SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

                                       OR

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

                          COMMISSION FILE NO. 000-22905

                          GOLDEN PHOENIX MINERALS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


               MINNESOTA                              41-1878178
               ---------                              ----------
     (State or Other Jurisdiction        (I.R.S. Employer Identification Number)
   of Incorporation or Organization)


       3595 AIRWAY DRIVE, SUITE 405, RENO, NEVADA                89511
       ------------------------------------------                -----
        (Address of Principal Executive Offices)               (Zip Code)

        Registrant's telephone number, including area code (775) 853-4919
                                                           --------------

      Securities registered pursuant to Section 12(g) of the Act:

                      COMMON STOCK, NO PAR VALUE PER SHARE
                                (Title of Class)

      Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___ -

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, 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. ___

      The registrant had revenues of $98,097 for the year ended December 31,
2003. The registrant also had other income of $160,409 for the same period.

      The aggregate market value of the voting common stock held by
non-affiliates of the Registrant on April 1, 2004, was approximately $34.4
million, based on the average bid and asked prices on such date of $0.39

      The Registrant had 104,779,533 shares of common stock, no par value per
share, outstanding on April 1, 2004.

<PAGE>
                                     PART I

ITEM 1.  BUSINESS


GENERAL DESCRIPTION OF BUSINESS

      FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS. This Filing contains
forward-looking statements. Such forward-looking statements include statements
regarding, among other things, (a) our estimates of mineral reserves and
mineralized material, (b) our projected sales and profitability, (c) our growth
strategies, (d) anticipated trends in our industry, (e) our future financing
plans, (f) our anticipated needs for working capital, (g) our lack of
operational experience and (h) the benefits related to ownership of our common
stock. Forward-looking statements, which involve assumptions and describe our
future plans, strategies, and expectations, are generally identifiable by use of
the words "may," "will," "should," "expect," "anticipate," "estimate,"
"believe," "intend," or "project" or the negative of these words or other
variations on these words or comparable terminology. This information may
involve known and unknown risks, uncertainties, and other factors that may cause
our actual results, performance, or achievements to be materially different from
the future results, performance, or achievements expressed or implied by any
forward-looking statements. These statements may be found under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," as well as in this Filing generally. Actual events or results may
differ materially from those discussed in forward-looking statements as a result
of various factors, including, without limitation, the risks outlined under
"Risk Factors" and matters described in this Filing generally. In light of these
risks and uncertainties, there can be no assurance that the forward-looking
statements contained in this Filing will in fact occur as projected.

THE COMPANY

      Golden Phoenix is a mineral property development company, formed in
Minnesota on June 2, 1997. Golden Phoenix plans to produce economically valuable
minerals from the mineral properties we currently control, and from mineral
properties that we may acquire in the future. Our acquisition emphasis is
focused on properties containing gold, silver, copper, and other strategic
minerals located in Nevada and the Western United States.

      Our five corporate directors and officers are individuals with prior
management experience who specialize in exploration and development with large
and small mining companies. This team has in excess of 120 years of mineral
exploration, development, and gold production experience, with career tracks
beginning at entry-level, then to mid-management and executive positions.
Management believes that Golden Phoenix has created the basis for a competitive
minerals exploration/development and operational company through assembling a
unique group of individuals with experience in target generation, ore discovery,
resource evaluation, mine development and mine operations.

      We have transformed the Company from a development-stage company to one
that operates its own mines. We intend to continue to develop properties. We
also plan to provide joint venture opportunities to mining companies to conduct
exploration or development on mineral properties we own or control. We, together
with any future joint venture partners, intend to explore and develop selected
properties to a stage of proven and probable reserves, at which time we would
then decide whether to sell our interest in a property or take the property into
production alone or with our partner(s). By joint venturing our properties, we
may be able to reduce our costs for further work on those properties, while
continuing to maintain and acquire interests in a portfolio of gold and base
metals properties in various stages of mineral exploration and development. We
expect that this corporate strategy will minimize the financial risk that we
would incur by assuming all the exploration costs associated with developing any
one property, while maximizing the potential of success and growth.

      Golden Phoenix has at least five sources of land available for
exploration, development and mining: public lands, private fee lands, unpatented
mining claims, patented mining claims, and tribal lands. The primary sources for
acquisition of these lands are the United States government, through the Bureau
of Land Management and the U. S. Forest Service, state governments, tribal
governments, and individuals or entities who currently hold title to or lease
government and private lands.

