U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                   FORM 10-KSB


[X]  Annual report under Section 13 or 15 (d) of the Securities  Exchange Act of
     1934 for the fiscal year ended September 30, 2003

[ ] Transition   report under Section 13  or 15 (d) of the  Securities  Exchange
     Act of 1934 for the transition period from _____________to _____________

                        Commission File Number 000-25170

                          CADENCE RESOURCES CORPORATION
                 (Name of Small Business Issuer in Its Charter)

           Utah                                                87-0306609
(State or Other Jurisdiction of                             (I.R.S. Employer
Incorporation or Organization)                              Identification No.)

      6 East Rose Street
   Walla Walla, Washington                                        99362
  (Address of Principal Executive Offices)                      (Zip Code)

                                 (509) 526-3491
                (Issuer's Telephone Number, Including Area Code)

Securities registered under Section 12(b) of the Exchange Act:
<TABLE>
<CAPTION>

                                                                                     Name of Each Exchnage
            Title of Each Class                                                       on Which Registered
            -------------------                                                       -------------------
<S>                 <C>                                                             <C>
                    NONE                                                                     N/A


Securities registered under Section 12(g) of the Exchange Act:                      Common Stock, par value, $0.01
                                                                                   -------------------------------
                                                                                           (Title of class)
</TABLE>
Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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 past 90 days.

Yes          x              No
     ---------------------      -----------------

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and will not 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. 9

State issuer's revenues for its most recent fiscal year:  $387,355

The  aggregate  market  value  of  the  voting  and  non-voting  stock  held  by
non-affiliates  of the  registrant  as of November 30, 2003,  was  approximately
$18,322,065. For purposes of this computation, all executive officers, directors
and 10% stockholders were deemed affiliates.  Such a determination should not be
construed  as an  admission  that  such  executive  officers,  directors  or 10%
stockholders are affiliates.

As of November 30, 2003,  there were  12,582,827  shares of the common stock, no
par value, of the registrant issued and outstanding.


Transitional Small Business Disclosure Format: Yes               No      x
                                                   ------             -------


<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS

Item                                                                                                            Page
----                                                                                                            ----
                                     PART I

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

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters................................................15
Item 6.  Management's Discussion and Analysis or Plan of Operations..............................................18
Item 7.  Financial Statements....................................................................................21
Item 8.  Changes in and Disagreements with Accountants...........................................................21
Item 8A. Controls and Procedures.................................................................................21

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons............................................21
Item 10.  Executive Compensation.................................................................................23
Item 11.  Security Ownership of Certain Beneficial Owners and Management.........................................26
Item 12.  Certain Relationships and Related Transactions.........................................................27
Item 13.  Exhibits and Reports on Form 8-K.......................................................................30

Financial Statements
         Independent Auditor's Report............................................................................F-1
         Balance Sheets as of September 30, 2003, 2002 and 2001..................................................F-2
         Statements of Operations and Comprehensive Loss for the years ended September 30, 2003, 2002
                  and 2001.......................................................................................F-4
         Statement of Stockholder's Equity.......................................................................F-5a
         Statements of Cash Flows for the years ended September 30, 2003, 2002 and 2001..........................F-8
         Notes to the Financial Statements.......................................................................F-10
</TABLE>



<PAGE>
                                     PART I

     This  report  contains  forward-looking  statements  within the  meaning of
Section 27A of the Securities Act of 1933, as amended  ("Securities  Act"),  and
Section 21E of the  Securities  Exchange Act of 1934, as amended (the  "Exchange
Act").  These  forward-looking  statements  are  subject  to  certain  risks and
uncertainties  that  could  cause  actual  results  to  differ  materially  from
historical  results or  anticipated  results,  including  those set forth  under
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" and elsewhere in, or incorporated by reference into, this report.

Item 1.  Description of Business

     We are an  independent  oil and gas company,  with  operations in Wilbarger
County,  Texas, DeSoto Parish,  Louisiana and Alpena County,  Michigan.  We also
have leased  interests in western Kansas and southern  Texas.  We are engaged in
acquiring, exploring, developing, and producing oil and gas properties.

     As of September  30, 2003,  substantially  all of our revenues were derived
from our  interests  in five oil wells in Texas,  but we had  recently  begun to
produce  natural  gas  from our  properties  in  DeSoto  Parish,  Louisiana.  We
currently  plan to focus on the  development  of these DeSoto Parish natural gas
properties.  Our short-term  development  plans for the DeSoto Parish properties
include jointly  developing with Bridas Energy USA, Inc. one new gas well in the
first quarter of calendar  2004, in addition to the five existing  wells on such
property, and  thereafter,  to  develop  gas  wells at a rate of one per  month,
provided  we are able to fund our share of the costs of such  wells.  We plan to
develop  our  Texas  oil  properties  and  those in  Michigan  as  finances  and
managerial  resources  permit.  Additionally,  over the next six  months we will
evaluate  potential  oil  reserves  on our new Kansas  leasehold  interests  and
potential reserves on our new Texas leasehold  interests to determine whether we
will drill on such property.

     We are a Utah  corporation,  originally  incorporated  on April 7,  1969 to
explore  and mine  natural  resources  under the name Royal  Resources,  Inc. In
January  1983,  we changed our name to Royal  Minerals,  Inc. In March 1994,  we
changed our name to Consolidated Royal Mines, Inc. In September 1995, we changed
our name to Royal  Silver  Mines,  Inc.  On May 2, 2001 we  changed  our name to
Cadence Resources Corporation,  in connection with a corporate reorganization to
focus our operations on oil and gas exploration.

Oil and Natural Gas Operations

DeSoto Parish, Louisiana

     Since April  2003,  we and Bridas  Energy have begun to develop  over 4,250
acres located in a natural gas field in west central DeSoto  Parish,  Louisiana,
approximately 40 miles south of Shreveport,  Louisiana. As of November 30, 2003,
we had  three  producing  wells  in this  field,  one of which  has  just  begun
producing in  mid-November  2003.  During the month of September  2003,  the two
established  wells  produced  natural  gas  at  an  aggregate  average  rate  of
approximately 2,689 Mcf per day, which reflects only a partial completion of the
wells. As of December 31, 2003, these two wells were fully completed, and we had
completed  drilling  our fourth and fifth wells in this  field.  The fourth well
began to produce during December 2003 and we currently anticipate the fifth well
to begin producing in January 2004.

     We first  leased  property  in  DeSoto  Parish  in the  summer  of 2001 and
throughout  2002.  Our acreage is southwest of the Holly Field and  southeast of
the Bethany Longstreet Field, both extensively  drilled and developed since 1996
by Sonat (now El Paso  Corporation).  In April 2003, we contributed these leases
to a joint  exploration  and development  program with Bridas Energy,  which has
operations in the  Texas-Louisiana  Gulf Coast area. Under this program,  Bridas
Energy is the  operator  of the DeSoto  Parish  properties.  Bridas  Energy is a
wholly-owned  subsidiary of Bridas Corporation,  an  Argentinean-based  private,
independent energy company with headquarters in Buenos Aires. Bridas Corporation
is active in all areas of energy production, including exploration,  production,
transportation,  storage and shipment, as well as power generation.  In addition
to  substantial  oil and natural gas  reserves  owned in South  America,  Bridas
Corporation  explores  and  produces  in the U.S.  and has  activities  in Latin
America, the Middle East and Europe.

     Under the terms of our April 2003 joint  exploration  agreement with Bridas
Energy,  we assigned Bridas Energy a 55% working  interest in all of the acreage
constituting  the area of mutual  interest of our DeSoto Parish

                                       1

<PAGE>

leases in return for a cash payment of $50,000. Bridas Energy agreed to fund all
costs of drilling,  completing and bringing to production the initial test well,
the Ardis-Martin  Timber Co. #1, drilled during June 2003, in Section 27 of this
prospect.  Upon  successful  completion  of  this  test  well,  we  conveyed  an
additional  20%  working  interest  to Bridas  Energy in that well and all other
leases  covering  acreage in Section 27,  leaving us a 25%  working  interest in
Section 27. We retain a 45%  working  interest in all other wells and acreage in
this prospect.

     As of November 30, 2003, our three  producing  wells in DeSoto Parish,  the
Ardis-Martin  Timber  Co.  #1 and the Mary  Belle  Smith  #1,  both of which are
located in Section 27, and the J.B.  Barr #28-1,  which is located in Section 28
to the west of Section 27, were producing from the Cotton Valley formation.  The
Hosston formation, which lies generally between about 6,450 and 8,950 feet, is a
sand and shale sequence with tight  gas-bearing  sands in thick  intervals.  The
Cotton Valley formation lies immediately below the Hosston,  with the best sands
typically extending to about 10,300 feet. The Ardis-Martin well was drilled to a
depth of 10,262 feet and well logs  indicate that there are over 100 feet of pay
in the Cotton  Valley  formation  and over 200 feet of pay in the  Hosston  sand
formation. The Mary Belle Smith well was drilled to a total depth of 10,300 feet
and well logs  indicate that there are over 100 feet of pay in the Cotton Valley
formation and over 250 feet of pay in the Hosston sand formation.  We have a 25%
working  interest  and an  approximate  20% net  revenue  interest  in these two
producing wells.  The Barr well was drilled to a depth of  approximately  10,800
feet and well  logs  indicate  that  there are over 115 feet of gross pay in the
Cotton  Valley  formation  and over 260 feet of gross  pay in the  Hosston  sand
formation.  We have a 45% working  interest and an  approximate  36% net revenue
interest in this well, which began producing in mid-November 2003.

     As of December 31,  2003,  we had  completed  drilling our fourth and fifth
wells in this prospect.  Our fourth well,  the Eva Gamble #32-1,  was drilled in
Section 32,  approximately  1 1/2 miles to the  southwest of the Barr well, to a
depth of 10,300 feet and was logged and began  producing in December 2003.  Well
logs indicate  that this well has 95 feet of pay in the Cotton Valley  formation
and 73 feet of pay in the Hosston  sand  formation.  Our fifth  well,  the Lewis
#29-1, was drilled in Section 29, also to a depth of 10,300 feet, and was logged
in early January 2004.  Well logs indicate that this well has 114 feet of pay in
the Cotton Valley formation and 73 feet of pay in the Hosston sand formation. We
expect  this well to begin  producing  in January  2004.  We have a 45%  working
interest and a 36% net revenue interest in these two wells.

     The DeSoto Parish  properties are located on a major  anticlinorium  on the
southeast side of the Sabine Uplift. The Sabine Uplift is a large structure that
is related to the  cretaceous and younger rocks in the  established  oil and gas
fields of northeast Texas and northern Louisiana. In this area, wells from these
formations  typically  return drilling and completion  costs quickly and rapidly
produce  approximately  35% to 50% of the well's reserves in the first 24 months
of production, with the remainder produced over 12 to 15 years. Our drilling and
completion  costs for these DeSoto Parish  wells,  to the 8/8ths  interest,  are
approximately  $1.25  million  to $1.3  million  per well.  Because  of the long
history of oil and gas  production  in this area,  it is one of the areas of the
country most easily  accessible by both interstate and intrastate gas pipelines.
Due to the extensive data  available on the dominant  geological  features,  our
future plans in this field include only development activities. Our current goal
is  to  continue  to  drill  development  wells  in  this  field  at a  rate  of
approximately  one well per month  during the first  quarter of  calendar  2004,
potentially  increasing  to two  wells  per  month  in the  second  quarter  and
thereafter, until the acreage has been fully developed,  provided we are able to
fund our  share of the  costs of  drilling  such  wells  out of cash  flow  from
operations  or other  sources.  We have no current  plans to conduct any further
seismic study of this field.

Wilbarger County, Texas

     Our oil  production  comes from the  Waggoner  Ranch in  Wilbarger  County,
Texas,  approximately  50 miles northwest of Wichita Falls,  Texas, and 15 miles
south of the Oklahoma border. Since October 2001, we have conducted  exploration
activities on the Waggoner Ranch, a large,  privately-held  ranch from which oil
and gas has been produced since 1910. The W.T.  Waggoner  Estate is the operator
of all of our  wells  on the  Waggoner  Ranch  and  the  sole  purchaser  of all
production from these  properties.  We logged our first  productive well in this
field in January 2002. During the month of September 2003, we owned interests in
five wells on these properties,  producing an aggregate of approximately 163 net
working  interest  barrels per day, to the 8/8ths  interest,  of 35(degree)  API
sweet crude oil.

     The major  geologic  feature  in this part of north  Texas is the Red River
Arch, which consists of Permian and Leonardon  shales and sands.  This structure
has  historically  produced  more than 150 million  barrels of oil from

                                       2

<PAGE>

several geologic features, including the Canyon limestone formation. Our primary
targets on this prospect are oil-bearing  pinnacle reefs in the Canyon limestone
formation, typically located between 3,000 and 3,600 feet. In addition, numerous
"stacked"  oil-bearing  shallower horizons are also known to exist in this area.
These zones are also primary targets of our exploration.

     We are  producing  oil from only two areas of the  Ranch:  the east side of
Electra  Lake,  referred  to as the Virgin Reef  Prospect,  and the west side of
Electra  Lake,  referred  to as the  West  Electra  Lake  Prospect.  We have two
currently producing wells on the Virgin Reef Prospect,  the #1A in which we have
a 60% working  interest and a 45.6% net revenue  interest  and the #1B well,  in
which we have 100% working interest and a 76% net revenue interest. The #1A well
was logged in January 2002 and shows four pay zones between 2,400 feet and 3,002
feet.  This well is  currently  completed in the lower Milham Sand at a depth of
approximately  2,500 feet.  This well produced an average of  approximately  100
barrels per day during  September  2003.  The #1B well produced only a nominal 3
barrels of oil per day during September 2003. We are exploring the prospects for
re-working  this  well.  We also  drilled  two other  wells on the  Virgin  Reef
Prospect:  the #2A well in May  2002,  which  targeted  the  lower  Milham  Sand
formation,  and the #2B well in December 2002, which targeted a reef prospect in
the Canyon limestone formation. The #2B well was a dry hole and the #2A well was
only marginally productive, so we converted the #2A well to a saltwater disposal
well. Because of the shallow nature of the wells in this prospect,  drilling and
completion  costs have ranged  between  approximately  $160,000 and $180,000 per
well, on an 8/8ths basis. The typical  production  profile of wells in the lower
Milham Sand formation is a steady decline of approximately 15% per year.

     In August 2002, we began developing the West Electra Lake Prospect with the
operator,  the W.T.  Waggoner  Estate.  We logged  our  first  well in the first
quarter of calendar 2003. We have three producing wells in this prospect, all of
which are producing from the upper Milham Sand at a depth of approximately 2,600
feet.  The first well,  the West Electra Lake #1, in which we have a 45% working
interest  and a 34.2% net  revenue  interest,  has 10 feet of net pay.  The West
Electra Lake #2 and #3 wells, in which we have a 50% working  interest and a 38%
net revenue interest, were both drilled in June 2003 and encountered 10 feet and
11 feet of net pay,  respectively,  in the same  zone.  These  three  wells  are
subject to Texas  Railroad  Commission  production  limits and during  September
2003, produced at a maximum allowable rate of an aggregate of 120 barrels of oil
per day, with the pumps  operating for only eight hours per day. At this time we
expect that rate of production to continue for at least the next two years.

     The Virgin Reef  Prospect  consists of  approximately  160 acres.  The West
Electra  Lake  Prospect  consists of an aggregate of 532 acres under lease and a
1/2 mile area of mutual interest  surrounding  such acreage.  In August 2002, we
signed an  exploration  agreement  with the Waggoner Ranch on 1,000 acres in the
West Electra Lake Prospect, with a surrounding 1/2 mile area of mutual interest,
from which our  current  production  comes.  We plan to shoot 3-D  seismic in or
adjacent  to the area of  mutual  interest  surrounding  the West  Electra  Lake
Prospect  starting in the first quarter of calendar 2004 to identify  additional
acreage we wish to lease and further delineate possible drilling targets for the
first quarter of calendar  2004.  We are also pursuing  options on an additional
4,256 acres in the West Electra Lake Prospect,  which we also plan to include in
a future 3-D  seismic  study.  Depending  on the results of a recent 3-D seismic
program in the Virgin Reef area and the 3-D seismic program planned for the West
Electra Lake  prospect in the first  quarter of calendar  2004,  we may elect to
drill from two to twelve more wells on the Waggoner  Ranch in 2004. We currently
anticipate that we will have  identified  several  drilling  targets in the West
Electra Lake  Prospect by the end of the first quarter of calendar 2004 and will
begin  drilling  one test well for each  structure  we  locate by the  middle of
calendar 2004.

Alpena County, Michigan

     In December 2002, we began  participating in a natural gas drilling program
in Alpena County,  Michigan with Aurora Energy, Ltd. As of November 30, 2003, we
had a 22.5% working interest (before payout, 20% after payout),  18% net revenue
interest (before payout,  16% after payout),  in eight producing wells in Alpena
County.  Production  commenced  from  this  field  in June  2003  and our  eight
producing  wells  produced at an average  aggregate  rate of  approximately  450
Mcf/day during  November  2003.  Aurora is the operator of all our properties in
Alpena County.

                                       3
<PAGE>

     The target of this prospect is the well-known  Antrim shale  formation that
has yielded  natural gas  production  from more than 7,500 wells along a 30 mile
thick trend  stretching  from Lake  Michigan to Lake  Huron.  Our  participation
agreement with Aurora Energy,  Ltd., gives us participation  rights in up to 200
wells to be drilled by Aurora into the Antrim  shale to depths of  approximately
800 to 1,000 feet. We will have a 22.5% working  interest  (before  payout,  20%
after payout) and an 18% net revenue interest (before payout,  16% after payout)
in all of the wells drilled. The initial test program was for 10 wells, of which
eight were  producing  as of  November  30,  2003.  We expect  these wells to be
producing by the end of February 2004

     Antrim shale wells  typically cost  approximately  $180,000 to $200,000 per
well to drill and complete and typically pay out in approximately  three to four
years.  Production  typically peaks at  approximately  six to 18 months and then
follows a slow decline curve of approximately  30 to 40 years.  Aurora currently
has sufficient acreage under lease in Michigan for an estimated 250 to 300 wells
and is very actively  assessing other property with Antrim shale  potential.  We
will continue to review drilling  proposals on new wells to be drilled by Aurora
and determine whether we will participate on a well-by-well basis.

Western Kansas

     Our newest oil exploration project is in the Anadarko Basin in west central
Kansas.  As of December 31, 2003, we had completed our first leasing  program in
the area,  consisting  of  approximately  10,000  acres.  We have a 100% working
interest  and an 82% net revenue  interest in these  leases.  As of December 31,
2003,  we had begun a second  leasing  program in another  area in this field of
interest to the Company, with an objective of leasing up to an additional 10,000
acres by the end of the second  calendar  quarter of 2004.  We will obtain a 3-D
seismic  study on all of the acquired  acreage in each of the projects  prior to
making a  decision  to drill any test  wells on such  acreage.  We plan to use a
local third-party  operator to develop these prospects,  and we currently expect
to begin drilling on the acquired acreage in May or June of 2004.

Southern Texas

     As of December 31, 2003, we had leased 58 acres in Matagorda County, Texas,
on a salt dome  prospect.  We  currently  intend to shoot  3-D  seismic  on this
prospect in February  2004, and after  evaluating  such data, to drill the first
test well on the prospect in April 2004.

Oil Reserves

     The following table presents  information  regarding proved reserves of oil
attributable  to our  interests in  producing  properties  in Wilbarger  County,
Texas,  as of October 1, 2003. The  information  regarding  reserves is based on
proved reserves reports prepared by Ralph E. Davis  Associates,  Inc.,  Houston,
Texas,  independent  petroleum engineers.  Ralph E. Davis's audit was based upon
review of production  histories and other  geological,  economic,  ownership and
engineering data provided by us. All of the reserves  presented in the following
table are proved, developed reserves.

     The SEC requires  that  estimates  of future net  revenues  from our proved
reserves,  discounted to present value using an annual discount rate of 10% (the
PV-10 Value), be made using oil and gas prices in effect as of the dates of such
estimates,  held  constant  throughout  of the  life of the  properties.  Proved
reserves  as of October 1, 2003 were  estimated  based upon  prices in effect on
September 30, 2003,  our fiscal  year-end.  The weighted  average of such prices
domestically  was  $28.49  per  barrel  of oil.

     The table contains  estimates of future net revenues presented on the basis
of unescalated  prices and costs and their PV-10 Value,  as required by the SEC.
We deducted  operating costs,  development costs and certain  production-related
taxes to arrive at the estimated future net revenues.  We calculated  future net
revenues  based on an  estimated  4.5 year  life of these  reserves.  We made no
provision  for income  taxes.  The  estimates  of future net  revenues and their
present value differ in this respect from the standardized measure of discounted
future net cash flows contained in Note 11 to our financial statements, which is
calculated after provision for future income taxes.

                                       4

<PAGE>

<TABLE>
<CAPTION>
                                                                   Weighted Average
  Proved Reserves          Estimated Net Reserves (MBbls)            Price ($/BBl)                Future Net Income
                                                                                             Undiscounted         PV-10
                                                                                             ------------         ------
<S>                                  <C>                                 <C>                  <C>              <C>
Producing                            66.137                              $28.49               $1,461,500       $1,248,500
</TABLE>

     Our Louisiana  natural gas production is too recent and has not yet reached
a volume that justifies an independent  study,  and thus no independent  reserve
estimate has been  prepared.  No  estimates of our total,  proved net oil or gas
reserves  have  been  filed  with any  Federal  authority  or  agency  since the
beginning of the last fiscal year.

Production Information

     The following table summarizes sales volumes,  sales prices, and production
cost  information  for our net oil  production  for the  two-year  period  ended
September 30, 2003.  "Net" production is production that is owned by us directly
or indirectly and is produced to our interest after deducting royalty, and other
similar interests.

<TABLE>
<CAPTION>
                                                                 Year Ended September 30,
                                                        -------------------------------------------
                                                                2003                   2002
                                                        ---------------------    ------------------
<S>                                                     <C>                      <C>
Total Net Revenues                                      $     337,355            $     56,608
Net Sales Volume (Bbls.)                                       11,447                   2,928
Average Sales Price (per Bbl.)                          $       29.47            $      26.98
Average Production Cost (per Bbl.)                      $        8.26            $       5.23
</TABLE>


Oil and Gas Wells

     The  following  table sets forth our gross and net  productive  wells as of
September 30, 2003 and 2002:

<TABLE>
<CAPTION>
                                        Oil Wells                     Gas Wells                 Total Well
                                --------------------------    --------------------------    ---------------------

<S>                                          <C>                           <C>                        <C>
September 30, 2003
       Gross(1)                              5                             10                         15
       Net(2)                                3.5                            2.3                        5.8
September 30, 2002
       Gross                                 2                              0                          2
       Net                                   2                              0                          2
---------------
</TABLE>

(1)  Gross wells are the total wells in which a working interest is owned.

(2)  Net wells are the sum of fractional working interests owned in gross wells.

Oil and Gas Acreage

     The  following  table sets forth our acreage  position as of September  30,
2003. Of this  acreage,  up to 1,280 acres of the  Louisiana  gross  undeveloped
acreage  would  expire at the end of 2004 if Cadence  does not have a  producing
well in each of two 640 acre sections by the end of 2004.

                                       5
<PAGE>
<TABLE>
<CAPTION>
                                                 Developed(1)                              Undeveloped(2)
                                     -----------------------------------    ------------------------------------------
                                           Gross               Net                 Gross                   Net
                                     ------------------    -------------    ---------------------   ------------------
<S>                                          <C>                 <C>                <C>                   <C>
Louisiana                                    1280                320                2970                  1336
Texas                                         625                392                1000                   500
Michigan                                      640                144                   0                     0
Kansas                                          0                  0                2270                  2270

                                     ------------------    -------------    ---------------------   ------------------
             Total                           2545                856                6240                  4106
                                     ==================    =============    =====================   ==================
</TABLE>
------------------------

(1)  The number of acres which are allocated or assignable to producing wells or
     wells capable of production.

(2)  Lease acreage on which wells have not been  participated in or completed to
     a point that would permit the  production of  commercial  quantities of oil
     and  natural  gas  regardless  of  whether  such  acreage  contains  proved
     reserves.

Drilling Activities

     We did not drill any wells in 2001.  The  following  table  sets  forth our
drilling results for the years ended September 30, 2003 and 2002:

<TABLE>
<CAPTION>
Fiscal                                                Gross Wells                                           Net Wells
 Year            Type of Well         Total    Productive(2)   Dry(3)   Abandoned(4)      Total    Productive      Dry    Abandoned
----------    ------------------    --------- --------------- -------- --------------  --------- -------------- -------- ---------
<S>           <C>                     <C>          <C>          <C>          <C>           <C>         <C>         <C>       <C>
2003          Exploratory(1)            2            1           1            0             1            .5         .5         0
              Development(1)           13           12           1            0             3.8         3.8         .5         0
2002          Exploratory               3            2           1            0             2           2            1         0
              Development               1            0           0            1             0           0            0         1
</TABLE>

---------------

(1)  An  exploratory  well is a well  drilled  either in search of a new, as yet
     undiscovered  oil or gas reservoir or to greatly extend the known limits of
     a previously  discovered  reservoir.  A development  well is a well drilled
     within the presently proved productive area of an oil or gas reservoir,  as
     indicated  by  reasonable   interpretation  of  available  data,  with  the
     objective of completing in that reservoir.

(2)  A productive well is an exploratory or development well found to be capable
     of  producing  either  oil or  gas  in  sufficient  quantities  to  justify
     completion as an oil or gas well.

(3)  A dry well is an exploratory  or  development  well that is not a producing
     well.

(4)  An  abandoned  well is a well  that has  either  been  plugged  or has been
     converted  to  another  use.  We have  converted  this well to a salt water
     disposal well.

Competition and Markets

     We face competition from other oil and natural gas companies in all aspects
of our business,  including  acquisition of producing properties and oil and gas
leases,  marketing of oil and gas, and obtaining goods, services and labor. Many
of our competitors  have  substantially  larger  financial and other  resources.
Factors  that  affect  our  ability  to  acquire  producing  properties  include
available funds,  available  information  about  prospective  properties and our
limited number of employees. Gathering systems are the only practical method for
the  intermediate  transportation  of natural gas.  Therefore,  competition  for
natural gas delivery is presented by other pipelines and gas gathering  systems.
Competition is also presented by alternative fuel sources, including heating oil
and other fossil fuels.

     The  availability  of a ready market for and the price of any  hydrocarbons
produced  will depend on many  factors  beyond our  control,  including  but not
limited to the amount of  domestic  production  and  imports of foreign  oil and
liquefied  natural gas, the marketing of  competitive  fuels,  the proximity and
capacity of natural gas pipelines,  the availability of transportation and other
market facilities, the demand for hydrocarbons,  the effect of federal and state
regulation of allowable rates of production,  taxation,  the conduct of drilling
operations and federal regulation of natural gas. In addition, the restructuring
of the natural gas pipeline  industry  virtually  eliminated  the gas purchasing

                                       6

<PAGE>

activity of traditional  interstate gas transmission pipeline buyers.  Producers
of natural gas have  therefore  been  required to develop new markets  among gas
marketing companies,  end users of natural gas and local distribution companies.
All of these  factors,  together with economic  factors in the marketing  arena,
generally  may affect  the supply of and/or  demand for oil and gas and thus the
prices available for sales of oil and gas.

