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**UNITED STATESSECURITIES 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, 2004

** ̈******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)

|NEVADA                                                         | 91-2147101                       
|-------------------------------------------------------------- | ---------------------------------
|(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. Yes **x****** 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.) $304,250 as of August 30, 2004

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 August 30, 2004

Transitional Small Business Disclosure Format (check one):
  Yes ** ̈******
  No **x******

1

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TERRACE VENTURES INC. ANNUAL REPORT ON FORM 10-KSBFOR THE YEAR ENDED APRIL 30, 2004

INDEX

|           |                                                                                                                       | PAGE
|---------- | --------------------------------------------------------------------------------------------------------------------- | ----
|           |                                                                                                                       |     
|PART I     |                                                                                                                       |     
|           |                                                                                                                       |     
|Item 1.    | Description Of Business                                                                                               | 4   
|           |                                                                                                                       |     
|Item 2.    | Description Of Property                                                                                               | 15  
|           |                                                                                                                       |     
|Item 3.    | Legal Proceedings                                                                                                     | 16  
|           |                                                                                                                       |     
|Item 4.    | Submission Of Matters To A Vote Of Security
      Holders                                                             | 16  
|           |                                                                                                                       |     
|PART II    |                                                                                                                       |     
|           |                                                                                                                       |     
|Item 5.    | Market For Common Equity And Related Stockholder
      Matters                                                        | 17  
|           |                                                                                                                       |     
|Item 6.    | Management's Discussion And Analysis Or
      Plan Of Operation                                                       | 18  
|           |                                                                                                                       |     
|Item 7.    | Financial Statements                                                                                                  | 23  
|           |                                                                                                                       |     
|Item 8.    | Changes In And Disagreements With Accountants
      On Accounting And Financial Disclosure                            | 24  
|           |                                                                                                                       |     
|Item 8A.   | Controls and Procedures                                                                                               | 24  
|           |                                                                                                                       |     
|PART III   |                                                                                                                       |     
|           |                                                                                                                       |     
|Item 9.    | Directors, Executive Officers, Promoters
      And Control Persons; Compliance With Section 16(a) Of The Exchange Act | 25  
|           |                                                                                                                       |     
|Item 10.   | Executive Compensation                                                                                                | 27  
|           |                                                                                                                       |     
|Item 11.   | Security Ownership Of Certain Beneficial
      Owners And Management and Related Stockholder Matters                  | 28  
|           |                                                                                                                       |     
|Item 12.   | Certain Relationships And Related Transactions                                                                        | 29  
|           |                                                                                                                       |     
|Item 13.   | Exhibits And Reports On Form 8-K                                                                                      | 30  
|           |                                                                                                                       |     
|Item 14.   | Principal Accountant Fees and Services                                                                                | 31  
|           |                                                                                                                       |     
|Signatures |                                                                                                                       | 32  

2

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GLOSSARY OF TECHNICAL TERMS

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

|andesite            | Volcanic rock (or lava)
        characteristically medium dark in color and containing 54 to 62  percent
        silica and moderate amounts of iron and magnesium.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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.
|sedimentary rock    | A rock formed by the accumulation
        and cementation of mineral grains transported by wind,  water, or
        ice to the site of deposition or chemically precipitated at the depositional
        site.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

3

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PART I

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" or "our company")
  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 operations 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".

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.

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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        | April 30, 2005

Title to the property is held in our name. 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 April 30, 2005, we must file confirmation
  of the completion of exploration work in the minimum amount of approximately
  $72 per unit or make a payment in lieu or exploration work in the minimum amount
  by April 30, 2005. The fee amount increases from $72 (CDN$100) per unit, per
  year in the first three years to approximately $144 per unit (CDN$200), per
  year afterwards, up to ten years. The Peach claim is 20 units in size, therefore
  the work requirement for the next year is $2,863 (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 claims will lapse on April
  30, 2005, and we will lose all interest that we have in these mineral claims.

Mr. Archibald recorded our claim to cover the main area of
  potential gold mineralization. We are the legal owner of the Peach Claim and
  no other person or entity has any interest in our mineral claim.

5

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Figure 1 
  Location of Claim




6

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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 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.                       | Commenced and expected to be 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 mid 2005 based on
      results of Phase II.   | $10,000                                                         
|Phase IV  | Subject to positive results from the previous
      phases, mechanical trenching and/or diamond drilling.             | To be completed in late 2005 based
      on results of Phase III. | To be determined based on
      the Results of Phases II and III

The phased program of exploration activities would have a
  goal of generating and prioritizing targets to test by trenching or drilling.
  The initial exploration activities on the Peach Claim (grid establishment,

7

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geological mapping, soil sampling and 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.

