**SECURITIES      AND EXCHANGE COMMISSION **

**Washington,      D.C. 20549**

**FORM      10-KSB**

**FOR      THE FISCAL YEAR ENDED JULY 31, 2006**

**Commission      File No. 0-13078**

**CAPITAL      GOLD CORPORATION**

|  **State                of                Delaware**                                          |   |  **13-31805030**                                                    |
|----------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|
|  (State                or other jurisdiction of                Incorporation or organization) |   |  (I.R.S.                Employer Identification                No.) |
|                                                                                               |   |                                                                     |
|  **76                Beaver Street, 26th                Floor, New York, New York**           |   |  **10005**                                                          |
|  (Address                of principal executive                offices)                       |   |  (Zip                Code)                                          |

**Issuer’s      telephone numbering: (212) 344-2785**

**.**

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| Table                  of Contents        |  Page                                                                                                                                                          |
|-------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Glossary                                  |                                                                                                                                                                | (ii) |
|                                      | Part                  I                                                                                                                                             |   |
|                                      |                                                                                                                                                                |   |
| Item                  1.                  | Description                  of Business.                                                                                                                           | 1 |
| Item                  2.                  | Description                  of Property.                                                                                                                           | 13 |
| Item                  3.                  | Legal                  Proceedings.                                                                                                                                 | 22 |
| Item                  4.                  | Submission                  of Matters to a Vote of Security Holders.                                                                                               | 22 |
|                                      |                                                                                                                                                                |   |
|                                      | Part                  II                                                                                                                                            |   |
|                                      |                                                                                                                                                                |   |
| Item                  5.                  | Market                  for Common Equity, Related Stockholder Matters and Small Business                  Issuer                  Purchases of Equity Securities.  | 23 |
| Item                  6.                  | Management's                  Discussion and Analysis of Financial Condition and Results of Operations;                  Plan of Operations.                        | 25 |
| Item                  7.                  | Financial                  Statements.                                                                                                                              | 36 |
| Item                  8.                  | Changes                  in and Disagreement with Accountants on Accounting and Financial                  Disclosure.                                              | 36 |
| Item                  8A                  | Controls                  and Procedures.                                                                                                                           | 36 |
| Item                  8B                  | Other                  Information.                                                                                                                                 | 36 |
|                                      |                                                                                                                                                                |   |
|                                      | Part                  III                                                                                                                                           |   |
|                                      |                                                                                                                                                                |   |
| Item                  9.                  | Directors,                  Executive Officers, Promoters and Control Persons; Compliance with                  Section                  16(a) of the Exchange Act. | 37 |
| Item                  10.                 | Executive                  Compensation.                                                                                                                            | 41 |
| Item                  11.                 | Security                  Ownership of Certain Beneficial Owners and Management and Related                  Stockholder Matters.                                   | 44 |
| Item                  12.                 | Certain                  Relationships and Related Transactions.                                                                                                    | 47 |
| Item                  13.                 | Exhibits                                                                                                                                                            | 47 |
| Item                  14.                 | Principal                  Accountant Fees and Services                                                                                                             | 51 |
| Signatures                                | 52                                                                                                                                                                  |
| Supplemental                  Information | N/A                                                                                                                                                                 |
| Financial                  Statements     | F-1                                                                                                                                                                 |

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**GLOSSARY      OF TECHNICAL TERMS**

|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|---------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Reserve:                              | That                  part of a mineral deposit which could be economically and legally                  extracted or produced at the time of the reserve determination.                  Reserves                  must be supported by a feasibility study done to bankable standards                  that                  demonstrates the economic extraction ("Bankable standards" implies                  that                  the confidence attached to the costs and achievements developed                  in the                  study is sufficient for the project to be eligible for external                  debt                  financing.) A reserve includes adjustments to the in-situ tonnes                  and grade                  to include diluting materials and allowances for losses that might                  occur                  when the material is mined. |
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| Proven                  Reserve:      | Reserves                  for which (a) quantity is computed from dimensions revealed in                  outcrops,                  trenches, workings or drill holes; grade and/or quality are computed                  from                  the results of detailed sampling and (b) the sites for inspection,                  sampling and measurement are spaced so closely and the geologic                  character                  is so well defined that size, shape depth and mineral content of                  reserves                  are well-established.                                                                                                                                                                                                                                                                                                                           |
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| Probable                  Reserve:    | Reserves                  for which quantity and grade and/or quality are computed from information                  similar to that used for proven (measured) reserves, but the sites                  for                  inspection, sampling, and measurement are farther apart or are                  otherwise                  less adequately spaced. The degree of assurance, although lower                  than that                  for proven reserves, is high enough to assume continuity between                  points of                  observation.                                                                                                                                                                                                                                                                                                                               |
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| mineralized                  material | The                  term “mineralized material” refers to material that is not included in the                  reserve as it does not meet all of the criteria for adequate demonstration                  for economic or legal extraction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| non-reserves                          | The                  term “non-reserves” refers to mineralized material that is not included in                  the reserve as it does not meet all of the criteria for adequate                  demonstration for economic or legal extraction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| exploration                  stage    | An                  “exploration stage” prospect is one which is not in either the development                  or production stage.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| development                  stage    | A                  “development stage” project is one which is undergoing preparation of an                  established commercially mineable deposit for its extraction but                  which is                  not yet in production.  This stage occurs after completion of a                  feasibility study.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| production                  stage     | A                  “production stage” project is actively engaged in the process of                  extraction and beneficiation of mineral reserves to produce a marketable                  metal or mineral product.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

----

**ADDITIONAL      DEFINITIONS**

| Caliche:                                                                           | Sediment                  cemented by calcium carbonate near surface.                                                                                                                                                                                                                        |
|------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                               |                                                                                                                                                                                                                                                                                         |
| Diorite:                                                                           | Igneous                  Rock.                                                                                                                                                                                                                                                               |
|                                                                               |                                                                                                                                                                                                                                                                                         |
| Dikes:                                                                             | Tabular,                  vertical bodies of igneous rock.                                                                                                                                                                                                                                   |
|                                                                               |                                                                                                                                                                                                                                                                                         |
| Fissility:                                                                         | Shattered,                  broken nature of rock.                                                                                                                                                                                                                                           |
|                                                                               |                                                                                                                                                                                                                                                                                         |
| Fracture                  Foliations:                                              | Fracture                  pattern in rock, parallel orientation, resulting from                  pressure.                                                                                                                                                                                   |
|                                                                               |                                                                                                                                                                                                                                                                                         |
| Heap                  Leaching:                                                    | Broken                  and crushed ore on a pile subjected to dissolution of metals by                  leach                  solution.                                                                                                                                                    |
|                                                                               |                                                                                                                                                                                                                                                                                         |
| Hydrometallurgical                  Plant:                                         | A                  metallurgical mineral processing plant that uses water to leach                  or                  separate and concentrate elements or minerals.                                                                                                                       |
|                                                                               |                                                                                                                                                                                                                                                                                         |
| Intercalated:                                                                      | Mixed                  in.                                                                                                                                                                                                                                                                   |
|                                                                               |                                                                                                                                                                                                                                                                                         |
| Litho                  static Pressure:                                            | Pressure                  brought on by weight of overlaying rocks.                                                                                                                                                                                                                          |
|                                                                               |                                                                                                                                                                                                                                                                                         |
| Major                  Intrusive Center:                                           | An                  area where large bodies of intrusive igneous rock exist and through                  which                  large amounts of mineralizing fluids rose.                                                                                                                   |
|                                                                               |                                                                                                                                                                                                                                                                                         |
| Mesothermal:                                                                       | A                  class of hydrothermal ore deposit formed at medium temperatures                  and a                  depth over one mile in the earth’s crust.                                                                                                                   |
|                                                                               |                                                                                                                                                                                                                                                                                         |
| Microporphyritic                  Latite:                                          | Extremely                  fine grained siliceous igneous rock with a distribution of larger                  crystals                  within.                                                                                                                                              |
|                                                                               |                                                                                                                                                                                                                                                                                         |
| Mudstone:                                                                          | Sedimentary                  bed composed primarily of fine grained material such as clay and                  silt.                                                                                                                                                                         |
|                                                                               |                                                                                                                                                                                                                                                                                         |
| PPM:                                                                               | Part                  per million.                                                                                                                                                                                                                                                           |
|                                                                               |                                                                                                                                                                                                                                                                                         |
| Pyritized:                                                                         | Partly                  replaced by the mineral pyrite.                                                                                                                                                                                                                                      |
|                                                                               |                                                                                                                                                                                                                                                                                         |
| Reverse                  Circulation Drilling                  (or R.C. Drilling): | Type                  of drilling using air to recover cuttings for sampling through                  the middle                  of the drilling rods rather than the outside of the drill rods,                  resulting                  in less contamination of the sampled interval. |
|                                                                               |                                                                                                                                                                                                                                                                                         |
| Sericitized:                                                                       | Rocks                  altered by heat, pressure and solutions resulting in formation                  of the                  mineral sericite, a very fine grained                  mica.                                                                                                  |

----

|                                |                                                                                                                                                           |
|-------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Siltstone:                          | A                  sedimentary rock composed of clay and silt sized particles.                                                                                 |
|                                |                                                                                                                                                           |
| Silicified:                         | Partly                  replaced by silica.                                                                                                                    |
|                                |                                                                                                                                                           |
| Stockwork                  Breccia: | Earth's                  crust broken by two or more sets of parallel faults converging                  from                  different directions.           |
|                                |                                                                                                                                                           |
| Stockwork:                          | Ore,                  when not in strata or in veins but in large masses, so as to be                  worked in                  chambers or in large blocks. |
|                                |                                                                                                                                                           |
| Surface                  Mine:      | Surface                  mining by way of an open pit without shafts or underground                  working.                                                  |

----

**PART      I**

**Item      1. **
**Description      of Business**

**Sonora,      Mexico Concessions**

----

*“Item      2. Description of Property; El Chanate Properties - Sonora,      Mexico”*
*“Part      II, Item 6, Management's Discussion and Analysis of Financial Condition and      Results of Operations; Liquidity and Capital Resources; Plan of      Operations.”*

**Competition**

**Human      Resources**

**Cautionary      Statement on Forward-Looking Statements**

----

**Risk      Factors**

**The      risks described below should not be considered to be comprehensive and      all-inclusive. Additional risks that we do not yet know of or that we currently      think are immaterial may also impair our business operations. If any events      occur that give rise to the following risks, our business, financial condition,      cash flow or results of operations could be materially and adversely affected,      and as a result, the trading price of our Common Stock could be materially      and      adversely impacted. These risk factors should be read in conjunction with other      information set forth in this report, including our Consolidated Financial      Statements and the related Notes.**

**Risks      related to our business and operations**

***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.***

***We      lack operating cash flow and rely on external funding sources. If we are unable      to continue to obtain needed capital from outside sources until we are able      to      generate positive cash flow from operations, we will be forced to reduce or      curtail 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 report have been prepared.***

*“*
*Part      II, Item 6, *
*Management's      Discussion *
*and      Analysis of Financial Condition and Results of Operations; Liquidity and Capital      Resources; Plan of Operations.”*

***Our      Credit Facility with Standard Bank imposes restrictive covenants on us.***

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

*“Part      II, Item 6, *
*Management's      Discussion and Analysis of Financial Condition and Results of Operations;      Liquidity and Capital Resources; Plan of Operations.”*

***We      will be using reconditioned and used equipment which could adversely affect      our      cost assumptions and our ability to economically and successfully mine the      project.***

----

***As      a result of the projected short mine life of seven years, if major problems      develop, we will have limited time to correct these problems and we may have      to      cease operations earlier than planned.***

***The      gold deposit we have identified at El Chanate is relatively small and low-grade.      If our estimates and assumptions are inaccurate, our results of operation and      financial condition could be materially adversely affected.***

***Our      currently permitted water rights may not be adequate for all of our total      project needs over the entire course of our anticipated mining operations.      If we      need to obtain additional rights, but are unable to procure them our planned      operations may be adversely affected.***

***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.***

----

***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                level of interest rates, |
|----------------------------------------------------|---------------------------------------------|

| ·                    | the                rate of inflation, |
|----------------------------------------------------|---------------------------------------|

| ·                    | central                bank sales, |
|----------------------------------------------------|------------------------------------|

| ·                    | world                supply of gold and |
|----------------------------------------------------|-----------------------------------------|

| ·                    | stability                of exchange rates. |
|----------------------------------------------------|---------------------------------------------|

***We      may not be successful in hedging against gold price and interest rate      fluctuations and may incur mark to market losses and lose money through our      hedging programs.****** ***

----

***Our      material property interests are in Mexico. Risks of doing business in a foreign      country could adversely affect our results of operations and financial      condition.***

| ·                   | labor                disputes, |
|----------------------------------------------|--------------------------------|

| ·                   | invalidity                of governmental orders, |
|----------------------------------------------|---------------------------------------------------|

| ·                   | uncertain                or unpredictable political, legal and economic                environments, |
|----------------------------------------------|------------------------------------------------------------------------------------------------------|

| ·                   | war                and civil disturbances, |
|----------------------------------------------|--------------------------------------------|

| ·                   | changes                in laws or policies, |
|----------------------------------------------|---------------------------------------------|

| ·                   | taxation, |
|----------------------------------------------|-----------|

| ·                   | delays                in obtaining or the inability to obtain necessary governmental                permits, |
|----------------------------------------------|--------------------------------------------------------------------------------------------------------------|

| ·                   | governmental                seizure of land or mining claims, |
|----------------------------------------------|---------------------------------------------------------------|

| ·                   | limitations                on ownership, |
|----------------------------------------------|------------------------------------------|

| ·                   | limitations                on the repatriation of earnings, |
|----------------------------------------------|-------------------------------------------------------------|

| ·                   | increased                financial costs, |
|----------------------------------------------|-------------------------------------------|

| ·                   | import                and export regulations, including restrictions on the export of gold,                and |
|----------------------------------------------|----------------------------------------------------------------------------------------------------------------|

| ·                   | foreign                exchange controls. |
|----------------------------------------------|-------------------------------------------|

***We      anticipate selling gold in U.S. dollars; however, we 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.***

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

| ·                   | ownership                of assets, |
|----------------------------------------------|-------------------------------------|

| ·                   | land                tenure, |
|----------------------------------------------|-----------------------------|

| ·                   | mining                policies, |
|----------------------------------------------|---------------------------------|

| ·                   | monetary                policies, |
|----------------------------------------------|-----------------------------------|

| ·                   | taxation, |
|----------------------------------------------|-----------|

| ·                   | rates                of exchange, |
|----------------------------------------------|-----------------------------------|

----

| ·                   | environmental                regulations, |
|----------------------------------------------|-------------------------------------------|

| ·                   | labor                relations, |
|----------------------------------------------|---------------------------------|

| ·                   | repatriation                of income and |
|----------------------------------------------|-------------------------------------------|

| ·                   | return                of capital. |
|----------------------------------------------|-----------------------------------|

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

| ·                   | stricter                standards and enforcement, |
|----------------------------------------------|----------------------------------------------------|

| ·                   | increased                fines and penalties for non-compliance, |
|----------------------------------------------|------------------------------------------------------------------|

| ·                   | more                stringent environmental assessments of proposed projects and |
|----------------------------------------------|----------------------------------------------------------------------------------|

| ·                   | a                heightened degree of responsibility for companies and their officers,                directors and employees. |
|----------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------|

***We      are not insured against any losses or liabilities that could arise from our      operations because we have not commenced operations at El Chanate. Although      we      plan on obtaining insurance once construction***
* *
***begins,      such insurance may not be adequate.***
*** ***
***If      we incur material losses or liabilities because we do not have insurance or      our      coverage is not adequate, our financial position could be materially and      adversely affected.***

| ·                   | environmental                hazards, |
|----------------------------------------------|---------------------------------------|

| ·                   | industrial                accidents, |
|----------------------------------------------|--------------------------------------|

| ·                   | metallurgical                and other processing, |
|----------------------------------------------|----------------------------------------------------|

| ·                   | acts                of God, and |
|----------------------------------------------|---------------------------------|

| ·                   | mechanical                equipment and facility performance problems. |
|----------------------------------------------|------------------------------------------------------------------------|

----

| ·                   | damage                to, or destruction of, mineral properties or production                facilities, |
|----------------------------------------------|----------------------------------------------------------------------------------------------------------|

| ·                   | personal                injury or death, |
|----------------------------------------------|------------------------------------------|

| ·                   | environmental                damage, |
|----------------------------------------------|--------------------------------------|

| ·                   | delays                in mining, |
|----------------------------------------------|----------------------------------|

| ·                   | monetary                losses and /or |
|----------------------------------------------|----------------------------------------|

| ·                   | possible                legal liability. |
|----------------------------------------------|------------------------------------------|

***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.***

***We      are dependent on the efforts of certain key personnel and we need to retain      additional personnel and/or contractors to develop our El Chanate Project.      If we      lose the services of these personnel or we are unable to retain additional      personnel and/or contractors, our ability to complete development and operate      our El Chanate Project may be delayed and our planned operations may be      materially adverse affected.***

----

***There      are uncertainties as to title matters in the mining industry. We believe that      we      have good title to our properties; however, any defects in such title that      cause      us to lose our rights in mineral properties could jeopardize our planned      business operations.***

***Should      we successfully commence mining operations in Mexico, our ability to remain      profitable long term, should we become profitable, eventually will depend on      our      ability to find, explore and develop additional properties. Our ability to      acquire such additional properties will be hindered by competition. If we are      unable to acquire, develop and economically mine additional properties, we      most      likely will not be able to be profitable on a long-term      basis.***

***Our      ability on a going forward basis to discover additional viable and economic      mineral reserves is subject to numerous factors, most of which are beyond our      control and are not predictable. If we are unable to discover such reserves,      we      most likely will not be able to be profitable on a long-term      basis.***

| ·                   | the                location of economic ore bodies, |
|----------------------------------------------|-----------------------------------------------------|

| ·                   | development                of appropriate metallurgical processes, |
|----------------------------------------------|--------------------------------------------------------------------|

| ·                   | receipt                of necessary governmental approvals and |
|----------------------------------------------|----------------------------------------------------------------|

| ·                   | construction                of mining and processing facilities at any site chosen for mining. |
|----------------------------------------------|------------------------------------------------------------------------------------------------|

| ·                   | the                price of gold, |
|----------------------------------------------|-----------------------------------|

| ·                   | the                particular attributes of the deposit, such as its |
|----------------------------------------------|----------------------------------------------------------------------|

| o                   | size, |
|-----------------------------------------|-------|

| o                   | grade                and |
|-----------------------------------------|--------------------------|

| o                   | proximity                to infrastructure, |
|-----------------------------------------|---------------------------------------------|

----

| ·                   | financing                costs, |
|----------------------------------------------|---------------------------------|

| ·                   | taxation, |
|----------------------------------------------|-----------|

| ·                   | royalties, |
|----------------------------------------------|------------|

| ·                   | land                tenure, |
|----------------------------------------------|-----------------------------|

| ·                   | land                use, |
|----------------------------------------------|--------------------------|

| ·                   | water                use, |
|----------------------------------------------|---------------------------|

| ·                   | power                use, |
|----------------------------------------------|---------------------------|

| ·                   | importing                and exporting gold and |
|----------------------------------------------|-------------------------------------------------|

| ·                   | environmental                protection. |
|----------------------------------------------|------------------------------------------|

**Risks      related to ownership of our stock**

***There      is a limited market for our common stock. If a substantial and sustained market      for our common stock does not develop, our stockholders may have difficulty      selling, or be unable to sell, their shares.***

***Our      stock price may be adversely affected if a significant amount of shares are      sold      in the public market.***

----

***We      do not intend to pay cash dividends in the near future.***

***If      our Common Stock is deemed to be a "penny stock," trading of our shares would      be      subject to special requirements that could impede our stockholders' ability      to      resell their shares.***

| i.   | with                a price of less than five dollars per share; |
|----------------|------------------------------------------------------------------|

| ii.   | that                are not traded on a recognized national                exchange; |
|-----------------|--------------------------------------------------------------------------------------|

| §   | whose                prices are not quoted on the NASDAQ automated quotation system;                or |
|--------------------|--------------------------------------------------------------------------------------------------------|

| iii.   | of                issuers with net tangible assets equal to or less than |
|------------------|--------------------------------------------------------------------------|

| §   | -$2,000,000                if the issuer has been in continuous operation for at least three                years;                or |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|

| §   | -$5,000,000                if in continuous operation for less than three years,                or |
|--------------------|----------------------------------------------------------------------------------------------------|

| §   | of                issuers with average revenues of less than $6,000,000 for the last                three                years. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| i.   | to                obtain from the investor information concerning his or her financial                situation, investment experience and investment objectives; |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ii.   | to                determine reasonably, based on that information, that transactions                in                penny stocks are suitable for the investor and that the investor                has                sufficient knowledge and experience as to be reasonably capable of                evaluating the risks of penny stock transactions; |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| iii.   | to                provide the investor with a written statement setting forth the basis                on                which the broker-dealer made the determination in (ii) above; and |
|------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| iv.   | to                receive a signed and dated copy of such statement from the investor,                confirming that it accurately reflects the investor's financial situation,                investment experience and investment objectives. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Item      2. **
**Description      of Property**

**El      Chanate Properties - Sonora, Mexico**

|   | **Concession                Name** |   | **Title                No.** |   | **Hectares** |
|--------|------------------------------------|--------|------------------------------|--------|--------------|
| 1      | San                Jose            |   | 200718                       |   | 96.0000      |
| 2      | Las                Dos Virgen      |   | 214874                       |   | 132.2350     |
| 3      | Rono                I              |   | 206408                       |   | 82.1902      |
| 4      | Rono                3              |   | 214224                       |   | 197.2180     |
| 5      | La                Cuchilla         |   | 211987                       |   | 143.3481     |
| 6      | Elsa                               |   | 212004                       |   | 2,035.3997   |
| 7      | Elisa                              |   | 214223                       |   | 78.4717      |
| 8      | Ena                                |   | 217495                       |   | 190.0000     |
| 9      | Eva                                |   | 212395                       |   | 416.8963     |
| 10     | Mirsa                              |   | 212082                       |   | 20.5518      |
| 11     | Olga                               |   | 212081                       |   | 60.5890      |
| 12     | Edna                               |   | 212355                       |   | 24.0431      |
| 13     | La                Tira             |   | 219624                       |   | 1.7975       |
| 14     | La                Tira 1           |   | 219623                       |   | 18.6087      |
| 15     | Los                Tres            |   | 223634                       |   | 8.000        |
| 16     | El                Charro           |   | 206,404                      |   | 40.0000      |
|   |                               |   | **Total**                    |   | 3,543.3491   |

