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

FORM 10-KSB

(Mark One)x   Annual
  Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934

For the fiscal year ended April 30, 2005

 ̈  Transition
  Report Under Section 13 Or 15(d) Of The Securities Exchange Act Of 1934

For the transition period from _____________________ to _____________________

COMMISSION FILE NUMBER:000-50569

TERRACE VENTURES INC.
  (Name of small business issuer in its charter)

|(State or other jurisdiction of incorporation
      or organization) | (IRS Employer Identification No.)
|-------------------------------------------------------------------- | ---------------------------------
|                                                                     |                                  
|                                                                     |                                  
|Suite 202, 810 Peace Portal Drive,                                   |                                  
|Blaine, WA                                                           | 98230                            
|(Address of principal executive offices)                             | (Zip Code)                       
|                                                                     |                                  
|                                                                     |                                  
|(360) 332-1752                                                       |                                  
|Issuer's telephone number                                            |                                  

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

Securities registered under Section 12(g) of the Exchange Act:

SHARES OF COMMON STOCK, $0.001 PAR VALUE 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. Yesx  
  No ̈

Check if there is no disclosure of delinquent filers in response
  to Item 405 of Regulation S-B is not contained in 
  this form, and no disclosure will be contained, to the best of registrant's
  knowledge, in definitive proxy or
  information statements incorporated by reference in Part III of this Form 10-KSB
  or any amendment to this 
  Form 10-KSB.x

State issuer's revenues for its most recent fiscal year $NIL

State the aggregate market value of the voting and non-voting
  common equity held by non-affiliates computed 
  by reference to the price at which the common equity was sold, or the average
  bid and asked price of such 
  common equity, as of a specified date within the past 60 days. (See definition
  of affiliate in Rule 12b-2 of the 
  Exchange Act.) $167,337 as of July 26, 2005.

State the number of shares outstanding of each of the issuer's
  classes of common equity, as of the latest 
  practicable date. 7,042,500 Shares of Common Stock as of July 26, 2005.

Transitional Small Business Disclosure Format (check one):
  Yes ̈  Nox

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TERRACE VENTURES INC. 
  ANNUAL REPORT ON FORM 10-KSB 
  FOR THE YEAR ENDED APRIL 30, 2005

INDEX

|           |                                                                                                                        |   
|---------- | ---------------------------------------------------------------------------------------------------------------------- | --
|PART I     |                                                                                                                        |   
|           |                                                                                                                        |   
|Item 1.    | Description of Business.                                                                                               | 5 
|Item 2.    | Description of Property.                                                                                               | 6 
|Item 3.    | Legal Proceedings.                                                                                                     | 13
|Item 4.    | Submission of Matters to a Vote of Security
      Holders.                                                             | 13
|           |                                                                                                                        |   
|PART II    |                                                                                                                        |   
|           |                                                                                                                        |   
|Item 5.    | Market for Common Equity and Related Stockholder
      Matters.                                                        | 14
|Item 6.    | Managements Discussion and Analysis
      or Plan of Operation.                                                       | 14
|Item 7.    | Financial Statements.                                                                                                  | 21
|Item 8.    | Changes in and Disagreements with Accountants
      on Accounting and Financial Disclosure.                            | 22
|Item 8A.   | Controls and Procedures.                                                                                               | 22
|Item 8B.   | Other Information.                                                                                                     | 22
|           |                                                                                                                        |   
|PART III   |                                                                                                                        |   
|           |                                                                                                                        |   
|Item 9.    | Directors, Executive Officers, Promoters
      And Control Persons; Compliance with Section 16(a) of the Exchange Act. | 23
|Item 10.   | Executive Compensation.                                                                                                | 25
|Item 11.   | Security Ownership of Certain Beneficial
      Owners and Management and Related Stockholder Matters.                  | 26
|Item 12.   | Certain Relationships and Related Transactions.                                                                        | 27
|Item 13.   | Exhibits.                                                                                                              | 28
|Item 14.   | Principal Accountant Fees and Services.                                                                                | 28
|           |                                                                                                                        |   
|SIGNATURES |                                                                                                                       

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GLOSSARY OF TECHNICAL TERMS

The following defined technical terms are used in this Annual
  Report on Form 10-KSB:

|assay                | A chemical test performed
        on a sample of ores or minerals to determine the amount of valuable metals
        contained.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|batholith            | A large mass of igneous
        rock extending to great depth with its upper portion dome-like in shape.
        It has crystallized below surface, but may be exposed as a result of erosion
        of the overlying rock. Smaller masses of igneous rocks are known as bosses
        or plugs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|Canadian  Cordillera | The name used to describe
        the mountains of western Canada, which includes not only the mountainous
        and plateau regions, but also the submerged regions on the continental
        shelf and slope.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|chert                | A sedimentary form of amorphous
        or extremely fine-grained silic, partially hydrous, found in concretions
        and beds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|feldspar             | A group of rock-forming
        minerals.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|igneous              | A type of rock which has
        been formed by the consolidation of magma, a molten substance from the
        earths core.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|massive              | Solid (without fractures)
        wide (thick) rock unit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|meta-volcanic        | Metamorphosed volcanic rocks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|mineralization       | The concentration of metals
        and their chemical compounds within a body of rock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|ore                  | A mixture of minerals and
        gangue from which at least one metal can be extracted at a profit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|molybdenum           | A refractory metallic element
        used principally as an alloying agent in steel, cast iron, and superalloys
        to enhance strength, toughness, and wear and corrosion resistance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|pluton               | Body of rock exposed after
        solidification at great depth.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|pyroclastic          | Pertaining to fragmented
        (clastic) rock material formed by a volcanic explosion or ejection from
        a volcanic vent.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|quartz               | A mineral whose composition
        is silicon dioxide. A crystalline form of silica.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|reserve              | For the purposes of this Annual
        Report on Form 10-KSB: that part of a mineral deposit which could be economically
        and legally extracted or produced at the time of the reserve determination.
        Reserves consist of:
      (1) Proven (Measured) Reserves.Reserves for which:
        (a) quantity is computed from dimensions revealed in outcrops, trenches,
        workings or drill holes; grade and/or quality are computed from the results
        of detailed sampling; and (b) the sites for inspection, sampling and measurement
        are spaced so closely and the geologic character is so well defined that
        size, shape, depth and mineral content of reserves are well-established.
      (2) Probable (Indicated) Reserves.Reserves for
        which quantity and grade and/or quality are computed from information
        similar to that used for proven (measured) reserves, but the sites for
        inspection, sampling and measurement are farther apart or are otherwise
        less adequately spaced. The degree of assurance, although lower than that
        for proven (measured) reserves, is high enough to assume continuity between
        points of observation.

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|tuffs     | Rock formed from pyroclastic material.                                                                                                   
|--------- | -----------------------------------------------------------------------------------------------------------------------------------------
|vein      | An occurrence of ore with an irregular
        development in length, width and depth  usually from an intrusion
        of igneous rock.
|volcanics | Volcanically formed rocks.                                                                                                               

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PART I

Foreign Currency and Exchange Rates

For purposes of consistency and to express United States Dollars
  throughout this Annual Report, Canadian Dollars have been converted into United
  States currency at the rate of CDN$1.00 being approximately equal to US$0.83,
  which is the approximate average exchange rate during recent months.

ITEM 1.           DESCRIPTION
  OF BUSINESS.

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-KSB contains forward-looking
  statements about Terrace Ventures Inc.s (we, us,
  our, the Company or Terrace) business, financial
  condition and prospects that reflect our managements assumptions and beliefs
  based on information currently available. We can give no assurance that the
  expectations indicated by such forward-looking statements will be realized.
  If any of our assumptions should prove incorrect, or if any of the risks and
  uncertainties underlying such expectations should materialize, our actual results
  may differ materially from those indicated by the forward-looking statements.

The key factors that are not within our control and that may
  have a direct bearing on operating results include, but are not limited to,
  the market price of gold, availability of funds, government regulations, common
  share prices, operating costs, capital costs, outcomes of ore reserve development
  and other factors. Forward-looking statements are made, without limitation,
  in relation to operating plans, property exploration and development, availability
  of funds, environmental reclamation, operating costs and permit acquisition.

There may be other risks and circumstances that management
  may be unable to predict. When used in this Report, words such as, believes,
  expects, intends, plans, anticipates,
  estimates and similar expressions are intended to identify and qualify
  forward-looking statements, although there may be certain forward-looking statements
  not accompanied by such expressions. However, the forward-looking statements
  contained herein are not covered by the safe harbors created by Section 21E
  of the Securities Exchange Act of 1934 (the Exchange Act).

CORPORATE ORGANIZATION

We were incorporated on February 20, 2001, under the laws
  of the State of Nevada. We have no subsidiaries.

DESCRIPTION OF BUSINESS

In General

We are an exploration stage company engaged in the acquisition
  and exploration of mineral properties. We own a 100% undivided interest in a
  mineral claim that we refer to as the Peach mineral claim (the Peach
  Claim) located in the Nicola, Simalkameen and Osoyoos Mining Divisions
  of the Province of British Columbia, Canada. Our plan of operation is to carry
  out exploration work on the Peach Claim in order to ascertain whether it possesses
  deposits of gold. Further exploration of this mineral claim is required before
  a final determination as to its viability can be made. No commercially viable
  mineral deposit may exist on our mineral claim. We can provide no assurance
  that our mineral claim contains a mineral deposit until appropriate exploratory
  work is done and an evaluation based on that work concludes further work programs
  are justified. At this time, we have no reserves on our mineral claim. See Item
  6. Managements Discussion and Analysis or Plan of Operation  Plan
  of Operation and Description of Property.

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Competition

We are a mineral resource exploration and development company.
  We compete with other mineral resource exploration and development companies
  for financing and for the acquisition of new mineral properties. Many of the
  mineral resource exploration and development companies with whom we compete
  have greater financial and technical resources than us. Accordingly, these competitors
  may be able to spend greater amounts on acquisitions of mineral properties of
  merit, on exploration of their mineral properties and on development of their
  mineral properties. In addition, they may be able to afford greater geological
  expertise in the targeting and exploration of mineral properties. This competition
  could result in competitors having mineral properties of greater quality and
  interest to prospective investors who may finance additional exploration and
  development. This competition could adversely impact on our ability to finance
  further exploration and to achieve the financing necessary for us to develop
  our mineral properties.

Employees

We have no employees as of the date of this Annual Report
  on Form 10-KSB other than our two officers. We conduct our business largely
  through agreements with consultants and arms-length third parties.

Research and Development Expenditures

We have not incurred any research or development expenditures
  since our incorporation.

Subsidiaries

We do not have any subsidiaries.

Patents and Trademarks

We do not own, either legally or beneficially, any patent
  or trademark.

ITEM 2.           DESCRIPTION
  OF PROPERTY.

