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EXCEL - IDEA: XBRL DOCUMENT - Shoshone Silver/Gold Mining CoFinancial_Report.xls
EX-31 - CERTIFICATION - Shoshone Silver/Gold Mining Coexhibit31-2.htm
EX-32 - CERTIFICATION - Shoshone Silver/Gold Mining Coexhibit32-2.htm
EX-31 - CERTIFICATION - Shoshone Silver/Gold Mining Coexhibit31-1.htm
EX-32 - CERTIFICATION - Shoshone Silver/Gold Mining Coexhibit32-1.htm
EX-3 - ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION DATED DECEMBER 30, 2011 - Shoshone Silver/Gold Mining Coexhibit3-16.htm
EX-10 - SILVER STRAND MINE PURCHASE AND SALE AGREEMENT - Shoshone Silver/Gold Mining Coexhibit10-13.htm
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

 [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2011

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

FOR THE TRANSITION PERIOD FROM __________ TO __________.

Commission File Number: 000-31184

SHOSHONE SILVER/GOLD MINING COMPANY
(Exact name of registrant as specified in its charter)

Idaho 82-0304993
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

3714 W Industrial Loop., Coeur d’Alene, ID 83815
(Address of principal executive offices) (Zip Code)

(208) 664-0620
(Registrant’s telephone number, including area code)

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

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

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

Class   Outstanding as of February 2, 2012
     
Common Stock ($0.10 par value)   53,221,704

- 1 -


SHOSHONE SILVER/GOLD MINING COMPANY

FORM 10-Q
For the Quarter Ended December 31, 2011

TABLE OF CONTENTS

PART I - Financial Information 3
       
  Item 1 Consolidated Financial Statements (Unaudited) 3
       
    Consolidated Balance Sheets 4
       
    Consolidated Statements of Operations and Comprehensive Income (Loss) 5
       
    Consolidated Statements of Cash Flows 6
       
    Notes to Consolidated Financial Statements 7
       
  Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
       
  Item 3 Quantitative and Qualitative Disclosures About Market Risk 18
       
  Item 4 Controls and Procedures 18
       
PART II - Other Information 18
       
  Item 1 Legal Proceedings 18
       
  Item 1A Risk Factors 18
       
  Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 18
       
  Item 3 Defaults Upon Senior Securities 19
       
  Item 4 Removed and Reserved 19
       
  Item 5 Other Information 19
       
  Item 6 Exhibits 20
       
Signatures 21

- 2 -


PART I – FINANCIAL INFORMATION

- 3 -


SHOSHONE SILVER/GOLD MINING COMPANY
(an Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS

             
    December 31,     September 30,  
    2011     2011  
    (unaudited)        
ASSETS            
             
     CURRENT ASSETS            
          Cash and cash equivalents $ 248,939   $ 942,428  
          Deposits and prepaids   29,235     48,780  
          Supplies inventory   1,777     1,777  
               Total Current Assets   279,951     992,985  
             
     PROPERTY, PLANT AND EQUIPMENT            
          Property, plant and equipment   3,256,650     3,255,558  
          Accumulated depreciation   (1,717,554 )   (1,675,106 )
               Total Property Plant and Equipment   1,539,096     1,580,452  
             
     MINERAL AND MINING PROPERTIES   2,327,369     2,206,369  
             
     OTHER ASSETS            
          Notes receivable (net of discount)   1,634,943     1,614,841  
          Investments   24,674     18,669  
               Total Other Assets   1,659,617     1,633,510  
             
               TOTAL ASSETS $ 5,806,033   $ 6,413,316  
             
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
             
     CURRENT LIABILITIES            
          Accounts payable $ 15,790   $ 53,155  
          Accrued expenses   8,250     5,420  
          Notes payable   15,088     -  
               Total Current Liabilities   39,128     58,575  
             
             
     COMMITMENTS AND CONTINGENCIES   -     -  
             
     STOCKHOLDERS' EQUITY            
          Common stock, 200,000,000 shares authorized, $0.10 par value;            
          52,926,704 and 51,087,704 shares issued and outstanding   5,292,670     5,108,770  
          Additional paid-in capital   4,619,013     4,554,963  
          Treasury stock   (206,894 )   (206,894 )
          Accumulated deficit in exploration stage   (2,279,611 )   (1,437,635 )
          Accumulated deficit prior to exploration stage   (1,667,482 )   (1,667,482 )
          Accumulated other comprehensive income (loss)   9,209     3,019  
               Total Stockholders' Equity   5,766,905     6,354,741  
             
               TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,806,033   $ 6,413,316  

- 4 -


SHOSHONE SILVER/GOLD MINING COMPANY
(an Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(unaudited)

