SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-KSB

            |X|  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                     FOR THE FISCAL YEAR ENDED JULY 31, 2003

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

                           Commission File No. 0-13078

                            CAPITAL GOLD CORPORATION
                 (Name of Small business issuer in its charter)

              State of Nevada                             13-31805030
    (State or other jurisdiction of                    (I.R.S. Employer
     Incorporation or organization)                   Identification No.)

 76 Beaver Street, 26th Floor, New York, New York            10005
   (Address of principal executive offices)                (Zip Code)

Issuer's telephone number, including area code: (212) 344-2785

Securities registered under Section 12(b) of the Exchange Act: none

Securities registered under Section 12(g) of the Exchange Act: Common Stock, par
value $.001 per share

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulations S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |X|

State issuer's revenues for its most recent fiscal year. $38,265

The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the average between the closing bid
($0.27) and asked ($0.28) price of the issuer's Common Stock as of November 10,
2003, was $10,907,074 based upon the average between the closing bid and asked
price ($0.275) multiplied by the 39,662,086 shares of the issuer's Common Stock
held by non-affiliates. (In computing this number, issuer has assumed all record
holders of greater than 5% of the common equity and all directors and officers
are affiliates of the issuer.).

The number of shares outstanding of each of the issuer's classes of common
equity as of November 7, 2003: 45,716,092.

                   DOCUMENTS INCORPORATED BY REFERENCE: None.

          Transitional Small Business Disclosure Format: Yes |_| No |X|

<PAGE>

                            CAPITAL GOLD CORPORATION
                                   Form 10-KSB
                                  July 31, 2003

Table of Contents                                                         Page
-----------------                                                         ----

Glossary                                                                 (iii)

                                     Part I

Item 1.      Description of Business.                                      1
Item 2.      Description of Properties.                                    6
Item 3.      Legal Proceedings.                                           14
Item 4.      Submission of Matters to a Vote of                           14
             Security Holders.

                                     Part II

Item 5.      Market for Common Equity and
             Related Stockholder Matters.                                 15
Item 6.      Management's Discussion and Analysis of                      16
             Financial Condition and Results of Operations.
Item 7.      Financial Statements.                                        29
Item 8.      Changes in and Disagreement with Accountants                 29
             on Accounting and Financial Disclosure.
Item 8A      Controls and Procedures.                                     29

                                    Part III

Item 9.      Directors, Executive Officers, Promoters                     30
             and Control Persons; Compliance with
             Section 16(a) of the Exchange Act.
Item 10.     Executive Compensation.                                      32
Item 11.     Security Ownership of Certain Beneficial                     33
             Owners and Management and Related
             Stockholder Matters.
Item 12.     Certain Relationships and Related Transactions.              34
Item 13.     Exhibits and Reports on Form 8-K                             34
Item 14.     Principal Accountant Fees and Services                       36
Signatures
Supplemental Information                                                 N/A
Financial Statements                                                     F-1


                                       ii
<PAGE>

                           GLOSSARY OF TECHNICAL TERMS

Andesites:              Rocks of volcanic origin

Backfilling:            Putting waste rock in an open stope.

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

Leadville Dolomite:     Name of a specific limestone bed in Leadville, Colorado.

Litho static Pressure:  Pressure brought on by weight of overlaying rocks.

Magnetite Skarn:        The mineral magnetite (iron oxide) in combination with
                        quartz emplaced in limestone. 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.


                                      iii
<PAGE>

Mineral Deposit or
Mineralized Material:   A mineralized rock mass which has been intersected by
                        sufficient closely spaced drill holes and or underground
                        sampling to support sufficient tonnage and average grade
                        of metal(s) to warrant further exploration-development
                        work. This deposit does not qualify as a commercially
                        mineable ore body (Reserves), as prescribed under
                        Commission standards, until a final and comprehensive
                        economic, technical and legal feasibility study based
                        upon the test results is concluded.

Open Stope:             A mined area that remains as an open space.

Patented Claim:         Unpatented claim that is now privately owned mineral
                        land after a grant from the federal government.

Placer Claim:           Claim on which minerals are found in sand and gravel -
                        on surface.

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.

Replacement
Body:                   Mineral ore, irregular in form, which is emplaced in
                        limestone.

Sandstone Lenses and
Thin Limestone
Interbeds:              Thin beds of limestone mixed with thin beds of
                        sandstone.

Sericitized:            Altered by heat, pressure and solutions resulting in the
                        mineral sericite a very fine grained mica.

Silicified:             Partly replaced by silica.

Stockwork Breccia:      Earth's crust broken by two or more sets of parallel
                        faults converging from different directions.

Sills:                  Tabular, horizontal bodies of igneous rock.

Square Setting:         A system of timbering a tunnel or opening underground to
                        prevent cave-in.


                                       iv
<PAGE>

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.

Unpatented Claim:       Mineral land staked on public lands open to
                        appropriation by mineral location, subject to the
                        paramount title of the federal government and maintained
                        by timely payment of an annual fee.


                                       v
<PAGE>

                                     PART I

Item 1. Description of Business

Capital Gold Corporation, formerly Leadville Mining And Milling Corp. (the
"Company," "we" or "us") was incorporated in the state of Nevada in February
1982. The Company, directly or indirectly owns concessions located in the State
of Sonora, Mexico and rights to property located in the California Mining
District, Lake County, Colorado and is engaged in the business of exploration
for gold and other minerals from its Mexican concessions. During the fiscal year
ended July 31, 2003, the Company actively engaged in the evaluation of its
Sonora, Mexico concessions. The future of the Company is dependent upon its
ability to continue to fund its activities and eventually produce gold in
sufficient quantities in an economically feasible manner. A description of the
mining concessions and properties owned by the Company is contained in "Item 2.
Description of Properties.". None of our concessions or properties is in
production, and consequently we have no operating income or cash flow.

                                 Sonora, Mexico
                                   El Chanate

On June 29, 2001, we purchased from AngloGold North America Inc. and AngloGold
(Jerritt Canyon) Corp. 100% of the issued and outstanding stock of Minera
Chanate, S.A. de C.V., a subsidiary of those two companies. Minera Chanate's
assets at the time of the closing of the purchase consisted of 106 exploitation
and exploration concessions in the States of Sonora, Chihuahua and Guerrero,
Mexico. By June of 2002, after property reviews and to minimize tax payments,
the 106 had been reduced to 12 concessions. To cover certain non-critical gaps
between concessions, the number of concessions is now 14. We sometimes refer to
these concessions as the El Chanate concessions. See "Item 2. Description of
Properties."

Pursuant to the terms of the agreement, on December 15, 2001, we made a $50,000
payment to AngloGold. AngloGold will be entitled to receive the remainder of the
purchase price by way of an ongoing percentage of net smelter returns of between
2% and 4% plus a 10% net profits interest (until the total net profits interest
payment received by AngloGold equals $1,000,000). AngloGold's right to a payment
of a percentage of net smelter returns and the net profits interest will
terminate at such point as they aggregate $18,018,355. In accordance with the
agreement, the foregoing payments are not to be construed as royalty payments.
Should the Mexican government or other jurisdiction determine that such payments
are royalties, we could be subjected to and would be responsible for any
withholding taxes assessed on such payments.

Under the terms of the agreement, we have granted AngloGold the right to
designate one of its wholly-owned Mexican subsidiaries to receive a one-time
option to purchase 51% of Minera Chanate (or such entity that owns the El
Chanate concessions at the time of option exercise). That option is exercisable
over a 180 day period commencing at such time as we notify AngloGold that we
have made a good faith determination that we have gold-bearing ore deposits on
any one of the identified groups of El Chanate concessions, when aggregated with
any ore that we have mined, produced and sold from such concessions, of in
excess of 2,000,000 troy ounces of contained gold. The exercise price would
equal twice our project costs on the properties during the period commencing on
December 15, 2000 and ending on the date of such notice.


                                       1
<PAGE>

Based on current information available to us, we do not believe that a deposit
of the size that would trigger these back-in rights is likely to be identified
at El Chanate, at this time.

On February 23, 2002, Minera Santa Rita S. de R.L. de C.V., one of our
wholly-owned Mexican affiliates ("Santa Rita"), now the leasee of the El Chanate
concessions, as discussed below, entered into a joint venture agreement with
Grupo Minero FG S.A. de C.V. to explore, evaluate and develop the El Chanate
concessions. Grupo Minero FG S.A. de C.V., referred to as FG, is a private
Mexican company that owns and operates the La Colorada open-pit gold mine
outside of Hermosillo in Sonora, Mexico. FG also is involved in road
construction and maintenance for the Sonoran government.

Pursuant to the agreement with FG, the venture is being conducted in five
phases. The first two phases entail continued exploration and evaluation of the
mining potential of lots within the concessions. Phase two was to culminate with
a feasibility study. Phase one was completed during the Fall of 2002 and cost
approximately $300,000 (see "2003 Activities and Planned 2004 Activities"
below). We estimate that Phase two will cost approximately $783,000. Phase two
was extended until the end of December 2003 to allow us to secure funding before
starting Phase Four. Phase three consists of FG's contribution to the venture of
mining equipment sufficient to develop the lots pursuant to the feasibility
study. Phase three will occur only if the parties determine to continue and they
are able to obtain outside funding for Phase four. We are unable to estimate
Phase four costs at this time. Phase four will involve the building of an access
road, the acquisition of water extraction rights and the drilling and equipping
of water wells. Phase five would entail exploitation, processing and sale of
minerals on a commercial scale.

Pursuant to the agreement, FG paid us $75,000 to participate in the venture and
contributed an additional $75,000 towards the first phase of the venture for
which it received a 30% interest in the venture. The balance of the costs for
Phase one and the costs for Phase two will be split equally between the parties.
As mentioned above, Phase four would be funded from outside sources. Phase five
funding would be provided by the parties in proportion to their respective
interests in the venture.

FG's percentage of the venture can increase to 45%. It increased to 31% upon
completion of Phase one and will increase to 33% upon completion of Phase two;
37% upon its contribution of equipment in Phase three; 40% upon completion of
Phase four; and 45% upon attaining optimal levels of production in Phase five.
Optimal levels of production will be determined by agreement of the parties.
Notwithstanding the foregoing, as discussed below, FG has not made all of the
payments required to be paid by it under Phase two. If FG does not pay its
required share of expenses, it will not earn all of the foregoing increases in
its percentage interest in the venture.

The venture is terminable, among other reasons, if:

      o     its purpose is concluded or can no longer be obtained;

      o     it experiences continued non-profitability;

      o     the parties elect to terminate it at a meeting of the parties;

      o     it loses 2/3 of its assets; or

      o     the parties fail to obtain the requisite financing to fund Phase
            four by September 1, 2003. -


                                       2
<PAGE>

The requisite financing for Phase four has not been obtained as of the date
hereof; however, we are in discussions with potential funding sources.

If FG determines that it does not want to continue to participate in the
venture, or it cannot provide its share of the funding for Phase two, Santa Rita
has a 45 day option to purchase FG's interest in the venture for $127,500. If
Santa Rita does not exercise this option within the 45 day period and pay the
purchase price within 15 days thereafter, FG may sell its interest to another
party. As of the date hereof, FG is behind by about $120,000 in its share of the
payments for Phase two.

If additional contributions to the venture are needed as determined by a meeting
of the parties, the parties have 30 days to elect whether they will make these
contributions and an additional 15 days to make their contribution. To the
extent that a party, referred to as the waiving party, does not want to pay its
share or does not pay its share, the other party can make the payment and the
waiving party's percentage interest in the venture will be diluted
proportionately plus 10%. The waiving party can reacquire its lost interest by
repaying the amount previously not paid plus a 25% penalty. These dilution
provisions do not apply to Santa Rita unless and until FG has contributed
$600,000 to the venture. Because its interest in the venture now exceeds 30%, FG
now can be diluted for failure to make its required contributions.

On March 30, 2002, we and our wholly-owned subsidiary, Leadville Mining &
Milling Holding Corporation ("Holding") sold all of the issued and outstanding
shares of stock of Minera Chanate to an unaffiliated party for a purchase price
of US$2,131,616, payable in three installments. We received the final
installment on December 9, 2002. In connection with the sale of Minera Chanate
stock, we incurred approximately $174,000 in commissions.

During March 2002, prior to the sale of Minera Chanate and pursuant to the FG
joint venture agreement, Minera Chanate, in a series of transactions, sold all
of its surface land and mining claims to Oro de Altar S. de R. L. de C.V.
("Ora"), another of our wholly-owned subsidiaries. Ora, in turn, leased the
foregoing land and mining claims to Minera Santa Rita.

2003 Activities and Planned 2004 Activities

During fiscal 2003, we focused our efforts on the evaluation of our Mexican
properties - the El Chanate concessions. This evaluation (Phase one and most of
phase two of the venture with FG) involved data reviews of existing geologic
maps and reports, drill logs, assay results, resource estimates, surface sample
results, land titles and a feasibility study. We utilized independent
consultants, in conjunction with company personnel, in this evaluation. We,
along with our technical consultants, completed reviews and reconnaissance of
the 44 remaining early stage exploration concessions. Following this evaluation,
we elected to maintain and focus exploration and development attention on 12 of
the concessions (increased to 14 concessions in March 2003 to cover certain
non-critical fractional gaps between concessions) totaling about approximately
3,497 hectares (8,642 acres or 13.5 square miles). Management believes that the
combination of existing data and analysis generally supports the existence of a
gold deposit that warrants further exploration work.


                                       3
<PAGE>

Metallurgical studies and tests also were undertaken to evaluate the potential
for gold recovery using heap leach technology and showed encouraging recovery
rates. These tests will continue. A 50 hole shallow definition drilling program
is being prepared at El Chanate to define the gold grade to a depth of two (30
ft.) benches of the proposed mine. Assuming adequate finding can be obtained,
samples would be on five foot centers and the pulps would be tested
metallurgically for gold recovery. A three hole deeper core drilling program is
also planned at El Chanate. The purpose of these additional activities is to
move toward the preparation, if warranted, of a feasibility study (Phase two of
the FG venture) and a detailed mine plan for the El Chanate project.

In August 2002, we retained SRK Consulting to conduct a Scoping Study of the
proposed project at El Chanate. SRK is an independent, international group of
consulting practices with 29 offices on six continents. SRK has worked with top
companies in the mining industry as well as performing due diligence for many of
the world's largest financial institutions and stock exchanges. A Scoping Study
is a preliminary evaluation, based upon existing data, to determine the
procedure to follow in the feasibility study for a mining project. The Scoping
Study was completed in October 2002. The study results indicate that the
prospects for a surface/heap leach mining operation at El Chanate remain
positive. SRK has audited and confirmed the geological and deposit models, the
metallurgical database and the operating cost parameters used by us, and
prepared a preliminary surface mine design, using the floating cone method.