Our cash on hand as of April 30, 2004 is $13,134. We have
  sufficient cash on hand to pay the costs of Phase II of our proposed exploration
  program. However, we may require additional financing in order to proceed with
  any additional work beyond Phase II of our exploration program.

The geological review and interpretations required in Phases
  II and 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 of the work program
  and the commencement and completion of work on Phase II 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.

Geological 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 one 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 the
  next stage of our exploration program. The second phase consisting of prospecting,
  geological outcrop mapping, and detailed soil sampling in areas of interest
  is anticipated to commence in late 2004.

The second phase consisting of prospecting, geological outcrop
  mapping, and detailed soil sampling in areas of interest is currently under
  way and is expected to be completed in the fall season of 2004. A decision on
  proceeding beyond the planned Phase III will be made by assessing whether the
  results of Phase II and Phase III were 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 myriad 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.

We plan to proceed with Phase IV of our exploration program,
  if recommended by our geologist, and subject to the results of Phase II and
  Phase III. Costs will depend on recommendations, which cannot be made until
  we receive the assay results for Phase II and Phase III.

8

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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 completed Phase I of the work program including a
  review of Phase I and recommendations from the geologist. The first phase consisted
  of consisted of rock sampling and an assessment of areas previously reported
  to have potential mineralization.

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 $72
  (CDN$100) per mineral claim 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 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

9

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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:

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


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.

10

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Subsidiaries

We do not have any subsidiaries.

Patents and Trademarks

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

RISK FACTORS

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 $96,966 for the period from
  February 20, 2001 (inception) to April 30, 2004, 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 April 30, 2004,
  we had cash in the amount of $13,134. We currently do not have any operations
  and we have no income. Our plan of operations calls for significant expenses
  in connection with the exploration of our mineral claim. We have sufficient
  cash on hand to complete Phase II of our proposed exploration program. However,
  we may need additional financing to proceed past Phase II of our exploration
  program. We may also require additional financing if the costs of the exploration
  of our mineral claim are greater than anticipated. We may 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.

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

11

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conditions are involved in mineral exploration and often result
  in unsuccessful exploration efforts. If the results of our Phase II and 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 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.

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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.

If a market for our common stock does not develop, shareholders
  may be unable to sell their shares.

There is currently no market for our common stock and we can
  provide no assurance that a market will develop. We intend to apply for trading
  of our common stock on the over-the-counter bulletin board. However, we can
  provide no assurance that our shares will be approved for trading on the bulletin
  board or, if traded, that a public market will materialize. If our common stock
  is not traded on the bulletin board or if a public market for our common stock
  does not develop, stockholders may not be able to re-sell the shares of our
  common stock that they have purchased and may lose all of their investment.

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 may constitute "penny stocks" within
  the meaning of the rules, the rules would 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:

contains a description of the nature and level of risk in the market
      for penny stocks in both public offerings and secondary trading;
    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 requirementsof securities laws;
    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;
    contains a toll-free telephone number for inquiries on disciplinary actions;


13

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- defines significant terms in the disclosure document
      or in the conduct of trading in penny stocks; and
- 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 if it becomes subject
  to these penny stock rules. Therefore, if our common stock becomes subject to
  the penny stock rules, stockholders may have difficulty selling those securities.

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.

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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.

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.

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.

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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.

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.

ITEM 3.              LEGAL
  PROCEEDINGS.

We currently are not a party to any material legal proceedings
  and to our knowledge, no such proceedings are threatened or contemplated.

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

No matters were submitted to a vote of our security holders,
  through the solicitation of proxies or otherwise, during the quarter ended April
  30, 2004.

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PART II

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

NO PUBLIC MARKET FOR COMMON STOCK

There is presently no public market for our common stock.
  We anticipate applying for trading of our common stock on the over-the-counter
  bulletin board. However, we can provide no assurance that our shares will be
  traded on the over-the-counter bulletin board or, if traded, that a public market
  will materialize.

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 system. The penny stock rules require
  a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
  from those rules, deliver a standardized risk disclosure document prepared by
  the SEC, which: (a) contains a description of the nature and level of risk in
  the market for penny stocks in both public offerings and secondary trading;
  (b) 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; (c) contains a brief,
  clear, narrative description of a dealer market, including bid and ask prices
  for penny stocks and significance of the spread between the bid and ask price;
  (d) contains a toll-free telephone number for inquiries on disciplinary actions;
  (e) defines significant terms in the disclosure document or in the conduct of
  trading in penny stocks; and (f) contains such other information and is in such
  form 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:
  (a) with 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) 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 if it becomes subject to these penny stock
  rules. Therefore, if our common stock becomes subject to the penny stock rules,
  stockholders may have difficulty selling those securities.