     
                Period from  
                January 1, 2000  
                (beginning of  
    Three-Month Period Ended December 31,     exploration stage)  
    2011     2010     to December 31, 2011  
                   
                   
REVENUES $ -   $ -   $ 209,585  
                   
COST OF REVENUES   -     -     228,828  
                   
GROSS PROFIT   -     -     (19,243 )
                   
OPERATING EXPENSES                  
     Depreciation   42,448     45,595     862,391  
     General and administrative   611,530     101,310     2,064,613  
     Mining and exploration expenses   179,031     66,390     4,739,565  
     Net gain on sale of load claim   -     -     (468,907 )
     Professional fees   29,308     19,677     1,305,141  
          Total Operating Expenses   862,317     232,972     8,502,803  
                   
LOSS FROM OPERATIONS   (862,317 )   (232,972 )   (8,522,046 )
                   
OTHER INCOME (EXPENSES)                  
     Bad debt recovery   -     -     47,008  
     Cancellation of debt income   -     -     69,418  
     Dividend and interest income   20,108     19,202     376,862  
     Gain on sale of fixed asset   -     -     28,115  
     Gain on sale of Mexican mining concession   -     -     4,363,353  
     Gain on settlement of note receivable   -     -     64,206  
     Interest expense   (83 )   (38 )   (12,134 )
     Lease income   -     -     444,044  
     Loss on abandonment of asset   -     -     (20,000 )
     Net gain on sale of investments   316     12,157     1,129,234  
     Net gain on settlement of lease dispute   -     85,000     85,000  
     Other income (expense)   -     -     197,435  
     Other-than-temporary impairment of investments   -     -     (149,279 )
     Unrealized holding loss on marketable securities   -     -     (380,827 )
          Total Other Income (Expenses)   20,341     116,321     6,242,435  
                   
INCOME (LOSS) BEFORE INCOME TAXES   (841,976 )   (116,651 )   (2,279,611 )
                   
INCOME TAXES   -     -     124,826  
DEFERRED TAX GAIN   -     -     (124,826 )
                   
NET INCOME (LOSS)   (841,976 )   (116,651 )   (2,279,611 )
                   
OTHER COMPREHENSIVE INCOME (LOSS)                  
      Unrealized holding gain (loss) on investments   6,190     66,436     10,244  
                   
                   
NET COMPREHENSIVE INCOME (LOSS) $ (835,786 ) $ (50,215 ) $ (2,269,367 )
                   
NET INCOME (LOSS) PER COMMON SHARE, BASIC $ (0.02 ) $ (0.00 )      
                   
NET INCOME (LOSS) PER COMMON SHARE, DILUTED $ (0.02 ) $ (0.00 )      
                   
WEIGHTED AVERAGE NUMBER OF COMMON STOCK SHARES OUTSTANDING, BASIC   52,504,056     42,792,378          
                   
WEIGHTED AVERAGE NUMBER OF COMMON STOCK SHARES OUTSTANDING, DILUTED   52,504,056     42,792,378          

- 5 -


SHOSHONE SILVER/GOLD MINING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

                Period from  
                January 1, 2000  
                (beginning of  
    Three-Month Period Ended December 31,     exploration stage)  
    2011     2010     to December 31, 2011  
                   
CASH FLOWS FROM OPERATING ACTIVITIES                  
     Net income (loss) $ (841,976 ) $ (116,651 ) $ (2,279,611 )
     Adjustments to reconcile net income (loss) to net cash used by operations:                  
          Adjustment to balance of note receivable   -     -     (766 )
          Amortization of note receivable discount   (20,102 )   (19,145 )   (269,580 )
          Available-for-sale securities issued in exchange for services   -     -     135,140  
          Available-for-sale silver investment issued in exchange for services   -     -     3,560  
          Bad debt expense   -     -     9,624  
          Cancellation of debt income   -     -     (69,418 )
          Common stock issued for mining and exploration expenses   -     -     308,100  
          Common stock issued for services   111,250     53,200     569,936  
          Common stock issued in settlement of agreement with former CEO   -     -     20,000  
          Depreciation and amortization expense   53,795     49,211     912,307  
          Discount given on early payment on note receivable   -     -     50,000  
          Gain on sale of fixed asset   -     -     (28,114 )
          Gain on settlement of note receivable   -     -     (64,206 )
          Impairment of mining expenses   -     -     413,000  
          Loss on abandonment of investment   -     -     20,000  
          Loss recognized on other-than-termporary impairment of investments   -     -     149,279  
          Net (gain) loss on sale of investments   (316 )   (12,157 )   (1,129,234 )
          Net gain on sale of lode claim   -     -     (468,907 )
          Net gain on sale of Mexican mining concession   -     -     (4,363,353 )
          Treasury stock issued for services   -     -     58,460  
          Unrealized holding loss on marketable securities   -     -     380,827  
     Changes in assets and liabilities:                  
          Change in accounts payable   (6,085 )   (17,859 )   (44,176 )
          Change in accrued interest receivable   -     -     (20,255 )
          Change in accrued liabilities   2,830     (12,841 )   4,266  
          Change in deposits and prepaids   (6,108 )   -     (26,140 )
          Change in other current assets   -     -     (14,443 )
          Change in stock to issue   -     -     230,680  
          Change in supplies inventory   -     117     10,955  
          Net cash used in operating activities   (706,712 )   (76,125 )   (5,502,069 )
                   