We own a 100% interest in the Peach Claim. We do not own any
  property other than the Peach Claim. We rent office space at Suite 202, 810
  Peace Portal Drive, Blaine, WA 98230, consisting of approximately 1124 square
  feet, at a cost of $250 per month. This rental is on a month-to-month basis
  without a formal contract. We pay a fee of $500 per month for office related
  services provided in connection with our office rental.

Acquisition of the Peach Mineral Claim

We purchased the Peach Claim property from Don Archibald for
  cash consideration of $5,000 pursuant to a purchase agreement dated August
  15, 2001.

Exploration History of the Peach Claim

The area of the Peach Claim property has been extensively
  explored for copper and molybdenum deposits during the late 1960s and
  early 1970s. Soil geochemistry, induced polarization surveys and airborne
  magnetometer surveys were conducted between 1966 and 1969 in the area of the
  Peach Claim property. From 1990 to 1995, Fairfield conducted soil geochemistry,
  stream sediment sampling, prospecting and geological mapping in the area of
  the Peach Claim property.

During 1990 and 1991, prospecting and reconnaissance rock
  sampling revealed numerous gold/silver bearing quartz vein and stringer occurrences
  on the Crest 10 and Pen 13 claims which are now partially covered by the Peach
  Claim.

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Trenching during 1994 at one of the showings near Brenda Lake,
  to the north of the current Peach Claim, uncovered gold-quartz veins. Five short
  holes totalling 124 metres were diamond drilled at this showing in 1995 but
  no significant gold mineralization was encountered.

Geology of Peach Mineral Claim

Much of the Peach Claim property is covered by glacial drift.
  Outcrops are essentially restricted to old trenches, roadcuts, ridge tops and
  stream gullies.

The property is underlain by volcanic and sedimentary rocks
  of the Nicola Group. Prior mapping data indicate a north-northeast striking,
  west-northwest dipping succession of andesitic flows and tuffs of the Peachland
  Creek formation and argillites and limy argillites of the Stemwinder Formation.

In the northern third of the property a number of quartz veins
  have been found cutting argillite and siliceous volcanic rocks. The quartz is
  glassy, grey to white locally with sparse disseminated pyrite and minor black
  grains, possibly tetrahedrite.

The Peach Claim property lies within the Intermontane Belt
  of the Canadian Cordillera. The area is mainly underlain by westerly younging,
  Upper Triassic sedimentary and volcaniclastic rocks of the Nicola Group. These
  are intruded by plutonic rocks of the Early Jurassic Pennask batholith.

The oldest rocks in the area, informally called the Peachland
  Creek formation, are divided into an older, predominately mafic tuffaceous and
  volcanic unit to the east and a more felsic suite of dacitic ash tuffs, flows
  and subvolcanic intrusions to the west.

The Peachland Creek formation is overlain to the west by the
  predominately sedimentary Stemwinder Mountain formation. In the area of the
  Peach claims this formation is divisible into three main units. At the base
  is a locally developed, thin horizon of polymictic conglomerate containing angular
  clasts of limestone, marble, siltstone, argillite, chert and andesitic volcanic
  rocks set within a tuffaceous matrix. This is overlain by a thicker sequence
  of black, limy argillites and siltstones interbedded with thin layers of black,
  gritty limestone and locally conglomerates. The top of the Stemwinder Mountain
  formation is characterised by a thick, monotonous sequence of black argillite
  with lesser amounts of siltsone, tuffaceous siltsone and tuff.

The youngest rocks in the Nicola Group are the Whistle Creek
  formation which consist primarily of bedded to massive, amphibole and pyroxene
  bearing ash and lapilli tuffs of andesitic composition as well as some tuffaceous
  siltstone and argillite.

The Nicola Group rocks are intruded by small bodies of unknown
  age ranging in composition from diorite through quartz diorite to granodiorite.
  The Pennask batholith is believed to be Early Jurassic in age, is massive to
  weakly foliated and ranges in composition from quartz diorite to granodiorite.

To the west of the property area, the Hidden Lake stock is
  comprised of a massive hornblende-bearing granodiorite. To the north of the
  property area, the Princeton Group comprises maroon coloured volcanic flows
  with rare interbedded arkosic sandstone which are overlain by flat-lying to
  gently dipping, bedded, grey dust tuffs.

Physiography, Climate and Infrastructure

The Peach Claim property is situated on the edge of the Okanagan
  Plateau of south central British Columbia. The typical topography here is gently
  rolling, with rounded ridge tops and deeply incised dendritic stream valleys.
  Locally steep mountain slopes dominate. The claims lie at elevations ranging
  from 1,524 metres (5,000 feet) above sea level in the southeast corner, to a
  high of 1,768 metres (5,800 feet) in the southwest and northeast. The forest
  vegetation on the property consists of mainly fir, pine, spruce and aspen, some
  of which has been harvested by logging.

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The climate is characterised by relatively low precipitation
  with temperatures ranging from minus 20° Celsius in the winter to over 30°
  Celsius in the summer. The summer months are generally dry, while a snow pack
  of up to two metres (6.5 feet) may accumulate during the winter. The property
  is easily accessible from late May to late November, although some work such
  as geophysical surveys and drilling could take place year round.

The Peach Claim property is accessed by good gravel logging
  roads. The city of Kelowna lies 40 kilometres to the east-northeast. It is the
  major service centre for the Okanagan Valley region. Provincial highways, rail
  freight lines, and an airport serve the city. Sufficient equipment, service
  suppliers and exploration personnel can be obtained in Kelowna.

Power is readily available from nearby transmission lines
  running to the formerly producing Brenda mine. Water in sufficient quantities
  for drilling is available from nearby streams and lakes.

Description of Property and Location of Peach Mineral Claim

The Peach Claim property is comprised of one mineral claim
  with a total area of approximately 1,236 acres, located in Nicola, Simalkameen
  and Osoyoos Mining Divisions, approximately 40 kilometres west of Kelowna, British
  Columbia, Canada, see Figure 1 below. The claim is accessible by
  a gravel road. We obtained information on the area from the British Columbia
  Department of Mines and Geological Consultants in 2001. We believed the timing
  was opportune at that time to obtain this property at the price paid.

The Peach Claim is recorded with the Ministry of Energy and
  Mines, Province of British Columbia, Canada under the following name, tag and
  tenure number:

|Name of Mineral 
      Claim | Tag Number | Tenure Number | Expiry Date 
|---------------------------- | ---------- | ------------- | ------------
|PEACH #1                     | 210577     | 385660        | May 30, 2007

The Province of British Columbia owns the land covered by
  the mineral claim. To our knowledge, there are no aboriginal land claims that
  might affect our title to the mineral claim or the Provinces title of
  the property. There is no viable way for us to determine what claims, if any,
  certain aboriginal groups may make. The Government of British Columbia has adopted
  a policy that no private property rights will be expropriated to settle aboriginal
  land claims.

In order to maintain our mineral claim in good standing, we
  must complete exploration work on the mineral claims and file confirmation of
  the completion of work on the mineral claims with the applicable mining recording
  office of the British Columbia Ministry of Energy and Mines. The completion
  of mineral exploration work or payment in lieu of exploration work in any year
  will extend the existence of our mineral claims for one additional year. As
  our mineral claim is effective until May 30, 2007, we must file confirmation
  of the completion of exploration work in the minimum amount of approximately
  $166 (CDN$200) per 25 hectare unit or make a payment in lieu or exploration
  work in the minimum amount by May 30, 2007. The Peach claim is 500 hectares
  in size, therefore the work requirement for each year is $3,320 (CDN$4,000).
  If we fail to complete the minimum required amount of exploration work or fail
  to make a payment in lieu of this exploration work, then our mineral claim will
  lapse on May 30, 2007, and we will lose all interest that we have in this mineral
  claim. Mr. Archibald recorded our claim to cover the main area of potential
  gold mineralization.

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Figure 1




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Recommendations of Geological Report and the Geological
  Exploration Program

We engaged Paul Reynolds, B.Sc., P.Geo., to prepare a geological
  evaluation report on the Peach Claim. Mr. Reynolds is a consulting professional
  geologist in the Geological Section of the Association of Professional Engineers
  and Geoscientists of the Province of British Columbia, Canada.

The work completed by Mr. Reynolds in preparing the geological
  report consisted of the review of geological data from previous exploration.
  The acquisition of this data involved the research and investigation of historic
  files to locate and retrieve data information acquired by previous exploration
  companies in the area of the mineral claim. The work involved in this data acquisition
  included report reproduction and compilation of pre-existing information.

We received the geological evaluation report on the Peach
  Claim prepared by Mr. Reynolds on September 25, 2001. This report is entitled
  "Geological Summary Report on the Peach Property". The geological report summarizes
  the results of the history of the exploration of the mineral claim, the regional
  and local geology of the mineral claim and the mineralization and the geological
  formations identified as a result of the prior exploration. The geological report
  also gives conclusions regarding potential mineralization of the mineral claim
  and recommends a further geological exploration program on the mineral claim.

In his initial geological report, Mr. Reynolds, recommended
  that a three phase exploration program, at an approximate cost of $22,500,
  be undertaken on the property to assess its potential to host high grade gold
  mineralization within quartz and sulphide veins, with a fourth phase of diamond
  drilling and/or mechanical trenching subject to positive results from earlier
  exploratory work. The four phase program consists of the following:

|Phase     | Exploration Program                                                                                                   | Status                                                 | Cost                                                                        
|--------- | --------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------ | ----------------------------------------------------------------------------
|Phase I   | A thorough assessment of the known showings along
      with basic geological mapping and rock sampling.              | Completed in June, 2002.                               | $5,000                                                                      
|Phase II  | Prospecting, geological outcrop mapping, and detailed
      soil sampling in areas of interest.                       | Completed in late 2004.                                | $7,500                                                                      
|Phase III | Soil sampling to be conducted on a flagged grid
      within prospective areas identified by the two previous phases. | To be completed in late 2005 or early 2006.            | To be
      determined                                                      
|Phase IV  | Subject to positive results from the previous phases,
      mechanical trenching and/or diamond drilling.             | To be completed in 2006 based on results of Phase III. | To be 
      determined 
      based on the
      Results of
      Phase III

The phased program of exploration activities is intended to
  generate and prioritize targets to test by trenching or drilling. The initial
  exploration activities on the Peach Claim (grid establishment, geological mapping,
  soil sampling and geophysical surveys) do not involve ground disturbance and
  as a result do not

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require a work permit. Any follow-up trenching and/or drilling
  will require permits, applications for which will be submitted well in advance
  of the planned work.