      There are numerous levels of government regulation associated with the
activities of exploration and mining companies. Permits, which we are
maintaining and amending include "Notice of Intent" to explore, "Plan of
Operations" to explore, "Plan of Operations" to mine, "Reclamation Permit", "Air
Quality Permit", "Water Quality Permit", "Industrial Artificial Pond Permit",
and several other health and safety permits. These permits are subject to
amendment or renewal during our operations. Although there is no guarantee that
the regulatory agencies will timely approve, if at all, the necessary permits
for our current operations or other anticipated operations, currently we have no
reason to believe that necessary permits will not be issued in due course. The
total cost and effects on our operations of the permitting and bonding process
cannot be estimated at this time. The cost will vary for each project when
initiated and could be material.


                                       1
<PAGE>

<TABLE>
<CAPTION>

      The following table set forth the regulations Golden Phoenix is subject to
and the costs associated with compliance of such regulations.

                                                    COMPLIANCE
NAME OF REGULATION                          FEES    COST        TYPE OF COMPLIANCE
------------------                          ----    ----------  ------------------
<S>                                      <C>      <C>         <C>
Nevada Department of Environmental
Protection Water Pollution Control       $ 14,000  $   4,800    Quarterly water sampling & waste rock sampling
Nevada Department of Environmental
Protection Air Quality                   $  2,000  $   2,000    Air quality monitoring of equipment
Nevada Department of Environmental
Protection Reclamation                   $  5,500  $ 360,000    Reclamation
Mining Safety Health Association         $     --  $   4,665    Safety equipment and training
                                         --------  ---------
Total                                    $ 21,500  $ 371,465
                                         ========  =========
</TABLE>

      We are current on all regulatory reports that must be filed with respect
to our properties and operations.

      There were a total of 29 permits required to bring a mine into production.
The last major permit for the Mineral Ridge Mine was the Reclamation Permit and
Plan of Operation and was issued May 8, 2003. This permit determines the amount
of bonding required for the project. There are three other major permits, which
have a renewal period that has coincided with Golden Phoenix's acquisition of
the mine property. These permits are: Air Quality Permit, Water Pollution
Control Permit, and Artificial Pond Permit. The renewal applications for these
permits have been submitted and Golden Phoenix is awaiting approval of the new
Water Pollution Control Permit. The new Air Quality Permit was received on
February 24, 2003. The Artificial Pond Permit was renewed during 2001. There are
several mine safety permits that were renewed when Golden Phoenix notified MSHA
that it is restarting the mine. These permits require inspections prior to the
start of full operations.

COMPETITION AND GOLD PRICE

      The mining industry has historically been intensely competitive. However,
over the last ten years imposition of numerous regulatory requirements and claim
rental policies by the United States Government and the general exodus of major
gold corporations from the U.S. to pursue mineral exploration in foreign
countries has allowed large areas of very prospective mineralized ground to
become open for location and acquisition. Nonetheless, the increasing price of
gold since 2002, has led to a number of companies to begin once again to
aggressively acquire claims and properties. Gold prices in 2002 increased from
$278 to $349 and closed at $347. In 2003 gold prices ranged from $320 to the
high closing of $416. In early 2004 gold prices ranged from a low of $399 to
$425.


CAPITAL EQUIPMENT

         In the next twelve months, we anticipate  purchasing or leasing with an
option to purchase  certain  capital  equipment for the Mineral Ridge mine. This
equipment  includes a track  mounted  crushing  unit, a water truck,  blast hole
drilling rigs, a road grader and field support vehicles,  which would be support
equipment for the process,  leach facilities and mining  operations,  which cost
could range from  $50,000 to  $200,000.  We  anticipate  funding  these  capital
equipment  expenditures  with funds we receive from our Fusion Capital financing
and from any gold  production  revenues we may  generate.  The pickup  trucks we
intend to purchase will be for our staff  professionals  only.  All  contractors
will provide their own vehicles.


MINING PROPERTIES AND PROJECTS

      The Federal government owns public lands that are administered by the
Bureau of Land Management or the United States Forest Service. Ownership of the
subsurface mineral estate can be acquired by staking a 20-acre mining claim
granted under the 1872 Mining Law. The Federal government still owns the surface
estate even though the subsurface can be owned through claim staking. Private
fee lands are lands that are controlled by fee-simple title by private
individuals or corporations. These lands can be controlled for mining and
exploration activities by either leasing or purchasing the surface and
subsurface rights from the private owner. Unpatented mining claims, which are
staked by another individual or corporation, can be controlled by either leasing
or purchasing the claims outright from the private owners that staked the claims
on public land. Patented mining claims are claims that were staked under the
1872 Mining Law, and through application and approval, the owners were granted
full private ownership of the surface and subsurface estate by the Federal
government. These lands can be acquired for exploration and mining through lease
or purchase from the private owners. Tribal lands are those lands that are under
control by sovereign Native American tribes. Areas that show promise for
exploration and mining can be leased or joint ventured with the tribe
controlling the land.