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

The study assumes a production rate of 2.6 million tonnes of ore per year or
7,500 tonnes per day, operating at 345 days per year. The processing plan for
this open pit heap leach gold project calls for crushing the ore to 100% minus
3/8 inch. Carbon columns will be used to recover the gold. If financing for the
project is obtained and required permitting is completed by the end of 2003, and
if the necessary mining plant, equipment and facilities are acquired, an
adequate water supply is secured, and power lines to the mine are constructed,
we anticipate, but cannot assure, that the mine will commence full commercial
production in January of 2005.

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


                                       4
<PAGE>

Management believes that the capital costs to establish a surface, heap leach
mining operation at El Chanate will be approximately $13.8 million. Financing,
is being sought through bank loans, equity and/or royalty arrangements. Normal
expenditures for the next fiscal year in New York and Mexico, such as Colorado
holding costs, general administration, accounting and legal are estimated to be
approximately $866,000 with our portion of non-capital items for the Chanate
mine development and related activities being estimated at $280,000. Surface
mine development would be funded by senior project financing of $13.8 million.
As discussed below in "Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations; Liquidity and Capital Resources," all of
our planned activities are dependent upon our ability to obtain adequate
financing.

Management continues to be encouraged by results to date however, there can be
no assurance that we will be able to establish and open a mine at El Chanate,
that any mining will be profitable or that necessary additional funding can be
obtained. Assuming that we are able to obtain adequate funding, we intend to
continue development work at the El Chanate project. (See "Part II, Item 6,
Management's Discussion and Analysis of Financial Condition and Results of
Operations; Liquidity and Capital Resources").

On March 13, 2003, we obtained exclusive options to purchase an ore crusher and
related assets (spare parts for the crusher and certain transportable building
structures). The total cost for these assets (exclusive of the option cost) will
be $700,000. FG, our joint venture partner, has agreed orally that this purchase
will be pursuant to the joint venture and that FG will be responsible for 50% of
the cost. On March 13, 2003, we paid $25,000 for these options. As originally
agreed, on April 30,2003, we elected to extend the options to June 30, 2003 by
paying an additional $25,000. Pursuant to the options, we were required to enter
definitive purchase agreements for these assets on or before June 30, 2003 and,
upon execution of these agreements, we were obligated to pay an aggregate of
$400,000 towards the purchase price. The owner of these assets is attempting to
obtain rights of clear passage from nearby property owners, who have filed suit
for back payments and are seeking to attach the assets. Although the June 30,
2003 deadline has passed, we are negotiating with the owner to extend the
deadline due to the current legal issues, which call into question the owner's
ability to deliver the equipment to us if we exercise the options. These
discussions have progressed to the point where we believe the owner has made
substantial progress regarding his ability to provide clear passage of the
equipment from its current location to the El Chanate Concessions. These assets
currently are located in Sonora, Mexico, approximately 70 miles from the El
Chanate Concessions. Assuming we can obtain the requisite financing to acquire
these assets, and rights of clear passage, we plan to move them to our
concessions after purchase. We continue to look for comparable equipment to
acquire in the event that we are unable to acquire these assets or comparable
assets are available at a better price.


                                       5
<PAGE>

Leadville, Colorado Developments

During the fiscal year ended July 31, 2003, activity at our Leadville, Colorado
properties consisted primarily of mine maintenance. Primarily as a result of our
focus on El Chanate, we temporarily ceased activities in Leadville, Colorado.
During the year ended July 31, 2002, we performed a review of our Leadville mine
and mill improvements and determined that an impairment loss should be realized.
Therefore, we significantly reduced the carrying value of certain assets
relating to our Leadville, Colorado assets (see, "Part II, Item 6, Management's
Discussion and Analysis of Financial Condition and Results of Operations;
Results of Operations").

Company Mill at Leadville

We have a mill situated on a 20.73-acre site in Leadville, Colorado.
Construction of the mill began in 1987 and was completed in August of 1989. The
mill is not in operation at this time.

Competition

The acquisition of gold properties and their exploration and development are
subject to intense competition. Companies with greater financial resources,
larger staffs, more experience and more equipment for exploration and
development may be in a better position than us to compete for such mineral
properties. Our lack of revenues and limited financial resources further hinder
our ability to acquire additional mineral properties. However, should we
commence mining operations at our Leadville property, we believe that there is
no material competition in the sale of metallic products because prices are
based upon standards established by the commodity exchange (London Metals
Exchange market).

Employees

As of July 31, 2003, we had six full time employees and/or consultants.

Item 2. Description of Properties

El Chanate Properties - Sonora, Mexico

Through our wholly-owned subsidiary, Oro de Altar S. de R. L. de C.V., and our
affiliate, Santa Rita, we own 100% of the following 14 mining concessions, all
of which are located in the Municipality of Altar, State of Sonora Republic of
Mexico, subject to the terms of our joint venture agreement with FG which allows
FG to earn up to a 45% interest in the venture.


                                       6
<PAGE>

     ----------------------------------------------------------------
       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
     ----------------------------------------------------------------
                            Total                           3497.3491

Surface Property Ownership

Emisa purchased surface property ownership, consisting of 466 Hectares in Altar,
Sonora, on January 27, 1998. The ownership was conveyed to our subsidiary, Oro
de Altar S.A. de C.V., in 2002. Minera Santa Rita S. de R.L de C.V., one of our
wholly-owned Mexican affiliates, has a lease on the property for the purpose of
mining the Chanate gold deposit. The purchase transaction was recorded as public
deed 19,591 granted by Mr. Jose Maria Morera Gonzalez, Notary Public 102 of the
Federal District, registered at the Public Registry of Property of Caborca,
Sonora, under number 36026, book one, volume 169 of the real estate registry
section on May 7, 1998.

Leadville, Colorado Properties

We own or lease the following patented claims (except where noted), all of which
are located in California Mining District, Lake County, Colorado, Township 9
South, Range 79.

<TABLE>
<CAPTION>
                                                                                      Gross            Net
   Claim       Percent                                                              Acreage        Acreage      Location
   Count      Ownership             CLAIM NAME                        CLAIM#       of Claim       of Claim   T-Section-R
<S>              <C>             <C>                                   <C>           <C>             <C>        <C>
     1            16%                 Ballard                            589           3.20           0.51       20-9-79
     2            50%               Belle Placer                        2778         129.00          64.50       14-9-79
                  13%               Belle Placer                        2778                         16.80       14-9-79
     3             3%            Big Six (West End)                     1616           3.70           0.11       20-9-79
                   6%            Big Six (West End)                     1616                          0.22       20-9-79
                   8%            Big Six (West End)                     1616                          0.30       20-9-79
     5            81%              Blue Belle***                       11121          7.594           6.17      22-09-79
     6           100%                 Bonanza                           1088           5.92           5.92       20-9-79
     7            25%               Boulder Nest                        3574           6.48           1.62       18-9-79
     8           100%                 Bow****                          11777          3.139           3.14      21-09-79
</TABLE>


                                       7
<PAGE>

<TABLE>
<S>              <C>       <C>                                      <C>              <C>             <C>        <C>
     9             8%                 Chestnut                           712           9.40           0.75       30-9-79
     10           50%                 CHICAGO                           1295          10.20           5.10       23-9-79
     11          100%                Chieftain                           978           8.55           8.55       19-9-79
     12          100%              Christmas****                         763          5.120           5.12      21-09-79
     13          100%              Codfish Balls                         767           2.60           2.60       19-9-79
     14           12%                  Colman                           9747           1.50           0.18       20-9-79
                  88%                  Colman                           9747                          1.32       20-9-79
     15          100%                COLUMBINE                     CMC-248958          7.30           7.30         14&23
     16          100%                 Comstock                          1542           3.50           3.50       20-9-79
     17          100%          Comstock (unpatented)                    3613           9.70           9.70       20-9-79
     18          100%      Content Liberty &Gold Belt***                9373         21.330          21.33      15-09-79
     19          100%                Cora Belle                         3919           6.70           6.70       20-9-79
     20          100%              County Line***                      11359          7.748           7.75      11-10-79
     21          100%                  Curran                            449           8.80           8.80       20-9-79
     22          100%                 Cyclops                           1567           8.70           8.70       19-9-79
     23          100%               Dauntless***                         579         10.330          10.33      22-09-79
     24          100%                  Devlin                           1579           7.60           7.60       19-9-79
     25           17%                Dolphin **                          719           1.99           0.33       24-9-80
     26            3%                  Elbert                           4163           9.90           0.30       20-9-79
                   6%                  Elbert                           4163                          0.59       20-9-79
                   8%                  Elbert                           4163                          0.79       20-9-79
     27           11%                Elmore****                          636         10.200           1.17      21-09-79
     28           38%                   EMMA                             756           8.30           3.15       29-9-79
     29           50%                Famous***                          4554          3.991           2.00      21-09-79
     30          100%                Fortune***                         2309          4.921           4.92      21-09-79
     31           75%             Free America #2                       1177           4.20           3.15       20-9-79
     32          100%                Gnome****                          1010          2.920           2.92      21-09-79
     33          100%               Golconda****                        3690          5.250           5.25      21-09-79
     34          100%                Golden rod                         9441           4.00           4.00       20-9-79
     35          100%               Grand Prize                       473 AM           4.50           4.50       20-9-79
     36          100%              Grand View***                         621          2.450           2.45      21-09-79
     37           13%                Great Hope                          489          10.30           1.34       20-9-79
     38           50%                Greenback                          1043           4.00           2.00       19-9-79
     39            3%                Greenwood                           630           9.40           0.28       19-9-79
                   6%                Greenwood                           630           9.40           0.56       19-9-79
     40          100%            Herman Placer****                       743         95.540          95.54      27-09-80
     41          100%              Highland Chief                        429           2.10           2.10       20-9-79
     42          100%              Highland Mary                         539           6.60           6.60       20-9-79
     43          100%                Homestake                          1540           7.60           7.60       20-9-79
     44           10%               Horseshoe **                        1493           5.48           0.54       30-9-79
     45          100%                 Hubert *                         11286           1.14           1.14       21-9-79
     46            8%                Ishpeming                          1018           8.20           0.66       20-9-79
                  83%                Ishpeming                          1018                          6.81       20-9-79
     47           32%               J G Fraction                       13251           1.70           0.54       20-9-79
     48          100%                 Jew****                           7141          1.480           1.48      21-09-79
     49          100%                  JFW *                           15176           0.02           0.02       21-9-79
     50           50%            Josephine Plus **                      3226           0.02           0.01       32-9-79
     51          100%                   JUDY                      CMC-248957          18.00          18.00         14&23
     52          100%                Kokomo***                           892          8.211           8.21      21-09-79
     53            8%                   KRL                             4299           4.70           0.38       20-9-79
     54           35%               Little Annie                         601          10.33           3.62       21-9-79
     55          100%                Lady Jane                           491           8.90           8.90       20-9-79
     56           38%              Little Bertha                         504           8.40           3.19       20-9-79
     57           11%               Little Chief                         358           6.98           0.76       24-9-80
     58          100%             Little Chippewa                        655           9.90           9.90       20-9-79
     59          100%            Little Ellen ****                       550         10.140          10.14      21-09-79
     60           13%             Little Galesburg                      1176           6.00           0.78       20-9-79
                  88%             Little Galesburg                      1176                          5.25       20-9-79
     61            3%               Little Maud                          758           4.90           0.15       20-9-79
                   6%               Little Maud                          758                          0.29       20-9-79
                   8%               Little Maud                          758                          0.39       20-9-79
     62          100%             Little Rische***                       412          9.710           9.71      21-09-79
     63           50%                  Medium                          13344           4.80           2.40       20-9-79
</TABLE>


                                       8
<PAGE>

<TABLE>
<S>              <C>           <C>                            <C>                   <C>             <C>        <C>
                  50%                  Medium                          13344                          2.40       20-9-79
     64          100%               Midnight****                        4532          4.310           4.31      21-09-79
     65          100%                  MIKADO                           8015           9.30           9.30       23-9-79
     66          100%               Mill site***                       tract        100.633         100.63
     67            8%              Mineral Farms                        1359           9.10           0.73       20-9-79
     68            8%                Minnesota                          2651           2.80           0.22       20-9-79
     69          100%                Moquito***                         4542          2.467           2.47      21-09-79
     70           11%              New Discovery                         286          10.70           1.17       24-9-80
     71          100%               New Year****                         496          9.300           9.30      21-09-79
     72           50%                 NEW YORK                          1294          10.10           5.05       23-9-79
     73          100%              Office Bldg***                                                        -
     74          100%                   Ohio                             584           9.24           9.24      20-09-79
     75            8%                   Park                             838          10.30           0.82       20-9-79
                   8%                 Park **                            838                          0.86       19-9-79
     76            8%                  Park#2                            897           9.70           0.78       20-9-79
     77           88%               Penfield***                         2308          3.576           3.13      21-09-79
     78           96%                PHARMACIST                        11617           1.20           1.15       19-9-79
     79            9%                Pittsburg                           422           8.43           0.79       19-9-79
     80          100%             Polaris #1-3****                     12486          5.720           5.72      21-09-79
     81           44%                President                          8942           6.90           3.04       20-9-79
                   6%                President                          8942                          0.41       20-9-79
     82           50%            PRIDE OF THE WEST                      3963           0.90           0.45       19-9-79
     83           63%               PROSPERINE &                        5214           9.90           6.24       19-9-79
     84          100%              PT ZUNI PLACER             Personal prop.          22.00          22.00
     85          100%                Pt. Oro***                          283          3.366           3.37      26-09-80
     86           75%                  PUEBLO                          12718          36.60          27.45       23-9-79
     87           39%                 Pyrenees                          1537           6.80           2.65       19-9-79
     88          100%                  R A M                            1566           5.90           5.90       19-9-79
     89           50%              Ready Cash **                         304          10.33           5.17       33-9-79
     90          100%          Resurrection#1-15****                    9269        148.169         148.17      22-09-79
     91          100%               Robert Burns                         538           9.90           9.90       20-9-79
     92          100%           Rocky & Snowflake *                     5038           9.40           9.40       21.9-79
     93          100%           Sailing Cissy #1***                    11121          6.336           6.34      22-09-79
     94          100%           Sailing Cissy #2***                    11121          5.412           5.41      22-09-79
     95          100%                 Security                          3181           2.85           2.85       19-9-79
     96           75%                 Shale***                         11121          9.684           7.26      22-09-79
     97           28%            Silent Friend****                       595          4.650           1.31      21-09-79
                  40%            Silent Friend****                       595                          1.86      21-09-79
     98            8%               Silver Cloud                        1016           4.90           0.39       20-9-79
     99          100%               Silver Spray                        1539           2.10           2.10       20-9-79
    100          100%                Slide****                          6455          2.810           2.81      36-09-79
    101            8%                   Snow                            4161           3.70           0.30       20-9-79
    102          100%              South Fork****                        623         10.160          10.16      21-09-79
    103          100%                 St. Ann                           4640           6.70           6.70       21-9-79
    104          100%                St. Louis                           558           8.00           8.00       21-9-79
    105           25%               Stray Horse                          301           7.30           1.83       24-9-80
    106          100%          Summit & Summit #2****                   6590         20.156          20.16      36-09-79
    107          100%                 Tokio *                           9923           1.01           1.01       21-9-79
    108          100%          Uintah Placer mill****                   2407          4.473           4.47      34-09-80
    109          100%        Uintah Placer(tract 5)****                 2407          2.273           2.27      27-09-80
    110          100%               Wade Hampton                        1538           6.10           6.10       20-9-79
    111           75%              Wall Street***                       1000          3.060           2.30      21-09-79
    112          100%             What is Left***                       4970          7.100           7.10      21-09-79
    113            8%                   XYT                             4162           7.10           0.57       20-9-79
                  92%                   XYT                             4162                          6.53       20-9-79
                        totals                                                     1,227.59         965.22
</TABLE>

            *     Highland Group Affiliation

            **    Purchased at tax lien sale/delinquents, pending completion of
                  payments (year 1999).

            ***   Purchased at tax lien sale, pending completion of payments
                  (year 2001)

            ****  Purchased at tax lien sale, pending completion of payments,
                  Paid two years taxes (2000, 2001)


                                       9
<PAGE>

            Note: We may have multiple agreements for the same claim that cover
                  fractional ownership interests.

