SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

                 |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended April 30, 2004

                                       OR

                 |_| TRANSITION REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                        For the transition period from to

                         Commission File Number: 0-13078

                            CAPITAL GOLD CORPORATION
        (Exact name of small business issuer as specified in its charter)

             NEVADA                                              13-3180530
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                76 Beaver Street, 26TH floor, New York, NY 10005
                    (Address of principal executive offices)

                    Issuer's telephone number: (212) 344-2785


--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

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 the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date.

        Class                                       Outstanding at June 15, 2004
----------------------                              ----------------------------

Common Stock, par value $.001 per share                      58,188,423

Transitional Small Business Format (check one); Yes |_| No |X|


<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

      The accompanying financial statements are unaudited for the interim
periods, but include all adjustments (consisting only of normal recurring
accruals), which we consider necessary for the fair presentation of results for
the three and nine months ended April 30, 2004.

      Moreover, these financial statements do not purport to contain complete
disclosure in conformity with generally accepted accounting principles and
should be read in conjunction with our audited financial statements at, and for
the fiscal year ended July 31, 2003.

      The results reflected for the three and nine months ended April 30, 2004
are not necessarily indicative of the results for the entire fiscal year.


                                      -2-
<PAGE>

                            CAPITAL GOLD CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                 APRIL 30, 2004
                                   (Unaudited)

                                     ASSETS

Current Assets:
  Cash and Cash Equivalents                                        $    387,359
  Loans Receivable - Related Party                                       23,787
  Loans Receivable - Others                                              17,390
  Other Current Assets                                                   12,703
  Prepaid Expenses                                                       11,364
  Marketable Securities                                                  35,000
                                                                   ------------
     Total Current Assets                                               487,603
                                                                   ------------

Mining, Milling and Other Property and Equipment
  (Net of Accumulated Depreciation of $358,230)                         344,780
                                                                   ------------

Other Assets:
  Other Investments                                                      23,466
  Mining Reclamation Bonds                                               35,550
  Security Deposits                                                       9,599
                                                                   ------------
     Total Other Assets                                                  68,615
                                                                   ------------

Total Assets                                                       $    900,998
                                                                   ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

   Current Liabilities:
     Accounts Payable                                              $     11,368
     Accrued Expenses                                                    71,925
                                                                   ------------
        Total Current Liabilities                                        83,293
                                                                   ------------

   Commitments and Contingencies

   Stockholders' Equity:
     Common Stock, Par Value $.001 Per Share;
       Authorized 150,000,000 Shares; Issued and
       Outstanding 56,279,061 Shares                                     56,279
     Additional Paid-In Capital                                      24,183,165
     Deficit Accumulated in the Development Stage                   (23,424,660)
Accumulated Other Comprehensive Income (Loss)                             2,921
                                                                   ------------
        Total Stockholders' Equity                                      817,705
                                                                   ------------

   Total Liabilities and Stockholders' Equity                      $    900,998
                                                                   ============

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


                                      -3-
<PAGE>

                            CAPITAL GOLD CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                                For The Period
                                                      Three Months Ended              Nine Months Ended        September 17,1982
                                                           April 30,                      April 30,              (Inception)
                                                 ----------------------------    ----------------------------         To
                                                     2004            2003            2004            2003       April 30, 2004
                                                 ------------    ------------    ------------    ------------   --------------
<S>                                              <C>             <C>             <C>             <C>             <C>
Revenues:
  Interest Income                                $      2,254    $      1,325    $      3,134    $     28,319    $    752,575
  Miscellaneous                                            --              --           6,905           7,701          39,582
                                                 ------------    ------------    ------------    ------------    ------------
       Total Revenues                                   2,254           1,325          10,039          36,020         792,157
                                                 ------------    ------------    ------------    ------------    ------------

Costs and Expenses:
  Mine Expenses                                        85,100         379,172         369,242         828,152       6,508,726
  Write-Down of Mining, Milling and Other
    Property and Equipment                                 --              --              --              --         999,445
  Selling, General and Administrative Expenses        158,294         195,561         491,822         499,772       8,662,029
  Stock Based Compensation                                900         132,201          34,934         207,554       8,877,904
  Loss on Joint Venture                               800,000              --         800,000              --         901,700
  Depreciation                                             --              --              --              --         367,726
                                                 ------------    ------------    ------------    ------------    ------------
        Total Costs and Expenses                    1,044,294         706,934       1,695,998       1,535,478      26,317,530
                                                 ------------    ------------    ------------    ------------    ------------

Loss Before Other Income (Expense)                 (1,042,040)       (705,609)     (1,685,959)     (1,499,458)    (25,525,373)
                                                 ------------    ------------    ------------    ------------    ------------

Other Income (Expense):
  Gain on Sale of Property and Equipment                   --              --              --              --          46,116
  Gain on Sale of Subsidiary                               --              --              --              --       1,907,903
  Option Payment                                           --              --              --              --          70,688
  Loss on Write-Off of Investment                          --              --              --              --         (10,000)
  Loss on Option                                           --              --              --              --         (50,000)
  Loss on Write-Off of Minority Interest             (150,382)             --        (150,382)             --        (150,382)
                                                 ------------    ------------    ------------    ------------    ------------
         Total Other Income (Expense)                (150,382)             --        (150,382)             --       1,814,325
                                                 ------------    ------------    ------------    ------------    ------------

Loss Before Minority Interest                      (1,192,422)       (705,609)     (1,836,341)     (1,499,458)    (23,711,048)
Minority Interest in Net Loss of Subsidiary                --          20,119          51,220          78,464         286,388
                                                 ------------    ------------    ------------    ------------    ------------

Net Loss                                         $ (1,192,422)   $   (685,490)   $ (1,785,121)   $ (1,420,994)   $(23,424,660)
                                                 ============    ============    ============    ============    ============

Net Loss Per Common Share - Basic and Diluted    $      (0.02)   $      (0.02)   $      (0.04)   $      (0.03)
                                                 ============    ============    ============    ============

Weighted Average Common Shares Outstanding         54,914,470      40,837,405      50,019,933      41,311,671
                                                 ============    ============    ============    ============
</TABLE>

