 70,123,643 shares (2008 – 68,615,310)
    16,550,144       16,485,145  
Additional paid-in capital
    872,644       848,659  
Share subscriptions received
    16,000       -  
Accumulated deficit
    (12,564,287 )     (12,564,287 )
Deficit accumulated during the exploration stage
    (5,786,204 )     (5,240,467 )
Total stockholders deficit
    (911,703 )     (470,950 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
    28,035       184,417  
 

 
The accompanying notes are an integral part of these consolidated financial statements
 
F-3

 

PIEDMONT MINING COMPANY, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS

 
   
For the Year
Ended
December 31, 2009
   
For the Year
Ended
December 31, 2008
   
For the Period from January 1, 2002 (Date of Inception of Exploration Stage) to
December 31, 2009
 
    $     $     $  
REVENUES
                       
Oil revenues (Note 3)
    3,233       -       3,233  
                         
EXPENSES
                       
Depreciation
    65       864       146,383  
Exploration, geological and geophysical costs
    67,144       450,109       2,319,510  
Finance fees
    -       100,000       191,200  
General and administrative
    89,020       213,259       898,572  
Impairment of mineral properties (Note 4)
    136,474       205,500       341,974  
Management fees
    191,984       285,217       1,014,872  
Professional fees
    85,383       180,583       862,661  
      570,070       1,435,532       5,775,172  
                         
LOSS BEFORE OTHER ITEMS
    (566,837 )     (1,435,532 )     (5,771,939 )
                         
INTEREST AND OTHER INCOME
    21,100       3,198       32,325  
OTHER NON-OPERATING LOSSES
    -       -       (46,590 )
                         
NET LOSS FOR THE YEAR
    (545,737 )     (1,432,334 )     (5,786,204 )
                         
BASIC AND DILUTED LOSS PER SHARE
    (0.01 )     (0.02 )  
                         
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED
    69,692,981       66,241,138    
 

 
The accompanying notes are an integral part of these consolidated financial statements
 
F-4

 

PIEDMONT MINING COMPANY, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
For the Period from January 1, 2002 (Date of Inception of Exploration Stage) to December 31, 2009
 
 
                     
Deficit
       
                     
Accumulated
   
Total
 
   
Common Stock
   
Additional
   
Accumulated
   
During
   
Stockholders'
 
   
Shares
   
Amount
   
Paid-in Capital
   
Deficit
   
Exploration Stage
   
Deficit
 
          $     $     $     $     $  
Balance, December 31, 2001
    37,152,646       12,335,434       371,075       (12,564,287 )     -       142,222  
  Net loss
    -       -       -       -       (202,264 )     (202,264 )
                                                 
Balance, December 31, 2002
    37,152,646       12,335,434       371,075       (12,564,287 )     (202,264 )     (60,042 )
  Net loss
    -       -       -       -       (181,391 )     (181,391 )
                                                 
Balance, December 31, 2003 as restated
    37,152,646       12,335,434       371,075       (12,564,287 )     (383,655 )     (241,433 )
  Net loss
    -       -       -       -       (162,439 )     (162,439 )
                                                 
Balance, December 31, 2004
    37,152,646       12,335,434       371,075       (12,564,287 )     (546,094 )     (403,872 )
  Stock issued upon conversion of debt
    4,063,403       316,037       -       -       -       316,037  
  Sale of common stock
    2,441,992       145,000       -       -       -       145,000  
  Common shares issued for mineral properties
    300,000       24,500       -       -       -       24,500  
  Net loss
    -       -       -       -       (462,889     (462,889 )
                                                 
Balance, December 31, 2005
    43,958,041       12,820,971       371,075       (12,564,287 )     (1,008,983 )     (381,224 )
  Sale of common stock, net of issuance costs
    10,062,141       1,358,998       -       -       -       1,358,998  
  Common shares issued pursuant to
     mineral property option agreements
    43,478       10,000       -       -       -       10,000  
  Stock-based compensation
    -       -       123,367       -       -       123,367  
  Net loss
    -       -       -       -       (1,140,612 )     (1,140,612 )
                                                 
Balance, December 31, 2006
    54,063,660       14,189,969       494,442       (12,564,287 )     (2,149,595 )     (29,471 )
  Sale of common stock, net of issuance costs
    8,894,480       1,495,726       -       -       -       1,495,726  
  Common shares issued pursuant to
     mineral property option agreements
    105,634       15,000       -       -       -       15,000  
  Warrants issued as finance fees
    -       -       92,100       -       -       92,100  
  Stock-based compensation
    -       -       143,500       -       -       143,500  
  Net loss
    -       -       -       -       (1,658,538 )     (1,658,538 )
                                                 
Balance, December 31, 2007
    63,063,774       15,700,695       730,042       (12,564,287 )     (3,808,133 )     58,317  
  Sale of common stock, net of issuance costs
    4,784,869       669,450       -       -       -       669,450  
  Common shares issued pursuant to
     mineral property option agreements
    100,000       15,000       -       -       -       15,000  
  Common shares issued as finance fees
    666,667       100,000       -       -       -       100,000  
  Stock-based compensation
    -       -       118,617       -       -       118,617  
   Net loss
    -       -       -       -       (1,432,334 )     (1,432,334 )
                                                 
Balance, December 31, 2008
    68,615,310       16,485,145       848,659       (12,564,287 )     (5,240,467 )     (470,950 )

 
F-5

 

PIEDMONT MINING COMPANY, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
For the Period from January 1, 2002 (Date of Inception of Exploration Stage) to December 31, 2009

 
                           
Deficit
       
               
Share
         
Accumulated
   
Total
 
   
Common Stock
   
Additional
   
Subscriptions
   
Accumulated
   
During
   
Stockholders'
 
   
Shares
   
Amount
   
Paid-in Capital
   
Received
   
Deficit
   
Exploration Stage
   
Deficit
 
          $     $     $     $     $     $  
Balance, December 31, 2008
    68,615,310       16,485,145       848,659       -       (12,564,287 )     (5,240,467 )     (470,950 )
  Sale of common stock, net of issuance costs
    1,008,333       40,000       -       16,000       -       -       56,000  
  Common shares issued in settlement of debt
    500,000       25,000       -       -       -       -       25,000  
  Stock-based compensation
    -       -       23,984       -       -       -       23,984  
  Net loss
    -       -       -       -       -       (545,737 )     (545,737 )
                                                         
Balance, December 31, 2009
    70,123,643       16,550,145       872,643       16,000       (12,564,287 )     (5,786,204 )     (911,703 )
 
 
The accompanying notes are an integral part of these consolidated financial statements
 
F-6

 

PIEDMONT MINING COMPANY, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS

 
   
For the Year
Ended
December 31,
2009
   
For the Year
Ended
December 31,
2008
   
For the Period from January 1, 2002 (Date of Inception of Exploration Stage) to December 31, 2009
 
    $     $     $  
                         
CASH FLOWS FROM OPERATING ACTIVITIES
                 
Net loss for the year
    (545,737 )