            CMC = Unpatented claim

We own or have rights to explore, develop and mine the foregoing claims as
indicated. We have not formed any partnership or joint venture regarding these
claims, nor have we entered into any associations whereby profits or expenses
are to be shared. The claims are located approximately 2.5 miles northeast of
the town of Leadville, Colorado and are accessible by County Road. The principal
acreage forms a contiguous group and is located on a prominent topographic
feature known as Breece Hill, as indicated in the discussion of the Hopemore
Project below.

                               General Information

El Chanate Project - Sonora Mexico

The El Chanate project is located in the State of Sonora, Mexico, 37 kilometers
northeast of the town of Caborca. It is accessible by paved and all weather dirt
roads. Driving time from Caborca is approximately 40 minutes. Access is via the
village of 16 de September.

The project is situated on the Sonora desert in a hot and windy climate,
generally devoid of vegetation with the exception of cactus. The terrain is
generally flat with immense, shallow basins, scattered rock outcropping and low
rocky hills and ridges. The desert floor is covered by shallow, fine sediment,
gravel and caliche. The main body of the known surface gold covers and
irregularly shaped area of approximately 1,800 feet long by 900 feet wide.
Several satellite bodies on surface exist which have not been thoroughly
explored. Assays on chip samples taken from trenches at these locations by us
indicate the presence of gold mineralization.

The general El Chanate mine area has been mined for gold since the early 19th
century. A number of old underground workings exist characterized by narrow
shafts, to a depth of several tens of feet and connecting drifts and cross cuts.
No information exists regarding the amount of gold taken out; however,
indications are that mining was conducted on a small scale.

Geology

The project area is underlain by sedimentary rocks of the Late Jurassic - Early
Cretaceous Bisbee Group, and the Late Cretaceous Chanate Group, which locally
are overlain by andesites of the Cretaceous El Charro volcanic complex. The
sedimentary strata are locally intruded by Andesitic sills and dikes, a
microporphyritic latite and by diorite stock. The sedimentary strata are
comprised of mudstone, siltstone, sandstone, conglomerate, shale and limestone.
Within the drilled resource area, a predecessor exploration company
differentiated two units on the basis of their position relative to the Chanate
fault. The upper member is an undifferentiated sequence of sandstone,
conglomerate and lesser mudstone that lies above the Chanate fault and it is
assigned to the Escalante Formation of the Middle Cretaceous Chanate Group. The
lower member is comprised of mudstone with intercalated sandstone lenses and
thin limestone interbreds; it lies below the Chanate fault and is assigned to
the Arroyo Sasabe Formation of the Lower Cretaceous Bisbee Group. The Arroyo
Sasabe formation overlies the Morita Formation of the Bisbee Group. Both the
Escalante and Arroyo Sasabe formations are significantly mineralized proximal to
the Chanate fault, while the Morita Formation is barren.


                                       10
<PAGE>

The main structural feature of the project area is the Chanate fault, a 7km long
(minimum) northwest-striking, variably southwest-dipping structure that has been
interpreted to be a thrust fault. The Chanate fault is overturned
(north-dipping) at surface, and is marked by brittle deformation and shearing
which has created a pronounced fracture foliation and fissility in the host
rocks. In drill holes the fault is often marked the presence of an andesitedike.
Reports prepared by a predecessor exploration company describe the fault as
consisting of a series of thrust ramps and flats; however, geologic cross
sections which we have reviewed but did not prepare may negate this
interpretation.

Alteration/Mineralization

A predecessor exploration company has defined a 600 meter long, 300 meter wide,
120 meter thick zone of alteration that is centered about the Chanate fault. The
strata within this zone have been sericised, silicified and pyritized to varying
degrees. In surface outcrop the altered zone is distinguished by its bleached
appearance relative to unaltered rock. The mineralized zone contains only single
digit ppm levels of silver. Dense swarms of vein lets form thick, mineralized
lenses, within a larger area of sub economic but anomalous gold concentrations.
Drill hole data indicates that the mineralized lenses are sub horizontal to
gently southwest-dipping and are grossly parallel to the Chanate fault. The
fault zone itself is also weakly mineralized, although strata in the near
hanging wall and footwall are appreciably mineralized.

Work to Date

The El Chanate property has been the site of small scale mining of high grade
quartz veins (La Cuchilla mine) during the last century. Modern exploration
includes a few core holes drilled by Phelps Dodge in the 1960's as part of a
copper exploration program. Kennecott conducted geologic mapping and geochemical
sampling in 1991 and dropped the property. A Mexican subsidiary of AngloGold
explored the property intermittently between 1992 and 1997, and has conducted
extensive surface geologic mapping, geochemical sampling, geophysical studies
and drilling, including 11,000 meters of trenching, over 14 line-kilometers of
induced polarization geophysical surveys, 61 line-kilometers of VLF-magnetometry
geophysical surveys, 87 line-kilometers of enzyme leach geochemical surveys and
34,000 meters of R.C. drilling in 190 holes and 1080 meters of diamond drilling
in 9 holes. That company also commissioned various consultant studies concerning
petrography, fluid inclusions, air photo interpretation and structural analyses,
and conducted some metallurgical test work.

In April and May 2002, to confirm previous results obtained by third parties and
to provide specifically located metallurgical test samples, we drilled six
diamond core holes totaling 1,508 feet into the main mineralized zone at El
Chanate. Management believes that the diamond drill results generally confirmed
the previous results and, in June 2002 and January 2003, we drilled an
additional 45 reverse circulation holes totaling 9,410 feet. This reverse
circulation drill program confirmed previous results and also expanded certain
mineralized areas. The total number of holes is now 253. Of these, 235 are
reverse circulation drill holes and 18 are diamond drill holes. Detailed check
assays were obtained both for core samples and for reverse drill samples that
initially assayed greater than 0.3 gm/tonne. Chemex Labs, Vancouver, Canada,
preformed both the initial and the check assays, and the check assays supported
the initial assay results.


                                       11
<PAGE>

Metallurgical studies and independent tests of El Chanate mineralization
continue. Management believes that these tests continue to show promise that
heap leach technology can be utilized at El Chanate.

We, along with our joint venture partner, FG, selected M3 Engineering, Tucson,
Arizona and their related subcontractors to prepare a bankable feasibility study
for the El Chanate Project for the purpose of securing bank financing. This
study was completed in August 2003 and includes metallurgy, economics, planning
and design. The feasibility study was financed by us and by our partner, FG.

Our Current Plans for the El Chanate Project

Assuming adequate funding can be obtained, that required permits are obtained,
and since the feasibility and related engineering studies have yielded positive
outcomes, we anticipate beginning project construction before the end of the
calendar year 2003 or in early 2004. Our current plans for the rest of calendar
year 2003 include:

Environmental and Permitting. We already own the surface over the deposit. We
will need to obtain mining permits from state, federal and local governments,
including water permits for processing ores and electrical permits to purchase
or produce our own power. We also need to establish reclamation plans. These
permits were recently completed and filed with the proper government agencies.

Site Construction. If warranted, we plan to construct a surface gold mine and
facility capable of producing about 2.8 million tons per year of ore and about
50,000 ounces of gold per year, over a five year mine life, at a targeted cash
cost of less than $230 per ounce.

Hopemore Project - Leadville, Colorado

The Leadville mining district is located 100 miles west of Denver, Colorado in
the heart of the Rocky Mountains. The weather is harsh with long winters and
short summers. The Hopemore Project can be reached by paved state highway and
other paved roads. Work by us started in 1984 with the acquisition of the
Comstock Hopemore Group of claims. Retimbering of the entire Hopemore shaft
followed along with establishment of the new 7th level, partial rehabilitation
of the other levels, several raises, the 5th level connection with the Hunter
shaft, construction of a mill and the retimbering of the Hunter escape shaft.

Historically, our properties were worked as separate mining areas, the Hopemore
and Hunter shafts in the Ibex area. The ores were not concentrated by milling
but were shipped directly to the Arkansas Valley Smelter in Leadville.

The Hopemore shaft was worked as part of the Ibex mines until approximately
1902. The Hopemore shaft was sunk in 1907 to reach the 7th level of the Ibex No.
4 mine. Ore bodies in the Leadville dolomite (Blue limestone) lie on the hanging
wall side (southwest) of the Ibex No. 4 vein. The ore is associated with a large
magnetite skarn replacement body in the Leadville dolomite. The Leadville
dolomite on the footwall (east) side of the Ibex No. 4 vein was mined via the
Hunter Shaft.


                                       12
<PAGE>

Ground conditions in the district generally do not allow open stopes, therefore,
square setting and backfilling with waste of low-grade ore was commonly
practiced. When the large historic ore bodies of the Hopemore were mined, zinc
sulfide ore was of no value. High zinc ore was penalized at the local lead
smelter, and it is believed that much of the backfill from historic operations
may be high-grade zinc mineralization.

The Hopemore area historically has been mined from the Ibex No. 7 level. The
lower host rocks of the Manitou and Dyer formations are thought to remain
unexplored. Steep sulfide veins commonly control the mineralized zones. Four
veins have been identified which could feed replacement mineral bodies in these
underlying formations. The potential mineral bodies are massive sulfide and
could contain between 25,000 to 80,000 tons each of mineralized material. [Scott
Hazlitt Geological Report, Leadville Mining & Milling Properties, January 1993].

Geology

The deposits in the Leadville district include precious and base metal massive
sulfide veins and carbonate hosted deposits near surface oxidized deposits, gold
bearing magnetite skarns, and gold rich veins. The major ore bodies are hosted
in Paleozoic aged, shelf carbonate rocks with a total thickness of 600 feet.

These sedimentary rocks have been intruded by a series of sills and dikes and
faulted, resulting in complex geology. Our properties are located on Breece
Hill, which is a major intrusive center, containing deposits of gold, silver and
base metal mineralization.

Weston Fault Massive Sulfide

The Weston fault forms the western boundary of the down-dropped block that
contains the deposits of the Black Cloud mine south and east of our properties.
The Black Cloud mine was operated from the early 1970's until 1998 by ASARCO,
primarily for lead and zinc. The Hopemore-Hunter workings are separated from the
Penn Group by the Weston fault that has had a complex history of movement. Early
compressional tectonics are believed to have resulted in minor over thrusting
and drag folding, possibly similar to that along the Tucson Main Fault on Iron
Hill. Later normal faulting resulted in a near vertical structure with the east
side down faulted. These two episodes of movement are believed to have produced
two strands of the Western Fault. The ground between the two strands of the
fault should have undergone good ground preparation and may contain the
favorable carbonate section for massive sulfide blanket mineralization. [Scott
Hazlitt Geological Report, Leadville Mining & Milling Properties, January 1993].

Weston Fault Stockwork Breccia

Along the southern strike of the Weston fault zone, intersecting faults have
hosted stockwork breccia zones that contain precious metals and are low in
sulfides. The Antioch mine was mined for precious metals during the early part
of the twentieth century, producing a siliceous gold ore contained in a broken
and brecciated porphyry body between two fault strands. Another similar


                                       13
<PAGE>

stockwork breccia ore zone is known as the South Ibex stockwork or Capital stope
that contained approximately 250,000 tons of mineralized rock. There are two
strands of the Weston fault on our property. The strike length controlled is
from 1,400-1,600 feet. [Scott Hazlitt Geological Report, Leadville Mining &
Milling Properties, January 1993].

Item 3. Legal Proceedings

We are not presently a party to any material litigation.

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

No matters were submitted to a vote of our shareholders during the fourth
quarter of fiscal 2003.


                                       14
<PAGE>

                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters

(a) Marketing Information -- The principal U.S. market in which our common
shares (all of which are of one class, $.001 par value Common Stock) are traded
or will trade is in the over-the-counter market (Bulletin Board Symbol: "CGLD").
Our stock is not traded or quoted on any Automated Quotation System.

The following table sets forth the range of high and low bid quotes of our
Common Stock per quarter for the past two fiscal years as reported by the OTC
Bulletin Board (which reflect inter-dealer prices without retail mark-up,
mark-down or commission and may not necessary represent actual transactions).

                          MARKET PRICE OF COMMON STOCK

                                                     Bid
                                                     ---
Quarter Ending                             High     and       Low
--------------                             ----------------------

July 31, 2003                              0.43              0.23
April 30, 2003                             0.33              0.19
January 31, 2003                           0.26              0.12
October 31, 2002                           0.18              0.12

July 31, 2002                              0.37              0.102
April 30, 2002                             0.29              0.10
January 31, 2002                           0.25              0.11
October 31, 2001                           0.38              0.15

      (b) Holders -- The approximate number of recordholders of our Common
Stock, as of November 7, 2003 amounts to 1,524 inclusive of those brokerage
firms and/or clearing houses holding our common shares for their clientele (with
each such brokerage house and/or clearing house being considered as one holder).
The aggregate number of shares of Common Stock outstanding is 45,716,092 as of
November 7, 2003.

      (c) Dividends - We had not paid or declared any dividends upon our Common
Stock since inception and, by reason of our present financial status and our
contemplated financial requirements, do not contemplate or anticipate paying any
dividends upon our Common Stock in the foreseeable future.

During the quarter ended July 31, 2003, we issued the following shares of our
Common Stock pursuant to the exemption from registration provided by Section
4(2) of the Securities Act of 1933: We sold an aggregate of 2,502,579 shares for
an aggregate of $416,599 to 14 persons. We also issued 14,348 shares to one
individual for administrative services.


                                       15
<PAGE>

The following table gives information about our Common Stock that may be issued
upon the exercise of options, warrants and rights under all of our equity
compensation plans as of July 31, 2003.