CASH FLOWS FROM INVESTING ACTIVITIES                  
          Advances on notes receivable   -     -     (111,022 )
          Advances to related party   -     -     (395,000 )
          Issuance of note receviable from related party   -     -     (243,000 )
          Payments received on notes receivable   -     -     582,846  
          Payments received on notes receivable from related party   -     -     332,498  
          Proceeds from sale of fixed assets   -     -     18,000  
          Proceeds from sale of investments   501     29,631     4,791,268  
          Proceeds from sale of lode claim   -     -     463,907  
          Proceeds from sale of Mexican mining concession   -     -     2,497,990  
          Proceeds from short-term loans   -     -     160,760  
          Purchase of fixed assets   (1,092 )   (1,027 )   (1,098,341 )
          Purchase of mineral and mining properties   (121,000 )   -     (197,472 )
          Purchases of investments   -     -     (4,059,939 )
          Net cash provided by investing activities   (121,591 )   28,604     2,742,495  
                   
CASH FLOWS FROM FINANCING ACTIVITIES                  
          Common shares repurchased for treasury   -     -     (50,616 )
          Net proceeds from sale of common stock   136,700     25,000     3,243,925  
          Payment made on long-term note payable   (1,886 )   (1,628 )   (270,704 )
          Payment of common stock subscriptions   -     -     20,225  
          Proceeds from sale of treasury stock   -     5,694     5,694  
          Net cash (used in) provided by financing activities   134,814     29,066     2,948,524  
                   
Net increase (decrease) in cash   (693,489 )   (18,455 )   188,950  
                   
Cash, beginning of period   942,428     55,853     59,989  
                   
Cash, end of period $ 248,939   $ 37,398   $ 248,939  
                   
                   
SUPPLEMENTAL CASH FLOW DISCLOSURES:                  
     Interest expense paid $ 83   $ 38   $ 10,590  
     Income taxes paid $ -   $ -   $ -  
                   
NON-CASH INVESTING AND FINANCING ACTIVITIES:                  
     Accounts payable issued in exchange for partial payment on office building $ -   $ -   $ 60,000  
     Common stock issued for purchase of equipment and mining properties $ -   $ -   $ 160,340  
     Common stock issued for services, accounts payable, finder's fee and mining & exploration expenses $ -   $ -   $ 539,333  
     Deposit utilized to purchase fixed asset $ -   $ -   $ 5,000  
     Equipment received in exchange for settlement of note recievable $ -   $ -   $ 4,139  
     Marketable securities received in lieu of note receivable $ -   $ -   $ 104,273  
     Mill building acquired in exchange for common stock and other consideration $ -   $ -   $ 224,475  
     Mineral properties acquired in exchange for common stock and other consideration $ -   $ -   $ 1,852,126  
     Mineral property reacquired upon default $ -   $ -   $ 131,553  
     Mining equipment acquired in exchange for common stock and other consideration $ -   $ -   $ 260,000  
     Note issued in exchanged for vehicle, equipment and prepaid asset $ 16,974   $ -   $ 125,130  
     Note receivable (net of discount) in connection with sale of Mexcian Mining Concession $ -   $ -   $ 1,865,363  
     Note receivable in connection with sale of lode claim $ -   $ -   $ 120,000  
     Office equipment acquired in exchange for common stock and other consideration $ -   $ -   $ 15,525  
     Stock received in exchange for lode claim $ -   $ -   $ 60,000  
     Treasury stock acquired through sale of investment $ -   $ -   $ 296,296  
     Treasury stock issued in exchange for fixed asset $ -   $ -   $ 7,500  

- 6 -


Shoshone Silver/Gold Mining Company (an Exploration Stage Company)
Condensed Notes to the Interim Financial Statements
December 31, 2011

NOTE 1: DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

Shoshone Silver/Gold Mining Company (an Exploration Stage Company) (“the Company” or “Shoshone”) was incorporated under the laws of the State of Idaho on August 4, 1969, under the name of Sunrise Mining Company and was engaged in the business of mining.  On January 22, 1970, the Company's name was changed to Shoshone Silver Mining Company.   During 2003, the Company’s focus broadened to include resource management and sales of mineral and timber interests.  On December 30, 2011, the Company’s name was changed to Shoshone Silver/Gold Mining Company.