----

----

** **

----

*** ***

| ·                   | an                increase in the mine life from five to six                years, |
|----------------------------------------------|------------------------------------------------------------------------------------|

| ·                   | an                increase in the base gold price from $325/oz to                $375/oz, |
|----------------------------------------------|-------------------------------------------------------------------------------------------|

| ·                   | use                of a mining contractor, |
|----------------------------------------------|--------------------------------------------|

| ·                   | revised                mining, processing and support                costs, |
|----------------------------------------------|-----------------------------------------------------------------------------|

----

| ·                   | stockpiling                of low grade material for possible processing in year six, if justified                by                gold prices at that time, |
|----------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·                   | a                reduced size for the waste rock dump and revised design of reclamation                waste dump slopes, |
|----------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|

| ·                   | a                revised process of equipment selection                and |
|----------------------------------------------|----------------------------------------------------------------------------|

| ·                   | evaluation                of the newly acquired water well for processing the                ore. |
|----------------------------------------------|---------------------------------------------------------------------------------------------------|

| ·                   | a                33% increase in proven and probable gold                reserves, |
|----------------------------------------------|------------------------------------------------------------------------------------|

| ·                   | an                increase in mine life from six to seven                years, |
|----------------------------------------------|---------------------------------------------------------------------------------|

| ·                   | an                increase in the base gold price from $375/oz to $450/oz                and |
|----------------------------------------------|----------------------------------------------------------------------------------------------|

| ·                   | Stockpiling                of low grade material for possible processing in year seven, if justified                by gold prices at that time. |
|----------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Production      Summary**

|                                                                                                                                                                                                                                                                                                                               | Metric                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | U.S.                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  **Materials**ReservesOther                Mineralized MaterialsWasteTotal Contained                Gold **Production**Ore                Crushed  Operating                Days/YearGold                Plant Average RecoveryAverage                Annual ProductionTotal                Gold Produced |   19.9                Tonnes @ 0.767 g/t*                    0 Million Tonnes 19.9                Million Tonnes39.8                Million Tonnes 15.24                Million grams  2.6                Million Tonnes /Year                  7,500 Mt/d*                   365 Days per year                  69.2 %   1.38                Million grams 10.55                Million grams |   21.9                Million Tons @ 0.022 opt*                    0 Million Tons 21.9                Million Tons43.8                Million tons 489,952                Oz  2.86                Million Tons/Year                  8,250 t/d                   365 Days per year                 69.2 %                 44,395 Oz339,047                Oz |

----

*“Part      II, Item 6, Management's Discussion and Analysis of Financial Condition and      Results of Operations; Liquidity and Capital Resources; Plan of      Operations.”*

----

----

*“Part      II, Item 6, Management's Discussion and Analysis of Financial Condition and      Results of Operations; Liquidity and Capital Resources; Plan of      Operations”*

----

**Item      3. **
**Legal      Proceedings**

**Item      4. **
**Submission      of Matters to a Vote of Security Holders**
** **

----

**PART      II**

**Item      5. **
**Market      for Common Equity, Related Stockholder Matters and Small Business Issuer      Purchases of Equity Securities**
**.**

|  Quarter              Ending |  High                  and   Low |
|-----------------------------------|----------------------------------------------------------------|
|                              |                                                           |   |
| July                31, 2006      | 0.43                                                           | 0.32 |
| April                30, 2006     | 0.39                                                           | 0.33 |
| January                31, 2006   | 0.42                                                           | 0.28 |
| October                31, 2005   | 0.27                                                           | 0.17 |
|                              |                                                           |   |
| July                31, 2005      | 0.24                                                           | 0.16 |
| April                30, 2005     | 0.40                                                           | 0.17 |
| January                31, 2005   | 0.39                                                           | 0.23 |
| October                31, 2004   | 0.33                                                           | 0.19 |

|  Period              Ending              |  High                   and    Low |
|-----------------------------------------------|-----------------------------------------------------------------------|
|                                          |  US$/CDN$                                                        |  US$/CDN$ |
| Quarter                ended July 31, 2006    | 0.49/0.55                                                             | 0.28/0.32 |
| March                22 2006 - April 30, 2006 | 0.44/0.50                                                             | 0.33/0.37 |

**.**

----

|                                                                       |   | Number                of Securities to be issued upon exercise of outstanding options,                warrants                and rights |       |                Weighted-average                Exercise                price ofOutstanding                options, warrants                and rights |   |                Number                of securities Remaining available for future issuance under equity                compensation plans (excluding securities reflected                in column (a)) |   |
|----------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Plan              Category                                                 |   |                                                                                                                                     |       |                                                                                                                                                            |   |                                                                                                                                                                                                         |   |
|                                                                       |   | (a)                                                                                                                                      |       | (b)                                                                                                                                                             |   | (c)                                                                                                                                                                                                          |   |
|                                                                       |   |                                                                                                                                     |       |                                                                                                                                                            |   |                                                                                                                                                                                                         |   |
| Equity                compensation plans approved by security holders:     |   |                                                                                                                                     | –    |                                                                                                                                                            |   | –                                                                                                                                                                                                      |   |   | - |   |
|                                                                       |   |                                                                                                                                     |       |                                                                                                                                                            |   |                                                                                                                                                                                                              |   |   |   |   |
| Equity                compensation plans not approved by security holders: |   |                                                                                                                                     | 39,731,454 |                                                                                                                                                            | $      | 0.27                                                                                                                                                                                                         |   |   | N/A |   |
| Total                                                                      |   |                                                                                                                                     | 39,731,454 |                                                                                                                                                            | $      | 0.27                                                                                                                                                                                                         |   |   | N/A |   |

----

**Item      6. **
**Management's      Discussion and Analysis of Financial Condition and Results of      Operations**
**.**

**Result      of Operations**

----

*Other      Income or Expense.*
*not*

**Liquidity      and Capital Resources; Plan of Operations**

----

| Activity                                                           |   | Estimated                  Cost |       |
|--------------------------------------------------------------------|--------|---------------------------------|------------|
|                                                               |   |                            |       |
| Mexico                                                             |   |                            |       |   |
|                                                               |   |                            |       |   |
| Crushing                                                           |   |                            | 3,950,000  |   |
| Heap                  leaching                                     |   |                            | 4,040,000  |   |
| Carbon                  handling & refining                    |   |                            | 960,000    |   |
| Power                  system                                      |   |                            | 930,000    |   |
| Water                  system                                      |   |                            | 965,000    |   |
| Trucks                  and other mining equipment                 |   |                            | 460,000    |   |
| Engineering                  and planning                          |   |                            | 1,050,000  |   |
| Ancillaries                  (building, shops, lab and road)       |   |                            | 1,172,000  |   |
| Owner’s                  costs                               |   |                            | 2,700,000  |   |
| Working                  capital                                   |   |                            | 1,600,000  |   |
| General                  and administrative                        |   |                            | 210,000    |   |
| Sub-total                                                          |   | $                               | 18,037,000 |   |
|                                                               |   |                            |       |   |
| New                  York and Colorado                             |   |                            |       |   |
|                                                               |   |                            |       |   |
| General,                  administrative and professional expenses |   |                            | 1,380,000  |   |
| Total                                                              |   | $                               | 19,417,000 |   |

----

**2006      Private Placements & Warrant Exercises**

**February      2005 Private Placement**

----

**Project      Finance Credit Facility **

** **

----

*We      lack operating cash flow and rely on external funding sources. If we are unable      to continue to obtain needed capital from outside sources until we are able      to      generate positive cash flow from operations, we will be forced to reduce or      curtail our operations*
*Part      I, Item 1, Description of Business; *
*Risk      Factors.”*

**Environmental      and Permitting Issues**

----

**Equipment      Disposition**

**Contractual      Obligations as of July 31, 2006**

| 2007   |   |   | 51,000 |   |
|--------|--------|--------|--------|--------|
| 2008   |   |   | 4,200  |   |
|   |   | $      | 55,200 |   |

----

**New      Accounting Pronouncements**

----

*Inventory      Costs - An amendment of ARB No. 43, Chapter 4*
*Inventory      Pricing*

*Accounting      Changes and Error Corrections.*

----

**Disclosure      About Off-Balance**
**      Sheet Arrangements **

**Critical      Accounting Policies**

----

*other      income*
*other      expense*

----

**Item 7.**
**Financial      Statements.**

**Item      8.**
**Changes      in and Disagreements with Accountants on Accounting and Financial      Disclosures.**

**Item      8A.**
**Controls      and Procedures**
**.      **

** **

**Item      8B.**
**Other      Information**
**.**

----

**PART      III**

**Item      9.**
**Directors,      Executive Officers, Promoters and Control Persons; Compliance with Section      16(a)      of the Exchange Act.**

| Name                                  |   | Age    |   | First                  BecameDirector |   | Position                                                                                                    |
|---------------------------------------|--------|--------|--------|---------------------------------------|--------|-------------------------------------------------------------------------------------------------------------|
|                                  |   |   |   |                                  |   |                                                                                                        |
| Gifford                  A. Dieterle  |   | 74     |   | 9/82                                  |   | President,                  Treasurer, Chief Financial Officer & Chairman of the                  Board |
|                                  |   |   |   |                                  |   |                                                                                                        |
| Christopher                  Chipman  |   | 33     |   |                                  |   | Chief                  Financial Officer                                                                    |
|                                  |   |   |   |                                  |   |                                                                                                        |
| Robert                  Roningen      |   | 71     |   | 9/93                                  |   | Director,                  Senior Vice President, Secretary                                                 |
|                                  |   |   |   |                                  |   |                                                                                                        |
| Jack                  V. Everett      |   | 85     |   | 1/95                                  |   | Director,                  Vice President - Exploration                                                     |
|                                  |   |   |   |                                  |   |                                                                                                        |
| Roger                  A. Newell      |   | 63     |   | 8/00                                  |   | Director,                  Vice President -Development                                                      |
|                                  |   |   |   |                                  |   |                                                                                                        |
| Jeffrey                  W. Pritchard |   | 48     |   | 1/00                                  |   | Director,                  Vice President -Investor Relations                                               |
|                                  |   |   |   |                                  |   |                                                                                                        |
| John                  Brownlie        |   | 57     |   |                                  |   | Vice                  President - Operations                                                                |
|                                  |   |   |   |                                  |   |                                                                                                        |
| J.                  Scott Hazlitt     |   | 54     |   |                                  |   | Vice                  President - Mine Development                                                          |
|                                  |   |   |   |                                  |   |                                                                                                        |
| Ian                  A. Shaw          |   | 66     |   | 3/06                                  |   | Director                                                                                                    |
|                                  |   |   |   |                                  |   |                                                                                                        |
| John                  Postle          |   | 65     |   | 3/06                                  |   | Director                                                                                                    |
|                                  |   |   |   |                                  |   |                                                                                                        |
| Mark                  T. Nesbitt      |   | 61     |   | 3/06                                  |   | Director                                                                                                    |

----

** **

----

----

----

**Item      10.**
**Executive      Compensation**

**SUMMARY      COMPENSATION TABLE**

|                                         |   |                                           |   |                 |   |                           |   |                                                    |   |  **Long-Term                  Compensation** |   |
|----------------------------------------------|--------|------------------------------------------------|--------|----------------------|--------|--------------------------------|--------|---------------------------------------------------------|--------|---------------------------------------------------|--------|
|                                         |   |  **Annual                  Compensation** |   |  **Awards**     |   |  **Payouts**              |   |
|  **(a)**                                |   |  **(b)**                                  |   |  **(c)**        |   |  **(d)**                  |   |  **(e)**                                           |   |  **(f)**                                     |   |  **(g)** |   |  **(h)** |   |  **(i)** |   |
| ** ****Name and Principal****Position** |   | ** ****Year **** **             |   | ** ****Salary** |   | **Bonus                  ($)** |   |  **Other                  Annual Compensation($)** |   | **Restricted****Stock****Award($)**               |   | **Options****SARs** |   | **LTIP****Payouts($)** |   | ** ****All Other****Compensation(i)** |   |
| Gifford                  A. Dieterle         |   |                                           | 2006   |                 |   | 169,000                        |   |                                                    | -0-    |                                              |   | -0- |   |   | -0- |   |   | 1,500,000* |   |   | -0- |   |   | -0- |   |
| Chief                  Executive             |   |                                           | 2005   |                 |   | 123,000                        |   |                                                    | -0-    |                                              |   | -0- |   |   | -0- |   |   | -0- |   |   | -0- |   |   | -0- |   |
| Officer                                      |   |                                           | 2004   |                 |   | 104,000                        |   |                                                    | 20,000 |                                              |   | -0- |   |   | -0- |   |   | 250,000 |   |   | -0- |   |   | -0- |   |
|                                         |   |                                           |   |                 |   |                           |   |                                                    |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| J.                  Scott Hazlitt            |   |                                           | 2006   |                 |   | 101,000                        |   |                                                    | -0-    |                                              |   | -0- |   |   | -0- |   |   | 25,000 |   |   | -0- |   |   | -0- |   |
| Vice                  President              |   |                                           | 2005   |                 |   | 97,000                         |   |                                                    | -0-    |                                              |   | -0- |   |   | -0- |   |   | -0- |   |   | -0- |   |   | -0- |   |
| Mine                  Development            |   |                                           | 2004   |                 |   | 96,000                         |   |                                                    | -0-    |                                              |   | -0- |   |   | -0- |   |   | -0- |   |   | -0- |   |   | -0- |   |

----

**OPTION/SAR      GRANTS IN LAST FISCAL YEAR**

**Individual      Grants**

|  (a)                              |   |  (b)           |      |  (c)                                                                                                                        |   |  (d)                                                      |   |  (e)      |                  |
|----------------------------------------|--------|---------------------|-----------|----------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------|--------|----------------|-----------------------|
| Name                                   |   | Options/SARsGranted |      | Percent                  of TotalOptions/SARsGranted                  toEmployee                  inFiscal                  Year |   | Exercise                  or BasePrice                  ($/SH) |   | ExpirationDate |                  |
|                                   |   |                |      |                                                                                                                             |   |                                                           |   |           |                  |   |   |   |   |
| Gifford                  A. Dieterlie  |   |                | 1,250,000 |                                                                                                                             |   | 22.4                                                           | %      | $              | .                  05 |   |   | 1/3/2007 |   |
| Gifford                  A. Dieterlie* |   |                | 250,000   |                                                                                                                             |   | 4.5                                                            | %      | $              | .                  32 |   |   | 7/31/2008 |   |
| J.                  Scott Hazlitt      |   |                | 25,000    |                                                                                                                             |   | 0.4                                                            | %      | $              | .05                   |   |   | 1/3/2007 |   |

----

**Aggregated      Option/SAR Exercises and Fiscal Year-End Option/SAR**

|  (a)                                |   |  (b)                                                           |    |  (c)                         |   |  (d)                                                                                                                                                  |   |  (e)                                                                                                                                                       |      |
|------------------------------------------|--------|---------------------------------------------------------------------|---------|-----------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|
| Name                                     |   | SharesAcquired                    onExercise                    (#) |    | Value                    Realized |   | Number                    of Unexercised                    Options/SARs                    at                    FY-End(#) Exercisable/Unexercisable |   | Value                    of UnexercisedIn-the-MoneyOptions/SARs                    at                    FY-End(#)                    Exercisable/Unexercisable |      |
|                                     |   |                                                                |    |                              |   |                                                                                                                                                       |   |                                                                                                                                                            |      |   |   |   |   |
| Gifford                    A. Dieterlie* |   |                                                                | 200,000 |                              |   | 44,000                                                                                                                                                     |   |                                                                                                                                                            | 1,550,000 |   | $ | 308,500 |   |
| J.                    Scott Hazlitt      |   |                                                                | 300,000 |                              |   | 75,000                                                                                                                                                     |   |                                                                                                                                                            | 25,000    |   | $ | 7,000 |   |

----

----

----

*“Part      III, Item 12. Certain Relationships and Related Transactions” *

**Item      11.**
**Security      Ownership of Certain Beneficial Owners and Management and Related Stockholder      Matters**
**.      **

| ·                   | Each                person, individually or as a group, known to us to be deemed the                beneficial owners of five percent or more of our issued and outstanding                Common Stock; |
|----------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·                   | each                of our Directors and the Named Executives;                and |
|----------------------------------------------|-----------------------------------------------------------------------------------|

| ·                   | all                of our officers and Directors as a group. |
|----------------------------------------------|--------------------------------------------------------------|

----

| Name                  and Address of Beneficial Owner                                                                       |   | Amount                  & Natureof                  BeneficialOwnership |           |  ApproximatePercentage(1)(2) |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|----------------|-----------------------------------|--------|
|                                                                                                                        |   |                                                                        |           |                              |   |
| Gifford                  A. Dieterle*                                                                                       |   |                                                                        | 2,650,000(2)(4 | )                                 |   | 2.0 | % |
|                                                                                                                        |   |                                                                        |           |                              |   |   |   |
| Jack                  Everett*534                  Observatory Drive Colorado                  Springs, CO 80904            |   |                                                                        | 1,300,000(3)(4 | )                                 |   | 1.0 | % |
|                                                                                                                        |   |                                                                        |           |                              |   |   |   |
| Robert                  Roningen*2955                  Strand Road** **Duluth,                  MN 55804               |   |                                                                        | 2,143,750(2)(5 | )                                 |   | 1.6 | % |
|                                                                                                                        |   |                                                                        |           |                              |   |   |   |
| Jeffrey                  W. Pritchard*                                                                                      |   |                                                                        | 956,354(2)(4   | )                                 |   | ** |   |
|                                                                                                                        |   |                                                                        |           |                              |   |   |   |
| Christopher                  Chipman* 4014                  Redwing Lane Audubon,                  PA 19407                 |   |                                                                        | -0-(4          | )                                 |   | 0.0 | % |
|                                                                                                                        |   |                                                                        |           |                              |   |   |   |
| Roger                  A Newell* 1781                  South Larkspur Drive Golden,                  CO 80401               |   |                                                                        | 1,477,273(2)(4 | )                                 |   | 1.1 | % |
|                                                                                                                        |   |                                                                        |           |                              |   |   |   |
| John                  Brownlie* 6040                  Puma Ridge Littleton,                  CO 80124                       |   |                                                                        | -0-(4          | )                                 |   | 0.0 | % |
|                                                                                                                        |   |                                                                        |           |                              |   |   |   |
| Scott                  Hazlitt* 9428                  W. Highway 50 Salida.                  CO 81201                       |   |                                                                        | 1,025,000(2    | )                                 |   | ** |   |
|                                                                                                                        |   |                                                                        |           |                              |   |   |   |
| Ian                  A. Shaw* 20                  Toronto Street, 12 Floor Toronto,                  Ontario M5C-2B8 Canada |   |                                                                        | -0-            |                              |   | 0.0 | % |

----

| John                  Postle* 2169                  Constance Drive Oakville                  Ontario Canada                  L6j 5l2               |   |   | -0-                  |   |   | 0.0    | %      |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------------|--------|--------|--------|--------|
|                                                                                                                                                |   |   |                 |   |   |   |   |
| Mark                  T. Nesbitt* 216                  Sixteenth Street Suite                  1300 Denver,                  CO 80202               |   |   | 41,666               |   |   | **     |   |
|                                                                                                                                                |   |   |                 |   |   |   |   |
| RAB                  Special Situations (Master)                  Fund Limited 1                  Adam Street London,                  WC2N 6LE, UK |   |   | 16,358,700(6         | )      |   | 12.3   | %      |
|                                                                                                                                                |   |   |                 |   |   |   |   |
| SPGP                  17,                  Avenue Matignon 75008                  Paris, France                                                     |   |   | 20,270,000(7         | )      |   | 14.2   | %      |
|                                                                                                                                                |   |   |                 |   |   |   |   |
| Standard                  Bank PLC 320                  Park Avenue New                  York, NY 10022                                             |   |   | 15,750,000(8         | )      |   | 10.8   | %      |
|                                                                                                                                                |   |   |                 |   |   |   |   |
| All                  Officers and Directors                  as a Group (11)                                                                        |   |   | 9,594,043(2)(3)(4)(5 | )      |   | 7.0    | %      |

----

|   |                                                      |   |
|--------|-----------------------------------------------------------|--------|
| *      | Officer                  and/or Director of Capital Gold. |   |
| **     | Less                  than 1%.                            |   |

| (1) | Based                upon 132,785,127, shares issued and outstanding as of October 24,                2006. |
|-----|-------------------------------------------------------------------------------------------------------------|

| (2) | For                Messrs. Dieterle, Roningen, Pritchard, Newell and Hazlitt, includes,                respectively, 1,300,000 shares, 750,000 shares, 622,727 shares, 750,000                shares and 25,000 shares issuable upon exercise of options and/or                warrants. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Includes                shares owned by Mr. Everett’s wife. |
|-----|-------------------------------------------------------------------|

| (4) | Excludes                for Messrs. Dieterle, Everett, Pritchard, Chipman, Brownlie and Newell,                respectively, 250,000 shares, 250,000 shares, 250,000 shares, 50,000                shares, 200,000 shares and 250,000 shares issuable upon exercise                of                options, which options cannot be exercised unless and until the options                have been approved by our                stockholders. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Includes                shares owned by Mr. Roningen’s                wife. |
|-----|-----------------------------------------------------------------------------------|

| (6) | The                shares are held of record by Credit Suisse First Boston LLC. We have                been                advised that William P. Richards is the Fund Manager for RAB Special                Situations (Master) Fund Limited, with dispositive and voting power                over                the shares held by RAB Special Situations (Master) Fund Limited. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (7) | Includes                shares issuable upon exercise of warrants to purchase an aggregate                of                9,600,000 shares. We have been advised that Xavier Roulet, is a natural                person with voting and investment control over shares of our Common                Stock                beneficially owned by SPGP. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Includes                shares issuable upon exercise of warrants to purchase an aggregate                of                13,600,000 shares. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------|

**Item      12. Certain Relationships and Related Transactions.**

*Employment      and Change of Control Agreements”*

**Item      13.**
**Exhibits.**

|   | 3.1 |   | Certificate                of Incorporation of Company.(1) |
|--------|-----|--------|------------------------------------------------------------|

|   | 3.2 |   | Amendments                to Certificate of Incorporation of                Company.(1)(5) |
|--------|-----|--------|--------------------------------------------------------------------------------------------|

|   | 3.3 |   | Certificate                of Merger (Delaware) (which amends our Certificate of                Incorporation)(16) |
|--------|-----|--------|--------------------------------------------------------------------------------------------------------------------|

|   | 3.4 |   | Amended                and Restated By-Laws of Company(17) |
|--------|-----|--------|------------------------------------------------------------|

|  | 4.1 | Specimen                certificate representing our Common                Stock.(9) |
|--|-----|--------------------------------------------------------------------------------------|

|   | 4.2 | Form                of Warrant for Common Stock of the Company issued in February 2005                private                placement.(8) |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.3 | Form                of Warrant for Common Stock of the Company issued to Standard                Bank.(10) |
|--------|-----|------------------------------------------------------------------------------------------------------------|