<TABLE>
<CAPTION>
                                                                Number of                                 Number of securities
                                                            Securities to be                              remaining available
                                                               issued upon          Weighted-average      for future issuance
                                                               exercise of          exercise price of         under equity
                                                               outstanding             outstanding         compensation plans
                                                            options, warrants       options, warrants    (excluding securities
                   Plan Category                               and rights              and rights       reflected in column (a))
--------------------------------------------------          -----------------       ----------------    ------------------------
                                                                   (a)                       (b)                  (c)
<S>                                                             <C>                      <C>                        <C>
Equity compensation plans approved by security
holders:                                                               -0-              $     -0-                   N/A
                                                               ==========                =======                =======

Equity compensation plans not approved by security              4,036,363               $   .022                    N/A
holders:                                                           25,000                    .50                    N/A
                                                                   97,826                   .115                    N/A
                                                                3,787,727                    .22                    N/A
                                                                1,450,000                    .05                    N/A
                                                                  100,000                    .20                    N/A
                                                                  100,000                    .24                    N/A
                                                                  200,000                    .25                    N/A
                                                               ==========                =======                =======

Total                                                           9,796,916                $  .199                    N/A
                                                               ==========                =======                =======
</TABLE>

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

      Cautionary Statement on Forward-Looking Statements

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


                                       16
<PAGE>

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

      o     volatility in market prices for gold and other metals;

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

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

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

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

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

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

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

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

      o     the availability of experienced employees; and

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

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


                                       17
<PAGE>

      Results of Operations

General

During the fiscal year ended July 31, 2003, we continued to analyze the El
Chanate concessions. In fiscal 2002, we conducted data reviews and exploration
reconnaissance on 44 remaining mineral concessions. The majority of these
concessions were many miles from the El Chanate project and were mostly located
over early stage prospects, or along conceptual geologic projections, which did
not contain any developed mineral resources. As a result of this review, we
succeeded in our objective of reducing property holdings to a coherent package
of 14 contiguous, high priority concessions totaling approximately 3,497
hectares (8,642 acres or 13.5 square miles) which now comprise the El Chanate
project. Further exploration and development of the El Chanate project, assuming
it is economically feasible, will mostly occur on these concessions owned by us.
We also own outright 466 hectares (1,151 acres or 1.8 square miles) of surface
rights at El Chanate (except for our joint venture agreement with FG) and no
third party ownership or leases exist on this fee land or the El Chanate
concessions.

Through our engineering consultants and with FG, we continue to conduct
metallurgical tests to determine the most optimal and economically feasible
crushing and or grinding sizes for processing the El Chanate deposit. Management
believes that these studies showed that El Chanate deposits are generally well
suited for treatment using dilute cyanide solutions, and ore grade samples from
El Chanate have shown recoveries from rock tested after crushing to minus 1/2
inch size. The result of the crushing and grinding studies show that the gold
recovery increases significantly as the rock is reduced to finer particle sizes.
Current plans call for crushing 100 percent of the rock through to minus 3/8
inch size. Test work was conducted at Resources Development Inc. in Wheat Ridge,
Colorado, Metcon's laboratory in Tucson, Arizona and in Mexico at the La
Colorada mine laboratory, which is owned by FG, our joint venture partner. We
are generally encouraged by these results.

      Fiscal year ended July 31, 2003 compared to fiscal year ended July 31,
2002

Revenues.

We generated no revenues from mining operations during the fiscal year ended
July 31, 2003 and 2002. We generated interest income during the 12 moths ended
July 31, 2003 of approximately $32,000, an increase of $29,000 from the 12 month
period ended July 31, 2002 ($3,000). This increase resulted from higher cash
balances and interest collected on the sale of our subsidiary, Minera Chanate.

Costs and Expenses.

Over all, costs and expenses during the 12 months ended July 31, 2003
($2,088,000) decreased by $487,000 (approximately 18.9%) from the 12 months
ended July 31, 2002 ($2,575,000). However, this decrease primarily relates to a
decrease in the write down of mining and milling properties ($999,500) offset by
an increase in other costs and expenses.


                                       18
<PAGE>

In accordance with SFAS 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of," we review our long-lived assets
for impairments. Impairment losses on long-lived assets are recognized when
events or changes in circumstances indicate that the undiscounted cash flows
estimated to be generated by such assets are less than their carrying value and,
accordingly, all or a portion of such carrying value may not be recoverable.
Impairment losses then are measured by comparing the fair value of assets to
their carrying amounts. Primarily as a result of our focus on El Chanate, we
temporarily ceased activities in Leadville, Colorado. During the year ended July
31, 2003, we performed a review of our Colorado mine and mill improvements and
determined that an additional impairment loss need not be recognized.
Accordingly, at July 31, 2002, we reduced by approximately $999,000 the carrying
value of certain assets relating to our Leadville, Colorado facility to
$300,000, which approximates our management's estimate of fair value. No
additional impairment loss was recognized at July 31, 2003.

Mine expenses during the 12 months ended July 31, 2003 ($1,029,000) increased by
$319,000 (approximately 44.9%) from the 12 months ended July 31, 2002
($710,000). We believe that the increase in mine expenses resulted primarily
from increased research activities at the Mexican property.

Selling, general and administrative expenses during the 12 months ended July 31,
2003 ($771,000) increased by $131,000 (approximately 20.5%) from the 12 months
ended July 31, 2002 ($640,000). We believe that the increase is due to increased
rent and related expenses ($30,000), public relations ($68,000) costs and
miscellaneous administrative costs ($33,000).

Stock based compensation increased $67,000 approximately (30.1%) during the 12
months ended July 31, 2003 ($289,000) from the 12 months ended July 31, 2002
($222,000).

Net Income.

As a result, our net loss for the 12 months ended July 31, 2003 was $1,919,000,
which was $1,427,000 more than our $492,000 loss for the 12 months ended July
31, 2002. .

Liquidity and Capital Resources

As of July 31, 2003, we had working capital of approximately $106,000. As noted
below, management anticipates that we will need at least $1,182,400 in order to
carry out our plans for fiscal 2004 which includes the costs of administration
and mine related activities and an additional $13.8 million in order to develop
a surface mine at the El Chanate project if it continues to be deemed
economically feasible. To the extent that cash flow is unavailable, management
intends to raise all necessary capital through bank financing and/or the sale of
our securities, or the sale of a royalty interest in the future production from
the Chanate properties.

Assuming that we are able to obtain funds, planned activities over the next year
in Mexico, in order of priority, are as set forth below. Some of these
activities may not be completed by July 31, 2004, the end of our current fiscal
year.


                                       19
<PAGE>

                  Activity                                       Estimated Cost*
                  --------                                       ---------------

Sonora, Mexico (assumes FG pays an equal amount)

Permitting and Public Relations                                         11,000
Water Rights Acquisition                                                50,000
Water Well Drill (test hole)                                            25,000
Road Construction                                                       30,000
Building down payment                                                   20,000
Land Taxes                                                              19,500
Employee Salaries, and Consultants                                     124,500
                                                                    ----------
         Subtotal                                                      280,000

Leadville, Colorado
Holding cost, maintenance, insurance                                    36,200

New York, NY - Admin
New York Office                                                        648,000**
Mexican legal, accounting,                                              71,200
Mining and Geological Consultants                                      147,600
                                                                    ----------
         Subtotal                                                      866,200

Project Development (Senior financing)                              13,800,000

                  Total                                             14,982,400
                                                                    ==========

----------
*     Does not include contributions by FG.

**    Includes rent and related costs, New York Salaries, taxes, U.S. legal and
      accounting expenses, and other U.S. general and administrative costs.

Management had been funding these basic requirements through funds obtained from
our sale of Minera Chanate. All of the proceeds from the sale have been
expended. During the year ended July 31, 2003, we obtained approximately
$380,000 from the issuance of Common Stock. All of our planned activities are
dependent upon our ability to obtain adequate financing. Financing, is being
sought through bank loans, the sale of equity and/or royalty arrangements.

There is no assurance whatsoever that we will generate any operating revenues
during the fiscal year ending July 31, 2003 or that any of our proposed plans to
raise capital and otherwise fund operations will prove successful. Our inability
to obtain sufficient funding will delay our planned operations or, possibly,
force us to go out of business.

Environmental Issues

Management does not expect that environmental issues will have an adverse
material effect on our liquidity or earnings. Before any additional exploration
or any development or mining or construction of milling facilities could begin
at our Leadville properties, it would be necessary to meet all environmental
requirements and to satisfy the regulatory agencies in Colorado that our


                                       20
<PAGE>

proposed procedures fell within the boundaries of sound environmental practice.
We currently are bonded to insure reclamation of any areas disturbed by our past
activities. The current amount of this bond is $35,550.

In Mexico, we are not aware of any significant environmental concerns or
existing reclamation requirements at the El Chanate properties. However, we will
be required to obtain various environmental and related permits in order to
engage in our planned activities at El Chanate. This has presently been
undertaken. The costs and any delays associated with obtaining these required
permits could have an impact on our ability to timely complete our planned
activities at El Chanate and ultimately on the feasibility of opening a mine.

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

We do include in all our internal revenue and cost projections a certain amount
for environmental and reclamation costs on an ongoing basis. This amount is
determined at a fixed amount of $1.50 per ton of material to be milled on a
continual, ongoing basis to provide for further tailing disposal sites and to
reclaim the tailings disposal sites in use. At this time, there do not appear to
be any environmental costs to be incurred by us beyond those already addressed
above. No assurance can be given that environmental regulations will not be
changed in a manner that would adversely affect our planned operations.

Off-Balance Sheet Transactions

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

                   APPLICATION OF CRITICAL ACCOUNTING POLICIES

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

In accordance with SFAS 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of," we review our long-lived assets
for impairments. Impairment losses on long-lived assets are recognized when
events or changes in circumstances indicate that the undiscounted cash flows
estimated to be generated by such assets are less than their carrying value and,
accordingly, all or a portion of such carrying value may not be


                                       21
<PAGE>

recoverable. Impairment losses then are measured by comparing the fair value of
assets to their carrying amounts. During the year ended July 31, 2002, we
performed a review of our Colorado mine and mill improvements and determined
that an impairment loss should be recognized. Accordingly, at July 31, 2002, we
reduced by $999,445 the net carrying value of certain assets relating to our
Leadville, Colorado facility to $300,000, which approximates management's
estimate of fair value. No additional impairment loss was recognized in 2003.

Environmental remediation costs are accrued based on estimates of known
environmental remediation exposure. Such accruals are recorded even if
significant uncertainties exist over the ultimate cost of the remediation. It is
reasonably possible that our estimates of reclamation liabilities, if any, could
change as a result of changes in regulations, extent of environmental
remediation required, means of reclamation or cost estimates. Ongoing
environmental compliance costs, including maintenance and monitoring costs, are
expensed as incurred. There were no environmental remediation costs accrued at
July 31, 2003.

                            ISSUES AND UNCERTAINTIES

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

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

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

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

We do not generate any positive cash flow from operations and we do not
anticipate that any positive cash flow will be generated for some time. We have
limited financial resources. Leases and licenses which we hold as well as our
joint venture agreement with FG, impose financial obligations on us. We cannot
assure that additional funding will be available to allow us to fulfill such
obligations.

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

            o     bank or other debt financing,

            o     equity financing, or

            o     other means.


                                       22
<PAGE>

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

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

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

            o     the location of economic ore bodies,

            o     development of appropriate metallurgical processes,

            o     receipt of necessary governmental approvals and

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

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

            o     the price of gold,

            o     exchange rates,

            o     the particular attributes of the deposit, such as its

                        o     size,

                        o     grade and

                        o     proximity to infrastructure,

            o     financing costs,

            o     taxation,

            o     royalties,

            o     land tenure,

            o     land use,

            o     water use,

            o     power use,

            o     importing and exporting gold and

            o     environmental protection.

The effect of these factors cannot be accurately predicted.

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

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

Our only current properties are the El Chanate concessions and our Leadville
properties. At present, we are not doing any substantive work at our Leadville
properties. Our El Chanate


                                       23
<PAGE>

concessions are owned by one of our wholly-owned subsidiaries Oro de Altar. FG,
our joint venture partner, has a 31% interest in the operating profits of the El
Chanate project with a right to increase its interest to 45%. We currently do
not have operations on either of our properties, and we must commence such
operations to receive revenues. Accordingly, we are dependent upon the success
of the El Chanate concessions.

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

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

            o     the level of interest rates,

            o     the rate of inflation,

            o     central bank sales,

            o     world supply of gold and

            o     stability of exchange rates.

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

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

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

            o     ownership of assets,

            o     land tenure,

            o     mining policies,

            o     monetary policies,

            o     taxation,

            o     rates of exchange,

            o     environmental regulations,

            o     labor relations,

            o     repatriation of income and

            o     return of capital.

Any such changes may affect our ability to undertake exploration and development
activities in respect of present and future properties in the manner currently
contemplated, as well as our ability to continue to explore, develop and operate
those properties in which we have an interest or in respect of which we have
obtained exploration and development rights to date. The


                                       24
<PAGE>

possibility, particularly in Mexico, that future governments may adopt
substantially different policies, which might extend to expropriation of assets,
cannot be ruled out.

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

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

            o     stricter standards and enforcement,

            o     increased fines and penalties for non-compliance,

            o     more stringent environmental assessments of proposed projects
                  and

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

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

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

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

            o     environmental hazards,

            o     industrial accidents,

            o     labor disputes,

            o     metallurgical and other processing,

            o     unusual and unexpected rock formations,

            o     ground or slope failures,

            o     cave-ins,

            o     acts of God,

            o     mechanical equipment and facility performance problems and

            o     the availability of materials and equipment.

Such risks could result in:

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

            o     personal injury or death,

            o     environmental damage,

            o     delays in mining,

            o     monetary losses and

            o     possible legal liability.


                                       25
<PAGE>

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

      We do not currently have liability insurance in place. Although we are
      currently seeking to obtain insurance, if we are unable to obtain adequate
      insurance and someone is injured on our property, our financial condition
      could be materially and adversely affected.

At present we do not have liability insurance coverage in place. We are
currently seeking to obtain such insurance and hope to have it soon. If we are
unable to obtain adequate insurance and/or prior such insurance taking effect,
someone is injured on our property and we are determined to be liable, our
financial condition could be materially and adversely affected.

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

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

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

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



                                       26
<PAGE>


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

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

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

The acquisition of gold properties and their exploration and development are
subject to intense competition. Companies with greater financial resources,
larger staffs, more experience and more equipment for exploration and
development may be in a better position than us to compete for such mineral
properties.

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

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

            o     labor disputes,

            o     invalidity of governmental orders,

            o     uncertain or unpredictable political, legal and economic
                  environments,

            o     war and civil disturbances,

            o     changes in laws or policies,

            o     taxation,

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

            o     governmental seizure of land or mining claims,

            o     limitations on ownership,

            o     limitations on the repatriation of earnings,

            o     increased financial costs,

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

            o     foreign exchange controls.


                                       27
<PAGE>

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

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

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

                        RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001 the Financial Accounting Standards Board, ("FASB") issued Statement
No. 141, "Business Combinations" ("SFAS 141"). SFAS 141 replaces APB Opinion No.
16 and eliminates pooling-of-interest accounting prospectively. It also requires
all business combinations initiated after June 30, 2001 to be accounted for
using the purchase method and provides guidance on purchase accounting related
to the recognition of intangible assets and accounting for negative goodwill.
There have been no acquisitions completed since June 30, 2001 and all previous
acquisitions have been accounted for using the purchase method.