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


                                      -4-
<PAGE>

                            CAPITAL GOLD CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                    For The Nine             For The Period
                                                                    Months Ended           September 17, 1982
                                                                      April 30,               (Inception)
                                                           -----------------------------           To
                                                               2004             2003         April 30, 2004
                                                           ------------     ------------     --------------
<S>                                                        <C>              <C>               <C>
Cash Flow From Operating Activities:
  Net Loss                                                 $ (1,785,121)    $ (1,420,994)     $(23,424,660)
  Adjustments to Reconcile Net Loss to Net Cash
    (Used) By Operating Activities:
      Depreciation                                                   --               --           367,726
      Gain on Sale of Subsidiary                                     --               --        (1,907,903)
      Minority Interest in Net Loss of Subsidiary               (51,220)         (78,464)         (286,388)
      Write-Down of Impaired Mining, Milling and Other
        Property and Equipment                                       --               --           999,445
       Gain on Sale of Property and Equipment                        --               --           (46,116)
       Loss on Write-Off of Investment                               --               --            10,000
       Loss From Joint Venture                                  800,000               --           901,700
        Write Off of Minority Interest                          150,382               --           150,382
      Value of Common Stock Issued for Services                     900               --         2,813,893
      Stock Based Compensation                                   34,034          207,554         8,877,004
      Changes in Operating Assets and Liabilities:
        (Increase) Decrease in Other Current Assets               2,275          (58,038)          (12,703)
        (Increase) in Security Deposits                          (1,164)              --            (9,599)
        (Increase) in Prepaid Expenses                           (1,337)              --           (11,364)
        Increase (Decrease) in Accounts Payable                (120,649)          (2,799)            3,561
        (Decrease) in Accrued Expenses                          (55,596)         (18,095)          (55,868)
                                                           ------------     ------------      ------------

Net Cash (Used) By Operating Activities                      (1,027,496)      (1,370,836)      (11,630,890)
                                                           ------------     ------------      ------------

Cash Flow From Investing Activities:
  Purchase of Mining, Milling and Other Property and
    Equipment                                                        --               --        (1,705,650)
  Proceeds on Sale of Mining, Milling and Other Property
    and Equipment                                                    --               --            83,638
  Proceeds From Sale of Subsidiary                                   --        1,492,131         2,131,616
  Expenses of Sale of Subsidiary                                     --               --          (101,159)
  Advance Payments - Joint Venture                                   --               --            98,922
  Investment in Joint Venture                                        --               --          (101,700)
  Investment in Privately Held Company                               --               --           (10,000)
  Net Assets of Business Acquired (Net of Cash)                      --               --           (42,130)
  Purchase of Marketable Securities                                  --          (50,000)          (50,000)
  Purchase of Other Investments                                 (10,584)         (12,882)          (23,466)
                                                           ------------     ------------      ------------

Net Cash Provided (Used) By Investing Activities                (10,584)       1,379,249           280,071
                                                           ------------     ------------      ------------
</TABLE>

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


                                      -5-
<PAGE>

                            CAPITAL GOLD CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Unaudited)
                                   (Continued)

<TABLE>
<CAPTION>
                                                               For the Six            For The Period
                                                              Months Ended          September 17, 1982
                                                                April 30,               (Inception)
                                                     -----------------------------          To
                                                         2004             2003        April 30, 2004
                                                     ------------     ------------    --------------
<S>                                                  <C>              <C>              <C>
Cash Flow From Financing Activities:
  (Increase) in Loans Receivable - Related Party     $     (3,607)    $         --     $    (23,787)
  (Increase) Decrease in Loans Receivable - Others            975          (41,465)         (17,390)
  Increase in Loans Payable - Officers                         --               --           18,673
  Repayment of Loans Payable - Officers                        --               --          (18,673)
  Increase in Note Payable                                     --               --           11,218
  Payments of Note Payable                                     --               --          (11,218)
  Proceeds From Issuance of Common Stock                1,067,448           30,800       11,850,549
  Commissions on Sale of Common Stock                          --               --           (5,250)
  Expenses of Initial Public Offering                          --               --         (408,763)
  Capital Contributions - Joint Venture Subsidiary        100,156           80,340          304,564
  Purchase of Certificate of Deposit - Restricted              --               --           (5,000)
  Purchase of Mining Reclamation Bond                          --               --          (30,550)
                                                     ------------     ------------     ------------

Net Cash Provided By Financing Activities               1,164,972           69,675       11,664,373
                                                     ------------     ------------     ------------

Effect of Exchange Rate Changes                            14,057           31,769           73,805
                                                     ------------     ------------     ------------

Increase (Decrease) In Cash and Cash Equivalents          140,949          109,857          387,359

Cash and Cash Equivalents - Beginning                     246,410          149,433               --
                                                     ------------     ------------     ------------

Cash and Cash Equivalents - Ending                   $    387,359     $    259,290     $    387,359
                                                     ============     ============     ============

Supplemental Cash Flow Information:
  Cash Paid For Interest                             $         --     $         --               --
                                                     ============     ============     ============

  Cash Paid For Income Taxes                         $         --     $         --     $         --
                                                     ============     ============     ============

Non-Cash Financing Activities:
  Issuances of Common Stock as Commissions
    on Sales of Common Stock                         $         --     $         --     $    440,495
                                                     ============     ============     ============

  Issuance of Common Stock as Payment for Mining,
    Milling and Other Property and Equipment         $         --     $         --     $      4,500
                                                     ============     ============     ============

  Transfer of Joint Venture Advance Payments into
    Joint Venture Capital                            $         --     $     98,922     $     98,922
                                                     ============     ============     ============
</TABLE>

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


                                      -6-
<PAGE>

                            CAPITAL GOLD CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 APRIL 30, 2004
                                   (Unaudited)

NOTE 1 - Basis of Presentation

      The accompanying unaudited condensed consolidated financial statements
include the accounts of Capital Gold Corporation and its subsidiaries, which are
wholly and majority owned. All significant inter-company accounts and
transactions have been eliminated in consolidation.

      The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with U.S. generally accepted accounting
principles for interim financial information and with instructions to Form
10-QSB. Accordingly, they do not include all of the information and footnotes
required by U.S. generally accepted accounting principles for complete financial
statements. In the opinion of the Company's management, the accompanying
consolidated financial statements reflect all adjustments (which include only
normal recurring adjustments) necessary to present fairly the consolidated
financial position and results of operations and cash flows for the periods
presented.

      Results of operations for interim periods are not necessarily indicative
of the results of operations for a full year.

      The condensed consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The Company is a
development stage enterprise and has recurring losses from operations and
operating cash constraints that raise substantial doubt about the Company's
ability to continue as a going concern.

NOTE 2 - Marketable Securities

      The Company accounts for its investments in marketable securities in
accordance with Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities."

      Management determines the appropriate classification of all securities at
the time of purchase and re-evaluates such designation as of each balance sheet
date. The Company has classified its marketable equity securities as available
for sale securities and has recorded such securities at fair value. The Company
uses the specific identification method to determine realized gains and losses.
Unrealized holding gains and losses are excluded from earnings and, until
realized, are reported in a separate component of stockholders' equity.