----

|   | 4.4 | Form                of Warrant for Common Stock of the Company issued in February and                March                2006 private placement.(14) |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4.5 | Rights                Agreement, dated as of August 15, 2006, between the Company and American                Stock Transfer & Trust Company. The Right Agreement includes the Form                of Certificate of Designation of the Series B Common Stock and the                Form of                Right Certificate. (17) |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 10.1 | Mining                Claims (1) |
|--|------|----------------------------------|

|  | 10.2 | Stock                Purchase Option Agreement from AngloGold                (2) |
|--|------|----------------------------------------------------------------------------------|

|  | 10.3 | Letter                of Intent with International Northair Mines Ltd.                (2) |
|--|------|-------------------------------------------------------------------------------------------|

|   | 10.4 | March                30, 2002 Minera Chanate Stock Purchase and Sale and Security Agreement                (Sale by us and Holding of all of the stock of Minera Chanate) (In                Spanish).(3) |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.5 | English                summary of March 30, 2002 Minera Chanate Stock Purchase and Sale                and                Security Agreement.(3) |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|  | 10.6 | Agreement                between Santa Rita and Grupo Minero                FG.(4) |
|--|------|------------------------------------------------------------------------------------|

|  | 10.7 | Amendment                to Agreement between Santa Rita and Grupo Minero                FG.(6) |
|--|------|-------------------------------------------------------------------------------------------------|

|  | 10.8 | Termination                Agreement between Santa Rita and Grupo Minero                FG.(7) |
|--|------|------------------------------------------------------------------------------------------------|

|  | 10.9 | English                summary of El Charro agreement.                (11) |
|--|------|----------------------------------------------------------------------------|

|  | 10.10 | Plan                and agreement of merger (reincorporation).                (12) |
|--|-------|------------------------------------------------------------------------------------|

|  | 10.11 | Contract                between MSR and Sinergia Obras Civiles y Mineras, S.A. de                C.V.(13) |
|--|-------|-----------------------------------------------------------------------------------------------------------|

|   | 10.12 | Amendment                to Contract between MSR and Sinergia Obras Civiles y Mineras, S.A.                de                C.V. |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | 10.13 | September                2006 Chipman Amended Engagement Agreement. |
|--------|-------|---------------------------------------------------------------------|

|   | 10.14 | Employment                Agreement with John Brownlie. (18) |
|--------|-------|--------------------------------------------------------------|

|   | 10.15 | June                1, 2006 EPCM agreement between MSR and a Mexican subsidiary of M3                Engineering & Technology Corporation                (18) |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.16 | Credit                Agreement dated August 15, 2006 among MSR and Oro, as the borrowers,                the                Company, as the guarantor, and Standard Bank PLC, as the lender and                the                offshore account holder. (17) |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.17 | Employment                Agreement with Gifford A. Dieterle. |
|--------|-------|---------------------------------------------------------------|

|   | 10.18 | Employment                Agreement with Roger A. Newell. |
|--------|-------|-----------------------------------------------------------|

|   | 10.19 | Employment                Agreement with Jack V. Everett. |
|--------|-------|-----------------------------------------------------------|

|   | 10.20 | Employment                Agreement with Jeffrey W.                Pritchard. |
|--------|-------|-------------------------------------------------------------------------------|

|  | 21 | Subsidiaries                of the Registrant. (9) |
|--|----|----------------------------------------------------|

|   | 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 |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| (1) | Previously                filed as an exhibit to the Company's Registration Statement on Form                S-18                (SEC File No. 2-86160-NY) filed on or about November 10, 1983, and                incorporated herein by this                reference. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Previously                filed as an exhibit to the Company's Quarterly Report on Form 10-QSB                for                the quarter ended January 31, 2001 filed with the Commission on or                about                March 16, 2001, and incorporated herein by this                reference. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Previously                filed as an exhibit to the Company's Quarterly Report on Form 10-QSB                for                the quarter ended April 30, 2002 filed with the Commission on or                about                June 20, 2002, and incorporated herein by this                reference. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Previously                filed as an exhibit to the Company's Quarterly Report on Form 10-QSB                for                the quarter ended January 31, 2002 filed with the Commission on or                about                March 25, 2002, and incorporated herein by this                reference. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Previously                filed as an exhibit to the Company's Current Report on Form 8-K filed                with                the Commission on or about April 11, 2003, and incorporated herein                by this                reference. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Previously                filed as an exhibit to the Company's Current Report on Form 8-K filed                with                the Commission on or about January 22, 2004, and incorporated herein                by                this reference. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Previously                filed as an exhibit to the Company's Current Report on Form 8-K filed                with                the Commission on or about April 12, 2004, and incorporated herein                by this                reference. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Previously                filed as an exhibit to the Company's Current Report on Form 8-K filed                with                the Commission on or about February 10, 2005, and incorporated herein                by                this reference. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (9) | Previously                filed as an exhibit to the Company's Registration Statement on Form                SB-2                (SEC file no. 333-123216) filed with the Commission on or about March                9,                2005, and incorporated herein by this                reference. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10) | Previously                filed as an exhibit to Amendment No. 1 to the Company's Registration                Statement on Form SB-2 (SEC file no. 333-123216) filed with the Commission                on or about June 27, 2005, and incorporated herein by this                reference. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (11) | Previously                filed as an exhibit to the Company's Quarterly Report on Form 10-QSB                for                the quarter ended April 30, 2005 filed with the Commission on or                about                June 20, 2005, and incorporated herein by this                reference. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (12) | Previously                filed as Appendix B to the Company's Definitive 14A Proxy Statement                filed                with the Commission on or about October 7, 2005, and incorporated                herein                by this reference. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (13) | Previously                filed as an exhibit to the Company's Quarterly Report on Form 10-QSB                for                the quarter ended October 31, 2005 filed with the Commission on or                about                December 15, 2005, and incorporated herein by this                reference. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (14) | Previously                filed as an exhibit to the Company's Current Report on Form 8-K filed                with                the Commission on or about February 16, 2006, and incorporated herein                by                this reference. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (15) | Previously                filed as an exhibit to the Company's Quarterly Report on Form 10-QSB                for                the quarter ended January 31, 2006 filed with the Commission on or                about                March 22, 2006, and incorporated herein by this                reference. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (16) | Previously                filed as an exhibit to the Company's Registration Statement on Form                SB-2                (SEC file no. 333-129939) filed with the Commission on or about November                23, 2005, and incorporated herein by this                reference. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (17) | Previously                filed as an exhibit to the Company's Current Report on Form 8-K filed                with                the Commission on or about August 16, 2006, and incorporated herein                by                this reference. |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (18) | Previously                filed as an exhibit to the Company's Quarterly Report on Form 10-QSB                for                the quarter ended April 30, 2006 filed with the Commission on or                about                June 19, 2006, and incorporated herein by this                reference. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Item      14. **
**Principal      Accountant Fees And Services.**

|                                   |   | **Amount                ($)** |    |
|----------------------------------------|--------|-------------------------------|---------|
| **Description                of Fees** |   | **2006**                      |    | **2005** |   |
| Audit                Fees              |   | $                             | 128,000 |   | $ | 55,000 |   |
| Audit-Related                Fees      |   |                          | -       |   |   | - |   |
| Tax                Fees                |   |                          | 7,000   |   |   | 7,000 |   |
| All                Other Fees          |   |                          | -       |   |   | - |   |
|                                   |   |                          |    |   |   |   |   |
| Total                                  |   | $                             | 135,000 |   | $ | 62,000 |   |

----

**SIGNATURES**

|                                       |                                               |                                      |
|--------------------------------------------|----------------------------------------------------|-------------------------------------------|
|                                       | CAPITAL              GOLD              CORPORATION |
|                                  |                                          |                                 |
|                                       | By:                                      | /s/ Gifford              A. Dieterle |
|                                       | Gifford              A. Dieterle, President        |
|  Dated:              October 31, 2006 |                                               |

| SIGNATURES                                           |   | TITLE                                              |   |  DATE                        |
|------------------------------------------------------|--------|---------------------------------------------------------|--------|-----------------------------------|
|                                                 |   |                                                    |   |                              |
| /s/                  Gifford A. Dieterle             |   | President,                  Treasurer,                  |   | October                  31, 2006 |
| Gifford                  A. Dieterle                 |   | and                  Chairman of the Board of Directors |   |                              |
|                                                 |   |                                                    |   |                              |
| /s/                  Christopher M. Chipman          |   | Principal                Financial and                  |   | October                  31, 2006 |
| Christopher                M.                Chipman |   | Accounting                Officer                       |   |                              |
|                                                 |   |                                                    |   |                              |
| /s/                  Jack V. Everett                 |   | Director                                                |   | October                  31, 2006 |
| Jack                  V. Everett                     |   |                                                    |   |                              |
|                                                 |   |                                                    |   |                              |
| /s/                  Robert N. Roningen              |   | Director                                                |   | October                  31, 2006 |
| Robert                  N. Roningen                  |   |                                                    |   |                              |
|                                                 |   |                                                    |   |                              |
| /s/                  Roger A. Newell                 |   | Director                                                |   | October                  31, 2006 |
| Roger                  A. Newell                     |   |                                                    |   |                              |
|                                                 |   |                                                    |   |                              |
| /s/                  Jeffrey W. Pritchard            |   | Director                                                |   | October                  31, 2006 |
| Jeffrey                  W. Pritchard                |   |                                                    |   |                              |

----

----

----

| ASSETS                                                        |   | July                    31,2006 |        |
|---------------------------------------------------------------|--------|---------------------------------|-------------|
| Current                  Assets:                              |   |                            |        |   |
|                                                          |   |                            |        |   |
| Cash                  and Cash Equivalents                    |   | $                               | 2,741,498   |   |
| Loans                  Receivable - Affiliate (Note 11)       |   |                            | 41,745      |   |
| Prepaid                  Assets                               |   |                            | 40,074      |   |
| Marketable                  Securities (Note 3)               |   |                            | 90,000      |   |
| Deposit                                                       |   |                            | 250,000     |   |
| Other                  Current Assets (Note 4)                |   |                            | 4,483,852   |   |
|                                                          |   |                            |        |   |
| Total                  Current Assets                         |   |                            | 7,647,169   |   |
|                                                          |   |                            |        |   |
| Mining                  Concessions (Note 10 )                |   |                            | 70,104      |   |
|                                                          |   |                            |        |   |
| Property                  & Equipment - net (Note 5)      |   |                            | 1,035,972   |   |
|                                                          |   |                            |        |   |
| Intangible                  Assets - net (Note 6)             |   |                            | 13,800      |   |
|                                                          |   |                            |        |   |
| Other                  Assets:                                |   |                            |        |   |
| Other                  Investments (Note 12)                  |   |                            | 21,480      |   |
| Deferred                  Financing Costs                     |   |                            | 450,777     |   |
| Mining                  Reclamation Bonds                     |   |                            | 35,550      |   |
| Other                                                         |   |                            | 43,047      |   |
| Derivative                  Contracts (Note 23)               |   |                            | 218,076     |   |
| Security                  Deposits                            |   |                            | 9,605       |   |
| Total                  Other Assets                           |   |                            | 778,535     |   |
|                                                          |   |                            |        |   |
| Total                  Assets                                 |   | $                               | 9,545,580   |   |
|                                                          |   |                            |        |   |
| LIABILITIES                  AND STOCKHOLDERS' EQUITY         |   |                            |        |   |
|                                                          |   |                            |        |   |
| Current                  Liabilities:                         |   |                            |        |   |
| Accounts                  Payable                             |   | $                               | 258,972     |   |
| Accrued                  Expenses                             |   |                            | 356,671     |   |
| Total                  Current Liabilities                    |   |                            | 615,643     |   |
|                                                          |   |                            |        |   |
| Commitments                  and Contingencies                |   |                            |        |   |
| Stockholders'                  Equity:                        |   |                            |        |   |
| Common                  Stock, Par Value $.0001 Per Share;    |   |                            |        |   |
| Authorized                  200,000,000 shares; Issued and    |   |                            |        |   |
| Outstanding                  131,635,129 Shares               |   |                            | 13,163      |   |
| Additional                  Paid-In Capital                   |   |                            | 40,733,825  |   |
| Deficit                  Accumulated in the Development Stage |   |                            | (31,388,503 | ) |
| Deferred                  Financing Costs (Note 20)           |   |                            | (522,541    | ) |
| Deferred                  Compensation                        |   |                            | (52,500     | ) |
| Accumulated                  Other Comprehensive Loss         |   |                            | 146,493     |   |
|                                                          |   |                            |        |   |
| Total                  Stockholders' Equity                   |   |                            | 8,929,937   |   |
| Total                  Liabilities and Stockholders' Equity   |   | $                               | 9,545,580   |   |

----

|                                                                            |   |                                  |        |                                |   | For                  the Period |   |
|---------------------------------------------------------------------------------|--------|---------------------------------------|-------------|-------------------------------------|--------|---------------------------------|--------|
|                                                                            |   |                                  |        | September                  17, 1982 |   |
|                                                                            |   | For                    The Year Ended |        | (Inception)                         |   |
|                                                                            |   | July                  31,             |        | To                                  |   |
|                                                                            |   | 2006                                  |        | 2005                                |   | July                  31, 2006  |   |
|                                                                            |   |                                  |        |                                |   |                            |   |
| Revenues                                                                        |   | $                                     | -           |                                | $      | -                               |   | $ | - |   |
| Costs                  and Expenses:                                            |   |                                  |        |                                |   |                            |   |   |   |   |
| Mine                  Expenses                                                  |   |                                  | 1,940,805   |                                |   | 851,374                         |   |   | 9,604,713 |   |
| Write-Down                  of Mining, Milling and Other Property and Equipment |   |                                  | -           |                                |   | -                               |   |   | 1,299,445 |   |
| Selling,                  General and Administrative Expenses                   |   |                                  | 2,135,493   |                                |   | 1,005,038                       |   |   | 11,998,460 |   |
| Stocks                  and Warrants issued for Services                        |   |                                  | 89,391      |                                |   | 187,844                         |   |   | 9,499,238 |   |
| Depreciation                  and Amortization                                  |   |                                  | 38,969      |                                |   | 7,431                           |   |   | 414,126 |   |
| Total                  Costs and Expenses                                       |   |                                  | 4,204,658   |                                |   | 2,051,687                       |   |   | 32,815,982 |   |
|                                                                            |   |                                  |        |                                |   |                            |   |   |   |   |
| Loss                  from Operations                                           |   |                                  | (4,204,658  | )                                   |   | (2,051,687                      | )      |   | (32,815,982 | ) |
|                                                                            |   |                                  |        |                                |   |                            |   |   |   |   |
| Other                  Income (Expense):                                        |   |                                  |        |                                |   |                            |   |   |   |   |
| Interest                  Income                                                |   |                                  | 183,719     |                                |   | 42,483                          |   |   | 979,717 |   |
| Miscellaneous                                                                   |   |                                  | -           |                                |   | 3,522                           |   |   | 36,199 |   |
| Loss                  on Sale of Property and Equipment                         |   |                                  | (201,829    | )                                   |   | -                               |   |   | (155,713 | ) |
| Gain                  on Sale of Subsidiary                                     |   |                                  | -           |                                |   | -                               |   |   | 1,907,903 |   |
| Option                  Payment                                                 |   |                                  | -           |                                |   | -                               |   |   | 70,688 |   |
| Loss                  on change in fair value of derivative                     |   |                                  | (581,924    | )                                   |   |                            |   |   | (581,924 | ) |
| Loss                  on Write-Off of Investment                                |   |                                  | -           |                                |   | -                               |   |   | (10,000 | ) |
| Loss                  on Joint Venture                                          |   |                                  | -           |                                |   | -                               |   |   | (901,700 | ) |
| Loss                  on Option                                                 |   |                                  | -           |                                |   | -                               |   |   | (50,000 | ) |
| Gain                  (Loss) on Other Investments                               |   |                                  | -           |                                |   | -                               |   |   | (3,697 | ) |
| Loss                  on Write -Off of Minority Interest                        |   |                                  | -           |                                |   | -                               |   |   | (150,382 | ) |
| Total                  Other Income (Expense)                                   |   |                                  | (600,034    | )                                   |   | 46,005                          |   |   | 1,141,091 |   |
|                                                                            |   |                                  |        |                                |   |                            |   |   |   |   |
| Loss                  Before Minority Interest                                  |   |                                  | (4,804,692  | )                                   |   | (2,005,682                      | )      |   | (31,674,891 | ) |
| Minority                  Interest                                              |   |                                  | -           |                                |   | -                               |   |   | 286,388 |   |
|                                                                            |   |                                  |        |                                |   |                            |   |   |   |   |
| Net                  Loss                                                       |   | $                                     | (4,804,692  | )                                   | $      | (2,005,682                      | )      | $ | (31,388,503 | ) |
|                                                                            |   |                                  |        |                                |   |                            |   |   |   |   |
| Net                  Loss Per Common Share - Basic and Diluted                  |   | $                                     | (0.04       | )                                   | $      | (0.03                           | )      |   |   |   |
|                                                                            |   |                                  |        |                                |   |                            |   |   |   |   |
| Weighted                  Average Common Shares Outstanding                     |   |                                  | 112,204,471 |                                |   | 75,123,922                      |   |   |   |   |

----

|                                                                                                                                       |   | Common                  Stock |      |   |   |                                             |   |                                                                                           |      |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|-----------|--------|--------|--------------------------------------------------|--------|------------------------------------------------------------------------------------------------|-----------|
|                                                                                                                                       |   | Shares                        |      | Amount |   | Additional                  Paid-In Capital |   | Deficit                  Accumulated                  in                  the DevelopmentStage |      | Total |   |
|                                                                                                                                       |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |
| Balance                  September 17, 1982 (Inception)                                                                                    |   |                          | -0-       |   | $      | -0-                                              |   | $                                                                                              | -0-       |   | $ | -0- |   | $ | -0- |   |
|                                                                                                                                       |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |   |   |   |   |   |
| Initial                  Cash                                                                                                              |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |   |   |   |   |   |
| Officers                  - At $.001 Per Share                                                                                             |   |                          | 1,575,000 |   |   | 1,575                                            |   |                                                                                           | -         |   |   | - |   |   | 1,575 |   |
|                                                                                                                                       |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |   |   |   |   |   |
| Other                  Investors - At $.001 Per Share                                                                                      |   |                          | 1,045,000 |   |   | 1,045                                            |   |                                                                                           | -         |   |   | - |   |   | 1,045 |   |
|                                                                                                                                       |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |   |   |   |   |   |
| Initial                  - Mining Claims - Officer - At $.002 Per Share                                                                    |   |                          | 875,000   |   |   | 875                                              |   |                                                                                           | 759       |   |   | - |   |   | 1,634 |   |
|                                                                                                                                       |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |   |   |   |   |   |
| Common                  Stock Issued For:                                                                                                  |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |   |   |   |   |   |
| Cash                  At $.50 Per Share                                                                                                    |   |                          | 300,000   |   |   | 300                                              |   |                                                                                           | 149,700   |   |   | - |   |   | 150,000 |   |
|                                                                                                                                       |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |   |   |   |   |   |
| Net                  Loss                                                                                                                  |   |                          | -         |   |   | -                                                |   |                                                                                           | -         |   |   | (                  8,486 | ) |   | (                  8,486 | ) |
|                                                                                                                                       |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |   |   |   |   |   |
| Balance                  - July 31, 1983                                                                                                   |   |                          | 3,795,000 |   |   | 3,795                                            |   |                                                                                           | 150,459   |   |   | (                  8,486 | ) |   | 145,768 |   |
|                                                                                                                                       |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |   |   |   |   |   |
| Common                  Stock Issued For:                                                                                                  |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |   |   |   |   |   |
| Cash                  Pursuant to Initial Offering At                  $1.50 Per Share, Net of Offering                  Costs of $408,763 |   |                          | 1,754,741 |   |   | 1,755                                            |   |                                                                                           | 2,221,594 |   |   | - |   |   | 2,223,349 |   |
|                                                                                                                                       |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |   |   |   |   |   |
| Net                  Income                                                                                                                |   |                          | -         |   |   | -                                                |   |                                                                                           | -         |   |   | 48,890 |   |   | 48,890 |   |
|                                                                                                                                       |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |   |   |   |   |   |
| Balance                  - July 31, 1984                                                                                                   |   |                          | 5,549,741 |   |   | 5,550                                            |   |                                                                                           | 2,372,053 |   |   | 40,404 |   |   | 2,418,007 |   |
|                                                                                                                                       |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |   |   |   |   |   |
| Net                  Income                                                                                                           |   |                          | -         |   |   | -                                                |   |                                                                                           | -         |   |   | 18,486 |   |   | 18,486 |   |
|                                                                                                                                       |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |   |   |   |   |   |
| Balance                  - July 31, 1985                                                                                                   |   |                          | 5,549,741 |   |   | 5,550                                            |   |                                                                                           | 2,372,053 |   |   | 58,890 |   |   | 2,436,493 |   |
|                                                                                                                                       |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |   |   |   |   |   |
| Common                  Stock Issued For:                                                                                                  |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |   |   |   |   |   |
| Mineral                  Lease At $1.00 Per Share                                                                                          |   |                          | 100       |   |   | -                                                |   |                                                                                           | 100       |   |   | - |   |   | 100 |   |
|                                                                                                                                       |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |   |   |   |   |   |
| Net                  Income                                                                                                                |   |                          | -         |   |   | -                                                |   |                                                                                           | -         |   |   | 4,597 |   |   | 4,597 |   |
|                                                                                                                                       |   |                          |      |   |   |                                             |   |                                                                                           |      |   |   |   |   |   |   |   |
| Balance                  - July 31, 1986                                                                                                   |   |                          | 5,549,841 |   |   | 5,550                                            |   |                                                                                           | 2,372,153 |   |   | 63,487 |   |   | 2,441,190 |   |