In October 2001, FASB issued Statement No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 clarifies the
accounting for the impairment of long-lived assets and for long-lived assets to
be disposed of, including the disposal of business segments and major lines of
business. We will adopt SFAS 144 in fiscal 2003 and do not expect that the
application of the provisions of SFAS 144 will have a material impact on our
consolidated financial statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure". SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock-Based Compensation" to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounts for
stock-based employee compensation and the effect of the method used on reported
results. The provisions of SFAS No. 148 are effective for financial statements
for the year ended July 31, 2003. SFAS No. 148 did not have a material impact on
our consolidated financial statements, as the adoption of this standard does not
require us to change, and we do not plan to change, to the fair value based
method of accounting for stock-based compensation


                                       28
<PAGE>

Item 7. Financial Statements.

For the Financial Statements required by Item 7 see the Financial Statements
included at the end of this Form 10-KSB.

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

There have been no changes in or disagreements with accountants with respect to
accounting and/or financial disclosure.

Item 8A. Controls and Procedures.

Gifford A Dieterle, our Chief Executive Officer and our Chief Financial Officer,
has conducted an evaluation of the effectiveness of disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based on that evaluation,
taking into account our limited resources and current business operations, he
concluded that the disclosure controls and procedures are effective in ensuring
that all material information required to be filed in this quarterly report has
been made known to him in a timely fashion. There have been no significant
changes in internal controls, or in other factors that could significantly
affect internal controls, subsequent to the date he completed his evaluation.


                                       29
<PAGE>

                                    PART III

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

The following table sets forth certain information concerning the directors and
executive officers of the Company:

<TABLE>
<CAPTION>
                                          First
                                          Became
Name                           Age        Director       Position
----                           ---        --------       --------
<S>                            <C>        <C>            <C>
Gifford A. Dieterle            71         9/22/82        President, Treasurer
                                                         & Chairman of the Board

Robert Roningen                69         9/14/93        Director, Senior Vice President,
                                                         Secretary

Jack V. Everett                82         1/25/95        Director, Vice President - Exploration

Roger A. Newell                60         8/28/00        Director, Vice President -
                                                         Development

Jeffrey W. Pritchard           45         1/27/00        Director, Vice President -
                                                         Investor Relations

J. Scott Hazlitt               51                        Vice President - Mine Development
</TABLE>

Directors are elected at the meeting of shareholders called for that purpose and
hold office until the next shareholders meeting called for that purpose or until
their resignation or death. Officers of the corporation are elected by the
directors at meetings called by the directors for its purpose.

GIFFORD A. DIETERLE, President, Treasurer and Chairman of the Board of Directors
of the Company. Mr. Dieterle was appointed President in September 1997 following
the resignation of Donald W. Wilson. He has been the Company's Chairman and
Treasurer since 1981. His highest educational degree is a M.S. in Geology
obtained from New York University. From 1977 until July 1993, he was Chairman,
Treasurer, and Executive Vice-President of Franklin Consolidated Mining Company.
From 1965 to 1987, he was lecturer in geology at the City University of N.Y.
(Hunter Division). Since 1962, he has been a consulting geologist engaged in the
geological evaluation of oil and mineral properties. Mr. Dieterle has been
Secretary-Treasurer of South American Minerals Inc. since 1997 and a director of
that company since 1996.

ROBERT RONINGEN, Senior Vice President, Secretary and Director, has been engaged
in the practice of law as a sole practitioner and is a self-employed consultant
geophysicist in Duluth, Minnesota. From 1988 to August 1993, he was an officer
and director of Franklin Consolidated


                                       30
<PAGE>

Mining Company, Inc. He graduated from the University of Minnesota in 1957 with
a B.A. in geology and in 1962 with a degree in Law.

JACK V. EVERETT, Vice President - Exploration and Director, has been a
consulting mining geologist since 1971, with expertise in all phases of
exploration for base and precious metals. Following his 1947 graduation from
Michigan State University, he was District Geologist for Pickands Mather &
Company on the Cuyuna Iron Range, Minnesota. From 1951 to 1970, he was Chief
Geologist and Exploration Manager for W.S. Moore Company, Duluth, Minnesota an
iron mining company with gold and base metal sulfide holdings in the U.S. and
Canada.

ROGER A. NEWELL, Vice President - Development and Director, has been in the
mining industry for over 30 years. From 1974 through 1977, he was a geologist
with Kennecott Copper Copper Corporation. From 1977 through 1989, he served as
Exploration Manager/Senior Geologist for the Newmont Mining Corporation and,
from 1989 through 1995, was the Exploration Manager for Gold Fields Mining
Company. He was Vice President Development, for Western Exploration Company from
1997 through 2000. He has been self-employed as a geologist since 2001. His
highest educational degree is a Ph.D. in mineral exploration from Stanford
University.

JEFFREY W. PRITCHARD, Vice President - Investor Relations and Director, has
worked for the Company since 1996. He has been in the marketing/public relations
field since receiving a Bachelor's degree from the State University of New York
in 1979. Jeff has served as the Director of Marketing for the New Jersey Devils
(1987-1990) and as the Director of Sales for the New York Islanders (1985-1987).
He also was an Executive Vice President with Long Island based Performance
Network, a marketing and publishing concern from 1990 through 1995.

J. SCOTT HAZLITT, Vice President - Mine Operations, has been a geologist since
1974. He has been providing geological consulting services to the Company since
November 1999. From 1995 to 1999, he was Chief Geologist for Getchell Gold Corp.
Mr. Hazlitt received a B.Sc. degree in Geology from Fort Lewis College in
Durango, Colorado in 1974 and a M.Sc. degree in Economic Geology from Colorado
State University in Fort Collins, Colorado in 1985.

Compliance with Section 16(a) of The Securities Exchange Act of 1934

To our knowledge, based solely on a review of such materials as are required by
the Securities and Exchange Commission, no officer, director or beneficial
holder of more than ten percent of our issued and outstanding shares of Common
Stock failed to timely file with the Securities and Exchange Commission any form
or report required to be so filed pursuant to Section 16(a) of the Securities
Exchange Act of 1934.

Code of Ethics

We recently adopted a Code of Ethics that applies to our officers, directors and
employees, including our principal executive officer, principal financial
officer and principal accounting officer. The Code of Ethics is publicly
available on our Website at www.capitalgoldcorp.com. If we make any substantive
amendments to this code of ethics or grant any waiver, including any implicit
waiver, from a provision of the code to our chief executive officer, principal
financial


                                       31
<PAGE>

officer or principal accounting officer, we will disclose the nature of such
amendment or waiver on that Website or in a report on Form 8-K.

Item 10. Executive Compensation

The following table shows all the cash compensation paid or to be paid by the
Company or any of its subsidiaries, as well as certain other compensation paid
or accrued, during the fiscal years indicated, to the Chief Executive Officer
for such period in all capacities in which he served. Information concerning the
Chief Executive Officer relates to Gifford Dieterle.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                           Long-Term Compensation
                                                                                -------------------------------------------
                                             Annual Compensation                       Awards                  Payouts
                             ------------------------------------------------   -------------------     -------------------
        (a)                   (b)          (c)          (d)            (e)        (f)          (g)        (h)         (i)
-------------------          ----        ------         ---         ---------   ---------   -------     -------   ---------
                                                                     Other      Restrict-                         All Other
                                                                     Annual     ed Stock                 LTIP     Compensa
 Name and Principal                                    Bonus        Compen-      Award      Options     Payouts     -tion
     Position                Year        Salary         ($)         sation($)     ($)         SARs        ($)        (i)
-------------------          ----        ------        -----        ---------   ---------   -------     -------   ---------
<S>                          <C>         <C>           <C>             <C>        <C>       <C>           <C>        <C>
Gifford A. Dieterle          2003        70,856        23,400          -0-        -0-             -0-     -0-        -0-
 Chief Executive             2002        70,642            -0-         -0-        -0-             -0-     -0-        -0-
 Officer                     2001        96,350            -0-         -0-        -0-       2,000,00      -0-        -0-
</TABLE>

The following table sets forth information with respect to the Company's
Executive Officers concerning the grants of options and Stock Appreciation
Rights ("SAR") during the past fiscal year:

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR
                                Individual Grants

<TABLE>
<CAPTION>
      (a)                       (b)                 (c)                       (d)                  (e)
-----------------------------------------------------------------------------------------------------------
                                               Percent of Total
                                               Options/SARs
                              Options/         Granted to
                              SARs             Employee in            Exercise or Base          Expiration
Name                          Granted          Fiscal Year              Price ($/SH)                Date
-----------------------------------------------------------------------------------------------------------
<S>                           <C>                 <C>                     <C>                    <C>
Scott Hazlitt                 300,000             20.8%                   $.05                   02-01-07
Scott Hazlitt                 400,000             20.5%                   $.05                   03-15-05
</TABLE>

The following table sets forth information with respect to the Company's
Executive Officers concerning exercise of options during the last fiscal year
and unexercised options and SARs held as of the end of the fiscal year:

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

<TABLE>
<CAPTION>
  (a)                          (b)               (c)               (d)                     (e)
-----------------------------------------------------------------------------------------------------
                                                                                       Value of
                                                                 Number of             Unexercised
                                                                 Unexercised           In-the-Money
                                                                 Options/SARs          Option/SARs
                             Shares                              at FY-End(#)          at FY-End(#)
                             Acquired on        Value            Exercisable/          Exercisable/
        Name                 Exercise (#)       Realized         Unexercisable         Unexercisable
-----------------------------------------------------------------------------------------------------
<S>                            <C>               <C>              <C>                     <C>
Gifford A. Dieterle                 --                --          1,250,000               $287,500
Robert N. Roningen             922,727           $90,427            500,000               $115,000
Jack V. Everett                200,000           $36,000            300,000               $ 69,000
Jeffrey W. Pritchard                --                --            372,727               $ 85,727
Roger A. Newell                     --                --          1,000,000               $230,000
Scott Hazlitt                       --                --            725,000               $166,750
</TABLE>


                                       32
<PAGE>

Directors are not compensated for acting in their capacity as Directors.
Directors are reimbursed for their accountable expenses incurred in attending
meetings and conducting their duties.

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

         (a) Security Ownership of Certain Beneficial Owners -- The persons set
forth on the charts below are known to the Company to be the beneficial owners
of more than 5% of the Company's outstanding voting Common Stock as of November
10, 2003.

         (b) Security Ownership of Management - Information concerning the
number and percentage of shares of voting Common Stock of the Company owned of
record and beneficially by management as of November 10, 2003, is set forth on
the charts below.

<TABLE>
<CAPTION>
                        Name of                    Amount & Nature
                        Beneficial                 of Beneficial              Approximate
Title of Class          Owner                      Ownership 11/10/03       Percentage(1)(2)
--------------          ----------                 ------------------       ----------------
<S>                     <C>                          <C>                          <C>
Common Stock            Gifford A. Dieterle*         2,783,379(2)                  5.9%
Common Stock            Jack Everett*                  975,000(2)                  2.1%
Common Stock            Robert Roningen*             1,800,000(2)(3)               3.9%
Common Stock            Jeffrey W. Pritchard*          706,354(2)                  1.5%
Common Stock            Roger A Newell*              1,227,273(2)                  2.6%
Common Stock            Scott Hazlitt*               1,025,000(2)                  2.2%
Common Stock            Richard Shevchenko           3,912,000(2)(4)               8.1%

   All Officers and
   Directors as a
   Group(6)                                          8,517,006(2)(3)              17.2%
</TABLE>

----------

*     Officer and/or Director of the Company.

(1)   Based upon 45,716,092 shares issued and outstanding as of November 7,
      2003.

(2)   For Messrs. Dieterle, Everett, Roningen, Pritchard, Newell, Hazlitt and
      Shevchenko, includes, respectively, 1,250,000 shares, 100,000 shares,
      500,000 shares, 372,727 shares, 927,273 shares, 725,000 shares and
      2,500,000 issuable upon exercise of options and/or warrants.

(3)   Includes shares owned by Mr. Roningen's wife and children.

(4)   Includes shares owned by Mr. Shevchenko's wife. The number of shares is
      based upon our review of our records and the records at our transfer
      agent. The actual number, to the extent that he owns stock in street name
      may be different.


                                       33
<PAGE>

Item 12. Certain Relationships and Related Transactions.

During the fiscal years ended July 31, 2003 and 2002, we paid Roger Newell
$60,000 and $60,000, respectively, for professional geologist services rendered
to us. In addition, during the fiscal year ended July 31, 2003 and 2002, we paid
Mr. Newell a bonus of $35,000 and $15,000, respectively. During the fiscal years
ended July 31, 2003 and 2002, we paid Scott Hazlitt $96,000 per year, for
professional geologist and mine management services rendered to us, plus
expenses. In addition, during the fiscal year ended July 31, 2003 and 2002, we
paid Mr. Hazlitt a bonus of $10,000 and $5,000, respectively. During the fiscal
year ended July 31, 2003 and 2002, we paid Jack Everett consulting fees of
$42,000 and $30,000, respectively. In addition, during the fiscal year ended
July 31, 2003 and 2002, we paid Mr. Everett a bonus of $35,000 and $15,000,
respectively. During the fiscal year ended July 31, 2003 and 2002, we paid
Robert Roningen legal fees of $2,300 and $22,500, respectively. In addition,
during the fiscal year ended July 31, 2003 and 2002, we paid Mr. Roningen a
bonus of $10,000 and $5,000, respectively. During the fiscal year ended July 31,
2003, we paid Gifford Dieterle a bonus of $23,400. During the fiscal year ended
July 31, 2003 and 2002, we paid Jeff Pritchard a bonus of $10,000 and $5,000,
respectively.

At July 31, 2003 we had outstanding salary advances of $10,020 to an
officer/director. Subsequent to July 31, 2003, we made additional salary
advances to this officer of $9,000. The officer has agreed to transfer his net
paychecks to us until such time as all salary advances have been exhausted. To
date, repayments are being made according to the arrangement.

On October 29, 2002, we issued to Scott Hazlitt options to purchase 400,000
shares that expire on March 15, 2005 and are exercisable at $.22 per share, and
options to purchase 300,000 shares that expire on February 1, 2007 and are
exercisable at $.22 per share.

On February 14, 2002, we issued to Scott Hazlitt an option to purchase 300,000
shares. These options expire November 16, 2003 and were exercisable at $.22 per
share (the exercise price was subsequently reduced to $.022 per share). Mr.
Hazlitt exercised these options.

On June 4, 2002, we issued to Roger Newell an option to purchase 227,273 shares.
These options expire June 4, 2005 and are exercisable at $.022 per share.

Item 13. Exhibits and Reports on Form 8-K.