     Proposals  and  proceedings  that might affect the oil and gas industry are
pending before Congress,  the Federal Energy Regulatory  Commission,  or "FERC",
the Minerals  Management  Service,  or "MMS", state legislatures and commissions
and the courts.  We cannot predict when or whether any such proposals may become
effective.  In the past,  the natural gas industry  has been heavily  regulated.
There is no assurance that the regulatory  approach currently pursued by various
agencies will continue indefinitely. Notwithstanding the foregoing, we currently
do not anticipate that compliance with existing  federal,  state and local laws,
rules and regulations will have a material or significantly  adverse effect upon
our capital expenditures,  earnings or competitive position. No material portion
of our  business  is subject to  re-negotiation  of  profits or  termination  of
contracts or subcontracts at the election of the federal government.

     The following discussion contains summaries of certain laws and regulations
and is qualified in its entirety by the foregoing.

Regulation of Natural Gas and Oil Exploration and Production

     Our  operations  are subject to various types of regulation at the federal,
state and local levels.  Such regulation includes requiring permits for drilling
wells,  maintaining bonding  requirements in order to drill or operate wells and
regulating the location of wells,  the method of drilling and casing wells,  the
surface use and  restoration  of  properties  upon which wells are drilled,  the
plugging and abandoning of wells and the disposal of fluids used or generated in
connection  with  operations.   Our  operations  are  also  subject  to  various
conservation  laws and regulations.  These include the regulation of the size of
drilling and spacing units or proration units and the density of wells which may
be  drilled  and the  unitization  or  pooling  of oil and  gas  properties.  In
addition, state conservation laws establish maximum rates of production from oil
and gas  wells,  generally  prohibit  the  venting  or flaring of gas and impose
certain requirements regarding the ratability of production. The effect of these
regulations may limit the amount of oil and gas we can produce from our wells in
a given state and may limit the number of wells or the locations at which we can
drill.

Federal Regulation of Sales Prices and Transportation

     Currently,  there are no  federal,  state or local laws that  regulate  the
price for our sales of natural gas, NGLs, crude oil or condensate.  However, the
rates  charged and terms and  conditions  for the movement of gas in  interstate
commerce  through  certain  intrastate  pipelines and  production  area hubs are
subject  to  regulation  under the  Natural  Gas  Policy  Act of 1978  ("NGPA").
Pipeline and hub construction  activities are, to a limited extent, also subject
to regulations  under the Natural Gas Act of 1938 ("NGA").  While these controls
do not  apply  directly  to us,  their  effect on  natural  gas  markets  can be
significant in terms of competition and cost of transportation  services,  which
in turn can have a substantial  impact on our  profitability  and costs of doing
business. Additional proposals and proceedings that might affect the natural gas
industry are considered from time to time by Congress,  FERC,  state  regulatory
bodies and the courts.  We cannot  predict when or if any such  proposals  might
become effective and their effect, if any, on our operations.  We do not believe
that we will be affected by any action taken in any materially different respect
from other natural gas producers, gatherers and marketers with whom we compete.

Gathering Regulations

     State regulation of gathering facilities generally includes various safety,
environmental and, in some circumstances,  nondiscriminatory  take requirements.
Such regulation has not generally been applied against gatherers of natural gas,
although  natural gas gathering may receive greater  regulatory  scrutiny in the
future.

Environmental Regulations

     Public  interest  in  the  protection  of  the  environment  has  increased
dramatically  in recent years.  Our oil and natural gas production and saltwater
disposal  operations  and our  processing,  handling  and  disposal of hazardous

                                       7


<PAGE>

materials,  such as hydrocarbons and naturally occurring  radioactive  materials
are subject to stringent regulation. We could incur significant costs, including
cleanup costs resulting from a release of hazardous material, third-party claims
for property  damage and personal  injuries fines and sanctions,  as a result of
any violations or liabilities under  environmental or other laws.  Changes in or
more stringent enforcement of environmental laws could also result in additional
operating costs and capital expenditures.

     Various federal, state and local laws regulating the discharge of materials
into  the  environment,   or  otherwise   relating  to  the  protection  of  the
environment, directly impact oil and gas exploration, development and production
operations,  and  consequently  may impact the Company's  operations  and costs.
These regulations include,  among others, (i) regulations by the EPA and various
state agencies  regarding approved methods of disposal for certain hazardous and
nonhazardous   wastes;   (ii)   the   Comprehensive    Environmental   Response,
Compensation,  and Liability Act, Federal Resource Conservation and Recovery Act
and analogous state laws which regulate the removal or remediation of previously
disposed  wastes  (including  wastes  disposed of or released by prior owners or
operators),  property contamination (including groundwater  contamination),  and
remedial plugging  operations to prevent future  contamination;  (iii) the Clean
Air Act and  comparable  state and local  requirements  which may  result in the
gradual imposition of certain pollution control requirements with respect to air
emissions from the operations of the Company; (iv) the Oil Pollution Act of 1990
which contains numerous  requirements relating to the prevention of and response
to oil spills into waters of the United  States;  (v) the Resource  Conservation
and Recovery Act which is the principal federal statute governing the treatment,
storage  and  disposal  of  hazardous  wastes;  and (vi) state  regulations  and
statutes  governing the handling,  treatment,  storage and disposal of naturally
occurring radioactive material ("NORM").

     In the course of our routine oil and natural gas operations, surface spills
and leaks, including casing leaks, of oil or other materials occur, and we incur
costs for waste handling and environmental  compliance. It is also possible that
our oil and  natural  gas  operations  may  require us to manage  NORM.  NORM is
present  in  varying   concentrations  in  sub-surface   formations,   including
hydrocarbon reservoirs, and may become concentrated in scale, film and sludge in
equipment  that comes in contact with crude oil and natural gas  production  and
processing  streams.  Some states,  including  Texas,  have enacted  regulations
governing the handling,  treatment,  storage and disposal of NORM. Moreover,  we
are able to control directly the operations of only those wells for which we act
as the operator. Despite our lack of control over wells owned by us but operated
by  others,   the  failure  of  the  operator  to  comply  with  the  applicable
environmental  regulations  may, in certain  circumstances,  be attributed to us
under applicable state, federal or local laws or regulations.

     Management  believes  that  we  are  in  substantial  compliance  with  all
currently  applicable  environmental laws and regulations.  To date,  compliance
with such laws and  regulations has not required the expenditure of any material
amounts,  and management does not currently  anticipate  that future  compliance
will have a materially adverse effect on our consolidated  financial position or
results  of  operations.  Since  these  laws and  regulations  are  periodically
amended,  we are unable to  predict  the  ultimate  cost of  compliance.  To our
knowledge, there are currently no material adverse environmental conditions that
exist on any of our properties and there are no current or threatened actions or
claims by any local, state or federal agency or by any private landowner against
us  pertaining to such a condition.  Further,  we are not aware of any currently
existing  condition or circumstance that may give rise to such actions or claims
in the future.

     We maintain insurance against some, but not all, potential risks and losses
associated  with  our  industry  and  operations.   We  do  not  carry  business
interruption  insurance.  For some  risks,  we may not  obtain  insurance  if we
believe  the cost of  available  insurance  is  excessive  relative to the risks
presented.  In addition,  pollution and  environmental  risks  generally are not
fully  insurable.  If a  significant  accident or other event  occurs and is not
fully covered by insurance, it could adversely affect us.

Employees

     As of November 30, 2003, we have three part-time employees, two of whom are
officers of Cadence, and none of whom work for Cadence on a full time basis.

                                       8

<PAGE>

Risks Related to our Business

We are paying a penalty  equal to $41,785 per month from December 14, 2003 until
the date the SEC declares our registration statement on Form SB-2 effective.

     In September and October 2003 we sold 1,721,400  shares of our common stock
for a total of $4,303,500.  In the securities  purchase agreement for the common
stock,  we committed  to pay the  purchasers  in the offering a monthly  penalty
equal to 1% of the total  amount of money we raised in the  offering  if the SEC
did not declare our  registration  statement  on Form SB-2  originally  filed on
October 30, 2003  effective by December 14, 2003. The SEC selected our Form SB-2
for limited review and we responded to the comments of the staff on December 16,
2003. The penalty,  $41,785 per month,  prorated for a partial month,  continues
until the registration statement is declared effective.

If we continue to experience significant operating losses, we may not be able to
continue as a going concern.

     We reorganized  our business in July 2001 to pursue oil and gas exploration
and  development  opportunities,  and have a limited  operating  history  in our
current  form.  Since we  reorganized  our business,  our  operating  costs have
exceeded our revenue in each quarter.  We have incurred cumulative net losses of
approximately  $3,900,000 from June 30, 2001 through  September 30, 2003, and we
anticipate  a net loss at least  through  2004.  We may not be able to obtain or
maintain  any  level  of  revenues,  natural  gas  and  crude  oil  reserves  or
production.  If we are  unsuccessful  in these  efforts,  we may  never  achieve
profitability.

     Note 2 to our  financial  statements  as of September 30, 2002 and June 30,
2003  included  as part of this  prospectus  discusses  the  issue of  Cadence's
ability  to  continue  as a going  concern.  Subsequent  to the  date  of  those
financial statements, we raised approximately $3.88 million of net proceeds from
the  sale  of  common  stock,  which,  together  with  funds  from  oil  and gas
production,  we believe to be sufficient to meet our working capital and capital
expenditure  needs. If this is not the case, then we may not be able to fund the
development  and  exploration  of our oil and gas properties and our general and
administrative  expenses.  As of September  30, 2003,  there is no going concern
qualification in our financial statements.

We have no full-time employees and are dependent on our directors,  officers and
third-party contractors.

     We have no full time  employees and are wholly  dependent upon the personal
efforts and abilities of our officers,  directors and our consulting  geologist,
each of whom  devotes  less than all of his time and efforts to our  operations.
The loss of any one of these individuals could adversely affect our business. We
do not have employment agreements with any of our officers or directors and must
rely on consultants paid on a monthly basis.  There is no assurance that we will
be able to hire and retain such personnel in the future.

We lack experience in the oil and gas industry and must rely on third parties to
conduct our oil and gas exploration activities.

     We have  limited  expertise  in the  area of oil and gas  exploration.  Our
management does not have significant technical training or experience in the oil
and gas  industry  and only  devotes  a small  percentage  of their  time to our
business.  Accordingly,  we have engaged third party  geologists and landmen who
have  been  largely   responsible  for  the  evaluation,   recommendation,   and
acquisition of our existing leases. We have historically  retained,  and plan to
continue in the future to retain,  drilling contractors,  technicians,  landmen,
additional  geologists,  and engineers to direct the drilling and  completion of
oil and gas wells on our leases, and to aid in the acquisition and evaluation of
other properties.

Our drilling activities may be unsuccessful.

     We cannot  predict  prior to drilling  and testing a well  whether the well
will  be  productive  or  whether  we will  recover  all or any  portion  of our
investment  in the  well.  Our  drilling  for oil and  natural  gas may  involve
unprofitable efforts, not only from dry holes but from wells that are productive
but do not produce sufficient  quantities to cover drilling and completion costs
thus which are not  economically  viable.  Our efforts to identify  commercially
productive  reservoirs,  such as studying  seismic data, the geology of the area
and production  history of

                                       9

<PAGE>

adjoining fields,  do not conclusively  establish that oil and gas is present in
commercial  quantities.  If our drilling  efforts are  unsuccessful we may never
achieve profitability.

We do not operate any of our oil and gas properties.

     We do not operate any of the properties in which we have an interest.  As a
result, we have a limited or no control over:

     o    the timing of drilling and recompleting of wells;

     o    the timing and amounts of production;

     o    the approval of other participants in drilling wells;

     o    development and operating costs; and

     o    negative gas balance conditions.

These and other  aspects of the operation of our  properties  and the success of
our drilling and development  activities are entirely dependent on the expertise
and financial resources of our third-party operators.

We may be unable to make  acquisitions  of producing  properties or prospects or
successfully integrate them into our operations.

     Acquisitions of producing properties are an essential part of our long-term
growth  strategy.  We may not be able to identify  suitable  acquisitions in the
future  or to  finance  these  acquisitions  on  favorable  terms or at all.  In
addition, we compete against other companies for acquisitions, many of whom have
substantially  greater  managerial  and  financial  resources  than  we do.  The
successful  acquisition  of  producing  properties  requires  an  assessment  of
recoverable  reserves,   exploration  potential,  future  oil  and  gas  prices,
operating costs, potential environmental and other liabilities and other factors
beyond our control. These assessments are necessarily inexact and their accuracy
inherently  uncertain.  Such a review may not reveal all  existing or  potential
problems, nor will it necessarily permit us to become sufficiently familiar with
the  properties  to fully  assess  their  merits and  deficiencies.  Significant
acquisitions can change the nature of our operations and business depending upon
the character of the acquired properties,  which may be substantially  different
in operating and geological characteristics or geographic location than existing
properties.  Our  acquisitions  may  not be  integrated  successfully  into  our
operations and may not achieve desired profitability objectives.

The failure to develop  reserves could adversely  affect our production and cash
flows.

     Our success  depends  upon our ability to find,  develop or acquire oil and
gas  reserves  that  are  economically  recoverable.  We will  need  to  conduct
successful   exploration  or  development   activities  or  acquire   properties
containing proved reserves,  or both. The business of exploring for,  developing
or  acquiring  reserves  is  capital  intensive.  We may not be able to make the
necessary  capital  investment  to expand our oil and natural gas reserves  from
cash flows and external  sources of capital may be limited or  unavailable.  Our
drilling  activities may not result in significant  reserves and we may not have
continuing success drilling productive wells. Exploratory drilling involves more
risk than development  drilling because exploratory drilling is designed to test
formations  for which proved  reserves have not been  discovered.  Additionally,
while our  revenues  may  increase  if  prevailing  oil and gas prices  increase
significantly, our finding costs for reserves also could increase and we may not
be able to finance additional exploration or development activities.

We may have difficulty financing our planned growth.

     We have  experienced  and  expect to  continue  to  experience  substantial
capital  expenditure and working capital needs,  particularly as a result of our
property acquisition and development  drilling  activities.  We will most likely
require additional financing, in addition to cash generated from our operations,
to fund our planned  growth.  If our cash flow from operations is not sufficient
to satisfy our capital expenditure requirements, additional financing may not be
available to us on acceptable terms or at all. In the event  additional  capital
resources  are  unavailable,  we

                                       10
<PAGE>

may be  forced  to  curtail  our  acquisition,  development  drilling  and other
activities or to sell some of our assets on an untimely or unfavorable basis.

Oil and gas prices are volatile.  A substantial  decrease in oil and natural gas
prices could adversely affect our business.

     Our revenues,  profitability and future growth depend in part on prevailing
natural  gas and crude oil  prices.  Prices  also affect the amount of cash flow
available  for  capital  expenditures  and  our  ability  to  borrow  and  raise
additional  capital.  Lower prices may also reduce the amount of natural gas and
crude oil that we can economically produce.

     Prices for natural gas and crude oil fluctuate  widely, as evidenced by the
recent  volatility  in natural  gas prices in  response  to the war  between the
United  States and Iraq.  The prices for oil and  natural  gas are  subject to a
variety of factors beyond our control, including:

     o    the level of consumer product demand;

     o    weather conditions;

     o    domestic and foreign governmental regulations;

     o    the price and availability of alternative fuels;

     o    political conditions in oil and gas producing regions;

     o    the domestic and foreign supply of oil and gas;

     o    market uncertainty; and

     o    worldwide economic conditions.

We may not have good and marketable title to our properties.

     It is customary in the oil and gas industry that upon acquiring an interest
in a non-producing property, that only a preliminary title investigation be done
at that time.  We have  followed  this  custom to date and intend to continue to
follow this custom in the future.  If the title to our prospects should prove to
be  defective,  we  could  lose  the  costs  that  we  have  incurred  in  their
acquisition, or incur substantial costs for curative title work.

Competition  in our  industry  is  intense,  and we are  smaller and have a more
limited operating history than most of our competitors.

     We compete with major and  independent  oil and gas  companies for property
acquisitions  and for the  equipment  and labor  required to operate and develop
these properties.  Most of our competitors have substantially  greater financial
and other resources than we do. In addition,  larger  competitors may be able to
absorb  the  burden  of any  changes  in  federal,  state  and  local  laws  and
regulations   more  easily  than  we  can,  which  would  adversely  affect  our
competitive position.  These competitors may be able to pay more for exploratory
prospects  and  productive  natural  gas and oil  properties  and may be able to
define,  evaluate,  bid for and  purchase  a greater  number of  properties  and
prospects  than we can. Our ability to explore for oil and gas  prospects and to
acquire  additional  properties  in the  future  will  depend on our  ability to
conduct  operations,  to evaluate and select suitable properties and to complete
transactions in this highly competitive environment.

Oil and natural gas operations involve various risks.

     The oil and gas business involves  operating hazards such as well blowouts,
craterings,  explosions,  uncontrollable flows of crude oil, natural gas or well
fluids, fires, formations with abnormal pressures,  pipeline ruptures or spills,
pollution,  releases of toxic gas and other environmental hazards and risks, any
of which could

                                       11

<PAGE>

cause us to experience  substantial  losses.  In addition,  we may be liable for
environmental damage caused by previous owners of properties purchased or leased
by us.

     Federal and state regulation of oil and gas production and  transportation,
tax and energy  policies,  changes in supply  and  demand and  general  economic
conditions  all could  adversely  affect our  ability to produce  and market our
natural gas and crude oil. Production from gas wells in many geographic areas of
the United States,  including Louisiana and Texas, has been curtailed or shut-in
for  considerable  periods  of time  due to a lack of  market  demand,  and such
curtailments may continue for a considerable period of time in the future. There
may be an excess supply of gas in areas where the Company's  operations  will be
conducted.  In such event, it is possible that there will be no market or a very
limited market for the Company's production.

     As a result of  operating  hazards,  regulatory  risks and other  uninsured
risks, we could incur  substantial  liabilities to third parties or governmental
entities,  the payment of which could reduce or eliminate  funds  available  for
exploration, development or acquisitions.

We lack insurance that would lower risks to our investors.

     We do not maintain any  insurance  against  certain  losses or  liabilities
which may arise from  operations,  including  some  pollution and  environmental
risks.  We also do not have "key man" life  insurance,  or errors and  omissions
coverage.  In addition to the  operational  risks that this poses for us, it may
make it more difficult to recruit or maintain executive officers and directors.

We are subject to complex  federal,  state and local laws and  regulations  that
could adversely affect our business.

     Oil and gas  operations  are  subject to various  federal,  state and local
government  laws and  regulations  which  may be  changed  from  time to time in
response  to  economic  or  political  conditions.  Matters  that are  typically
regulated include:

     o    discharge permits for drilling operations;

     o    drilling bonds;

     o    reports concerning operations;

     o    spacing of wells;

     o    unitization and pooling of properties;

     o    environmental protection; and

     o    taxation.

     From time to time,  regulatory  agencies  have imposed  price  controls and
limitations on production by  restricting  the rate of flow of oil and gas wells
below allowed production  capacity to conserve supplies of natural gas and crude
oil. We also are  subject to changing  and  extensive  tax laws,  the effects of
which we cannot predict.

     The development, production, handling, storage, transportation and disposal
of natural gas and crude oil,  by-products  and other  substances  and materials
produced or used in connection  with oil and gas  operations are subject to laws
and  regulations  primarily  relating  to  protection  of human  health  and the
environment. The discharge of natural gas, crude oil or pollutants into the air,
soil or  water  may  give  rise to  significant  liabilities  on our part to the
government  and  third  parties  and may  result in the  assessment  of civil or
criminal penalties or require us to incur substantial costs of remediation.

     Legal  and  tax   requirements   frequently  are  changed  and  subject  to
interpretation,  and we are unable to predict the  ultimate  cost of  compliance
with these  requirements  or their effect on our  operations.  Existing  laws or
regulations, as currently interpreted or reinterpreted in the future, could harm
our business, results of operations and financial condition.

                                       12


<PAGE>

Risks Related to the Ownership of our Stock

We may experience volatility in our stock price.

     The  market  price of our  common  stock  may  fluctuate  significantly  in
response  to a  number  of  factors,  some of  which  are  beyond  our  control,
including:

     o    quarterly variations in operating results;

     o    changes in financial estimates by securities analysts;

     o    changes in market valuations of other similar companies;

     o    announcements  by  us  or  our  competitors  of  new  products  or  of
          significant technical innovations, contracts, acquisitions,  strategic
          partnerships or joint ventures;

     o    additions or departures of key personnel;

     o    any  deviations  in net sales or in losses  from  levels  expected  by
          securities analysts; and

     o    future sales of common stock.

     In addition,  the stock market has recently  experienced extreme volatility
that has often been unrelated to the performance of particular companies.  These
market  fluctuations  may  cause  our  stock  price  to fall  regardless  of our
performance.

Because our securities trade on the OTC Bulletin Board, market liquidity for our
stock may be limited.

     The shares of our common stock have been listed and  principally  quoted on
the Nasdaq OTC Bulletin Board since May 1994.  Because our securities  currently
trade on the OTC Bulletin Board, they are subject to the rules promulgated under
the Securities  Exchange Act of 1934, as amended,  which impose additional sales
practice  requirements on broker-dealers  that sell securities governed by these
rules to persons other than  established  customers and  "accredited  investors"
(generally,  individuals  with a net  worth in excess  of  $1,000,000  or annual
individual  income  exceeding  $200,000 or $300,000 jointly with their spouses).
For such transactions, the broker-dealer must determine whether persons that are
not  established  customers or accredited  investors  qualify under the rule for
purchasing such securities and must receive that person's written consent to the
transaction  prior to sale.  Consequently,  these rules may adversely effect the
ability of purchasers to sell our  securities  and otherwise  affect the trading
market in our securities.

Because our shares are deemed "penny  stocks," you may have  difficulty  selling
them in the secondary trading market.

     The  Securities  and  Exchange  Commission  has adopted  regulations  which
generally  define a "penny  stock" to be any equity  security  that has a market
price (as therein  defined) less than $5.00 per share or with an exercise  price
of less than $5.00 per share,  subject to certain exceptions.  Additionally,  if
the equity  security is not  registered or  authorized on a national  securities
exchange or Nasdaq,  the equity security also would  constitute a "penny stock."
As  our  common  stock  falls  within  the  definition  of  penny  stock,  these
regulations require the delivery,  prior to any transaction involving our common
stock, of a risk disclosure  schedule  explaining the penny stock market and the
risks  associated  with  it.  Disclosure  is  also  required  to be  made  about
compensation payable to both the broker-dealer and the registered representative
and current quotations for the securities.  In addition,  monthly statements are
required to be sent  disclosing  recent price  information for the penny stocks.
The  ability  of  broker/dealers  to sell our  common  stock and the  ability of
shareholders to sell our common stock in the secondary  market would be limited.
As a result,  the market  liquidity  for our common  stock would be severely and
adversely affected. We can provide no assurance that trading in our common stock
will not be subject to these or other  regulations  in the  future,  which would
negatively affect the market for our common stock.

                                       13
<PAGE>

A large  number of shares will be  eligible  for future sale and may depress our
stock price.

     Our shares that are eligible for future sale may have an adverse  effect on
the price of our stock. As of November 30, 2003, there were 12,582,827 shares of
our common stock outstanding. We expect to have a registration statement for the
resale of shares of our common stock by certain shareholders  declared effective
by the SEC by mid-January  2004. As of such time, over 4.5 million shares of our
common stock will be freely  tradeable  without  substantial  restriction or the
requirement  of  future  registration  under  the  Securities  Act of 1933.  The
remainder of our  outstanding  shares,  most of which are held by our  officers,
directors  and greater than 5%  shareholders,  may be sold without  registration
under the exemption from registration  provided by Rule 144 under the Securities
Act. In addition,  as of November 30, 2003, an additional  1,209,590 shares were
subject to outstanding  options or warrants or were issuable upon the conversion
of our Class A Preferred Shares.

     Sales of  substantial  amounts of common stock,  or a perception  that such
sales could occur,  and the existence of options or warrants to purchase  shares
of common stock at prices that may be below the then current market price of the
common stock,  could  adversely  affect the market price of our common stock and
could  impair  our  ability  to raise  capital  through  the sale of our  equity
securities.

We do not have  cumulative  voting and a small  number of existing  shareholders
control our company,  which could limit any individual  shareholder's ability to
influence the outcome of shareholder votes.

     Our  shareholders do not have the right to cumulative votes in the election
of our directors. Cumulative voting, in some cases, could allow a minority group
to elect at least one director to our board.  Because  there is no provision for
cumulative  voting,  a minority  group will not be able to elect any  directors.
Accordingly, the holders of a majority of the shares of common stock, present in
person or by proxy,  will be able to elect  all of the  members  of our board of
directors.

     Our  executive  officers  and  directors,  together  with  our two  largest
shareholders, beneficially own as of September 30, 2003 approximately 56% of our
common  stock.  As a result,  these  entities  and  individuals  will be able to
control  the  outcome of  shareholder  votes,  including  votes  concerning  the
election of directors, the adoption or amendment of provisions in our charter or
bylaws and the approval of mergers and other significant corporate transactions.

Our Articles of  Incorporation  contain  provisions  that discourage a change of
control.

     Our articles of incorporation  contain  provisions that could discourage an
acquisition or change of control without our board of directors'  approval.  Our
articles of  incorporation  authorize our board of directors to issue  preferred
stock without  shareholder  approval.  If our board of directors elects to issue
preferred stock, it could be more difficult for a third party to acquire control
of us, even if that change of control might be beneficial to shareholders.

Item 2.  Description of Properties

     The  Company's  oil and gas  leasehold  properties,  as well as its mineral
properties  are  described  above  in  Item  1. In  addition  to the  properties
described  above, our principal  executive  offices are located in leased office
space at 6 East Rose Street,  Walla Walla,  WA 99362.  This lease provides for a
monthly  rental rate of $400 and  expires in June,  2004.  We also have  mineral
rights in a number of properties,  although we do not presently consider them to
be material to our business on a going forward basis.

Item 3.  Legal Proceedings

     There are no currently threatened or pending claims against Cadence.

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

     There were no matters for  submission to a vote of security  holders during
the last fiscal year.

                                       14


<PAGE>

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

Market for Our Common Stock

     Our  common  stock  trades  under the symbol  CDNR on the  Over-the-Counter
Bulletin  Board  Electronic   Quotation   System   maintained  by  the  National
Association  of Securities  Dealers,  Inc.  Approximately  fifteen  professional
market  makers  hold  themselves  out as  willing to make a market in our common
stock.  Following is information  about the range of high and low bid prices for
our common  stock for each fiscal  quarter in the last two fiscal  years.  These
quotations reflect  inter-dealer  prices,  without retail mark-up,  mark-down or
commission, and may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
       Quarter Ended                                     High Bid Quotation    Low Bid Quotation
       ------------------------------------              ------------------    -----------------
       <S>                                                    <C>                   <C>
       December 31, 2001                                      $  .87                 $  .65
       March 31, 2002                                         $ 1.01                 $  .90
       June 30, 2002                                          $ 1.35                 $ 1.15
       September 30, 2002                                     $ 1.65                 $ 1.30

       December 31, 2002                                      $ 1.90                 $ 1.51
       March 31, 2003                                         $ 1.75                 $ 1.40
       June 30, 2003                                          $ 1.85                 $ 1.40
       September 30, 2003                                     $ 3.55                 $ 1.75

       December 31, 2003                                      $ 3.60                 $ 2.75
</TABLE>

Equity Compensation Plan Information

     We do not have any written  equity  compensation  plans,  but  occasionally
issue options or warrants to  employees,  directors or  consultants  to purchase
goods or  services.  The  table  below  sets  forth  certain  information  as of
Cadence's fiscal year ended September 30, 2003 regarding the shares of Cadence's
common stock (i) available for grant or granted under  outstanding stock options
or (ii) issuable upon exercise of warrants granted as compensation for services.