HOLDERS OF OUR COMMON STOCK

As of August 30, 2004 we have ninety seven (97) 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
|--- | --------------------------------------------------------------------------------------------------

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|(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

We completed the following unregistered sales of shares of
  our common stock during the year ended April 30, 2004.

We issued 125,000 shares of our common stock on November 6,
  2003 to a purchaser at a price of $0.10 per share. The total amount we received
  from this offering was $12,500. These shares were issued pursuant to Section
  4(2) of the Securities Act of 1933, as amended (the "Securities Act") and are
  restricted shares as defined in the Securities Act.

We completed an offering of 275,000 shares of our common stock
  at a price of $0.10 per share to a total of three purchasers on November 6,
  2003. The total amount we received from this offering was $27,500. We completed
  the offering pursuant to Regulation S of the Securities Act. All securities
  issued pursuant to Regulation S of the Securities Act are deemed to be "restricted
  securities" as defined in Rule 144 of the Securities Act. The securities issued
  in the offering were endorsed with a restrictive legend confirming that the
  securities had been issued pursuant to Regulation S of the Securities Act and
  could not be resold without registration under the Securities Act or an applicable
  exemption from the registration requirements of the Securities Act.

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

FORWARD LOOKING STATEMENTS

Certain statements contained in this Annual Report on Form
  10-KSB that are forward-looking in nature are based on the current beliefs of
  our management as well as assumptions made by and information currently available
  to management, including statements related to our capital needs, business strategy
  and expectations, general trends in our operations or financial results, plans,
  expectations, estimates and beliefs. In addition, when used in this Annual Report
  on Form 10-KSB, the words "may," "could," "should," "anticipate," "believe,"
  "estimate," "expect," "intend," "plan," "predict" and similar expressions and
  their variants, as they relate to us or our management, may identify forward-looking
  statements. These statements reflect our judgment as of the date of this Annual
  Report on Form 10-KSB with respect to future events, the outcome of which are
  subject to risks, which may have a significant impact on our business, operating
  results or financial condition. You are cautioned that these forward-looking
  statements are inherently uncertain. Should one or more of these risks or uncertainties
  materialize, or should underlying assumptions prove incorrect, actual results
  or outcomes may vary materially from those described herein. We undertake no
  obligation to update forward-looking statements. The risks identified under
  the heading "Risk Factors" in this Annual Report on Form 10-KSB, among others,
  may impact forward-looking statements contained in this Annual Report on Form
  10-KSB.

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PLAN OF OPERATIONS

Our plan of operations 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.

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 of our exploration program has commenced and is expected
  to be completed in the fall season of 2004. The estimated costs of completing
  Phase II of our exploration program is approximately $7,500.

A decision on proceeding beyond the planned Phase II and Phase
  III explorations will be made by assessing whether the results of Phase II and
  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 II and 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.

We are currently proceeding with Phase II of our exploration
  program for the Peach Claim. We have sufficient cash on hand to pay the costs
  of Phase II of our proposed exploration program and will require additional
  financing to fund our operations for the next twelve months. We will also require
  additional financing in order to proceed with any additional work beyond Phase
  II of our exploration program.

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
  $25,000. Our cash on hand as at April 30, 2004 is $13,134. We have sufficient
  cash on hand to pay the costs of Phase II of our proposed exploration program;
  however, we will require further financing to fund our operations for the next
  twelve months. We will also require additional financing in order to proceed
  with any additional work beyond Phase II of our exploration program.

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RESULTS OF OPERATIONS

Year End Summary

|                  |                     |           |                             | 
|----------------- | ------------------- | --------- | --------------------------- | 
|                  | Year Ended April 30 |          
|                  |                     |           | Percentage                  | 
|                  | 2004                | 2003      | Increase
      / (Decrease) | 
|Revenue           | $ -                 | $-        | n/a                         | 
|Expenses          | $58,708             | $17,632   | 232%                        | 
|Net Income (Loss) | $(58,708)           | $(17,632) | 232%                        | 

Revenues

We have not earned any revenues to date. We do not anticipate
  earning revenues until such time as we enter into commercial production of our
  mineral properties. We are presently in the exploration stage of our business
  and we can provide no assurance that we will discover commercially exploitable
  levels of mineral resources on our properties, or if such deposits are discovered,
  that we will enter into further substantial exploration programs.