      Exhibits
      --------

         3.a      Certificate of Incorporation of Company(1)

         3.b      Amendments to Certificate of Incorporation of Company (1)(5)

         3.c      By-Laws of Company (1)

         10.a     Mining Claims (1)

         10.b     Stock Purchase Option Agreement from AngloGold (2)

         10.c     Letter of Intent with International Northair Mines Ltd. (2)

         10.d     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)


                                       34
<PAGE>

         10.e     English summary of March 30, 2002 Minera Chanate Stock
                  Purchase and Sale and Security Agreement.(3)

         10.f     Agreement between Santa Rita and Grupo Minero FG.(4)

         21.1     Subsidiaries of the Company

         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.

         Reports of Form 8-K

None.

Statements contained in this Form 10-KSB as to the contents of any agreement or
other document referred to are not complete, and where such agreement or other
document is an exhibit to this Report or is included in any forms indicated
above, each such statement is deemed to be qualified and amplified in all
respects by such provisions.


                                       35
<PAGE>

Item 14. Principal Accountant Fees And Services.

Wolinetz, Lafazan & Company, P.C. ("WL"), Certified Public Accountants, are the
Company's independent auditors that examined the financial statements of the
Company for the fiscal years ended July 31, 2003 and 2002. WL has performed the
following services and has been paid the following fees for these fiscal years.

Audit Fees

WL billed $39,000 and $43,000 for our audit of Company's financial statements
for the fiscal years ended July 31, 2003 and 2002 and our review of the
financial statements included in the Company's filing of its quarterly reports
on form 10-QSB during these fiscal years.

Audit-Related Fees

WL was not paid any additional fees for the fiscal years ended July 31, 2003 and
2002 for assurance and related services reasonably related to the performance of
the audit or review of the Company's financial statements.

Tax Fees

WL billed $12,000 for the fiscal years ended July 31, 2003 and 2002 for
professional services rendered for tax compliance, tax advice and tax planning.

Other Fees

WL was paid no other fees for professional services during the fiscal years
ended July 31, 2003 and 2002.

Audit Committee Pre-Approval Policies

The Board of Directors, which performs the equivalent functions of an audit
committee, currently does not have any pre-approval policies or procedures
concerning services performed by WL. All the services performed by WL that are
described above were pre-approved by the Board of Directors. Less than 50% of
the hours expended on WL's engagement to audit the Company's financial
statements for the fiscal years ended July 31, 2003 and 2002 were attributed to
work performed by persons other than WL's full-time, permanent employees.


                                       36
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                          CAPITAL GOLD CORPORATION

                                          By: /s/ Gifford A. Dieterle
                                              ----------------------------------
Dated:                                        Gifford A. Dieterle, President
Dated: November 12, 2003

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

     SIGNATURES                    TITLE                       DATE
     ----------                    -----                       ----

     /s/ Gifford A. Dieterle       President,                  November 12, 2003
     ------------------------      Treasurer,
     Gifford A. Dieterle           Principal Financial
                                   and Accounting
                                   Officer and Chairman
                                   of the Board of Directors

      /s/ Jack V. Everett          Director                    November 12, 2003
     ------------------------
     Jack V. Everett

     /s/ Robert Roningen           Director
     ------------------------                                  November 12, 2003
     Robert Roningen

     /s/ Roger A. Newell           Director                    November 12, 2003
     ------------------------
     Roger A. Newell

     /s/ Jeffrey W. Pritchard      Director                    November 12, 2003
     ------------------------
     Jeffrey W. Pritchard


                                       37
<PAGE>

                            SUPPLEMENTAL INFORMATION

Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act.

                                 NOT APPLICABLE.


                                       38
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Board of Directors and Shareholders of
Capital Gold Corporation

We have audited the accompanying consolidated balance sheet of Capital Gold
Corporation (F/K/A Leadville Mining and Milling Corp.) and Subsidiaries (A
Development Stage Enterprise) ("the Company") as of July 31, 2003, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the two years in the period ended July 31, 2003 and
for the period September 17, 1982 (Inception) to July 31, 2003. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Capital
Gold Corporation and Subsidiaries as of July 31, 2003 and the consolidated
results of their operations and their cash flows for each of the two years in
the period ended July 31, 2003 and for the period September 17, 1982 (Inception)
to July 31, 2003 in conformity with accounting principles generally accepted in
the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is a development stage enterprise whose
operations have generated recurring losses and cash flow deficiencies from its
inception. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
described in Note 17. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


                                               WOLINETZ, LAFAZAN & COMPANY, P.C.

Rockville Centre, New York
October 17, 2003


                                      F-1
<PAGE>

                            CAPITAL GOLD CORPORAITON
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                           CONSOLIDATED BALANCE SHEET
                                  JULY 31, 2003

                                     ASSETS

Current Assets:
  Cash and Cash Equivalents                                        $    246,410
  Loans Receivable - Related Party                                       20,180
  Loans Receivable - Others                                              18,365
  Other Current Assets                                                   14,978
  Prepaid Expenses                                                       10,027
  Marketable Securities                                                  50,000
                                                                   ------------
     Total Current Assets                                               359,960
                                                                   ------------

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

Other Assets:
  Other Investments                                                      12,882
  Mining Reclamation Bonds                                               35,550
  Security Deposits                                                       8,435
                                                                   ------------
     Total Other Assets                                                  56,867
                                                                   ------------

Total Assets                                                       $    761,607
                                                                   ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accounts Payable                                                 $    132,017
  Accrued Expenses                                                      122,282
                                                                   ------------
     Total Current Liabilities                                          254,299
                                                                   ------------

Minority Interest                                                      (143,692)
                                                                   ------------

Commitments and Contingencies

Stockholders' Equity:
  Common Stock, Par Value $.001 Per Share;
    Authorized 150,000,000 shares; Issued and
    Outstanding 44,677,534 Shares                                        44,677
  Additional Paid-In Capital                                         22,192,229
  Deficit Accumulated in the Development Stage                      (21,639,539)
  Accumulated Other Comprehensive Income (Loss)                          53,633
                                                                   ------------
     Total Stockholders' Equity                                         651,000
                                                                   ------------

Total Liabilities and Stockholders' Equity                         $    761,607
                                                                   ============

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


                                      F-2
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                      CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                        For The Period
                                                             For The Year Ended        September 17,1982
                                                                   July 31,               (Inception)
                                                         ----------------------------          To
                                                             2003            2002        July 31, 2003
                                                         ------------    ------------  -----------------
<S>                                                      <C>             <C>             <C>
Revenues:
  Sales                                                  $         --    $         --    $         --
  Interest Income                                              31,864           3,103         749,441
  Miscellaneous                                                 6,401              --          32,677
                                                         ------------    ------------    ------------

    Total Revenues                                             38,265           3,103         782,118
                                                         ------------    ------------    ------------

Costs and Expenses:
  Mine Expenses                                             1,028,899         709,961       6,139,484
  Write-Down of Mining, Milling and Other Property and
    Equipment                                                      --         999,445         999,445
  Selling, General and Administrative Expenses                770,629         639,652       8,170,207
  Stock Based Compensation                                    288,623         222,338       8,842,970
  Depreciation                                                     --           3,105         367,726
                                                         ------------    ------------    ------------

  Total Costs and Expenses                                  2,088,151       2,574,501      24,519,832
                                                         ------------    ------------    ------------

Loss Before Other Income (Expense)                         (2,049,886)     (2,571,398)    (23,737,714)
                                                         ------------    ------------    ------------

Other Income (Expense):
  Gain on Sale of Property and Equipment                           --          46,116          46,116
  Gain on Sale of Subsidiary                                       --       1,907,903       1,907,903
  Option Payment                                                   --          70,688          70,688
  Loss on Write-Off of Investment                                  --              --         (10,000)
  Loss on Joint Venture                                            --              --        (101,700)
  Loss on Option                                              (50,000)             --         (50,000)
                                                         ------------    ------------    ------------

         Total Other Income (Expense)                         (50,000)      2,024,707       1,863,007
                                                         ------------    ------------    ------------

Loss Before Minority Interest                              (2,099,886)       (546,691)    (21,874,707)

Minority Interest in Net Loss of Subsidiary                   180,625          54,543         235,168
                                                         ------------    ------------    ------------

Net Loss                                                 $ (1,919,261)   $   (492,148)   $(21,639,539)
                                                         ============    ============    ============

Net Loss Per Common Share - Basic and Diluted            $       (.05)   $       (.01)
                                                         ============    ============

Weighted Average Common Shares Outstanding                 41,892,989      37,499,663
                                                         ============    ============
</TABLE>

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


                                      F-3
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2003


<TABLE>
<CAPTION>
                                                                                                 Deficit
                                                                                               Accumulated
                                                  Common Stock               Additional          In The
                                           --------------------------         Paid-In          Development
                                             Shares           Amount          Capital             Stage             Total
                                           ---------        ---------       -----------        -----------       -----------
<S>                                        <C>              <C>             <C>                <C>               <C>
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
</TABLE>

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


                                      F-4
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2003

<TABLE>
<CAPTION>

                                                                                        Deficit
                                                                                      Accumulated
                                        Common Stock                Additional           In The
                               -----------------------------         Paid-In          Development
                                  Shares            Amount           Capital              Stage             Total
                               -----------       -----------       -----------        -----------        -----------
<S>                            <C>               <C>               <C>                <C>                <C>
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
</TABLE>

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


                                      F-5
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2003

<TABLE>
<CAPTION>
                                                                                           Deficit
                                                                                         Accumulated
                                           Common Stock                Additional           In The
                                  -----------------------------         Paid-In          Development
                                     Shares            Amount           Capital             Stage              Total
                                  -----------       -----------       -----------        -----------        -----------
<S>                               <C>               <C>               <C>                <C>                <C>
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
</TABLE>

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


                                      F-6
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2003

<TABLE>
<CAPTION>
                                                                                                   Deficit
                                                                                                 Accumulated
                                                    Common Stock              Additional            In The
                                          -----------------------------         Paid-In          Development
                                               Shares            Amount         Capital             Stage              Total
                                          -----------       -----------       -----------        -----------        -----------
<S>                                        <C>              <C>               <C>                <C>                <C>
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
</TABLE>

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


                                      F-7
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2003

<TABLE>
<CAPTION>
                                                                                            Deficit
                                                                                          Accumulated
                                           Common Stock                Additional           In The
                                   -----------------------------         Paid-In          Development
                                      Shares            Amount           Capital             Stage              Total
                                   -----------       -----------       -----------        -----------        -----------
<S>                                     <C>          <C>               <C>                <C>                <C>
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
</TABLE>

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


                                      F-8
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2003

<TABLE>
<CAPTION>
                                                                                             Deficit
                                                                                           Accumulated
                                            Common Stock                 Additional           In The
                                    -----------------------------         Paid-In          Development
                                       Shares            Amount           Capital              Stage             Total
                                    -----------       -----------       -----------        -----------        -----------
<S>                                 <C>               <C>               <C>                <C>                <C>
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
</TABLE>

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


                                      F-9
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2003

<TABLE>
<CAPTION>
                                                                                             Deficit
                                                                                           Accumulated
                                            Common Stock                Additional            In The
                                    ----------------------------          Paid-In          Development
                                       Shares            Amount           Capital             Stage              Total
                                    -----------       -----------       -----------        -----------        -----------
<S>                                 <C>               <C>               <C>                <C>                <C>
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
</TABLE>

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


                                      F-10
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2003

<TABLE>
<CAPTION>
                                                                                             Deficit
                                                                                           Accumulated
                                            Common Stock                Additional            In The
                                    ----------------------------          Paid-In          Development
                                       Shares            Amount           Capital             Stage              Total
                                    -----------       -----------       -----------        -----------        -----------
<S>                                   <C>               <C>              <C>                <C>                <C>
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
</TABLE>

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


                                      F-11
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2003

<TABLE>
<CAPTION>
                                                                                           Deficit
                                                                                        Accumulated
                                            Common Stock                Additional         In The
                                   -----------------------------         Paid-In         Development
                                   -  Shares            Amount           Capital            Stage              Total
                                   -----------       -----------       -----------       -----------        -----------
<S>                                <C>               <C>               <C>               <C>                <C>
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
</TABLE>

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


                                      F-12
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2003

<TABLE>
<CAPTION>
                                                                                                   Deficit
                                                                                                 Accumulated
                                               Common Stock                   Additional           In The
                                       ------------------------------          Paid-In           Development
                                          Shares             Amount            Capital               Stage                Total
                                       ------------       ------------       ------------        ------------        ------------
<S>                                      <C>              <C>                <C>                 <C>                 <C>
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
</TABLE>

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


                                      F-13
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2003

<TABLE>
<CAPTION>
                                                                                       Deficit
                                                                                     Accumulated      Accumulated
                                       Common Stock                 Additional         In The            Other
                                -----------------------------        Paid-In         Development     Comprehensive
                                   Shares           Amount            Capital            Stage       Income (Loss)        Total
                                -----------       -----------       -----------      -----------     --------------    -----------
<S>                                <C>            <C>               <C>                <C>             <C>             <C>
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
</TABLE>

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


                                      F-14
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2003

<TABLE>
<CAPTION>
                                                                                        Deficit
                                                                                      Accumulated     Accumulated
                                             Common Stock            Additional          In The           Other
                                     ---------------------------       Paid-In        Development    Comprehensive
                                        Shares          Amount         Capital           Stage        Income (Loss)        Total
                                     -----------     -----------     -----------      -----------    --------------     -----------
<S>                                   <C>                 <C>         <C>             <C>                     <C>         <C>
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
</TABLE>

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


                                      F-15
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (Continued)
         FOR THE PERIOD SEPTEMBER 17, 1982 (INCEPTION) TO JULY 31, 2003

<TABLE>
<CAPTION>
                                                                                       Deficit
                                                                                     Accumulated      Accumulated
                                             Common Stock            Additional         In The            Other
                                     ----------------------------     Paid-In        Development      Comprehensive
                                         Shares          Amount        Capital          Stage         Income (Loss)        Total
                                     ------------    ------------    ------------    ------------     ------------     ------------
<S>                                    <C>           <C>             <C>             <C>              <C>              <C>
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
                                     ============    ============    ============    ============     ============     ============
</TABLE>

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


                                      F-16
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                      CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                                For The Period
                                                                               For The Year Ended             September 17, 1982
                                                                                     July 31,                     (Inception)
                                                                       ---------------------------------              To
                                                                           2003                 2002            July 31, 2003
                                                                       ------------         ------------      ------------------
<S>                                                                    <C>                  <C>                  <C>
Cash Flow From Operating Activities:
  Net Loss                                                             $ (1,919,261)        $   (492,148)        $(21,639,539)
  Adjustments to Reconcile Net Loss to
    Net Cash (Used) By Operating Activities:
      Depreciation                                                               --                3,105              367,726
      Gain on Sale of Subsidiary                                                 --           (1,907,903)          (1,907,903)
      Minority Interest in Net Loss of Subsidiary                          (180,625)             (54,543)            (235,168)
      Write-Down of Impaired Mining, Milling and Other
        Property and Equipment                                                   --              999,445              999,445
       Gain (Loss) on Sale of Property and Equipment                             --              (46,116)             (46,116)
       Loss on Write-Off of Investment                                           --                   --               10,000
       Loss From Joint Venture                                                   --                   --              101,700
      Value of Common Stock Issued for Services                              57,391                8,595            2,812,993
      Stock Based Compensation                                              288,623              222,338            8,842,970
      Changes in Operating Assets and Liabilities:
        (Increase) in Prepaid Expenses                                      (10,027)                  --              (10,027)
        (Increase) Decrease in Other Current Assets                         (11,654)               2,992              (14,978)
        (Increase) in Security Deposits                                          --               (4,768)              (8,435)
        Increase (Decrease) in Accounts Payable                             (51,015)             112,396              124,210
        Increase (Decrease) in Accrued Expenses                             (62,781)              62,509                 (272)
                                                                       ------------         ------------         ------------