Beginning in fiscal 2000, the Company entered into an exploration stage.  The Company has acquired several mining properties since entering the exploration stage. 

The Company’s year-end is September 30th.

Basis of Presentation

The foregoing unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim consolidated financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X as promulgated by the Securities and Exchange Commission.  Accordingly, these financial statements do not include all of the disclosures required by accounting principles generally accepted in the United States of America for complete financial statements.  These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended September 30, 2011, included in the Company’s Annual Report on Form 10-K which was filed with the SEC on December 23, 2011. 

In the opinion of management, the unaudited interim consolidated financial statements furnished herein include all adjustments (consisting of only normal recurring adjustments) necessary for a fair statement of the results for the interim periods presented.  Operating results for the three-month period ended December 31, 2011, are not necessarily indicative of the results that may be expected for the year ending September 30, 2012.

NOTE 2:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Fair Value Measurements

- 7 -


Topic 820 in the Accounting Standards Codification (ASC 820) defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. ASC 820 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. In this standard, the FASB clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability. In support of this principle, ASC 820 establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy is as follows:

  • Level 1 inputs — Unadjusted quoted process in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date.
  • Level 2 inputs — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.
  • Level 3 inputs — Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.

Investments in available-for-sale securities and investments in silver coins and bars are reported at fair value utilizing Level 1 inputs. For these investments, the Company obtains fair value from active markets.

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

The following table presents information about the Company’s assets measured at fair value on a recurring basis as of December 30, 2011, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.

          Fair Value Measurements  
          At December 31, 2011, Using  
          Quoted Prices              
          In Active     Other     Significant  
          Markets for     Observable     Unobservable  
    Fair Value     Identical Assets     Inputs     Inputs  
Description   December 31, 2011     (Level 1)     (Level 2)     (Level 3)  
Investments $ 24,674   $ 24,674   $ -   $ -  
Note Receivable (net of discount)   1,634,943     -     1,634,943     -  
Total Assets Measured at Fair Value $ 1,659,617   $ 24,674   $ 1,634,943   $ -  

Going Concern

As shown in the accompanying financial statements, the Company typically has limited cash and limited revenues and has incurred an accumulated deficit of $3,947,093 from inception through December 31, 2011.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  Management intends to seek additional capital from new equity securities offerings that will provide funds needed to increase liquidity and fully implement its business plan.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

- 8 -


Historically, the Company has generally funded its operations with proceeds from the sale of marketable securities, royalty and option agreement payments, and from the sale of the Company’s common stock.  Should the Company be unable to raise capital through any of these avenues, its business, financial position, results of operations and cash flow will likely be materially adversely impacted.  As such, substantial doubt as to the Company’s ability to continue as a going concern remains as of the date of these financial statements.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.  An estimated $2,000,000 is believed necessary to continue operations and increase development through the next twelve months. Towards this end, during fiscal 2011, the Company raised $1,159,500 from the issuance of 7,816,667 shares of its common stock.  During the first quarter of fiscal 2012, the Company raised and additional $136,700 in net proceeds from the issuance of 1,010,000 shares of its common stock.

Currently, the Company anticipates raising the majority of the remaining $800,000 to $1,000,000 through the issuance of common stock to private investors.  The timing and amount of capital requirements will depend on a number of factors, including demand for products and services, capital expenditures and revenues generated. 

Notes Receivable

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

Principles of Consolidation

The Company’s consolidated financial statements include the accounts of the Company and its one wholly owned subsidiary, Lakeview Consolidated Silver Mines, Inc.  The inter-company accounts and transactions are eliminated upon consolidation. 

Use of Estimates

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

NOTE 3: DEPOSITS AND PREPAID EXPENSES

In December 2011, the Company purchased for $23,082 a one-year liability insurance policy (the “Policy”).  The Policy was purchased with a cash payment of $6,108 with the balance of $16,974 settled with a promissory note.  The Company recorded prepaid insurance of $23,082 and a related entry to record a $16,974 note payable. During the three-month period ended December 31, 2011, $3,847 of this prepaid insurance was amortized into General & Administrative Expenses.  See Note 8.