                                       2
<PAGE>

      The following describes the existing mining projects found in Nevada that
are owned or controlled by the Company. Our primary and most important mining
property asset is the operating Mineral Ridge gold project. The other three key
projects are exploration/development-stage properties and are the Contact
copper-silver project, the Borealis gold-silver project and the Ashdown
gold-molybdenum project.

<TABLE>
<CAPTION>

                                         GOLDEN PHOENIX PROBABLE RESERVES
-------------------------------------------------------------------------------------------------------------------------
PROPERTY                           PROBABLE RESERVE         GRADE        RECOVERY        PRICE        RECOVERABLE METAL
<S>                                <C>                     <C>              <C>        <C>               <C>
Mineral Ridge Gold Project         2,400,000 tons          0.076 opt        81%        $325/oz           157,800 oz
-------------------------------------------------------------------------------------------------------------------------

</TABLE>

MINERAL RIDGE GOLD MINE, ESMERALDA COUNTY, NEVADA

      The Mineral Ridge gold mine is located four miles northwest of the town of
Silver Peak and thirty-two miles west of Tonopah in Esmeralda County, Nevada.
The property consists of 54 patented and 132 unpatented mining claims totaling
nearly 3,700 acres, or 5.8 square miles. The property is accessed on the east
side from state highway 265 and on the west side from a well-maintained gravel
road. Heavy trucks access the site by way of the west entrance by way of state
highway 264, which connects to state highway 773 and U. S. highway 6.

      Golden Phoenix purchased the Mineral Ridge mine in late 2000 out of
bankruptcy for $225,000 cash and the assumption of a $382,000 liability to
Sierra Pacific Power Co. for a facility charge for the installation of a grid
power line. Additional commitments were also assumed, including obligations to
pay advanced royalty payments of $60,000 per year and the annual permit cost for
the Nevada Department of Environmental Protection of approximately $20,000
during the time the permits were being transferred to Golden Phoenix from the
previous operator. Prior mine operators had spent about $30 million on the
property, which includes about $18 million in office, process, and ancillary
facilities, about $2 million in engineering and feasibility studies, about $6
million in drilling and assays, $2 million in past permitting costs, and the
remainder in site preparation. The property comes with an active leach pad and
ore exposed in the Drinkwater pit.

         The Mineral Ridge property holds three separate  economically  mineable
gold deposits, the Drinkwater, Mary, and Brodie. The combined reserves, at a
0.030 troy ounces of gold per ton cut off grade, is 2,400,000 tons averaging
0.076 troy ounces of gold per ton for 157,800 ounces of recoverable gold at an
81 percent recovery. The reserve was calculated using Minesight(TM) software and
has been reviewed by Behre Dolbear & Company, Inc., a outside consultant.
Included in the reserve estimate of recoverable gold are 10,000 recoverable
ounces of gold contained in the leach pad that remain to be recovered by cyanide
leaching. The property holds further mineral potential with identified targets
potentially containing additional gold mineralization. As of December 31, 2003,
total expenditures, excluding acquisition costs, on the Mineral Ridge property
have been $4,579,081.

      In 2001 Golden Phoenix filed a $1.8 million interim reclamation bond,
which allowed the company to hold the Mineral Ridge property while other
permitting was underway. The reclamation permit, which was in place when Golden
Phoenix bought the property out of bankruptcy, was not transferable and the
company holding the surety bond refused to write a new bond for a startup
company. We were required to post a new bond, but this could not be completed
until a new reclamation plan and permit was completed. The bond was due for a
three-year review by the Bureau of Land Management and Nevada Department of
Environmental Protection. This review changed the cost of the bond from $1.64
million to $3.2 million for the same plan. The previous bonding company wanted
to be released from the bond held by the Bureau of Land Management; however,
without a replacement bond, the only method of release would have been by
reclaiming the property. To avoid loss of the property value due to destruction
of the infrastructure, Golden Phoenix needed to bring the property back into
production. We negotiated an interim bond amount to keep the project in a
status-quo status until a new plan and bond amount could be negotiated. The
source for the cash bond was from the two previous operators and one of our
shareholders. On May 8, 2003, we received the new amended operating permit and
on June 23, 2003, we filed a $2.7 million reclamation bond with the Bureau of
Land Management with respect to the Mineral Ridge mine. We utilized an
insurance-backed financial assurance program produced by IMA Environmental
Insurance of Denver, Colorado, and underwritten by AIG Environmental, to acquire
the bond. The program structure includes an insurance policy that will pay
reclamation expenses as they occur. The insurance enables us to acquire the
necessary reclamation bond at a fixed and discounted rate for a term of twelve
years. It also allows us the flexibility to increase our bond in the future as
we move into Phase II of our operations at Mineral Ridge. Operations began once
the bond was in place, and these included adding chemicals to the process
solutions, plumbing the pad with drip lines and main trunk pipes, and mining new
ore and old stockpiled ore.