Net Cash (Used) By Operating Activities                                  (1,889,349)          (1,094,098)         (10,603,394)
                                                                       ------------         ------------         ------------

Cash Flow From Investing Activities:
  Purchase of Other Investments                                             (12,882)                  --              (12,882)
  Purchase of Mining, Milling and Other Property and
    Equipment                                                                    --                   --           (1,705,650)
  Proceeds on Sale of Mining, Milling and Other Property
    and Equipment                                                                --               83,638               83,638
  Proceeds From Sale of Subsidiary                                        1,492,131              639,485            2,131,616
  Expenses of Sale of Subsidiary                                                 --             (101,159)            (101,159)
  Advance Payments - Joint Venture                                               --               98,922               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)
  (Decrease) in Option Payment Payable                                           --              (50,000)                  --
  Investment in Marketable Securities                                       (50,000)                  --              (50,000)
                                                                       ------------         ------------         ------------

Net Cash Provided By Investing Activities                                 1,429,249              670,886              290,655
                                                                       ------------         ------------         ------------
</TABLE>

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


                                      F-17
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Continued)

<TABLE>
<CAPTION>
                                                                                                                    For The Period
                                                                                  For The Year Ended             September 17, 1982
                                                                                         July 31,                    (Inception)
                                                                           ---------------------------------             To
                                                                               2003                  2002           July 31, 2003
                                                                           ------------          ------------    -------------------
<S>                                                                        <C>                   <C>                <C>
Cash Flow From Financing Activities:
  (Increase) Decrease in Loans Receivable -
    Related Party                                                          $    (20,180)         $     11,000       $    (20,180)
  Increase (Decrease) in Loans Receivable - Others                               (3,365)               26,300            (18,365)
  Increase in Loans Payable - Officers                                               --                    --             18,673
  Repayment of Loans Payable - Officers                                              --                    --            (18,673)
  Increase in Note Payable                                                           --                    --             11,218
  Payments of Note Payable                                                           --                (5,201)           (11,218)
  Proceeds From Issuance of Common Stock                                        381,330               399,562         10,783,101
  Commissions on Sale of Common Stock                                                --                    --             (5,250)
  Expenses of Initial Public Offering                                                --                    --           (408,763)
  Capital Contributions - Joint Venture Subsidiary                              130,216                74,192            204,408
  Purchase of Certificate of Deposit - Restricted                                                          --             (5,000)
  (Purchase) Sale of Mining Reclamation Bonds                                     6,600                 5,600            (30,550)
                                                                           ------------          ------------       ------------

Net Cash Provided By Financing Activities                                       494,601               511,453         10,499,401
                                                                           ------------          ------------       ------------

Effect of Exchange Rate Changes                                                  62,476                (2,728)            59,748
                                                                           ------------          ------------       ------------

Increase In Cash and Cash Equivalents                                            96,977                85,513            246,410

Cash and Cash Equivalents - Beginning                                           149,433                63,920                 --
                                                                           ------------          ------------       ------------

Cash and Cash Equivalents - Ending                                         $    246,410          $    149,433       $    246,410
                                                                           ============          ============       ============

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

  Cash Paid For Income Taxes                                               $      2,433          $      1,839       $     28,060
                                                                           ============          ============       ============

Non-Cash Financing Activities:
  Issuances of Common Stock as Commissions
    on Sales of Common Stock                                               $         --          $    108,765       $    440,495
                                                                           ============          ============       ============

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

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


                                      F-18
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JULY 31, 2003

NOTE 1 -    Organization and Basis of Presentation

            Leadville Mining and Milling Corp. ("Leadville", "the Company", "we"
or "us") was incorporated in February 1982 in the State of Nevada. During March
2003 the Company's stockholders approved an amendment to the Articles of
Incorporation to change its name from Leadville Mining and Milling Corp. to
Capital Gold Corporation. The Company owns rights to property located in the
California Mining District, Lake County, Colorado and in the State of Sonora,
Mexico and is engaged in the exploration for gold and other minerals from its
properties. Substantially all of the Company's mining activities are now being
performed in Mexico. The Company is a development stage enterprise.

            On June 29, 2001 the Company exercised an option and purchased from
AngloGold North America Inc. and AngloGold (Jerritt Canyon) Corp. 100% of the
issued and outstanding stock of Minera Chanate, S.A. de C.V., a subsidiary of
those two companies. Minera Chanate's assets consisted of certain exploitation
and exploration concessions in the States of Sonora, Chihuahua and Guerrero,
Mexico. We sometimes refer to these concessions as the El Chanate Concessions.

            Pursuant to the terms of the agreement, on December 15, 2001, the
Company made a $50,000 payment to AngloGold. AngloGold will be entitled to
receive the remainder of the purchase price by way of an ongoing percentage of
net smelter returns of between 2% and 4% plus 10% net profits interest (until
the total net profits interest payment received by AngloGold equals $1,000,000).
AngloGold's right to a payment of a percentage of net smelter returns and the
net profits interest will terminate at such point as they aggregate $18,018,355.
In accordance with the agreement, the foregoing payments are not to be construed
as royalty payments. Should the Mexican government or other jurisdiction
determine that such payments are royalties, we could be subjected to and would
be responsible for any withholding taxes assessed on such payments.

            Under the terms of the agreement, the Company has granted AngloGold
the right to designate one of its wholly-owned Mexican subsidiaries to receive a
one-time option to purchase 51% of Minera Chanate (or such entity that owns the
Minera Chanate concessions at the time of option exercise). That Option is
exercisable over a 180 day period commencing at such time as the Company
notifies AngloGold that it has made a good faith determination that it has
gold-bearing ore deposits on any one of the identified group of El Chanate
Concessions, when aggregated with any ore that the Company has mined, produced
and sold from such concessions, of in excess of 2,000,000 troy ounces of
contained gold. The exercise price would equal twice the Company's project costs
on the properties during the period commencing on December 15, 2000 and ending
on the date of such notice.

            The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. However, the Company is a
development stage enterprise and since its inception has had no mining revenues
and has incurred recurring losses aggregating $21,639,539. These factors raise
substantial doubt about the Company's ability to continue as a going concern. As
indicated in Note 19, the Company is in the process of raising additional
capital and financing. Continuation of the Company is dependent on (1)
consummation of the contemplated financings, (2) achieving sufficiently
profitable operations (3) subsequently maintaining adequate financing
arrangements and (4) its exiting the development stage. The achievement and/or
success of the Company's planned measures, however, cannot be determined at this
time. These financial statements do not reflect any adjustments relating to the
recoverability and classification of assets carrying amounts and classification
of liabilities should the Company be unable to continue as a going concern.


                                      F-19
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JULY 31, 2003

NOTE 2 -    Summary of Significant Accounting Policies

            Principals of Consolidation

            The consolidated financial statements include the accounts of
Capital Gold Corporation and its wholly owned and majority owned subsidiaries.
The Company accounts for its Mexican joint venture operation (see Note 6) as a
subsidiary since it controls the decision making process and at July 31, 2003 it
owned 70% of the venture and at no time can the ownership go below 55%. All
significant intercompany accounts and transactions are eliminated in
consolidation.

            Cash and Cash Equivalents

            The Company considers those short-term, highly liquid investments
with original maturities of three months or less as cash and cash equivalents.

            Marketable Securities

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

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

            Mining, Milling and Other Property and Equipment

            Mining, milling and other property and equipment is reported at
cost. It is the Company's policy to capitalize costs incurred to improve and
develop the mining and milling properties. General exploration costs and costs
to maintain rights and leases are expensed as incurred. Management of the
Company periodically reviews the recoverability of the capitalized mineral
properties and mining equipment. Management takes into consideration various
information including, but not limited to, historical production records taken
from previous mine operations, results of exploration activities conducted to
date, estimated future prices and reports and opinions of outside geologists,
mine engineers, and consultants. When it is determined that a project or
property will be abandoned or its carrying value has been impaired, a provision
is made for any expected loss on the project or property.

            Depletion of mining and milling improvements will be computed at
cost using the units of production method. The Company has made no provision for
depletion for the years ended July 31, 2003 and 2002 as the mine and mill in
Colorado were not in operation during these years. Provision is made for the
depreciation of office furniture fixtures and equipment, machinery and
equipment, and building. Depreciation is computed using both straight-line and
accelerated methods over the estimated useful lives of the related assets which
are 5 to 7 years for personal property and 32 years for real property.


                                      F-20
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JULY 31, 2003

NOTE 2 -    Summary of Significant Accounting Policies (Continued)

            Impairment of Long-Lived Assets

            In accordance with SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of," the Company
reviews its long-lived assets for impairments. Impairment losses on long-lived
assets are recognized when events or changes in circumstances indicate that the
undiscounted cash flows estimated to be generated by such assets are less than
their carrying value and, accordingly, all or a portion of such carrying value
may not be recoverable. Impairment losses then are measured by comparing the
fair value of assets to their carrying amounts. During the year ended July 31,
2002 the Company performed a review of its Colorado mine and mill improvements
and determined that an impairment loss should be recognized. Accordingly, at
July 31, 2002 the Company reduced by $999,445 the net carrying value of certain
assets relating to its Leadville, Colorado facility to $300,000, which
approximates management's estimate of fair value. The Company recognized no
impairment loss at July 31, 2003.

            Fair Value of Financial Instruments

            The carrying value of the Company's financial instruments, including
cash and cash equivalents, loans receivable and accounts payable approximated
fair value because of the short maturity of these instruments.

            Revenue Recognition

            Revenues, if any, from sales of minerals will be recognized only
upon receipt of final settlement funds.

            Foreign Currency Translation

            Assets and liabilities of the Company's Mexican subsidiaries are
translated to US dollars using the current exchange rate for assets and
liabilities. Amounts on the statement of operations are translated at the
average exchange rates during the year. Gains or losses resulting from foreign
currency translation are included as a component of other comprehensive income
(loss).

            Comprehensive Income (Loss)

            Comprehensive income (loss) which is reported on the accompanying
consolidated statement of stockholders' equity as a component of accumulated
other comprehensive income (loss) consists of accumulated foreign translation
gains and losses and net unrealized gains and losses on available-for-sale
securities.

            Income Taxes

            The Company records deferred income taxes using the liability method
as prescribed under the provisions of SFAS No. 109. Under the liability method,
deferred tax assets and liabilities are recognized for the expected future tax
consequences of temporary differences between the financial statement and income
tax bases of the Company's assets and liabilities. An allowance is recorded,
based upon currently available information, when it is more likely than not that
any or all of the deferred tax assets will not be realized. The provision for
income taxes includes taxes currently payable, if any, plus the net change
during the year in deferred tax assets and liabilities recorded by the Company.


                                      F-21
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JULY 31, 2003

NOTE 2 -    Summary of Significant Accounting Policies (Continued)

            Stock-Based Compensation

            The Company accounts for stock-based compensation to its employees
using the intrinsic value method in accordance with provisions of the Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations which requires the recognition of
compensation expense over the vesting period of the option when the exercise
price of the stock option granted is less than the fair value of the underlying
common stock. Additionally, the Company complies with the disclosure provisions
of Statement of Financial Accounting Standards No. 123 "Accounting for Stock
Based Compensation" ("SFAS 123") and provides pro forma disclosure of net loss
and loss per share as if the fair value method has been applied in measuring
compensation expense for stock options granted. Stock-based compensation related
to options granted to non-employees is recognized using the fair value method in
accordance with SFAS 123.

            Net Loss Per Common Share

            The computation of net loss per share of common stock is computed by
diving net loss for the period by the weighted average number of common shares
outstanding during that period.

            Because the Company is incurring losses, the effect of stock options
and warrants is antidilutive. Accordingly, the Company's presentation of diluted
net loss per share is the same as that of basic net loss per share.

            Concentrations of Credit Risk

            Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist principally of cash and cash
equivalents and marketable securities. The Company maintains cash balances at
financial institutions which exceed the Federal Deposit Insurance Corporation
limit of $100,000 at times during the year.

            Use of Estimates

            The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.

            Environmental Remediation Costs

            Environmental remediation costs are accrued based on estimates of
known environmental remediation exposure. Such accruals are recorded even if
significant uncertainties exist over the ultimate cost of the remediation. It is
reasonably possible that the Company's estimates of reclamation liabilities, if
any, could change as a result of changes in regulations, extent of environmental
remediation required, means of reclamation or cost estimates. Ongoing
environmental compliance costs, including maintenance and monitoring costs, are
expensed as incurred. There were no environmental remediation costs accrued at
July 31, 2003.


                                      F-22
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JULY 31, 2003

NOTE 2 -    Summary of Significant Accounting Policies (Continued)

            Recent Accounting Pronouncements

            In July 2001 the Financial Accounting Standards Board, ("FASB")
issued Statement No. 141, "Business Combinations" ("SFAS 141"). SFAS 141
replaces APB Opinion No. 16 and eliminates pooling-of-interest accounting
prospectively. It also requires all business combinations initiated after June
30, 2001 to be accounted for using the purchase method and provides guidance on
purchase accounting related to the recognition of intangible assets and
accounting for negative goodwill. There have been no acquisitions completed
since June 30, 2001 and all previous acquisitions have been accounted for using
the purchase method.

            In October 2001, FASB issued Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 clarifies
the accounting for the impairment of long-lived assets and for long-lived assets
to be disposed of, including the disposal of business segments and major lines
of business. The Company adopted SFAS 144 for the year ended July 31, 2003 and
the application of the provisions of SFAS 144 did not have a material impact on
the Company's consolidated financial statements.

            In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure". SFAS No. 148 amends SFAS
No. 123, "Accounting for Stock-Based Compensation" to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. The provisions of SFAS No. 148 are effective for
financial statements for the year ended July 31, 2003. SFAS No. 148 did not have
a material impact on the Company's consolidated financial statements, as the
adoption of this standard does not require the Company to change, and the
Company does not plan to change, to the fair value based method of accounting
for stock-based compensation.

            Reclassifications

            Certain items in these financial statements have been reclassified
to conform to the current period presentation.

NOTE 3 -    Marketable Securities

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

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

                    Marketable equity securities, at fair value    $  50,000
                                                                   =========

NOTE 4 -    Loans Receivable - Others

            Loans receivable - others are short-term non-interest bearing loans
made to two individuals.