Operating Expenses

Our operating expenses were $58,708 for the year ended April
  30, 2004 compared to operating expenses of $17,632 for the year ended April
  30, 2003. Operating expenses for the years ended April 30, 2004 and 2003 included
  the following expenses:

|                               | Year Ended     | Year Ended    
|------------------------------ | -------------- | --------------
|Operating Expenses             | April 30, 2004 | April 30, 2003
|Professional fees              | $30,031        | $5,066        
|Office and sundry              | $1,383         | $3,616        
|Office facilities and services | $9,000         | $8,950        
|Regulatory expenses and fees   | $4,294         | $-            
|Mineral Exploration Expenses   | $14,000        | $-            

We incurred operating expenses in the amount of $58,708 for
  the year ended April 30, 2004 compared to operating expenses of $17,632 for
  the year ended April 30, 2003. Our operating expenses incurred during the year
  ended April 30, 2004 included the following: (a) office related fees in the
  amount of $10,383 and rent in the amount of $3,000; (b) professional fees in
  the amount of $30,031 in connection with our corporate organization and ongoing
  reporting obligations under the Exchange Act; and (c) mineral exploration expenses
  of $14,000. During the year ended April 30, 2004 we incurred an additional $9,000
  in audit fees due to our change in auditors and their subsequent review of our
  audited financial statements. See "Item 8. Changes in and Disagreements With
  Accountants on Accounting and Financial Disclosure".

We anticipate our operating expenses will increase as we undertake
  our plan of operations. The increase will be attributable to our completion
  of Phase II of our geological exploration program and the professional fees
  to be incurred in connection with our ongoing reporting obligations under the
  Exchange Act.

20

---

Net Loss

We recorded a net loss of $58,708 for the year ended April
  30, 2004, compared to a net loss of $17,632 for the comparative period in 2003.

We incurred a loss in the amount of $96,946 for the period
  from inception to April 30, 2004. Our loss during these periods was entirely
  attributable to operating expenses.

LIQUIDITY AND FINANCIAL CONDITION

Working Capital

|                                               |                   |                           | Percentage           
|---------------------------------------------- | ----------------- | ------------------------- | ---------------------
|                                               | At April 30, 2004 | At April 30, 2003         | Increase / (Decrease)
|Current Assets                                 | $13,134           | $10,112                   | 30%                  
|Current Liabilities                            | $26,830           | $5,100                    | 426%                 
|Working Capital (Deficit)                      | $(13,696)         | $5,012                    | (173)%               
|                                               |                   |                           |                      
|Cash Flows                                     |                   |                           |                      
|                                               |                   |                           |                      
|                                               |                   | Year Ended April
      30
|                                               |                   | 2004                      | 2003                 
|                                               |                   |                           |                      
|Cash Flows from (used in) Operating Activities |                   | $(36,978)                 | $(17,532)            
|Cash Flows from (used in) Investing Activities |                   | $ -                       | $ -                  
|Cash Flows from (used in) Financing Activities |                   | $40,000                   | $14,250              
|Net Increase (decrease) in Cash During Period  |                   | $3,022                    | $(3,282)             

We had cash on hand of $13,134 as at April 30, 2004, and a
  working capital deficit of $13,696 as of April 30, 2004 compared to working
  capital of $5,012 as of April 30, 2003. We anticipate that we will incur approximately
  $25,000for operating expenses, including professional legal and accounting
  expenses associated with our reporting requirements under the Exchange Act during
  the next twelve months.

Since our inception, we have used our common stock to raise
  money for the property acquisition, for corporate expenses and to repay outstanding
  indebtedness. We issued 4,000,000 shares of our common stock on March 9, 2001
  to a total of two purchasers at a price of $0.001 per share. The total amount
  we received from this offering was $4,000. These shares were issued pursuant
  to Section 4(2) of the United States Securities Act and are restricted shares
  as defined in the Securities Act.

We completed an offering of 2,500,000 shares of our common
  stock at a price of $0.01 per share to a total of 11 purchasers on August 15,
  2001. The total amount we received from this offering was $25,000. We completed
  the offering pursuant to Regulation S of the Securities Act.

We completed an offering of 142,500 shares of our common stock
  at a price of $0.10 per share to a total of 80 purchasers on September 30, 2002.
  The total amount we received from this offering was $14,250. We completed the
  offering pursuant to Regulation S of the Securities Act.