<TABLE>
<CAPTION>
                                                                                      Number of securities remaining
                             Number of securities to be       Weighted-average        available for future issuance
                             issued upon exercise of          exercise price of       under equity compensation
                             outstanding options, warrants    outstanding options,    plans (excluding securities in
                             and rights                       warrants and rights     the first column of this table)
----------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                           <C>                           <C>
Compensatory warrants or                   -0-                         -0-                          -0-
options approved by
security holders

Compensatory warrants or
options  not approved by
security holders                        1,174,640                     $1.45                         -0-
</TABLE>

Holders

     As of  November  30,  2003,  there were 434 holders of record of our common
stock,  although we believe that there are additional  beneficial  owners of our
common stock who own their shares in "street name."

                                       15


<PAGE>

Dividends

     There have been no cash  dividends  declared on our common  stock since our
company was formed.  Dividends are declared at the sole  discretion of our board
of directors.  It is not anticipated that any dividends will be declared for the
foreseeable future on our common stock.

Recent Sales of Unregistered Equity Securities

     From July through October 2002,  Cadence sold an aggregate of 212,500 units
to 7 accredited investors, each unit consisting of one share of common stock and
a warrant to purchase one share of common  stock,  for an aggregate of $140,625.
Each  warrant is  exercisable  at a price of $1.35 per share and  expires  three
years from the date of issuance.  No sales  commissions  were paid in connection
with this transaction. The units were issued in reliance upon the exemption from
registration provided by Section 4 (2) of the Securities Act.

     On October 17, 2002,  Cadence  issued  13,500 shares of its common stock to
one  sophisticated  investor in  consideration  of certain  consulting  services
provided to Cadence.  No sales  commissions  were paid in  connection  with this
transaction.  The  shares  were  issued  in  reliance  upon the  exemption  from
registration provided by Section 4 (2) of the Securities Act.

     Between November 2002 and March 2003, Cadence issued 34,950 shares of Class
A Preferred  Shares to 8 investors who were not US persons under Regulation S of
the Securities Act for an aggregate of $52,425.  No sales  commissions were paid
in connection with this transaction. The shares were issued in reliance upon the
exemption from registration provided by Regulation S of the Securities Act.

     During fiscal 2003, Howard M. Crosby made two loans to Cadence. One loan in
December 2002 was in the principal amount of $70,000, bearing interest at 5% and
the other loan made in February 2003 in the principal  amount of $50,000 bearing
interest at a rate of 8%. Cadence issued 14,000 shares of its common stock as an
inducement  to making the $70,000  loan and 20,000  shares as an  inducement  to
making the $50,000 loan.  Cadence  repaid  $60,000 and has agreed to issue 4,000
shares of its common  stock in  repayment  of the  remaining  $10,000  principal
amount  outstanding  on the $70,000 loan.  Cadence repaid $25,000 of the $50,000
loan in cash and issued 25,000 shares of its common stock to repay the remaining
$25,000  principal  amount  outstanding.  No  sales  commissions  were  paid  in
connection with these transactions.  The shares were issued in reliance upon the
exemption from registration provided by Section 4(2) of the Securities Act.

     In February 2003,  Kevin Stulp, one of Cadence's  directors,  made a bridge
loan to Cadence in the principal  amount of $50,000,  bearing interest of 8% per
annum.  Cadence  issued 20,000 shares of its stock to Mr. Stulp as an inducement
to making the loan. In July 2003,  Cadence  issued 25,000 shares of its stock in
repayment of $25,000 of the principal  amount of such loan and 100,000 shares of
common  stock  upon  the  exercise  of a  warrant  at $.75 per  share.  No sales
commissions  were paid in connection  with these  transactions.  The shares were
issued in reliance upon the exemption  from  registration  provided by Section 4
(2) of the Securities Act.

     On February 4, 2003,  Cadence  issued an aggregate of 150,000 shares of its
common  stock to four of its  officers  and/or  directors  in  consideration  of
services provided to Cadence.  No sales commissions were paid in connection with
this  transaction.  The shares were issued in reliance upon the  exemption  from
registration provided by Section 4 (2) of the Securities Act.

     On February  19, 2003,  Cadence  issued 5,000 shares of its common stock to
one  sophisticated  investor in  consideration  of certain  consulting  services
provided to Cadence.  No sales  commissions  were paid in  connection  with this
transaction.  The  shares  were  issued  in  reliance  upon the  exemption  from
registration provided by Section 4 (2) of the Securities Act.

     On February 19, 2003,  Cadence  issued 40,000 shares of its common stock to
an  accredited  investor  as an  inducement  for  making  a loan to  Cadence  of
$100,000.  No sales  commissions were paid in connection with this  transaction.
The shares were issued in reliance upon the exemption from registration provided
by Section 4 (2) of the Securities Act.

     Between April and May 2003, Cadence issued an aggregate of 44,000 shares of
its common  stock to two  sophisticated  investor  in  consideration  of certain
consulting  services  provided to  Cadence.  No sales  commissions

                                       16

<PAGE>

were paid in  connection  with  this  transaction.  The  shares  were  issued in
reliance upon the exemption from  registration  provided by Section 4 (2) of the
Securities Act.

     On May 7, 2003,  Cadence issued an aggregate of 75,000 shares of its common
stock to four of its  officers  and/or  directors in  consideration  of services
provided to Cadence.  No sales  commissions  were paid in  connection  with this
transaction.  The  shares  were  issued  in  reliance  upon the  exemption  from
registration provided by Section 4 (2) of the Securities Act.

     On May 7, 2003,  Cadence  issued  10,000  shares of its common stock to one
sophisticated  investor in consideration of certain consulting services provided
to Cadence.  No sales commissions were paid in connection with this transaction.
The shares were issued in reliance upon the exemption from registration provided
by Section 4 (2) of the Securities Act.

     Between May and August 2003, Cadence sold an aggregate of 730,000 shares of
its common stock to 16  accredited  investors  for an aggregate of $710,000.  No
sales commissions were paid in connection with this transaction. The shares were
issued in reliance upon the exemption  from  registration  provided by Section 4
(2) of the Securities Act.

     On February  19, 2003,  Cadence  issued 6,000 shares of its common stock to
one  sophisticated  investor in consideration  for a loan of $30,000,  which was
subsequently repaid.

     In June 2003, Nathan Low loaned $300,000 to Cadence  Resources  Corporation
Limited  Partnership,  of which Cadence was the sole general partner and Mr. Low
was the sole  limited  partner.  As partial  inducement  for  making  this loan,
Cadence issued Mr. Low 120,000 shares of common stock. No sales commissions were
paid in  connection  with this  transaction.  The shares were issued in reliance
upon the exemption from registration provided by Section 4 (2) of the Securities
Act.

     In July 2003, CGT Management, Ltd. loaned Cadence $300,000 at 10% interest.
See  "Related  Parties  Transactions."  As an  inducement  for  making the loan,
Cadence issued 120,000 shares to CGT Management.  No sales commissions were paid
in connection with this transaction. The shares were issued in reliance upon the
exemption from registration provided by Section 4 (2) of the Securities Act.

     On July 1, 2003, Cadence issued an aggregate of 95,000 shares of its common
stock to four of its  officers  and/or  directors in  consideration  of services
provided to Cadence.  No sales  commissions  were paid in  connection  with this
transaction.  The  shares  were  issued  in  reliance  upon the  exemption  from
registration provided by Section 4 (2) of the Securities Act.

     In August 2003,  Cadence  issued 102,000 shares of its common stock to four
sophisticated investors in consideration of certain consulting services provided
to Cadence.  No sales commissions were paid in connection with this transaction.
The shares were issued in reliance upon the exemption from registration provided
by Section 4 (2) of the Securities Act.

     On September 15, 2003,  Cadence issued an aggregate of 95,000 shares of its
common  stock to four of its  officers  and/or  directors  in  consideration  of
services provided to Cadence.  No sales commissions were paid in connection with
this  transaction.  The shares were issued in reliance upon the  exemption  from
registration provided by Section 4 (2) of the Securities Act.

     Between September and October 2003,  Cadence sold an aggregate of 1,721,400
shares of its  common  stock to 29  accredited  investors  for an  aggregate  of
$4,303,500.  Sales  commissions  consisting of (i) $376,565 in cash, (ii) 11,000
shares of common stock valued at $2.90 per share or $31,900 in the aggregate and
(iii) options to purchase  162,140  shares of common stock at $2.50 per share to
one finder or an entity controlled by such finder,  and additional fees totaling
$11,250 to two other finders. All finders are accredited  investors.  The shares
and  warrant  were  issued in  reliance  upon the  exemption  from  registration
provided by Section 4 (2) of the Securities Act.


                                       17

<PAGE>

Item 6.  Management's Discussion and Analysis or Plan of Operations

     You should read the following  discussion in conjunction with our financial
statements,  together with the notes to those statements,  included at pages F-1
to F-39 of this Form 10-KSB. The following  discussion contains  forward-looking
statements that involve risks, uncertainties, and assumptions such as statements
of our plans, objectives,  expectations,  and intentions. Our actual results may
differ  materially  from those  discussed  in these  forward-looking  statements
because of the risks and uncertainties  inherent in future events,  particularly
those identified in "Risk Related to our Business."

Overview

     We were  formed in 1969 as Royal  Resources,  Inc.  to acquire  and develop
mineral  properties and we pursued  mining  operations  under several  different
names until mid-2001 when we changed our name to Cadence Resources  Corporation,
split our stock on a  1-for-20  reverse  basis,  and  changed  our  business  to
acquiring,  exploring  and  developing  oil  and  gas  properties.  The  current
management of Cadence,  Mr. Crosby and Mr. Ryan,  assumed  control of Cadence in
1996,  in  connection  with  the  acquisition  of  Cadence  by  an  entity  they
controlled.  Although the  management  of Cadence has been reduced in size since
1996, our key executives, Mr. Crosby and Mr. Ryan, have remained with Cadence.

     Following a corporate  reorganization in May 2001 to shift our focus to oil
and gas  exploration,  we began to lease oil and gas  properties in Louisiana in
the fall of 2001,  and in both Texas and  Louisiana in fiscal 2002,  but did not
produce  commercial  quantities  of oil and gas until the fourth  quarter of the
fiscal year ended September 30, 2002, when production  began from our properties
in Texas.  During the fourth  quarter of 2003,  we began to produce gas from our
properties in Louisiana  that we are exploring  together with Bridas Energy USA,
Inc.

     As a result of our change from a mineral  exploration company to an oil and
gas exploration  company,  in 2001 our Board determined to write-off and dispose
of our inventory of mineral properties to the greatest extent possible.  Because
mineral  properties at the  exploration  stage have limited  marketability,  and
because the management of Cadence does not have the extensive time it would take
to attempt to reach the limited number of buyers for our properties, we have not
been  successful at disposing of our  properties in outright arms' length sales,
but have chosen to write-down  the carrying  value of a substantial  majority of
our properties to zero, or to sell the  properties to other entities  controlled
by the management of the Company in non-arms' length transactions.

Recent Developments

     On  October  30,  2003,  we filed a  registration  statement  with the SEC,
registering over 3.5 million shares of our common stock for resale by certain of
our shareholders. We expect this registration statement to be declared effective
by the SEC by mid-January 2004.

     During  September  2003, and to a minor extent in October 2003, we received
net proceeds of approximately $3.88 million from the sale of 1,721,140 shares of
our common stock on a private  placement  basis to a small group of  individuals
and  entities.  Approximately  $967,000 of these net proceeds were used to repay
indebtedness  and  approximately  $75,000  was used to payoff  nearly all of our
existing accounts payable, with the remainder to be used for our exploration and
development drilling through fiscal 2004.

     Also in the fourth  quarter of fiscal  2003,  we began to generate  greater
revenues from our oil wells in Texas as a result of the successful completion of
two new wells  and the  reworking  of an  existing  well  which  quintupled  our
production.  As a result,  we received  net revenues of $83,433 and $59,519 from
our Texas  production in the months of August and September 2003,  respectively,
as compared to net revenues of $18,704 and $18,481 from Texas  production in the
months of June and July 2003, respectively. During October and November 2003, we
received  net  revenues  from our  Texas  production  of  $76,705  and  $76,426,
respectively.

Capital Resources and Liquidity

     From our  reorganization  in mid-2001 until the end of our 2003 fiscal year
on September 30, 2003, we funded our operations  principally through the private
sale of equity securities, borrowings from officers, directors and shareholders,
and borrowings from third party individuals.

     We realized  net  proceeds of  $123,000  from the sale of our common  stock
during our 2001 fiscal  year,  net  proceeds  of  $941,900  from the sale of our
common  stock  and  warrants  during  fiscal  year  2002,  and net  proceeds  of
approximately  $4,830,000 from the sale of our common stock, preferred stock and
warrants during the year ended September 30, 2003.


                                       18

<PAGE>

     In our  fiscal  years  ended  September  30,  2001 and  2002,  we  received
approximately $92,000 and $86,000 from the sale of investments in various public
companies.  The sales of these investments were made to fund our working capital
needs.  Prior to our refocus upon the exploration and development of oil and gas
properties,  we would from time to time make  investments  in public  companies.
These  investments were passive in nature and were generally  relatively  small.
Given our focus on oil and gas, future  investments of this nature are likely to
be limited to opportunities that are of some strategic value to our core oil and
gas business and are likely to be less passive in nature.

     In our 2001 fiscal  year,  we borrowed  $125,000  from Howard  Crosby,  (an
officer and  shareholder  of Cadence)  and $10,000  from Dotson  Exploration,  a
related party which is 48% owned by Messrs.  Crosby and Ryan. These amounts were
repaid in fiscal  2002 for cash of  $45,000,  and  300,000  shares of our common
stock. In fiscal 2002, we had no net borrowings, and in the year ended September
30, 2003, we had total  borrowings of $300,000,  of which $140,000 was repaid in
cash and $50,000 of which was repaid by the  issuance of 50,000  shares of stock
prior to the fiscal year-end.  As of September 30, 2003,  $50,000 of the balance
of  $110,000  was owed to Nathan A. Low, a  shareholder  of  Cadence,  while the
remaining  $60,000  was owed to Mr.  Crosby.  As of  November  30,  2003,  these
balances had been repaid.

     We spent  $19,000 in fiscal  2001,  $144,000 in fiscal 2002 and $321,000 in
the year ended  September  30,  2003,  for oil and gas lease  expenses and lease
operating  expenses.  In the same periods we spent $0,  $134,000  and  $145,000,
respectively,  for oil and gas  drilling,  production  and  operating  expenses.
Furthermore,  given our capital constraints,  we have been unable to employ full
time  technical  and  professional  people,  a small  portion  of  which  is for
geologists and other oil and gas professionals.  Consequently,  we have obtained
services  largely on a  consulting  basis.  We spent  approximately  $114,000 in
fiscal 2001,  $934,000 in fiscal 2002, and $591,000 in the year ended  September
30, 2003 for consulting services in various disciplines.

     During  fiscal  2002 and fiscal  2003,  we  purchased  fixed  assets in the
amounts  of  $172,000  and  $183,000,   respectively.  These  expenditures  were
primarily related to the purchase of well equipment, including pipelines, tanks,
casings and pumping units.

     As of September 30, 2003, we had cash and cash equivalents of approximately
$3.6  million  and at  November  30,  2003,  had cash and  cash  equivalents  of
approximately  $1.21  million.  All of  the  net  proceeds  remaining  from  our
September 2003 sale of common stock will be used to pay our portion of the costs
of drilling and  completing  wells on our DeSoto  Parish  acreage  together with
Bridas Energy. We anticipate funding our operating and  administrative  overhead
out of revenues from the sale of our Texas oil production and our recently added
Louisiana gas production.

     For the years ending September 30, 2002 and 2001, our auditors  expressed a
going concern qualification on our audited financial  statements.  Subsequent to
the date of those financial statements,  in September and October 2003 we raised
approximately  $4.3 million in a private  placement of our common stock,  with a
substantial portion of the net proceeds to be used to fund future operations. We
believe that the proceeds  received  from our recent stock sales,  together with
internally  generated funds expected from our oil and gas production  during the
next  year,  should  be  sufficient  to meet our  working  capital  and  capital
expenditure  requirements through the middle of fiscal 2004. Accordingly,  there
is no going concern  qualification from our auditors on our financial statements
for the year ended September 30, 2003.

Results of Operations

Years ended September 30, 2003 and 2002

         Revenues

     During the year ended September 30, 2003, revenues from the sale of oil and
gas totaled approximately $337,355, all from production from our wells in Texas.
This revenue came from the sale of 11,447 net barrels of oil at an average price
of $29.47 per barrel.  We also  realized a cash receipt of $50,000 in April 2003
from Bridas  Energy  upon  transfer of  drilling  and  production  rights in our
leasehold  acreage in DeSoto Parish,  Louisiana that we

                                       19


<PAGE>

are currently exploring with them on a joint basis. No revenues from oil and gas
exploration were received in the comparable period of fiscal 2002.

         Expenses

     Our expenses during fiscal 2002 and 2003 break into two general categories:
corporate and administrative  overhead and expenses from oil and gas operations.
Our overall general and  administrative  expenses include officer  compensation,
rent, travel, audits and legal fees associated with SEC filings, directors fees,
investor  relations and related  consulting  fees, stock transfer fees and other
items associated with the costs of being a public entity.  Expenses from oil and
gas operations include  consulting fees for technical and professional  services
related  to oil and  gas  activities,  leases,  drilling  expenses,  exploration
expenses, depletion, depreciation and amortization of oil and gas properties and
related equipment, and other expenses related to the procurement and development
of oil and gas properties.

     The following table is a comparison of Cadence's two general  categories of
expenses  for the years ended  September 30 2003 and 2002,  and the  percentages
each of these categories comprise of total expenses:

<TABLE>
<CAPTION>
                                                                       Year Ended September 30,
                                                  ---------------------------------------------------------------------
                                                                   % of 2003 Total                      % of 2002 Total
                                                      2003             Expenses            2002             Expenses
                                                  --------------   ----------------    --------------   ---------------
<S>                                               <C>                   <C>            <C>                    <C>
Corporate and Administrative Overhead             $ 1,732,756            74.8%         $1,230,956              81.3%
Expenses from Oil and Gas Operations                  583,393            25.2%            282,682              18.7%
                                                  --------------   ----------------    --------------    -------------
Total Expenses                                    $ 2,316,149           100.0%         $1,513,638             100.0%
                                                  ==============   ================    ==============    =============
</TABLE>

     The Company's  general and  administrative  expenses  increased from fiscal
2002 to fiscal 2003 by approximately $555,000,  principally because of increased
compensation  for officers and  directors  and  increased  fees to  professional
service providers paid for their services in connection with private  placements
of our of stock and the formation of the Cadence Resources  Corporation  Limited
Partnership.

     The comparable  year to year increases in oil and gas related  expenditures
are  summarized  in the  following  table,  which  reflects  the  major  expense
categories  for expenses from oil and gas  operations  for fiscal 2003 and 2002.
These expenses almost doubled from year to year,  principally due to an increase
in the level of activity in leasing additional properties.

<TABLE>
<CAPTION>
                                                                        Year Ended September 30,
                                                  --------------------------------------------------------------------
                                                                2003                                2002
                                                  ---------------------------------    -------------------------------
                                                      2003           % of Total            2002           % of Total
                                                                      Expenses                             Expenses
                                                  --------------   ----------------    --------------     ------------
     <S>                                            <C>                  <C>             <C>                  <C>
     Exploration and drilling                       $109,968             18.8%           $128,974              45.6%
     Depreciation, depletion and amortization         57,310              9.8%              4,312               1.5%
     Oil and gas lease expenses                      302,204             51.8%            131,812              46.6%
     Oil and gas production costs                     34,577              6.0%              5,305               1.9%
     Oil and gas lease operating expenses             19,334              3.3%             12,279               4.4%
     Oil and gas consulting                           60,000             10.3%                 --                --
                                                  --------------   ----------------    --------------    -------------
Total Expenses from oil and gas operations          $583,393            100.0%           $282,682             100.0%
                                                  ==============   ================    ==============    =============
</TABLE>

     Exploration and drilling expenses  decreased  approximately 15% from fiscal
2002 to fiscal 2003 due to fewer wells being drilled on our Texas  properties in
2003 in anticipation of  implementing  an intensive  drilling  program in DeSoto
Parish in fiscal 2004. Oil and gas lease expenses increased 230% between the two
periods due to

                                       20

<PAGE>

an increased  leasing  program on the West Electra  Prospect in fiscal 2003,  as
well as our new  leasing  program in Kansas.  Oil and gas  production  costs and
lease operating  expenses increased between the two periods due to approximately
500% higher  production in 2003 than in 2002. Oil and gas consulting  costs were
first attributable to production activities in fiscal 2003.

Recent Accounting Pronouncements

     There  have been no  recently  issued  accounting  pronouncements  which we
expect to have a  material  effect on our  consolidated  financial  position  or
results of operations.

Item 7.  Financial Statements

     The Financial Statements of the Company appear at pages F-1 to F-39.

Item 8.  Changes in and Disagreements with Accountants.

     There  have  been no  disagreements  with  accountants  on  accounting  and
financial disclosures from the inception of the Company through the date of this
Annual Report.

Item 8A.  Controls and Procedures.

     We maintain  disclosure  controls  and  procedures  and  internal  controls
designed to ensure that  information  required  to be  disclosed  in our filings
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported  within the time  periods  specified  in the  Securities  and  Exchange
Commission's  rules and forms.  Our chief executive  officer and chief financial
officer have  evaluated our disclosure  controls and  procedures  within 90 days
prior to the filing of this  Annual  Report on Form  10-KSB and have  determined
that such disclosure controls and procedures are effective.

     Subsequent  to their  evaluation,  there  were no  significant  changes  in
internal controls that could  significantly  affect such controls  subsequent to
the date of their evaluation.

                                    PART III

 Item 9.  Directors, Executive Officers, Promoters and Control Persons

     The  following  table sets forth the name,  age and position of each of our
officers and directors:

<TABLE>
<CAPTION>
                       Name                  Age                      Position
                       ----                  ---                      --------
       <S>                                    <C>          <C>
       Howard M. Crosby                       51           President, Treasurer and Director
       John P. Ryan                           42           Vice President, Secretary and Director
       Kevin Stulp                            47           Director
</TABLE>

     Under our Bylaws,  the authorized number of directors of our company is set
at no fewer than three and no more than ten directors. We currently have a board
of directors  with three  members.  Each director  serves for a term of one year
that expires at the following annual shareholders'  meeting. Each officer serves
at the  pleasure  of the  board of  directors  and  until a  successor  has been
qualified  and  appointed.   There  are  no  family   relationships,   or  other
arrangements or understandings between or among any of the directors,  executive
officers or other person  pursuant to which such person was selected to serve as
a director or officer.

     We did not  conduct  an annual  meeting  following  the  fiscal  year ended
September  30, 2002.  Therefore,  the  directors  continue to serve beyond their
elected term under  provisions  of the Utah  Revised  Business  Corporation  Act
providing that the existing  directors  continue to serve until their successors
are elected or appointed.  Set forth below is certain  biographical  information
regarding each of our directors and executive officers:

                                       21


<PAGE>

     Mr. Crosby has served as our President and a director  since February 1994.
He has served as our treasurer  since January 1998.  Since 1989,  Mr. Crosby has
been president of Crosby Enterprises, Inc., a family-owned business advisory and
public  relations firm. Mr. Crosby received a B.A. degree from the University of
Idaho. Mr. Crosby is also an officer and director of Western Goldfields, Inc., a
publicly traded gold mining exploration company, and Dotson Exploration Company,
Nevada-Comstock  Mining Company (formerly Caledonia  Silver-Lead Mines Company),
and Great Wall Minerals, Ltd., all privately held companies.

     Mr. Ryan has served as our Vice  President of Corporate  Development  since
September  1996, as Secretary since October 1998 and as a member of our board of
directors  since April 1997.  Mr. Ryan is a degreed mining  engineer.  From June
1996 to February 2000, Mr. Ryan served in various positions,  such as President,
Secretary and Director for  Metalline  Mining  Company and Grand Central  Silver
Mines.  From August,  2000 to the  present,  he has served as a Director and the
Chief  Financial  Officer of Trend Mining  Company,  a publicly  traded  mineral
exploration and development  company and from July, 2000 to the present,  he has
served as a Director and Chief Financial Officer of Western Goldfields,  Inc., a
publicly traded gold mining exploration company.  Other companies with which Mr.
Ryan holds an officer and/or director position include  Bio-Quant,  Inc., Oxford
Metallurgical,  Inc., Nevada-Comstock Mining Company, Great Wall Minerals, Ltd.,
Continental  Timber  Company,  Inc.,  Rio  Grande  Resources,  Inc.,  and Dotson
Exploration  Company.  Many of these  companies  have only minimal  activity and
require only a small amount of Mr. Ryan's time.  Mr. Ryan is a former U.S. Naval
Officer and obtained a B.S. in Mining  Engineering  from the University of Idaho
and a Juris Doctor from Boston College Law School.

     Mr. Stulp has served as a director since March 1997. Since August 1995, Mr.
Stulp has been an independent consultant in the fields of volume electronics and
manufacturing,  general business consulting,  business strategy, business use of
the  Internet,  automation  and  integration  through  computers,  and financial
analysis. From December 1983 to July 1995, Mr. Stulp held various positions with
Compaq  Computer  Corporation,   including  industrial  engineer,  new  products
planner,  manufacturing  manager,  director  of  manufacturing  and  director of
manufacturing  reengineering.  Mr. Stulp holds an M.B.A.  and B.S. in Mechanical
Engineering,  both from the  University  of  Michigan,  and a B.S.  from  Calvin
College, Grand Rapids, Michigan.

     Set forth  below is  certain  biographical  information  about our  primary
geological  consultant.  While not an employee of ours, he is under  contract to
provide us with consulting services on a 75% of full-time basis.

     Mr. Lucius C. Geer has served as our chief consulting  geologist since July
2001 and has been an independent geological consultant since 1971. Prior to that
he held  positions  as Chief of  Exploration  for Texas  Crude,  Inc., a private
Houston  based  oil  and  gas  company.  From  1966-1969  he  was  the  Division
Exploration Manager for Signal Oil & Gas based in Los Angeles. From 1957-1966 he
was the Division Geophysicist for Union Oil of California (UNOCAL). Mr. Geer has
an M.S. in Geology  from the  University  of Houston and a B.S. in Geology  from
Mississippi State University.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section  16(a) of the  Securities  Exchange  Act of 1934  requires  certain
defined  persons to file  reports of and changes in  beneficial  ownership  of a
registered security with the Securities and Exchange Commission and the National
Association of Securities  Dealers in accordance  with the rules and regulations
promulgated  by the  Commission to implement the provisions of Section 16. Under
the regulatory procedure, officers, directors, and persons who own more than ten
percent of a registered class of a company's equity securities are also required
to furnish the Company with copies of all Section 16(a) forms they file.