- 9 -


NOTE 4: PROPERTY, PLANT & EQUIPMENT

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

The useful lives of property, plant and equipment for purposes of computing depreciation are three to thirty-one and one-half years. The following is a summary of property, equipment, and accumulated depreciation at December 31, 2011 and September 30, 2011:

    December 31,     September 30,  
    2011     2011  
Administrative:            
     Equipment $ 624,405   $ 623,312  
    624,405     623,312  
Lakeview:            
     Building   56,255     56,255  
     Equipment   381,007     381,007  
     Mill   1,539,282     1,539,282  
    1,976,544     1,976,544  
Warren:            
     Building   379,960     379,960  
     Equipment   275,741     275,742  
    655,701     655,702  
Total   3,256,650     3,255,558  
Less:  Accumulated Depreciation   (1,717,554 )   (1,675,106 )
Property, Plant & Equipment, net $ 1,539,096   $ 1,580,452  

Depreciation expense was $42,448 for the three-month period ended December 31, 2011 and $45,595 for the comparable period last year. 

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

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

NOTE 5: MINERAL AND MINING PROPERTIES

During the fiscal 2012 first quarter, the Company purchased the Silver Strand Mine from an unrelated party.  This property consists of 15 unpatented mining claims located in northern Kootenai County.   The Company paid $121,000 in cash and entered into an agreement to pay a 20% net profits royalty interest valued at $880,000.  The cost of the property is included in our consolidated financial statements under mining properties until such time as the Company’s outside study on the property’s reserves, if any, is completed.  The Purchase and Sale Agreement is filed as Exhibit 10.13.  See Note 11.

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NOTE 6: NOTES RECEIVABLE

Mexican Concessions

On August 11, 2008, the Company sold 100% of the common stock of its wholly owned subsidiary in Mexico, Shoshone Mexico, S.A. de C.V, to Xtierra Resources, Ltd (“Xtierra”).  The Company’s interest in the Bilbao concessions in Zacatecas, Mexico was included in this sale.   In exchange for its interest in the Bilbao concessions the Company received net proceeds of $2,497,990 and a non-interest bearing note receivable for $2,500,000. 

The note does not bear interest and a discounted payment of $450,000 was made in July 2009.   The remaining balance of $2,000,000 is to be paid in four consecutive equal annual installments to begin at the time of the commencement of construction of any mine developed on the Bilbao concessions but in any event will be due and payable no later than August 11, 2019. 

Since the note does not bear interest, the Company imputed interest at a rate of 5%.  Accordingly the Company recorded a note discount of $634,637.  During the three-month period ended December 31, 2011, $20,102 of interest income was realized through the amortization of this note discount. 

The balance on this note receivable (net of discount) was $1,634,943 at December 31, 2011.

NOTE 7: INVESTMENTS

The Company has invested in various privately and publicly held companies and silver coins and bars.  At this time, the Company holds securities classified as available for sale.  Amounts are reported at fair value as determined by quoted market prices, with unrealized gains and losses excluded from earnings and reported separately as a component of stockholders’ equity. The cost of securities sold is based on the specific identification method.

Unrealized gains and losses are recorded on the statements of operations as other comprehensive income (loss) and on the balance sheet as other accumulated comprehensive income.

The following summarizes the investments at December 31, 2011:

                Market  
Investment   Quantity     Cost     Value  
                   
Available for Sale Securities:                  
Gold Crest Mines   550,100   $ 713   $ 11,002  
Lucky Friday Extension   5,000     250     550  
Merger Mines   10,000     1,400     1,300  
New Jersey Mining   52,857     12,686     10,571  
     Subtotal   617,957     15,049     23,423  
                   
Silver Coins & Bars   45     542     1,251  
                   
Total at December 31, 2011   618,002   $ 15,591   $ 24,674  

The Company’s net change in accumulated other comprehensive income (loss) was $6,190 during the first quarter of fiscal year 2012.  This change includes both adjustments for previously unrealized gains and losses on investments sold during the year and the unrealized gains and losses on the Company’s available-for-sale investments that are still held by the Company.   The $6,190 is recorded on the statements of operations as other comprehensive income and the change is reflected in the change in accumulated other comprehensive income on the balance sheet from September 30, 2011 to December 31, 2011.

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The Company realized $316 of net gain previously included in accumulated other comprehensive income on the sale of investments during the first quarter of fiscal year 2012, which is reflected on the statements of operations.