                                       3
<PAGE>

      The total value of the gold sales over five-year mine life, at a $325 gold
price, is estimated to be $59 million. The total operating cost, which includes
royalty payments, refining costs, mining costs, milling costs, reclamation
costs, and operating expenses is estimated to be $36 million and capital costs
of $6 million. The net cash flow, including royalties and federal income taxes,
is estimated to be $12 million. As of December 31, 2003, the Mineral Ridge
property has sold 2,126 ounces of gold and 983 ounces of silver since
acquisition by the Company, for a net value to the Company of $572,147.

      We intend to commence further exploration of numerous targets and
development of identified economic mineralization at the Mineral Ridge Project
once mining is initiated. It is expected that this work will identify and
delineate additional reserves for both open pit and underground deposits and
ultimately extend the life of the mine.

LAND AND ROYALTIES

      The Mineral Ridge property consists of 54 patented and 132 unpatented
mining claims totaling nearly 3,700 acres or 5.8 square miles. We also control
three private land parcels, which are located outside the main mine area. These
are the abandoned Blair town site, the Silver Peak mill site, and deeded land
west of Mineral Ridge over some springs. These private lands total about 430
acres.

      We are obligated to honor two prior royalty agreements. The first is to
Mary Mining Company, which includes annual advanced royalty payments of $60,000,
and a sliding-scale production royalty based on gold price divided by 100 in $50
increments. The other agreement, which originated from Benquet Corp., is with
private individuals on several patented claims. This agreement includes a 1.0%
sliding-scale production royalty on production when gold prices are below $300
per ounce and 2.0% when gold prices are above $300 per ounce.

RECENT MINE AND PROPERTY OWNERSHIP AND DISCUSSION OF PAST RESULTS

      Modern exploration, development and mining interest in the Mineral Ridge
District commenced in the mid-1970s when Sunshine Mining Company, Homestead
Mining Company, and Zephyr Resources became involved in exploring for low-grade
ores that could be mined economically through open pit mining. In the early
1980s, a number of companies conducted geologic investigations and exploration
programs on the Mary and Drinkwater claims at Mineral Ridge including Houston
Oil and Minerals, Occidental Minerals and the Sunshine Mining Company. During
this same period Sunshine Mining and FMC Gold Co. conducted exploration programs
on the Oromonte claims.

      Cornucopia Resources Ltd., a prior owner of Mineral Ridge, initially built
the Mineral Ridge facilities that Golden Phoenix took over in 2000. In July
1993, Cornucopia entered into a mining lease on the Mary and Drinkwater claims
with the Mary Mining Trust. In May 1995, Cornucopia entered into an option
agreement with BUSA on the Oromonte claims, which generally cover the land on
top of the ridge where the crusher is now located. Commencing in July 1993,
Cornucopia conducted extensive exploration and development programs on the
Mineral Ridge Property. In February 1996, Behre Dolbear performed a feasibility
study for Cornucopia that was positive and stressed two main risks: (1) grade
control during mining and (2) maintaining the permeability of the heaps by
agglomerating with sufficient cement.

      We believe that Cornucopia failed in 1997 because of delivery of a lower
than planned grade of ore to the leach pad, slower than planned recovery of the
gold that was delivered to the leach pads, periodic water shortages due to the
one well and inadequate storage capacity, falling gold prices, and a lack of
working capital to cover the lag in gold recovery from the heaps.

      In 1998 the property was transferred to Vista Gold Corp., whose general
operating plan included increased placement of ore on the pads, albeit at a
somewhat lower grade, and mining of both ore and waste with large equipment (to
keep mining costs low), which Vista had available at their Hycroft Mine. The new
operations by Vista also ran somewhat less than a year, and also failed at the
end of 1999, reportedly from a combination of excessive dilution of the ore, the
use of insufficient cement for agglomeration causing poor heap permeability and
thus slow gold recovery, a 10-year low for gold prices, a lack of working
capital to buy time to fix the operating problems, the large number of personnel
on the payroll for the size of the operation, and a lack of available cash to
service the large construction debt to the bank, which was assumed from
Cornucopia's transfer of the property to Vista.