     To the Company's knowledge, based solely on a review of the copies of Forms
3 and 4  furnished  to the  Company  during the 2003  fiscal  year,  and Forms 5
furnished  to the  Company  with  respect to such  fiscal  year,  the  Company's
officers,  directors and greater than 10%  beneficial  owners  complied with all
Section 16(a) filing requirements except as follows: Mr. Howard M. Crosby failed
to timely  file a Form 4 for  transactions  that  occurred  on February 4, 2003,
February 19, 2003 (two  transactions),  May 7, 2003, July 17, 2003 and September
15, 2003; Mr. John P. Ryan failed to timely file a Form 4 for transactions  that
occurred on February 4, 2003, May 7, 2003,  July 17, 2003 and September 15, 2003
(two  transactions);  Mr.  Kevin D.  Stulp  failed to  timely  file a Form 4 for
transactions that occurred on February 4, 2003,  February 19, 2003, May 7, 2003,
July 17, 2003 and September 15, 2003; Crosby Enterprises,  Inc. failed to timely
file a Form 4 for a  transaction  on  September  15,  2003;  Dotson  Exploration
Company failed to timely file a Form 4

                                       22

<PAGE>

for a transaction on September 15, 2003. Messrs.  Crosby, Ryan, Stulp as well as
Crosby  Enterprises,  Inc. and Dotson Exploration  Company each failed to timely
file a Form 5 to report these transactions,  but are currently in the process of
preparing and filing a Form 5 to report them.

Code of Ethics

     We have  adopted a Code of Ethics that applies to our  principal  executive
officer and senior  financial  officers.  Our Code of Ethics is attached to this
Form 10-KSB as Exhibit 14.

Item 10.  Executive Compensation

Summary of Cash and Certain Other Compensation

     The  following  table  sets forth  certain  summary  information  regarding
compensation  paid or  accrued by us to or on behalf of our  executive  officers
(determined  as of September 30, 2003) for the fiscal years ended  September 30,
2003, 2002 and 2001. None of our executive  officers has any employment or other
written agreement relating to his compensation.

<TABLE>
<CAPTION>
                                                                                 Long Term Compensation
                                                                    -------------------------------------------------
                                      Annual Compensation                    Awards                  Payouts
                            ------------------------------------------------------------------------------------------
                                                                                 Securities
                                                          Other     Restricted     Under-
  Name and                                                Annual       Stock        Lying     LTIP          All Other
  Principal                     Salary(1)      Bonus   Compensation   Award(s)     Options/  Payouts     Compensation
  Position            Year         ($)          ($)       ($)           ($)        SARs(#)     ($)            ($)
------------------    ----  -------------    --------  ------------ -----------  ----------  -------     --------------
<S>                   <C>   <C>                 <C>        <C>      <C>      <C>      <C>      <C>            <C>
Howard M. Crosby      2003  $   178,000(2)      --         --       $        --       --       --             --
Chief Executive       2002  $   93,000 (2)      --         --       $        --       --       --             --
Officer               2001  $    42,400(2)      --         --       $        --       --       --             --

John P. Ryan          2003  $   222,500(3)      --         --       $        --       --       --             --
Vice President and    2002  $   144,255(3)      --         --       $        --       --       --             --
Secretary             2001  $    42,400(3)      --         --       $        --       --       --             --

Guma Aguiar           2003     $109,600(4)      --         --       $        --       --       --             --
</TABLE>

---------------

(1)  Salary  was  structured  to be paid  part in cash and part in stock for all
     three fiscal years shown. The stock portion,  20,000 shares per quarter for
     the last two  quarters of fiscal  2001 and for all four  quarters of fiscal
     2002 and 2003, was accrued  quarterly and valued as of the final  quotation
     on the last day of each quarter.  Of the shares  awarded,  5,000 shares per
     quarter were for executive compensation, and 15,000 shares per quarter were
     for services as a director.  The amounts reflect the total of cash plus the
     value all shares received for services as an officer and director.

(2)  The cash portion of Mr.  Crosby's  salary for fiscal 2003 was  $62,500,  of
     which he received $18,000 in fiscal 2003,  payment of the remaining $44,500
     having been deferred  until after the end of fiscal 2003.  In addition,  he
     received 80,000 shares of our common stock, 20,000 per quarter.  These were
     valued at the closing  price at the end of the quarter for which the shares
     were  awarded:  $34,000  for the  first  quarter,  $29,000  for the  second
     quarter,  $33,000 for the third quarter and $65,000 for the fourth quarter,
     for a total  of  $161,000  in  stock  compensation  and  $212,255  in total
     compensation.  The cash portion of Mr.  Crosby's salary for fiscal 2002 was
     set at $51,255,  which he elected to defer  until the Company had  adequate
     production  revenues to cover this salary.  Accordingly,  he received  this
     payment  after the end of fiscal  2003.  In  addition,  he received  80,000
     shares of our common  stock,  20,000 per quarter.  These were valued at the
     closing  price at the end of the quarter for which the shares were awarded:
     $15,000 for the first quarter,  $19,000 for the second quarter, $24,000 for
     the third  quarter  and  $30,000  for the  fourth  quarter,  for a total of
     $88,400 in stock  compensation  and $139,655 total  compensation.  The cash
     portion of Mr. Crosby's salary for fiscal 2001 was set at $25,000.

                                       23

<PAGE>

     However,  he received  83,500  shares of our common stock in lieu  thereof,
     which had a market  value,  when issued in January  2002,  of  $25,000.  In
     addition, he received 40,000 shares of our common stock, 20,000 per quarter
     for each of the last two quarters of the fiscal year.  These were valued at
     the  closing  price at the end of the  quarter  for which the  shares  were
     awarded:  $11,000 for the third quarter and $15,000 for the fourth quarter,
     for a  total  of  $26,000  in  stock  compensation  and  $51,000  in  total
     compensation.

(3)  The cash  portion of Mr.  Ryan's  salary for fiscal  2003 was  $62,500.  In
     addition,  he  received  80,000  shares of our  common  stock,  20,000  per
     quarter.  These were valued at the closing  price at the end of the quarter
     for which the shares were awarded:  $34,000 for the first quarter,  $29,000
     for the second  quarter,  $33,000 for the third quarter and $65,000 for the
     fourth quarter,  for a total of $161,000 in stock compensation and $212,255
     in total  compensation.  The cash portion of Mr.  Ryan's  salary for fiscal
     2002 was $51,255, of which $6,255 was paid after the end of fiscal 2003. In
     addition,  he  received  80,000  shares of our  common  stock,  20,000  per
     quarter.  These were valued at the closing  price at the end of the quarter
     for which the shares were awarded:  $15,000 for the first quarter,  $19,000
     for the second  quarter,  $24,000 for the third quarter and $30,000 for the
     fourth quarter,  for a total of $88,400 in stock  compensation and $139,655
     total  compensation.  The cash portion of Mr. Ryan's salary for fiscal 2001
     was set at $25,000.  However,  this was later paid  through the issuance of
     30,000  shares of our common  stock  valued at $9,000 and the  transfer  of
     shares the Company  owned in Trend  Mining  Company  valued at $16,000.  In
     addition, he received 40,000 shares of our common stock, 20,000 per quarter
     for each of the last two quarters of the fiscal year.  These were valued at
     the  closing  price at the end of the  quarter  for which the  shares  were
     awarded:  $11,000 for the third quarter and $15,000 for the fourth quarter,
     for a  total  of  $26,000  in  stock  compensation  and  $51,000  in  total
     compensation.

(4)  Mr.  Aguiar  served as an  executive  officer  and a director  for the last
     quarter of fiscal year 2002 and for the first three quarters of fiscal year
     2003 (through June 30, 2003).  During fiscal year 2002 he received  $10,000
     of cash  compensation and deferred $5,000.  During fiscal year 2003 through
     June 30, 2003 he was entitled to cash  compensation  of $45,000 of which he
     received  $15,000  in cash and  deferred  $30,000.  In the final  period of
     fiscal year 2003 he was entitled to $15,000 of non-executive  compensation.
     In September  2003, and subject to a previous Board of Directors  decision,
     he  received  66,667  shares of stock,  which had an agreed  upon  value of
     $50,000,  for his past due deferred salary from fiscal years 2002 and 2003.
     He resigned as an executive  officer and director  effective June 30, 2003,
     but continues to work as an employee.

Stock Option Grants

     During fiscal 2003,  no stock  options were granted to the named  executive
officers.

                                       24
<PAGE>

Option Values

     The following  table contains  information  concerning the number of shares
acquired and value  realized from the exercise of options during fiscal 2003 and
the  number of  unexercised  options  held by the named  executive  officers  at
September 30, 2003.

<TABLE>
<CAPTION>
                                       Aggregate Option Exercises in Last Fiscal Year
                                                             And
                                                Fiscal Year End Option Values

                                                                                                  Value of Unexercised
                                                               Number of Shares of                In-The-Money Options
                                                             Common Stock Underlying            at Year End (September 30
                                                               Unexercised Options                      2003)(1)
                                                         at Year End (September 30) 2003                  ($)
                                                         --------------------------------- -----------------------------------
                              Shares
                             Acquired
                                On       Value Realized
          Name               Exercise         ($)         Exercisable     Unexercisable      Exercisable     Unexercisable
-------------------------- ------------- --------------- --------------- ----------------- ---------------- ------------------
<S>                            <C>       <C>                 <C>                     <C>   <C>                           <C>
Howard M. Crosby               70,834    $     141,668            --                 --                --                --

John P. Ryan                   36,834    $      73,668            --                 --                --                --

Guma Aguiar                        --               --       200,000                 --    $      380,000                --
</TABLE>
---------------
(1)  Options are  "in-the-money"  if the market price of a share of common stock
     exceeds the exercise price of the option.

Option/SAR Grants

     In January 1992, the  shareholders of Royal Silver Mines,  Inc.  approved a
1992 Stock  Option and Stock  Award  Plan under  which up to ten  percent of the
issued and  outstanding  shares of our common  stock  could be awarded  based on
merit of work  performed.  As of September 30, 2003,  638 shares of common stock
have been awarded under this Plan, of which none are currently  outstanding  and
exercisable. We currently have no other qualified stock or option plans.

     Absent an approved  qualified  plan, the Board has chosen to make option or
warrant    awards   to   select    officers,    directors,    consultants,    or
shareholder/investors  in order to induce them to assist us in implementing  our
business plan and to provide long term  additional  incentive.  These options or
warrants,  as  awarded,  are not awarded  pursuant  to a qualified  plan but are
specific individual awards with varying terms and conditions. In some instances,
the Board has reserved the right to cancel these awards for  non-performance  or
other reasons, or has established a vesting schedule pursuant to which the award
is earned.

Director Compensation

     As of October 1, 2003, we compensate our directors in cash and in shares of
our common stock.  We grant our  directors  (employee  and  nonemployee)  12,500
shares per quarter of completed service.  In addition,  the Board members may be
granted stock options pursuant to Board recommendation and approval. We also pay
our  nonemployee  directors  $1,600 for each board meeting they attend in person
and $600 for each  telephonic  meeting and our employee  directors $600 for each
board meeting they attend in person.

     During  fiscal  2003,  225,000  shares  were  awarded to our  directors  as
compensation. There are no contractual arrangements with any member of our board
of directors.  In addition,  we granted  options to purchase

                                       25
<PAGE>

200,000  shares of common stock to Kevin  Stulp,  a  nonemployee  director at an
exercise price of $0.75 per share. Mr. Stulp exercised  100,000 of these options
in the fiscal year 2003. Mr. Stulp's  remaining options expire on March 1, 2007.
During fiscal 2002, we also granted options to purchase 200,000 shares of common
stock to Guma Aguiar,  who, at the time of grant was an employee director,  at a
price of $1.35,  which options expire on July 8, 2007.  Mr. Aguiar  resigned his
position as a director effective June 30, 2003.

<TABLE>
<CAPTION>
                          Nonemployee Director Options
                               September 30, 2003
                                                                                  Shares of Common Stock
Name                                                                          Underlying Unexercised Options
<S>                                                                                        <C>
Kevin Stulp                                                                                100,000
</TABLE>

 Item 11.  Security Ownership of Certain Beneficial Owners and Management

     The  following  table  sets  forth,  as  of  September  30,  2003,  certain
information  with respect to the beneficial  ownership of Cadence's common stock
by (i) each  person  known by  Cadence to  beneficially  own more than 5% of the
outstanding shares, (ii) each director of Cadence,  (iii) each executive officer
of Cadence and (iv) all executive  officers and directors of Cadence as a group.
Except as  otherwise  indicated,  each person  listed  below has sole voting and
investment  power with respect to the shares of Cadence's common stock set forth
opposite such person's name.

<TABLE>
<CAPTION>
               Name and Address of                  Amount and Nature of               Percent of
              Beneficial Owner (1)                Beneficial Ownership (2)       Outstanding Shares (3)
    ------------------------------------------ -------------------------------- --------------------------

    <S>                                                     <C>                               <C>
    Howard Crosby ...........................               1,201,218 (4)                      9.71%

    John Ryan ...............................                 976,734 (5)                      7.89%

    Kevin Stulp..............................                 290,250 (6)                      2.33%

    Nathan A. Low Roth IRA and affiliates....               2,260,492 (7)                     18.30%
    641 Lexington Avenue
    New York, New York

    Thomas Kaplan............................               2,410,992 (8)                     19.49%
    154 West 18th Street
    New York, New York

    All executive officers and directors ....               2,359,202 (9)                     18.91%
    as a group (3 persons)
</TABLE>

---------------

*      Less than 1%

(1)  Under the rules of the SEC,  addresses  are only given for  holders of more
     than 5% of the outstanding  common stock of Cadence who are not officers or
     directors of Cadence.

(2)  Under the rules of the SEC, a person is deemed to be the  beneficial  owner
     of a security  if such person has or shares the power to vote or direct the
     voting of such  security or the power to dispose or direct the  disposition
     of such security.  A person is also deemed to be a beneficial  owner of any
     securities  if that  person has the right to acquire  beneficial  ownership
     within 60 days of the date hereof.  Except as otherwise indicated the named
     entities or individuals  have sole voting and investment power with respect
     to the shares of common stock beneficially owned.

(3)  Represents  the number of shares of common stock  beneficially  owned as of
     September 30, 2003 by each named person or group, expressed as a percentage
     of the sum of all of (i) the  shares of such class  outstanding  as of such
     date, and (ii) the number of shares not outstanding, but beneficially owned
     by such named person or group as of such date.

                                       26
<PAGE>

(4)  Includes  204,168 shares of common stock held by Crosby  Enterprises,  Inc.
     and 109,000  shares of common  stock owned by Dotson  Exploration  Company.
     Effective  December 31, 2003,  Mr.  Crosby  transferred  150,000  shares of
     common stock to the Lillian Jean Kaplan Foundation.

(5)  Includes 190,750 shares of common stock owned by Nancy Martin-Ryan;  45,000
     shares of common stock owned by Nancy  Martin Ryan as  custodian  for Karen
     Ryan; 45,000 shares of common stock owned by Nancy Martin Ryan as custodian
     for Patrick Ryan; 150,000 shares owned by J.P. Ryan Company,  Inc.; 109,000
     shares of common  stock  owned by Dotson  Exploration  Company;  and 87,500
     shares of common  stock  owned by Andover  Capital  Corporation.  Effective
     December 31, 2003, Mr. Ryan  transferred  150,000 shares of common stock to
     the Lillian Jean Kaplan Foundation.

(6)  Includes options currently exercisable for 100,000 shares of common stock.

(7)  Includes   131,000   shares  of  common  stock  owned  by  Nathan  A.  Low,
     individually,  40,000  shares of  common  stock  held by the  Nathan A. Low
     Family Trust and options to purchase  100,000  shares of common stock owned
     by Lisa Low as  Custodian  for Daniel  Low,  Michael  Low,  Gabriel Low and
     Chantal Low.

(8)  Consists  of 480,811  shares of common  stock  owned by LCM  Holdings  LDC,
     480,811 shares of common stock owned by Electrum Resources,  LLC, 1,329,370
     shares of common stock owned by Electrum Capital, LLC and 120,000 shares of
     common stock owned by CGT Management Ltd.

(9)  Includes options currently  exercisable for 100,000 shares of common stock;
     204,168 shares of common stock held by Crosby  Enterprises,  Inc.;  109,000
     shares of common stock owned by Dotson Exploration Company;  190,750 shares
     of common stock owned by Nancy  Martin-Ryan;  45,000 shares of common stock
     owned by Nancy Martin Ryan as custodian  for Karen Ryan;  45,000  shares of
     common  stock owned by Nancy  Martin Ryan as  custodian  for Patrick  Ryan;
     150,000  shares owned by J.P.  Ryan  Company,  Inc.;  and 87,500  shares of
     common stock owned by Andover Capital Corporation

 Item 12.  Certain Relationships and Related Transactions

     Nevada-Comstock Mining Company, formerly Caledonia Silver-Lead Mines, Inc.,
is owned  approximately  1.2% by Howard  Crosby,  chief  executive  officer  and
director,  1.2% by John Ryan,  vice president and director,  and 35% by Cadence.
Cadence had unpatented  mineral claims in Kil Group and West Mullan Group, which
it sold  during the fiscal  year ended  September  30,  2002,  to  Caledonia  in
exchange for 3,501,980  shares of Caledonia's  common stock,  par value $.10 per
share. The Board of Directors valued the Caledonia shares at $350,198. The board
of  directors  deemed  the  value of Kil Group  and West  Mullan  Group to be de
minimus, recording all but $20,000 of the amount received as gain.

     Messrs.  Crosby and Ryan  collectively own in excess of 40% of the stock of
Dotson  Exploration  Company and they are the sole  officers  and  directors  of
Dotson.  Dotson owns 109,000 shares of Cadence's shares of common stock.  During
fiscal  year 2002 and the first  quarter  of fiscal  year 2003,  Cadence  repaid
Dotson a loan in the amount of $10,000 and Cadence made two loans to Dotson, one
for $35,000  and one for  $20,000,  each at an  interest  rate of 10% per annum.
Dotson transferred to Cadence  marketable  securities of the common stock of two
unaffiliated companies, Enerphaze Corporation and The Williams Companies, valued
by the Board of  Directors at $33,380 as partial  payment of the amount  loaned.
During the nine months  ended June 30, 2003,  Dotson  repaid the $20,000 loan in
cash.  Of the total  amount of  principal  and  interest  Dotson  owed  Cadence,
$57,100,  the amount of $3,720 remained outstanding at September 30, 2003, which
amount is payable on demand and bears interest at 10% per annum.

     In  September  2000,   Cadence,   through  its  wholly  owned   subsidiary,
Celebration  Mining  Company,  entered  into a  5-year,  $6,000  per year  lease
agreement with Oxford Metallurgical, Inc., a company of which Messrs. Crosby and
Ryan  collectively  own  a  majority,  on  Cadence's  Palisades  Group  property
consisting of eight unpatented  mineral claims.  The lease permitted  payment in
cash or 10,000 Oxford shares per $3,000 of lease  payments.  Cadence  terminated
the lease in fiscal 2002.

     In October 2001,  Cadence  issued 200,000 shares of its common stock to Mr.
Crosby for cash in the amount of $60,000.  On January 15, 2002,  Cadence  issued
100,000  shares of its common  stock to Mr.  Crosby in payment of a loan made to
Cadence in the principal  amount of $30,000 in the November 2001. On January 22,
2002, Mr. Crosby made an additional loan of $30,000  bearing  interest at 8% for
which  Cadence  issued him 15,000  shares  valued at $4,500 as an  inducement to
making the loan.

                                       27
<PAGE>

     On January 22, 2002, Cadence  transferred 41,667 shares of the common stock
it owned in Trend Mining Company,  of which Mr. Ryan is a director,  to Mr. Ryan
in payment of past due salary of $16,000.  Further,  in October  2001,  Mr. Ryan
transferred  marketable securities of Enerphaze Corporation valued at $90,000 to
Cadence in exchange for 300,000 shares of Cadence, which shares are held by J.P.
Ryan Company, Inc. held 100% by John Ryan, Andover Capital Corporation held 100%
by John Ryan, and Dotson Exploration Company.

     In April 2002, Mr. Crosby purchased 83,334 Cadence investment units and Mr.
Ryan purchased  43,334  Cadence  investment  units at $0.30 per unit,  each unit
consisting  of one share of common  stock and one warrant  exercisable  at $0.30
(see also below  description  of  additional  purchases of units by  significant
shareholders).  The  warrants  contained  a  provision  which  allowed  cashless
exercise  when and if Cadence  common  stock traded at or above $1.50 per share.
Also, in April 2002, Cadence issued to Mr. Ryan 6,800 shares of its common stock
in repayment of 6,800 Cadence  shares owned by Mr. Ryan that he had  transferred
to third parties to pay Cadence invoices.

     During  fiscal  2003,  Mr.  Crosby made two loans to  Cadence.  One loan in
December 2002 was in the principal amount of $70,000, bearing interest at 5% and
the other  loan made in  February  2003 was in the  principal  amount of $50,000
bearing  interest at a rate of 8%.  Cadence  issued  14,000 shares of its common
stock valued at $10,920,  as an inducement to making the $70,000 loan and 20,000
shares  valued at $15,600,  as an  inducement  to making the $50,000  loan.  The
$50,000  loan was one of three  bridge  loans,  one for $50,000 from Kevin Stulp
(see  below)  and one for  $100,000  from the  Nathan A. Low  Family  Trust (see
below). Cadence repaid $60,000 in cash subsequent to the end of the fiscal year.
In addition, Cadence issued 4,000 shares of its common stock in repayment of the
remaining  $10,000  principal  amount  outstanding on the $70,000 loan.  Cadence
repaid  $25,000 of the $50,000  loan in cash  during  fiscal 2003 and repaid the
remaining  $25,000  principal  amount  outstanding  subsequent to the end of the
fiscal year.  Mr.  Crosby  waived the interest on both loans,  which Cadence has
recorded as income.

     In February 2003, Kevin Stulp,  director,  made a bridge loan to Cadence in
the  principal  amount of $50,000,  bearing  interest  of 8% per annum.  Cadence
issued  20,000  shares  of its  stock  valued  at  $15,600,  to Mr.  Stulp as an
inducement  to making the loan.  In April 2003,  Cadence  repaid  $25,000 of the
$50,000  loan in cash and in July 2003,  it issued  25,000  shares of its common
stock to repay the remaining  $25,000  principal amount  outstanding.  Mr. Stulp
waived interest on this loan which Cadence has recorded as income. In July 2003,
Mr. Stulp exercised a warrant to purchase 100,000 shares of common stock at $.75
per share.

     In April  2002,  the  Nathan  A. Low Roth IRA  purchased  1,083,334  of the
investment  units  described  above for $0.30 per unit, for a total of $325,000.
The Nathan A. Low Roth IRA gave Cadence a non-interest bearing note for $150,000
for the  partial  payment of the units.  The due date was June 15,  2002 and the
note was paid in full and on time.

     In April 2002,  entities controlled by Thomas Kaplan purchased 1,083,334 of
the  investment  units  described  above  for  $0.30  per  unit,  for a total of
$325,000.  These  entities  gave  Cadence  two  non-interest  bearing  notes for
$150,000  for the partial  payment of the units.  The due date for the notes was
June 15, 2002 and they were paid in full and on time.

     In October 2002, the Nathan A. Low Roth IRA and various entities controlled
by  Thomas  Kaplan  exercised  warrants  acquired  as part of the unit  offering
referred  to above.  The  exercise  was done in separate  cashless  transactions
whereby each party  surrendered a total of 175,676 shares of common stock valued
at $325,000 to exercise warrants for 1,083,334 shares of stock,  netting 907,658
shares.

     In 2002,  Nathan Low, a Cadence  Resources major  shareholder,  and Cadence
decided to form a limited partnership to acquire and develop oil and natural gas
properties.  Low planned to seek investors to invest as limited  partners in the
partnership.  On  August 8,  2002,  Cadence  formed  Cadence  Resources  Limited
Partnership,  with Cadence as the sole general partner.  Low had not brought any
investors to the  partnership by the time the  partnership  was ready to acquire
oil and gas interests.  Therefore,  Low elected to provide the initial  funding,
$250,000,  for the  first  prospect,  in the form of the  purchase  of a limited
partnership  interest  in  the  partnership.  Cadence  paid  Sunrise  Securities
Corporation,  an entity controlled by Low, a finders' fee on this funding. Also,
on August 1, 2002,  Sunrise  Securities  Corporation,  together with Low and his
assigns,  the  limited  partnership  and  Cadence  entered  into the Side Letter
Agreement  of Certain  Terms of Limited  Partnership  Drawdown  Facility,  a $20
million  funding  agreement.   This  was  intended  to  provide  further  equity
investments  in the  partnership.  It was

                                       28


<PAGE>

structured so that the Low parties had the option,  but not the  obligation,  to
provide capital  contributions to the partnership.  In partial consideration for
entering into the drawdown facility, the Low parties were given a right of first
refusal  to  provide  funding  for  any  drilling  project  contemplated  by the
partnership.

     Cadence  and Low have  agreed in  principal  as to the  termination  of the
drawdown  facility,  the  repurchase of Low's limited  partnership  interest for
$250,000,  dissolution  of the  partnership  and related  matters and in October
2003,  Low received  $250,000  from Cadence for the  repurchase.  The  following
description of the transactions with regard to the partnership should be read in
light of the foregoing disclosure.

     In the formation of the  partnership,  Cadence  contributed  $12,500 to the
partnership  and Low,  the limited  partner,  contributed  $250,000  in cash.  A
portion of the  $250,000  was used to advance the  drilling on the West  Electra
Lake #1 well.  For  example,  $24,552  was  spent  on  seismic  acquisition  and
processing  which  covered the Virginia  Reef #2B well and also the West Electra
Lake #1 well acreage. Also $26,105 of the limited partnership funds was spent on
the leasing of the West Electra Lake Prospect as well as $16,077 on  preparatory
costs for the West Electra Lake #1 well. Prior to the limited  partner's request
for repayment of the limited  partner's  contribution  (see below),  Cadence had
granted the limited  partner a 5% working  interest in the #1 West  Electra Lake
well. However,  the limited partner has agreed to convey his working interest in
the West  Electra  Lake #1 well to Cadence as part of the buyout of his  limited
partnership interest by Cadence.

     Low also  advanced  $300,000  to the  partnership  to explore  natural  gas
interests in Michigan in the Black Bean Unit. As an inducement for this advance,
Cadence  issued Low 120,000  shares of common stock  valued at  $210,000.  As an
additional  inducement to making the $300,000  advance,  Low was granted a 2.25%
working  interest  in each well in the  Black  Bean  Unit in  Michigan  that was
drilled using the $300,000 until  "unitized well payout," the point at which the
partnership  receives 100% of its contribution back in the form of revenues from
the well unit. After unitized well payout, Low's working interest in these wells
will be reduced to a 2.00%  working  interest.  Cadence has repaid the  $300,000
loan.