We issued 125,000 shares of our common stock on November 6,
  2003 to a purchaser at a price of $0.10 per share. The total amount we received
  from this offering was $12,500. These shares were issued pursuant to Section
  4(2) of the Securities Act and are restricted shares as defined in the Securities
  Act.

21

---

We completed an offering of 275,000 shares of our common stock
  at a price of $0.10 per share to a total of three purchasers on November 6,
  2003. The total amount we received from this offering was $27,500. We completed
  the offering pursuant to Regulation S of the Securities Act.

We have not attained profitable operations and are dependent
  upon obtaining financing to pursue any extensive exploration activities. For
  these reasons our auditors stated in their report that they have substantial
  doubt we will be able to continue as a going concern.

Financing Requirements

From inception to April 30, 2004, we have suffered recurring
  losses in the amount of $96,946 and net cash outflows from operations. We expect
  to continue to incur substantial losses until we complete the development of
  our business.

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 April 30, 2004,
  we had cash in the amount of $13,134. We currently do not have any operations
  and we have no income. Our plan of operations calls for significant expenses
  in connection with the exploration of our mineral claim. We have sufficient
  cash on hand to complete Phase II of our proposed exploration program. However,
  we may need additional financing to proceed past Phase II of our exploration
  program. We may also require additional financing if the costs of the exploration
  of our mineral claim are greater than anticipated. We may 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.

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 that are material
  to our stockholders.

22

---

ITEM 7.              FINANCIAL
  STATEMENTS.

Index to Financial Statements

|                        |                                                       | PAGE
|----------------------- | ----------------------------------------------------- | ----
|                        |                                                      
|Auditors' Report        | F-2                                                  
|                        |                                                      
|Financial Statements:   |                                                      
|                        |                                                       |     
|                        | Balance Sheet                                         | F-3 
|                        |                                                       |     
|                        | Statement of Operations and Accumulated
      Deficit | F-4 
|                        |                                                       |     
|                        | Statement of Changes in Stockholders'
      Equity    | F-5 
|                        |                                                       |     
|                        | Statement of Cash Flows                               | F-6 
|                        |                                                       |     
|                        | Notes to Financial Statements                         | F-7 
|                        |                                                      
|Supplemental Statement: |                                                      
|                        |                                                       |     
|                        | Statement of Operating Expenses                       | F-11

23

---

**TERRACE VENTURES INC.**

FINANCIAL STATEMENTS

APRIL 30, 2004 AND APRIL 30, 2003





F-1

---

|SARNA & COMPANY |  |             |            |         
|--------------- |  | ----------- | ---------- | --------
|Certified       |  |             |            |         
|Public          |  |             |            |         
|                |  |             |            |         
|                |  |             |            |         
|Accountants     |  |             |            |         
|                |  | 310         | Westlake   | 805     
|                |  | N. Westlake | Village    | 371-8900
|                |  | Boulevard   | California | Fax 805 
|                |  | Suite 270   | 91362      | 79-0140 

INDEPENDENT AUDITORS' REPORT

To the Board of Directors 
  Terrace Ventures Inc.

We have audited the accompanying balance sheet of Terrace
  Ventures Inc., an exploration stage company, as of April 30, 2004 and April
  30, 2003 and the related statements of operations and accumulated deficit, changes
  in stockholders' equity, and statement of cash flows for the years then ended.
  These financial statements are the responsibility of Terrace Ventures' management.
  Our responsibility is to express an opinion on these financial statements based
  on our audits.

We conducted out audit in accordance with generally accepted
  auditing standards. 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 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 audit provides
  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. as of April 30, 2004 and April 30, 2003, and the results of its
  operations, changes in stockholders' equity and cash flows for the years then
  ended, in conformity with generally accepted accounting principles.

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"
  Sarna & Company
  Certified Public Accountants 
  June 14, 2004

---

**TERRACE VENTURES INC.**
  (AN EXPLORATION STAGE COMPANY)
  BALANCE SHEET

|ASSETS                                |  
|------------------------------------- | -
|                                      |  
|                                      |  
|                                      |  
|                                      |  
|                                      |  
|Current Assets                        |  
|Cash                                  | $
|Total
      Current Assets            |  
|                                      |  
|                                      |  
|TOTAL ASSETS                          | $
|                                      |  
|                                      |  
|LIABILITIES AND STOCKHOLDERS' EQUITY  |  
|                                      |  
|                                      |  
|                                      |  
|Current Liabilities                   |  
|Accounts Payable and Accrued Expenses | $
|                                      |  
|Total
      Current Liabilities       |  
|                                      |  
|Stockholders' Equity                  |  
|Common Stock, $0.001 par value        |  
|100,000,000
      shares authorized,  |  
|7,042,500
      shares and 6,642,500  |  
|issued                                |  
|Additional Paid in Capital            |  
|Accumulated deficit                   |  
|Total
      Stockholders' Equity      |  
|                                      |  
|TOTAL LIABILITIES AND                 |  
|STOCKHOLDERS' EQUITY                  | $