      Marketable securities are classified as current assets and are summarized
as follows:

             Marketable equity securities, at cost           $  50,000
                                                             =========

             Marketable equity securities, at fair value     $  35,000
                                                             =========


                                      -7-
<PAGE>

                            CAPITAL GOLD CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 APRIL 30, 2004
                                   (Unaudited)

NOTE 3 - Other Comprehensive Income (Loss) - Supplemental Non-Cash Investing
Activities

      Other comprehensive income (loss) consists of accumulated foreign
translation gains and losses and net unrealized gain on available-for-sale
securities and is summarized as follows:

                Balance - July 31, 2003               $ 53,633
                  Equity Adjustments from Foreign
                    Currency Translation               (15,712)
                  Unrealized Loss on Available-for-
                    Sale Securities                    (35,000)
                                                      --------

                Balance - April 30, 2004              $  2,921
                                                      ========

NOTE 4 - Other Events - Termination of Joint Venture Agreement

      On April 6 and 8, 2004, effective March 31, 2004, Minera Santa Rita S. de
R.L. de C.V. ("MSR"), one of our wholly-owned Mexican affiliates, and Grupo
Minero FG S.A. de C.V. ("FG") executed an agreement (the "Termination
Agreement") terminating their joint venture agreement (the "JV Agreement") with
regard to the El Chanate project in Mexico.

      Pursuant to the Termination Agreement, the parties have terminated
amicably the JV Agreement and have released each other from all obligations
under the JV Agreement. In consideration of FG's contributions to the venture of
$457,455, we issued to FG 2,000,000 restricted shares of our common stock valued
at $800,000 and MSR issued to FG a participation certificate entitling FG to
receive five percent of the MSR's annual dividends, when declared. In connection
with the issuance of these 2,000,000 shares, the Company recognized a charge to
operations of $800,000. Additionally, the Company has recognized a loss of
$150,382 on the write off of the joint venture minority interest. The
participation certificate also gives FG the right to participate, but not to
vote, in the meetings of MSR's Board of Managers, Technical Committee and
Partners. MSR also received a right of first refusal to carry out the works and
render construction services required to effectuate the El Chanate project. This
right of first refusal is not applicable where a funding source for the project
determines that others should render such works or services.

      FG has agreed to assign or otherwise transfer to MSR all permits,
licenses, consents and authorizations (collectively, "authorizations") for which
FG had obtained in its name in connection with the development of the El Chanate
project to the extent that the authorizations are assignable. If the
authorizations are not assignable or other wise transferable, FG has given its
consent for the authorizations to be cancelled so that they can be re-issued ore
re-granted in MSR's name. The foregoing is in the process of being completed.


                                      -8-
<PAGE>

                            CAPITAL GOLD CORPORATION
                        (A DEVELOPMENT STAGE ENTERPRISE)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 APRIL 30, 2004
                                   (Unaudited)

NOTE 5 - Financing Term Sheet

      The Company had executed a royalty financing term sheet with Royal Gold,
Inc., of Denver, Colorado to supply $13.8 million. Consummation of this funding
was subject to due diligence, execution of a definitive agreement, the
satisfaction of conditions to be contained therein, and approval by both
parties' Directors.

During April 2004 the Company and Royal Gold agreed not to proceed because the
parties could not agree on final terms.

      NOTE 6 - Stockholders' Equity

      During the nine months ended April 30, 2004, the Company sold 10,506,300
shares of common stock to unrelated third party investors for gross proceeds of
$1,821,098. Also, during the nine months ended April 30, 2004 the Company issued
572,727 shares of common stock for gross proceeds of $20,600 to related parties
upon exercise of options and 515,000 shares of common stock for gross proceeds
of $25,750 to an unrelated party upon exercise of options.


                                      -9-
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.

Cautionary Statement on Forward-Looking Statements

Some information contained in or incorporated by reference into this report on
Form 10-QSB may contain "forward-looking statements," as defined in Section 21E
of the Securities and Exchange Act of 1934. These statements include comments
regarding exploration and mine development and construction plans, costs, grade,
production and recovery rates, permitting, financing needs, the availability of
financing on acceptable terms or other sources of funding, and the timing of
additional tests, feasibility studies and environmental permitting. The use of
any of the words "anticipate," "continue," "estimate," "expect," "may," "will,"
"project," "should," "believe" and similar expressions are intended to identify
uncertainties. We believe the expectations reflected in those forward-looking
statements are reasonable. However, we cannot assure you that these expectations
will prove to be correct. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of the risk factors
set forth below and other factors set forth in, including the section "Issues
and Uncertainties" below, or incorporated by reference into, this report:

      o     worldwide economic and political events affecting the supply of and
            demand for gold;

      o     volatility in market prices for gold and other metals;

      o     financial market conditions, and the availability of debt or equity
            financing on terms acceptable to us;

      o     uncertainties as to whether additional drilling, testing and
            feasibility studies will establish reserves at any of our
            properties;

      o     uncertainties associated with developing a new mine, including
            potential cost overruns and the unreliability of estimates in early
            states of mine development;

      o     uncertainties as to title to our properties and the availability of
            sufficient properties to allow for planned activities at El Chanate
            in Mexico and at Leadville in Colorado.

      o     variations in ore grade and other characteristics affecting mining,
            crushing, milling and smelting operations and mineral recoveries;

      o     geological, metallurgical, technical, permitting, mining and
            processing problems;

      o     the availability and timing of acceptable arrangements for power,
            transportation, mine construction, contract mining, water and
            smelting; the availability, terms conditions and timing of required
            government approvals;

      o     uncertainties regarding future changes in tax and foreign-investment
            legislation or implementation of existing tax and foreign-investment
            legislation;

      o     the availability of experienced employees; and

      o     political instability, violence and other risks associated with
            operating in a country like Mexico with a developing economy.


                                      -10-
<PAGE>

Many of those factors are beyond our ability to control or predict. You should
not unduly rely on these forward-looking statements. These statements speak only
as of the date of this report on Form 10-QSB. Except as required by law, we are
not obligated to publicly release any revisions to these forward-looking
statements to reflect future events or developments. All subsequent written and
oral forward-looking statements attributable to us and persons acting on our
behalf are qualified in their entirety by the cautionary statements contained in
this section and elsewhere in this report on Form 10-QSB.