     In February  2003,  Cadence gave a $100,000  note,  as part of the $200,000
bridge loans referenced  above, to the Nathan A. Low Family Trust at an interest
rate of 8%.  Cadence  issued 40,000 shares valued at $31,200 as an inducement to
making the loan. The principal on this note was repaid in full in October 2003.

     Cadence  issued  approximately  1,721,400  shares  of its  common  stock in
September  and  October  2003 in a  brokered  private  placement.  It paid sales
commissions of $376,565 in cash and options to purchase 162,140 shares for $2.50
per share to a broker, Sunrise Securities Corporation, a company owned by Nathan
Low. It also issued  11,000  shares of Cadence  common stock valued at $2.90 per
share to Nathan Low in connection with the private placement.

     CGT Management,  Ltd., in which members of the Thomas Kaplan family have an
indirect  interest,  loaned  Cadence  $300,000  in 2003 at 10%  interest.  As an
inducement for making the loan,  Cadence,  in fiscal 2003, issued 120,000 shares
valued at $168,000 to CGT Management.  Mr. Kaplan disclaims beneficial ownership
of the shares under the Exchange Act. The $300,000 loan and interest were repaid
in full in October 2003.

     In the ordinary course of Cadence's business, Cadence acquires interests in
exploratory and  developmental oil and gas prospects and sells interests in such
prospects to unaffiliated third parties.  In fiscal 2002, Cadence made available
for sale to its  executive  officers,  directors  and  consultants  a portion of
working  interests in the #1A well in Wilbarger  County,  Texas on terms no less
favorable to Cadence than those at which  interests  would  otherwise  have been
sold to third  party  investors  in that  well.  Messrs.  Crosby  and Ryan  each
acquired from Cadence a 6% working interest in the #1A well in Wilbarger County,
Texas for $40,800 in fiscal year 2002. Expenses are deducted from the production
checks and to date,  production has been sufficient to cover  expenses.  Cadence
sold these working interests to raise the capital to drill the well.

     Lucius C. Geer,  a  consultant  to Cadence  who  manages  its  acquisition,
exploration  and production  operations,  has entered  several  agreements  with
Cadence.  In October  2001,  Geer entered into an agreement  with Cadence  under
which  Cadence  purchased  from  Geer and an  associate  of  Geer's,  geological
information for $30,000 cash and a 2% overriding  royalty  interest each to Geer
and his  associate,  in the Virgin Reef  Prospect in  Wilbarger  County,  Texas.
Effective  December 31, 2001,  Cadence  assigned  Geer a 2%  overriding  royalty
interest in the oil,  gas and mineral  lease from the W. T.  Waggoner  Estate in
Wilbarger County,  Texas. In April 2003,  Cadence assigned

                                       29
<PAGE>

Geer and an  associate  each a 1%  overriding  royalty  interest  in oil and gas
leases in Desoto Parish,  Louisiana.  Effective August 1, 2003, Cadence and Geer
amended their February 1, 2002 Letter Agreement with respect to the creation and
funding of a geological and operations office to be staffed by Geer and paid for
by  Cadence.  Under the  agreement,  Geer  agreed  to  evaluate  the  geological
feasibility  and land  availability  of  agreed  upon  areas in order to  locate
prospects  that meet certain  criteria.  The  agreement  provides that Geer will
devote 75% of his time to his work for  Cadence  for  $7,500 per month.  On each
lease that Cadence  acquires  under the  agreement,  Cadence must assign Geer an
overriding  royalty  interest of 2% of the sales price received for all oil, gas
and minerals from such lease,  which amount is to be reduced  proportionately if
the lease covers less than the full fee mineral estate.

Item 13.  Exhibits and Reports on Form 8-K

<TABLE>
<CAPTION>
(a)  Exhibits

     <S>         <C>
      3.1        Restated Articles of Incorporation of Cadence Resources Corporation filed with the Utah Secretary
                 of State on November 24, 2003
      3.2        Bylaws of Cadence Resources Corporation, a Utah corporation, adopted June 14, 2001
      4          Articles of Amendment to the Articles of Incorporation, relating to the Class A Preferred Stock
     10.1        Joint Exploration Agreement with Bridas Energy USA, Inc. dated April 30, 2003
     10.2        Lease Acquisition and Participation Agreement with Aurora Energy, Ltd. dated December 8, 2002
     10.3        Consulting Agreement with Lucius C. Geer dated August 1, 2003
     10.4        Agreement dated effective September 30, 2003 with Nathan A. Low, Sunrise Securities Corporation and
                 Cadence Resources Corporation Limited Partnership
     14          Code of Ethics
     23.1        Consent of Ralph E. Davis Associates, Inc.
     31          Rule 13a-14(a)/15d-14(a) Certifications
     32          Certification of principal executive officer and principal financial officer pursuant to section
                 906 of the Sarbanes-Oxley Act of 2002
     99.1        Report of Ralph E. Davis Associates, Inc.
</TABLE>

(b)  Reports on Form 8-K

     The following reports on Form 8-K were filed during the last quarter of the
period covered by this report:

     (1)  Current  Report  on Form 8-K dated  July 25,  2003  attaching  a press
release regarding successful drilling of well with Bridas Energy USA.

     (2) Current  Report on Form 8-K dated July 30, 2003  attaching  (i) a press
release announcing  drilling of a new well in Louisiana and (ii) a press release
summarizing an analyst report completed by Proteus Capital Corp.

     (3)  Current  Report on From 8-K dated  August 21,  2003  attaching a press
release  announcing  (i)  successful  drilling of a second well in Louisiana and
(ii) the Company's upcoming drilling plans.

     (4) Current  Report on Form 8-K dated  September 19, 2003 attaching a press
release announcing drilling progress of a third well in Louisiana.

     (5) Current  Report on Form 8-K dated  September  30, 2003  attaching (i) a
press  release  announcing  the  Company's  completion  of a $4 million  private
placement and (ii) a Securities Purchase Agreement dated September 30, 2003.


                                       30

<PAGE>


The Board of Directors
Cadence Resources Corporation
Walla Walla, Washington


                          INDEPENDENT AUDITOR'S REPORT


We have audited the accompanying balance sheets of Cadence Resources Corporation
(formerly Royal Silver Mines, Inc.) as of September 30, 2003, 2002 and 2001, and
the related  statements  of operations  and  comprehensive  loss,  stockholders'
equity, and cash flows for the years then ended. These financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Cadence Resources  Corporation
(formerly Royal Silver Mines, Inc.) as of September 30, 2003, 2002 and 2001, and
the  results  of its  operations  and cash  flows  for the years  then  ended in
conformity with accounting principles generally accepted in the United States of
America.


/s/ Williams & Webster, P.S.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
December 10, 2003

                                      F-1
<PAGE>
<TABLE>
<CAPTION>
                                                    CADENCE RESOURCES CORPORATION
                                                 (FORMERLY ROYAL SILVER MINES, INC.)
                                                           BALANCE SHEETS

                                                                                           September 30,
                                                                 -------------------------------------------------------------------
                                                                        2003                    2002                    2001
                                                                 -------------------    --------------------     -------------------
<S>                                                              <C>                    <C>
ASSETS

      CURRENT ASSETS
          Cash                                                   $        3,619,345     $            40,011      $          191,684
          Oil & gas revenue receivable                                       84,575                  26,123                       -
          Receivable from working interest owners                            12,873                  16,037                       -
          Notes receivable                                                    3,720                  13,078                  18,000
          Prepaid expenses                                                    5,925                  27,500                   1,275
          Other current assets                                                  425                     431                     425
                                                                 -------------------    --------------------     -------------------
               TOTAL CURRENT ASSETS                                       3,726,863                 123,180                 211,384
                                                                 -------------------    --------------------     -------------------

      OIL AND GAS PROPERTIES, USING
          SUCCESSFUL EFFORTS ACCOUNTING
          Proved properties                                                 590,747                  48,694                       -
          Unproved properties                                               833,836                  78,997                       -
          Wells and related equipment and facilities                        202,886                  67,374                       -
          Support equipment and facilities                                  151,963                 105,108                       -
          Prepaid oil and gas leases                                        395,973                 177,177                  82,155
          Less accumulated depreciation, depletion,
               amortization and impairment                                  (61,611)                 (4,312)                      -
                                                                 -------------------    --------------------     -------------------
               TOTAL OIL AND GAS PROPERTIES                               2,113,794                 473,038                  82,155
                                                                 -------------------    --------------------     -------------------

      PROPERTY AND EQUIPMENT
          Furniture and equipment                                             1,660                   1,440                   1,440
          Less accumulated depreciation                                      (1,451)                 (1,440)                  1,440)
                                                                 -------------------    --------------------     -------------------
               TOTAL PROPERTY AND EQUIPMENT                                     209                       -                       -
                                                                 -------------------    --------------------     -------------------

      OTHER ASSETS
          Investments                                                       394,454                 448,793                 104,343
          Mineral properties available for sale                             246,757                 246,757                 266,757
                                                                 -------------------    --------------------     -------------------
               TOTAL OTHER ASSETS                                           641,211                 695,550                 371,100
                                                                 -------------------    --------------------     -------------------

      TOTAL ASSETS                                               $        6,482,077     $         1,291,768      $          664,639
                                                                 ===================    ====================     ===================

                             The accompaning notes are an integral part of these financial statements.

                                                                F-2
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                    CADENCE RESOURCES CORPORATION
                                                 (FORMERLY ROYAL SILVER MINES, INC.)
                                                           BALANCE SHEETS

                                                                                           September 30,
                                                                   -----------------------------------------------------------------
                                                                          2003                   2002                  2001
                                                                   --------------------   -------------------   --------------------
<S>                                                                <C>                    <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

      CURRENT LIABILITIES
          Accounts payable                                         $           584,866    $          119,923    $           158,857
          Revenue distribution payable                                          68,929                14,835                      -
          Payable to related party                                             550,000                 2,500                  8,231
          Deferred working interest                                                  -                22,184                      -
          Accrued compensation                                                  94,920                66,261                  5,000
          Accrued interest - related party                                      15,752                     -                      -
          Notes payable - related party                                        460,000                     -                      -
                                                                   --------------------   -------------------   --------------------
               TOTAL CURRENT LIABILITIES                                     1,774,467               225,703                217,088
                                                                   --------------------   -------------------   --------------------

      LONG-TERM DEBT
          Notes payable - related parties                                            -                     -                135,000
                                                                   --------------------   -------------------   --------------------

      COMMITMENTS AND CONTINGENCIES                                                  -                     -                      -
                                                                   --------------------   -------------------   --------------------

      REDEEMABLE PREFERRED STOCK                                                59,925                     -                      -
                                                                   --------------------   -------------------   --------------------

      STOCKHOLDERS' EQUITY
          Common stock, $0.01 par value; 100,000,000
             shares authorized, 12,512,827, 6,866,210,
             and 2,453,890 shares issued and outstanding,
             respectively                                                      125,128                68,662                 24,539
          Additional paid-in capital                                        18,343,422            13,291,965             12,198,855
          Stock options                                                      1,210,704               626,790                      -
          Stock warrants                                                        51,375               233,334                      -
          Accumulated deficit                                              (14,863,687)          (12,906,132)           (11,760,681)
          Accumulated other comprehensive loss                                (219,257)             (248,554)              (150,162)
                                                                   --------------------   -------------------   --------------------
               TOTAL STOCKHOLDERS' EQUITY                                    4,647,685             1,066,065                312,551
                                                                   --------------------   -------------------   --------------------

      TOTAL LIABILITIES AND STOCKHOLDERS'
          EQUITY                                                   $         6,482,077    $        1,291,768    $           664,639
                                                                   ====================   ===================   ====================

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

                                                                F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                    CADENCE RESOURCES CORPORATION
                                                 (FORMERLY ROYAL SILVER MINES, INC.)
                                           STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

                                                                           Years Ended September 30,
                                                          ---------------------------------------------------------
                                                                2003                  2002               2001
                                                          -----------------   ------------------ ------------------

<S>                                                       <C>                 <C>                <C>
REVENUES
     Oil and gas sales                                    $        337,355    $          56,608  $               -
     Sale of drilling and production rights                         50,000                    -                  -
                                                          -----------------   ------------------ ------------------
            Total Revenues                                         387,355               56,608                  -
                                                          -----------------   ------------------ ------------------

OPERATING AND ADMINISTRATIVE EXPENSES
     Depreciation, depletion and amortization                       57,310                4,312                402
     Officers' and directors' compensation                         528,727              152,510             80,250
     Consulting                                                    531,137              934,254                  -
     Oil and gas lease expenses                                    302,204              131,812                  -
     Oil and gas consulting                                         60,000                    -                  -
     Exploration and drilling                                      109,968              128,974                  -
     Oil and gas production costs                                   34,577                5,305                  -
     Lease operating expenses                                       19,334               12,279                  -
     Other general and administrative                              386,892              144,192            245,432
                                                          -----------------   ------------------ ------------------
         Total Expenses                                          2,030,149            1,513,638            326,084
                                                          -----------------   ------------------ ------------------

LOSS FROM OPERATIONS                                            (1,642,794)          (1,457,030)          (326,084)
                                                          -----------------   ------------------ ------------------

OTHER INCOME (EXPENSE)
     Interest income                                                   136                1,034                100
     Interest expense and loan fees                               (227,978)              (5,872)           (25,711)
     Partnership income (loss)                                     (15,200)              10,000                  -
     Gain (loss) on debt forgiveness                                (4,699)               6,109                  -
     Loss on disposition and impairment of assets                  (67,020)             (29,890)           (82,482)
                                                          -----------------   ------------------ ------------------
         Total Other Income (Expense)                             (314,761)             (18,619)          (108,093)
                                                          -----------------   ------------------ ------------------

LOSS BEFORE TAXES                                               (1,957,555)          (1,475,649)          (434,177)

INCOME TAXES BENEFIT                                                     -               66,040                  -
                                                          -----------------   ------------------ ------------------

LOSS FROM CONTINUING OPERATIONS                                 (1,957,555)          (1,409,609)          (434,177)

GAIN (LOSS) FROM DISCONTINUED OPERATIONS
     Gain (loss) from mining operations (net of
         income taxes)                                                   -              264,158           (441,038)
                                                          -----------------   ------------------ ------------------

NET LOSS                                                        (1,957,555)          (1,145,451)          (875,215)

OTHER COMPREHENSIVE INCOME (LOSS)
     Unrealized gain (loss) in market value of
         investments                                                29,297              (98,392)          (115,773)
                                                          -----------------   ------------------ ------------------

COMPREHENSIVE LOSS                                        $     (1,928,258)   $      (1,243,843) $        (990,988)
                                                          =================   ================== ==================

LOSS PER COMMON SHARE BASIC AND DILUTED:
     Net loss from continuing operations                  $          (0.21)   $           (0.28) $           (0.28)
     Net gain (loss) from discontinued operations                        -                 0.05              (0.28)
                                                          -----------------   ------------------ ------------------
NET LOSS PER COMMON SHARE                                 $          (0.21)   4           (0.23) $           (0.57)
                                                          =================   ================== ==================

WEIGHTED AVERAGE NUMBER OF
     COMMON SHARES OUTSTANDING,
     BASIC AND DILUTED                                           9,348,374            4,965,179          1,548,785
                                                          =================   ================== ==================

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

                                                                F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                    CADENCE RESOURCES CORPORATION
                                                 (FORMERLY ROYAL SILVER MINES, INC.)
                                                 STATEMENTS OF STOCKHOLDERS' EQUITY

                                                                Common Stock
                                                          ---------------------------              Additional
                                                            Number                                  Paid-in              Stock
                                                          of Shares        Amount                   Capital             Options
                                                          ---------    --------------             -----------        ---------------
<S>                                                       <C>          <C>                        <C>                <C>
Balance,
      September 30, 2000                                  1,199,607    $       11,996             $11,767,998        $            -

Shares issued to consultants and
      others for services at prices
      varying from $0.30 to $1.40
      per share                                             174,375             1,744                  95,656                      -

Shares issued to officers for
      investments at $0.40 per share                        310,000             3,100                 120,900                      -

Shares issued to officers for
      investment and cash at $0.25
      per share                                             160,000             1,600                  38,400                      -

Shares issued to officers and
      directors for services at $0.25
      to $0.30 per share                                    110,000             1,100                  29,150                      -

Adjustment for fractional shares
      issued                                                  4,074                41                     (41)                     -

Shares issued for loan consideration
      at $0.30 per share                                     62,500               625                  18,125                      -

Shares issued for cash at $0.30
      per share                                             393,334             3,933                 114,067                      -

Shares issued for marketing services
      at $0.30 per share                                     40,000               400                  14,600                      -

Net loss for year ended
      September 30, 2001                                          -                 -                       -                      -

Unrealized loss on market value
      of investments                                              -                 -                       -                      -
                                                          ---------    --------------             -----------        ---------------

Balance,
      September 30, 2001                                  2,453,890    $       24,539             $12,198,855        $             -

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

                                                               F-5a
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                    CADENCE RESOURCES CORPORATION
                                                 (FORMERLY ROYAL SILVER MINES, INC.)
                                                 STATEMENTS OF STOCKHOLDERS' EQUITY

                                                                                               Accumulated
                                                                                                  Other                 Total
                                                         Stock           Accumulated           Comprehensive         Stockholders'
                                                        Warrants            Deficit                 Loss                Equity
                                                        --------    --------------------      ---------------        --------------

<S>                                                     <C>         <C>                       <C>                    <C>
Balance,
      September 30, 2000                                $      -    $       (10,885,466)      $       (34,389)       $      860,139

Shares issued to consultants and
      others for services at prices
      varying from $0.30 to $1.40
      per share                                                -                      -                     -                97,400

Shares issued to officers for
      investments at $0.40 per share                           -                      -                     -               124,000

Shares issued to officers for
      investment and cash at $0.25
      per share                                                -                      -                     -                40,000

Shares issued to officers and
      directors for services at $0.25
      to $0.30 per share                                       -                      -                     -                30,250

Adjustment for fractional shares
      issued                                                   -                      -                     -                     -

Shares issued for loan consideration
      at $0.30 per share                                       -                      -                     -                18,750

Shares issued for cash at $0.30
      per share                                                -                      -                     -               118,000

Shares issued for marketing services
      at $0.30 per share                                       -                      -                     -                15,000

Net loss for year ended
      September 30, 2001                                       -               (875,215)                    -              (875,215)

Unrealized loss on market value
      of investments                                           -                      -              (115,773)             (115,773)
                                                        --------    --------------------      ---------------        --------------

Balance,
      September 30, 2001                                $      -    $       (11,760,681)      $      (150,162)       $      312,551

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

                                                               F-5b
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                    CADENCE RESOURCES CORPORATION
                                                 (FORMERLY ROYAL SILVER MINES, INC.)
                                                 STATEMENTS OF STOCKHOLDERS' EQUITY

                                                 Common Stock
                                            ---------------------------     Additional
                                             Number                           Paid-in          Stock
                                            of Shares       Amount            Capital         Options
                                            ---------   ---------------  ---------------  --------------
<S>                                          <C>               <C>       <C>               <C>
Balance,
     September 30, 2001                     2,453,890          $ 24,539  $    12,198,855   $           -

Shares issued for cash at $0.24
     to $0.50 per share                       783,000             7,830          234,070               -

Shares issued to officer for debt
     at $0.30 per share                       300,000             3,000           87,000               -

Shares issued to officers, consultants
     and others for services, accrued
     compensation and prepaid
     expenses at $0.30 to $0.38 per
     share                                    589,184             5,892          205,775               -

Shares issued for cash with warrants
     attached at $0.30 per share            2,333,336            23,333          443,333               -

Shares issued to officer for
     reimbursement of expenses
     paid for Company at $1.03
     per share                                  6,800                68            6,932               -

Shares issued for investment at
     $0.30 per share                          400,000             4,000          116,000               -

Options issued to directors and
     consultants for services                       -                 -                -         626,790

Net loss for the year ended
     September 30, 2002                             -                 -                -               -

Unrealized loss on market value
     of investments                                 -                 -                -               -
                                            ---------   ---------------  ---------------  --------------
Balance
     September 30, 2002                     6,866,210          $ 68,662      $13,291,965       $ 626,790

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

                                                               F-6a
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                    CADENCE RESOURCES CORPORATION
                                                 (FORMERLY ROYAL SILVER MINES, INC.)
                                                 STATEMENTS OF STOCKHOLDERS' EQUITY

                                                                                                      Accumulated
                                                                                                         Other           Total
                                                               Stock              Accumulated        Comprehensive    Stockholders'
                                                             Warrants               Deficit               Loss           Equity
                                                             --------            -------------         ----------      -----------
<S>                                                          <C>                 <C>                   <C>             <C>
Balance,
      September 30, 2001                                     $      -            $ (11,760,681)        $ (150,162)     $   312,551

Shares issued for cash at $0.24
      to $0.50 per share                                            -                        -                  -          241,900

Shares issued to officer for debt
      at $0.30 per share                                            -                        -                  -           90,000

Shares issued to officers, consultants
      and others for services, accrued
      compensation and prepaid
      expenses at $0.30 to $0.38 per
      share                                                         -                        -                  -          211,667

Shares issued for cash with warrants
      attached at $0.30 per share                             233,334                        -                  -          700,000

Shares issued to officer for
      reimbursement of expenses
      paid for Company at $1.03
      per share                                                     -                        -                  -            7,000

Shares issued for investment at
      $0.30 per share                                               -                        -                  -          120,000

Options issued to directors and
      consultants for services                                      -                        -                  -          626,790

Net loss for the year ended
      September 30, 2002                                            -               (1,145,451)                 -       (1,145,451)

Unrealized loss on market value
      of investments                                                -                        -            (98,392)         (98,392)
                                                             --------            -------------         ----------      -----------
Balance
      September 30, 2002                                     $233,334            $(12,906,132)         $ (248,554)     $ 1,066,065


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

                                                               F-6b
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                    CADENCE RESOURCES CORPORATION
                                                 (FORMERLY ROYAL SILVER MINES, INC.)

                                                 Common Stock
                                            ---------------------------     Additional
                                             Number                           Paid-in          Stock
                                            of Shares       Amount            Capital         Options
                                            ---------   ---------------  ---------------  --------------
<S>                                         <C>                <C>       <C>               <C>
Balance
     September 30, 2002                     6,866,210          $ 68,662  $    13,291,965   $     626,790

Shares issued for cash with warrants
     attached at an average of $0.52
     per unit                                 212,500             2,125           56,500               -

Shares issued to officers, directors
     and others for services at $0.78
     to $1.80                                 496,500             4,965          535,710               -

Shares issued for loan consideration
     at $1.08 per share                       220,000             2,200          204,800               -

Shares issued for exercise of options
     at $0.75 per share                       100,000             1,000          142,100         (68,100)

Shares issued from exercise of warrants     1,956,984            19,569          213,765               -

Shares issued for cash at $0.80 to
     $2.50 per share, net of financing
     fee of $347,850                        2,525,183            25,252        4,216,347               -

Options issued for financing                        -                 -         (429,671)        429,671

Shares issued for related party loan
     fee at $1.00 per share                   120,000             1,200          118,800               -

Conversion of shares of Celebration
     for shares of Cadence common stock        14,250               143             (143)              -

Options issued to consultants for services          -                 -                -         222,343

Miscellaneous adjustment                        1,200                12              (12)              -

Dividends paid on preferred stock                   -                 -            6,739)              -

Net loss for the year ended
     September 30, 2003                             -                 -                -               -

Unrealized gain on market value of
     investments (unaudited)                        -                 -                -               -
                                           ----------          --------  ---------------   -------------
Balance, September 30, 2003                12,512,827          $125,128  $    18,343,422   $   1,210,704

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

                                                               F-7a
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                    CADENCE RESOURCES CORPORATION
                                                 (FORMERLY ROYAL SILVER MINES, INC.)
                                                 STATEMENTS OF STOCKHOLDERS' EQUITY


                                                                                               Accumulated
                                                                                                  Other                  Total
                                                         Stock        Accumulated             Comprehensive          Stockholders'
                                                        Warrants        Deficit                    Loss                 Equity
                                                        --------      ------------            ---------------        --------------

<S>                                                     <C>           <C>                       <C>                    <C>

Balance
    September 30, 2002                                  $233,334      $(12,906,132)             $(248,554)             $ 1,066,065

Shares issued for cash with warrants
    attached at an average of $0.52
    per unit                                              51,375                 -                      -                  110,000

Shares issued to officers, directors
    and others for services at $0.78
    to $1.80                                                   -                 -                      -                  540,675

Shares issued for loan consideration
    at $1.08 per share                                         -                 -                      -                  207,000

Shares issued for exercise of options
    at $0.75 per share                                         -                 -                      -                   75,000

Shares issued from exercise of
    warrants                                            (233,334)                -                      -                        -

Shares issued for cash at $0.80 to
    $2.50 per share, net of financing
    fee of $347,850                                            -                 -                      -                4,241,599

Options issued for financing                                   -                 -                      -                        -

Shares issued for related party loan
    fee at $1.00 per share                                     -                 -                      -                  120,000

Conversion of shares of Celebration
    for shares of Cadence common stock                         -                 -                      -                        -

Options issued to consultants for
    services                                                   -                 -                      -                  222,343

Miscellaneous adjustment                                       -                 -                      -                        -

Dividends paid on preferred stock                              -                 -                      -                   (6,739)

Net loss for the year ended
    September 30, 2003                                         -        (1,957,555)                     -               (1,957,555)

Unrealized gain on market value of
    investments (unaudited)                                    -               -                   29,297                   57,797
                                                        --------      ------------              ---------              -----------
    Balance, September 30, 2003                         $ 51,375      $(14,863,687)             $(219,257)             $ 4,676,185
                                                        ========      ============              =========              ===========

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

                                                               F-7b
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                    CADENCE RESOURCES CORPORATION
                                                 (FORMERLY ROYAL SILVER MINES, INC.)
                                                      STATEMENTS OF CASH FLOWS