We completed Phase I of our planned four phase exploration
  program on the Peach Claim property in June, 2002. The total cost for the first
  phase was approximately $5,000. Following the successful completion of Phase
  I, our geologist recommended that we complete a second phase consisting of geological
  prospecting, geological outcrop mapping, and detailed soil sampling in areas
  of interest. Phase II of our exploration program was completed in late 2004.
  The cost of completing Phase II of our exploration program was $7,500. We
  received a geological report on the results of Phase II of our exploration program
  on July 27, 2005. Pursuant to the results of the Phase II report our independent
  geologist recommended we proceed with Phase III of our exploration program.
  See Current State of Exploration below.

The geological review and interpretations required in Phases
  III of the exploration program will be comprised of reviewing the data acquired
  and analyzing this data to assess the potential mineralization of the mineral
  claim. Geological review entails the geological study of an area to determine
  the geological characteristics, identification of rock types and any obvious
  indications of mineralization. The purpose of undertaking the geological review
  is to determine if there is sufficient indication of mineralization to warrant
  additional exploration. Positive results at each stage of the exploration program
  would be required to justify continuing with the next stage. Such positive results
  would include the identification of the zones of mineralization. As mentioned,
  positive results have been achieved for Phase I and II of the work program and
  the commencement and completion of work on Phase III is considered justified.

Current State of Exploration

Our mineral claim presently does not have any mineral reserves.
  The property that is the subject to our mineral claim is undeveloped and does
  not contain any open-pit or underground mines. There is no plant or equipment
  located on the property that is the subject of the mineral claim. Power is readily
  available from nearby transmission lines. Water in sufficient quantities for
  drilling is available from nearby streams and lakes.

We have only recently commenced exploration of the Peach Claim
  and this exploration is currently in the preliminary stages. Our planned exploration
  program is exploratory in nature and no mineral reserves may ever be found.

June 2002 Exploration Program

Phase I of our exploration program was completed in June,
  2002. The Phase I exploratory program was conducted by Mr. Reynolds over a period
  of three days and consisted of rock sampling and an assessment of areas previously
  reported to have potential mineralization. On June 27, 2002, Mr. Reynolds, our
  consulting geologist, completed his review of Phase I work results on our Peach
  Claim and provided us with a report containing his conclusions. Mr. Reynolds
  concluded that the results were favorable and he recommended we proceed to Phase
  II of our exploration program.

September 2004 Exploration Program

Phase II of our exploration program was designed to follow-up
  prospecting, sampling and mapping of the earlier exploration carried out by
  Fairfield Minerals Ltd. The target of the 2004 program was the location of a
  gold bearing quartz vein system similar to the Siwash North deposit, previously
  found and bulk sampled by Fairfield. Using Fairfield assessment reports as guides,
  a program of follow-up sampling, prospecting and mapping was carried out over
  four areas of anomalous samples. The September 2004 exploration program was
  successful in locating gold mineralized quartz float and bedrock in areas with
  anomalous soil sample sites from surveys done by Fairfield Minerals Ltd. Our
  geologist concluded that further exploration work should be undertaken on the
  Peach Property to assess its potential to host high grade gold mineralization
  within quartz (and sulphide) veins. We budgeted to expend $5,000 on our
  planned

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exploration program over the next twelve months. We plan to
  commence Phase III of our exploration program in late 2005 or early 2006 subject
  to our ability to obtain additional financing.

Compliance with Government Regulation

We will be required to comply with all regulations, rules
  and directives of governmental authorities and agencies applicable to the exploration
  of minerals in the Province of British Columbia. The main agency that governs
  the exploration of minerals in the Province of British Columbia, Canada, is
  the Ministry of Energy and Mines.

The Ministry of Energy and Mines manages the development of
  British Columbia's mineral resources, and implements policies and programs respecting
  their development while protecting the environment. In addition, the Ministry
  regulates and inspects the exploration and mineral production industries in
  British Columbia to protect workers, the public and the environment.

The material legislation applicable to us is the Mineral Tenure
  Act, administered by the Mineral Titles Branch of the Ministry of Energy and
  Mines, and the Mines Act, as well as the Health, Safety and Reclamation Code
  and the Mineral Exploration Code.

The Mineral Tenure Act and its regulations govern the procedures
  involved in the location, recording and maintenance of mineral titles in British
  Columbia. The Mineral Tenure Act also governs the issuance of leases which are
  long term entitlements to minerals.

All mineral exploration activities carried out on a mineral
  claim or mining lease in British Columbia must be in compliance with the Mines
  Act. The Mines Act applies to all mines during exploration, development, construction,
  production, closure, reclamation and abandonment. It outlines the powers of
  the Chief Inspector of Mines, to inspect mines, the procedures for obtaining
  permits to commence work in, on or about a mine and other procedures to be observed
  at a mine. Additionally, the provisions of the Health, Safety and Reclamation
  Code for mines in British Columbia contain standards for employment, occupational
  health and safety, accident investigation, work place conditions, protective
  equipment, training programs, and site supervision. Also, the Mineral Exploration
  Code contains standards for exploration activities including construction and
  maintenance, site preparation, drilling, trenching and work in and about a water
  body.

Additional approvals and authorizations may be required from
  other government agencies, depending upon the nature and scope of the proposed
  exploration program. If the exploration activities require the falling of timber,
  then either a free use permit or a license to cut must be issued by the Ministry
  of Forests. Items such as waste approvals may be required from the Ministry
  of Environment, Lands and Parks if the proposed exploration activities are significantly
  large enough to warrant them. Waste approvals refer to the disposal of rock
  materials removed from the earth which must be reclaimed. An environmental impact
  statement may be required.

We have not budgeted for regulatory compliance costs in the
  proposed work program recommended by the geological report. British Columbia
  law requires that a holder of title to mineral claims must spend at least $166
  (CDN$200) per 25 hectare unit per year in order to keep the property in
  good standing, which we have done. We will also have to sustain the cost of
  reclamation and environmental remediation for all exploration work undertaken.
  Both reclamation and environmental remediation refer to putting disturbed ground
  back as close to its original state as possible. Other potential pollution or
  damage must be cleaned-up and renewed along standard guidelines outlined in
  the usual permits. Reclamation is the process of bringing the land back to its
  natural state after completion of exploration activities. Environmental remediation
  refers to the physical activity of taking steps to remediate, or remedy, any
  environmental damage caused. The amount of these costs is not known at this
  time as we do not know

12

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the extent of the exploration program that will be undertaken
  beyond completion of the recommended work program. Because there is presently
  no information on the size, tenor, or quality of any resource or reserve at
  this time, it is impossible to assess the impact of any capital expenditures
  on earnings, our competitive position or on us in the event a potentially economic
  deposit is discovered.

Prior to undertaking mineral exploration activities, we must
  make application under the British Columbia Mines Act for a permit, if we anticipate
  disturbing land. A permit is issued within 45 days of a complete and satisfactory
  application. We do not anticipate any difficulties in obtaining a permit, if
  needed. The initial exploration activities on the Peach Claim (grid establishment,
  geological mapping, soil sampling, geophysical surveys) do not involve ground
  disturbance and as a result do not require a work permit. Any follow-up trenching
  and/or drilling will require permits, applications for which will be submitted
  well in advance of the planned work.

If we enter the production phase, the cost of complying with
  permit and regulatory environment laws will be greater because the impact on
  the project area is greater. Permits and regulations will control all aspects
  of the production program if the project continues to that stage. Examples of
  regulatory requirements include:

| | 1. | Water discharge will have to meet drinking
        water standards;                                                                                 
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                     
| | 2. | Dust generation will have to be minimal
        or otherwise re-mediated;                                                                           
| |    |                                                                                                                                                     
| | 3. | Dumping of material on the surface will
        have to be re-contoured and re-vegetated with natural vegetation;                                   
| |    |                                                                                                                                                     
| | 4. | An assessment of all material to be left
        on the surface will need to be environmentally benign;                                             
| |    |                                                                                                                                                     
| | 5. | Ground water will have to be monitored for
        any potential contaminants;                                                                      
| |    |                                                                                                                                                     
| | 6. | The socio-economic impact of the project
        will have to be evaluated and if deemed negative, will have to be re-mediated;
        and         
| |    |                                                                                                                                                     
| | 7. | There will have to be an impact report of
        the work on the local fauna and flora including a study of potentially
        endangered species.

ITEM 3.          
  LEGAL PROCEEDINGS.

None.

ITEM 4.           SUBMISSION
  OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

13

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PART II

ITEM 5.           MARKET
  FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market Information

Our shares of common stock have traded on the OTC Bulletin
  Board under the symbol TVNT since July 19, 2005. The high and the
  low bid prices for our shares since July 19, 2005, as reported by the OTC Bulletin
  Board were:

|QUARTER          | HIGH ($) | LOW ($)
|---------------- | -------- | -------
|1st Quarter 2005 | $0.06    | $0.05  

The trades reflect inter-dealer prices, without retail mark-up,
  markdown or commission and may not represent actual transactions.

Holders Of Our Common Stock

As of July 26, 2005 we have ninety seven (96) registered shareholders
  and 7,042,500 shares of our common stock issued and outstanding.

Dividends

We have not declared any dividends on our common stock since
  our inception in February, 2001. There are no dividend restrictions that limit
  our ability to pay dividends on our common stock in our Articles of Incorporation
  or bylaws. Our governing statute, Chapter 78 - Private Corporations
  of the Nevada Revised Statutes (the NRS), does provide limitations
  on our ability to declare dividends. Section 78.288 of Chapter 78 of the NRS
  prohibits us from declaring dividends where, after giving effect to the distribution
  of the dividend:

|(a) | we would not be able to pay our debts as
        they become due in the usual course of business; or                                                                                                                                                                                                                                                                                                                                                                       
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(b) | our total assets would be less than the
        sum of our total liabilities plus the amount that would be needed, if
        we were to be dissolved at the time of distribution, to satisfy the preferential
        rights upon dissolution of stockholders who may have preferential rights
        and whose preferential rights are superior to those receiving the distribution
        (except as otherwise specifically allowed by our articles of incorporation).

RECENT SALES OF UNREGISTERED SECURITIES

None.

ITEM 6.          
  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

PLAN OF OPERATION

Our plan of operation is to conduct mineral exploration activities
  on the Peach Claim in order to assess whether this claim possesses commercially
  exploitable mineral deposits. Our exploration program is designed to explore
  for commercially viable deposits of gold minerals. We have not, nor has any
  predecessor, identified any commercially exploitable reserves of these minerals
  on our mineral claim.

14

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We engaged Mr. Reynolds, B.Sc. P.Eng., our geological consultant,
  to prepare a geological evaluation report on the Peach Claim. We received this
  report entitled "Geological Summary Report on the Peach Property" on September
  25, 2001. This report summarized the results of the history of the exploration
  of the mineral claim, the regional and local geology of the mineral claim and
  the mineralization and the geological formations identified as a result of the
  prior exploration. The geological report also gave conclusions regarding potential
  mineralization of the mineral claim and recommended a four phase exploration
  program on the mineral claim.