                              Results of Operation

General

Sonora, Mexico

During the quarter ended April 30, 2004, we continued to analyze the El Chanate
concessions in Mexico. Our property holdings there consist of 14 contiguous,
high priority concessions totaling approximately 3,497 hectares (8,642 acres or
13.5 square miles). Further exploration and development of the El Chanate
project, assuming it is economically feasible, will mostly occur on these
concessions owned by us. We also own outright 466 hectares (1,151 acres or 1.8
square miles) of surface rights at El Chanate and no third party ownership or
leases exist on this fee land or the El Chanate concessions.

In August 2003, M3 Engineering of Tucson, Arizona completed a feasibility study
(the "Study") on the El Chanate concessions. Based on 253 drill holes and more
than 22,000 gold assays, the study provides details for an open pit gold mine.
The Study indicates that the initial open pit project contains proven and
probable reserves of 358,000 ounces of gold within 13.5 million metric tonnes of
ore with an average grade of 0.827 grams/tonne. It estimated that the mine could
recover approximately 48,000 - 50,000 ounces of gold per year over a five year
mine life.

The study assumes a production rate of 2.6 million tonnes of ore per year or
7,500 tonnes per day, operating at 345 days per year. The processing plan for
this open pit heap leach gold project calls for crushing the ore to 100% minus
3/8 inch. Carbon columns will be used to recover the gold. If financing for the
project is obtained and if the necessary plant, equipment and facilities are
acquired, an adequate water supply is secured, and power lines to the mine are
constructed, we anticipate, but cannot assure, that the mine will commence
commercial production in 2005.

Based on the current reserve calculations, the mine life is estimated to be 62
months. The study forecasts initial capital costs of $13.8 million, which
includes $2.1 million of working capital. Average initial annual production is
planned at approximately 50,000 ounces per year at an average operating cash
cost of $229 per ounce. This cash cost may decrease as the production rate
increases. Total costs will vary depending upon the price of gold (due to the
nature of underlying payment obligations to the original owner of the property);
they are estimated to range between $292 per ounce at a gold price of $310/ounce
and $299 per ounce at a gold price of $370 per ounce. We will be working on
measures to attempt to reduce costs going forward. Reserves and production rates
are based on a gold price of $325 per ounce, which is the Base Case of the
study.

Management believes that the capital costs to establish a surface, heap leach
mining operation at El Chanate will be approximately $13.8 million. Financing is
being sought through bank


                                      -11-
<PAGE>

loans, equity and/or royalty arrangements. In this regard, we had executed a
royalty financing term sheet with Royal Gold, Inc., of Denver, Colorado to
supply the $13.8 million, as specified in the Study. However, in April 2004, we
and Royal Gold mutually agreed not to proceed because the parties could not
agree on final terms. We believe that equity financing may provide certain
attractive alternative sources of project funding and we are exploring those
possibilities. Unless and until we obtain adequate financing on acceptable
terms, we will not be able to move forward with full-scale construction of the
mine. There can be no assurance that adequate equity or debt financing can be
attained.

Management believes the project will benefit substantially from rising gold
prices, which are currently in the $390 per ounce range. Mineralized material
previously below operating cut-off gold grades, could possibly become economic
if future engineering studies support lowering the cutoff grade due to gold
prices substantially above the $325 per ounce used in the feasibility study to
define the proven and probable reserves mentioned above. We are currently
looking at equipment and processing techniques that may be capable of supporting
higher production rates. In this regard, Metcon Research Inc. of Tucson, Arizona
is completing studies of gold recoveries on existing samples at fine grind sizes
of 100 mesh, 150 mesh and 200 mesh and will prepare a report of its findings.
These studies have been undertaken to determine whether extraction by fine
grinding is economical given the elevated price of gold. Generally, fine
grinding, while more expensive, can achieve higher gold recoveries than the heap
leach method recommended in the feasibility study. However, M3, who conducted
the feasibility study for us, recently informed us that heap leaching remains
the most economical method of extraction at current gold prices. In addition, we
recently completed further core drilling (three holes for 657 meters) to
validate the reverse circulation drilling in the deeper levels of the deposit.
We are expecting assays from this core drilling program. If the results are
sufficiently positive, we plan on having our feasibility study updated. Should
the results be positive, no assurance can be given that additional reserves will
be identified.

In January 2004, we received the permits from the Mexican Department of
Environmental Affairs and Natural Resources necessary to begin construction of
the El Chanate gold mining project. These permits also cover the operation of a
heap-leach gold recovery system.

Effective March 31, 2004, by mutual agreement, Minera Santa Rita S. de R.L. de
C.V. ("MSR"), one of our wholly-owned Mexican affiliates, and FG terminated
their joint venture agreement. For information, please see "Liquidity and
Capital Resources; Plan of Operations" below.

Leadville, Colorado

During the nine months ended April 30, 2004, as during the prior fiscal year
ended July 31, 2003, activity at our Leadville, Colorado properties consisted
principally of mine maintenance. Primarily as a result of our focus on El
Chanate, we temporarily reduced to a minimum activity in Leadville, Colorado.

Between November 1, 2002 and December 1, 2003, we conditionally acquired 61
properties in Leadville, Colorado having a gross acreage of approximately 623
acres. Some of the properties are classified as residential and others are
classified as mining. All were purchased at the Lake County, Colorado, tax sale
for the back taxes due on the properties. We paid an aggregate of approximately
$19,400 for the properties. Of these properties, we let 9 lapse and, with regard
to 8 of these properties, we were paid off by the property owners and we
received back our payments for these properties, plus interest at 10%.

If a property owner does not pay his property taxes the county treasurer has the
right to put the property up for auction at an advertised county tax sale.
Sometimes, the property owner will


                                      -12-
<PAGE>

ask the treasurer to postpone the auction of the property for a year with the
promise to pay soon. If taxes are still not paid, the auction bidder will be
required to pay two years of taxes. If we pay the 'back taxes' and then 'current
year' taxes for four consecutive years our ownership of a given property
purchased at tax sale is final, and the deed is transferred to us. If the
property owner can pay the back taxes, he is required to pay us the back taxes
plus interest. The current back tax interest rate is 12% in Lake County.

We acquired these properties, especially the residential properties, as an
investment. We are not required to commit to any work or maintenance on any of
the properties at this time. Management believes that these are good
investments. The mining properties are located in the general area of our other
mining properties. There is a possibility that at some future date the zoning
for the mining claims will be changed to allow residential development.
Management believes that, at such time, these properties will most likely become
more valuable due to their scenic location. In the time prior to any zoning
change, these properties may have mineral value; however, we have no current
plans to explore these mining properties.