                                                                             Year Ended
                                                                            September 30,
                                                         --------------------------------------------------
                                                              2003              2002             2001
                                                         ----------------  ----------------  --------------
<S>                                                      <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss                                            $    (1,957,555)  $    (1,145,451)  $    (875,215)
     Adjustments to reconcile net loss to net cash
         used by operating activities:
             Loss (gain) on sale of equipment                          -                 -            (115)
             Loss (gain) on sale of investments                   67,020           (29,890)         85,446
             Partnership loss                                     15,200                 -               -
             Loss (gain) from mining operations                        -          (330,198)        441,038
             Gain (loss) on debt forgiveness                       4,699                 -               -
             Depreciation, depletion and amortization             57,310             4,312             402
             Issuance of common stock for services               540,675           211,667         142,650
             Issuance of common stock for
                   reimbursement of expenses                           -             7,000               -
             Issuance of common stock for loan
                   consideration                                 327,000                 -          18,750
             Issuance of stock options for consulting
                   fees                                          222,343           626,790               -
             Investment given for services                        14,700                 -               -
             Loss on devaluation of investments                                          -           8,000
     Changes in assets and liabilities:
             Oil & gas revenue receivable                        (58,452)          (26,123)                 -
             Receivable from working interest owners               3,164           (16,037)                 -
             Notes receivable                                      6,058           (30,000)        (15,000)
             Prepaid expenses                                     21,575           (26,225)        (83,430)
             Deposit                                                   6                (6)           (275)
             Prepaid mineral leases                             (218,796)          (95,022)              -
             Accounts payable                                      1,082           (38,934)         49,742
             Revenue distribution payable                         54,094            14,835               -
             Deferred working interest                           (22,184)           22,184               -
             Accrued expenses                                     28,659            50,261          50,000
             Interest payable                                     15,752                 -               -
             Payable to related parties                           (2,500)                -           8,231
                                                         ----------------  ----------------  --------------
         Net cash provided (used) by operating activities       (880,150)         (800,837)       (169,776)
                                                         ----------------  ----------------  --------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchase of investments                                     (32,795)          (33,889)         (7,908)
     Purchase and development of proved and
         unproved properties                                    (629,383)         (127,691)              -
     Purchase of mineral leases                                        -                 -               -
     Purchase of fixed assets                                   (182,587)         (172,482)              -
     Sale of fixed assets                                              -                 -           3,000
     Sale of investments                                          16,614            86,326          92,453
                                                         ----------------  ----------------  --------------
         Net cash provided (used) by investing activities       (828,151)         (247,736)         87,545
                                                         ----------------  ----------------  --------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Issuance of common stock for cash                         4,728,324            708,566        123,000
     Issuance of redeemable preferred stock                       59,925                  -              -
     Issuance of warrants for cash                                46,125            233,334              -
     Payments of preferred stock dividends                        (6,739)                 -              -
     Proceeds from notes payable - related parties               600,000                  -        135,000
     Payments of notes payable                                  (140,000)           (45,000)             -
                                                         ----------------  ----------------  --------------
         Net cash provided by financing activities             5,287,635           896,900         258,000
                                                         ----------------  ----------------  --------------
         Net increase (decrease) in cash                 $     3,579,334   $      (151,673)  $     175,769
                                                         ----------------  ----------------  --------------

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

                                                               F-8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                    CADENCE RESOURCES CORPORATION
                                                 (FORMERLY ROYAL SILVER MINES, INC.)
                                                      STATEMENTS OF CASH FLOWS
                                                                                               Year Ended
                                                                                              September 30,
                                                                       -------------------------------------------------------------
                                                                                2003                  2002                2001
                                                                       --------------------  -------------------  ------------------

<S>                                                                    <C>                   <C>                  <C>
Net increase (decrease) in cash (balance forward)                      $         3,579,334   $         (151,673)  $         175,769

Cash, beginning of period                                                           40,011              191,684              15,915

                                                                       --------------------  -------------------  ------------------
Cash, end of period                                                    $         3,619,345   $           40,011   $         191,684
                                                                       ====================  ===================  ==================

SUPPLEMENTAL CASH FLOW DISCLOSURE:

      Income taxes paid                                                $                  -  $                -   $               -
      Interest paid                                                    $                  -  $                -   $               -

NON-CASH INVESTING AND FINANCING
      ACTIVITIES:

      Common stock issued for services rendered,
           accrued compensation and prepaid expenses                   $           540,675   $        211,667     $         142,650
      Common stock issued for exchange of debt                         $                 -   $         90,000     $               -
      Common stock issued in exchange for investments                  $                 -   $          120,000   $         159,000
      Common stock issued for reimbursement
           of expenses paid                                            $                 -   $           7,000    $               -
      Common stock issued for loan consideration                       $           327,000   $                -   $          18,750
      Investment received for mining claims                            $                 -   $          350,000   $               -
      Investment received for note receivable                          $                 -   $           15,000   $               -
      Investment given for related party receivable                    $                 -   $            8,231   $               -
      Investment given for consulting services                         $            14,700   $                -   $               -
      Stock options issued for services                                $           222,343   $          626,790   $               -
      Stock options issued for financing fees                          $           429,671   $                -   $               -
      Exchange of unproved property leases for
           interest in limited partnership                             $                 -   $            2,700   $               -
      Stock issued for cashless exercise of warrants                   $           233,334   $                -   $               -

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

                                                               F-9
</TABLE>
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003



NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Cadence Resources  Corporation  (formerly Royal Silver Mines,  Inc.) hereinafter
("Cadence" or "the Company") was incorporated in April of 1969 under the laws of
the State of Utah primarily for the purpose of acquiring and developing  mineral
properties.  The  Company  changed  its name from Royal  Silver  Mines,  Inc. to
Cadence  Resources  Corporation on May 2, 2001 upon obtaining  approval from its
shareholders  and filing an  amendment  to its  articles of  incorporation.  The
Company  shall be referred to as  "Cadence" or "Cadence  Resources  Corporation"
even though the events  described may have occurred while the Company's name was
"Royal  Silver  Mines,  Inc." The  Company  has  elected a  September  30 fiscal
year-end.

On July 1, 2001,  Cadence  developed  a plan for  acquisition,  exploration  and
development of oil and gas properties and  accordingly  began a new  exploration
stage as an energy project development company. Prior to this, Cadence conducted
its business as a "junior" mineral resource company, meaning that it intended to
receive  income from property  sales or joint  ventures of its mineral  projects
with larger companies. The Company continues to hold several mineral properties,
which are described in Note 3.

Celebration  Mining  Company  ("Celebration"),  a  wholly  owned  subsidiary  of
Cadence, was incorporated for the purpose of identifying,  acquiring,  exploring
and developing mining properties. Celebration was organized on February 17, 1994
as a Washington corporation.  Celebration has not yet realized any revenues from
its operations.

On August 8, 1995,  Cadence and  Celebration  completed an agreement and plan of
reorganization whereby the Company issued 207,188 shares of its common stock and
72,750  warrants  in  exchange  for  all  of the  outstanding  common  stock  of
Celebration. Pursuant to the reorganization, the name of the Company was changed
to Royal Silver  Mines,  Inc.  Immediately  prior to the  agreement  and plan of
reorganization, the Company had 118,773 common shares issued and outstanding.

The  acquisition  was  accounted  for as a purchase by  Celebration  of Cadence,
because  the  shareholders  of  Celebration  controlled  the  Company  after the
acquisition.  Therefore,  Celebration is treated as the acquiring entity.  There
was no adjustment to the carrying  value of the assets or liabilities of Cadence
in the exchange as the market value approximated the net carrying value. Cadence
is the  acquiring  entity for legal  purposes and  Celebration  is the surviving
entity for accounting purposes.

As a result of the Company's  entering a new exploration  stage on July 1, 2001,
the Company  elected to dispose of its mineral  properties  and has  accordingly
reclassified those remaining  properties,  which total $246,757 at September 30,
2003,  as other  assets.  The Company has not  determined  whether these mineral
exploration  properties contain ore reserves that are economically  recoverable,
and is in the process of disposing of these properties. The ultimate realization
of the  Company's  investment in these  properties  cannot be determined at this
time and, accordingly,  no provision for any asset impairment that may result in
the event the

                                     F-10
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003



 NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS (Continued)

Company is not  successful  in  selling  these  properties  has been made in the
accompanying financial statements. See Note 3.

The costs of prepaid oil and gas leases  ($395,973 and  $177,177,  respectively)
included  in the  accompanying  balance  sheets  as of  September  30,  2003 and
September  30,  2002 are  principally  related to natural  gas  properties.  The
Company  has  not  determined  whether  the  properties   contain   economically
recoverable gas reserves.  The ultimate  realization of the Company's investment
in oil and gas properties is dependent upon finding and developing  economically
recoverable  reserves,  the ability of the Company to obtain  financing  or make
other  arrangements for development and upon future profitable  production.  The
ultimate  realization  of the  Company's  investment  in oil and gas  properties
cannot be determined at this time and,  accordingly,  no provision for any asset
impairment  that may  result in the  event  the  Company  is not  successful  in
developing  these  properties,  has  been  made  in the  accompanying  financial
statements.

The  Company  was in the  exploration  stage  through  most of the  year  ending
September 30, 2002.  During the fourth  quarter of the year ended  September 30,
2002,  the  Company  entered a very brief  development  stage and has since been
considered  an operating  company.  For the years ending  September 30, 2002 and
2001,  the Company's  auditors  expressed a going concern  qualification  on the
Company's audited financial statements.

In September  and October  2003,  the Company  obtained  significant  additional
capital  through  a  private  placement  of its  stock  and  paid off all of its
substantial debts. Management plans to use the majority of the proceeds from the
financing  for lease  acquisition,  and for  drilling of wells on the  Company's
leased oil and gas property in Louisiana,  Michigan, and Kansas. The Company has
demonstrated that it now has sufficient funds from operations and investments to
continue its committed development plans.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Cadence Resources Corporation
is presented to assist in understanding the Company's financial statements.  The
financial statements and notes are representations of the Company's  management,
which is  responsible  for their  integrity and  objectivity.  These  accounting
policies  conform to  accounting  principles  generally  accepted  in the United
States of America and have been  consistently  applied in the preparation of the
financial statements.

Accounting Method
-----------------
The Company's  financial  statements  are prepared  using the accrual  method of
accounting in accordance with accounting  principles  generally  accepted in the
United States of America.

                                     F-11
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Exploration Stage
-----------------
The Company began a new  exploration  stage with the  acquisition of oil and gas
leases on July 1, 2001.  This stage ended  during  July 2002 with the  commenced
sale of oil and gas products.

Estimates
---------
The process of preparing  financial  statements  in conformity  with  accounting
principles  generally  accepted in the United States of America requires the use
of estimates and  assumptions  regarding  certain types of assets,  liabilities,
revenues,   and  expenses.   Such  estimates   primarily   relate  to  unsettled
transactions and events as of the date of the financial statements. Accordingly,
upon settlement, actual results may differ from estimated amounts.

Loss Per Share
--------------
Loss per share was  computed by dividing  the net loss by the  weighted  average
number of shares  outstanding  during the year.  The weighted  average number of
shares was calculated by taking the number of shares  outstanding  and weighting
them by the amount of time they were outstanding.  Outstanding warrants were not
included in the  computation  of diluted loss per share because their  inclusion
would be antidilutive.

Cash Equivalents
----------------
The Company  considers  all highly liquid  investments  with a maturity of three
months or less when purchased to be cash equivalents.

Mineral Properties
------------------
Costs of acquiring,  exploring and developing mineral properties are capitalized
by project area. Costs to maintain the mineral rights and leases are expensed as
incurred.  When a property reaches the production stage, the related capitalized
costs will be amortized,  using the units of  production  method on the basis of
periodic  estimates of ore reserves.  At September 30, 2003, 2002, and 2001, the
cost of the  Company's  mineral  properties  are included in other assets in the
accompanying  financial  statements,  as the  Company has changed its focus from
minerals exploration to oil and gas.

Mineral  properties  are  periodically  assessed for impairment of value and any
losses are charged to operations at the time of impairment.

Should a property be abandoned, its capitalized costs are charged to operations.
The Company  charges to operations the allocable  portion of  capitalized  costs
attributable to properties sold.  Capitalized  costs are allocated to properties
sold based on the proportion of claims sold to the claims  remaining  within the
project area.

                                     F-12

<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Oil and Gas Properties
----------------------
The Company uses the  successful  efforts  method of accounting  for oil and gas
producing  activities.  Costs  to  acquire  mineral  interests  in oil  and  gas
properties,  to drill and equip exploratory wells that find proved reserves, and
to drill and equip development wells are capitalized. Costs to drill exploratory
wells that do not find proved  reserves,  geological and geophysical  costs, and
costs of carrying and retaining unproved properties are expensed.

Unproved  oil  and  gas  properties  that  are   individually   significant  are
periodically  assessed for impairment of value,  and a loss is recognized at the
time  of  impairment  by  providing  an  impairment  allowance.  Other  unproved
properties  are  amortized  based  on the  Company's  experience  of  successful
drilling and average holding period.  Capitalized costs of producing oil and gas
properties,  after considering estimated dismantlement and abandonment costs and
estimated salvage values, are depreciated and depleted by the unit-of-production
method.  Support equipment and other property and equipment are depreciated over
their estimated useful lives. Property leases are expensed ratably over the life
of the lease.

On the sale or retirement of a complete unit of a proven property,  the cost and
related  accumulated  depreciation,  depletion,  and amortization are eliminated
from the property accounts, and the resultant gain or loss is recognized. On the
retirement or sale of a partial unit of proven property,  the cost is charged to
accumulated  depreciation,  depletion, and amortization with a resulting gain or
loss recognized in income.

On the sale of an  entire  interest  in an  unproved  property  for cash or cash
equivalent,  gain or loss on the sale is recognized,  taking into  consideration
the  amount of any  unrecorded  impairment  if the  property  had been  assessed
individually.  If a partial interest in an unproved property is sold, the amount
received is treated as a reduction of the cost of the interest retained.

Provision For Taxes
-------------------
Income taxes are provided based upon the liability method of accounting pursuant
to Statement of Financial  Accounting  Standards No. 109  "Accounting for Income
Taxes." Under this approach,  deferred  income taxes are recorded to reflect the
tax consequences in future years of differences  between the tax basis of assets
and  liabilities  and their  financial  reporting  amounts at each  year-end.  A
valuation  allowance is recorded  against deferred tax assets if management does
not believe the Company has met the "more likely than not"  standard  imposed by
SFAS No. 109 to allow recognition of such an asset.

Environmental Remediation and Compliance
----------------------------------------
Expenditures for ongoing compliance with  environmental  regulations that relate
to current  operations are expensed or capitalized as appropriate.  Expenditures
resulting from the remediation of existing  conditions caused by past operations
that do not contribute to future revenue  generations are expensed.  Liabilities
are recognized when environmental  assessments indicate that remediation efforts
are probable and the costs can be reasonably estimated.

                                     F-13
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Environmental Remediation and Compliance (continued)
---------------------------------------------------
Estimates of such liabilities are based upon currently available facts, existing
technology and presently enacted laws and regulations  taking into consideration
the likely  effects of inflation and other  societal and economic  factors,  and
include  estimates of associated  legal costs.  These amounts also reflect prior
experience  in  remediating   contaminated   sites,  other  companies'  clean-up
experience  and data released by The  Environmental  Protection  Agency or other
organizations.  Such estimates are by their nature imprecise and can be expected
to  be  revised  over  time  because  of  changes  in  government   regulations,
operations,  technology and inflation.  Recoveries are evaluated separately from
the liability and, when recovery is assured,  the Company records and reports an
asset  separately  from the  associated  liability.  At September 30, 2003,  the
Company  had  no  accrued   liabilities   for  compliance   with   environmental
regulations.

Investments
-----------
Investments,  principally  consisting of equity  securities of private and small
public companies, are stated at current market value.

Revenue Recognition
-------------------
Cadence  began  producing  revenues  during July 2002.  Oil and gas revenues are
recorded  using the sales  method.  Under this  method,  the Company  recognizes
revenues based on actual volumes of oil and gas sold to purchasers.

Impaired Asset Policy
---------------------
The Company adopted Statement of Financial  Accounting  Standards No. 144 titled
"Accounting for Impairment of Disposal of Long-Lived  Assets." In complying with
this standard,  the Company reviews its long-lived assets quarterly to determine
if any events or changes in  circumstances  have transpired  which indicate that
the carrying value of its assets may not be recoverable.  The Company determines
impairment  by  comparing  the  undiscounted  future cash flows  estimated to be
generated by its assets to their  respective  carrying amount whenever events or
changes in circumstances indicate that an asset may not be recoverable.  Because
of write-downs and write-offs taken in prior years, the Company does not believe
any  further  adjustments  are  needed to the  carrying  value of its  assets at
September 30, 2003. See Note 3.

Fair Value Standards
--------------------
The  Company  has  adopted  the  fair  value  accounting  rules  to  record  all
transactions in equity instruments for goods or services.

Principles of Consolidation
---------------------------
The financial statements include those of the Cadence Resources  Corporation and
Celebration  Mining  Company.   All  significant   inter-company   accounts  and
transactions have been eliminated.  The financial  statements are not considered
consolidated statements since Cadence Resources Corporation was the successor by
merger to Celebration Mining Company.

                                     F-14
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Reclassifications
-----------------
Certain  amounts from prior periods have been  reclassified  to conform with the
current period presentation. These reclassifications have resulted in no changes
to the Company's accumulated deficit and net losses presented.

Fair Value of Financial Instruments
-----------------------------------
The carrying amounts for cash,  receivables,  deposits,  payables,  and advances
from related parties approximate their fair value.

Derivative Instruments
----------------------
The  Financial   Accounting   Standards  Board  issued  Statement  of  Financial
Accounting  Standards ("SFAS") No. 133,  "Accounting for Derivative  Instruments
and Hedging  Activities," as amended by SFAS No. 137, "Accounting for Derivative
Instruments and Hedging  Activities - Deferral of the Effective Date of FASB No.
133",  and SFAS No. 138,  "Accounting  for Certain  Derivative  Instruments  and
Certain Hedging Activities" and SFAS No. 149, "Amendment of Statement No. 133 on
Deriviative  Instruments  and Hedging  Activities."  These  standards  establish
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts,  and for hedging activities.
They  require  that an entity  recognize  all  derivatives  as either  assets or
liabilities in the balance sheet and measure those instruments at fair value.

If certain conditions are met, a derivative may be specifically  designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging  derivative  with the  recognition of (i) the changes in the fair
value of the hedged asset or liability that are  attributable to the hedged risk
or  (ii)  the  earnings  effect  of the  hedged  forecasted  transaction.  For a
derivative  not  designated  as a  hedging  instrument,  the  gain  or  loss  is
recognized in income in the period of change.

Historically,  the Company has not entered into  derivatives  contracts to hedge
existing risks or for speculative purposes.

At  September  30, 2003 and for the  periods  covered in these  statements,  the
Company has not engaged in any transactions that would be considered  derivative
instruments or hedging activities.

Recent Accounting Pronouncements
--------------------------------
In May 2003,  the  Financial  Accounting  Standards  Board  issued  Statement of
Financial  Accounting  Standards  No. 150,  "Accounting  for  Certain  Financial
Instruments with  Characteristics  of Both Liabilities and Equity"  (hereinafter
"SFAS  No.  150").  SFAS No.  150  establishes  standards  for  classifying  and
measuring certain financial instruments with characteristics of both liabilities
and equity and requires that those  instruments  be classified as liabilities in
statements of financial  position.  Previously,  many of those  instruments were
classified  as  equity.  SFAS No. 150 is  effective  for  financial  instruments
entered  into or modified  after May 31, 2003 and  otherwise is effective at the
beginning of the first interim period

                                     F-15
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements (continued)
-------------------------------------------
beginning  after June 15,  2003.  The Company has  determined  that there was no
impact  on  the  Company's  financial  statements  from  the  adoption  of  this
statement.

In April 2003,  the Financial  Accounting  Standards  Board issued  Statement of
Financial   Accounting  Standards  No.  149,  "Amendment  of  Statement  133  on
Derivative  Instruments and Hedging  Activities"  (hereinafter  "SFAS No. 149").
SFAS No. 149 amends and clarifies the  accounting  for  derivative  instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging  activities under SFAS No. 133,  "Accounting for Derivative  Instruments
and Hedging Activities".  This statement is effective for contracts entered into
or modified after June 30, 2003 and for hedging  relationships  designated after
June 30, 2003.  The  adoption of SFAS No. 149 did not have a material  impact on
the financial position or results of operations of the Company.

In December 2002, the Financial  Accounting Standards Board, issued Statement of
Financial   Accounting   Standards,   No.  148,   "Accounting   for  Stock-Based
Compensation - Transition and Disclosure"  ("SFAS No. 148"). SFAS No. 148 amends
SFAS No. 123, "Accounting for Stock-Based  Compensation," to provide alternative
methods of transition  for a voluntary  change to the fair value based method of
accounting for stock-based  employee  compensation.  In addition,  the statement
amends  the  disclosure  requirements  of  SFAS  No.  123 to  require  prominent
disclosure in both annual and interim  financial  statements about the method of
accounting for stock-based  employee  compensation  and the effect of the method
used on reported  results.  The  provisions  of the  statement are effective for
financial  statements  for fiscal  years ending  after  December  15, 2002.  The
Company  currently reports stock issued to employees under the rules of SFAS No.
123.  Accordingly there is no change in disclosure  requirements due to SFAS No.
148.

In June 2002,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards No. 146,  "Accounting for Costs Associated with
Exit  or  Disposal   Activities"  ("SFAS  No.  146").  SFAS  No.  146  addresses
significant  issues  regarding the  recognition,  measurement,  and reporting of
costs  associated  with exit and disposal  activities,  including  restructuring
activities.  SFAS No. 146 also addresses recognition of certain costs related to
terminating  a  contract  that is not a  capital  lease,  costs  to  consolidate
facilities or relocate employees, and termination benefits provided to employees
that  are  involuntarily  terminated  under  the  terms  of a  one-time  benefit
arrangement  that  is  not  an  ongoing  benefit  arrangement  or an  individual
deferred-compensation  contract. SFAS No. 146 was issued in June 2002, effective
December 31, 2002 with early  adoption  encouraged.  There has been no impact on
the Company's financial position or results of operations from adopting SFAS No.
146.

                                     F-16
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements (continued)
-------------------------------------------
In April 2002,  the Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting Standards No. 145, "Rescission of FASB Statements No. 44, 4
and 64,  Amendment of FASB Statement No. 13, and Technical  Corrections"  ("SFAS
No.  145"),  which  updates,   clarifies  and  simplifies   existing  accounting
pronouncements.  FASB No.  4,  which  required  all gains  and  losses  from the
extinguishment  of debt to be  aggregated  and, if  material,  classified  as an
extraordinary  item, net of related tax effect was rescinded.  As a result, FASB
No. 64, which amended FASB No. 4, was  rescinded as it was no longer  necessary.
SFAS No. 44,  "Accounting for Intangible Assets of Motor Carriers",  established
the accounting  requirements  for the effects of transition to the provisions of
the Motor Carrier Act of 1980. Since the transition has been completed, SFAS No.
44 is no longer necessary and has been rescinded.  SFAS No. 145 amended SFAS No.
13  to  eliminate  an   inconsistency   between  the  required   accounting  for
sale-leaseback  transactions  and the  required  accounting  for  certain  lease
modifications  that have  economic  effects  that are similar to  sale-leaseback
transactions.  The Company  adopted  SFAS No. 145,  which has not had a material
effect on the Company's financial statements.

In October 2001, the Financial  Accounting  Standards Board issued  Statement of
Financial  Accounting  Standards  No. 144,  "Accounting  for the  Impairment  or
Disposal of Long-Lived  Assets" ("SFAS No. 144"). SFAS No. 144 replaces SFAS No.
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to Be Disposed of." This standard  establishes a single  accounting model
for  long-lived  assets  to be  disposed  of  by  sale,  including  discontinued
operations.  SFAS No. 144 requires that these  long-lived  assets be measured at
the lower of carrying amount or fair value less cost to sell,  whether  reported
in continuing operations or discontinued operations. This statement is effective
beginning  for fiscal years after  December 15, 2001,  with earlier  application
encouraged.  The Company  adopted  SFAS No. 144 and the  adoption did not have a
material  impact on the  financial  statements  of the Company at September  30,
2003.

In October 2001, the Financial  Accounting  Standards Board issued  Statement of
Financial  Accounting  Standards  No.  143,  "Accounting  for  Asset  Retirement
Obligations"  ("SFAS No. 143"). SFAS No. 143 establishes  guidelines  related to
the retirement of tangible  long-lived  assets of the Company and the associated
retirement costs. This statement requires that the fair value of a liability for
an asset  retirement  obligation  be  recognized  in the  period  in which it is
incurred  if a  reasonable  estimate of fair value can be made.  The  associated
asset  retirement  costs are  capitalized as part of the carrying  amount of the
long-lived assets.  This statement is effective for financial  statements issued
for the fiscal years beginning after June 15, 2002 and with earlier  application
encouraged.  The Company  adopted  SFAS No. 143 and the  adoption did not have a
material  impact on the  financial  statements  of the Company at September  30,
2003.

                                     F-17
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements (continued)
-------------------------------------------
In June 2001,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting Standards No. 141, "Business Combinations" and Statement of
Financial  Accounting  Standards No. 142, "Goodwill and Other Intangible Assets"
(hereinafter  "SFAS No. 141" and "SFAS No. 142").  SFAS No. 141 provides for the
elimination  of the  pooling-of-interests  method  of  accounting  for  business
combinations  with an  acquisition  date of July 1, 2001 or later.  SFAS No. 142
prohibits  the  amortization  of  goodwill  and  other  intangible  assets  with
indefinite lives and requires  periodic  reassessment of the underlying value of
such assets for impairment. SFAS No. 142 is effective for fiscal years beginning
after December 15, 2001. An early adoption  provision  exists for companies with
fiscal years beginning after March 15, 2001. The adoption of these standards did
not have a material effect on the Company's financial statements.

In  January  2003,  the  Financial   Accounting   Standards  Board  issued  FASB
Interpretation  No.  46  "Consolidation  of  Variable  Interest   Entities,   an
Interpretation  of ARB No. 51"  (hereinafter  "FIN 46"). FIN 46 requires certain
variable interest entities to be consolidated by the primary  beneficiary of the
entity if the equity investors in the entity do not have the  characteristics of
a controlling  financial  interest or do not have sufficient  equity at risk for
the entity to finance its activities without additional  subordinated  financial
support from other  parties.  FIN 46 is effective for all new variable  interest
entities  created or acquired  after January 31, 2003.  The provisions of FIN 46
must be applied for the first interim or annual period  beginning after June 15,
2003.  The Company does not have any entities  that  require  disclosure  or new
consolidation as a result of adopting the provisions of FIN 46.

In  November  2002,  the  Financial   Accounting  Standards  Board  issued  FASB
Interpretation  No. 45 "Guarantor's  Accounting and Disclosure  Requirements for
Guarantees,   including   Indirect   Guarantees  of   Indebtedness   of  Others"
(hereinafter  "FIN 45").  FIN 45  requires  a  company,  at the time it issues a
guarantee,  to recognize an initial  liability for the fair value of obligations
assumed under the guarantee and elaborates on existing  disclosure  requirements
related to guarantees and warranties.  The initial  recognition  requirements of
FIN 45 are effective for  guarantees  issued or modified after December 31, 2002
and do not have an  impact  on the  financial  statements  of the  Company.  The
Company does not anticipate issuing any guarantees which would be required to be
recognized  as a  liability  under  the  provisions  of FIN 45 and thus does not
expect the adoption of this  interpretation  to have an impact on its results of
operations or financial position.


NOTE 3 - MINERAL PROPERTIES

Over the last three years,  the Company's  mineral  properties have for the most
part been disposed of or written off as the Company's  focus and direction  have
shifted to oil and gas production.

                                     F-18
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003


NOTE 3 - MINERAL PROPERTIES (Continued)

Utah Property
-------------
The Company has elected to retain its 25% undivided  interest in the Vipont Mine
located in northwest  Utah.  This interest is carried on the Company's  books at
$246,757 and is included in other assets.

Mineral Properties in North Idaho
---------------------------------
At  September  30,  2003,  the  Company,  directly  and through its  subsidiary,
Celebration  Mining Company,  held forty-three  unpatented  mining claims in the
Coeur d'Alene Mining  District in distinct groups called the South Galena Group,
Moe Group, Rock Creek Group and Palisades Group. The Company has undertaken only
minimal  exploration and development work on these  properties,  such as general
geological reconnaissance and claim-staking activities. All of these claims have
been written off as permanently impaired.