The following summarizes the investments at September 30, 2011:

                Market  
Investment   Quantity     Cost     Value  
                   
Available for Sale Securities:                  
Gold Crest Mines   550,100   $ 713   $ 5,501  
Lucky Friday Extension   5,000     250     325  
Merger Mines   10,000     1,400     1,500  
New Jersey Mining   52,857     12,686     9,514  
     Subtotal   617,957     15,049     16,840  
                   
Silver Coins & Bars   61     735     1,829  
                   
Total at September 30, 2011   618,018   $ 15,784   $ 18,669  

The Company’s net annual change in accumulated other comprehensive income (loss) was $54,072 during the fiscal year ended September 30, 2011.  This change includes both adjustments for previously unrealized gains and losses on investments sold during the year and the unrealized gains and losses on the Company’s available-for-sale investments that are still held by the Company.   The $54,072 is recorded on the statements of operations on the Company’s September 30, 2011 audited consolidate financial statements as other comprehensive income and the change is reflected in the change in accumulated other comprehensive income on the balance sheet from September 30, 2010 to September 30, 2011.

 The Company realized $4,551 of net loss previously included in accumulated other comprehensive income on the sale of investments during the fiscal year ended September 30, 2011, which is reflected on the Company’s September 30, 2011 audited consolidated financial statements on the statements of operations.

NOTE 8:  NOTES PAYABLE

In December 2011, the Company purchased for $23,082 a one-year liability insurance policy (the “Policy”).  The Policy was purchased with a cash payment of $6,108 with the balance of $16,974 settled with a promissory note.  The Company recorded prepaid insurance of $23,082 and a related entry to record a $16,974 note payable.  The note has a term of nine months, bears interest at 10.25% annually and stipulates that payments of $1,969 be made monthly.   The outstanding balance on this note payable was $15,790 at December 31, 2011.  See Note 3.

NOTE 9:  COMMON STOCK

The Company is authorized to issue 200,000,000 shares of $0.10 par value common stock.  All shares have equal voting rights, are non-assessable and have one vote per share.  Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could, if they choose to do so, elect all of the directors of the Company.

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During the three-month period ended December 31, 2011, the Company issued 516,000 common shares to four of its directors in exchange for services valued at $82,260.

During the three-month period ended December 31, 2011, the Company issued 173,000 common shares in exchange for services valued at $28,990.

During the three-month period ended December 31, 2011, the Company issued 1,010,000 shares of common stock to four investors for net proceeds of $136,700.   In connection with this offering, the company incurred a total of $28,800 in commission expenses paid to brokers.  Of this amount, $14,800 was paid in cash and $14,000 was settled with the issuance of 140,000 shares of common stock.  For every share purchased, each investor received one warrant to purchase one share of common stock.  The warrants are exercisable at $0.25 per share and expire on August 1, 2013.

NOTE 10: RELATED PARTY TRANSACTIONS

During the fiscal 2012 first quarter, the Company paid cash compensation of $407,500 and issued 516,000 common shares valued at $82,260 to four of its directors in connection with the cessation of their board service.  The total related expenses of $489,760 are included in the Company’s General and Administrative expenses on its Consolidated Statements of Operations.

NOTE 11: COMMITMENTS AND CONTINGENCIES

Environmental Issues

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

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

Silver Strand Mine

During the fiscal 2012 first quarter, the Company purchased the Silver Strand Mine from an unrelated party.  In connection with this purchase, the Company entered into an agreement to pay a 20% net profits royalty interest valued at $880,000.  The Purchase and Sale Agreement is filed as Exhibit 10.13.  See Note 5.

NOTE 12: SUBSEQUENT EVENTS

Subsequent events have been evaluated through the date that the consolidated financial statements were available to be issued and management has determined that there have not been any events that have occurred that would require adjustments to the unaudited financial statements.

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Item 2 - Management’s Discussion and Analysis or Plan of Operation

This report contains forward-looking statements

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

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

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

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

Plan of Operation

Lakeview Property

During 2010, we entered into an agreement to sell silver concentrate produced at our Lakeview property to a smelter for refining.  During the prior fiscal year, our test runs generated revenues of $47,885 from the sale of concentrate to the smelter.  Our long-term goal is to mine and mill silver at our Lakeview property. 

Rescue Mine Property

Our first priority has been the upgrading and renovating the mill at the Rescue Mine Property.  Once this work is completed, test runs on stockpiled ore will be conducted. 

2011 Work Season - Mine development required some ground support, general clean up, the installation of a refuge station and the addition of air and water lines.  A new decline portal has been planned to access the Rescue vein 1,000 feet east of the mill.  Road work, site preparation and collaring off for the new decline portal were accomplished.  This new decline portal will provide access to un-mined portions of the Rescue vein and, when completed, will serve as the secondary escape-way from the mine as well as the exhaust ventilation. 