Revenues

We generated no revenues from mining operations during the three or nine months
ended April 30, 2004 and 2003. There were de minimis non-operating revenues
during the three months ended April 30, 2004 and 2003 of approximately $2,254
and $1,325, respectively. There were de minimis non-operating revenues during
the nine months ended April 30, 2004 and 2003 of approximately $10,039 and
$36,000, respectively. These non-operating revenues primarily represent interest
income

Costs and Expenses

Over all costs and expenses during the three months ended April 30, 2004
($1,044,294) increased by $337,360 (approximately 48%) from the three months
ended April 30, 2003 ($706,934). Over all costs and expenses during the nine
months ended April 30, 2004 ($1,695,998) increased by $160,520 (approximately
10%) from the nine months ended April 30, 2003 ($1,535,478).

The primary reason for the increase in overall costs and expenses during the
three months ended April 30, 2004 was the loss incurred on our joint venture
with FG, offset by significantly reduced mine expenses and stock based
compensation.

As discussed above in Note 4 to our Condensed Consolidated Financial Statements,
effective March 31, 2004, the joint venture agreement with FG was terminated. In
consideration of FG's contributions to the venture of $457,455, we issued to FG
2,000,000 restricted shares of our common stock valued at $800,000 and MSR
issued to FG a participation certificate entitling FG to receive five percent of
the MSR's annual dividends, when declared. In connection with the issuance of
these 2,000,000 shares, the Company recognized a one-time charge to operations
of $800,000. This charge represents the cost of acquiring FG's interest in the
joint venture.

Mine expenses during the three months ended April 30, 2004 ($85,100) decreased
by $294,072 (approximately 78%) from the three months ended April 30, 2003
($379,172). Mine expenses during the nine months ended April 30, 2004 ($369,242)
decreased by $458,910 (approximately 55%) from the nine months ended April 30,
2003 ($828,152). We believe that the decrease in mine expenses resulted
primarily from less physical activity on the property due to our major efforts
being directed at locating development funding to fully develop the project less
available capital and termination of our joint venture agreement.


                                      -13-
<PAGE>

Selling, general and administrative expenses during the three months ended April
30, 2004 ($158,294) decreased by $37,267 (approximately 19%) from the three
months ended April 30, 2003 ($195,561). Selling, general and administrative
expenses during the nine months ended April 30, 2004 ($491,822) decreased by
$7,950 (approximately 2%) from the nine months ended April 30, 2003 ($499,772).
We believe that the decrease in selling, general and administration expenses
resulted primarily from less activity due to less available capital during the
three months ended April 30, 2004.

Stock based compensation during the three months ended April 30, 2004 was $900
compared to $132,201 for the three months ended April 30, 2003. Stock based
compensation during the nine months ended April 30, 2004 was $34,934 compared to
$207,554 for the nine months ended April 30, 2003.

Other Expenses

As a result of the termination of the joint venture discussed above, the Company
recognized a loss of $150,382 on the write off of the joint venture minority
interest during the quarter ended April 30, 2004.

Net Loss

As a result, our net loss for the three months ended April 30, 2004 was
$1,192,422, which was $506,932 greater than our $685,490 net loss for the three
months ended April 30, 2003. As a result, our net loss for the nine months ended
April 30, 2004 was $1,785,121, which was $364,127 greater than our $1,420,994
net loss for the nine months ended April 30, 2003.

Loss from Changes in Foreign Exchange Rates

During the three months ended April 30, 2004, we recorded equity adjustments
from foreign currency translations of approximately $5,630. These translation
adjustments are related to changes in the rates of exchange between the Mexican
Peso and the US dollar.

Liquidity and Capital Resources; Plan of Operations

As of April 30, 2004, we had working capital of $404,310. Our plans over the
next 12 months primarily include the cost of construction of the El Chanate
open-pit gold mine in Mexico, administration and holding costs in Colorado and
general administrative costs in New York.

Our primary source of funds used during the quarter ended April 30, 2004 was
from the sale and issuance of common stock for gross proceeds of $120,000.

On April 6 and 8, 2004, effective March 31, 2004, MSR, one of our wholly-owned
Mexican affiliates, and FG executed an agreement (the "Termination Agreement")
terminating the joint venture agreement (the "JV Agreement") with regard to the
El Chanate project in Mexico.

Pursuant to the Termination Agreement, the parties have terminated amicably the
JV Agreement and have released each other from all obligations under the JV
Agreement. In consideration of FG's contributions to the venture of $457,455, we
issued 2,000,000 restricted shares (valued at $800,000) of our common stock and
MSR issue to FG a participation certificate entitling FG to receive five percent
of MSR's annual dividends, when declares. The participation certificate also
gives FG the right to participate, but not to vote, in the meetings of MSR's
Board of Managers, Technical Committee and Partners. FG also received a right of
first refusal to carry out the works and render construction services required
to effectuate the El


                                      -14-
<PAGE>

Chanate project. This right of first refusal is not applicable where a funding
source for the project determines that others should render such works or
services.

FG has agreed to assign or otherwise transfer to MSR all permits, licenses,
consents and authorizations (collectively, "authorizations") for which FG had
obtained in its name in connection with the development of the El Chanate
project to the extent that the authorizations are assignable. If the
authorizations are not assignable or otherwise transferable, FG has given its
consent for the authorizations to be cancelled so that they can be re-issued or
re-granted in MSR's name. The foregoing is in the process of being completed.

We solicited and received bids from three experienced and qualified contactors
for mining El Chanate ores. These bids were higher than anticipated and were
rejected. We are reviewing certain ways to optimize blasting, hauling and the
amounts of pre-production mine stripping to reduce the mining costs. We believe,
but cannot guarantee, that there are certain cost savings to be made which, if
implemented, will improve the economic returns at El Chanate.

We are actively looking for financing for construction of the El Chanate
open-pit gold mine in Sonora, Mexico. We had a term sheet for funding from Royal
Gold. However, in April 2004, we and Royal Gold mutually agreed not to proceed
because the parties could not agree on final terms. We believe that equity
financing may provide certain attractive alternative sources of project funding
and we are exploring those possibilities. Unless and until we obtain adequate
financing on acceptable terms, we will not be able to move forward with
full-scale construction of the mine. There can be no assurance that adequate
equity or debt financing can be attained.

As explained in our annual report on form 10-KSB, historically, we have not
generated any material revenues from operations and have been in a precarious
financial condition. No assurance whatsoever can be given that we will be able
to obtain any significant funds in the near future or that we will be able to
continue as a going concern or that any of our plans with respect to our gold
properties will, to a material degree, come to fruition. In order to continue
our program we will need to obtain substantial financing. There is no assurance
that we will be successful.