In September 2000, the Company,  through its wholly owned subsidiary Celebration
Mining  Company,  entered into a five-year  lease  agreement  with an affiliated
company, Oxford Metallurgical, Inc.("Oxford") on its eight-claim Palisades Group
property.   The  lease  called  for  a   semi-annual   payment  of  $3,000,   or
alternatively,  the semi-annual  payment of 10,000 shares of the common stock of
Oxford.  Oxford had the right to explore and  potentially  develop the  property
under  certain  conditions.  This  lease was  rescinded  during  the year  ended
September 30, 2002.

Other Domestic Properties
-------------------------
In the fourth quarter of the year ended  September 30, 2001, the Company elected
to write off all of its  interests in mineral  properties  except for the ViPont
Mine,  Kil Group  Claims and West Mullan  Group  Claims.  The net effect of this
write down was to record a loss on asset  impairment of $432,090 during the year
ended September 30, 2001.

On October 31, 2001, the Company sold its Kil Group and West Mullan Group claims
to Caledonia  Silver-Lead Mines, Inc., an affiliated company.  The combined sale
price for these claims was  3,501,980  shares of the common stock of  Caledonia,
having an estimated market value of $0.10 per share and valued at $350,198.  The
net effect of the transaction was a gain of $330,198. See Note 5.


NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost.  Major  additions and  improvements
are  capitalized.  Minor  replacements,  maintenance  and  repairs  that  do not
increase the useful life of the assets are expensed as incurred. Depreciation of
property and equipment is  determined  using the  straight-line  method over the
expected useful lives of the assets of five to ten years.  Depreciation  expense
for the years ended September 30, 2003,  2002, and 2001 was $21,222,  $4,303 and
$402, respectively.

                                     F-19

<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003

NOTE 5 - INVESTMENTS

The  Company's  investment  securities  are  classified  as  available  for sale
securities which are recorded at fair value on the balance sheet as investments.
The  change in fair  value  during  the period is  excluded  from  earnings  and
recorded net of tax as a component of other  comprehensive  income.  The Company
has no investments which are classified as trading securities.

At September 30, 2003 and 2002, the market values of stock  investments  were as
follows:

<TABLE>
<CAPTION>
                                                                    2003               2002                   2001
                                                                 ---------           ---------             ---------
<S>                                                              <C>                 <C>                   <C>
Elite Logistics, Inc.                                            $     656           $   2,950             $  35,632
Ashington Mining Company                                             5,709               5,709                 7,200
Cadence Resources Corp. LP                                               -              15,200                     -
Enerphaze Corporation                                                  982               5,400                     -
Exhaust Technology                                                       -               2,244                     -
Integrated Pharmaceuticals, Inc.                                     9,406                   -                 4,444
Metalline Mining Company                                               925                   -                     -
Nevada-Comstock (formerly Caledonia
    Silver-Lead Mines, Inc.)                                             -             350,198                     -
Rigid Airship Tech                                                     310                   -                     -
Sterling Mining Co.                                                      -               4,859                 6,300
The Williams Companies, Inc.                                             -               6,800                     -
Trend Mining Company                                                24,483              54,567                50,167
Western Goldfields, Inc                                            351,373                 866                     -
Other investments                                                      610                   -                   600
                                                                 ---------           ---------             ---------
                                                                 $ 394,454           $ 448,793             $ 104,343
                                                                 =========           =========             =========
</TABLE>

The carrying value of these shares are reevaluated at each reporting  period and
adjustments, if appropriate, are made to the carrying value of these securities.
Of all the  aforementioned  investments  owned by the Company at  September  30,
2003,  only  Trend  Mining  Company,   Metalline  Mining  Company,  and  Western
Goldfields, Inc. are public companies with a trading market.

Other information regarding the Company's investments follows:

Enerphaze Corporation
---------------------
In October  2001,  the Company  received  8,000 shares of Enerphaze  Corporation
common  stock in payment of a $15,000 note  receivable.  In January and February
2002, the Company received 65,000 shares of Enerphaze  Corporation  common stock
in exchange for 400,000  shares of the Company's  common stock.  No gain or loss
was recognized on these transactions.

Nevada-Comstock Mining Company (formerly Caledonia Silver-Lead Mines, Inc.)
--------------------------------------------------------------------------
The Company on October 31, 2001 received 3,501,980 shares of the $0.10 par value
common stock of Caledonia  Silver-Lead  Mines,  Inc. (an affiliated  company) in
exchange for its Kil Group

                                     F-20

<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003


NOTE 5 - INVESTMENTS (Continued)

Nevada-Comstock Mining Company (formerly Caledonia Silver-Lead Mines, Inc.)
--------------------------------------------------------------------------
and West Mullan Group claims.  The stock  received was recorded at its par value
of $350,198  which, in the opinion of management,  approximates  its fair value.
The net effect of the transaction  resulted in a gain of $330,198.  At September
30, 2003, this  investment was written off as the investment  company is dormant
and there is no way to value the shares.

Western Goldfields, Inc.
-----------------------
In 2002, the Company exchanged fully depreciated  mining equipment for shares of
a privately held business, Calumet Mining Company, which was eventually acquired
by Western  Goldfields,  Inc.  Upon  completion of the  acquisition  the Company
received 160,000 shares of Western's common stock. At the time,  Western's stock
had experienced  minimal trading and had a limited market for its stock.  During
the year ended September 30, 2003,  Western's  trading volume has  substantially
increased. The current value of this stock is included in the attached financial
statements as an  unrealized  gain on market value of  investments.  In addition
during 2003, the Company  acquired an additional  21,200 shares of Western stock
for $24,730.

Cadence Resources Corporation Limited Partnership
-------------------------------------------------
On August 8, 2002,  the  Company  formed a limited  partnership  in the State of
Washington  whereby  the  Company  became the  managing  general  partner and an
outside  individual  investor became the initial limited partner.  In connection
with the formation of the Partnership,  the Company agreed to contribute $12,500
and its  leasehold  interest in an oil well ("2B",  which  ultimately  was a dry
hold) in Wilbarger County, Texas and the limited partner contributed $250,000 in
cash. The entity, Cadence Resources Corporation Limited Partnership (hereinafter
"CRCLP" or "the  Partnership") was formed to invest in oil and gas properties in
Texas and Louisiana. The limited partner's interest was purchased by the Company
in a transaction with an effective date of September 30, 2003, at which time the
Company held all of the general partner  interests and limited partner interests
in the Partnership. See Note 13.

Other Limited Partnerships
--------------------------
During the year ended  September 30, 2003, the Company formed four other limited
partnerships in the State of Washington  whereby the Company became the managing
general  partner and an outside  individual  investor became the initial limited
partner. The entities, Cadence West Electra Partners LP, Cadence Antrim Partners
1 LP, Cadence Antrim  Partners 2 LP and Cadence Antrim Partners 3 LP were formed
to invest in oil and gas  properties.  As of September 30, 2003,  these entities
have not begun activities.

NOTE 6 - COMMON STOCK

During the year ended  September 30, 2001,  the Company issued 284,375 shares of
common stock to  officers,  directors,  consultants  and others for services and
532,500  shares of common stock were issued to officers for loan  consideration,
investments  and cash. The Company also issued 40,000 shares of its common stock
pursuant to terms of a consulting agreement and sold

                                     F-21

<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003


NOTE 6 - COMMON STOCK (Continued)

393,334  shares of its common  stock for cash.  The shares  were valued at their
fair market value at the date of issuance, which ranged from $0.25 to $1.40.

On April 23,  2001,  the  Company's  board of  directors  authorized  a 1-for-20
reverse  stock  split  of the  Company's  $0.01  par  value  common  stock.  All
references in the accompanying  financial  statements and notes to the number of
common  shares and  per-share  amounts have been restated to reflect the reverse
stock  split.  The  Company  also  approved  an  increase  in the  number of its
authorized common stock shares to 100,000,000.

During the year ended  September 30, 2002,  the Company issued 589,184 shares of
its common  stock to officers,  consultants  and others for services and prepaid
expenses  valued  at  $211,667,  400,000  shares  of  its  common  stock  for an
investment,  6,800 shares of its common stock to an officer for reimbursement of
expenses  valued at $7,000 and 300,000  shares of its common stock to an officer
in payment of a note payable.  These transactions were valued in accordance with
a plan for stock  issuance  previously  approved by the board of directors.  The
Company also sold 783,000 shares of its common stock for $241,900.

During the year ended  September  30,  2002,  the  Company  also sold  2,333,336
"units" to  investors,  two  officers of the Company  and another  entity  under
common control at $0.30 per unit in a private  placement.  Each unit consists of
one share of common stock and one warrant  exercisable at $0.30 per common share
for five years.  Sales of these units  generated cash proceeds of $700,000.  Two
officers of the Company and another entity under common control invested $50,000
in these common stock units. (See Note 9.)

During the year ended  September 30, 2003,  the Company sold 212,500  "units" to
investors at prices ranging from $0.50 to $0.80 per unit in a private placement.
Each unit consists of one share of common stock and one warrant  exercisable  at
$1.35 per common  share for three  years.  Sales of these units  generated  cash
proceeds of $110,000.  Warrants previously issued (2,320,175) were exercised for
1,956,984 shares of common stock in "cashless" redemptions. (See Note 9.) During
this same  period the  Company  sold  2,625,183  shares of its common  stock for
$4,316,599  net of expenses of $347,850.  The Company also issued 496,500 shares
of its common stock to officers,  directors and  consultants for services valued
at $540,675 and 220,000  shares for loan  consideration  valued at $207,000.  In
addition,  the Company  issued to a related party an additional  120,000  shares
valued at $120,000 as an inducement for a loan. The value of this inducement was
used to reduce the payable to related party.

NOTE 7 - REDEEMABLE PREFERRED STOCK

On April 23, 2001, the Company's board of directors authorized 20,000,000 shares
of  preferred  stock  with a par  value  of  $0.01  per  share  and  rights  and
preferences to be determined. No shares

                                     F-22

<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003


NOTE 7 - REDEEMABLE PREFERRED STOCK (Continued)

were issued and  outstanding  as of September  30,  2002.  During the year ended
September 30, 2003, the Company  issued 34,950 shares of its preferred  stock to
investors at prices ranging from $1.50 to $2.00 per share for aggregate proceeds
of  $59,925.  The  shares  bear a  preferred  dividend  of 15% per annum and are
convertible  to common stock at a price of $1.50 per share under  certain  terms
and conditions.

The Class A shares  mature seven years from the date of  issuance.  At maturity,
the Class A shares will be redeemed for cash or common stock at Cadence's option
in an amount equal to the amount paid by the  investors  for the shares plus any
accrued  and  unpaid  dividends.  If shares of common  stock are to be issued at
maturity,  the conversion  price shall be determined by the average  closing bid
price for the 20 trading days prior to the maturity date.

At September 30, 2003, the Company had no accrued dividends payable to preferred
shareholders.


NOTE 8 - COMMON STOCK OPTION AND AWARD PLAN

In January 1992, the  shareholders  of Cadence  approved a 1992 Stock Option and
Stock  Award Plan under  which up to ten  percent of the issued and  outstanding
shares of the  Company's  common  stock could be awarded  based on merit or work
performed.  As of September  30, 2002,  only 638 shares of common stock had been
awarded under the Plan.

The Company has a stock-based  compensation  plan whereby the Company's board of
directors may grant common stock to its employees  and  directors.  At September
30, 2001, a total of 72,750  options  have been  granted  under the plan.  These
options have been forfeited and none have been exercised through the year ending
September  30, 2002.  The old existing  options are  attributed to the merger of
Celebration Mining Company with Royal in August 1995.

During the year ended September 30, 2002, the Company's board of directors chose
to  make  option  awards  to  select   officers,   directors,   consultants  and
shareholder/investors.  These  options were not awarded  pursuant to a qualified
plan and carry  various  terms and  conditions.  The Company  granted a total of
750,000 options at an average  exercise price of $1.08 per share.  These options
were exercisable immediately.  The Company's board of directors has reserved the
right to cancel these awards for non-performance or other reasons.

The fair value of each  option  granted  during  fiscal  2002 and the year ended
September  30,  2003 was  estimated  on the grant date  using the  Black-Scholes
Option Price Calculation. The following assumptions were made in estimating fair
value during fiscal 2002:  risk-free  interest  rate of 5%,  volatility of 100%,
expected  life of 3 to 5 years,  and no expected  dividends.  The value of these
options in the amount of $626,790 was included in operating expense in the

                                     F-23


<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003

NOTE 8 - COMMON STOCK OPTION AND AWARD PLAN (Continued)

financial  statements.  The following  assumptions  were made in estimating fair
value during the year ended September 30, 2003: risk-free interest rate of 3% to
4%,  volatility  of 106% to 337%,  expected life of 4 to 5 years and no expected
dividends.  The value of these options in the amount of $222,343 was included in
the Company's statement of operations for 2003.

The value of options  issued for  financing  fees in the amount of  $429,671  is
deducted against additional paid in capital, as a cost of selling common stock.

Following is a summary of the stock options during the years ended September 30,
2003, 2002, and 2001:


<TABLE>
<CAPTION>
                                                                                                      Weighted
                                                                                    Number             Average
                                                                                      of              Exercise
                                                                                    Options             Price
                                                                                ----------------    --------------
<S>                                                                                  <C>               <C>
Outstanding at 10/1/2000                                                             60,000            $ 18.60
Granted
                                                                                          -                  -
Exercised
                                                                                          -                  -
Expired or forfeited
                                                                                          -                  -
                                                                                ----------------    --------------
Outstanding at 9/30/2001                                                             60,000            $ 18.60
                                                                                ================    ==============

Options exercisable at 9/30/2001                                                     60,000            $ 18.60
                                                                                ================    ==============

Weighted average fair value of options granted during
   the year ended 9/30/2001                                                     $         -
                                                                                ================

Outstanding at 10/1/2001                                                             60,000            $ 18.60
Granted                                                                             750,000               1.08
Exercised                                                                                 -                  -
Expired or forfeited                                                              (  60,000)             18.60
                                                                                ----------------    ---------------
Outstanding at 9/30/2002                                                            750,000            $  1.08
                                                                                ================    ===============


Options exercisable at 9/30/2002                                                   750,000             $  1.08
                                                                                ================    ===============
Weighted average fair value of options granted during
   the year ended 9/30/2002                                                     $     0.84
                                                                                ================

Outstanding at 10/1/2002                                                           750,000             $  1.08
Granted                                                                            287,140                2.23
Exercised                                                                         (100,000)              (0.68)
Expired or forfeited                                                                     -                   -
                                                                                ----------------    ---------------
Outstanding at 9/30/2003                                                           937,140             $  1.47
                                                                                ================    ===============
Options exercisable at 9/30/2003                                                   937,140             $  1.47
                                                                                ================    ===============

Weighted average fair value of options granted
   during the year ended 9/30/2003                                              $     2.27
                                                                                ================
</TABLE>

                                     F-24


<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003


NOTE 8 - COMMON STOCK OPTION AND AWARD PLAN (Continued)

<TABLE>
<CAPTION>
                                                                       Weighted Average
       Exercise Date                                 Number of Shares  Price per Share
       -------------                                 ----------------  ---------------
       <S>                                              <C>                 <C>
       On or before June 21, 2005                       200,000             $1.50
       On of before August 1, 2005                       50,000             $1.50
       On or before March 1, 2007                       300,000             $0.75
       On or before July 8, 2007                        100,000             $1.35
       On or before June 18, 2007                        50,000             $1.70
       On or before June 1, 2007                         75,000             $2.00
       On or before September 30, 2008                  162,140             $2.50
</TABLE>

In July 2003, 100,000 of the outstanding options were exercised for the purchase
of 100,000 shares of the Company's common stock.

Prior to April  2001,  a total of 72,750  options  were  granted by the board to
officers,  directors and other  consultants.  As shown above, the 60,000 options
remaining were forfeited during the fiscal year ending September 30, 2002.

The following table gives  information about the Company's common stock that may
be issued upon the exercise of options under all of the Company  existing  stock
option plans as of September 30, 2003.

<TABLE>
<CAPTION>
                                                              Remaining
    Exercise        Number of       Weighted Average        Contractual Life         Number     Weighted Average
      Prices         Options         Exercise Price          (in years)           Exercisable     Exercise Price
    ----------    -------------    --------------------    ------------------     ----------  ---------------------
      <S>         <C>                     <C>                    <C>               <C>                 <C>
      $0.75         300,000               $ 0.75                 3.42                300,000           $0.75
       1.35         100,000                 1.35                 3.75                100,000            1.35
       1.50         200,000                 1.50                 1.75                200,000            1.50
       1.50          50,000                 1.50                 1.83                 50,000            1.50
       1.70          50,000                 1.70                 3.75                 50,000            1.70
       2.00          75,000                 2.00                 3.67                 75,000            2.00
       2.50         162,140                 2.50                 5.0                 162,140            2.50
                  ---------               ------                -----              ---------          ------

                    937,140               $ 1.47                 3.32                937,140           $1.47
                 ==========               ======                =====             ==========          ======
</TABLE>

Stock Award Plan
----------------
During the year ended  September  30,  2001,  the  Company's  board of directors
approved the issuance of 15,000 shares of the Company's common stock per quarter
to each entitled  director as compensation  for service to the Company and 5,000
shares of the  Company's  common  stock per  quarter to  officers in addition to
their salaried compensation for services.

                                     F-25

<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003


NOTE 9 - WARRANTS

During the year ended September 30, 2002, the Company issued 2,333,336 shares of
stock with 2,333,336 warrants  attached.  These warrants were valued at $233,334
using the Black-Scholes Option Price Calculation. The following assumptions were
made in estimating fair value: risk free interest rate is 5%, volatility is 100%
and expected life is 5 years.  These warrants may be used in a cashless exercise
to purchase  2,333,336  shares of the Company's common stock at $0.30 per share.
The warrants remain  exercisable  through April 15, 2007.  During the year ended
September 30, 2003, all of these  warrants were exercised in cashless  exercises
in  accordance  with the  terms of the  warrants  and  1,956,984  shares  of the
Company's common stock were then issued to the warrant  holders.  As of the date
of these financial  statements,  none of these warrants  remain  outstanding and
exercisable.

During the year ended  September 30, 2003,  the Company issued 212,500 shares of
stock with 212,500 warrants  attached and 25,000 warrants related to a July 2002
purchase.  The warrants  were valued at $51,375 using the  Black-Scholes  Option
Price Calculation. The following assumptions were made is estimating fair value:
risk free interest rate is 5%,  volatility is 100% and expected life is 3 years.
These warrants may be used to purchase  237,500  shares of the Company's  common
stock at $1.35 per share.  The warrants remain  exercisable  through October 15,
2005. As of the date of these financial statements, all of these warrants remain
outstanding and exercisable.


NOTE 10 - OIL AND GAS PROPERTIES

The  Company's  oil  and gas  producing  activities  are  subject  to  laws  and
regulations controlling not only their exploration and development, but also the
effect of such  activities  on the  environment.  Compliance  with such laws and
regulations may necessitate additional capital outlays,  affect the economics of
a  project,  and  cause  changes  or  delays in the  Company's  activities.  The
Company's  oil  and  gas  properties  are  valued  at the  lower  of cost or net
realizable value.

Louisiana
---------
During the fourth  quarter of the year ended  September  30,  2001,  the Company
began leasing acreage in a natural gas field in Desoto Parish,  Louisiana. As of
the date of these financial statements, the Company has leased over 4,250 acres.
At September 30, 2003 and September 30, 2002,  Louisiana  leases of $350,675 and
$169,077,  respectively,  are included in the attached  financial  statements as
prepaid  mineral  leases.  In June  2003,  under the terms of a joint  operating
agreement with Bridas Energy USA,  Bridas  commenced  drilling the first of five
wells.  The first  three wells are now in the  process of being  completed  with
small  amounts of  production  being  generated.  The  Company has a 25% working
interest in and 20% net revenue interest in the first two wells drilled.  In the
third,  fourth and fifth wells,  the Company has a 45% working  interest and 36%
net revenue interest.  Bridas is the operator of all of Cadence's  properties in
Louisiana.

                                     F-26

<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003


NOTE 10 - OIL AND GAS PROPERTIES (Continued)

Texas
-----
During the year ended  September 30, 2002,  the Company  acquired an exploration
permit and lease option  agreement for an oil well project in Wilbarger  County,
Texas known as the Waggoner  Ranch  Project.  During the quarter ended March 31,
2002  under  the terms of a joint  operating  agreement  with the W.T.  Waggoner
Estate,  Waggoner drilled an initial test well. By September 30, 2003,  Waggoner
had  drilled a total of seven  wells in  Wilbarger  County,  of which  five were
producing  oil.  The W.T.  Waggoner  Estate is the  operator of all of Cadence's
properties in Wilbarger  County and the sole  purchaser of all  production  from
these properties.

During the year ended  September  30, 2002,  the Company sold 40% of the working
interest  in its  initial  well in this area (known as the "1A" well) to private
investors  and two officers of the Company for $210,000.  The Company's  initial
cost in the portion of the prospect sold totaled $3,200.

At September 30, 2003 and September 30, 2002, the Company  recorded a receivable
from third party working  interest  owners in the amount of $12,873 and $16,037,
respectively,  to reflect some sales of the prospect's  partial  interest.  This
initial  well  was  placed  in  production  during  July  2002.  Two  additional
exploratory  wells (the "2A" and "1B") were  drilled by Waggoner on the property
with the Company retaining 100% of the working interest. The 1B was successfully
placed in  production  and the 2A was converted to a salt-water  disposal  well.
Subsequent  efforts were made to drill the "2B" well (the Company's fourth well)
which was funded through the Cadence Resources  Corporation Limited Partnership.
This well was unsuccessful.

During  February 2003,  the Company  completed the West Electra Lake Well on the
Waggoner Ranch Project.  The Company  entered into a 45% working  interest joint
operating agreement with the Waggoner Ranch for the operations conducted on this
acreage.  In the quarter  ending  September  30, 2003,  the Company  drilled and
completed two additional wells on the West Electra Lake joint venture  operating
area on the Waggoner  Ranch.  The Company  owns a 50% working  interest in these
last two wells.

At  September  30, 2003 and 2002,  prepaid oil and gas leases  relating to Texas
property  of,  $4,500 and $8,100,  respectively,  are  included in the  attached
financial statements. See Note 13.

Michigan
--------
In December  2002,  the Company  began  participating  in a natural gas drilling
program in Alpena County,  Michigan with Aurora Energy, Ltd. As of September 30,
2003,  Cadence had a 22.5% working interest  (before payout,  20% after payout),
18% net revenue  interest  (before payout,  16% after payout),  in six producing
wells in Alpena  County.  Production  commenced  from this  field in June  2003.
Aurora is the operator of all of Cadence's properties in Alpena County. At

                                     F-27
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003


NOTE 10 - OIL AND GAS PROPERTIES (Continued)

Michigan (continued)
-------------------
September  30,  2003,  Michigan  leases  totaling  $29,687  are  included in the
attached financial statements as prepaid mineral leases. See Note 12.

Kansas
------
During the year ended September 30, 2003, the Company leased 2,270 acres of land
in the Anadarko Basin in west central  Kansas.  No drilling has commenced on any
of this  acreage.  Cadence  holds a 100%  working  interest  and 82% net revenue
interest in these leases. At September 30, 2003, $11,111 of leases in Kansas are
included in the attached financial statements as prepaid mineral leases.


NOTE 11 - OIL AND GAS PRODUCING ACTIVITIES

The  Securities and Exchange  Commission  defines proved oil and gas reserves as
those  estimated  quantities of crude oil,  natural gas, and natural gas liquids
which geological and engineering  data demonstrate with reasonable  certainty to
be recovered in future years from known reservoirs  under existing  economic and
operating  conditions.  Proved  developed oil and gas reserves are reserves that
can be expected to be recovered  through existing wells with existing  equipment
and operating methods.

The Company has retained the services of an independent  petroleum consultant to
estimate its oil reserves in Texas at September  30, 2003.  Natural gas reserves
have not been estimated because there has been no independent study performed of
the  Company's  reserves  of natural  gas.  The oil  reserve  estimates  include
reserves in Texas in which  Cadence holds an economic  interest  under lease and
operating agreements.

Proved  reserves  do not include  amounts  that may result  from  extensions  of
currently  proved areas or from application of enhanced  recovery  processes not
yet determined to be commercial in specific reservoirs.

Cadence  has no supply  contracts  to  purchase  petroleum  or natural  gas from
foreign governments.









                                     F-28
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003



NOTE 11 - OIL AND GAS PRODUCING ACTIVITIES (Continued)

The changes in proved reserves for the years ended September 30, 2003 and 2002
including the reserves at September 30, 2002 were as follows and as estimated by
the management of Cadence:


<TABLE>
<CAPTION>
                                                            Petroleum Liquids                    Natural Gas
                                                                (Mbarrels)                          (MMCF)
                                                              United States                     United States
                                                         -------------------------          -----------------------
<S>                                                                <C>                                 <C>
Reserves at October 1, 2001                                          -                                 -
Extensions and discoveries                                         101                                 -
Production/sales                                                    (3)                                -
                                                         ----------------------             -----------------------
Reserves at September 30, 2002
                                                                    98                                 -
                                                         ======================             =======================

Reserves at October 1, 2002                                         98                                 -
Revision of previous estimate                                      (21)                                -
Production/sales                                                   (11)                                -
                                                         ----------------------             -----------------------
Reserves at September 30, 2003                                      66                                 -
                                                         ======================             =======================
</TABLE>

All reserve shown at September 30, 2003 are proved developed reserves.

The aggregate  amounts of  capitalized  costs  relating to oil and gas producing
activities and the related accumulated depreciation,  depletion and amortization
as of September 30, 2003 and 2002 were as follows:

<TABLE>
<CAPTION>
                                                            September 30,                    September 30,
                                                                2003                              2002
                                                        ------------------------        -------------------------
<S>                                                     <C>                             <C>
Proved properties                                       $      290,747                  $         48,694
Unproved properties                                          1,133,836                            78,997
Wells and related equipment and facilities                     202,886                            67,374
Support equipment and facilities                               151,963                           105,108
Prepaid oil and gas leases                                     395,971                           177,177
Accumulated depreciation,
     depletion and amortization                                (61,611)                           (4,312)
                                                        ------------------------       --------------------------
Total capitalized costs                                 $    2,113,792                 $         473,038
                                                        ========================       ==========================
</TABLE>

                                     F-29

<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003



NOTE 11 - OIL AND GAS PRODUCING ACTIVITIES (Continued)

Costs  both   capitalized   and  expensed,   which  were  incurred  in  oil  and
gas-producing  activities  during the years ended  September 30, 2003,  2002 and
2001, are set forth below.  Property  acquisition costs represent costs incurred
to purchase or lease oil and gas properties.  Exploration costs include costs of
geological and geophysical activity and drilling exploratory wells.  Development
costs include costs of drilling and equipping development wells and construction
of production facilities to extract, treat and store oil and gas.