                                       4
<PAGE>

      In January 2000 Mineral Ridge Resources, a subsidiary of Vista Gold, filed
for Chapter 11 bankruptcy. A Trustee of the court maintained the property until
Golden Phoenix acquired the ownership of the mine on November 8, 2000.

FURTHER POTENTIAL

      The Mineral Ridge gold property has produced over 626,000 ounces of gold
from two distinctly different types of deposits. The most important is the
mesothermal gold quartz veins and adjacent silicified zones that historically
have been recognized as the only gold producing system on the property. The
mesothermal veins generally lie conformably at or above the granite contact with
the lower Wyman formation. The early miners exploited these high-grade veins by
underground mining methods and more recently by open pit mining.

      The second most important gold producing system is the recently recognized
epithermal quartz-sulfide veins, breccias and related mineralization that
overprints the earlier mesothermal veins. The epithermal quartz-sulfide veins
and breccias occupy late cross structures formed while the Mineral Ridge core
complex was being uplifted from the ductile to the brittle environment. These
veins have not been previously recognized, but are distinct and have probably
made significant contributions to the total gold inventory of the district.

      Steven D. Craig, in-house geologist and an Officer and Director of Golden
Phoenix, has completed an analysis of the various favorable geological features
associated with the two types of veins. This includes defining the different
types of gold veins and when they formed, performing a structural reconstruction
of the host rocks through time, and identifying the extent of the favorable
geological environment in which gold deposits could be found. This work then
allowed certain conclusions for discovering gold mineralization in previously
unrecognized and untested targets. The further potential was analyzed by
identifying both mesothermal and epithermal targets. The five targets that were
identified we believe have potential for the discovery of additional gold
mineralization. These targets are (1) the down dip extension of the Mary
Drinkwater zone, (2) the up dip extension of the Mary Drinkwater zone under Deep
Springs Hill, (3) The NNE structural zone trending through the Drinkwater
deposit, (4) the Brodie NNE structural zone to Oro Monte, and (5) the
Brodie-Missouri WNW structural zone. We believe that by drilling these targets,
the mineable ore reserves held on the property will increase.

BOREALIS PROJECT, MINERAL COUNTY, NEVADA

      The Borealis gold property is located approximately twelve miles southwest
of the town of Hawthorne in the Walker Lane gold belt. Access to the property is
gained from a gravel road located about two miles south of Hawthorne from State
Highway 359. The gravel road goes over Lucky Boy Pass to the west and the
property is accessed from this road after about ten miles from the highway.

      The property is held under a lease agreement with the Borealis
Partnership, which consists of three separate individuals who entered an
exploration partnership to facilitate leasing the entire mineralized zone owned
by the three partners. Subsequent to acquiring this lease, two of the partners
have become shareholders in the Company; one is a minor shareholder and the
other is John Whitney who, as of December 31, 2003 controlled approximately 2.3%
of Golden Phoenix's issued and outstanding common stock. The lease was entered
into on January 24, 1997 and control of the property is maintained with monthly
advanced royalty payments. Current monthly payments are $8,000; and these
payments are current. The production royalty is calculated by dividing the price
of gold by 100. As of December 31, 2003, The companies total expenditures
including acquisition cost on the Borealis property have been approximately
$2,000,000.

      On July 18, 2003 the Company signed a Joint Venture agreement for its
Borealis gold project with Gryphon Gold Corporation, a Nevada incorporated
company. Under the terms of the agreement Gryphon Gold has the right to acquire
a 50% interest in the property after incurring qualified expenditures on work
programs or making payments to Golden Phoenix in the aggregate of five million
dollars over a four-year period. Gryphon Gold has the right to acquire an
additional 20% by delivering to Golden Phoenix a feasibility study for mine
production based on a mineable reserve of 500,000 ounces of gold or gold
equivalent or by incurring an additional four million dollars in expenditures.
Gryphon has paid Golden Phoenix $25,000 in consideration of a 75-day due
diligence period and an additional $100,000 upon signing of the definitive joint
venture agreement. Gryphon Gold is now managing the project and making plans for
drilling, metallurgy, and other exploration activities.

      Echo Bay Minerals and their predecessors mined the property from eight
pits beginning in 1981. The mine processed approximately 10.7 million tons of
gold ore that averaged near 0.059 ounces of gold per ton, which yielded 635,000
ounces of gold. Echo Bay terminated oxide ore mining in 1991.