We completed Phase I of our planned four phase exploration
  program on the Peach Claim property in June, 2002. The total cost for the first
  phase was approximately $5,000. Following the successful completion of Phase
  I, our geologist recommended that we complete a second phase consisting of geological
  prospecting, geological outcrop mapping, and detailed soil sampling in areas
  of interest. Phase II was completed in late 2004, at a cost of $7,500. Based
  on the results of Phase II of the exploration program we determined to proceed
  with Phase III subject to obtaining additional financing.

Our plan of operation is to proceed with Phase III of the
  exploration of the Peach Claim in late 2005 or early 2006 subject to receiving
  additional financing. A decision on proceeding beyond the planned Phase III
  will be made by assessing whether the results of Phase III are sufficiently
  positive to enable us to obtain the financing we will need for us to continue
  through additional stages of the exploration program. This assessment will include
  an assessment of the market for financing of mineral exploration projects at
  the time of our assessment and an evaluation of our cash reserves after the
  completion of Phase III. The decision whether or not to proceed will be based
  on the recommendations of our geological consultant. The decision of the consultant
  whether or not to recommend proceeding will be based on a number of factors,
  including his subjective judgment and will depend primarily on the results of
  the immediately preceding stage. It is impossible to quantify in advance what
  will be sufficiently positive.

During this exploration stage, our president will only be
  devoting approximately six hours per week of his time to our business. We do
  not foresee this limited involvement as negatively impacting our company over
  the next twelve months as all exploratory work has been and will continue to
  be performed by outside consultants. Additionally, we will not have a need to
  hire any employees over the next twelve months; nor do we plan to make any purchases
  of equipment over the next twelve months due to reliance upon outside consultants
  to provide all tools needed for the exploratory work being conducted. Our total
  expenditures over the next twelve months are anticipated to be approximately
  $15,000.

LIQUIDITY AND FINANCIAL CONDITION

|Working Capital                                |                   |                     |                      
|---------------------------------------------- | ----------------- | ------------------- | ---------------------
|                                               |                   |                     | Percentage           
|                                               | At April 30, 2005 | At April 30, 2004   | Increase / (Decrease)
|Current Assets                                 | $22               | $13,134             | 998%                 
|Current Liabilities                            | $51,250           | $26,830             | 91%                  
|Working Capital (Deficit)                      | $(51,228)         | $(13,696)           | 274%                 
|                                               |                   |                     |                      
|Cash Flows                                     |                   |                     |                      
|                                               |                   | Year Ended April 30
|                                               |                   | 2005                | 2004                 
|Cash Flows from (used in) Operating Activities |                   | $(37,532)           | $(58,708)            
|Cash Flows from (used in) Investing Activities |                   | -                   | -                    
|Cash Flows from (used in) Financing Activities |                   | -                   | $40,000              
|Net Increase (decrease) in Cash During Period  |                   | $(13,112)           | $3,022               

15

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We had cash on hand of $22 and a working capital deficit
  of $51,228 as of April 30, 2005 compared to working capital deficit $13,696
  as of April 30, 2004. We anticipate that we will incur approximately $15,000
  for operating expenses, including professional legal and accounting expenses
  associated with our reporting requirements under the Exchange Act during the
  next twelve months.

Financing Requirements

As at July 26, 2005, we had cash in the amount of $12.
  Our current operating funds are not sufficient to complete the proposed exploration
  program and will be insufficient to complete the full exploration of the mineral
  claim and begin mining efforts should the mineral claim prove commercially viable.
  Therefore, we will need to obtain additional financing in order to complete
  our full business plan. We currently do not have any operations and we have
  no income. Our plan of operation calls for significant expenses in connection
  with the exploration of our mineral claim. We do not have sufficient cash on
  hand to complete Phase III of our proposed exploration program. We also require
  additional financing to sustain our business operations if we are not successful
  in earning revenues. We currently do not have any arrangements for financing
  and we may not be able to obtain financing when required. Obtaining additional
  financing would be subject to a number of factors, including the market prices
  for the mineral property and gold. These factors may make the timing, amount,
  terms or conditions of additional financing unavailable to us.

From inception to April 30, 2005, we have suffered aggregate
  losses in the amount of $127,530 and net cash outflows from operations.
  We expect to continue to incur substantial losses until we complete the development
  of our business. For these reasons our auditors stated in their report that
  they have substantial doubt we will be able to continue as a going concern.

OFF-BALANCE SHEET ARRANGEMENTS

We have no significant off-balance sheet arrangements that
  have or are reasonably likely to have a current or future effect on our financial
  condition, changes in financial condition, revenues or expenses, results of
  operations, liquidity, capital expenditures or capital resources.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with
  United States generally accepted accounting principles requires our management
  to make estimates and assumptions that affect the reported amount of assets
  and liabilities and disclosure of contingent assets and liabilities at the date
  of the financial statements and the reported amounts of revenues and expenses
  during the reporting period. Actual results could differ from those estimates.
  Our management routinely makes judgments and estimates about the effects of
  matters that are inherently uncertain.

We have identified certain accounting policies, described
  below, that are most important to the portrayal of our current financial condition
  and results of operations. Our significant accounting policies are disclosed
  in Note 1 to the audited financial statements included in this Annual Report.

Use of Estimates

Management uses estimates and assumptions in preparing these
  financial statements in accordance with generally accepted accounting principles.
  Those estimates and assumptions affect the reported amounts of assets and liabilities,
  the disclosure of contingent assets and liabilities, and the reported revenues
  and expenses.

Exploration Stage Company

The Company has been in the exploration stage since its formation
  and has not yet realized any revenues from its planned operations. The Company
  is primarily engaged in the acquisition and exploration of

16

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mining properties. Upon the location of commercially minable
  reserves, the Company plans to prepare for mineral extraction and enter the
  development stage.

Mineral Property Acquisition and Exploration Costs

The Company expenses all costs related to the acquisition
  and exploration of mineral properties in which it has secured exploration rights
  prior to establishment of proven and probable reserves. To date, the Company
  has not established the commercial feasibility of any exploration prospects,
  therefore, all costs are being expensed.

Depreciation, Amortization and Capitalization

The Company records depreciation and amortization when appropriate
  using both straight-line and declining balance methods over the estimated useful
  life of the assets (five to seven years). Expenditures for maintenance and repairs
  are charged to expense as incurred. Additions, major renewals and replacements
  that increase the property's useful life are capitalized. Property sold or retired,
  together with the related accumulated depreciation, is removed from the appropriate
  accounts and the resultant gain or loss is included in net income.

RISKS AND UNCERTAINTIES

We have yet to attain profitable operations and because
  we will need additional financing to fund our exploration activities, our accountants
  believe there is substantial doubt about our ability to continue as a going
  concern.

We have incurred a net loss of $127,530 for the period
  from February 20, 2001 (inception) to April 30, 2005, and have no revenues to
  date. Our future is dependent upon our ability to obtain financing and upon
  future profitable operations from the development of our mineral claim. These
  factors raise substantial doubt that we will be able to continue as a going
  concern.

If we do not obtain additional financing, our business
  will fail.

Our current operating funds are sufficient to complete the
  proposed exploration program; however, they will be insufficient to complete
  the full exploration of the mineral claim and begin mining efforts should the
  mineral claim prove commercially viable. Therefore, we will need to obtain additional
  financing in order to complete our full business plan. As at July 26, 2005,
  we had cash in the amount of $12. We currently do not have any operations
  and we have no income. Our plan of operation calls for significant expenses
  in connection with the exploration of our mineral claim. We do not have sufficient
  cash on hand to complete Phase III of our proposed exploration program. We also
  require additional financing to sustain our business operations if we are not
  successful in earning revenues. We currently do not have any arrangements for
  financing and we may not be able to obtain financing when required. Obtaining
  additional financing would be subject to a number of factors, including the
  market prices for the mineral property and gold. These factors may make the
  timing, amount, terms or conditions of additional financing unavailable to us.

Since this is an exploration project, we face a high risk
  of business failure due to our inability to predict the success of our business.

We have just begun the initial stages of exploration of our
  mineral claim, and thus have no way to evaluate the likelihood that we will
  be able to operate the business successfully. We were incorporated on February
  20, 2001, and to date have been involved primarily in organizational activities,
  the acquisition of the mineral claim, obtaining a summary geological report
  and performing certain limited work on our mineral claim. We have not earned
  any revenues to date.

17

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Because of the unique difficulties and uncertainties inherent
  in mineral exploration ventures, we face a high risk of business failure.

You should be aware of the difficulties normally encountered
  by new mineral exploration companies and the high rate of failure of such enterprises.
  The likelihood of success must be considered in light of the problems, expenses,
  difficulties, complications and delays encountered in connection with the exploration
  of the mineral properties that we plan to undertake. These potential problems
  include, but are not limited to, unanticipated problems relating to exploration,
  and additional costs and expenses that may exceed current estimates. The expenditures
  to be made by us in the exploration of the mineral claim may not result in the
  discovery of mineral deposits. Problems such as unusual or unexpected formations
  and other conditions are involved in mineral exploration and often result in
  unsuccessful exploration efforts. If the results of our Phase III exploration
  do not reveal viable commercial mineralization, we may decide to abandon our
  claim and acquire new claims for new exploration. The acquisition of additional
  claims will be dependent upon us possessing capital resources at the time in
  order to purchase such claims. If no funding is available, we may be forced
  to abandon our operations.

Because we anticipate our operating expenses will increase
  prior to our earning revenues, we may never achieve profitability.

Prior to completion of our exploration stage, we anticipate
  that we will incur increased operating expenses without realizing any revenues.
  We therefore expect to incur significant losses into the foreseeable future.
  We recognize that if we are unable to generate significant revenues from the
  exploration of our mineral claim, we will not be able to earn profits or continue
  operations. There is no history upon which to base any assumption as to the
  likelihood that we will prove successful, and we can provide no assurance that
  we will generate any revenues or ever achieve profitability. If we are unsuccessful
  in addressing these risks, our business will most likely fail.

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

The search for valuable minerals involves numerous hazards.
  As a result, we may become subject to liability for such hazards, including
  pollution, cave-ins and other hazards against which we cannot insure or against
  which we may elect not to insure. At the present time we have no coverage to
  insure against these hazards. The payment of such liabilities may have a material
  adverse effect on our financial position.

Because access to our mineral claim may be restricted by
  inclement weather, we may be delayed in our exploration.

Access to the Peach Claim may be restricted through some of
  the year due to weather in the area. As a result, any attempt to test or explore
  the property is largely limited to the times when weather permits such activities.
  These limitations can result in significant delays in exploration efforts. Such
  delays can have a significant negative effect on our exploration efforts.