See Notes to Financial Statements

F-3

---

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

|                           |   | YEAR ENDED     |   |   | YEAR ENDED           |   |   | INCEPTION-      |  
|-------------------------- | - | -------------- | - | - | -------------------- | - | - | --------------- | -
|                           |   | APRIL 30, 2004 |   |   | APRIL
      30, 2003 |   | $ | APRIL  30, 2004 |  
|                           |   |                |   |   |                      |   |   |                 |  
|Revenues                   | $ | -0-            |   | $ | -0-                  |   |   | -0-             |  
|                           |   |                |   |   |                      |   |   |                 |  
|Operating Expenses         |   | (58,708        | ) |   | (17,632              | ) |   | (96,946         | )
|                           |   |                |   |   |                      |   |   |                 |  
|Loss Before Provision for  |   | (58,708        | ) |   | (17,632              | ) |   | (96,946         | )
|Income Taxes               |   |                |   |   |                      |   |   |                 |  
|                           |   |                |   |   |                      |   |   |                 |  
|Provision for Income Taxes |   | (0             | ) |   | (0                   | ) |   | (0              | )
|                           |   |                |   |   |                      |   |   |                 |  
|Net Loss                   |   | (58,708        | ) |   | (17,632              | ) |   | (96,946         | )
|                           |   |                |   |   |                      |   |   |                 |  
|Deficit, Beginning         |   |                |   |   |                      |   |   |                 |  
|of Period                  |   | (38,238        | ) |   | (20,606              | ) |   | (0              | )
|                           |   |                |   |   |                      |   |   |                 |  
|Accumulated Deficit, End   |   |                |   |   |                      |   |   |                 |  
|of Period                  | $ | (96,946        | ) | $ | (38,238              | ) | $ | (96,946         | )
|                           |   |                |   |   |                      |   |   |                 |  
|                           |   |                |   |   |                      |   |   |                 |  
|Net Loss per Share         | $ | (0.01          | ) | $ | (0.01                | ) | $ | (0.01           | )
|                           |   |                |   |   |                      |   |   |                 |  
|Weighted Average           |   |                |   |   |                      |   |   |                 |  
|Shares Outstanding         |   | 6,589,063      |   |   | 6,589,063            |   |   | 5,622,917       |  

See Notes to Financial Statements

F-4

---

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

|                    | 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    | 125,000      |  |   | 12         |  |   | 12,488      |  |   | ----    |  
|                    |              |  |   |            |  |   |             |  |   |         |  
|Common Stock Issued |              |  |   |            |  |   |             |  |   |         |  
|$0.10 per share     |              |  |   |            |  |   |             |  |   |         |  
|November 6, 2003    | 275,000      |  |   | 28         |  |   | 27,472      |  |   | ----    |  
|                    |              |  |   |            |  |   |             |  |   |         |  
|Net Loss            |              |  |   |            |  |   |             |  |   |         |  
|Period Ended        |              |  |   |            |  |   |             |  |   |         |  
|April 30, 2004      | ----         |  |   | ----       |  |   | ----        |  |   | (58,708 | )
|                    |              |  |   |            |  |   |             |  |   |         |  
|Balances            |              |  |   |            |  |   |             |  |   |         |  
|April 30, 2004      | 7,042,500    |  | $ | 704        |  | $ | 82,546      |  | $ | (96,946 | )