Our condensed consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. We are a development stage
enterprise and have recurring losses from operations and operating cash
constraints that raise substantial doubt about our ability to continue as a
going concern.

Environmental Issues

Management does not expect that environmental issues will have an adverse
material effect on our liquidity or earnings. Before any additional exploration
or any development or mining or construction of milling facilities could begin
at our Leadville properties, it would be necessary to meet all environmental
requirements and to satisfy the regulatory agencies in Colorado that our
proposed procedures fell within the boundaries of sound environmental practice.
We currently are bonded to insure reclamation of any areas disturbed by our past
activities. The current amount of this bond is $35,550. In Mexico, we are not
aware of any significant environmental concerns or existing reclamation
requirements at the El Chanate properties. We received the required Mexican
government permits for construction, mining and processing the El Chanate ores
in January 2004.


                                      -15-
<PAGE>

Part of the Leadville Mining District has been declared a federal Superfund site
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, and the Superfund Amendments and Reauthorization Act of 1986. Several
mining companies and one individual were declared defendants in a possible
lawsuit. We were not named a defendant or Possible Responsible Party. We did
respond in full detail to a lengthy questionnaire prepared by the Environmental
Protection Agency ("EPA") regarding our proposed procedures and past activities
in November 1990. To our knowledge, the EPA has initiated no further comments or
questions.

We do include in all our internal revenue and cost projections a certain amount
for environmental and reclamation costs on an ongoing basis. This amount is
determined at a fixed amount of $0.05 per metric tonne of material to be milled
on a continual, ongoing basis to provide primarily for reclaiming tailing
disposal sites and other reclamation requirements. At this time, there do not
appear to be any environmental costs to be incurred by us beyond those already
addressed above. No assurance can be given that environmental regulations will
not be changed in a manner that would adversely affect our planned operations.

Off-Balance Sheet Transactions

We do not have any transactions, agreements or other contractual arrangements
that constitute off-balance sheet arrangements.

                   Application Of Critical Accounting Policies

Our financial statements and accompanying notes are prepared in accordance with
accounting principles generally accepted in the United States of America.
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
and expenses. These estimates and assumptions are affected by management's
application of accounting policies. Critical accounting policies for us include
impairment of long-lived assets, accounting for stock-based compensation and
environmental remediation costs.

In accordance with SFAS 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of," we review our long-lived assets
for impairments. Impairment losses on long-lived assets are recognized when
events or changes in circumstances indicate that the undiscounted cash flows
estimated to be generated by such assets are less than their carrying value and,
accordingly, all or a portion of such carrying value may not be recoverable.
Impairment losses then are measured by comparing the fair value of assets to
their carrying amounts. During the year ended July 31, 2002, we performed a
review of our Colorado mine and mill improvements and determined that an
impairment loss should be recognized. Accordingly, at July 31, 2002, we reduced
by $999,445 the net carrying value of certain assets relating to our Leadville,
Colorado facility to $300,000, which approximates management's estimate of fair
value. We recognized no additional impairment loss during the quarter ended
April 30, 2004.

We account for stock-based compensation to our employees using the intrinsic
value method in accordance with provisions of the Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" and related
interpretations which requires the recognition of compensation expense over the
vesting period of the option when the exercise price of the stock option granted
is less than the fair value of the underlying common stock. Additionally, we
comply with the disclosure provisions of Statement of Financial Accounting
Standards No. 123 "Accounting for Stock Based Compensation" ("SFAS 123") and
provide pro


                                      -16-
<PAGE>

forma disclosure of net loss and loss per share as if the fair value method has
been applied in measuring compensation expense for stock options granted.
Stock-based compensation related to options granted to non-employees is
recognized using the fair value method in accordance with SFAS 123.

Environmental remediation costs are accrued based on estimates of known
environmental remediation exposure. Such accruals are recorded even if
significant uncertainties exist over the ultimate cost of the remediation. It is
reasonably possible that our estimates of reclamation liabilities, if any, could
change as a result of changes in regulations, extent of environmental
remediation required, means of reclamation or cost estimates. Ongoing
environmental compliance costs, including maintenance and monitoring costs, are
expensed as incurred. There were no environmental remediation costs accrued at
April 30, 2004.

                            Issues And Uncertainties

The following issues and uncertainties, among others, should be considered in
evaluating our financial outlook.

      We have not generated any operating revenues. If we are unable to
      commercially develop our mineral properties, we will not be able to
      generate profits and our business may fail.

To date, we have no producing properties. As a result, we have no current source
of operating revenue and we have historically operated and continue to operate
at a loss. Our ultimate success will depend on our ability to generate profits
from our properties. Our viability is largely dependent on the successful
commercial development of the El Chanate project.

      We lack operating cash flow and rely on external funding sources. If we
      are unable to continue to obtain needed capital from outside sources, we
      will be forced to reduce or curtail our operations.

We do not generate any positive cash flow from operations and we do not
anticipate that any positive cash flow will be generated for some time. We have
limited financial resources. Leases and licenses that we hold impose financial
obligations on us. As a result we need to obtain additional capital from outside
sources to continue operations and effect our business plan. We cannot assure
that adequate additional funding will be available. We believe that equity
financing may provide certain attractive sources of project funding and we are
exploring those possibilities. If we are unable to continue to obtain needed
capital from outside sources, we will be forced to reduce or curtain our
operations. Mining costs quotes were recently received from selected qualified
mining contractors and these bids range from 13% to 45% above feasibility study
costs. We are exploring ways to reduce these mining costs as quoted by the
potential contractors.

Further exploration and development of the mineral properties in which we hold
interests depends upon our ability to obtain financing through

            o     bank or other debt financing,

            o     equity financing, or

            o     other means.


                                      -17-
<PAGE>

Failure to obtain additional financing on a timely basis could cause us to
forfeit all or parts of our interests in some or all of (i) the El Chanate
concessions, and (ii) our Leadville properties, and reduce or terminate our
operations.

Our year end audited financial statements contain a "going concern" explanatory
paragraph. Our inability to continue as a going concern would require a
restatement of assets and liabilities on a liquidation basis, which would differ
materially and adversely from the going concern basis on which our financial
statements included in this quarterly report have been prepared.

Our financial statements for the year ended July 31, 2003 included in our form
10-KSB for the year ended as of that date, and the financial statements for the
quarter ended April 30, 2004 contained in this quarterly report on form 10-QSB,
and filed with the Commission, have been prepared on the basis of accounting
principles applicable to a going concern. Our auditors' report on the financial
statements contained in our Form 10-KSB includes an additional explanatory
paragraph following the opinion paragraph on our ability to continue as a going
concern. A note to these financial statements describes the reasons why there is
substantial doubt about our ability to continue as a going concern and our plans
to address this issue. Neither our July 31, 2003 financial statements nor our
April 30, 2004 quarterly unaudited financial statements include any adjustments
that might result from the outcome of this uncertainty. Our inability to
continue as a going concern would require a restatement of assets and
liabilities on a liquidation basis, which would differ materially and adversely
from the going concern basis on which our financial statements have been
prepared.