                                       5
<PAGE>

      The Borealis property hosts an epithermal gold system marked by large
areas of silicification, hydrothermal brecciation and advanced argillic
alteration in Tertiary volcanic rocks. The volcanic stratigraphy consists of
andesite flows, breccias, and tuffs. The gold deposits are structurally
controlled along a series of northeasterly-trending normal faults that dip
steeply to the northwest. Gold occurs as micron-sized particles in highly
altered andesite and tuff. Fissure-type quartz veining is not present. The
average silver to gold ratio is five to one.

      Golden Phoenix began acquiring operating rights to the Borealis Project in
1997 and in October of 2000 it had increased its ownership of the underlying
lease to 100 percent. After gaining majority control in early 1998, the Company
began an extensive evaluation of the property, which mostly focused on building
a digital drill-hole database. This work developed a new understanding of the
remaining gold resource and the potential to find significant new gold deposits.

      An in house mining engineer using Minesight(TM) software, after the drill
hole information was entered and checked into a database, calculated the
remaining mineralized material using industry standard search parameters. This
material is contained in the Borealis, Freedom Flats, East Ridge/Gold View,
Polaris, and Northeast Ridge deposits. In total the Company identified a large
quantity of mineralized material totaling 33,396,000 tons averaging 0.044 ounces
per ton of gold and silver averaging 0.228 ounces per ton silver.

      The plans and program that Gryphon Gold has proposed are extensive and are
designed to support an initial production decision by March 2005. Gold
production is initially anticipated to be from both the existing leach piles and
from mining of new oxide ore. The plan includes obtaining all permits and a
comprehensive sampling and testing program for mine design and engineering in
order to optimize gold recovery.

CONTACT PROJECT, ELKO COUNTY, NEVADA

      The Contact copper project is located about 50 miles north of Wells in
Elko County, Nevada. The property covers about five-square miles and is
controlled by both 152 patented and 8 unpatented mining claims. Access to the
property is by following a dirt road one mile to the west, which intersects U.S.
Highway 93 at the Nevada Department of Transportation yard at the hamlet of
Contact. Golden Phoenix has two agreements in place on the Contact property; the
first is the International Enexco Joint Venture and the second is with F. W.
Lewis, Inc. On January 28, 1998, we acquired the right to earn a 60 percent
interest in the International Enexco Limited ("Enexco") patented mining claims
through a combination of annual work commitments totaling $2,600,000 on the
Enexco property and $4,000 per month payments to Enexco totaling $313,000 over
seven years. At December 31, 2003 the total liability for the minimum work
commitments to Enexco was $1,599,000. The Company plans to conduct significant
work in 2004 to meet the requirements of the agreement. Golden Phoenix also has
the option to acquire Enexco's remaining 40 percent in the joint venture
following the 60 percent earn-in, for an additional $5 million for the first 20
percent and $10 million for the remaining 20 percent. These agreements expire if
Golden Phoenix terminates the joint venture agreement or is found in default of
any term in the agreement. A 0.25 percent net smelter return royalty burdens the
Enexco property upon production and is payable to the SF Lewis Trust.

      On July 10, 1998 Golden Phoenix entered into a separate exploration
license and purchase option agreement for the SF Lewis Trust portion of the
Contact Project. The F. W. Lewis Inc. Exploration License with Option to
Purchase was acquired for an initial payment of $15,000 and 100,000 shares of
common stock. The agreement requires Golden Phoenix to make monthly cash
payments, initially at $1,500 per month and then escalating to $2,500 per month
and will total $149,000. In addition, Golden Phoenix is to issue F.W. Lewis
common shares with total cash value of $2.2 million over the 4-1/2 year option
term which ended December 31, 2002 and expend a total of $1,650,000 of minimum
work commitment related costs. On February 19, 2003 Lewis and Golden Phoenix
entered into a First Amendment to Exploration License with Option to Purchase,
which extended the term of the Agreement to December 31, 2007 and modified the
requirements for the stock distributions to 350,000 shares on January 1 and on
July 1 of each year and minimum annual work commitments of $100,000. Monthly
payments continue at $2,500. On May 7, 2003, the parties signed a second
amendment that clarified that expenditures for work performed by Golden Phoenix
on either the Lewis property or the adjoining International Enexco, Ltd.
property shall be applied to Lewis' minimum work commitment. Additionally, the
second amendment clarified that Lewis holds a 0.25 per cent net smelter return
Production Royalty with respect to the Enexco property. As of December 31, 2003,
$62,500 has been paid toward the monthly payments and 4,453,623 shares have been
issued, which were valued at $676,000. As of December 31, 2003, the total
liability owed to F.W. Lewis was $7,500 for the exploration license, $1,744,250
for the bi-annual stock distribution and $1,217,000 for the minimum work
commitment not yet performed. The option to purchase price for the Lewis
property is $3 million cash and $1 million worth of Golden Phoenix common stock
and can be exercised at any time during the option period. The option was
further granted and extended under the First Amendment agreement. The SF Lewis
Trust, which controls all the shares of F. W. Lewis, Inc., will retain a five
per cent production royalty on gold and silver and 4 percent on all other
minerals. The SF Lewis Trust production royalty may be purchased for $3 million
cash and $2 million worth of common stock. Golden Phoenix was obligated to
expend $250,000 on exploration during 1998 and $1.4 million over the term of the
4-1/2 year License agreement, which ended December 31, 2002, but has been
extended under the First Amendment.