Electrical work, which included installation of electrical panels, lights and power outlets, was completed in the large staging building, which was erected next to the mill portal last summer to service operations in the Rescue Mine.   The new building is fully MSHA compliant.  Additionally, a diesel generator was installed to provide power to the mine as part of our ongoing preparations to bring the Rescue Mine and mill back into full operation.

Please refer to our discussion regarding our ability to continue as a going concern below for further details.

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Going Concern

As shown in the accompanying financial statements, we typically have limited cash and limited revenues and have incurred an accumulated deficit of $3,947,093 from inception through December 31, 2011.  These factors raise substantial doubt about our ability to continue as a going concern.  Management intends to seek additional capital from new equity securities offerings that will provide funds needed to increase liquidity and fully implement its business plan.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event we cannot continue in existence.

Historically, we have generally funded our operations with proceeds from the sale of marketable securities, royalty and option agreement payments, and from the sale of our common stock.  Should we be unable to raise capital through any of these avenues, our business, financial position, results of operations and cash flow will likely be materially adversely impacted.  As such, substantial doubt as to our ability to continue as a going concern remains as of the date of these financial statements.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event we cannot continue in existence.  An estimated $2,000,000 is believed necessary to continue operations and increase development through the next twelve months. Towards this end, during fiscal 2011, we raised $1,159,500 from the issuance of 7,816,667 shares of our common stock.  During the first quarter of fiscal 2012, we raised and additional $136,700 in net proceeds from the issuance of 1,010,000 shares of our common stock.

Currently, we anticipate raising the majority of the remaining $800,000 to $1,000,000 through the issuance of common stock to private investors.  The timing and amount of capital requirements will depend on a number of factors, including demand for products and services, capital expenditures and revenues generated. 

Comparison of the Three-Month Periods Ended December 31, 2011 and 2010:

Results of Operations

The following table sets forth certain information regarding the components of our Consolidated Statements of Operations for the three-month period ended December 31, 2011, compared with the same period in the prior year.  This table is provided to assist in assessing differences in our overall performance:

    Three-Month Period Ended              
    Dec. 31, 2011     Dec. 31, 2010     $ Change     % Change  
                         
Revenues $ -   $ -   $ -     0.0%  
Cost of Revenues   -     -     -     0.0%  
Gross Profit   -     -     -     0.0%  
     Depreciation   42,448     45,595     (3,147 )   -6.9%  
     General and administrative   611,530     101,310     510,220     503.6%  
     Mining and exploration expenses   179,031     66,390     112,641     169.7%  
     Professional fees   29,308     19,677     9,631     48.9%  
          Total Operating Expenses   862,317     232,972     629,345     270.1%  
Loss from Operations   (862,317 )   (232,972 )   (629,345 )   270.1%  
Other Income (Expense)                        
     Dividend and interest income   20,108     19,202     906     4.7%  
     Interest expense   (83 )   (38 )   (45 )   118.4%  
     Net (loss) gain on sale of securities   316     12,157     (11,841 )   -97.4%  
     Net gain on settlement of lease dispute   -     85,000     (85,000 )   -100.0%  
          Total Other Income (Expense)   20,341     116,321     (95,980 )   -82.5%  
Net Loss $ (841,976 ) $ (116,651 ) $ (725,325 )   621.8%  

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Overview of Operating Results

The increase in net loss during the three-month period ended December 31, 2011 was primarily due to expenses of $489,760 incurred in connection with cash and stock based remuneration to four board members.  Also contributing, although to a lesser extent, was the receipt of $85,000 in lease income in the comparable period last year versus none in the current quarter. 

Operating Expenses

The increase in our operating expenses primarily reflects the payments to four board members totaling $489,760 comprised of $407,500 in cash and $82,260 in stock based compensation from the issuance of 516,000 shares of our common stock.   These expenses are included in our General and Administrative expenses on our Consolidated Statements of Operations.   Also contributing to the increase in our operating expenses were increased mining and exploration activities at our Rescue Mine Property.

Other Income (Expenses)

The decrease in other income (expense) during the three-month period ended December 31, 2011, was primarily related to our receipt of $85,000 in connection the settlement of a lease dispute during the first quarter last year. During the first quarter of fiscal 2011, we were awarded a total of $100,000 as settlement of a claim we had filed in the Chapter 11 bankruptcy proceeds of an unrelated company.  The claim asserted that we, as lessor, were owed compensation for the failure of the lessee to maintain proper title to the Bullion Claims with the Bureau of Land Management.  During the first quarter of fiscal 2011, we assigned the rights to this settlement to an investment firm for net proceeds of $85,000. 