      Our ability on a going forward basis to discover viable and economic
      mineral reserves is subject to numerous factors, most of which are beyond
      our control and are not predictable.

Exploration for gold is speculative in nature, involves many risks and is
frequently unsuccessful. Any gold exploration program entails risks relating to

            o     the location of economic ore bodies,

            o     development of appropriate metallurgical processes,

            o     receipt of necessary governmental approvals and

            o     construction of mining and processing facilities at any site
                  chosen for mining.

The commercial viability of a mineral deposit is dependent on a number of
factors including:

            o     the price of gold,

            o     exchange rates,

            o     the particular attributes of the deposit, such as its

                        o     size,

                        o     grade and

                        o     proximity to infrastructure,

            o     financing costs,

            o     taxation,

            o     royalties,

            o     land tenure,

            o     land use,

            o     water use,

            o     power use,

            o     importing and exporting gold and


                                      -18-
<PAGE>

            o     environmental protection.

The effect of these factors cannot be accurately predicted.

Aside from our El Chanate concessions, the mineral properties in which we have
an interest or right are in the exploration stages and are without reserves of
gold or other minerals. We cannot assure that current or proposed exploration or
development on our other properties in which we have an interest will result in
the discovery of gold mineralization reserves or will result in a profitable
commercial mining operation.

      We have a limited number of prospects. As a result, our chances of
      commencing viable mining operations are dependent upon the success of one
      project.

Our only current properties are the El Chanate concessions and our Leadville
properties. At present, we are not doing any substantive work at our Leadville
properties. Our El Chanate concessions are owned by one of our wholly-owned
subsidiaries, Oro de Altar. MSR, another of our Mexican subsidiaries, leases the
land and claims at El Chanate from Oro de Altar. FG, our former joint venture
partner, has the right to receive five percent of MSR's annual dividends, when
declared. We currently do not have operations on either of our properties, and
we must commence such operations to receive revenues. Accordingly, we are
dependent upon the success of the El Chanate concessions.

      If we are unable to obtain a crushing system and other equipment for our
      Mexican concessions at an acceptable cost, our ability to obtain requisite
      funding for our planned mining operations and our anticipated results of
      operations from mining at these concessions, once mining commences, may be
      adversely affected.

In March 2003, we obtained exclusive options to purchase an ore crusher and
related assets (spare parts for the crusher and certain transportable building
structures). The options expired and the owner of these assets sold his interest
to a third party. We currently are in discussions with others for the
acquisition of equipment for use at our Mexican concessions. We are optimistic
about being able to acquire additional equipment at favorable costs; however,
there can be no assurance that we will be successful in acquiring these assets.
Moreover, our ability to acquire such equipment is subject to our ability to
obtain adequate necessary funding. If we are unable to obtain this equipment at
an acceptable cost, our ability to obtain requisite funding for our planned
mining operations and our anticipated results of operations from mining at these
concessions, once mining commences, may be adversely affected.

      Gold prices can fluctuate on a material and frequent basis due to numerous
      factors beyond our control. If and when we commence production, our
      ability to generate profits from operations could be materially and
      adversely affected by such fluctuating prices.

The profitability of any gold mining operations in which we have an interest
will be significantly affected by changes in the market price of gold. Gold
prices fluctuate on a daily basis and are affected by numerous factors beyond
our control, including:

            o     the level of interest rates,

            o     the rate of inflation,

            o     central bank sales,

            o     world supply of gold and

            o     stability of exchange rates.


                                      -19-
<PAGE>

Each of these factors can cause significant fluctuations in gold prices. Such
external factors are in turn influenced by changes in international investment
patterns and monetary systems and political developments. The price of gold has
historically fluctuated widely and, depending on the price of gold, revenues
from mining operations may not be sufficient to offset the costs of such
operations.

      Changes in regulatory or political policy could adversely affect our
      exploration and future production activities.

Any changes in government policy may result in changes to laws affecting:

            o     ownership of assets,

            o     land tenure,

            o     mining policies,

            o     monetary policies,

            o     taxation,

            o     rates of exchange,

            o     environmental regulations,

            o     labor relations,

            o     repatriation of income and

            o     return of capital.

Any such changes may affect our ability to undertake exploration and development
activities in respect of present and future properties in the manner currently
contemplated, as well as our ability to continue to explore, develop and operate
those properties in which we have an interest or in respect of which we have
obtained exploration and development rights to date. The possibility,
particularly in Mexico, that future governments may adopt substantially
different policies, which might extend to expropriation of assets, cannot be
ruled out.

      Compliance with environmental regulations could adversely affect our
      exploration and future production activities.

With respect to environmental regulation, environmental legislation generally is
evolving in a manner which will require:

            o     stricter standards and enforcement,

            o     increased fines and penalties for non-compliance,

            o     more stringent environmental assessments of proposed projects
                  and

            o     a heightened degree of responsibility for companies and their
                  officers, directors and employees.

There can be no assurance that future changes to environmental legislation and
related regulations, if any, will not adversely affect our operations. We could
be held liable for environmental hazards that exist on the properties in which
we hold interests, whether caused by previous or existing owners or operators of
the properties. Any such liability could adversely affect our business and
financial condition.


                                      -20-
<PAGE>

      Mining Risks and Potential Inadequacy of Insurance Coverage could
      adversely affect us

If and when we commence mining operations at any of our properties, such
operations will involve a number of risks and hazards, including:

            o     environmental hazards,

            o     industrial accidents,

            o     labor disputes,

            o     metallurgical and other processing,

            o     unusual and unexpected rock formations,

            o     ground or slope failures,

            o     cave-ins,

            o     acts of God,

            o     mechanical equipment and facility performance problems and

            o     the availability of materials and equipment.

Such risks could result in:

            o     damage to, or destruction of, mineral properties or production
                  facilities,

            o     personal injury or death,

            o     environmental damage,

            o     delays in mining,

            o     monetary losses and

            o     possible legal liability.

Industrial accidents could have a material adverse effect on our future business
and operations. Although as we move forward in the development of any of our
properties we plan to maintain insurance within ranges of coverage consistent
with industry practice, we cannot be certain that this insurance will cover the
risks associated with mining or that we will be able to maintain insurance to
cover these risks at economically feasible premiums. We also might become
subject to liability for pollution or other hazards which we cannot insure
against or which we may elect not to insure against because of premium costs or
other reasons. Losses from such events could have a material adverse effect on
us.