----

|                                                        |   |   | Common                        Stock |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |
|-------------------------------------------------------------|--------|--------|-------------------------------------|--------|--------|--------|--------|--------|--------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------------------------------------|--------|
|                                                        |   |   | Shares                              |   |   | Amount |   |   | Additional                        Paid-In Capital |   |   | Deficit                        Accumulated                        in                        the DevelopmentStage |   |   | Total |   |
| Net                        Loss                             |   |   | -                                   |   | $      | -      |   | $      | -                                                      |   | $      | (                        187,773                                                                                 | )      | $ | (187,773 | ) |
|                                                        |   |   |                                |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |   |   |   |
| Balance                        - July 31, 1987              |   |   | 5,549,841                           |   |   | 5,550  |   |   | 2,372,153                                              |   |   | (                        124,286                                                                                 | )      |   | 2,253,417 |   |
|                                                        |   |   |                                |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |   |   |   |
| Common                        Stock Issued For:             |   |   |                                |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |   |   |   |
| Services                        Rendered At $1.00 Per Share |   |   | 92,000                              |   |   | 92     |   |   | 91,908                                                 |   |   | -                                                                                                                |   |   | 92,000 |   |
|                                                        |   |   |                                |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |   |   |   |
| Net                        Loss                             |   |   | -                                   |   |   | -      |   |   | -                                                      |   |   | (                        328,842                                                                                 | )      |   | (328,842 | ) |
|                                                        |   |   |                                |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |   |   |   |
| Balance                        - July 31, 1988              |   |   | 5,641,841                           |   |   | 5,642  |   |   | 2,464,061                                              |   |   | (                        453,128                                                                                 | )      |   | 2,016,575 |   |
|                                                        |   |   |                                |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |   |   |   |
| Net                        Loss                             |   |   | -                                   |   |   | -      |   |   | -                                                      |   |   | (                        379,852                                                                                 | )      |   | (                        379,852 | ) |
|                                                        |   |   |                                |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |   |   |   |
| Balance                        - July 31, 1989              |   |   | 5,641,841                           |   |   | 5,642  |   |   | 2,464,061                                              |   |   | (                        832,980                                                                                 | )      |   | 1,636,723 |   |
|                                                        |   |   |                                |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |   |   |   |
| Common                        Stock Issued For:             |   |   |                                |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |   |   |   |
| Cash:                                                       |   |   |                                |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |   |   |   |
| At                        $.70 Per Share                    |   |   | 269,060                             |   |   | 269    |   |   | 194,219                                                |   |   | -                                                                                                                |   |   | 194,488 |   |
| At                        $.50 Per Share                    |   |   | 387,033                             |   |   | 387    |   |   | 199,443                                                |   |   | -                                                                                                                |   |   | 199,830 |   |
| Services:                                                   |   |   |                                |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |   |   |   |
| At                        $.50 Per Share                    |   |   | 68,282                              |   |   | 68     |   |   | 34,073                                                 |   |   | -                                                                                                                |   |   | 34,141 |   |
| Commissions:                                                |   |   |                                |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |   |   |   |
| At                        $.70 Per Share                    |   |   | 15,000                              |   |   | 15     |   |   | (                        15                            | )      |   | -                                                                                                                |   |   | - |   |
| Commissions                        Paid                     |   |   | -                                   |   |   | -      |   |   | (                        2,100                         | )      |   | -                                                                                                                |   |   | (                        2,100 | ) |
|                                                        |   |   |                                |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |   |   |   |
| Net                        Loss                             |   |   | -                                   |   |   | -      |   |   | -                                                      |   |   | (                        529,676                                                                                 | )      |   | (                        529,676 | ) |
|                                                        |   |   |                                |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |   |   |   |
| Balance                        - July 31, 1990              |   |   | 6,381,216                           |   |   | 6,381  |   |   | 2,889,681                                              |   |   | (1,362,656                                                                                                       | )      |   | 1,533,406 |   |
|                                                        |   |   |                                |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |   |   |   |
| Common                        Stock Issued For:             |   |   |                                |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |   |   |   |
| Cash                        At $.60 Per Share               |   |   | 318,400                             |   |   | 319    |   |   | 180,954                                                |   |   | -                                                                                                                |   |   | 181,273 |   |
|                                                        |   |   |                                |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |   |   |   |
| Net                        Loss                             |   |   | -                                   |   |   | -      |   |   | -                                                      |   |   | (                        356,874                                                                                 | )      |   | (                        356,874 | ) |
|                                                        |   |   |                                |   |   |   |   |   |                                                   |   |   |                                                                                                             |   |   |   |   |
| Balance                        - July 31, 1991              |   |   | 6,699,616                           |   |   | 6,700  |   |   | 3,070,635                                              |   |   | (1,719,530                                                                                                       | )      |   | 1,357,805 |   |

----

|                                                      |   |  Common                        Stock |      |                               |   |                                                                               |   |                                                                                                             |                           |
|-----------------------------------------------------------|--------|-------------------------------------------|-----------|------------------------------------|--------|------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------|--------------------------------|
|                                                      |   |                        Shares        |      |                        Amount |   |                        Additional                        Paid-In Capital |   | Deficit                        Accumulated                        in                        the DevelopmentStage |                           |                        Total |   |
| Common                        Stock Issued For:           |   |                                      |      |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| Cash:                                                     |   |                                      |      |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| At                        $.30 Per Share                  |   |                                      | 114,917   |                               | $      | 115                                                                                |   | $                                                                                                                | 34,303                         |   | $ | - |   | $ | 34,418 |   |
| At                        $.50 Per Share                  |   |                                      | 2,000     |                               |   | 2                                                                                  |   |                                                                                                             | 998                            |   |   | - |   |   | 1,000 |   |
| At                        $.60 Per Share                  |   |                                      | 22,867    |                               |   | 23                                                                                 |   |                                                                                                             | 13,698                         |   |   | - |   |   | 13,721 |   |
| At                        $.70 Per Share                  |   |                                      | 10,000    |                               |   | 10                                                                                 |   |                                                                                                             | 6,990                          |   |   | - |   |   | 7,000 |   |
| At                        $.80 Per Share                  |   |                                      | 6,250     |                               |   | 6                                                                                  |   |                                                                                                             | 4,994                          |   |   | - |   |   | 5,000 |   |
| At                        $.90 Per Share                  |   |                                      | 5,444     |                               |   | 5                                                                                  |   |                                                                                                             | 4,895                          |   |   | - |   |   | 4,900 |   |
| Services:                                                 |   |                                      |      |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| At                        $.32 Per Share                  |   |                                      | 39,360    |                               |   | 39                                                                                 |   |                                                                                                             | 12,561                         |   |   | - |   |   | 12,600 |   |
| At                        $.50 Per Share                  |   |                                      | 92,353    |                               |   | 93                                                                                 |   |                                                                                                             | 46,084                         |   |   | - |   |   | 46,177 |   |
| Exercise                        of Options:               |   |                                      |      |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| At                        $.50 Per Share By Related Party |   |                                      | 100,000   |                               |   | 100                                                                                |   |                                                                                                             | 49,900                         |   |   | - |   |   | 50,000 |   |
|                                                      |   |                                      |      |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| Net                        Loss                           |   |                                      | -         |                               |   | -                                                                                  |   |                                                                                                             | -                              |   |   | (                        307,477 | ) |   | (                        307,477 | ) |
|                                                      |   |                                      |      |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| Balance                        - July 31, 1992            |   |                                      | 7,092,807 |                               |   | 7,093                                                                              |   |                                                                                                             | 3,245,058                      |   |   | (2,027,007 | ) |   | 1,225,144 |   |
|                                                      |   |                                      |      |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| Common                        Stock Issued For:           |   |                                      |      |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| Cash:                                                     |   |                                      |      |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| At                        $.30 Per Share                  |   |                                      | 176,057   |                               | $      | 176                                                                                |   | $                                                                                                                | 51,503                         |   | $ | - |   | $ | 51,679 |   |
| At                        $.50 Per Share                  |   |                                      | 140,000   |                               |   | 140                                                                                |   |                                                                                                             | 69,964                         |   |   | - |   |   | 70,104 |   |
| At                        $.60 Per Share                  |   |                                      | 10,000    |                               |   | 10                                                                                 |   |                                                                                                             | 5,990                          |   |   | - |   |   | 6,000 |   |
| At                        $.70 Per Share                  |   |                                      | 17,000    |                               |   | 17                                                                                 |   |                                                                                                             | 11,983                         |   |   | - |   |   | 12,000 |   |
| At                        $1.00 Per Share                 |   |                                      | 50,000    |                               |   | 50                                                                                 |   |                                                                                                             | 49,950                         |   |   | - |   |   | 50,000 |   |
| Services:                                                 |   |                                      |      |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| At                        $.50 Per Share                  |   |                                      | 495,556   |                               |   | 496                                                                                |   |                                                                                                             | 272,504                        |   |   | - |   |   | 273,000 |   |
| Commissions:                                              |   |                                      |      |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| At                        $.50 Per Share                  |   |                                      | 20,220    |                               |   | 20                                                                                 |   |                                                                                                             | (                        20    | ) |   | - |   |   | - |   |
|                                                      |   |                                      |      |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| Commissions                        Paid                   |   |                                      | -         |                               |   | -                                                                                  |   |                                                                                                             | (                        1,500 | ) |   | - |   |   | (                        1,500 | ) |
|                                                      |   |                                      |      |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| Net                        Loss                           |   |                                      | -         |                               |   | -                                                                                  |   |                                                                                                             | -                              |   |   | (                        626,958 | ) |   | (                        626,958 | ) |
|                                                      |   |                                      |      |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| Balance                        - July 31, 1993            |   |                                      | 8,001,640 |                               |   | 8,002                                                                              |   |                                                                                                             | 3,705,432                      |   |   | (2,653,965 | ) |   | 1,059,469 |   |

----

|                                                     |   |  Common                        Stock |       |                               |   |                                                                               |   |                                                                                                             |                           |
|----------------------------------------------------------|--------|-------------------------------------------|------------|------------------------------------|--------|------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------|--------------------------------|
|                                                     |   |                        Shares        |       |                        Amount |   |                        Additional                        Paid-In Capital |   | Deficit                        Accumulated                        in                        the DevelopmentStage |                           |                        Total |   |
| Common                        Stock Issued For:          |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| Cash:                                                    |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| At                        $.30 Per Share                 |   |                                      | 249,330    |                               | $      | 150                                                                                |   | $                                                                                                                | 43,489                         |   | $ | - |   | $ | 43,639 |   |
| At                        $.50 Per Share                 |   |                                      | 377,205    |                               |   | 377                                                                                |   |                                                                                                             | 189,894                        |   |   | - |   |   | 190,271 |   |
| Services:                                                |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| At                        $.30 Per Share                 |   |                                      | 500,000    |                               |   | 500                                                                                |   |                                                                                                             | 149,500                        |   |   | - |   |   | 150,000 |   |
| At                        $.50 Per Share                 |   |                                      | 130,000    |                               |   | 130                                                                                |   |                                                                                                             | 71,287                         |   |   | - |   |   | 71,417 |   |
| At                        $.50 Per Share                 |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| By                        Related Party                  |   |                                      | 56,000     |                               |   | 156                                                                                |   |                                                                                                             | 77,844                         |   |   | - |   |   | 78,000 |   |
| At                        $.70 Per Share                 |   |                                      | 4,743      |                               |   | 4                                                                                  |   |                                                                                                             | 3,316                          |   |   | - |   |   | 3,320 |   |
| Exercise                        of Options For Services: |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| At                        $.50 Per Share                 |   |                                      | 35,000     |                               |   | 35                                                                                 |   |                                                                                                             | 17,465                         |   |   | - |   |   | 17,500 |   |
| At                        $.50 Per Share                 |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| By                        Related Party                  |   |                                      | 150,000    |                               |   | 150                                                                                |   |                                                                                                             | 74,850                         |   |   | - |   |   | 75,000 |   |
|                                                     |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| Net                        Loss                          |   |                                      | -          |                               |   | -                                                                                  |   |                                                                                                             | -                              |   |   | (                        665,909 | ) |   | (                        665,909 | ) |
| Balance                        - July 31, 1994           |   |                                      | 9,503,918  |                               |   | 9,504                                                                              |   |                                                                                                             | 4,333,077                      |   |   | (3,319,874 | ) |   | 1,022,707 |   |
|                                                     |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| Common                        Stock Issued For:          |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| Cash:                                                    |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| At                        $.30 Per Share                 |   |                                      | 150,000    |                               | $      | 150                                                                                |   | $                                                                                                                | 49,856                         |   | $ | - |   | $ | 50,006 |   |
| At                        $.40 Per Share                 |   |                                      | 288,200    |                               |   | 288                                                                                |   |                                                                                                             | 115,215                        |   |   | - |   |   | 115,503 |   |
| At                        $.50 Per Share                 |   |                                      | 269,611    |                               |   | 270                                                                                |   |                                                                                                             | 132,831                        |   |   | - |   |   | 133,101 |   |
| At                        $.60 Per Share                 |   |                                      | 120,834    |                               |   | 121                                                                                |   |                                                                                                             | 72,379                         |   |   | - |   |   | 72,500 |   |
| At                        $.70 Per Share                 |   |                                      | 23,000     |                               |   | 23                                                                                 |   |                                                                                                             | 16,077                         |   |   | - |   |   | 16,100 |   |
| Services:                                                |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| At                        $.40 Per Share                 |   |                                      | 145,000    |                               |   | 145                                                                                |   |                                                                                                             | 60,755                         |   |   | - |   |   | 60,900 |   |
| At                        $.50 Per Share                 |   |                                      | 75,000     |                               |   | 75                                                                                 |   |                                                                                                             | 34,925                         |   |   | - |   |   | 35,000 |   |
| Exercise                        of Options For:          |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| Cash:                                                    |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| At                        $.50 Per Share                 |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| By                        Related Party                  |   |                                      | 350,000    |                               |   | 350                                                                                |   |                                                                                                             | 174,650                        |   |   | - |   |   | 175,000 |   |
| Services:                                                |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| At                        $.50 Per Share                 |   |                                      | 35,000     |                               |   | 35                                                                                 |   |                                                                                                             | 17,465                         |   |   | - |   |   | 17,500 |   |
|                                                     |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| Commissions                        Paid                  |   |                                      | -          |                               |   | -                                                                                  |   |                                                                                                             | (                        1,650 | ) |   | - |   |   | (                        1,650 | ) |
|                                                     |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| Net                        Loss                          |   |                                      | -          |                               |   | -                                                                                  |   |                                                                                                             | -                              |   |   | (                        426,803 | ) |   | (                        426,803 | ) |
|                                                     |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                           |   |   |   |   |   |   |   |
| Balance                        - July 31, 1995           |   |                                      | 10,960,563 |                               |   | 10,961                                                                             |   |                                                                                                             | 5,005,580                      |   |   | (3,746,677 | ) |   | 1,269,864 |   |

----

|                                                   |   |  Common                        Stock |       |                               |   |                                                                               |   |                                                                                                             |                        |
|--------------------------------------------------------|--------|-------------------------------------------|------------|------------------------------------|--------|------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------|-----------------------------|
|                                                   |   |                        Shares        |       |                        Amount |   |                        Additional                        Paid-In Capital |   | Deficit                        Accumulated                        in                        the DevelopmentStage |                        |                        Total |   |
| Common                        Stock Issued For:        |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                        |   |   |   |   |   |   |   |
| Cash:                                                  |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                        |   |   |   |   |   |   |   |
| At                        $.40 Per Share               |   |                                      | 75,972     |                               | $      | 76                                                                                 |   | $                                                                                                                | 30,274                      |   | $ | - |   | $ | 30,350 |   |
| At                        $.50 Per Share               |   |                                      | 550,423    |                               |   | 550                                                                                |   |                                                                                                             | 270,074                     |   |   | - |   |   | 270,624 |   |
| At                        $.60 Per Share               |   |                                      | 146,773    |                               |   | 147                                                                                |   |                                                                                                             | 87,853                      |   |   |   |   |   | 88,000 |   |
| At                        $.70 Per Share               |   |                                      | 55,722     |                               |   | 56                                                                                 |   |                                                                                                             | 38,949                      |   |   |   |   |   | 39,005 |   |
| At                        $.80 Per Share               |   |                                      | 110,100    |                               |   | 110                                                                                |   |                                                                                                             | 87,890                      |   |   |   |   |   | 88,000 |   |
|                                                   |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                        |   |   |   |   |   |   |   |
| Services:                                              |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                        |   |   |   |   |   |   |   |
| At                        $.40 Per Share               |   |                                      | 104,150    |                               |   | 104                                                                                |   |                                                                                                             | 38,296                      |   |   | - |   |   | 38,400 |   |
| At                        $.50 Per Share               |   |                                      | 42,010     |                               |   | 42                                                                                 |   |                                                                                                             | 20,963                      |   |   | - |   |   | 21,005 |   |
| At                        $.60 Per Share               |   |                                      | 4,600      |                               |   | 5                                                                                  |   |                                                                                                             | 2,755                       |   |   |   |   |   | 2,760 |   |
| At                        $.70 Per Share               |   |                                      | 154,393    |                               |   | 155                                                                                |   |                                                                                                             | 107,920                     |   |   |   |   |   | 108,075 |   |
|                                                   |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                        |   |   |   |   |   |   |   |
| Commissions:                                           |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                        |   |   |   |   |   |   |   |
| At                        $.35 Per Share               |   |                                      | 23,428     |                               |   | 23                                                                                 |   |                                                                                                             | (                        23 | ) |   |   |   |   |   |   |
| At                        $.50 Per Share               |   |                                      | 50,545     |                               |   | 50                                                                                 |   |                                                                                                             | (                        50 | ) |   |   |   |   |   |   |
| At                        $.60 Per Share               |   |                                      | 2,000      |                               |   | 2                                                                                  |   |                                                                                                             | (                        2  | ) |   |   |   |   |   |   |
| At                        $.70 Per Share               |   |                                      | 12,036     |                               |   | 12                                                                                 |   |                                                                                                             | (                        12 | ) |   |   |   |   |   |   |
|                                                   |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                        |   |   |   |   |   |   |   |
| Exercise                        of Options:            |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                        |   |   |   |   |   |   |   |
| Cash:                                                  |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                        |   |   |   |   |   |   |   |
| At                        $.35 Per Share               |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                        |   |   |   |   |   |   |   |
| By                        Related Party                |   |                                      | 19,571     |                               |   | 20                                                                                 |   |                                                                                                             | 6,830                       |   |   |   |   |   | 6,850 |   |
|                                                   |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                        |   |   |   |   |   |   |   |
| Services:                                              |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                        |   |   |   |   |   |   |   |
| At                        $.35 Per Share               |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                        |   |   |   |   |   |   |   |
| By                        Related Party                |   |                                      | 200,429    |                               |   | 200                                                                                |   |                                                                                                             | 69,950                      |   |   | - |   |   | 70,150 |   |
| At                        $.50 Per Share               |   |                                      | 95,000     |                               |   | 95                                                                                 |   |                                                                                                             | 47,405                      |   |   | - |   |   | 47,500 |   |
|                                                   |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                        |   |   |   |   |   |   |   |
| Compensation                        Portion of Options |   |                                      | -          |                               |   | -                                                                                  |   |                                                                                                             | 261,500                     |   |   | - |   |   | 261,500 |   |
|                                                   |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                        |   |   |   |   |   |   |   |
| Net                        Loss                        |   |                                      | -          |                               |   | -                                                                                  |   |                                                                                                             | -                           |   |   | (                        956,043 | ) |   | (                        956,043 | ) |
|                                                   |   |                                      |       |                               |   |                                                                               |   |                                                                                                             |                        |   |   |   |   |   |   |   |
| Balance                        - July 31, 1996         |   |                                      | 12,607,715 |                               |   | 12,608                                                                             |   |                                                                                                             | 6,076,152                   |   |   | (4,702,720 | ) |   | 1,386,040 |   |

----

|                                                              |   |  Common                          Stock |       |                                 |   |                                                                                   |   |                                                                                                                   |                          |
|-------------------------------------------------------------------|--------|---------------------------------------------|------------|--------------------------------------|--------|----------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------|-------------------------------|
|                                                              |   |                          Shares        |       |                          Amount |   |                          Additional                          Paid-In Capital |   | Deficit                          Accumulated                          in                          the DevelopmentStage |                          |                          Total |   |
| Common                          Stock Issued For:                 |   |                                        |       |                                 |   |                                                                                   |   |                                                                                                                   |                          |   |   |   |   |   |   |   |
| Cash:                                                             |   |                                        |       |                                 |   |                                                                                   |   |                                                                                                                   |                          |   |   |   |   |   |   |   |
| At                          $.35 Per Share                        |   |                                        | 50,000     |                                 | $      | 50                                                                                     |   | $                                                                                                                      | 17,450                        |   | $ | - |   | $ | 17,500 |   |
| At                          $.40 Per Share                        |   |                                        | 323,983    |                                 |   | 324                                                                                    |   |                                                                                                                   | 128,471                       |   |   | - |   |   | 128,795 |   |
| At                          $.50 Per Share                        |   |                                        | 763,881    |                                 |   | 762                                                                                    |   |                                                                                                                   | 381,174                       |   |   | - |   |   | 381,936 |   |
| At                          $.60 Per Share                        |   |                                        | 16,667     |                                 |   | 17                                                                                     |   |                                                                                                                   | 9,983                         |   |   | - |   |   | 10,000 |   |
| At                          $.70 Per Share                        |   |                                        | 7,143      |                                 |   | 7                                                                                      |   |                                                                                                                   | 4,993                         |   |   | - |   |   | 5,000 |   |
| At                          $.80 Per Share                        |   |                                        | 28,750     |                                 |   | 29                                                                                     |   |                                                                                                                   | 22,971                        |   |   | - |   |   | 23,000 |   |
|                                                              |   |                                        |       |                                 |   |                                                                                   |   |                                                                                                                   |                          |   |   |   |   |   |   |   |
| Services:                                                         |   |                                        |       |                                 |   |                                                                                   |   |                                                                                                                   |                          |   |   |   |   |   |   |   |
| At                          $.50 Per Share                        |   |                                        | 295,884    |                                 |   | 296                                                                                    |   |                                                                                                                   | 147,646                       |   |   | - |   |   | 147,942 |   |
|                                                              |   |                                        |       |                                 |   |                                                                                   |   |                                                                                                                   |                          |   |   |   |   |   |   |   |
| Commissions:                                                      |   |                                        |       |                                 |   |                                                                                   |   |                                                                                                                   |                          |   |   |   |   |   |   |   |
| At                          $.35 Per Share                        |   |                                        | 44,614     |                                 |   | 45                                                                                     |   |                                                                                                                   | (                          45 | ) |   |   |   |   |   |   |
| At                          $.40 Per Share                        |   |                                        | 41,993     |                                 |   | 42                                                                                     |   |                                                                                                                   | (                          42 | ) |   |   |   |   |   |   |
| At                          $.50 Per Share                        |   |                                        | 37,936     |                                 |   | 38                                                                                     |   |                                                                                                                   | (                          38 | ) |   |   |   |   |   |   |
|                                                              |   |                                        |       |                                 |   |                                                                                   |   |                                                                                                                   |                          |   |   |   |   |   |   |   |
| Expense:                                                          |   |                                        |       |                                 |   |                                                                                   |   |                                                                                                                   |                          |   |   |   |   |   |   |   |
| At                          $.35 Per Share                        |   |                                        | 8,888      |                                 |   | 9                                                                                      |   |                                                                                                                   | 3,099                         |   |   |   |   |   | 3,108 |   |
| At                          $.40 Per Share                        |   |                                        | 9,645      |                                 |   | 10                                                                                     |   |                                                                                                                   | 3,848                         |   |   |   |   |   | 3,858 |   |
|                                                              |   |                                        |       |                                 |   |                                                                                   |   |                                                                                                                   |                          |   |   |   |   |   |   |   |
| Property                          and Equipment At $.60 Per Share |   |                                        | 7,500      |                                 |   | 8                                                                                      |   |                                                                                                                   | 4,492                         |   |   |   |   |   | 4,500 |   |
|                                                              |   |                                        |       |                                 |   |                                                                                   |   |                                                                                                                   |                          |   |   |   |   |   |   |   |
| Exercise                          of Options                      |   |                                        |       |                                 |   |                                                                                   |   |                                                                                                                   |                          |   |   |   |   |   |   |   |
| Services:                                                         |   |                                        |       |                                 |   |                                                                                   |   |                                                                                                                   |                          |   |   |   |   |   |   |   |
| At                          $.35 Per Share                        |   |                                        |       |                                 |   |                                                                                   |   |                                                                                                                   |                          |   |   |   |   |   |   |   |
| By                          Related Party                         |   |                                        | 136,301    |                                 |   | 136                                                                                    |   |                                                                                                                   | 47,569                        |   |   |   |   |   | 47,705 |   |
|                                                              |   |                                        |       |                                 |   |                                                                                   |   |                                                                                                                   |                          |   |   |   |   |   |   |   |
| Net                          Loss                                 |   |                                        | -          |                                 |   | -                                                                                      |   |                                                                                                                   | -                             |   |   | (                          805,496 | ) |   | (                          805,496 | ) |
|                                                              |   |                                        |       |                                 |   |                                                                                   |   |                                                                                                                   |                          |   |   |   |   |   |   |   |
| Balance                          - July 31, 1997                  |   |                                        | 14,380,900 |                                 |   | 14,381                                                                                 |   |                                                                                                                   | 6,847,723                     |   |   | (5,508,216 | ) |   | 1,353,888 |   |