The property comprises one mineral claim with a total area
  of approximately 1,236 acres, located in Nicola, Simalkameen and Osoyoos Mining
  Divisions, approximately 40 kilometres west of Kelowna, British Columbia, Canada.
  This is an essentially undeveloped area in British Columbia. The area consists
  of many mountains and lakes with heavy forestation. An unpaved gravel road is
  the only access. Winters are often severe with rain, freezing rain, wind, and
  snow common between November and March, making the road often unsafe and impassable
  for travel.

As we undertake exploration of our mineral claim, we will
  be subject to compliance with government regulation that may increase the anticipated
  cost of our exploration program.

There are several governmental regulations that materially
  restrict mineral exploration. We will be subject to the laws of the Province
  of British Columbia as we carry out our exploration program. We may be

18

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required to obtain work permits, post bonds and perform remediation
  work for any physical disturbance to the land in order to comply with these
  laws. While our planned exploration program budgets for regulatory compliance,
  there is a risk that new regulations could increase our costs of doing business
  and prevent us from carrying out our exploration program.

Because our executive officers do not have formal training
  specific to the technicalities of mineral exploration, there is a higher risk
  our business will fail.

Mr. Gordon F. Burley and Mr. Ryan S. McCleery our executive
  officers and directors, do not have any formal training as geologists or in
  the technical aspects of management of a mineral exploration company. Our management
  lacks technical training and experience with exploring for, starting, and operating
  a mine. With no direct training or experience in these areas, our management
  may not be fully aware of the specific requirements related to working within
  this industry. Our management's decisions and choices may not take into account
  standard engineering or managerial approaches mineral exploration companies
  commonly use. Consequently, our operations, earnings, and ultimate financial
  success could suffer irreparable harm due to management's lack of experience
  in this industry.

Because our executive officers have only agreed to provide
  their services on a part-time basis, they may not be able or willing to devote
  a sufficient amount of time to our business operations, causing our business
  to fail.

Our directors and officers are employed on a full time basis
  by other companies. Because we are in the early stages of our business, Mr.
  Burley and Mr. McCleery will not be spending a significant amount of time on
  our business. Mr. Burley expects to expend approximately 5 to 7 hours per week
  on our business. Mr. McCleery expects to spend approximately 6 to 8 hours per
  week on our business. Competing demands on Mr. Burley's and Mr. McCleerys
  time may lead to a divergence between their interests and the interests of other
  shareholders.

Because our stock is a penny stock, shareholders will be
  more limited in their ability to sell their stock.

The Securities and Exchange Commission (the SEC)
  has adopted rules that regulate broker-dealer practices in connection with transactions
  in penny stocks. Penny stocks are generally equity securities with a price of
  less than $5.00, other than securities registered on certain national securities
  exchanges or quoted on the Nasdaq system, provided that current price and volume
  information with respect to transactions in such securities is provided by the
  exchange or quotation system.

Because our securities constitute "penny stocks" within the
  meaning of the rules, the rules apply to us and to our securities. The rules
  may further affect the ability of owners of shares to sell our securities in
  any market that might develop for them. As long as the trading price of our
  common stock is less than $5.00 per share, the common stock will be subject
  to rule 15g-9 under the Exchange Act. The penny stock rules require a broker-dealer,
  prior to a transaction in a penny stock, to deliver a standardized risk disclosure
  document prepared by the SEC, that:

| | 1. | contains a description of the nature and level of
        risk in the market for penny stocks in both public offerings and secondary
        trading;                                                                                          
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                
| | 2. | contains a description of the broker's or dealer's
        duties to the customer and of the rights and remedies available to the
        customer with respect to a violation to such duties or other requirements
        of securities laws;
| |    |                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                
| | 3. | contains a brief, clear, narrative description of
        a dealer market, including bid and ask prices for penny stocks and the
        significance of the spread between the bid and ask price;                                             
| |    |                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                
| | 4. | contains a toll-free telephone number for inquiries
        on disciplinary actions;                                                                                                                                                           

19

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| | 5. | defines significant terms in the disclosure document
        or in the conduct of trading in penny stocks; and                                                 
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                
| |    |                                                                                                                                                                
| | 6. | contains such other information and is in such form,
        including language, type, size and format, as the SEC shall require by
        rule or regulation.

The broker-dealer also must provide, prior to effecting any
  transaction in a penny stock, the customer with: (a) bid and offer quotations
  for the penny stock; (b) the compensation of the broker-dealer and its salesperson
  in the transaction; (c) the number of shares to which such bid and ask prices
  apply, or other comparable information relating to the depth and liquidity of
  the market for such stock; and (d) a monthly account statements showing the
  market value of each penny stock held in the customer's account. In addition,
  the penny stock rules require that prior to a transaction in a penny stock not
  otherwise exempt from those rules; the broker-dealer must make a special written
  determination that the penny stock is a suitable investment for the purchaser
  and receive the purchaser's written acknowledgment of the receipt of a risk
  disclosure statement, a written agreement to transactions involving penny stocks,
  and a signed and dated copy of a written suitably statement. These disclosure
  requirements may have the effect of reducing the trading activity in the secondary
  market for our stock.

As our business assets and our directors and officers are
  located outside of the United States, investors may be limited in their ability
  to enforce civil actions against our assets or our directors and officers.

Our business assets are located in Canada and our directors
  and officers are residents of Canada. Consequently, it may be difficult for
  United States investors to effect service of process within the United States
  upon our assets or our directors or officers, or to realize in the United States
  upon judgments of United States courts predicated upon civil liabilities under
  U.S. Federal Securities Laws. A judgment of a U.S. court predicated solely upon
  such civil liabilities may not be enforceable in Canada by a Canadian court
  if the U.S. court in which the judgment was obtained had jurisdiction, as determined
  by the Canadian court, in the matter. There is substantial doubt whether an
  original action could be brought successfully in Canada against any of our assets
  or our directors and officers predicated solely upon such civil liabilities.

20

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ITEM 7.           FINANCIAL
  STATEMENTS.

TERRACE VENTURES INC.

FINANCIAL STATEMENTS

APRIL 30, 2005 AND APRIL 30, 2004





21

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INDEX TO FINANCIAL STATEMENTS

|                                                          |                                                                 | Page
|--------------------------------------------------------- | --------------------------------------------------------------- | ----
|Report of Independent Registered Public Accounting  Firm. | 1                                                              
|                                                          |                                                                 |     
|Financial
      Statements:                               |                                                                
|                                                          |                                                                 |     
|                                                          | Balance
      Sheets                                            | 2   
|                                                          |                                                                 |     
|                                                          | Statements 
      of  Operations and Accumulated Deficit        | 3   
|                                                          |                                                                 |     
|                                                          | Statements 
      of  Changes in Stockholders Equity (Deficit) | 4   
|                                                          |                                                                 |     
|                                                          | Statements 
      of  Cash Flows.                               | 5   
|                                                          |                                                                 |     
|                                                          | Notes to
      Financial Statements                             | 6-9 
|                                                          |                                                                
|Supplemental
      Statement:                             |                                                                
|                                                          |                                                                 |     
|                                                          | Statements 
      of  Operating Expenses.                       | 11  

F-i

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REPORT OF INDEPENDENT REGISTERED
  PUBLIC ACCOUNTING FIRM

To the Board of Directors
  Terrace Ventures Inc.
  Blaine, Washington

We have audited the accompanying
  balance sheets of Terrace Ventures Inc., an exploration stage company, as of
  April 30, 2005 and April 30, 2004, and the related statements of operations
  and accumulated deficit, changes in stockholders equity (deficit), and
  statement of cash flows for the years then ended. These financial statements
  are the responsibility of Terrace Ventures Inc.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 Unites 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 financial
  statements referred to above present fairly, in all material respects, the financial
  position of Terrace Ventures Inc., an exploration stage company, as of April
  30, 2005 and April 30, 2004, and the results of its operations, changes in stockholders
  equity (deficit) and cash flows for the years then ended, in conformity with
  accounting principles generally accepted in The United States of America.

Our audit was made for the
  purpose of forming an opinion on the basic financial statements taken as a whole.
  The supplemental statement of operating expenses is presented for the purposes
  of additional analysis and is not a required part of the basic financial statements,
  and in our opinion, is fairly stated in all material respects in relation to
  the basic financial statements taken as a whole.

The accompanying financial
  statements have been prepared assuming that the Company will continue as a going
  concern. As discussed in Note 5 to the financial statements, the Company has
  suffered recurring losses from operations, which raise substantial doubt about
  its ability to continue as a going concern. The financial statements do not
  include any adjustments that might result from the outcome of this uncertainty.

Sarna & Company,
  Certified Public Accountants
  Westlake Village, California
  July 10, 2005

F-1

---

TERRACE VENTURES INC.
  (AN EXPLORATION  STAGE COMPANY)
  BALANCE  SHEETS

|                                                     |   | APRIL 30, |  |   | APRIL 30, | 
|---------------------------------------------------- | - | --------- |  | - | --------- | 
|                                                     |   | 2005      |  |   | 2004      | 
|                                                     |   |           |  |   |           | 
|ASSETS                                               |  
|                                                     |   |           |  |   |           | 
|Current Assets                                       |   |           |  |   |           | 
|Cash                                                 | $ | 22        |  | $ | 13,134    | 
|Total
      Current Assets                           |   | 22        |  |   | 13,134    | 
|                                                     |   |           |  |   |           | 
|TOTAL ASSETS                                         | $ | 22        |  | $ | 13,134    | 
|                                                     |   |           |  |   |           | 
|LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT) |  

|Current Liabilities                   |   |          |   |   |         |  
|------------------------------------- | - | -------- | - | - | ------- | -
|Accounts
      Payable and            |   |          |   |   |         |  
|Accrued
      Expenses                | $ | 51,250   |   | $ | 26,830  |  
|                                      |   |          |   |   |         |  
|Total
      Current Liabilities       |   | 51,250   |   |   | 26,830  |  
|                                      |   |          |   |   |         |  
|Stockholders' Equity                  |   |          |   |   |         |  
|Common
      Stock, $0.001 par value  |   |          |   |   |         |  
|100,000,000
      shares authorized,  |   |          |   |   |         |  
|7,042,500 
      shares issued        |   | 704      |   |   | 704     |  
|Additional
      Paid in Capital      |   | 82,546   |   |   | 82,546  |  
|Accumulated 
      deficit            |   | (134,478 | ) |   | (96,946 | )
|Total
      Stockholders'             |   |          |   |   |         |  
|Equity 
      (Deficit)               |   | (51,228  | ) |   | (13,696 | )
|TOTAL LIABILITIES AND                 |   |          |   |   |         |  
|STOCKHOLDERS'  EQUITY
      (DEFICIT) | $ | 22       |   | $ | 13,134  |  

See Notes to Financial Statements.