<TABLE>
<CAPTION>
                                            September 30,             September 30,                 September 30,
                                                 2003                     2002                           2001
                                      -----------------------    -------------------------    ----------------------
<S>                                   <C>                        <C>                          <C>
Property acquisition costs:
     Proved properties                $                    -     $                  8,000     $                    -
     Unproved properties                             319,188                      245,483                     84,503
Exploration costs                                    139,010                      456,086                          -
Development costs                                  1,479,030                      306,761                          -
Operating expenses                                   281,143                       12,279                          -
                                      -----------------------    -------------------------    -----------------------
Total expenditures                    $            2,218,371     $              1,028,609     $               84,503
                                      =======================    =========================    =======================
</TABLE>

There  were no  results  of  operations  for oil  and gas  producing  activities
(including  operating  overhead)  for the year ended  September  30,  2001 since
exploration and development activities had not commenced.

Results of operations for oil and gas producing activities  (including operating
overhead) for the year ended September 30, 2003 were as follows:


<TABLE>
<CAPTION>
         <S>                                                                          <C>
         Revenues                                                                     $           387,355
         Depreciation, depletion and amortization                                                 (57,310)
         Oil & gas lease expenses                                                                (302,204)
         Exploration and drilling                                                                (109,968)
         Oil and gas production expenses                                                          (34,577)
         Other operating expenses                                                                 (79,334)
                                                                                      -------------------
              Total expenses                                                                       583,393
                                                                                      ---------------------
         Results before income taxes                                                             (196,038)
         Income tax expense                                                                              -
                                                                                      ---------------------
         Results of operations from oil and gas producing activities                  $          (196,038)
                                                                                      =====================

         Standardized Measure of Future Net Cash Flows
         ---------------------------------------------
         Future cash flows                                                            $         1,930,539
         Future development and production costs                                                 (469,039)
         Future income tax expense                                                                      -
                                                                                      ---------------------
         Future net cash flows                                                                  1,461,500
         10% annual discount                                                                      213,000
                                                                                      ---------------------
         Standardized measure of discounted future net cash flows                     $         1,248,500
                                                                                      =====================
</TABLE>

                                     F-30

<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003


NOTE 11 - OIL AND GAS PRODUCING ACTIVITIES (Continued)

Future net cash flows were computed using fiscal  year-end  prices of West Texas
Intermediate  crude.  Future  price  changes are  considered  only to the extent
provided  by  contractual   arrangements.   Estimated  future   development  and
production costs are determined by estimating the expenditures to be incurred in
developing  and  producing  the  proved oil and gas  reserves  at the end of the
fiscal  year,  based on year-end  costs and  assuming  continuation  of existing
economic conditions.  Estimated future income tax expense is normally calculated
by  applying  fiscal  year-end  statutory  tax  rates  (adjusted  for  permanent
differences  and tax credits) to estimated  future pretax net cash flows related
to proved oil and gas reserves, less the tax basis of the properties involved.

These estimates are furnished and calculated in accordance with  requirements of
the Financial  Accounting  Standards Board and the SEC.  Estimates of future net
cash  flows  presented  do  not  represent  management's  assessment  of  future
profitability  or future cash flows to  Cadence.  Management's  investments  and
operating decisions are based on reserves estimated that include proved reserves
prescribed by the SEC as well as probable  reserves,  and on different price and
cost assumptions from those used here.

It should be  recognized  that  applying  current  costs  and  prices  and a 10%
standard  discount rate does not convey absolute value.  The discounted  amounts
arrived at are only one measure of the value of proved reserves.


NOTE 12 - NOTES PAYABLE - RELATED PARTIES

All of the Company's notes payable are considered  short-term.  At September 30,
2003, notes payable consisted of the following:

<TABLE>
<CAPTION>
         <S>                                                                              <C>
         Nathan Low Family Trust (a shareholder of the Company), secured by
         assignment of a prorata interest in gas producing properties located in
         Alpena County, Michigan, interest at 8%, dated February 24, 2003,
         originally due on April 4, 2003,
         Extended to December 31, 2003.                                                   $     50,000

         Kevin Stulp (a shareholder of the Company), interest at 8%, dated
         February 24, 2003, originally due on April 5, 2003, extended to
         December 31, 2003.                                                                     25,000

         Howard Crosby (an officer and shareholder of the Company), interest at
         8%, dated February 24, 2003, originally due on April 5, 2003, extended
         to December 31, 2003.                                                                  25,000
</TABLE>

                                     F-31
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003

NOTE 12 - NOTES PAYABLE - RELATED PARTIES (Continued)

<TABLE>
<CAPTION>
         <S>                                                                             <C>
         Howard Crosby (an officer and shareholder of the Company), unsecured,
         interest at 5%, dated January 9, 2003, originally due on February 28,
         2003, extended to
         December 31, 2003.                                                                     60,000

         CGT Management Ltd., unsecured, interest at 10%,
         dated July 16, 2003 (paid in full October 2, 2003).                                   300,000
                                                                                         -------------

         Total                                                                           $     460,000
                                                                                         =============
</TABLE>

NOTE 13 - COMMITMENTS AND CONTINGENCIES

Prospective Penalty
-------------------
In September and October 2003, the Company sold  1,721,400  shares of its common
stock for a total of $4,303,500.  In the securities  purchase  agreement for the
stock, Cadence committed to pay the purchasers in the offering a monthly penalty
equal to 1% of the total  proceeds  raised in the offering if the Securities and
Exchange   Commission  did  not  declare   effective  by  December  14,  2003  a
registration statement (Form SB-2) which Cadence filed on October 30, 2003.

Under the terms of the securities purchase agreement, the penalty of $43,035 per
month  could be  prorated  for a  partial  month and  would  continue  until the
registration statement was declared effective.

Litigation
----------
The Company was a defendant  in a lawsuit  alleging  that the Company  failed to
transfer common stock in exchange for a mining property interest.  In June 1999,
Box Elder County Superior Court rejected the  plaintiff's  lawsuit and let stand
the Company's  countersuit alleging fraudulent  misrepresentation.  Although the
plaintiff filed an appeal  (regarding the originally  filed  lawsuit),  the Utah
Supreme Court rejected the appeal in a judgment rendered on July 31, 2001.

The Company's  countersuit,  which sought both full title to the  aforementioned
mineral  property  and  compensatory  damages as well as punitive  damages,  was
rejected in a jury trial in October 2002.  Although the Company filed an appeal,
it expects the jury  verdict will stand.  As a result,  the Company has and will
continue to hold an undivided 25% interest in the Vipont Mine. See Note 3.

Environmental Issues
--------------------
The  Compay is  engaged in oil and gas  exploration  and may  become  subject to
certain  liabilities  as they relate to  environmental  cleanup of well sites or
other environmental restoration procedures as they relate to the drilling of oil
and gas  wells  and the  operation  thereof.  In the  Company's  acquisition  of
existing or previously drilled wells, the Company may not be aware of


                                     F-32
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003

NOTE 13 - COMMITMENTS AND CONTINGENCIES (Continued)

Environmental Issues (continued)
-------------------------------
what environmental  safeguards were taken at the time such wells were drilled or
during such time the wells were operated.

The Company could incur  significant  costs,  including  cleanup costs resulting
from a release of hazardous material, third-party claims for property damage and
personal  injuries  fines  and  sanctions,  as a  result  of any  violations  or
liabilities  under  environmental  or other laws.  Changes in or more  stringent
enforcement  of  environmental  laws could also result in  additional  operating
costs and  capital  expenditures.  In the course of routine  oil and natural gas
operations,  surface spills and leaks,  including  casing leaks, of oil or other
materials  do occur,  and the  Company may incur  costs for waste  handling  and
environmental compliance.

The Company was previously engaged in exploration of mineral  properties.  These
properties  are  classified  as  assets  from  discontinued  operations  or were
previously  written  off as  permanently  impaired.  Although  the  Company  has
discontinued the exploration of mineral properties,  the possibility exists that
environmental cleanup or other environmental restoration procedures could remain
to be  completed or be mandated by law,  causing  unpredictable  and  unexpected
liabilities  to arise.  At the date of this report,  the Company is not aware of
any  environmental  issues  related  to  any  of its  assets  from  discontinued
operations.

Capital Commitments
-------------------
At September 30, 2003, the Company's  future capital  commitments  are dependent
upon the Company's  decision to proceed with  additional well  development.  See
Note 10. No accruals have been made in the accompanying financial statements for
these amounts.

Lease Commitments
-----------------
The  Company  began  leasing  office  facilities  in  Walla  Walla,   Washington
commencing  in June 2001.  The  agreement  is a  three-year  lease with  monthly
payments of $400.  Total rent paid for this office  space  during the year ended
Sept 30, 2003 and 2002 was $4,800.

The Company began leasing  additional office space in Hilton Head Island,  South
Carolina in August 2003. The one-year lease calls for monthly rental payments of
$550.  For the year ended  September 30, 2003, the Company  expended  $1,100 for
this rental space.

Cadence Resources Corporation Limited Partnership
-------------------------------------------------
On August 8, 2002,  the  Company  formed a limited  partnership  in the State of
Washington  whereby  the  Company  became the  managing  general  partner and an
outside  individual  investor  became the initial limited  partner.  The entity,
Cadence Resources Corporation Limited Partnership ("CRCLP" or the "Partnership")
was formed to invest in oil and gas properties in Texas and Louisiana. See Notes
5 and 11.

                                     F-33
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003

NOTE 13 - COMMITMENTS AND CONTINGENCIES (Continued)

Cadence Resources Corporation Limited Partnership (continued)
------------------------------------------------------------
In  connection  with the  formation of the  Partnership,  the Company  agreed to
contribute  $12,500 in cash and its  leasehold  interest  in an oil well  ("2B",
which  ultimately  was a dry hole) in  Wilbarger  County,  Texas and the limited
partner contributed $250,000 in cash.

The terms of the  Partnership  agreement  provide that 90% of initial income and
expenses  will be allocated  to the limited  partner and further  provide  that,
after the limited  partner's  receipt of funds invested and an 11% return on his
investment,  subsequent  Partnership profits and losses will be allocated 90% to
the general partner and 10% to the limited partner. In order to ensure repayment
of the  limited  partner's  investment,  Cadence  agreed to grant to the limited
partner a security  interest in the equipment  and fixtures  affixed to wells 1A
and 1B in Wilbarger  County and agreed to contribute the Company's  share of the
cash flows it  receives  from these two wells to the  Partnership.  The  Company
holds a 60% working  interest in well 1A and a 100% working interest in well 1B.
See Notes 5 and 11.

Effective  September 30, 2003,  Cadence purchased the limited partner's interest
in the Partnership and thereby  terminated the limited partner's  aforementioned
security interest. In this transaction,  Cadence made a cash payment of $250,000
in October 2003 to the limited  partner and received,  from the limited  partner
his 5%  working  interest  in the West  Electra  Lake #1 oil well in  Wilbarger,
Texas.

In  connection  with the  aforementioned  transaction,  Cadence  also  repaid in
October 2003 to the limited  partner the unsecured sum of $300,000.  These funds
were previously  advanced to the Partnership in June 2003 for the exploration of
natural  gas  interests  in the Black  Bean Unit in  Michigan  in return for the
limited  partner's  receiving  120,000  shares  of  Cadence  stock and a working
interest  in each well  drilled  in the unit.  Upon  repayment  of the  $300,000
advance,  the limited  partner's  working  interest in each well  drilled in the
Black Bean Unit was fixed at 2%.

Consulting Commitments
----------------------
In June 2002,  the Company  entered  into an agreement  with Memphis  Consulting
Group  ("Memphis")  for  financial  consulting  and  public  relations  services
beginning on August 1, 2002 through  August 1, 2003.  The  agreement  called for
monthly  payments of $3,000,  and an initial  50,000 stock  options  exercisable
through  August 1,  2005 at $1.50 per  share.  See Note 8.  This  agreement  was
terminated during the quarter ended March 31, 2003.

In September 2001, the Company entered into a consulting agreement with American
Financial  Group for  promotion to investors.  The agreement  called for monthly
payments of $2,000 to cover all expenses,  20,000 shares of the Company's common
stock  (which  were  issued in October  2001) and an  override of 2.5% of monies
raised in private placements from referrals or directed business.  The agreement
was terminated during the quarter ended March 31, 2003.

                                     F-34
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003

NOTE 13 - COMMITMENTS AND CONTINGENCIES (Continued)

Consulting Commitments (continued)
---------------------------------
In June 2003,  the Company  entered  into a corporate  advisory  agreement  with
Proteus  Capital  Corp.  calling  for a monthly  fee of $3,000 in cash and 2,000
restricted  shares of the common  stock of the  Company.  Additionally,  Proteus
received an option for 50,000 shares  exercisable  at $1.75 for a period of four
years, such shares bearing certain registration rights should the Company file a
registration statement on behalf of other shareholders.

Lucius C. Geer,  a  consultant  to the  Company  who  manages  its  acquisition,
exploration and production operations,  has entered into several agreements with
Cadence and has contractually  received a 2% overriding royalty interest in oil,
gas and mineral leases in Wilbarger  County,  Texas and a 1% overriding  royalty
interest in oil and gas leases in Desoto Parish, Louisiana.  Effective August 1,
2003, an agreement provides that Geer will work for Cadence for $7,500 per month
plus an overriding  royalty  interest of 2% of the sales price  received for all
oil, gas and minerals from leases which Geer acquires for Cadence.

Other Limited Partnerships
--------------------------
During the quarter  ended June 30, 2003,  the Company  formed four other limited
partnerships in the state of Washington  whereby the Company became the managing
general  partner and an outside  individual  investor became the initial limited
partner. The entities, Cadence West Electra Partners LP, Cadence Antrim Partners
1 LP, Cadence Antrim  Partners 2 LP and Cadence Antrim Partners 3 LP were formed
to invest in oil and gas  properties.  As of September 30, 2003,  these entities
have not begun activities. See Note 5.

Other Commitments
-----------------
The Company entered into an exploration  agreement with the W.T. Waggoner Estate
(Waggoner)  and its  trustees  on  August  1,  2002.  This  agreement  calls for
exploration of the West Electra Lake Project located in Wilbarger County, Texas.
See Note 10.

On August  13,  2002,  the  Company  entered  into a public  relations  retainer
agreement for one year whereby the Company  agreed to issue 60,000 shares of its
common stock during this period for services received.  The agreement also calls
for reimbursement of expenses incurred pursuant to terms of this agreement. This
agreement was terminated in the quarter ending September 30, 2003.

NOTE 14 - SETTLEMENT AGREEMENT

Fausett International, Inc.
---------------------------
During June 2001, the Company  entered into a settlement  agreement  wherein the
Company  relinquished  all claims to the  Crescent  Mine  (located  in  Shoshone
County,  Idaho) under a previously  executed  lease and delivered to counsel for
Fausett  International,  Inc. (hereinafter  "Fausett"),  a quitclaim deed to the
Crescent Mine. Upon receipt of the quitclaim deed, Fausett

                                     F-35
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003

NOTE 14 - SETTLEMENT AGREEMENT (Continued)

Fausett International, Inc. (continued)
--------------------------------------
transferred all interest in the Crescent Mine to Shoshone County and surrendered
to the Company 8,600 shares of the Company's common stock held by Fausett and an
officer of Fausett.  The settlement  agreement released the Company from further
obligations  under the lease  agreement.  It also contained a general release in
favor of the Company from the Environmental  Protection Agency and from Shoshone
County.

NOTE 15 - RELATED PARTY TRANSACTIONS

The Company previously sublet office space on a month-to-month basis from one of
its officers in Walla Walla, Washington for $400 per month through May 2001.

During the year ended  September  30, 2002,  the Company  sold  several  mineral
properties  located in Shoshone County,  Idaho to Caledonia  Silver-Lead  Mines,
Inc., later renamed  Nevada-Comstock Mining Company. Two officers of the Company
collectively own 2.4% of this entitity and Cadence owns 35%. See Note 5.

Two  officers of the Company  collectively  own in excess of 40% of the stock of
Dotson  Exploration  Company and they are the sole  officers  and  directors  of
Dotson.  Dotson owns 109,000 shares of the Company's common stock. During fiscal
year 2002 and the first  quarter of fiscal year 2003,  Cadence  repaid  Dotson a
loan in the amount of $10,000 and made two new loans to Dotson,  one for $35,000
and one  for  $20,000,  each  at an  interest  rate  of 10%  per  annum.  Dotson
transferred to Cadence marketable  securities in the form of common stock of two
unaffiliated companies,  Enerphaze Corporation and The Williams Companies, Inc.,
valued by Cadence's  board of directors  at $33,380,  as partial  payment of the
amount  loaned.  During the nine months ended June 30, 2003,  Dotson  repaid the
$20,000 loan in cash. At September 30, 2003,  Dotson owed Cadence $3,720,  which
amount is payable on demand and bears interest at 10% per annum.

Because   Dotson   Exploration   Company,   Oxford   Metallurgical,   Inc.   and
Nevada-Comstock  Mining Company are controlled by two officers of Cadence, these
transactions   cannot  be  considered  to  be  the  product  of  an  arms-length
negotiation.

In October 2001, Cadence issued 200,000 shares of its common stock to Mr. Crosby
for cash in the amount of $60,000.  On January 15, 2002,  Cadence issued 100,000
shares of its common stock to Mr. Crosby in payment of a loan made to Cadence in
the  principal  amount of $30,000 in November  2001.  On January 22,  2002,  Mr.
Crosby  made an  additional  loan of $30,000  bearing  interest  at 8% for which
Cadence issued him 15,000 shares valued at $4,500 as an inducement to making the
loan.

                                     F-36
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003

NOTE 15 - RELATED PARTY TRANSACTIONS (Continued)

In January 2002, Cadence  transferred 41,667 shares of the common stock it owned
in Trend Mining Company, of which Mr. Ryan is a director, to Mr. Ryan in payment
of past due salary of $16,000.  Further,  in October 2001, Mr. Ryan  transferred
marketable  securities of Enerphaze  Corporation valued at $90,000 to Cadence in
exchange  for 300,000  shares of  Cadence,  which  shares are held by J.P.  Ryan
Company,  Inc. held 100% by John Ryan, Andover Capital  Corporation held 100% by
John Ryan, and Dotson Exploration Company.

In April 2002, Mr. Crosby purchased 83,334 Cadence investment units and Mr. Ryan
purchased  43,334 Cadence  investment  units at $0.30 per unit consisting of one
share of common  stock  and one  warrant  exercisable  at  $0.30.  The  warrants
contained a provision which allowed cashless exercise when and if Cadence common
stock traded at or above $1.50 per share. Also, in April 2002, Cadence issued to
Mr. Ryan 6,800 shares of its common stock in repayment of 6,800  Cadence  shares
owned by Mr.  Ryan  that he had  transferred  to third  parties  to pay  Cadence
invoices.

On August 8, 2002, the Company formed a limited  partnership whereby the Company
became the managing  general partner and an outside  individual  investor became
the  initial  limited   partner.   In  connection  with  the  formation  of  the
Partnership,  the  Company  contributed  $12,500  and agreed to  contribute  its
leasehold  interest in an oil well ("2B",  which  ultimately  was a dry hole) in
Wilbarger County, Texas. See Notes 5, 11 and 13. During the year ended September
30, 2003, the limited partner  advanced  $300,000 to the limited  partnership in
exchange for a note payable.  This note is unsecured and bears  interest at 10%.
The proceeds  from this note were used to purchase an interest in the  Company's
Michigan properties.  This amount reflected in the attached financial statements
as a payable to related party was repaid in October 2003.

During fiscal 2003,  Mr. Crosby made two loans to Cadence.  One loan in December
2002 was in the  principal  amount of  $70,000,  bearing  interest at 5% and the
other loan made in February 2003 was in the principal  amount of $50,000 bearing
interest  at a rate of 8%.  Cadence  issued  14,000  shares of its common  stock
valued at $10,920, as an inducement to making the $70,000 loan and 20,000 shares
valued at $15,600,  as an inducement to making the $50,000 loan.  Cadence repaid
$60,000 and has agreed to issue 4,000 shares of its common stock in repayment of
the remaining $10,000 principal amount  outstanding on the $70,000 loan. Cadence
repaid  $25,000 of the  $50,000  loan in cash and has  offered  to issue  25,000
shares of its  common  stock to repay the  remaining  $25,000  principal  amount
outstanding.

In February 2003, Mr. Kevin Stulp, a director,  made a bridge loan to Cadence in
the  principal  amount of $50,000,  bearing  interest  of 8% per annum.  Cadence
issued  20,000  shares  of its  stock  valued  at  $15,600  to Mr.  Stulp  as an
inducement to making the loan. Cadence later repaid $25,000 of the $50,000 loan.
In July 2003, Mr. Stulp exercised a warrant to purchase 100,000 shares of common
stock at $.75 per share.

                                     F-37
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003

NOTE 15 - RELATED PARTY TRANSACTIONS (Continued)

In October 2002, the Nathan A. Low Roth IRA and various  entities  controlled by
Thomas Kaplan,  shareholders of Cadence, exercised warrants in separate cashless
transactions  whereby each party surrendered a total of 175,676 shares of common
stock valued at $325,000 to exercise  warrants for the  acquisition of 1,083,334
shares of Cadence common stock..

Other related party transactions are disclosed in Notes 3, 5, 6, 12 and 13.


NOTE 16 - GAIN ON DEBT FORGIVENESS

During the year ended  September  30,  2002,  a vendor of the  Company  chose to
forgive interest charges on its delinquent account. This transaction resulted in
the recognition of other income of $6,109.


NOTE 17 - INCOME TAXES

At September 30, 2003, the Company had net deferred tax assets  calculated at an
expected  rate  of  34% of  approximately  $5,134,000  as  indicated  below.  As
management of the Company cannot  determine that it is more likely than not that
the Company will realize the benefit of the net deferred tax asset,  a valuation
allowance equal to the net deferred tax asset has been  established at September
30, 2003.

The significant components of the deferred tax asset at September 30, 2003, 2002
and 2001 were as follows:

<TABLE>
<CAPTION>
                                               2003                    2002                   2001
                                        --------------------    ------------------    -------------------
<S>                                          <C>                     <C>                   <C>
Net operating loss carryforwards             $ 2,829,000             $ 1,423,000           $ 1,372,000
Stock options and warrants issued                622,000                 172,000                     -
Section 1231 loss carryforwards                  151,000                  89,000               155,000
Capital loss carryforwards                     1,532,000                 887,000               881,000
                                        --------------------    ------------------    -------------------
Total deferred tax asset                       5,134,000               2,571,000             2,408,000
Less valuation allowance                       5,134,000               2,571,000             2,408,000
                                        --------------------    ------------------    -------------------
Net deferred tax asset                       $         -            $          -           $         -
                                        ====================    ==================    ===================
</TABLE>

At September  30, 2003,  the Company has net  operating  loss  carryforwards  of
approximately  $8,300,000,  which  expire in the years  2009  through  2023.  In
addition,  the Company has net Section 1231 loss  carryforwards of approximately
$446,000,  which  expire in the years 2005  through  2006,  and net capital loss
carryforwards  of  approximately  $4,506,000,  which  expire in the  years  2004
through 2008. The change in the allowance account from September 30, 2002 to

                                     F-38
<PAGE>
                          CADENCE RESOURCES CORPORATION
                       (Formerly Royal Silver Mines, Inc.)
                        NOTES TO THE FINANCIAL STATEMENTS
                               September 30, 2003


NOTE 17 - INCOME TAXES (Continued)

September  30,  2003  was  $2,563,000,  which  was in part  due to a  change  in
management's estimates of expected tax rates.

The Company may have had a control change as defined under the Internal  Revenue
Code,  because of new stock  issuances and changes in  ownership.  The effect of
such control  changes have not been  calculated  but may limit the future use of
net operating losses.


NOTE 18 - SUBSEQUENT EVENTS

On October 2, 2003, the Company repaid a loan from CGT  Management,  Ltd. in the
amount of $300,000.  The terms of this loan,  which originated on July 16, 2003,
provided that the loan shall be  immediately  repaid upon the Company  closing a
private placement of shares of the Company in excess of $1,000,000.

In October 2003, the Company successfully completed a brokered private placement
of approximately $4,303,500 gross proceeds,  (principally received in September)
and obligated  itself to pay  approximately  $375,000 of commissions in cash and
$430,000 in stock options as finder's fees.  Investors  subscribed for 1,721,400
shares of the Company's  common stock bearing  registration  rights at $2.50 per
share.  The Company  plans to use net proceeds  from this  placement to fund the
Company's  working interest in its natural gas project located in DeSoto Parish,
Louisiana, to repay loans made to the Company and for working capital purposes.

In October 2003, the Company purchased the complete interest of the only limited
partner in Cadence  Resources  Corporation  Limited  Partnership for $250,000 in
cash with an effective  transaction  date of September 30, 2003. Also in October
2003, the Company repaid  $300,000 to the limited  partner for funds advanced to
CRCLP. The aforementioned amounts, which total $550,000, have been recorded as a
related party payable on the accompanying  balance sheet. Under the terms of the
repayment, the limited partner retains a 2% working interest in certain Michigan
gas wells.


                                     F-39

<PAGE>

                                 SIGNATURES

     In accordance  with Section 13 or 15(d) of the  Securities  Exchange Act of
1934,  the  registrant  has duly caused this annual  report on Form 10-KSB to be
signed on its behalf by the undersigned thereto duly authorized.

                                  Cadence Resources Corporation
                                  (Registrant)



Date: January 12, 2004           By:       /s/ Howard M. Crosby
                                            ---------------------
                                            Howard M. Crosby, President

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
annual report on Form 10-KSB has been signed below by the  following  persons on
behalf of the registrant and in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
                      SIGNATURE                                        OFFICE                          DATE
                      ---------                                        ------                          ----



<S>                                                    <C>                                     <C>
 /s/ Howard M. Crosby                                  President and  Director (Principal      January 12, 2004
 ------------------------------------------------      Executive Officer)
 Howard M. Crosby

 /s/ John M. Ryan                                      Vice President (Principal Financial     January 12, 2004
 ------------------------------------------------      and Principal Accounting Officer)
John M. Ryann

 /s/ Kevin Stulp                                       Director                                January 12, 2004
 ------------------------------------------------
Kevin Stulp
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                      Exhibit Index
                                                      -------------

     <S>         <C>
      3.1        Restated Articles of Incorporation of Cadence Resources Corporation filed with the Utah Secretary
                 of State on November 24, 2003
      3.2        Bylaws of Cadence Resources Corporation, a Utah corporation, adopted June 14, 2001
      4          Articles of Amendment to the Articles of Incorporation, relating to the Class A Preferred Stock
     10.1        Joint Exploration Agreement with Bridas Energy USA, Inc. dated April 30, 2003
     10.2        Lease Acquisition and Participation Agreement with Aurora Energy, Ltd. dated December 8, 2002
     10.3        Consulting Agreement with Lucius C. Geer dated August 1, 2003
     10.4        Agreement dated effective September 30, 2003 with Nathan A. Low, Sunrise Securities Corporation and
                 Cadence Resources Corporation Limited Partnership
     14          Code of Ethics
     23.1        Consent of Ralph E. Davis Associates, Inc.
     31          Rule 13a-14(a)/15d-14(a) Certifications
     32          Certification of principal executive officer and principal financial officer pursuant to section
                 906 of the Sarbanes-Oxley Act of 2002.
     99.1        Report of Ralph E. Davis Associates, Inc.
</TABLE>