      Calculation of reserves and metal recovery dedicated to future production
      is not exact, might not be accurate and might not accurately reflect the
      economic viability of our properties.

Reserve estimates may not be accurate. There is a degree of uncertainty
attributable to the calculation of reserves, resources and corresponding grades
being dedicated to future production. Until reserves or resources are actually
mined and processed, the quantity of reserves or resources and grades must be
considered as estimates only. In addition, the quantity of reserves or resources
may vary depending on metal prices. Any material change in the quantity of
reserves, resource grade or stripping ratio may affect the economic viability of
our properties. In addition, there can be no assurance that mineral recoveries
in small scale laboratory tests will be duplicated in large tests under on-site
conditions or during production.


                                      -21-
<PAGE>

      We are dependent on the efforts of certain key personnel and contractors,
      the loss of whose services could have a materially adverse effect on our
      operations.

We are dependent on a relatively small number of key personnel, the loss of any
one of whom could have an adverse effect on us. In addition, while certain of
our officers and directors have experience in the exploration and operation of
gold producing properties, we will remain highly dependent upon contractors and
third parties in the performance of our exploration and development activities.
As such there can be no guarantee that such contractors and third parties will
be available to carry out such activities on our behalf or be available upon
commercially acceptable terms.

      There are uncertainties as to title matters in the mining industry. We
      believe that we have good title to our properties; however, defects in
      such title could have a material adverse effect on us.

We have investigated our rights to explore, exploit and develop our various
properties in manners consistent with industry practice and, to the best of our
knowledge, those rights are in good standing. However, we cannot assure that the
title to or our rights of ownership of either the El Chanate concessions or our
Leadville properties will not be challenged or impugned by third parties or
governmental agencies. In addition, there can be no assurance that the
properties in which we have an interest are not subject to prior unregistered
agreements, transfers or claims and title may be affected by undetected defects.
Any such defects could have a material adverse effect on us.

      Should we successfully commence mining operations in the future, our
      ability to remain profitable, should we become profitable, will be
      dependent on our ability to find, explore and develop additional
      properties. Our ability to acquire such additional properties will be
      hindered by competition.

Gold properties are wasting assets. They eventually become depleted or
uneconomical to continue mining. The acquisition of gold properties and their
exploration and development are subject to intense competition. Companies with
greater financial resources, larger staffs, more experience and more equipment
for exploration and development may be in a better position than us to compete
for such mineral properties.

      Our property interests in Mexico are subject to the risks of doing
      business in foreign countries.

We face risks normally associated with any conduct of business in foreign
countries with respect to our El Chanate project in Sonora, Mexico, including
various levels of political and economic risk. The occurrence of one or more of
these events could have a material adverse impact on our efforts or future
operations which, in turn, could have a material adverse impact on our future
cash flows, earnings, results of operations and financial condition. These risks
include the following:

      o     labor disputes,

      o     invalidity of governmental orders,

      o     uncertain or unpredictable political, legal and economic
            environments,

      o     war and civil disturbances,

      o     changes in laws or policies,

      o     taxation,

      o     delays in obtaining or the inability to obtain necessary
            governmental permits,


                                      -22-
<PAGE>

      o     governmental seizure of land or mining claims,

      o     limitations on ownership,

      o     limitations on the repatriation of earnings,

      o     increased financial costs,

      o     import and export regulations, including restrictions on the export
            of gold, and

      o     foreign exchange controls.

These risks may limit or disrupt the project, restrict the movement of funds or
impair contract rights or result in the taking of property by nationalization or
expropriation without fair compensation.

      Gold is sold in the world market in U.S. dollars; however, we may incur a
      significant amount of our expenses in Mexican pesos. If and when we sell
      gold, if applicable currency exchange rates fluctuate our revenues and
      results of operations may be materially and adversely affected.

If and when we commence sales of gold, such sales will be made in the world
market in U.S. dollars. We may incur a significant amount of our expenses in
Mexican pesos. As a result, our financial performance would be affected by
fluctuations in the value of the Mexican peso to the U.S. dollar. At the present
time, we have no plan or policy to utilize forward contracts or currency options
to minimize this exposure, and even if these measures are implemented there can
be no assurance that such arrangements will be available, be cost effective or
be able to fully offset such future currency risks.

Item 3. Controls and Procedures.

Gifford A Dieterle, our Chief Executive Officer and our Chief Financial Officer,
has evaluated, as of the end of the period covered by this report, the
effectiveness of the design and operation of our disclosure controls and
procedures with respect to the information generated for use in this report.
Based upon that evaluation, taking into account our limited resources and
current business operations, he concluded that the disclosure controls and
procedures were effective to provide reasonable assurances that information
required to be disclosed in the reports filed or submitted under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission. There have been no changes in our internal
control over financial reporting that occurred during our last fiscal quarter
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.


                                      -23-
<PAGE>

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings

            None.

Item 2. Changes in Securities and Small Business Issuer Purchases of Equity
        Securities.

During the quarter ended April 30, 2004, we issued the following shares of our
Common Stock pursuant to the exemption from registration provided by Section
4(2) of the Securities Act of 1933: We sold 729,605 shares for $90,100 to 16
persons. Also, during the three months ended April 30, 2004, we issued 200,000
shares of common stock and received gross proceeds of $4,000 from the exercise
of options by one of our officers and directors, and we issued 515,000 shares of
common stock for gross proceeds of $25,750 to an unrelated party upon exercise
of options.

Item 3. Defaults Upon Senior Securities

            None.

Item 4 Submission of Matters to a Vote of Security Holders

            None.

Item 5. Other Information

            None.

Item 6. Exhibits and Reports on Form 8-K

Exhibits:

      31.1  Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
            2002 from the Company's Chief Executive Officer

      31.2  Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
            2002 from the Company's Chief Financial Officer

      32.1  Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
            2002 from the Company's Chief Executive Officer

      32.2  Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
            2002 from the Company's Chief Financial Officer

Reports on Form 8-K:

Report filed on April 12, 2004. Item 5. Other Events and Regulation FD
Disclosure.


                                      -24-
<PAGE>

                                   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 thereto duly authorized.

                                            CAPITAL GOLD CORPORATION
                                                   Registrant


                                            By:  /s/ Gifford A. Dieterle
                                                 -------------------------------
                                                 Gifford A.  Dieterle
                                                 President/Treasurer

Date: June 18, 2004