F-2

---

TERRACE VENTURES INC. 
  (AN EXPLORATION STAGE COMPANY)
  STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT

|                           |   | YEAR ENDED           |   |   | YEAR ENDED     |   |   | INCEPTION-           |  
|-------------------------- | - | -------------------- | - | - | -------------- | - | - | -------------------- | -
|                           |   | APRIL
      30, 2005 |   |   | APRIL 30, 2004 |   |   | APRIL
      30, 2005 |  
|                           |   |                      |   |   |                |   |   |                      |  
|Revenues                   | $ | -0-                  |   | $ | -0-            |   | $ | -0-                  |  
|                           |   |                      |   |   |                |   |   |                      |  
|Operating Expenses         |   | (37,532              | ) |   | (58,708        | ) |   | (134,478             | )
|                           |   |                      |   |   |                |   |   |                      |  
|Loss Before Provision for  |   | (37,532              | ) |   | (58,708        | ) |   | (134,478             | )
|Income
      Taxes         |   |                      |   |   |                |   |   |                      |  
|                           |   |                      |   |   |                |   |   |                      |  
|Provision for Income Taxes |   | (0                   | ) |   | (0             | ) |   | (0                   | )
|                           |   |                      |   |   |                |   |   |                      |  
|Net Loss                   |   | (37,532              | ) |   | (58,708        | ) |   | (134,478             | )
|                           |   |                      |   |   |                |   |   |                      |  
|Deficit, Beginning         |   |                      |   |   |                |   |   |                      |  
|of
      Period            |   | (96,946              | ) |   | (38,238        | ) |   | (0                   | )
|                           |   |                      |   |   |                |   |   |                      |  
|Accumulated Deficit, End   |   |                      |   |   |                |   |   |                      |  
|of
      Period            | $ | (134,478             | ) | $ | (96,946        | ) | $ | (134,478             | )
|                           |   |                      |   |   |                |   |   |                      |  
|Net Loss per Share         | $ | (0.01                | ) | $ | (0.01          | ) | $ | (0.01                | )
|                           |   |                      |   |   |                |   |   |                      |  
|Weighted Average           |   |                      |   |   |                |   |   |                      |  
|Shares
      Outstanding   |   | 7,042,500            |   |   | 6,589,063      |   |   | 6,702,422            |  

See Notes to Financial Statements.

F-3

---

TERRACE VENTURES INC. 
  (AN EXPLORATION STAGE COMPANY)
  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

|                        | Common Stock |  |   | Additional |  |   | Accumulated |  |   | Total    |  
|----------------------- | ------------ |  | - | ---------- |  | - | ----------- |  | - | -------- | -
|                        |              |  |   | Dollar     |  |   | Paid in     |  |   | Deficit  |  
|                        | Shares       |  |   | Amount     |  |   | Capital     |  |   |          |  
|Inception               |              |  |   |            |  |   |             |  |   |          |  
|February
      20, 2001 | ----         |  | $ | ----       |  | $ | ----        |  | $ | ----     |  
|                        |              |  |   |            |  |   |             |  |   |          |  
|Common Stock Issued     |              |  |   |            |  |   |             |  |   |          |  
|$0.001
      per share  |              |  |   |            |  |   |             |  |   |          |  
|April
      9, 2001     | 4,000,000    |  |   | 400        |  |   | 3,600       |  |   | ----     |  
|                        |              |  |   |            |  |   |             |  |   |          |  
|Net Loss                |              |  |   |            |  |   |             |  |   |          |  
|Period Ended            |              |  |   |            |  |   |             |  |   |          |  
|April
      30, 2001    | ----         |  |   | ----       |  |   | ----        |  |   | (1,410   | )
|                        |              |  |   |            |  |   |             |  |   |          |  
|Balances                |              |  |   |            |  |   |             |  |   |          |  
|April
      30, 2001    | 4,000,000    |  |   | 400        |  |   | 3,600       |  |   | (1,410   | )
|                        |              |  |   |            |  |   |             |  |   |          |  
|Common Stock Issued     |              |  |   |            |  |   |             |  |   |          |  
|$0.01
      per share   |              |  |   |            |  |   |             |  |   |          |  
|August
      15, 2001   | 2,500,000    |  |   | 250        |  |   | 24,750      |  |   | ----     |  
|                        |              |  |   |            |  |   |             |  |   |          |  
|Net Loss                |              |  |   |            |  |   |             |  |   |          |  
|Period
      Ended      |              |  |   |            |  |   |             |  |   |          |  
|April
      30, 2002    | ----         |  |   | ----       |  |   | ----        |  |   | (19,196  | )
|                        |              |  |   |            |  |   |             |  |   |          |  
|Balances                |              |  |   |            |  |   |             |  |   |          |  
|April
      30, 2002    | 6,500,000    |  |   | 650        |  |   | 28,350      |  |   | (20,606  | )
|                        |              |  |   |            |  |   |             |  |   |          |  
|Common Stock Issued     |              |  |   |            |  |   |             |  |   |          |  
|$0.10
      per share   |              |  |   |            |  |   |             |  |   |          |  
|September**30, 2002**   | 142,500      |  |   | 14         |  |   | 14,236      |  |   | ----     |  
|                        |              |  |   |            |  |   |             |  |   |          |  
|Net Loss                |              |  |   |            |  |   |             |  |   |          |  
|Period
      Ended      |              |  |   |            |  |   |             |  |   |          |  
|April
      30, 2003    | ----         |  |   | ----       |  |   | ----        |  |   | (17,632  | )
|                        |              |  |   |            |  |   |             |  |   |          |  
|Balances                |              |  |   |            |  |   |             |  |   |          |  
|April
      30, 2003    | 6,642,500    |  |   | 664        |  |   | 42,586      |  |   | (38,238  | )
|                        |              |  |   |            |  |   |             |  |   |          |  
|Common Stock Issued     |              |  |   |            |  |   |             |  |   |          |  
|$0.10
      per share   |              |  |   |            |  |   |             |  |   |          |  
|November
      6, 2003  | 400,000      |  |   | 40         |  |   | 39,960      |  |   | ----     |  
|                        |              |  |   |            |  |   |             |  |   |          |  
|Net Loss                |              |  |   |            |  |   |             |  |   |          |  
|Period
      Ended      |              |  |   |            |  |   |             |  |   |          |  
|April
      30, 2004    | ----         |  |   | ----       |  |   | ----        |  |   | (58,708  | )
|                        |              |  |   |            |  |   |             |  |   |          |  
|Balances                |              |  |   |            |  |   |             |  |   |          |  
|April
      30, 2004    | 7,042,500    |  |   | 704        |  |   | 82,546      |  |   | (96,946  | )
|                        |              |  |   |            |  |   |             |  |   |          |  
|Net Loss                |              |  |   |            |  |   |             |  |   |          |  
|Period
      Ended      |              |  |   |            |  |   |             |  |   |          |  
|April
      30, 2005    | ----         |  |   | ----       |  |   | ----        |  |   | (37,532  | )
|                        |              |  |   |            |  |   |             |  |   |          |  
|Balances                |              |  |   |            |  |   |             |  |   |          |  
|April
      30, 2005    | 7,042,500    |  | $ | 704        |  | $ | 82,546      |  | $ | (134,478 | )

See Notes to Financial Statements.

F-4

---

TERRACE VENTURES INC.
  (AN EXPLORATION STAGE COMPANY)
  STATEMENTS OF CASH FLOWS

|                                      |   | YEAR ENDED   |   |   | YEAR ENDED   |   |   | INCEPTION-         |  
|------------------------------------- | - | ------------ | - | - | ------------ | - | - | ------------------ | -
|                                      |   | APR 30, 2005 |   |   | APR 30, 2004 |   |   | APR
      30, 2005 |  
|Cash Flows from                       |   |              |   |   |              |   |   |                    |  
|Operating
      Activities:           |   |              |   |   |              |   |   |                    |  
|                                      |   |              |   |   |              |   |   |                    |  
|Net Loss                              | $ | (37,532      | ) | $ | (58,708      | ) | $ | (134,478           | )
|                                      |   |              |   |   |              |   |   |                    |  
|Increase in Accounts Payable          |   | 24,420       |   |   | 21,730       |   |   | 51,250             |  
|                                      |   |              |   |   |              |   |   |                    |  
|Net Cash Used by                      |   |              |   |   |              |   |   |                    |  
|Operating
      Activities            |   | (13,112      | ) |   | (36,978      | ) |   | (83,228            | )
|                                      |   |              |   |   |              |   |   |                    |  
|Cash Flows from                       |   |              |   |   |              |   |   |                    |  
|Financing
      Activities:           |   |              |   |   |              |   |   |                    |  
|                                      |   |              |   |   |              |   |   |                    |  
|Proceeds from Issuance of             |   |              |   |   |              |   |   |                    |  
|Common
      Stock                    |   | -0-          |   |   | 40,000       |   |   | 83,250             |  
|                                      |   |              |   |   |              |   |   |                    |  
|Cash Provided by                      |   |              |   |   |              |   |   |                    |  
|Financing
      Activities            |   | -0-          |   |   | 40,000       |   |   | 83,250             |  
|                                      |   |              |   |   |              |   |   |                    |  
|Net Increase (Decrease) in
      Cash |   | (13,112      | ) |   | 3,022        |   |   | 22                 |  
|                                      |   |              |   |   |              |   |   |                    |  
|Cash at Beginning of Period           |   | 13,134       |   |   | 10,112       |   |   | -0-                |  
|                                      |   |              |   |   |              |   |   |                    |  
|Cash at End of Period                 | $ | 22           |   | $ | 13,134       |   | $ | 22                 |  

See Notes to Financial Statements.

F-5

---

TERRACE VENTURES INC.
  (AN EXPLORATION STAGE COMPANY)
  NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT
  ACCOUNTING POLICIES

General

Terrace Ventures Inc. was incorporated
  on February 20, 2001 in the State of Nevada. The Company acquires and develops
  certain mineral rights in Canada.

Basis of Presentation

The Company reports revenue
  and expenses using the accrual method of accounting for financial and tax reporting
  purposes.

Use of Estimates

Management uses estimates and
  assumptions in preparing these financial statements in accordance with generally
  accepted accounting principles. Those estimates and assumptions affect the reported
  amounts of assets and liabilities, the disclosure of contingent assets and liabilities,
  and the reported revenues and expenses.

Exploration Stage Company

The Company has been in the
  exploration stage since its formation and has not yet realized any revenues
  from its planned operations. The Company is primarily engaged in the acquisition
  and exploration of mining properties. Upon the location of commercially minable
  reserves, the Company plans to prepare for mineral extraction and enter the
  development stage.

Pro Forma Compensation Expense

No stock options have been
  issued by Terrace Ventures Inc. Accordingly, no pro forma compensation expense
  is reported in these financial statements.