Also contributing to this decrease was a net gain realized on the sale of investments of $12,157 during the first quarter last year compared with only $316 during our most recent quarter. 

Overview of Financial Position

At December 31, 2011, we had cash of $248,939 and total liabilities of $39,128.  During the first quarter of fiscal 2012, we raised $136,700 in net proceeds from the issuance of 1,010,000 shares of our common stock.  These proceeds were used primarily to continue limited exploration activities at our Lakeview property, to continue refining our milling process at that same location and to continue refurbishing our newly acquired mill building at our Rescue mine. 

Property, Plant and Equipment

At December 31, 2011, property, plant and equipment before accumulated depreciation totaled $3,256,650, an increase of $1,092 from $3,255,558 at September 30, 2011.  The small increase was related to equipment purchases for administration purposes. 

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Notes Receivable

On December 31, 2011, we had a note receivable, net of discount, of $1,634,943 compared with $1,614,841 at September 30, 2011.  The increase related entirely to the amortization of the discount into interest income.

See “Note 6. Notes Receivable” to our consolidated financial statements for further details.

Investments

Our investment portfolio at December 31, 2011, was $24,674, an increase of $6,005 from the September 30, 2011, balance of $18,669.  This increase was primarily due to rising share prices of the investments in our portfolio partially offset by the sale of 16 ounces of silver.

See “Note 7:  Investments” to our consolidated financial statements for further details.

Stockholders’ Equity

Our total stockholders’ equity was $5,766,905 at December 31, 2011, a decrease of $587,836 from $6,354,741 at September 30, 2011.  The decrease in total stockholders’ equity was primarily due a net loss of $841,976 incurred during the fiscal 2012 first quarter.   

See “Note 9: Common Stock” to our consolidated financial statements for further details. 

Liquidity and Capital Resources

Operating Activities

During three-month period ended December 31, 2011, our operating activities used $706,712 and used $76,125 during the same period last year.  This decrease was primarily the result of the realization of a net loss of $841,976 during the current quarter compared with a net loss of $116,651 last year.

Investing Activities

During three-month period ended December 31, 2011, our investing activities used $121,591 and provided $28,604 during the same period last year.  This decrease was primarily due to our purchase of the Silver Strand Mine for $121,000. 

See “Note 5: Mining and Mineral Properties” to our consolidated financial statements for further details. 

Financing Activities

During three-month period ended December 31, 2011, our financing activities provided $134,814 and provided $29,066 during the same period last year.  This increase was primarily related to net proceeds from the sale of stock of $136,700 received during the current quarter compared with $25,000 last year.

Off-Balance Sheet Arrangements

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

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Item 3 – Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4 – Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this quarterly report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the Principal Executive Officer and the Principal Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”) as of December 31, 2011.  Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.

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

Changes in Internal Control Over Financial Reporting

As of the end of the period covered by this report, there have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended December 31, 2011, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1 - Legal Proceedings

We are, from time to time, involved in various legal proceedings incidental to the conduct of business. In the opinion of management, our gross liability, if any, and without any consideration given to the availability of insurance or other indemnification, under any pending litigation or administrative proceedings, including that discussed below, would not materially affect our consolidated financial position, results of operations or cash flows.

Item 1A – Risk Factors

We are a smaller reporting company as defined by the Exchange Act and are not required to provide the information required under this item.

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

During the three-month period ended December 31, 2011, the Company sold 1,010,000 shares of common stock at a price per share of $0.15 to four accredited investors for net proceeds of $136,700.  For every share purchased, each investor received one warrant to purchase one share of common stock.  The warrants are exercisable at $0.25 per share expire on August 1, 2013.   This sale was made under the exemption from registration provided by Regulation D, Rule 506.

Item 3 - Defaults Upon Senior Securities

None.

Item 4 - Removed and Reserved

Not Applicable

Item 5 - Other Information

None.

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Item 6 - Exhibits

(a) Exhibit No.   Description of Document
       
  3.1.6   Articles of Amendment to the Articles of Incorporation dated December 30, 2011
  10.13   Silver Strand Mine Purchase and Sale Agreement
  31.1   Certification of Principal Executive Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2   Certification of Principal Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32.1   Certification of Principal Executive Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  32.2   Certification of Principal Financial Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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Signatures

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

    SHOSHONE SILVER/GOLD MINING COMPANY
    (Registrant)
       
February 21, 2012   By: /s/ Howard Crosby
Date     Howard Crosby
      President and Chief Executive Officer
(Principal Executive Officer)
       
       
February 21, 2012   By: /s/ John Ryan
Date     John Ryan
      Treasurer and Chief Financial Officer
(Principal Financial Officer)