                                       6
<PAGE>

      The best mineralization on the Contact property is located on the private
patented claims, which Golden Phoenix controls through the aforementioned joint
venture agreement with Enexco and aforementioned exploration license with option
to purchase with F. W. Lewis, Inc.

      Early explorers discovered the district in about 1870 and modern
exploration was begun in about 1967. Calta Mines, Coralta Resources, Phelps
Dodge, and finally Golden Phoenix have diligently explored the district for
copper since then.

      The Contact copper project is located over a Jurassic granodiorite stock
and flanking Paleozoic sedimentary rocks. Copper mineralization occurs in
association with high-grade quartz veins hosted in fault zones in the
granodiorite or sediments, as disseminations in potassically altered
granodiorite, and fracture controlled stock works and skarns in the sediments.
The district does not host a classic-style porphyry copper deposit.

      Mining will be by open pit and processing by solvent extraction leaching.
We intend to retain a contract miner to conduct mining, processing, and
reclamation operations. Golden Phoenix personnel will supervise the contractor.

      The Contact copper project contains mineralized material from over 100
drill holes of 61,513,000 tons grading 0.77% copper at a 0.2% cutoff. Internal
to the Banner mineralized zone are several continuous high-grade zones that
range from five to forty feet wide. Using a 3% cutoff grade on these zones,
Golden Phoenix estimated this mineralized material to be 1,777,000 tons grading
7.17% copper.

FURTHER POTENTIAL

      We believe that the Banner zone within the Contact property may have
considerable potential for expanding both open-pittable and underground ore
reserves. Ore types include SX-EW leaching of shallow oxide ores, and milling
and concentrating of the deeper high-grade sulfide ores for smelting at another
facility. Additionally, other areas on the property have abundant oxide copper
mineralization, which have not been previously explored. We believe these highly
prospective areas offer potential for discovery of other valuable copper
deposits. We are planning to drill additional holes, once funding is obtained,
to better delineate these copper deposits.

ASHDOWN PROJECT, HUMBOLDT COUNTY, NEVADA

      The Ashdown gold-molybdenum project is located about 100 miles northwest
of Winnemucca in Humboldt County, Nevada. The property covers about 6-square
miles and is controlled by 196 unpatented mining claims. Access to the property
is gained by following a dirt road located about 10 miles west of Denio Junction
off of paved State Route 140 for about three miles to the southeast to the
property.

Golden  Phoenix has signed two agreements  for the Ashdown  property;  the first
terminated due to another  parties  failure to perform.  The first agreement was
signed on  September  19, 2003 where  Golden  Phoenix  Minerals  entered  into a
Memorandum  of  Understanding  with PRS  Enterprise,  Inc. to become its project
operator for the Ashdown  project.  The  agreement  required  that PRS raise the
funding necessary to develop and operate the Ashdown Property.  Prior to signing
of the PRS agreement with Golden  Phoenix,  PRS Enterprise  Inc. (PRS), a Nevada
LLC, and  Win-Eldrich  Mines,  Ltd.  (W-E) signed a Memorandum of  Understanding
relating  to  the  Ashdown  mine,   controlled   by  W-E.  This   Memorandum  of
Understanding  granted PRS the rights to explore and develop the property  known
as the Ashdown  Mine in Humboldt  County,  Nevada,  provided  PRS meets  certain
investment  requirements by December 15, 2003. These funds were not obtained and
the  agreement  terminated.  The second  agreement  was a joint  venture  signed
directly with Win-Eldrich  Mines on February 5, 2004. The terms of the agreement
gives  60% to  Golden  Phoenix,  as  manager/operator  of  project,  and  40% to
Win-Eldrich  Mines,  as owner  of the  property.  Golden  Phoenix  will  earn an
undivided  vested 60% interest in the project in either of two ways:  by placing
the project into profitable  production using a small pilot mill, or spending $5
million  toward  development  of the  project.  The  Company  has four  years to
complete  vesting into the project.  Upon  signing an agreement  Letter,  Golden
Phoenix  paid  Win-Eldrich  $50,000,  and  beginning  in three  months after the
signing,  it  will  pay  $5,000  per  month  until a cash  distribution  through
profitable production is achieved.