F-6

---

TERRACE VENTURES INC.
  (AN EXPLORATION STAGE COMPANY) 
  NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 - SUMMARY OF SIGNIFICANT
  ACCOUNTING POLICIES - CONTINUED

Mineral Property Acquisition
  and Exploration CostsThe Company expenses all costs related to the acquisition and exploration
  of mineral properties in which it has secured exploration rights prior to establishment
  of proven and probable reserves. To date, the Company has not established the
  commercial feasibility of any exploration prospects, therefore, all costs are
  being expensed.

Depreciation, Amortization
  and Capitalization
  The Company records depreciation and amortization when appropriate using both
  straight-line and declining balance methods over the estimated useful life of
  the assets (five to seven years).

Expenditures for maintenance
  and repairs are charged to expense as incurred. Additions, major renewals and
  replacements that increase the property's useful life are capitalized. Property
  sold or retired, together with the related accumulated depreciation, is removed
  from the appropriate accounts and the resultant gain or loss is included in
  net income.

Income TaxesThe Company accounts for its income taxes in accordance with Statement of
  Financial Accounting Standards No. 109, "Accounting for Income Taxes". Under
  Statement 109, a liability method is used whereby deferred tax assets and liabilities
  are determined based on temporary differences between basis used for financial
  reporting and income tax reporting purposes. Income taxes are provided based
  on tax rates in effect at the time such temporary differences are expected to
  reverse. A valuation allowance is provided for certain deferred tax assets if
  it is more likely than not, that the Company will not realize the tax assets
  through future operations.

Fair Value of Financial
  InstrumentsFinancial accounting Standards Statement No. 107, "Disclosures About Fair
  Value of Financial Instruments", requires the Company to disclose, when reasonably
  attainable, the fair market values of its assets and liabilities which are deemed
  to be financial instruments. The Company's financial instruments consist primarily
  of cash and certain investments.

F-7

---

TERRACE VENTURES INC.
  (AN EXPLORATION STAGE COMPANY) 
  NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 1 - SUMMARY OF SIGNIFICANT
  ACCOUNTING POLICIES - CONTINUED

Per Share InformationThe Company computes per share information by dividing the net loss for
  the period presented by the weighted average number of shares outstanding during
  such period.

NOTE 2 - PROVISION FOR INCOME
  TAXES

The provision for income taxes
  for the periods ended April 30, 2005 and April 30, 2004 represents the minimum
  state income tax expense of the Company, which is not considered significant.

NOTE 3 - COMMITMENTS AND
  CONTINGENCIES

Operating Leases
  The Company currently rents administrative office space under a monthly renewable
  contract.

Litigation
  The Company is not presently involved in any litigation.

NOTE 4 - RECENTLY ISSUED
  ACCOUNTING PRONOUNCEMENTS

Recently issued accounting
  pronouncements will have no significant impact on the Company and its reporting
  methods.

F-8

---

TERRACE VENTURES INC.
  (AN EXPLORATION STAGE COMPANY) 
  NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 5  GOING CONCERN

Future issuances of the Companys
  equity or debt securities will be required in order for the Company to continue
  to finance its operations and continue as a going concern. The Companys
  present revenues are insufficient to meet operating expenses.

The consolidated financial
  statements of the Company have been prepared assuming that the Company will
  continue as a going concern, which contemplates, among other things, the realization
  of assets and the satisfaction of liabilities in the normal course of business.
  The Company has incurred cumulative net losses of $127,350 since its inception
  and requires capital for its contemplated operational and marketing activities
  to take place. The Company's ability to raise additional capital through the
  future issuances of common stock is unknown. The obtainment of additional financing,
  the successful development of the Company's contemplated plan of operations,
  and its transition, ultimately, to the attainment of profitable operations are
  necessary for the Company to continue operations. The ability to successfully
  resolve these factors raise substantial doubt about the Company's ability to
  continue as a going concern. The consolidated financial statements of the Company
  do not include any adjustments that may result from the outcome of these aforementioned
  uncertainties.

F-9

---

SUPPLEMENTAL STATEMENT





F-10

---

TERRACE VENTURES INC.
  (AN EXPLORATION STAGE COMPANY)
  STATEMENT OF OPERATING EXPENSES

|                               |   | YEAR ENDED    |  |   | YEAR  ENDED   |  |   | INCEPTION-    
|------------------------------ | - | ------------- |  | - | ------------- |  | - | --------------
|                               |   | APRIL 30,2005 |  |   | APRIL 30,2004 |  |   | APRIL 30, 2005
|                               |   |               |  |   |               |  |   |               
|Operating Expenses             |   |               |  |   |               |  |   |               
|Accounting                     | $ | 7,240         |  | $ | 15,920        |  | $ | 24,660        
|Exploration
      Expense      |   | -0-           |  |   | 14,000        |  |   | 24,266        
|Legal                          |   | 19,102        |  |   | 14,111        |  |   | 34,971        
|Office
      Administration    |   | 6,000         |  |   | 6,000         |  |   | 20,500        
|Office
      Expenses          |   | 119           |  |   | 28            |  |   | 1,617         
|Regulatory
      Expenses/Fees |   | 1,747         |  |   | 4,294         |  |   | 6,041         
|Rent                           |   | 3,000         |  |   | 3,000         |  |   | 10,950        
|elephone                       |   | -0-           |  |   | 720           |  |   | 1,344         
|Travel
      & Entertainment   |   | 324           |  |   | 635           |  |   | 3,001         
|                               |   |               |  |   |               |  |   |               
|                               |   |               |  |   |               |  |   |               
|Total
      Operating Expenses | $ | 37,532        |  | $ | 58,708        |  | $ | 127,350       

See Notes to Financial Statements.

F-11

---

ITEM 8.           CHANGES
  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 8A.           CONTROLS
  AND PROCEDURES.

|(A) | Evaluation Of Disclosure Controls And
        Procedures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | As of the end of the period covered by this
        report, we carried out an evaluation, under the supervision and with the
        participation of our Principal Executive Officer and Principal Financial
        Officer, of the effectiveness of the design and operation of our disclosure
        controls and procedures. Our disclosure controls and procedures are designed
        to provide a reasonable level of assurance of achieving our disclosure
        control objectives. Our Principal Executive Officer and Principal Accounting
        Officer have concluded that our disclosure controls and procedures are,
        in fact, effective at this reasonable assurance level as of the period
        covered.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(B) | Changes In Internal Controls Over Financial
        Reporting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | In connection with the evaluation of our
        internal controls during our last fiscal year ended April 30, 2005, our
        Principal Executive Officer and Principal Financial Officer have determined
        that there are no changes to our internal controls over financial reporting
        that has materially affected, or is reasonably likely to materially affect,
        our internal controls over financial reporting.                                                                                                                                                                                                                                                                                              

ITEM 8B.         OTHER
  INFORMATION.

None.

22

---

PART III

ITEM 9.           DIRECTORS,
  EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A)
  OF THE EXCHANGE ACT.

Our current executive officers and directors are:

|                 |    |                                                           
|---------------- | -- | ----------------------------------------------------------
|Gordon F. Burley | 67 | Director, President and Chief Executive
      Officer     
|                 |    |                                                           
|Ryan S. McCleery | 31 | Director, Secretary, Treasurer and Chief Financial Officer

Set forth below is a brief description of the background and
  business experience of each of our executive officers and directors for the
  past five years.

Mr. Gordon Frederick Burleyis our president and a
  director. Mr. Burley was appointed as a director on February 20, 2001 and has
  served as our president since February 28, 2003. Mr. Burley has served as purchasing
  agent and estimator for LNS Services Ltd., a design-build contractor, since
  1996. From 1968 to 1996, Mr. Burley was a self-employed contractor specializing
  in hospital and commercial laundry and dry-cleaning installations.

Mr. Burley provides his services on a part-time basis as required
  for our business. Mr. Burley presently commits approximately 5 to 7 hours a
  week of his business time to our business.

Mr. Ryan S. McCleeryis our secretary, treasurer and
  a director. Mr. McCleery was appointed a director on June 30, 2002 and has served
  as our secretary and treasurer since February 28, 2003. Mr. McCleery currently
  is an account executive for Brookdale (a Du Pont Canada Company), which manufactures
  fire-safety products. Prior to working at Brookdale, Mr. McCleery was engaged
  in the brokerage industry, most recently as a sales assistant with Canaccord
  Capital from December 1999 through May 2001. He has also served as a director
  of International All North Resource Corp. from June 1995 to February 1996.

Mr. McCleery provides his services on a part-time basis as
  required for our business. Mr. McCleery presently commits approximately 6 to
  8 hours a week of his business time to our business.

Mr. Burley and Mr. McCleery do not have formal training as
  geologists or in the technical or managerial aspects of management of a mineral
  exploration company. Their prior managerial and consulting positions have not
  been in the mineral exploration industry. Accordingly, we will have to rely
  on the technical services of others to advise us on the managerial aspects specifically
  associated with a mineral exploration company. We do not have any employees
  who have professional training and experience in the mining industry. We rely
  on our independent geological consultant, Paul Reynolds, B. Sc., P.Geo., to
  make recommendations to us on work programs on our property, to hire appropriately
  skilled persons on a contract basis to complete work programs and to supervise,
  review, and report on such programs to us.

Terms of Office

Our directors are appointed for one year terms to hold office
  until the next annual general meeting of the holders of the our common stock,
  as provided by Article 330 of Chapter 78 Private Corporations of
  the Nevada Revised Statutes, or until removed from office in accordance with
  our by-laws. Our officers are appointed by our board of directors and hold office
  until removed by our board.

We presently do not pay to our directors or officers any salary
  or consulting fee. We do not pay to our directors any compensation for each
  director serving as a director on our board of directors We anticipate that
  compensation may be paid to officers in the event that we determines to proceed
  with additional exploration programs beyond the fourth phase of our exploration
  program.

23

---

Significant Employees

We have no significant employees other than our officers and
  directors. We conduct our business through agreements with consultants and arms-length
  third parties.

Committees of the Board Of Directors

Our audit committee presently consists of members of our board
  of directors. We presently do not have a compensation committee, nominating
  committee, an executive committee of our board of directors, stock plan committee
  or any other committees. However, our board of directors is considering establish
  various committees during the current fiscal year.

Audit Committee Financial Expert

We have no financial expert. We believe the cost related to
  retaining a financial expert at this time is prohibitive. Further, because of
  our start-up operations, we believe the services of a financial expert are not
  warranted.