See Notes to Financial Statements

F-5

---

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

|                                       |   | YEAR ENDED   |   |   | YEAR ENDED   |   |   | INCEPTION-   |  
|-------------------------------------- | - | ------------ | - | - | ------------ | - | - | ------------ | -
|                                       |   | APR 30, 2004 |   |   | APR 30, 2003 |   |   | APR 30, 2004 |  
|Cash Flows from                        |   |              |   |   |              |   |   |              |  
|Operating Activities:                  |   |              |   |   |              |   |   |              |  
|                                       |   |              |   |   |              |   |   |              |  
|Net Loss                               | $ | (58,708      | ) | $ | (17,632      | ) | $ | (96,946      | )
|Increase (Decrease)                    |   |              |   |   |              |   |   |              |  
|Accounts Payable                       |   | 21,730       |   |   | 100          |   |   | 26,830       |  
|                                       |   |              |   |   |              |   |   |              |  
|Net Cash (Used) Provided
      by      |   |              |   |   |              |   |   |              |  
|Operating Activities                   |   | (36,978      | ) |   | (17,532      | ) |   | (70,166      | )
|                                       |   |              |   |   |              |   |   |              |  
|Cash Flows from                        |   |              |   |   |              |   |   |              |  
|Financing Activities:                  |   |              |   |   |              |   |   |              |  
|                                       |   |              |   |   |              |   |   |              |  
|Proceeds from Issuance of              |   |              |   |   |              |   |   |              |  
|Common Stock                           |   | 40,000       |   |   | 14,250       |   |   | 83,250       |  
|                                       |   |              |   |   |              |   |   |              |  
|Cash Provided by                       |   |              |   |   |              |   |   |              |  
|Financing Activities                   |   | 40,000       |   |   | 14,250       |   |   | 83,250       |  
|                                       |   |              |   |   |              |   |   |              |  
|Cash Flows from                        |   |              |   |   |              |   |   |              |  
|Investing Activities                   |   |              |   |   |              |   |   |              |  
|                                       |   |              |   |   |              |   |   |              |  
|Exploration and Property
      Rights: |   | -0-          |   |   | -0-          |   |   | -0-          |  
|                                       |   |              |   |   |              |   |   |              |  
|Cash Used by                           |   |              |   |   |              |   |   |              |  
|Investing Activities                   |   | -0-          |   |   | -0-          |   |   | -0-          |  
|                                       |   |              |   |   |              |   |   |              |  
|Net Increase (Decrease) in Cash        |   | 3,022        |   |   | (3,282       | ) |   | 13,134       |  
|                                       |   |              |   |   |              |   |   |              |  
|Cash at Beginning of Period            |   | 10,112       |   |   | 13,394       |   |   | -0-          |  
|                                       |   |              |   |   |              |   |   |              |  
|Cash at End of Period                  | $ | 13,134       |   | $ | 10,112       |   | $ | 13,134       |  

See Notes to Financial Statements

F-6

---

**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.

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.

F-7

---

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

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 Taxes

The 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 Instruments

Financial 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.

Per Share Information

The 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.

F-8

---

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

NOTE 2 - PROVISION FOR INCOME TAXES

The provision for income taxes for the periods ended April
  30, 2004 and April 30, 2003 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.

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 $96,946 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

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SUPPLEMENTAL STATEMENT









F-10

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

|                         |   | YEAR ENDED          |  |   | YEAR ENDED     |   |   | INCEPTION-     | 
|------------------------ | - | ------------------- |  | - | -------------- | - | - | -------------- | 
|                         |   | APRIL
      30,2004 |  |   | APRIL  30,2003 |   |   | APRIL 30, 2004 | 
|                         |   |                     |  |   |                |   |   |                | 
|Operating Expenses       |   |                     |  |   |                |   |   |                | 
|Accounting               | $ | 15,920              |  | $ | 1,500          |   | $ | 17,420         | 
|Exploration Expense      |   | 14,000              |  |   | -0             | - |   | 24,266         | 
|Legal                    |   | 14,111              |  |   | 3,566          |   |   | 22,997         | 
|Office Administration    |   | 6,000               |  |   | 6,000          |   |   | 14,500         | 
|Office Expenses          |   | 28                  |  |   | 1,061          |   |   | 1,498          | 
|Regulatory Expenses/Fees |   | 4,294               |  |   | -0             | - |   | 4,294          | 
|Rent                     |   | 3,000               |  |   | 2,950          |   |   | 7,950          | 
|Telephone                |   | 720                 |  |   | 624            |   |   | 1,344          | 
|Travel & Entertainment   |   | 635                 |  |   | 1,931          |   |   | 2,677          | 
|                         |   |                     |  |   |                |   |   |                | 
|Total Operating Expenses | $ | 58,708              |  | $ | 17,632         |   | $ | 96,946         | 

See Notes to Financial Statement

F-11

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

On March 18, 2004, Morgan & Company resigned as our independent
  accountants. On March 18, 2004 our board of directors decided to engage Sarna
  & Company, to serve as our independent accountants and approved the change
  of independent accountants. We made the decision to change our auditors pursuant
  to the SEC's request that we retain a U.S. auditor and to comply with certain
  of the registration requirements of the Public Company Accounting Oversight
  Board ("PCAOB") which prohibit accounting firms that are not registered with
  the PCAOB from preparing or issuing audit reports on U.S. public companies or
  from participating in these activities.