----

|                                                |   |  Common                            Stock |       |                                   |   |                                                                                       |   |                                                                                                                         |                             |
|-----------------------------------------------------|--------|-----------------------------------------------|------------|----------------------------------------|--------|--------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------|----------------------------------|
|                                                |   |                            Shares        |       |                            Amount |   |                            Additional                            Paid-In Capital |   | Deficit                            Accumulated                            in                            the DevelopmentStage |                             |                            Total |   |
| Common                            Stock Issued For: |   |                                          |       |                                   |   |                                                                                       |   |                                                                                                                         |                             |   |   |   |   |   |   |   |
| Cash:                                               |   |                                          |       |                                   |   |                                                                                       |   |                                                                                                                         |                             |   |   |   |   |   |   |   |
| At                            $.20 Per Share        |   |                                          | 10,000     |                                   | $      | 10                                                                                         |   | $                                                                                                                            | 1,990                            |   | $ | - |   | $ | 2,000 |   |
| At                            $.25 Per Share        |   |                                          | 100,000    |                                   |   | 100                                                                                        |   |                                                                                                                         | 24,900                           |   |   | - |   |   | 25,000 |   |
| At                            $.27 Per Share        |   |                                          | 45,516     |                                   |   | 46                                                                                         |   |                                                                                                                         | 12,244                           |   |   | - |   |   | 12,290 |   |
| At                            $.28 Per Share        |   |                                          | 150,910    |                                   |   | 151                                                                                        |   |                                                                                                                         | 41,349                           |   |   | - |   |   | 41,500 |   |
| At                            $.30 Per Share        |   |                                          | 60,333     |                                   |   | 60                                                                                         |   |                                                                                                                         | 18,040                           |   |   | - |   |   | 18,100 |   |
| At                            $.31 Per Share        |   |                                          | 9,677      |                                   |   | 10                                                                                         |   |                                                                                                                         | 2,990                            |   |   | - |   |   | 3,000 |   |
| At                            $.32 Per Share        |   |                                          | 86,750     |                                   |   | 87                                                                                         |   |                                                                                                                         | 27,673                           |   |   | - |   |   | 27,760 |   |
| At                            $.33 Per Share        |   |                                          | 125,364    |                                   |   | 125                                                                                        |   |                                                                                                                         | 41,245                           |   |   | - |   |   | 41,370 |   |
| At                            $.35 Per Share        |   |                                          | 75,144     |                                   |   | 75                                                                                         |   |                                                                                                                         | 26,225                           |   |   | - |   |   | 26,300 |   |
| At                            $.38 Per Share        |   |                                          | 49,048     |                                   |   | 49                                                                                         |   |                                                                                                                         | 18,311                           |   |   | - |   |   | 18,360 |   |
| At                            $.40 Per Share        |   |                                          | 267,500    |                                   |   | 268                                                                                        |   |                                                                                                                         | 106,732                          |   |   | - |   |   | 107,000 |   |
| At                            $.45 Per Share        |   |                                          | 65,333     |                                   |   | 65                                                                                         |   |                                                                                                                         | 29,335                           |   |   | - |   |   | 29,400 |   |
| At                            $.50 Per Share        |   |                                          | 611,184    |                                   |   | 610                                                                                        |   |                                                                                                                         | 304,907                          |   |   | - |   |   | 305,517 |   |
|                                                |   |                                          |       |                                   |   |                                                                                       |   |                                                                                                                         |                             |   |   |   |   |   |   |   |
| Services:                                           |   |                                          |       |                                   |   |                                                                                       |   |                                                                                                                         |                             |   |   |   |   |   |   |   |
| At                            $.23 Per Share        |   |                                          | 48,609     |                                   |   | 49                                                                                         |   |                                                                                                                         | 11,131                           |   |   | - |   |   | 11,180 |   |
|                                                |   |                                          |       |                                   |   |                                                                                       |   |                                                                                                                         |                             |   |   |   |   |   |   |   |
| Exercise                            of Options:     |   |                                          |       |                                   |   |                                                                                       |   |                                                                                                                         |                             |   |   |   |   |   |   |   |
| Services:                                           |   |                                          |       |                                   |   |                                                                                       |   |                                                                                                                         |                             |   |   |   |   |   |   |   |
| At                            $.22 Per Share        |   |                                          | 82,436     |                                   |   | 82                                                                                         |   |                                                                                                                         | 18,054                           |   |   | - |   |   | 18,136 |   |
| At                            $.35 Per Share        |   |                                          | 183,846    |                                   |   | 184                                                                                        |   |                                                                                                                         | 64,162                           |   |   | - |   |   | 64,346 |   |
|                                                |   |                                          |       |                                   |   |                                                                                       |   |                                                                                                                         |                             |   |   |   |   |   |   |   |
| Compensation:                                       |   |                                          |       |                                   |   |                                                                                       |   |                                                                                                                         |                             |   |   |   |   |   |   |   |
| At                            $.22 Per Share        |   |                                          | 105,000    |                                   |   | 105                                                                                        |   |                                                                                                                         | 22,995                           |   |   | - |   |   | 23,100 |   |
| At                            $.35 Per Share        |   |                                          | 25,000     |                                   |   | 25                                                                                         |   |                                                                                                                         | 8,725                            |   |   | - |   |   | 8,750 |   |
|                                                |   |                                          |       |                                   |   |                                                                                       |   |                                                                                                                         |                             |   |   |   |   |   |   |   |
| Commissions:                                        |   |                                          |       |                                   |   |                                                                                       |   |                                                                                                                         |                             |   |   |   |   |   |   |   |
| At                            $.22 Per Share        |   |                                          | 67,564     |                                   |   | 68                                                                                         |   |                                                                                                                         | (                            68  | ) |   | - |   |   |   |   |
| At                            $.35 Per Share        |   |                                          | 291,028    |                                   |   | 291                                                                                        |   |                                                                                                                         | (                            291 | ) |   | - |   |   |   |   |
|                                                |   |                                          |       |                                   |   |                                                                                       |   |                                                                                                                         |                             |   |   |   |   |   |   |   |
| Net                            Loss                 |   |                                          | -          |                                   |   | -                                                                                          |   |                                                                                                                         | -                                |   |   | (                            807,181 | ) |   | (                            807,181 | ) |
|                                                |   |                                          |       |                                   |   |                                                                                       |   |                                                                                                                         |                             |   |   |   |   |   |   |   |
| Balance                            - July 31, 1998  |   |                                          | 16,841,142 |                                   |   | 16,841                                                                                     |   |                                                                                                                         | 7,628,372                        |   |   | (6,315,397 | ) |   | 1,329,816 |   |

----

|                                                        |   |  Common                              Stock |    |                                     |   |                                                                                           |   |                                                                                                                               |                               |
|-------------------------------------------------------------|--------|-------------------------------------------------|---------|------------------------------------------|--------|------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------|------------------------------------|
|                                                        |   |                              Shares        |    |                              Amount |   |                              Additional                              Paid-In Capital |   | Deficit                              Accumulated                              in                              the DevelopmentStage |                               |                              Total |   |
| Common                              Stock Issued For:  |   |                                            |    |                                     |   |                                                                                           |   |                                                                                                                               |                               |   |   |   |   |   |   |   |
| Cash:                                                       |   |                                            |    |                                     |   |                                                                                           |   |                                                                                                                               |                               |   |   |   |   |   |   |   |
| At                              $0.20 Per Share             |   |                                            | 12,500  |                                     | $      | 13                                                                                             |   | $                                                                                                                                  | 2,487                              |   | $ | - |   | $ | 2,500 |   |
| At                              $0.22 Per Share             |   |                                            | 45,454  |                                     |   | 45                                                                                             |   |                                                                                                                               | 9,955                              |   |   | - |   |   | 10,000 |   |
| At                              $0.25 Per Share             |   |                                            | 248,788 |                                     |   | 249                                                                                            |   |                                                                                                                               | 61,948                             |   |   | - |   |   | 62,197 |   |
| At                              $0.27 Per Share             |   |                                            | 132,456 |                                     |   | 132                                                                                            |   |                                                                                                                               | 35,631                             |   |   | - |   |   | 35,763 |   |
| At                              $0.28 Per Share             |   |                                            | 107,000 |                                     |   | 107                                                                                            |   |                                                                                                                               | 30,493                             |   |   | - |   |   | 30,600 |   |
| At                              $0.29 Per Share             |   |                                            | 20,000  |                                     |   | 20                                                                                             |   |                                                                                                                               | 5,780                              |   |   | - |   |   | 5,800 |   |
| At                              $0.30 Per Share             |   |                                            | 49,333  |                                     |   | 49                                                                                             |   |                                                                                                                               | 14,751                             |   |   | - |   |   | 14,800 |   |
| At                              $0.32 Per Share             |   |                                            | 152,725 |                                     |   | 153                                                                                            |   |                                                                                                                               | 48,719                             |   |   | - |   |   | 48,872 |   |
| At                              $0.33 Per Share             |   |                                            | 149,396 |                                     |   | 149                                                                                            |   |                                                                                                                               | 49,151                             |   |   | - |   |   | 49,300 |   |
| At                              $0.35 Per Share             |   |                                            | 538,427 |                                     |   | 538                                                                                            |   |                                                                                                                               | 187,912                            |   |   | - |   |   | 188,450 |   |
| At                              $0.40 Per Share             |   |                                            | 17,000  |                                     |   | 17                                                                                             |   |                                                                                                                               | 6,783                              |   |   | - |   |   | 6,800 |   |
| At                              $0.50 Per Share             |   |                                            | 53,000  |                                     |   | 53                                                                                             |   |                                                                                                                               | 26,447                             |   |   | - |   |   | 26,500 |   |
| At                              $0.55 Per Share             |   |                                            | 6,000   |                                     |   | 6                                                                                              |   |                                                                                                                               | 3,294                              |   |   | - |   |   | 3,300 |   |
| At                              $0.65 Per Share             |   |                                            | 33,846  |                                     |   | 34                                                                                             |   |                                                                                                                               | 21,966                             |   |   | - |   |   | 22,000 |   |
| At                              $0.68 Per Share             |   |                                            | 13,235  |                                     |   | 13                                                                                             |   |                                                                                                                               | 8,987                              |   |   | - |   |   | 9,000 |   |
| At                              $0.70 Per Share             |   |                                            | 153,572 |                                     |   | 154                                                                                            |   |                                                                                                                               | 107,346                            |   |   | - |   |   | 107,500 |   |
| At                              $0.90 Per Share             |   |                                            | 57,777  |                                     |   | 58                                                                                             |   |                                                                                                                               | 51,942                             |   |   | - |   |   | 52,000 |   |
| At                              $1.00 Per Share             |   |                                            | 50,000  |                                     |   | 50                                                                                             |   |                                                                                                                               | 49,950                             |   |   | - |   |   | 50,000 |   |
| At                              $1.10 Per Share             |   |                                            | 150,000 |                                     |   | 150                                                                                            |   |                                                                                                                               | 164,850                            |   |   | - |   |   | 165,000 |   |
|                                                        |   |                                            |    |                                     |   |                                                                                           |   |                                                                                                                               |                               |   |   |   |   |   |   |   |
| Expenses:                                                   |   |                                            |    |                                     |   |                                                                                           |   |                                                                                                                               |                               |   |   |   |   |   |   |   |
| At                              $0.21 Per Share             |   |                                            | 37,376  |                                     |   | 37                                                                                             |   |                                                                                                                               | 7,812                              |   |   | - |   |   | 7,849 |   |
| At                              $0.30 Per Share             |   |                                            | 19,450  |                                     |   | 19                                                                                             |   |                                                                                                                               | 5,816                              |   |   | - |   |   | 5,835 |   |
| At                              $0.36 Per Share             |   |                                            | 34,722  |                                     |   | 35                                                                                             |   |                                                                                                                               | 12,465                             |   |   | - |   |   | 12,500 |   |
|                                                        |   |                                            |    |                                     |   |                                                                                           |   |                                                                                                                               |                               |   |   |   |   |   |   |   |
| Commission:                                                 |   |                                            |    |                                     |   |                                                                                           |   |                                                                                                                               |                               |   |   |   |   |   |   |   |
| At                              $0.21 Per Share             |   |                                            | 158,426 |                                     |   | 158                                                                                            |   |                                                                                                                               | (                              158 | ) |   | - |   |   | - |   |
| At                              $0.25 Per Share             |   |                                            | 28,244  |                                     |   | 28                                                                                             |   |                                                                                                                               | (                              28  | ) |   | - |   |   | - |   |
| At                              $0.30 Per Share             |   |                                            | 132,759 |                                     |   | 133                                                                                            |   |                                                                                                                               | (                              133 | ) |   | - |   |   | - |   |
| At                              $0.35 Per Share             |   |                                            | 40,000  |                                     |   | 40                                                                                             |   |                                                                                                                               | (                              40  | ) |   | - |   |   | - |   |
|                                                        |   |                                            |    |                                     |   |                                                                                           |   |                                                                                                                               |                               |   |   |   |   |   |   |   |
| Services:                                                   |   |                                            | 95,238  |                                     |   | 95                                                                                             |   |                                                                                                                               | 19,905                             |   |   | - |   |   | 20,000 |   |
| At                              $0.25 Per Share             |   |                                            | 17,000  |                                     |   | 17                                                                                             |   |                                                                                                                               | 4,233                              |   |   | - |   |   | 4,250 |   |
| At                              $0.30 Per Share             |   |                                            | 145,941 |                                     |   | 146                                                                                            |   |                                                                                                                               | 43,636                             |   |   | - |   |   | 43,782 |   |
| At                              $0.50 Per Share             |   |                                            | 71,808  |                                     |   | 72                                                                                             |   |                                                                                                                               | 35,832                             |   |   | - |   |   | 35,904 |   |

----

|                                                                    |   |  Common                                  Stock |       |   |   |                                                                                                   |   |                                                                                                                                           |      |
|-------------------------------------------------------------------------|--------|-----------------------------------------------------|------------|--------|--------|--------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|-----------|
|                                                                    |   |                                  Shares        |       | Amount |   |                                  Additional                                  Paid-In Capital |   | Deficit                                  Accumulated                                  in                                  the DevelopmentStage |      |                                  Total |   |
| Compensation                                  portion of Cash           |   |                                                |       |   |   |                                                                                                   |   |                                                                                                                                           |      |   |   |   |   |   |   |   |
| Compensation                                  portion of Cash Issuances |   |                                                | -          |   | $      | -                                                                                                      |   | $                                                                                                                                              | 618,231   |   | $ | - |   | $ | 618,231 |   |
|                                                                    |   |                                                |       |   |   |                                                                                                   |   |                                                                                                                                           |      |   |   |   |   |   |   |   |
| Compensation                                  Portion of Options        |   |                                                | -          |   |   | -                                                                                                      |   |                                                                                                                                           | 304,900   |   |   | - |   |   | 304,900 |   |
|                                                                    |   |                                                |       |   |   |                                                                                                   |   |                                                                                                                                           |      |   |   |   |   |   |   |   |
| Exercise                                  of Options:                   |   |                                                |       |   |   |                                                                                                   |   |                                                                                                                                           |      |   |   |   |   |   |   |   |
| Cash                                                                    |   |                                                |       |   |   |                                                                                                   |   |                                                                                                                                           |      |   |   |   |   |   |   |   |
| At                                  $0.10 Per Share                     |   |                                                | 510,000    |   |   | 510                                                                                                    |   |                                                                                                                                           | 50,490    |   |   | - |   |   | 51,000 |   |
|                                                                    |   |                                                |       |   |   |                                                                                                   |   |                                                                                                                                           |      |   |   |   |   |   |   |   |
| Services:                                                               |   |                                                |       |   |   |                                                                                                   |   |                                                                                                                                           |      |   |   |   |   |   |   |   |
| At                                  $0.70 Per Share                     |   |                                                | 100,000    |   |   | 100                                                                                                    |   |                                                                                                                                           | 69,900    |   |   | - |   |   | 70,000 |   |
|                                                                    |   |                                                |       |   |   |                                                                                                   |   |                                                                                                                                           |      |   |   |   |   |   |   |   |
| Net                                  Loss                               |   |                                                | -          |   |   | -                                                                                                      |   |                                                                                                                                           | -         |   |   | (1,964,447 | ) |   | (1,964,447 | ) |
|                                                                    |   |                                                |       |   |   |                                                                                                   |   |                                                                                                                                           |      |   |   |   |   |   |   |   |
| Balance                                  - July 31, 1999                |   |                                                | 20,222,615 |   |   | 20,221                                                                                                 |   |                                                                                                                                           | 9,689,625 |   |   | (8,279,844 | ) |   | 1,430,002 |   |
|                                                                    |   |                                                |       |   |   |                                                                                                   |   |                                                                                                                                           |      |   |   |   |   |   |   |   |
| Common                                  Stock Issued For:               |   |                                                |       |   |   |                                                                                                   |   |                                                                                                                                           |      |   |   |   |   |   |   |   |
| Cash:                                                                   |   |                                                |       |   |   |                                                                                                   |   |                                                                                                                                           |      |   |   |   |   |   |   |   |
| At                                  $.18 Per Share                      |   |                                                | 27,778     |   |   | 28                                                                                                     |   |                                                                                                                                           | 4,972     |   |   | - |   |   | 5,000 |   |
| At                                  $.20 Per Share                      |   |                                                | 482,500    |   |   | 483                                                                                                    |   |                                                                                                                                           | 96,017    |   |   | - |   |   | 96,500 |   |
| At                                  $.21 Per Share                      |   |                                                | 47,500     |   |   | 47                                                                                                     |   |                                                                                                                                           | 9,953     |   |   | - |   |   | 10,000 |   |
| At                                  $.22 Per Share                      |   |                                                | 844,821    |   |   | 845                                                                                                    |   |                                                                                                                                           | 185,012   |   |   | - |   |   | 185,857 |   |
| At                                  $.30 Per Share                      |   |                                                | 100,000    |   |   | 100                                                                                                    |   |                                                                                                                                           | 29,900    |   |   | - |   |   | 30,000 |   |
| At                                  $.35 Per Share                      |   |                                                | 280,000    |   |   | 280                                                                                                    |   |                                                                                                                                           | 97,720    |   |   | - |   |   | 98,000 |   |
| At                                  $.37 Per Share                      |   |                                                | 56,000     |   |   | 56                                                                                                     |   |                                                                                                                                           | 19,944    |   |   | - |   |   | 20,000 |   |
| At                                  $.38 Per Share                      |   |                                                | 100,000    |   |   | 100                                                                                                    |   |                                                                                                                                           | 37,900    |   |   | - |   |   | 38,000 |   |
| At                                  $.40 Per Share                      |   |                                                | 620,000    |   |   | 620                                                                                                    |   |                                                                                                                                           | 247,380   |   |   | - |   |   | 248,000 |   |
| At                                  $.42 Per Share                      |   |                                                | 47,715     |   |   | 48                                                                                                     |   |                                                                                                                                           | 19,952    |   |   | - |   |   | 20,000 |   |
| At                                  $.45 Per Share                      |   |                                                | 182,445    |   |   | 182                                                                                                    |   |                                                                                                                                           | 81,918    |   |   | - |   |   | 82,100 |   |
| At                                  $.50 Per Share                      |   |                                                | 313,000    |   |   | 313                                                                                                    |   |                                                                                                                                           | 156,187   |   |   | - |   |   | 156,500 |   |
| At                                  $.55 Per Share                      |   |                                                | 122,778    |   |   | 123                                                                                                    |   |                                                                                                                                           | 67,377    |   |   | - |   |   | 67,500 |   |
| At                                  $.58 Per Share                      |   |                                                | 12,069     |   |   | 12                                                                                                     |   |                                                                                                                                           | 6,988     |   |   | - |   |   | 7,000 |   |
|                                                                    |   |                                                |       |   |   |                                                                                                   |   |                                                                                                                                           |      |   |   |   |   |   |   |   |
| Expenses:                                                               |   |                                                |       |   |   |                                                                                                   |   |                                                                                                                                           |      |   |   |   |   |   |   |   |
| At                                  $.20 Per Share                      |   |                                                | 4,167      |   |   | 4                                                                                                      |   |                                                                                                                                           | 829       |   |   | - |   |   | 833 |   |
| At                                  $.22 Per Share                      |   |                                                | 46,091     |   |   | 46                                                                                                     |   |                                                                                                                                           | 10,094    |   |   | - |   |   | 10,140 |   |
|                                                                    |   |                                                |       |   |   |                                                                                                   |   |                                                                                                                                           |      |   |   |   |   |   |   |   |
| Compensation                                  Portion                   |   |                                                | -          |   |   | -                                                                                                      |   |                                                                                                                                           | 94,430    |   |   | - |   |   | 94,430 |   |