CODE OF ETHICS

We adopted a Code of Ethics applicable to our Chief Executive
  Officer, Chief Financial Officer, Corporate Controller and certain other finance
  executives, which is a "code of ethics" as defined by applicable rules of the
  SEC. Our Code of Ethics is attached as an exhibit to our Annual Report on Form
  10-KSB for the year ended April 30, 2004. If we make any amendments to our Code
  of Ethics other than technical, administrative, or other non-substantive amendments,
  or grant any waivers, including implicit waivers, from a provision of our Code
  of Ethics to our chief executive officer, chief financial officer, or certain
  other finance executives, we will disclose the nature of the amendment or waiver,
  its effective date and to whom it applies in a Current Report on Form 8-K filed
  with the SEC.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE
  ACT

Section 16(a) of the Exchange Act requires our executive officers
  and directors, and persons who beneficially own more than ten percent of our
  equity securities, to file reports of ownership and changes in ownership with
  the SEC. Officers, directors and greater than ten percent shareholders are required
  by the SEC regulation to furnish us with copies of all Section 16(a) forms they
  file. Based on our review of the copies of such forms received by us, we believe
  that during the fiscal year ended April 30, 2005 all such filing requirements
  applicable to our officers and directors were complied with.

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ITEM 10.          EXECUTIVE
  COMPENSATION.

COMPENSATION OF EXECUTIVE OFFICERS

We have not had a bonus, profit sharing, or deferred compensation
  plan for the benefit of our employees, officers or directors since our inception.
  We have not paid any other salaries or other compensation to our officers, directors
  or employees since our inception.

Stock Option Grants

We did not grant any stock options to the executive officers
  or directors during our most recently completed fiscal year ending April 30,
  2005. We have also not granted any stock options to the executive officers since
  our inception.

Exercises of Stock Options and Year-End Option Values

No stock options were exercised by our officers, directors
  or employees during the financial year ended April 30, 2005. No stock options
  have been exercised since April 30, 2005.

COMPENSATION ARRANGEMENTS

We do not pay to our directors or officers any salary or consulting
  fee. We anticipate that compensation may be paid to officers in the event that
  we decide to proceed with additional exploration programs beyond the second
  stage program. We do not pay to our directors any compensation for each director
  serving as a director on our board of directors.

We conduct our business through agreements with consultants
  and arms-length third parties. Currently, we have no formal agreements. Our
  verbal agreement with our geologist includes his reviewing all of the results
  from the exploratory work performed upon the site and making recommendations
  based on those results in exchange for payments equal to the usual and customary
  rates received by geologists performing similar consulting services. Additionally,
  we have a verbal agreement with our outside auditors to perform requested accounting
  functions at their normal and customary rates.

EMPLOYMENT CONTRACTS

We are not party to any employment contracts with any of our
  named executed officers.

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ITEM 11.          SECURITY
  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
  MATTERS.

The following table sets forth certain information concerning
  the number of shares of our common stock owned beneficially as of July 26, 2005
  by: (i) each person (including any group) known to us to own more than five
  percent (5%) of any class of our voting securities, (ii) each of our directors,
  (iii) each of our named executive officers; and (iv) officers and directors
  as a group. Unless otherwise indicated, the shareholders listed possess sole
  voting and investment power with respect to the shares shown.

|Title of Class                   | Name and Address of Beneficial Owner                                                                                                                      | Amount and Nature of Beneficial Ownership           | Percentage of Common Stock(1)
|-------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------- | -----------------------------
|DIRECTORS AND EXECUTIVE OFFICERS
|Common Stock                     | Gordon F. Burley,  
      Director, President and Chief  
      Executive Officer  
      #603  3600 Windcrest Drive  
      North Vancouver, BC V6G 2S5 | 3,000,000 Shares of
      Common Stock
      Direct | 42.5%                        
|Common Stock                     | Ryan S. McCleery,  
      Director, Chief Financial Officer,  
      Secretary and Treasurer  
      2033 Comox Street  
      Vancouver, BC V6G 1S1      | 1,001,000 Shares of
      Common Stock
      Direct | 14.2%                        
|Common Stock                     | All Directors and Executive  
      Officers as a Group (2 persons)                                                                                       | 4,001,000 Shares of
      Common Stock              | 56.7%                        
|5% STOCKHOLDERS                 
|Common Stock                     | Gordon F. Burley,  
      Director, President and Chief  
      Executive Officer  
      #603  3600 Windcrest Drive  
      North Vancouver, BC V6G 2S5 | 3,000,000 Shares of
      Common Stock
      Direct | 42.5%                        
|Common Stock                     | Ryan S. McCleery,  
      Director, Chief Financial Officer,  
      Secretary and Treasurer  
      2033 Comox Street  
      Vancouver, BC V6G 1S1      | 1,001,000 Shares of
      Common Stock
      Direct | 14.2%                        

|(1) | Based on 7,042,500 shares of our common
        stock issued and outstanding as of July 26, 2005. Under Rule 13d-3, certain
        shares may be deemed to be beneficially owned by more than one person
        (if, for example, persons share the power to vote or the power to dispose
        of the shares). In addition, shares are deemed to be beneficially owned
        by a person if the person has the right to acquire the shares (for example,
        upon exercise of an option) within 60 days of the date as of which the
        information is provided.In computing the percentage ownership of any person,
        the amount of shares outstanding is deemed to include the amount of shares
        beneficially owned by such person (and only such person) by reason of
        these acquisition rights. As a result, the percentage of outstanding shares
        of any person as shown in this table does not necessarily reflect the
        persons actual ownership or voting power with respect to the number
        of shares of common stock actually outstanding on July 26, 2005.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

26

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CHANGE IN CONTROL

We are not aware of any arrangement that might result in a
  change in control in the future.

EQUITY COMPENSATION PLAN INFORMATION.

We are not party to any equity compensation plans. The following
  summary equity compensation plan information is presented as of April 30, 2005.

|Plan Category                                                    | (a) | (b) | (c)
|---------------------------------------------------------------- | --- | --- | ---
|Equity Compensation Plans
      Approved By Security Holders     | Nil | N/A | N/A
|Equity Compensation Plans Not
      Approved By Security Holders | Nil | N/A | N/A

ITEM 12.          CERTAIN
  RELATIONSHIPS AND RELATED TRANSACTIONS.

Except as described below, none of the following parties has,
  since our date of incorporation, had any material interest, direct or indirect,
  in any transaction with us or in any presently proposed transaction that has
  or will materially affect us, other than noted in this section:

- Any of our directors or officers;
- Any person proposed as a nominee for election as a director;
- Any person who beneficially owns, directly or indirectly, shares carrying
    more than 10% of the voting rights attached to our outstanding shares of common
    stock;
- Any of our promoters; and
- Any relative or spouse of any of the foregoing persons who has the same
    house as such person.

We issued 4,000,000 shares of our common stock on March 9,
  2001 at a price of $0.001 per share to our former president and to our current
  president, Gordon F. Burley. Each acquired 2,000,000 shares of our common stock
  and paid a total purchase price of $2,000 for these shares. These shares
  were issued pursuant to Section 4(2) of the Securities Act and are restricted
  shares as defined in the Act. This issuance was made to our former president,
  and to Mr. Burley, our president, each of whom are sophisticated individuals
  and by way of their positions are in a position of access to relevant and material
  information regarding our operations.

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ITEM 13.  EXHIBITS.

|Exhibit  Number | Description of Exhibit                                                                                                                                            
|--------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                |                                                                                                                                                                   
|2.1             | Articles of Incorporation.(1)                                                                                                                                     
|                |                                                                                                                                                                   
|                |                                                                                                                                                                   
|2.2             | Bylaws.(1)                                                                                                                                                        
|                |                                                                                                                                                                   
|                |                                                                                                                                                                   
|6.1             | Mineral Claim Purchase Agreement dated August
        15, 2001 between Terrace Ventures Inc. and Don Archibald.(1)                                                
|                |                                                                                                                                                                   
|                |                                                                                                                                                                   
|14.1            | Code of Ethics. (2)                                                                                                                                               
|                |                                                                                                                                                                   
|                |                                                                                                                                                                   
|31.1            | Certification
        of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002.                                               
|                |                                                                                                                                                                   
|                |                                                                                                                                                                   
|31.2            | Certification
        of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002.                                               
|                |                                                                                                                                                                   
|                |                                                                                                                                                                   
|32.1            | Certification
        of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
        pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|                |                                                                                                                                                                   
|                |                                                                                                                                                                   
|32.2            | Certification
        of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
        pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

|(1) | Filed with the SEC as an exhibit to our
        Registration Statement on Form 10-SB originally filed on February 2, 2004.
|--- | --------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                           
|(2) | Filed with the SEC as an exhibit to our
        Annual Report on Form 10-KSB filed on September 8, 2004.                  

ITEM 14.          PRINCIPAL
  ACCOUNTANT FEES AND SERVICES

Audit Fees

During the fiscal years ended 2005 and 2004, we retained our
  independent auditor, Sarna & Company, Certified Public Accountants, to provide
  services in the following categories and amounts:

|Audit Related Fees | $12,200 | $15,920
|------------------ | ------- | -------
|Tax Fees           | -       | -      
|All Other Fees     | -       | -      
|Total              | $12,200 | $15,920

Our Audit Committee has considered whether the provision of
  non-audit services is compatible with maintaining the independence of Sarna
  & Company, and has concluded that it is.

Policy on Pre-Approval by Audit Committee of Services Performed
  by Independent Auditors

The policy of our Audit Committee is to pre-approve all audit
  and permissible non-audit services to be performed by our independent auditors
  during the fiscal year.

No services related to Audit-Related Fees, Tax Fees
  or All Other Fees described above that was approved by the Audit Committee
  pursuant to the waiver of pre-approval provisions set forth in the applicable
  rules of the SEC.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act,
  the registrant caused this report to be signed on its behalf by the undersigned,
  thereunto duly authorized.

TERRACE VENTURES INC.

|By: | /s/ Gordon F. Burley                    | 
|--- | --------------------------------------- | 
|    | GORDON F. BURLEY                        | 
|    | President and Chief Executive Officer   | 
|    | Director                                | 
|    | Date:               July
      29, 2005 | 

In accordance with the Securities Exchange Act, this report
  has been signed below by the following persons on behalf of the registrant and
  in the capacities and on the dates indicated.

|By: | /s/ Gordon F. Burley                                           | 
|--- | -------------------------------------------------------------- | 
|    | GORDON F. BURLEY                                               | 
|    | President and Chief Executive Officer                          | 
|    | (Principal Executive Officer)                                  | 
|    | Director                                                       | 
|    | Date:               July
      29, 2005                        | 
|    |                                                                | 
|    |                                                                | 
|    |                                                                | 
|    |                                                                | 
|By: | /s/ Ryan S. McCleery                                           | 
|    | RYAN S. McCLEERY                                               | 
|    | Secretary, Treasurer and Chief Financial Officer               | 
|    | (Principal Financial Officer and Principal Accounting Officer) | 
|    | Director                                                       | 
|    | Date:               July
      29, 2005                        | 

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