The reports of Morgan & Company on our consolidated financial
  statements for the past two fiscal years contained no adverse opinion or disclaimer
  of opinion, and, except for a "going concern" qualification, were not qualified
  or modified as to audit scope or accounting principles.

During our two most recent fiscal years, and the subsequent
  interim periods preceding Morgan & Company's resignation, we had no disagreements
  with Morgan & Company on any matter of accounting principles or practices,
  financial statement disclosure, or auditing scope or procedure, which disagreements,
  if not resolved to the satisfaction of Morgan & Company, would have caused
  Morgan & Company to make reference to the subject matter of the disagreement
  in connection with its reports on our financial statements for such years and
  interim periods. We believe that during our two most recent fiscal years and
  the subsequent interim periods preceding Morgan & Company's resignation,
  there were no "reportable events," as defined in Item 304(a)(1)(v) of Regulation
  S-K.

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 quarter, 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 effect, our internal controls
        over financial reporting.                                                                                                                                                                                                                                                                                                        

24

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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:

|Name             | Age | Position                                                  
|---------------- | --- | ----------------------------------------------------------
|                 |     |                                                           
|Gordon F. Burley | 65  | Director, President and Chief Executive Officer           
|                 |     |                                                           
|Ryan S. McCleery | 29  | 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 second phase of our exploration
  program.

25

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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. 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 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, 2004 all such filing requirements
  applicable to our officers and directors were complied with.

26

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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,
  2004. 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, 2004. No stock options
  have been exercised since April 30, 2004.

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.

27

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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 August 30,
  2004 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 | 42.6%                        
|Common Stock                     | Ryan S. McCleery,   Director , Chief Financial
      Officer,   Secretary and Treasurer   2033 Comox Street 
       Vancouver, BC V6G 1S1   | 1,000,000 Shares of Common Stock Direct       | 14.1%                        
|Common Stock                     | All Directors and Executive   Officers
      as a Group (2 persons)                                                                         | 4,000,000 Shares of Common Stock              | 56.7%                        

|(1) | Based on 7,042,500 shares of our common stock issued
        and outstanding as of August 30, 2004. 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 August 30, 2004.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

CHANGE IN CONTROL

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

28

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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, 2004.

|                                                             | Number of Securities  
      to be Issued Upon   Exercise of   Outstanding Options, 
       Warrants and Rights | Weighted-Average   Exercise
      Price of   Outstanding Options,   Warrants and Rights | Number of Securities  
      Remaining Available   for Future Issuance   Under Equity 
       Compensation Plans   (Excluding Securities   Reflected
      in column   (a))
|------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Plan Category                                                | (a)                                                                                                             | (b)                                                                                     | (c)                                                                                                                                                                        
|Equity Compensation Plans   Approved By Security Holders     | 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 Mr.
  Burley our president, each of which are sophisticated individuals and by way
  of their positions are in a position of access to relevant and material information
  regarding our operations.

29

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ITEM 13.             EXHIBITS
  AND REPORTS ON FORM 8-K.

(a)            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.                                                                                                                                                
|               |                                                                                                                                                                
|23.1           | Consent of Sarna & Company, Certified Public
      Accountants.(1)                                                                                             
|               |                                                                                                                                                                
|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.

(b)            Reports
  on Form 8-K.

We did not file any current reports on Form 8-K during the last quarter of our fiscal year ended April 30, 2004.

30

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ITEM 14.             PRINCIPAL
  ACCOUNTANT FEES AND SERVICES

Audit Fees

During the fiscal years ended 2004 and 2003, we retained our
  independent auditor, Sarna & Company, Certified Public Accountants, to provide
  services in the following categories and amounts:

|                   | Year Ended April 30, 2004 | Year Ended April 30, 2003
|------------------ | ------------------------- | -------------------------
|Audit Related Fees | $15,920                   | $1,500                   
|Tax Fees           | -                         | -                        
|All Other Fees     | -                         | -                        
|Total              | $15,920                   | $1,500                   




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.

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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: September 7, 2004              

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: September 7, 2004                                              | 
|    |                                                                      | 
|    |                                                                      | 
|    |                                                                      | 
|    |                                                                      | 
|By: | /s/ Ryan S. McCleery                                                 | 
|    | RYAN S. McCLEERY                                                     | 
|    | Secretary, Treasurer and Chief Financial Officer                     | 
|    | (Principal Financial Officer and Principal Accounting
      Officer) | 
|    | Director                                                             | 
|    | Date: September 7, 2004                                              | 

32

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