----

|                                                      |   |  Common                                  Stock |       |                                         |   |                                                                                                   |   |                                                                                                                                           |                                  |
|-----------------------------------------------------------|--------|-----------------------------------------------------|------------|----------------------------------------------|--------|--------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------|
|                                                      |   |                                  Shares        |       |                                  Amount |   |                                  Additional                                  Paid-In Capital |   | Deficit                                  Accumulated                                  in                                  the DevelopmentStage |                                  |                                  Total |   |
| Exercise                                  of Options:     |   |                                                |       |                                         |   |                                                                                                   |   |                                                                                                                                           |                                  |   |   |   |   |   |   |   |
| Services:                                                 |   |                                                |       |                                         |   |                                                                                                   |   |                                                                                                                                           |                                  |   |   |   |   |   |   |   |
| At                                  $.25 Per Share        |   |                                                | 30,000     |                                         | $      | 30                                                                                                     |   | $                                                                                                                                              | 7,470                                 |   | $ | - |   | $ | 7,500 |   |
| At                                  $.40 Per Share        |   |                                                | 95,000     |                                         |   | 95                                                                                                     |   |                                                                                                                                           | 37,905                                |   |   | - |   |   | 38,000 |   |
| At                                  $.50 Per Share        |   |                                                | 25,958     |                                         |   | 26                                                                                                     |   |                                                                                                                                           | 12,954                                |   |   | - |   |   | 12,980 |   |
|                                                      |   |                                                |       |                                         |   |                                                                                                   |   |                                                                                                                                           |                                  |   |   |   |   |   |   |   |
| Commissions:                                              |   |                                                |       |                                         |   |                                                                                                   |   |                                                                                                                                           |                                  |   |   |   |   |   |   |   |
| At                                  $.20 Per Share        |   |                                                | 26,750     |                                         |   | 27                                                                                                     |   |                                                                                                                                           | (                                  27 | ) |   | - |   |   | - |   |
| At                                  $.22 Per Share        |   |                                                | 86,909     |                                         |   | 87                                                                                                     |   |                                                                                                                                           | (                                  87 | ) |   | - |   |   | - |   |
|                                                      |   |                                                |       |                                         |   |                                                                                                   |   |                                                                                                                                           |                                  |   |   |   |   |   |   |   |
| Exercise                                  of Options:     |   |                                                |       |                                         |   |                                                                                                   |   |                                                                                                                                           |                                  |   |   |   |   |   |   |   |
| Cash:                                                     |   |                                                |       |                                         |   |                                                                                                   |   |                                                                                                                                           |                                  |   |   |   |   |   |   |   |
| At                                  $.10 Per Share        |   |                                                | 100,000    |                                         |   | 100                                                                                                    |   |                                                                                                                                           | 9,900                                 |   |   | - |   |   | 10,000 |   |
|                                                      |   |                                                |       |                                         |   |                                                                                                   |   |                                                                                                                                           |                                  |   |   |   |   |   |   |   |
| Exercise                                  of Options:     |   |                                                |       |                                         |   |                                                                                                   |   |                                                                                                                                           |                                  |   |   |   |   |   |   |   |
| Services:                                                 |   |                                                |       |                                         |   |                                                                                                   |   |                                                                                                                                           |                                  |   |   |   |   |   |   |   |
| At                                  $.22 Per Share        |   |                                                | 150,000    |                                         |   | 150                                                                                                    |   |                                                                                                                                           | 32,850                                |   |   | - |   |   | 33,000 |   |
|                                                      |   |                                                |       |                                         |   |                                                                                                   |   |                                                                                                                                           |                                  |   |   |   |   |   |   |   |
| Stock                                  Based Compensation |   |                                                | -          |                                         |   | -                                                                                                      |   |                                                                                                                                           | 221,585                               |   |   | - |   |   | 221,585 |   |
|                                                      |   |                                                |       |                                         |   |                                                                                                   |   |                                                                                                                                           |                                  |   |   |   |   |   |   |   |
| Net                                  Loss                 |   |                                                | -          |                                         |   | -                                                                                                      |   |                                                                                                                                           | -                                     |   |   | (1,530,020 | ) |   | (1,530,020 | ) |
|                                                      |   |                                                |       |                                         |   |                                                                                                   |   |                                                                                                                                           |                                  |   |   |   |   |   |   |   |
| Balance                                  - July 31, 2000  |   |                                                |       |                                         |   |                                                                                                   |   |                                                                                                                                           |                                  |   |   |   |   |   |   |   |
| (Unconsolidated)                                          |   |                                                | 24,024,096 |                                         |   | 24,023                                                                                                 |   |                                                                                                                                           | 11,178,748                            |   |   | (9,809,864 | ) |   | 1,392,907 |   |
|                                                      |   |                                                |       |                                         |   |                                                                                                   |   |                                                                                                                                           |                                  |   |   |   |   |   |   |   |
| Common                                  Stock Issued For: |   |                                                |       |                                         |   |                                                                                                   |   |                                                                                                                                           |                                  |   |   |   |   |   |   |   |
| Cash:                                                     |   |                                                |       |                                         |   |                                                                                                   |   |                                                                                                                                           |                                  |   |   |   |   |   |   |   |
| At                                  $.15 Per Share        |   |                                                | 120,000    |                                         |   | 120                                                                                                    |   |                                                                                                                                           | 17,880                                |   |   | - |   |   | 18,000 |   |
| At                                  $.17 Per Share        |   |                                                | 80,000     |                                         |   | 80                                                                                                     |   |                                                                                                                                           | 13,520                                |   |   | - |   |   | 13,600 |   |
| At                                  $.18 Per Share        |   |                                                | 249,111    |                                         |   | 249                                                                                                    |   |                                                                                                                                           | 44,591                                |   |   | - |   |   | 44,840 |   |
| At                                  $.19 Per Share        |   |                                                | 70,789     |                                         |   | 71                                                                                                     |   |                                                                                                                                           | 13,379                                |   |   | - |   |   | 13,450 |   |
| At                                  $.20 Per Share        |   |                                                | 1,322,500  |                                         |   | 1,323                                                                                                  |   |                                                                                                                                           | 261,677                               |   |   | - |   |   | 263,000 |   |
| At                                  $.21 Per Share        |   |                                                | 33,810     |                                         |   | 34                                                                                                     |   |                                                                                                                                           | 7,066                                 |   |   | - |   |   | 7,100 |   |
| At                                  $.22 Per Share        |   |                                                | 2,472,591  |                                         |   | 2,473                                                                                                  |   |                                                                                                                                           | 541,497                               |   |   | - |   |   | 543,970 |   |
| At                                  $.23 Per Share        |   |                                                | 65,239     |                                         |   | 65                                                                                                     |   |                                                                                                                                           | 14,935                                |   |   | - |   |   | 15,000 |   |
| At                                  $.24 Per Share        |   |                                                | 123,337    |                                         |   | 123                                                                                                    |   |                                                                                                                                           | 29,477                                |   |   | - |   |   | 29,600 |   |
| At                                  $.25 Per Share        |   |                                                | 610,400    |                                         |   | 611                                                                                                    |   |                                                                                                                                           | 151,884                               |   |   | - |   |   | 152,495 |   |
| At                                  $.26 Per Share        |   |                                                | 625,769    |                                         |   | 626                                                                                                    |   |                                                                                                                                           | 162,074                               |   |   | - |   |   | 162,700 |   |
| At                                  $.27 Per Share        |   |                                                | 314,850    |                                         |   | 315                                                                                                    |   |                                                                                                                                           | 84,695                                |   |   | - |   |   | 85,010 |   |
| At                                  $.28 Per Share        |   |                                                | 7,143      |                                         |   | 7                                                                                                      |   |                                                                                                                                           | 1,993                                 |   |   | - |   |   | 2,000 |   |
| At                                  $.30 Per Share        |   |                                                | 33,333     |                                         |   | 33                                                                                                     |   |                                                                                                                                           | 9,967                                 |   |   | - |   |   | 10,000 |   |
| At                                  $.35 Per Share        |   |                                                | 271,429    |                                         |   | 272                                                                                                    |   |                                                                                                                                           | 94,728                                |   |   | - |   |   | 95,000 |   |
| At                                  $.38 Per Share        |   |                                                | 453,158    |                                         |   | 453                                                                                                    |   |                                                                                                                                           | 169,547                               |   |   | - |   |   | 170,000 |   |
| At                                  $.40 Per Share        |   |                                                | 300,000    |                                         |   | 300                                                                                                    |   |                                                                                                                                           | 119,700                               |   |   | - |   |   | 120,000 |   |
| At                                  $.50 Per Share        |   |                                                | 10,000     |                                         |   | 10                                                                                                     |   |                                                                                                                                           | 4,990                                 |   |   | - |   |   | 5,000 |   |

----

|                                                                 |   |  Common                                  Stock |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |
|----------------------------------------------------------------------|--------|-----------------------------------------------------|-----------|----------------------------------------------|--------|--------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                 |   |                                  Shares        |      |                                  Amount |   |                                  Additional                                  Paid-In Capital |   | Deficit                                  Accumulated                                  in                                  the DevelopmentStage |      |   Accumulated                                  OtherComprehensive                                  Income                                  (Loss) |   |                                  Total |   |
| Compensation                                  Portion:               |   |                                                | -         |                                         | $      | -                                                                                                      |   | $                                                                                                                                              | 24,000    |                                                                                                                                                        | $      | - |   | $ | - |   | $ | 24,000 |   |
|                                                                 |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Expenses:                                                            |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| At                                  $.27 Per Share                   |   |                                                | 30,000    |                                         |   | 30                                                                                                     |   |                                                                                                                                           | 8,070     |                                                                                                                                                        |   | - |   |   | - |   |   | 8,100 |   |
|                                                                 |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Services:                                                            |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| At                                  $0.20 Per Share                  |   |                                                | 33,850    |                                         |   | 34                                                                                                     |   |                                                                                                                                           | 6,736     |                                                                                                                                                        |   | - |   |   | - |   |   | 6,770 |   |
| At                                  $0.23 Per Share                  |   |                                                | 15,000    |                                         |   | 15                                                                                                     |   |                                                                                                                                           | 3,435     |                                                                                                                                                        |   | - |   |   | - |   |   | 3,450 |   |
| At                                  $0.11 Per Share                  |   |                                                | 87,272    |                                         |   | 87                                                                                                     |   |                                                                                                                                           | 9,513     |                                                                                                                                                        |   | - |   |   | - |   |   | 9,600 |   |
| At                                  $0.34 Per Share                  |   |                                                | 50,000    |                                         |   | 50                                                                                                     |   |                                                                                                                                           | 16,950    |                                                                                                                                                        |   | - |   |   | - |   |   | 17,000 |   |
|                                                                 |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Compensation                                  Portion:               |   |                                                | -         |                                         |   | -                                                                                                      |   |                                                                                                                                           | 21,777    |                                                                                                                                                        |   | - |   |   | - |   |   | 21,777 |   |
|                                                                 |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Commission:                                                          |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| At                                  $0.11 Per Share                  |   |                                                | 266,500   |                                         |   | 267                                                                                                    |   |                                                                                                                                           | (267      | )                                                                                                                                                           |   | - |   |   | - |   |   | - |   |
| At                                  $0.20 Per Share                  |   |                                                | 26,150    |                                         |   | 26                                                                                                     |   |                                                                                                                                           | (26       | )                                                                                                                                                           |   | - |   |   | - |   |   | - |   |
| At                                  $0.22 Per Share                  |   |                                                | 15,000    |                                         |   | 15                                                                                                     |   |                                                                                                                                           | (15       | )                                                                                                                                                           |   | - |   |   | - |   |   | - |   |
|                                                                 |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Compensation                                  Portion:               |   |                                                | -         |                                         |   | -                                                                                                      |   |                                                                                                                                           | 36,595    |                                                                                                                                                        |   | - |   |   | - |   |   | 36,595 |   |
|                                                                 |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Exercise                                  of Options:           |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Cash:                                                           |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| At                                  $0.02 Per Share By               |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Related                                  Party                       |   |                                                | 225,000   |                                         |   | 225                                                                                                    |   |                                                                                                                                           | 4,725     |                                                                                                                                                        |   | - |   |   | - |   |   | 4,950 |   |
| At                                  $0.10 Per Share                  |   |                                                | 200,000   |                                         |   | 200                                                                                                    |   |                                                                                                                                           | 19,800    |                                                                                                                                                        |   | - |   |   | - |   |   | 20,000 |   |
|                                                                 |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Expenses:                                                            |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| At                                  $0.02 Per Share By Related Party |   |                                                | 53,270    |                                         |   | 53                                                                                                     |   |                                                                                                                                           | 1,120     |                                                                                                                                                        |   | - |   |   | - |   |   | 1,173 |   |
|                                                                 |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Compensation                                  Portion:               |   |                                                | -         |                                         |   | -                                                                                                      |   |                                                                                                                                           | 25,463    |                                                                                                                                                        |   | - |   |   | - |   |   | 25,463 |   |
|                                                                 |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Commission:                                                          |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| At                                  $0.02 Per Share                  |   |                                                | 350,000   |                                         |   | 350                                                                                                    |   |                                                                                                                                           | (350      | )                                                                                                                                                           |   | - |   |   | - |   |   | - |   |
|                                                                 |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Compensation                                  Portion:               |   |                                                | -         |                                         |   | -                                                                                                      |   |                                                                                                                                           | 132,300   |                                                                                                                                                        |   | - |   |   | - |   |   | 132,300 |   |
|                                                                 |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Commission:                                                          |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| At                                  $0.05 Per Share                  |   |                                                | 1,000,000 |                                         |   | 1,000                                                                                                  |   |                                                                                                                                           | (1,000    | )                                                                                                                                                           |   | - |   |   | - |   |   | - |   |
|                                                                 |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Compensation                                  Portion:               |   |                                                | -         |                                         |   | -                                                                                                      |   |                                                                                                                                           | 400,000   |                                                                                                                                                        |   | - |   |   | - |   |   | 400,000 |   |
|                                                                 |   |                                                |      |                                         |   |                                                                                                   |   |                                                                                                                                           |      |                                                                                                                                                        |   |   |   |   |   |   |   |   |   |
| Stock                                  Based Compensation            |   |                                                | -         |                                         |   | -                                                                                                      |   |                                                                                                                                           | 7,002,500 |                                                                                                                                                        |   | - |   |   | - |   |   | 7,002,500 |   |

----

|                                                 |   |  Common                              Stock |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |
|------------------------------------------------------|--------|-------------------------------------------------|------------|------------------------------------------|--------|------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------|------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                 |   |                              Shares        |       |                              Amount |   |                              Additional                              Paid-In Capital |   | Deficit                              Accumulated                              in                              the DevelopmentStage |                               |                              Accumulated                              OtherComprehensive                              Income                              (Loss) |   |                              Total |   |
| Comprehensive                              Loss:     |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Net                              Loss                |   |                                            | -          |                                     |   | -                                                                                              |   |                                                                                                                               | -                                  |                                                                                                                                                                  |   | (                              9,418,266 | ) |   | - |   |   | (9,418,266 | ) |
|                                                 |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Equity                              Adjustment from  |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Foreign                              Currency        |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Translation                                          |   |                                            | -          |                                     |   | -                                                                                              |   |                                                                                                                               | -                                  |                                                                                                                                                                  |   | - |   |   | (                              493 | ) |   | (                              493 | ) |
|                                                 |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Total                              Comprehensive     |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Loss                                                 |   |                                            | -          |                                     |   | -                                                                                              |   |                                                                                                                               | -                                  |                                                                                                                                                                  |   | - |   |   | - |   |   | (9,418,759 | ) |
|                                                 |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Balance                              - July 31, 2001 |   |                                            | 33,539,597 |                                     |   | 33,540                                                                                         |   |                                                                                                                               | 20,633,674                         |                                                                                                                                                                  |   | (19,228,130 | ) |   | (                              493 | ) |   | 1,438,591 |   |
|                                                 |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Common                              Stock Issued     |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| For:                                                 |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Cash:                                                |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| At                              $.022 Per Share      |   |                                            | 1,400,976  |                                     |   | 1,401                                                                                          |   |                                                                                                                               | 29,420                             |                                                                                                                                                                  |   | - |   |   | - |   |   | 30,821 |   |
| At                              $.08 Per Share       |   |                                            | 250,000    |                                     |   | 250                                                                                            |   |                                                                                                                               | 19,750                             |                                                                                                                                                                  |   | - |   |   | - |   |   | 20,000 |   |
| At                              $.10 Per Share       |   |                                            | 980,000    |                                     |   | 980                                                                                            |   |                                                                                                                               | 97,020                             |                                                                                                                                                                  |   | - |   |   | - |   |   | 98,000 |   |
| At                              $.11 Per Share       |   |                                            | 145,456    |                                     |   | 145                                                                                            |   |                                                                                                                               | 15,855                             |                                                                                                                                                                  |   | - |   |   | - |   |   | 16,000 |   |
| At                              $.115 Per Share      |   |                                            | 478,260    |                                     |   | 478                                                                                            |   |                                                                                                                               | 54,522                             |                                                                                                                                                                  |   | - |   |   | - |   |   | 55,000 |   |
| At                              $.12 Per Share       |   |                                            | 500,000    |                                     |   | 500                                                                                            |   |                                                                                                                               | 59,500                             |                                                                                                                                                                  |   | - |   |   | - |   |   | 60,000 |   |
| At                              $.125 Per Share      |   |                                            | 40,000     |                                     |   | 40                                                                                             |   |                                                                                                                               | 4,960                              |                                                                                                                                                                  |   | - |   |   | - |   |   | 5,000 |   |
| At                              $.14 Per Share       |   |                                            | 44,000     |                                     |   | 44                                                                                             |   |                                                                                                                               | 6,116                              |                                                                                                                                                                  |   | - |   |   | - |   |   | 6,160 |   |
| At                              $.15 Per Share       |   |                                            | 383,667    |                                     |   | 384                                                                                            |   |                                                                                                                               | 57,166                             |                                                                                                                                                                  |   | - |   |   | - |   |   | 57,550 |   |
| At                              $.18 Per Share       |   |                                            | 25,000     |                                     |   | 25                                                                                             |   |                                                                                                                               | 4,475                              |                                                                                                                                                                  |   | - |   |   | - |   |   | 4,500 |   |
|                                                 |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Commissions:                                         |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| At                              $.115 Per Share      |   |                                            | 69,565     |                                     |   | 70                                                                                             |   |                                                                                                                               | (                              70  | )                                                                                                                                                                     |   | - |   |   | - |   |   | - |   |
| At                              $.22 Per Share       |   |                                            | 100,000    |                                     |   | 100                                                                                            |   |                                                                                                                               | (                              100 | )                                                                                                                                                                     |   | - |   |   | - |   |   | - |   |
| At                              $.08 Per Share       |   |                                            | 20,625     |                                     |   | 21                                                                                             |   |                                                                                                                               | (                              21  | )                                                                                                                                                                     |   | - |   |   | - |   |   | - |   |
| At                              $.14-$.22 Per Share  |   |                                            | 282,475    |                                     |   | 282                                                                                            |   |                                                                                                                               | (                              282 | )                                                                                                                                                                     |   | - |   |   | - |   |   | - |   |
|                                                 |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Services:                                            |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| At                              $.10 Per Share       |   |                                            | 35,950     |                                     |   | 36                                                                                             |   |                                                                                                                               | 3,559                              |                                                                                                                                                                  |   | - |   |   | - |   |   | 3,595 |   |
|                                                 |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Exercise                              of Options:    |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Non                              Cash:               |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| At                              $.022 Per Share by   |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Related                              Party:          |   |                                            | 227,273    |                                     |   | 227                                                                                            |   |                                                                                                                               | 4,773                              |                                                                                                                                                                  |   | - |   |   | - |   |   | 5,000 |   |
|                                                 |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Exercise                              of Options:    |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Cash:                                                |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| At                              $.022 Per Share by   |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Related                              Parties         |   |                                            | 909,092    |                                     |   | 909                                                                                            |   |                                                                                                                               | 19,091                             |                                                                                                                                                                  |   | - |   |   | - |   |   | 20,000 |   |
| At                              $.022 Per Share by   |   |                                            |       |                                     |   |                                                                                           |   |                                                                                                                               |                               |                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |
| Others                                               |   |                                            | 1,205,929  |                                     |   | 1,206                                                                                          |   |                                                                                                                               | 25,325                             |                                                                                                                                                                  |   | - |   |   | - |   |   | 26,531 |   |