                                      F-23
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JULY 31, 2003

NOTE 5 -    Joint Venture

            On February 23, 2002, Minera Santa Rita S. de R.L. de C.V., one of
our wholly-owned Mexican subsidiaries, entered into a joint venture agreement
with Grupo Minero FG S.A. de C.V. to explore, evaluate and develop the El
Chanate concessions. Grupo Minero FG S.A. de C.V., referred to as FG, is a
private Mexican company.

            Pursuant to the agreement with FG, the venture is being conducted in
five phases. The first two phases entail continued exploration and evaluation of
the mining potential of lots within the concessions. Phase one was completed
during the Fall of 2002 and cost approximately $300,000. A feasibility study was
completed during Phase two. We estimate that Phase two will cost approximately
$783,000. Phase three consists of FG's contribution to the venture of mining
equipment sufficient to develop the lots pursuant to the feasibility study.
Phase three will occur only if the parties determine to continue and they are
able to obtain outside funding for Phase four. We are unable to estimate Phase
four costs at this time. Phase four will involve the building of an access road,
the acquisition of water extraction rights and the drilling and equipping of
water wells. Phase five would entail exploitation, processing and sale of
minerals on a commercial scale.

            Pursuant to the agreement, FG has paid us $75,000 to participate in
the venture and contributed an additional $75,000 towards the first phase of the
venture for which it received a 30% interest in the venture. The balance of the
costs for Phase one and the costs for Phase two will be split equally between
the parties. As mentioned above, Phase four would be funded from outside
sources. Phase five funding would be provided by the parties in proportion to
their respective interests in the venture.

            FG's percentage of the venture can increase to 45%. It increased to
31% upon completion of Phase one; and will increase to 33% upon completion of
Phase two; 37% upon its contribution of equipment in Phase three; 40% upon
completion of Phase four; and 45% upon attaining optimal levels of production in
Phase five. Optimal levels of production will be determined by agreement of the
parties.

            The venture is terminable, among other reasons, if:

                  o     its purpose is concluded or can no longer be obtained;

                  o     it experiences continued non-profitability;

                  o     the parties elect to terminate it at a meeting of the
                        parties;

                  o     it loses 2/3 of its assets; or

                  o     the parties fail to obtain the requisite financing to
                        fund phase four by September 1, 2003.

            The requisite financing for Phase four has not been obtained as of
July 31, 2003; however, we are in discussions with potential funding sources.

            If FG determines that it does not want to continue to participate in
the venture after the parties agree to commence Phase two, or it cannot provide
its share of the funding for Phase two, Santa Rita has a 45 day option to
purchase FG's interest in the venture for $127,500. If Santa Rita does not
exercise this option within the 45 day period and pay the purchase price within
15 days thereafter, FG may sell its interest to another party.


                                      F-24
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JULY 31, 2003

NOTE 5 -    Joint Venture (Continued)

            If additional contributions to the venture are needed as determined
by a meeting of the parties, the parties have 30 days to elect whether they will
make these contributions and an additional 15 days to make their contribution.
To the extent that a party, referred to as the waiving party, does not want to
pay its share or does not pay its share, the other party can make the payment
and the waiving party's percentage interest in the venture will be diluted
proportionately plus 10%. The waiving party can reacquire its lost interest by
repaying the amount previously not paid plus a 25% penalty. These dilution
provisions do not apply to Santa Rita unless and until FG has contributed
$600,000 to the venture. Because its interest in the venture now exceeds 30%, FG
now can be diluted for failure to make its required contributions.

NOTE 6 -    Sale of Subsidiary Stock

            On March 20, 2002, the Company sold all of the issued and
outstanding shares of stock of its wholly-owned subsidiary, Minera Chanate S.A.
de C.V. ("Minera Chanate"), to an unaffiliated party for a purchase price of
$2,131,616, payable in three installments. We received the first installment of
$639,485 and paid commissions of $51,159 in March 2002. A second payment of
$497,377 plus interest at the rate of 4.5% per annum was Paid-In August 2002. A
third payment of $994,754 plus interest at the rate of 4.5% per annum, was paid
in December 2002. Commissions of $41,733 and $80,821 were paid in connection
with the second and third installments, respectively. In connection with the
above transaction the Company recognized a gain of $1,907,903.

            During March 2002, prior to the sale of Minera Chanate and pursuant
to the FG joint venture agreement, Minera Chanate, in a series of transactions,
sold all of its surface land and mining claims to Oro de Altar S. de R.L. de
C.V. ("Ora"), another of our wholly-owned subsidiaries. Ora, in turn, leased the
foregoing land and mining claims to Minera Santa Rita.

NOTE 7  -   Mining Reclamation Bonds

            These represent certificates of deposit that have been deposited as
security for Mining Reclamation Bonds in Colorado. They bear interest at rates
varying from 5.1% to 5.87% annually and mature at various dates in 2004 through
2005.


                                      F-25
<PAGE>

                            CAPITAL GOLD CORPORAITON
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JULY 31, 2003

NOTE 8 -    Mining, Milling and Other Property and Equipment

            Mining, milling and other property and equipment consists of the
following:

            Land and Mine Improvements - Mexico             $   44,780
            Machinery and Equipment                            358,230
            Mining Claims and Leasehold Improvements           106,786
            Mill and Mining Improvements                       193,214
                                                            ----------
                                                               703,010
            Less: Accumulated Depreciation                     358,230
                                                            ----------
                                                            $  344,780
                                                            ==========

NOTE 9 -    Minority Interest

            Minority interest in the Company's 69% owned joint venture
subsidiary at July 31, 2003 represents the excess of the minority interest loss
over its proportionate capital.

NOTE 10 -   Loans Receivable - Related Party

            Loans receivable-related party consist of expense reimbursements
from this entity. They are non-interest bearing and due on demand (see Notes 3
and 13).

NOTE 11 -   Other Investments

            Other investments are carried at cost and consist of tax liens
purchased on properties located in Lake County, Colorado.

NOTE 12 -   Other Comprehensive Income (Loss) - Supplemental Non-Cash Investing
            Activities

            Other comprehensive income (loss) consists of accumulated foreign
translation gains and losses and is summarized as follows:

                  Balance - July 31, 2001                              $   (493)
                    Equity Adjustments from Foreign
                      Currency Translation                               (6,753)
                                                                       --------
                  Balance - July 31, 2002                                (7,246)
                    Equity Adjustments from Foreign
                      Currency Translation                               60,879
                                                                       --------
                  Balance - July 31, 2003                              $ 53,633
                                                                       ========


                                      F-26
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JULY 31, 2003

NOTE 13 -   Related Party Transactions

            In August 2002 the Company purchased marketable equity securities of
a related company (see Notes 4 and 12). The Company recorded approximately
$19,000 in expense reimbursements due from this entity for the year ended July
31, 2003 (see Notes 3 and 10).

NOTE 15 -   Stockholders' Equity

            Common Stock

            At various stages in the Company's development, shares of common
stock have been issued in exchange for the fair market value, as determined by
the Board of Directors, for services received with a corresponding charge to
operations, property and equipment or capital Paid-In excess of par value
depending on the nature of the services provided.

            During the year ended July 31, 2002, the Company issued 4,247,359
shares for gross proceeds of $353,031. During the year ended July 31, 2002 the
Company issued 2,342,294 shares of common stock upon exercising of stock options
with gross proceeds of $46,531.

            During the year ended July 31, 2003, the Company issued 2,802,579
shares for gross proceeds of $346,030. During the year ended July 31, 2003 the
Company issued 1,222,727 shares of common stock upon exercising of stock options
with gross proceeds of $35,300.

            Stock Options

            A summary of stock option activity for the years ended July 31, 2003
and 2002 is as follows:

                                       Options Outstanding
                                    --------------------------      Weighted
                                    Number of      Price Range      Average
                                      Shares        Per Share    Exercise Price
                                    ----------     -----------   --------------

Outstanding - July 31, 2001         13,555,000      .022-.1.75        .181

Options Granted:
  Related Parties                      227,273      .022              .022
  Others                             1,217,391      .022-.22          .094

Exercised:
  Related Parties                   (1,136,365)     .022              .022
  Others                            (1,205,929)     .022              .022
  Expired                             (930,000)     .022-.10          .071
                                    ----------      --------          ----

Outstanding - July 31 2002          11,727,370      .022-.50          .199
                                    ==========      ========          ====


                                      F-27
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JULY 31, 2003

NOTE 14 -   Stockholders' Equity (Continued)

                                       Options Outstanding
                                  -----------------------------      Weighted
                                   Number of        Price Range       Average
                                     Shares          Per Share    Exercise Price
                                  ----------        -----------   --------------
Options Granted:
  Related Parties                    700,000               .05              .05
  Others                           1,250,000           .05-.25              .11

Exercised:
  Related Parties                 (1,122,727)         .022-.05              .03
  Others                            (100,000)              .05              .05

Expired                           (2,657,727)         .022-.22              .08
                                  ----------        ----------       ==========

Outstanding - July 31, 2003        9,796,916        $ .022-.50       $      .11
                                  ==========        ==========       ==========

            Options to purchase 9,796,916 shares of common stock were
exercisable at July 31, 2003 at a weighted average exercise price of $.11 with a
weighted average contractual life of .75 years as follows:

            Options Outstanding and Exercisable by Price Range as of July 31,
2003

<TABLE>
<CAPTION>
                                            Options Outstanding                              Options Exercisable
                            ---------------------------------------------------         ---------------------------------
                                               Weighted
                                                 Average            Weighted                                 Weighted
 Range of Exercise             Number           Remaining            Average              Number             Average
     Prices                 Outstanding     Contractual Life     Exercise Price         Exercisable       Exercise Price
-------------------         -----------     ----------------     --------------         -----------       --------------
<S>                          <C>                   <C>              <C>                  <C>                <C>
      $.022                  4,036,363              .36             $    .022            4,036,363          $    .022
       .50                      25,000             2.40                  .50                25,000               .50
       .115                     97,826             1.25                  .115               97,826               .115
       .22                   3,787,727              .42                  .22             3,787,727               .22
       .25                     200,000             1.67                  .25               200,000               .25
       .05                   1,450,000             2.34                  .05             1,450,000               .05
       .20                     100,000             1.50                  .20               100,000               .20
       .24                     100,000             2.91                  .24               100,000               .24

     $.022-.22               9,796,916              .75             $    .11             9,796,916          $    .11
     =========               =========                                                   =========
</TABLE>

      The Company recognized approximately $289,000 and $222,000 of stock-based
compensation expense during the years ended July 31, 2003 and 2002 respectively,
relating to options granted.


                                      F-28
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JULY 31, 2003

NOTE 14  -  Stockholders' Equity (Continued)

            Stock Options (Continued)

            Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company has
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes options pricing model with the following weighted-average
assumptions: risk-free interest rate of 5.5%; volatility factor of the expected
market price of the Company's common stock of .50; and a weighted-average
expected life of the option of 3 years.

            The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its stock options.

            Had compensation cost for stock options granted been determined
based on the fair value at the grant date consistent with the provisions of SFAS
123, there would have been no material effect on the Company's net loss and net
loss per share for the years ended July 31, 2003 and 2002.

            The effects of applying the pro forma disclosures of SFAS 123 are
not likely to be representative of the effects on reported net earnings for
future years.

            Authorized Common Stock

            In September 1993 the Company's shareholders approved an increase in
the authorized common stock from 100,000,000 shares to 150,000,000 shares.

            Effective April 11, 1998 the Company underwent a 1 for 10 reverse
split with all fractions being rounded up into new common stock.

            All references to common stock are restated to reflect the 1 for 10
reverse split.

NOTE 15  -  Income Taxes

            For income tax purposes, the Company had available net operating
loss carry forwards ("NOL") at July 31, 2003 of approximately $9,863,000 to
reduce future federal taxable income, if any. The NOL's expire at various date
through 2023. There may be certain limitations as to the future annual use of
the NOLs due to certain changes in the Company's ownership.


                                      F-29
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JULY 31, 2003

NOTE 15  -  Income Taxes (Continued)

            Income tax benefit attributable to net loss differed from the
amounts computed by applying the statutory Federal Income tax rate applicable
for each period as a result of the following:

<TABLE>
<CAPTION>
                                                             Year Ended July 31,
                                                          ------------------------
                                                             2003          2002
                                                          ----------    ----------
<S>                                                       <C>           <C>
            Computed "expected" tax benefit               $3,353,517    $3,163,020
            Decrease in tax benefit resulting from net
              operating loss for which no benefit is
              currently available                          3,353,517     3,163,020
                                                          ----------    ----------
                                                          $       --    $       --
                                                          ==========    ==========
</TABLE>

            The Company had deferred tax assets of approximately $3,353,517 at
July 31, 2003 resulting primarily from net operating loss carry forwards. The
deferred tax assets have been fully offset by a valuation allowance resulting
from the uncertainty surrounding their future realization. The difference
between the federal statutory rate of 34% and the Company's effective tax rate
of 0% is due to an increase in the valuation allowance of $190,497 and $71,400
in 2003 and 2002, respectively.

sNOTE 16 -  Loss on Option

            In March 2003 the Company obtained exclusive non-refundable options
to purchase an ore crusher and related assets for a total cost of $700,000. The
Company paid $50,000 for these options, which ultimately expired. Accordingly,
the Company has realized a loss of $50,000.

NOTE 17 -   Liquidity and Going Concern Uncertainty

            The Company is a development stage enterprise with no mining
revenues and has incurred recurring losses amounting to $21,639,539 through July
31, 2003. These factors, among others, raise substantial doubt about the
Company's ability to continue as a going concern.

            Specific plans to obtain funding for a full scale mining operation
in Mexico include: (i) the obtaining of bank financing in order to proceed with
the joint venture operations, (ii) additional capital contributions by the
minority interest joint venture partner, and (iii) the raising of capital
through the sale of the Company's common stock.

            There is no assurance, however, that any of the Company's proposed
plans to obtain financing, raise capital and otherwise fund operations will
prove successful. The Company's ability to continue as a going concern is
dependent upon its ability to obtain sufficient funding as discussed above and
its inability to do so will delay or cease the Company's planned operations as
discussed above.


                                      F-30
<PAGE>

                            CAPITAL GOLD CORPORATION
                    F/K/A LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JULY 31, 2003

NOTE 18  -  Commitments and Contingencies

            Minera Chanate Option

            Under the terms of the Minera Chanate purchase agreement, Leadville
has granted AngloGold's designee to receive a one-time option to purchase 51% of
Minera Chanate (or such entity that owns the Minera Chanate concessions at time
of exercise) based upon the achievements of certain events (see Note 1).

            Lease Commitments

            The Company occupies office space in New York City under a non
cancelable operating lease that commenced on September 1, 2002 and terminates on
August 31, 2007. In addition to base rent, the lease calls for payment of
utilities and other occupancy costs.

            Approximate future minimum payments under this lease are as follows:

            Year Ending July 31,

                  2004                   $    52,000
                  2005                        54,000
                  2006                        55,000
                  2007                        57,000
                  2008                         5,000
                                         -----------

                                         $   223,000
                                         ===========

            Rent expense under the office lease in New York City was
approximately $56,000 and $25,000 for the years ended July 31, 2003 and 2002,
respectively.


                                      F-31