----

|                                                                                                                                                         |   |                            |       |    |   |                        |   | Deficit                   |       |                             |   |                           |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|------------|---------|--------|-----------------------------|--------|---------------------------|------------|----------------------------------|--------|--------------------------------|--------|
|                                                                                                                                                         |   |                            |       |    |   |                        |   | Accumulated               |       | Accumulated                      |   |                           |   |
|                                                                                                                                                         |   |                            |       |    |   | Additional                  |   | in                    the |       | Other                            |   |                           |   |
|                                                                                                                                                         |   | Common                    Stock |       | Paid-In |   | Development                 |   | Comprehensive             |       |                             |   |
|                                                                                                                                                         |   | Shares                          |       | Amount  |   | Capital                     |   | Stage                     |       | Income                    (Loss) |   | Total                          |   |
| Additional                    Paid-In Capital  Arising From Investment In Joint Venture Subsidiary                    by Minority Interest              |   |                            |  -    |    |   |                      - |   |                      | 51,934     |                             |   |  -                        |   |   | - |   |   | 51,934 |   |
|                                                                                                                                                         |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Stock                    Based Compensation                                                                                                                  |   |                            | -          |    |   | -                           |   |                      | 222,338    |                             |   | -                              |   |   | - |   |   | 222,338 |   |
|                                                                                                                                                         |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Comprehensive                    Loss:                                                                                                                       |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Net                    Loss                                                                                                                                  |   |                            | -          |    |   | -                           |   |                      | -          |                             |   | (                    492,148   | )      |   | - |   |   | (                    492,148 | ) |
|                                                                                                                                                         |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Equity                    Adjustment from Foreign Currency Translation                                                                                       |   |                            | -          |    |   | -                           |   |                      | -          |                             |   | -                              |   |   | (                    6,753 | ) |   | (                    6,753 | ) |
|                                                                                                                                                         |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Total                    Comprehensive                                                                                                                       |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Loss                                                                                                                                                         |   |                            | -          |    |   | -                           |   |                      | -          |                             |   | -                              |   |   | - |   |   | (                    498,901 | ) |
|                                                                                                                                                         |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Balance                    - July 31, 2002                                                                                                                   |   |                            | 40,637,865 |    |   | 40,638                      |   |                      | 21,309,005 |                             |   | (19,720,278                    | )      |   | (                    7,246 | ) |   | 1,622,119 |   |
|                                                                                                                                                         |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Common                    Stock Issued for:                                                                                                                  |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Cash:                                                                                                                                                        |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| At                    $.022 Per Share                                                                                                                        |   |                            | 250,000    |    |   | 250                         |   |                      | 5,250      |                             |   | -                              |   |   | - |   |   | 5,500 |   |
| At                    $.10 Per Share                                                                                                                         |   |                            | 50,000     |    |   | 50                          |   |                      | 4,950      |                             |   | -                              |   |   | - |   |   | 5,000 |   |
| At                    $.12 Per Share                                                                                                                         |   |                            | 1,250,000  |    |   | 1,250                       |   |                      | 148,750    |                             |   | -                              |   |   | - |   |   | 150,000 |   |
| At                    $.14 Per Share                                                                                                                         |   |                            | 235,714    |    |   | 236                         |   |                      | 32,764     |                             |   | -                              |   |   | - |   |   | 33,000 |   |
| At                    $.15 Per Share                                                                                                                         |   |                            | 1,016,865  |    |   | 1,017                       |   |                      | 151,513    |                             |   | -                              |   |   | - |   |   | 152,530 |   |
|                                                                                                                                                         |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Exercise                    of Options:                                                                                                                      |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Cash:                                                                                                                                                        |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| At                    $.022 Per Share by                                                                                                                     |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Related                    Party                                                                                                                             |   |                            | 922,727    |    |   | 923                         |   |                      | 19,377     |                             |   | -                              |   |   | - |   |   | 20,300 |   |
| At                    $.05 Per Share by                                                                                                                      |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Related                    Party                                                                                                                             |   |                            | 200,000    |    |   | 200                         |   |                      | 9,800      |                             |   | -                              |   |   | - |   |   | 10,000 |   |
| At                    $.05 Per Share by                                                                                                                      |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Others                                                                                                                                                       |   |                            | 100,000    |    |   | 100                         |   |                      | 4,900      |                             |   | -                              |   |   | - |   |   | 5,000 |   |
|                                                                                                                                                         |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Services:                                                                                                                                                    |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| At                    $4.00 Per Share                                                                                                                        |   |                            | 14,363     |    |   | 13                          |   |                      | 57,378     |                             |   | -                              |   |   | - |   |   | 57,391 |   |
|                                                                                                                                                         |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Additional                    Paid-In Capital Arising from Investment In Joint Venture Subsidiary                    By                    Minority Interest |   |                            | -          |    |   | -                           |   |                      | 159,919    |                             |   | -                              |   |   | - |   |   | 159,919 |   |
|                                                                                                                                                         |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Stock                    Based Compensation                                                                                                                  |   |                            | -          |    |   | -                           |   |                      | 288,623    |                             |   | -                              |   |   | - |   |   | 288,623 |   |
|                                                                                                                                                         |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Comprehensive                    Loss:                                                                                                                       |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Net                    Loss                                                                                                                                  |   |                            | -          |    |   | -                           |   |                      | -          |                             |   | (                    1,919,261 | )      |   | - |   |   | (                    1,919,261 | ) |
|                                                                                                                                                         |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Equity                    Adjustment from Foreign Currency Translation                                                                                       |   |                            | -          |    |   | -                           |   |                      | -          |                             |   | -                              |   |   | 60,879 |   |   | 60,879 |   |
|                                                                                                                                                         |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Total                    Comprehensive Loss                                                                                                                  |   |                            | -          |    |   | -                           |   |                      | -          |                             |   | -                              |   |   | - |   |   | (                    1,858,382 | ) |
|                                                                                                                                                         |   |                            |       |    |   |                        |   |                      |       |                             |   |                           |   |   |   |   |   |   |   |
| Balance                    - July 31, 2003                                                                                                                   |   |                            | 44,677,534 |    |   | 44,677                      |   |                      | 22,192,229 |                             |   | (21,639,539                    | )      |   | 53,633 |   |   | 651,000 |   |

----

|                                                                                                                                            |   |  Common                    Stock |       |                           |   |                                                                       |   |                                                                                                 |       |                                                                                                                          |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|------------|--------------------------------|--------|----------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                            |   |                    Shares        |       |                    Amount |   |                    Additional                    Paid-In Capital |   | Deficit                    Accumulated                    in                    the DevelopmentStage |       |                    Accumulated                    OtherComprehensive                    Income                    (Loss) |   |                    Total |   |
| Common                    Stock Issued for:                                                                                                     |   |                                  |       |                           |   |                                                                       |   |                                                                                                 |       |                                                                                                                          |   |   |   |   |   |   |   |   |   |
| Cash:                                                                                                                                           |   |                                  |       |                           |   |                                                                       |   |                                                                                                 |       |                                                                                                                          |   |   |   |   |   |   |   |   |   |
| At                    $.05 Per Share                                                                                                            |   |                                  | 150,000    |                           |   | 150                                                                        |   |                                                                                                 | 7,350      |                                                                                                                          |   | - |   |   | - |   |   | 7,500 |   |
| At                    $.11 Per Share                                                                                                            |   |                                  | 245,455    |                           |   | 245                                                                        |   |                                                                                                 | 26,755     |                                                                                                                          |   | - |   |   | - |   |   | 27,000 |   |
| At                    $.12 Per Share                                                                                                            |   |                                  | 5,929,565  |                           |   | 5,929                                                                      |   |                                                                                                 | 705,318    |                                                                                                                          |   | - |   |   | - |   |   | 711,247 |   |
| At                    $.13 Per Share                                                                                                            |   |                                  | 349,691    |                           |   | 350                                                                        |   |                                                                                                 | 45,110     |                                                                                                                          |   | - |   |   | - |   |   | 45,460 |   |
| At                    $.14 Per Share                                                                                                            |   |                                  | 346,284    |                           |   | 346                                                                        |   |                                                                                                 | 48,133     |                                                                                                                          |   | - |   |   | - |   |   | 48,479 |   |
| At                    $.15 Per Share                                                                                                            |   |                                  | 368,665    |                           |   | 369                                                                        |   |                                                                                                 | 54,931     |                                                                                                                          |   | - |   |   | - |   |   | 55,300 |   |
| At                    $.16 Per Share                                                                                                            |   |                                  | 593,750    |                           |   | 594                                                                        |   |                                                                                                 | 94,406     |                                                                                                                          |   | - |   |   | - |   |   | 95,000 |   |
| At                    $.17 Per Share                                                                                                            |   |                                  | 145,000    |                           |   | 145                                                                        |   |                                                                                                 | 24,505     |                                                                                                                          |   | - |   |   | - |   |   | 24,650 |   |
| At                    $.18 Per Share                                                                                                            |   |                                  | 55,554     |                           |   | 56                                                                         |   |                                                                                                 | 9,944      |                                                                                                                          |   | - |   |   | - |   |   | 10,000 |   |
| At                    $.20 Per Share                                                                                                            |   |                                  | 365,000    |                           |   | 365                                                                        |   |                                                                                                 | 72,635     |                                                                                                                          |   | - |   |   | - |   |   | 73,000 |   |
| At                    $.23 Per Share                                                                                                            |   |                                  | 45,439     |                           |   | 45                                                                         |   |                                                                                                 | 10,405     |                                                                                                                          |   | - |   |   | - |   |   | 10,450 |   |
| At                    $.24 Per Share                                                                                                            |   |                                  | 74,166     |                           |   | 74                                                                         |   |                                                                                                 | 17,726     |                                                                                                                          |   | - |   |   | - |   |   | 17,800 |   |
| At                    $.25 Per Share                                                                                                            |   |                                  | 80,000     |                           |   | 80                                                                         |   |                                                                                                 | 19,920     |                                                                                                                          |   | - |   |   | - |   |   | 20,000 |   |
|                                                                                                                                            |   |                                  |       |                           |   |                                                                       |   |                                                                                                 |       |                                                                                                                          |   |   |   |   |   |   |   |   |   |
| Exercise                    of Options:                                                                                                         |   |                                  |       |                           |   |                                                                       |   |                                                                                                 |       |                                                                                                                          |   |   |   |   |   |   |   |   |   |
| Cash:                                                                                                                                           |   |                                  |       |                           |   |                                                                       |   |                                                                                                 |       |                                                                                                                          |   |   |   |   |   |   |   |   |   |
| At                        $.02 Per Share by Related                        Party                                                                |   |                                  | 250,000    |                           |   | 250                                                                        |   |                                                                                                 | 5,250      |                                                                                                                          |   | - |   |   | - |   |   | 5,500 |   |
| At                        $.05 Per Share by Related                        Party                                                                |   |                                  | 1,415,000  |                           |   | 1,415                                                                      |   |                                                                                                 | 69,338     |                                                                                                                          |   | - |   |   | - |   |   | 70,753 |   |
| At                        $.12 Per Share by Related                        Party                                                                |   |                                  | 97,826     |                           |   | 98                                                                         |   |                                                                                                 | 11,152     |                                                                                                                          |   | - |   |   | - |   |   | 11,250 |   |
| At                        $.02 Per Share by Related                        Party                                                                |   |                                  | 272,727    |                           |   | 273                                                                        |   |                                                                                                 | 5,327      |                                                                                                                          |   | - |   |   | - |   |   | 5,600 |   |
| At                        $.05 Per Share by Related                        Party                                                                |   |                                  | 300,000    |                           |   | 300                                                                        |   |                                                                                                 | 14,700     |                                                                                                                          |   | - |   |   | - |   |   | 15,000 |   |
|                                                                                                                                            |   |                                  |       |                           |   |                                                                       |   |                                                                                                 |       |                                                                                                                          |   |   |   |   |   |   |   |   |   |
| Services:                                                                                                                                       |   |                                  |       |                           |   |                                                                       |   |                                                                                                 |       |                                                                                                                          |   |   |   |   |   |   |   |   |   |
| At                    $.12 Per Share                                                                                                            |   |                                  | 7,500      |                           |   | 8                                                                          |   |                                                                                                 | 892        |                                                                                                                          |   | - |   |   | - |   |   | 900 |   |
|                                                                                                                                            |   |                                  |       |                           |   |                                                                       |   |                                                                                                 |       |                                                                                                                          |   |   |   |   |   |   |   |   |   |
| Additional                    Paid-In Capital  Arising from Investment In Joint Venture Subsidiary                    By Minority Interest |   |                                  | -          |                           |   | -                                                                          |   |                                                                                                 | 100,156    |                                                                                                                          |   | - |   |   | - |   |   | 100,156 |   |
|                                                                                                                                            |   |                                  |       |                           |   |                                                                       |   |                                                                                                 |       |                                                                                                                          |   |   |   |   |   |   |   |   |   |
| Stock                    Based Compensation:                                                                                                    |   |                                  |       |                           |   |                                                                       |   |                                                                                                 |       |                                                                                                                          |   |   |   |   |   |   |   |   |   |
| Related                    Parties                                                                                                              |   |                                  | -          |                           |   | -                                                                          |   |                                                                                                 | 314,000    |                                                                                                                          |   | - |   |   | - |   |   | 314,000 |   |
| Other                                                                                                                                           |   |                                  | -          |                           |   | -                                                                          |   |                                                                                                 | 65,033     |                                                                                                                          |   | - |   |   | - |   |   | 65,033 |   |
|                                                                                                                                            |   |                                  |       |                           |   |                                                                       |   |                                                                                                 |       |                                                                                                                          |   |   |   |   |   |   |   |   |   |
| Common                    Stock Issued In Connection with Termination of Joint                    Venture                                       |   |                                  | 2,000,000  |                           |   | 2,000                                                                      |   |                                                                                                 | 798,000    |                                                                                                                          |   | - |   |   | - |   |   | 800,000 |   |
|                                                                                                                                            |   |                                  |       |                           |   |                                                                       |   |                                                                                                 |       |                                                                                                                          |   |   |   |   |   |   |   |   |   |
| Comprehensive                    Loss:                                                                                                          |   |                                  |       |                           |   |                                                                       |   |                                                                                                 |       |                                                                                                                          |   |   |   |   |   |   |   |   |   |
| Net                    Loss                                                                                                                     |   |                                  | -          |                           |   | -                                                                          |   |                                                                                                 | -          |                                                                                                                          |   | (                    2,938,590 | ) |   | - |   |   | (                    2,938,590 | ) |
|                                                                                                                                            |   |                                  |       |                           |   |                                                                       |   |                                                                                                 |       |                                                                                                                          |   |   |   |   |   |   |   |   |   |
| Equity                    Adjustment fromForeign Currency Translation                                                                           |   |                                  | -          |                           |   | -                                                                          |   |                                                                                                 | -          |                                                                                                                          |   | - |   |   | (24,894 | ) |   | (                    24,894 | ) |
|                                                                                                                                            |   |                                  |       |                           |   |                                                                       |   |                                                                                                 |       |                                                                                                                          |   |   |   |   |   |   |   |   |   |
| Unrealized                    Gain on Marketable Securities                                                                                     |   |                                  | -          |                           |   | -                                                                          |   |                                                                                                 | -          |                                                                                                                          |   | - |   |   | 60,000 |   |   | 60,000 |   |
|                                                                                                                                            |   |                                  |       |                           |   |                                                                       |   |                                                                                                 |       |                                                                                                                          |   |   |   |   |   |   |   |   |   |
| Total                    Comprehensive Loss                                                                                                     |   |                                  | -          |                           |   | -                                                                          |   |                                                                                                 | -          |                                                                                                                          |   | - |   |   | - |   |   | (                    2,903,484 | ) |
| Balance                    - July 31, 2004                                                                                                      |   |                                  | 57,769,156 |                           |   | 57,769                                                                     |   |                                                                                                 | 24,713,215 |                                                                                                                          |   | (24,578,129 | ) |   | 88,739 |   |   | 281,594 |   |

----

|                                                                                                          |   | Common                    Stock |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |
|---------------------------------------------------------------------------------------------------------------|--------|---------------------------------|------------|--------|--------|--------------------------|--------|------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|--------|
|                                                                                                          |   | Shares                          |       | Amount |   | AdditionalPaid-InCapital |   | Deficit                    Accumulated                    in                    the DevelopmentStage |       | Accumulated                    Other                    ComprehensiveIncome                    (Loss) |   | Deferred                    FinancingCosts |   | Total |   |
| Common                    Stock Issued for:                                                                   |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Cash:                                                                                                         |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
|                                                                                                          |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| At                    $.10 Per Share                                                                          |   |                            | 175,000    |   |   | 175                      |   |                                                                                                 | 17,325     |                                                                                                  |   | -                                          |   |   | - |   |   | - |   |   | 17,500 |   |
| At                    $.11 Per Share                                                                          |   |                            | 381,763    |   |   | 382                      |   |                                                                                                 | 41,612     |                                                                                                  |   | -                                          |   |   | - |   |   | - |   |   | 41,994 |   |
| At                    $.12 Per Share                                                                          |   |                            | 2,378,493  |   |   | 2,379                    |   |                                                                                                 | 283,042    |                                                                                                  |   | -                                          |   |   | - |   |   | - |   |   | 285,421 |   |
| At                    $.13 Per Share                                                                          |   |                            | 582,307    |   |   | 582                      |   |                                                                                                 | 75,118     |                                                                                                  |   | -                                          |   |   | - |   |   | - |   |   | 75,700 |   |
| At                    $.14 Per Share                                                                          |   |                            | 35,714     |   |   | 36                       |   |                                                                                                 | 4,964      |                                                                                                  |   | -                                          |   |   | - |   |   | - |   |   | 5,000 |   |
| At                    $.15 Per Share                                                                          |   |                            | 101,333    |   |   | 101                      |   |                                                                                                 | 15,099     |                                                                                                  |   | -                                          |   |   | - |   |   | - |   |   | 15,200 |   |
| At                    $.20 Per Share                                                                          |   |                            | 25,000     |   |   | 25                       |   |                                                                                                 | 4,975      |                                                                                                  |   | -                                          |   |   | - |   |   | - |   |   | 5,000 |   |
|                                                                                                          |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| At                    $.25 Per Share                                                                          |   |                            | 27,200,004 |   |   | 27,200                   |   |                                                                                                 | 6,772,801  |                                                                                                  |   | -                                          |   |   | - |   |   | - |   |   | 6,800,001 |   |
| Shares                    issued for Cash Through Private PlacementPrivate Placement                    costs |   |                            |       |   |   |                     |   |                                                                                                 | (637,991   | )                                                                                                     |   |                                       |   |   |   |   |   | - |   |   | (637,991 | ) |
|                                                                                                          |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Services:                                                                                                     |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| At                    $.11 Per Share                                                                          |   |                            | 188,173    |   |   | 188                      |   |                                                                                                 | 20,511     |                                                                                                  |   | -                                          |   |   | - |   |   | - |   |   |  20,699 |   |
| At                    $.12 Per Share                                                                          |   |                            | 71,334     |   |   | 71                       |   |                                                                                                 | 8,489      |                                                                                                  |   | -                                          |   |   | - |   |   | - |   |   | 8,560 |   |
|                                                                                                          |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Exercise                    of Options:                                                                       |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Cash:                                                                                                         |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
|                                                                                                          |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| At                        $.022 Per Share by Related                        Party                             |   |                            | 227,273    |   |   | 227                      |   |                                                                                                 | 4,773      |                                                                                                  |   | -                                          |   |   | - |   |   | - |   |   | 5,000 |   |
| At                        $.05 Per Share by Related                        Party                              |   |                            | 400,000    |   |   | 400                      |   |                                                                                                 | 19,600     |                                                                                                  |   | -                                          |   |   | - |   |   | - |   |   | 20,000 |   |
| At                        $.05 Per Share by                        Other                                      |   |                            | 250,000    |   |   | 250                      |   |                                                                                                 | 12,250     |                                                                                                  |   | -                                          |   |   | - |   |   | - |   |   |  12,500 |   |
| At                        $.22 Per Share by                        Other                                      |   |                            | 250,000    |   |   | 250                      |   |                                                                                                 | 54,750     |                                                                                                  |   | -                                          |   |   | - |   |   | - |   |   | 55,000 |   |
|                                                                                                          |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Services                                                                                                      |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| At                        $.12 Per Share by                        Other                                      |   |                            | 300,000    |   |   | 300                      |   |                                                                                                 | 35,700     |                                                                                                  |   | -                                          |   |   | - |   |   | - |   |   | 36,000 |   |
|                                                                                                          |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Commissions:                                                                                                  |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| At                    $.12 Per Share                                                                          |   |                            | 193,666    |   |   | 194                      |   |                                                                                                 | (194       | )                                                                                                     |   | -                                          |   |   | - |   |   | - |   |   |  - |   |
|                                                                                                          |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Non                    Registration Penalty:                                                                  |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| At                    $.19 Per Share                                                                          |   |                            | 5,440,000  |   |   | 5,440                    |   |                                                                                                 | (5,440     | )                                                                                                     |   | -                                          |   |   |  - |   |   | - |   |   |  - |   |
|                                                                                                          |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Stock                    Based Compensation                                                                   |   |                            |       |   |   |                     |   |                                                                                                 | 158,584    |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   | 158,584 |   |
|                                                                                                          |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Deferred                    Financing Costs                                                                   |   |                            | -          |   |   | -                        |   |                                                                                                 | 252,541    |                                                                                                  |   | -                                          |   |   | - |   |   | (252,541 | ) |   |   |   |
|                                                                                                          |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Net                    Loss                                                                                   |   |                            | -          |   |   | -                        |   |                                                                                                 | -          |                                                                                                  |   | (                    2,005,682             | )      |   | - |   |   | - |   |   | (2,005,682 | ) |
|                                                                                                          |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Equity                    Adjustment from Foreign Currency Translation                                        |   |                            | -          |   |   | -                        |   |                                                                                                 | -          |                                                                                                  |   | -                                          |   |   | 28,975 |   |   | - |   |   | 28,975 |   |
|                                                                                                          |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Unrealized                    Gain on Marketable Securities                                                   |   |                            | -          |   |   | -                        |   |                                                                                                 | -          |                                                                                                  |   | -                                          |   |   | 40,000 |   |   | - |   |   | 40,000 |   |
|                                                                                                          |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Total                    Comprehensive Loss                                                                   |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   | (1,936,707 | ) |
|                                                                                                          |   |                            |       |   |   |                     |   |                                                                                                 |       |                                                                                                  |   |                                       |   |   |   |   |   |   |   |   |   |   |
| Balance                    - July 31, 2005                                                                    |   |                            | 95,969,216 |   | $      | 95,969                   |   | $                                                                                                    | 31,851,724 |                                                                                                  | $      | (26,583,811                                | )      | $ | 157,714 |   | $ | (252,541 | ) | $ | 5,269,055 |   |

----

|                                                                 |   | Common                  Stock |        |   |   |                                        |   |                                                                         |       |                                                                           |   |                                     |   |                                        |    |
|----------------------------------------------------------------------|--------|-------------------------------|-------------|--------|--------|---------------------------------------------|--------|------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------|--------|------------------------------------------|--------|---------------------------------------------|---------|
|                                                                 |   | Shares                        |        | Amount |   | Additional                  Paid-In-capital |   | Deficit                  Accumulatedin                  the DevelopmentStage |       | Accumulated                  Other                  ComprehensiveIncome/(Loss) |   | Deferred                  FinancingCosts |   | Deferred                  CompensationCosts |    | Total                  Stockholder                  Equity |   |
| Balance                  at July 31, 2005                            |   |                          | 95,969,216  |   |   | 95,969                                      |   |                                                                         | 31,851,724 |                                                                           |   | (26,583,811                              | )      |                                        | 157,714 |   |   | (252,541 | ) |   | - |   |   | 5,269,055 |   |
| Change                  in par value to $0.0001                      |   |                          | -           |   |   | (86,372                                     | )      |                                                                         | 86,372     |                                                                           |   | -                                        |   |                                        | -       |   |   | - |   |   | - |   |   | - |   |
| Deferred                  Financing Costs                            |   |                          | 1,000,000   |   |   | 100                                         |   |                                                                         | 269,900    |                                                                           |   | -                                        |   |                                        | -       |   |   | (270,000 | ) |   | - |   |   | - |   |
| Issuance                  of common stock upon                       |   |                          |        |   |   |                                        |   |                                                                         |       |                                                                           |   | -                                        |   |                                        |    |   |   |   |   |   |   |   |   |   |   |
| warrant                  and option exercises, net                   |   |                          | 4,825,913   |   |   | 482                                         |   |                                                                         | 741,338    |                                                                           |   |                                     |   |                                        | -       |   |   |   |   |   | - |   |   | 741,820 |   |
| Issuance                  of common stock upon                       |   |                          |        |   |   |                                        |   |                                                                         |       |                                                                           |   | -                                        |   |                                        |    |   |   |   |   |   |   |   |   |   |   |
| warrant                  and option exercises, net                   |   |                          | 8,600,000   |   |   | 860                                         |   |                                                                         | 2,372,740  |                                                                           |   |                                     |   |                                        | -       |   |   |   |   |   | - |   |   | 2,373,600 |   |
| Private                  placement, net                              |   |                          | 21,240,000  |   |   | 2,124                                       |   |                                                                         | 4,997,376  |                                                                           |   | -                                        |   |                                        | -       |   |   |   |   |   | - |   |   | 4,999,500 |   |
| Options                  and warrants issued for services            |   |                          |        |   |   |                                        |   |                                                                         | 414,375    |                                                                           |   | -                                        |   |                                        |    |   |   |   |   |   | (52,500 | ) |   | 361,875 |   |
| Unrealized                  loss on marketable securities            |   |                          | -           |   |   | -                                           |   |                                                                         | -          |                                                                           |   |                                     |   |                                        | (60,000 | ) |   |   |   |   | - |   |   | (60,000 | ) |
| Equity                  adjustment from foreign currency translation |   |                          |        |   |   |                                        |   |                                                                         |       |                                                                           |   | -                                        |   |                                        | 48,779  |   |   |   |   |   | - |   |   | 48,779 |   |
| Net                  loss for the year ended July 31, 2006           |   |                          | -           |   |   | -                                           |   |                                                                         | -          |                                                                           |   | (4,804,692                               | )      |                                        | -       |   |    |    |   |   | - |   |   | (4,804,692 | ) |
| Balance                  - July 31, 2006                             |   |                          | 131,635,129 |   |   | 13,163                                      |   |                                                                         | 40,733,825 |                                                                           |   | (31,388,503                              | )      |                                        | 146,493 |   |   | (522,541 | ) |   | (52,500 | ) |   | 8,929,937 |   |

----

|                                                                                                   |   |                                                     |       | For                  The Period     |   |
|--------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|------------|-------------------------------------|--------|
|                                                                                                   |   | For                    TheYears                    Ended |       | September                  17, 1982 |   |
|                                                                                                   |   | July                  31,                                |       | (Inception)                  To     |   |
|                                                                                                   |   | 2006                                                     |       | 2005                                |   | July                  31, 2006 |   |
| Cash                  Flow From Operating Activities:                                                  |   |                                                     |       |                                |   |   |   |   |   |   |
| Net                  Loss                                                                              |   | $                                                        | (4,804,692 | )                                   | $      | (2,005,682 | ) | $ | (31,388,503 | ) |
| Adjustments                  to Reconcile Net Loss to                                                  |   |                                                     |       |                                |   |   |   |   |   |   |
| Net                  Cash Used in Operating Activities:                                                |   |                                                     |       |                                |   |   |   |   |   |   |
| Depreciation                  and Amortization                                                         |   |                                                     | 38,969     |                                |   | 7,431 |   |   | 422,696 |   |
| Gain                  on Sale of Subsidiary                                                            |   |                                                     | -          |                                |   | - |   |   | (1,907,903 | ) |
| Minority                  Interest in Net Loss of Subsidiary                                           |   |                                                     | -          |                                |   | - |   |   | (286,388 | ) |
| Write-Down                  of Impaired Mining, Milling and Other                                      |   |                                                     | -          |                                |   |   |   |   |   |   |
| Property                  and Equipment                                                                |   |                                                     | -          |                                |   | - |   |   | 1,299,445 |   |
| Loss                  on Sale of Property and Equipment                                                |   |                                                     | 201,829    |                                |   | - |   |   | 155,713 |   |
| Loss                  on change in fair value of derivative                                            |   |                                                     | 581,924    |                                |   |   |   |   | 581,924 |   |
| Loss                  on Write-Off of Investment                                                       |   |                                                     | -          |                                |   | - |   |   | 10,000 |   |
| Loss                  on Joint Venture                                                                 |   |                                                     | -          |                                |   | - |   |   | 901,700 |   |
| Loss                  on Write-Off of Minority Interest                                                |   |                                                     | -          |                                |   | - |   |   | 150,382 |   |
| Value                  of Common Stock and Warrants Issued for Services                                |   |                                                     | 361,875    |                                |   | 187,844 |   |   | 12,585,615 |   |
| Changes                  in Operating Assets and Liabilities:                                          |   |                                                     |       |                                |   |   |   |   |   |   |
| (Increase)                  Decrease in Prepaid Expenses                                               |   |                                                     | (21,082    | )                                   |   | (54,299 | ) |   | (21,082 | ) |
| (Increase)                  Decrease in Other Current Assets                                           |   |                                                     | (5,243,003 | )                                   |   | (10,601 | ) |   | (5,265,839 | ) |
| (Increase)                  in Other Deposits                                                          |   |                                                     | (170,000   | )                                   |   | (80,000 | ) |   | (268,000 | ) |
| Decrease                  in Other Assets                                                              |   |                                                     | 755        |                                |   | - |   |   | (42,668 | ) |
| (Increase)                  in Security Deposits                                                       |   |                                                     | -          |                                |   | (1,170 | ) |   | (9,605 | ) |
| Increase                  (Decrease) in Accounts Payable                                               |   |                                                     | 166,932    |                                |   | 39,953 |   |   | 342,184 |   |
| Increase                  (Decrease) in Accrued Expenses                                               |   |                                                     | 165,895    |                                |   | 74,703 |   |   | 136,929 |   |
| Net                  Cash Used in Operating Activities                                                 |   |                                                     | (8,720,598 | )                                   |   | (1,841,821 | ) |   | (22,603,400 | ) |
|                                                                                                   |   |                                                     |       |                                |   |   |   |   |   |   |
| Cash                  Flow From Investing Activities:                                                  |   |                                                     |       |                                |   |   |   |   |   |   |
| (Increase)                  in Other Investments                                                       |   |                                                     | (260       | )                                   |   | (11,330 | ) |   | (21,740 | ) |
| Purchase                  of Mining, Milling and Other Property and Equipment                          |   |                                                     | (810,425   | )                                   |   | (657,683 | ) |   | (3,191,282 | ) |
| Purchase                  of Concessions                                                               |   |                                                     | -          |                                |   | (25,324 | ) |   | (25,324 | ) |
| Investment                  in Intangibles                                                             |   |                                                     | (89        | )                                   |   | (18,531 | ) |   | (18,620 | ) |
| Proceeds                  on Sale of Mining, Milling and Other Property and                  Equipment |   |                                                     | 192,000    |                                |   | - |   |   | 275,638 |   |
| Proceeds                  From Sale of Subsidiary                                                      |   |                                                     | -          |                                |   | - |   |   | 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 | ) |
| Investment                  in Marketable Securities                                                   |   |                                                     | -          |                                |   | - |   |   | (50,000 | ) |

----

|                                                                              |   |                          |       | For                  The Period     |   |
|-----------------------------------------------------------------------------------|--------|-------------------------------|------------|-------------------------------------|--------|
|                                                                              |   | For                    The    |       | September                  17, 1982 |   |
|                                                                              |   | Year                    Ended |       | (Inception)                         |   |
|                                                                              |   | July                  31,     |       | To                                  |   |
|                                                                              |   | 2006                          |       | 2005                                |   | July                  31, 2006 |   |
|                                                                              |   |                          |       |                                |   |   |   |
| Net                  Cash Used in Investing Activities                            |   |                          | (618,774   | )                                   |   | (712,868 | ) |   | (1,055,779 | ) |
|                                                                              |   |                          |       |                                |   |   |   |   |   |   |
| Cash                  Flow From Financing Activities:                             |   |                          |       |                                |   |   |   |   |   |   |
| Advances                  to Affiliate                                            |   |                          | (10,326    | )                                   |   | (3,571 | ) |   | (45,322 | ) |
| Decrease                  in Loans Receivable - Others                            |   |                          | -          |                                |   | 2,065 |   |   | - |   |
| Proceeds                  of Borrowings - Officers                                |   |                          | -          |                                |   | - |   |   | 18,673 |   |
| Repayment                  of Loans Payable - Officers                            |   |                          | -          |                                |   | - |   |   | (18,673 | ) |
| Proceeds                  of Note Payable                                         |   |                          | -          |                                |   | - |   |   | 11,218 |   |
| Payments                  of Note Payable                                         |   |                          | -          |                                |   | - |   |   | (11,218 | ) |
| Proceeds                  From Issuance of Common Stock, Net                      |   |                          | 8,114,920  |                                |   | 6,700,325 |   |   | 26,850,844 |   |
| Commissions                  on Sale of Common Stock                              |   |                          | -          |                                |   | - |   |   | (5,250 | ) |
| Deferred                  Finance Costs                                           |   |                          | (350,777   | )                                   |   | (100,000 | ) |   | (450,777 | ) |
| Expenses                  of Initial Public Offering                              |   |                          | -          |                                |   | - |   |   | (408,763 | ) |
| Capital                  Contributions - Joint Venture Subsidiary                 |   |                          | -          |                                |   | - |   |   | 304,564 |   |
| Purchase                  of Certificate of Deposit - Restricted                  |   |                          | -          |                                |   | - |   |   | (5,000 | ) |
| Purchase                  of Mining Reclamation Bonds                             |   |                          | -          |                                |   | - |   |   | (30,550 | ) |
| Net                  Cash Provided By Financing Activities                        |   |                          | 7,753,817  |                                |   | 6,598,819 |   |   | 26,209,746 |   |
| Effect                  of Exchange Rate Changes                                  |   |                          | 45,506     |                                |   | 28,975 |   |   | 190,932 |   |
|                                                                              |   |                          |       |                                |   |   |   |   |   |   |
| Increase                  (Decrease) In Cash and Cash Equivalents                 |   |                          | (1,540,050 | )                                   |   | 4,073,105 |   |   | 2,741,498 |   |
| Cash                  and Cash Equivalents - Beginning                            |   |                          | 4,281,548  |                                |   | 208,443 |   |   | - |   |
| Cash                  and Cash Equivalents - Ending                               |   | $                             | 2,741,498  |                                | $      | 4,281,548 |   | $ | 2,741,498 |   |
|                                                                              |   |                          |       |                                |   |   |   |   |   |   |
| Supplemental                  Cash Flow Information:                              |   |                          |       |                                |   |   |   |   |   |   |
| Cash                  Paid For Interest                                           |   | $                             | -          |                                | $      | - |   | $ | - |   |
| Cash                  Paid For Income Taxes                                       |   | $                             | 15,099     |                                | $      | - |   | $ | 39,886 |   |
| Non-Cash                  Financing Activities:                                   |   |                          |       |                                |   |   |   |   |   |   |
| Issuances                  of Common Stock as Commissionson Sales of Common Stock |   | $                             | -          |                                | $      | 23,240 |   | $ | 440,495 |   |
| Issuance                  of common stock as payment for financing costs          |   | $                             | 270,000    |                                | $      | - |   | $ | 270,000 |   |
| Issuance                  of common stock and warrants as payment for Expenses    |   | $                             | -          |                                | $      | - |   | $ | 192,647 |   |
| Issuance                  of Common Stock as Payment for Mining,                  |   |                          |       |                                |   |   |   |   |   |   |
| Milling                  and Other Property and Equipment                         |   | $                             | -          |                                | $      | - |   | $ | 4,500 |   |
| Exercise                  of Options as Payment of Accounts Payable               |   | $                             | -          |                                | $      | 36,000 |   | $ | 36,000 |   |

----

----

----

----

|                                       |   | Years                    ended July 31,           |
|--------------------------------------------|--------|---------------------------------------------------|
|                                       |   | 2006                                         |   |  2005 |
|                                       |   |                                              |   |   |
| Expected                    volatility     |   | 95%                    - 165%                     |   | 70%                    - 100% |
| Risk-free                    interest rate |   | 5.95%                                             |   | 3.10% |
| Expected                    dividend yield |   | -                                                 |   | - |
| Expected                    life           |   | 1                    -                    2 years |   | 3                    years |

----

|                                                               |   |   Number                  ofOptions |       | WeightedAverageexerciseprice |   | Weightedaverageremainingcontractedterm                  (years) |   |  Aggregateintrinsicvalue |   |
|--------------------------------------------------------------------|--------|-----------------------------------------------|------------|------------------------------|--------|-----------------------------------------------------------------|--------|-------------------------------|--------|
|                                                               |   |
|                                                               |   |
|                                                               |   |
|                                                               |   |                                          |       |                         |   |                                                            |   |                          |   |
| Outstanding                  at July 31, 2004                      |   |                                          | 5,588,636  |                         | $      | .32                                                             |   |                          | -      |   | $ | - |   |
| Options                  granted                                   |   |                                          | -          |                         |   | -                                                               |   |                          | -      |   |   | - |   |
| Options                  exercised                                 |   |                                          | (877,273   | )                            |   | .09                                                             |   |                          | -      |   |   | - |   |
| Options                  expired                                   |   |                                          | -          |                         |   | -                                                               |   |                          | -      |   |   | - |   |
| Outstanding                  at July 31, 2005                      |   |                                          | 4,711,363  |                         | $      | .30                                                             |   |                          | 0.30   |   | $ | 1,277,977 |   |
| Options                  granted                                   |   |                                          | 4,611,363  |                         |   | .13                                                             |   |                          | -      |   |   | - |   |
| Options                  exercised                                 |   |                                          | (590,909   | )                            |   | .05                                                             |   |                          | -      |   |   | - |   |
| Options                  expired                                   |   |                                          | (3,161,363 | )                            |   | .05                                                             |   |                          | -      |   |   | - |   |
| Warrants                  and options outstanding at July 31, 2006 |   |                                          | 5,570,454  |                         | $      | .16                                                             |   |                          | 1.17   |   | $ | 702,250 |   |
| Warrants                  and options exercisable at July 31, 2006 |   |                                          | 4,120,454  |                         | $      | .10                                                             |   |                          | 0.71   |   | $ | 680,250 |   |

|                                                           |   | Number                  of Options |    | WeightedAverageExerciseprice |   | Weightedaverageremainingcontractedterm                  (years) |   | AggregateIntrinsicvalue |   |
|----------------------------------------------------------------|--------|------------------------------------|---------|------------------------------|--------|-----------------------------------------------------------------|--------|-------------------------|--------|
| Outstanding                  at August 1, 2005                 |   |                               | -       |                         |   | -                                                               |   |                    | -      |   | $ | - |   |
| Options                  granted                               |   |                               | 150,000 |                         | $      | .32                                                             |   |                    | 1.83   |   |   | 16,500 |   |
| Unvested                  Options outstanding at July 31, 2006 |   |                               | 150,000 |                         | $      | .32                                                             |   |                    | 1.83   |   | $ | 16,500 |   |

|                                                               |   | Number                  of Options |       | WeightedAverageExerciseprice |   | Weightedaverageremainingcontractedterm                  (years) |   | AggregateIntrinsic                  value |   |
|--------------------------------------------------------------------|--------|------------------------------------|------------|------------------------------|--------|-----------------------------------------------------------------|--------|-------------------------------------------|--------|
| Outstanding                  at July 31, 2004                      |   |                               | 1,300,000  |                         | $      | .31                                                             |   |                                      | -      |   | $ | - |   |
| Options                  granted                                   |   |                               | 31,452,004 |                         |   | .29                                                             |   |                                      | -      |   |   | - |   |
| Options                  exercised                                 |   |                               | (550,000   | )                            |   | .09                                                             |   |                                      | -      |   |   | - |   |
| Options                  expired                                   |   |                               | (300,000   | )                            |   | .23                                                             |   |                                      | -      |   |   | - |   |
| Outstanding                  at July 31, 2005                      |   |                               | 31,902,004 |                         | $      | .30                                                             |   |                                      | 1.13   |   | $ | 3,430,120 |   |
| Options                  granted                                   |   |                               | 6,844,000  |                         |   | .28                                                             |   |                                      | -      |   |   | - |   |
| Options                  exercised                                 |   |                               | (4,235,004 | )                            |   | .27                                                             |   |                                      | -      |   |   | - |   |
| Options                  expired                                   |   |                               | (350,000   | )                            |   | .10                                                             |   |                                      | -      |   |   | - |   |
| Warrants                  and options outstanding at July 31, 2006 |   |                               | 34,161,000 |                         | $      | .29                                                             |   |                                      | 1.33   |   | $ | 2,540,530 |   |
| Warrants                  and options exercisable at July 31, 2006 |   |                               | 33,911,000 |                         | $      | .29                                                             |   |                                      | 1.31   |   | $ | 2,539,630 |   |

----

*Accounting        for Stock Issued to Employees*
*Accounting        for Certain Transactions involving Stock Compensation an interpretation of        APB        Opinion No.*
*25*
*Accounting        for Stock-Based Compensation*
*Accounting        for Stock-Based Compensation Transition and Disclosure, an amendment of FASB        Statement No.*
*123*
*Accounting        for Stock-Based Compensation*

|                                                                                                                                                                                           |   | Year                  Ended July                  31, 2006 |        |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------|-------------|
| Net                  loss                                                                                                                                                                      |   | $                                                          | (4,804,692  | ) |
| Add                  stock-based employee compensation expense (recovery) included in                  reported                  net income (loss)                                             |   |                                                       | -           |   |
| Deduct                  total stock-based employee compensation expense determined                  under fair value based method for                  all awards, net                  of tax |   |                                                       | (773,263    | ) |
| Pro                  forma net loss                                                                                                                                                            |   | $                                                          | (5,577,955  | ) |
| Pro                  forma net loss per common share (Basic and diluted)                                                                                                                       |   | $                                                          | (.05        | ) |
| Weighted                  average common shares outstanding: Basic and                  diluted                                                                                                |   |                                                       | 112,204,471 |   |
|  Net                  loss per common share basic and diluted                                                                                                                             |   | $                                                          | (.04        | ) |

----

*other        income*
*other        expense*

----

----

|                                                                                   |   | July                    31,2006 |   |
|----------------------------------------------------------------------------------------|--------|---------------------------------|--------|
|                                                                                   |   |                            |   |
| Marketable                    equity securities, at cost                               |   | $                               | 50,000 |   |
| Marketable                    equity securities, at fair value (See Notes 11 & 13) |   | $                               | 90,000 |   |

| Cash                    collateral on project facility (Note 20) |   | $      | 4,267,445 |   |
|------------------------------------------------------------------|--------|--------|-----------|--------|
| Other                    current assets                          |   |   | 216,407   |   |
| Total                    Other Current Assets                    |   | $      | 4,483,852 |   |

----

| Construction                    in progress       |   | $      | 661,899                     |   |
|---------------------------------------------------|--------|--------|-----------------------------|--------|
| Water                    Well                     |   |   | 141,243                     |   |
| Building                                          |   |   | 116,000                     |   |
| Equipment                                         |   |   | 75,757                      |   |
| Vehicle                                           |   |   | 51,385                      |   |
| Improvements                                      |   |   | 15,797                      |   |
| Office                    Equipment               |   |   | 12,266                      |   |
| Furniture                                         |   |   | 1,843                       |   |
|                                              |   |   |                        |   |
| Total                                             |   | $      | 1,076,190                   |   |
|                                              |   |   |                        |   |
| Less:                    accumulated depreciation |   |   | (                    40,218 | )      |
|                                              |   |   |                        |   |
| Property                    and equipment, net    |   | $      | 1,035,972                   |   |

** **

| Investment                    in Right of way     |   | $      | 18,620                     |   |
|---------------------------------------------------|--------|--------|----------------------------|--------|
|                                              |   |   |                       |   |
| Less:                    accumulated amortization |   |   | (                    4,820 | )      |
|                                              |   |   |                       |   |
| Intangible                    assets, net         |   | $      | 13,800                     |   |

----

| El                    Charro  |   | $      | 25,324 |   |
|-------------------------------|--------|--------|--------|--------|
| El                    Chanate |   |   | 44,780 |   |
|                          |   |   |   |   |
| Total                         |   | $      | 70,104 |   |

----

| Balance                    - July 31, 2004                              |   | $      | 88,739  |   |
|-------------------------------------------------------------------------|--------|--------|---------|--------|
|                                                                    |   |   |    |   |
| Equity                    Adjustments from Foreign Currency Translation |   |   | 28,975  |   |
| Unrealized                    Gains on Marketable Securities            |   |   | 40,000  |   |
|                                                                    |   |   |    |   |
| Balance                    - July 31, 2005                              |   |   | 157,714 |   |
|                                                                    |   |   |    |   |
| Equity                    Adjustments from Foreign Currency Translation |   |   | 48,779  |   |
| Unrealized                    Gains (loss) on Marketable Securities     |   |   | (60,000 | )      |
|                                                                    |   |   |    |   |
| Balance                    - July 31, 2006                              |   | $      | 146,493 |   |

----

----

|                                                                                                                                        |   | Year                    Ended July 31, |      |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|-----------|
|                                                                                                                                        |   | 2006                                   |      |                       2005   |   |
|                                                                                                                                        |   |                                   |      |   |   |
| Computed                    "expected" tax benefit                                                                                          |   | $                                      | 5,823,176 |   | $ | 4,661,620 |   |
| Decrease                    in tax benefit resulting from net operating loss for which no                    benefit is currently available |   |                                   | 5,823,176 |   |   | 4,661,620 |   |
|                                                                                                                                        |   | $                                      |  -   |   | $ | - |   |

----

| Year                    Ending July 31, |   |   |   |
|-----------------------------------------|--------|--------|--------|
|                                    |   |   |   |   |
| 2007                                    |   | $      | 51,000 |   |
| 2008                                    |   |   | 4,200  |   |
|                                    |   | $      | 55,200 |   |

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** **

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** **

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