                                       7
<PAGE>

The Ashdown mine previously  produced  approximately  50,000 ounces of gold from
underground ores averaging about 0.35 ounces per ton. This production took place
from about 1880 to 1942. More recently,  four companies,  including  Win-Eldrich
Mines,  beginning in 1979 spent about $7-8 million  drilling 270 core and rotary
holes,  performing numerous metallurgical tests, excavating an 1,880-foot tunnel
for bulk molybdenum  samples,  and conducting  several  feasibility  studies for
potential open pit and underground mining  operations.  All this work identified
potentially economic  open-pittable gold and high-grade  underground  molybdenum
resources on the property.  Past  economic  evaluations  identified  mineralized
material of about 1.18  million tons of gold ore at 0.125 ounces per ton and, in
a  separate  deposit,  146,000  tons of  molybdenum  ore  averaging  about  2.9%
molybdenum.  Both  deposits are open for possible  expansion of the  mineralized
inventory  and  numerous  step-out  exploration  holes  have  identified  strong
mineralization  needing follow up drilling.  The property  currently consists of
187 mining claims, covering about 6.0 square miles.

Golden  Phoenix  has  begun  a new  economic  evaluation  and  has  started  the
permitting  process for a pilot mill,  designed to run about 100 to 200 tons per
day of high-grade  molybdenum ore. The Company reports that the starter feed for
a combination  gravity and flotation  recovery plant is currently  stockpiled at
the mine site and was previously mined for a large  metallurgical test conducted
more than ten years ago. It is estimated that  considerable  metal values lie in
this  stockpile,  and the  metal  recovered  could  pay for  this  phase  of the
operation.  Golden  Phoenix  also plans to expand into a larger  operation  once
production is underway.

ALASKAN ROYALTIES

      We have retained a one- percent net smelter return royalty on the
following properties located in Alaska. We are not required to perform any work
or make any payments for these royalties.

      1. GLORY CREEK. This property is 100% controlled by Great American Mineral
Exploration, Inc. ("GAME"). It is located in the Bonnifield mining district,
about 60 miles south of Fairbanks. Exploration work on the property has defined
an anomalous zone of gold mineralization that requires drilling for the next
phase of work. Any further work is deferred on the property at this time and we
do not know if and when a discovery of gold mineralization will be made.

      2. UNCLE SAM. This property is 100% controlled by GAME. The property is
located in the Richardson Gold District, about 60 miles southeast of Fairbanks.
Their work has defined a strongly anomalous gold zone that requires drilling for
the next phase of work. Work has been deferred on the property at this time and
we do not know if and when a discovery of gold mineralization will be made.

FUSION CAPITAL TRANSACTION

      On November 12, 2002, we entered into a common stock purchase agreement
with Fusion Capital Fund II, LLC, for the issuance and purchase of our common
stock. Under the common stock purchase agreement, Fusion Capital committed to
purchase up to $12.0 million of our common stock over a forty-month period
commencing when the registration statement became effective as part of this
transaction. Once the registration statement became effective, and subject to
certain conditions, Fusion Capital is to purchase $15,000 of our common stock on
each trading day during the term of the agreement, subject to our right to
increase, decrease or suspend purchases by Fusion Capital. The purchase price of
the shares of common stock is equal to a price based upon the future market
price of the common stock without any fixed discount to the market price.
However, Fusion Capital does not have the right and is not obligated to purchase
our stock in the event that the purchase price is below $0.10. We intend to use
the proceeds from the sale of our common stock to Fusion Capital for working
capital and general corporate purposes, if market conditions are favorable. The
number of shares ultimately offered for sale by Fusion Capital is dependent upon
the number of shares purchased by Fusion Capital under the common stock purchase
agreement. The related registration statement became effective with the
Securities and Exchange Commission in November 2003 and through April 1, 2004,
we have issued a total of 9,342,613 shares of common stock pursuant to this
agreement for total proceeds of $2,966,340.


                                       8
<PAGE>

STAFFING

      CORPORATE OFFICE

      We have a staffing level of two key professionals, a Controller/CPA,
Operations Manager, an Executive Assistant and a computer drafting person in the
Reno office. The Company plans to hire a receptionist, purchasing agent and a
senior mining engineer to assist the Company as it grows. We intend to employ
independent contractors to fulfill short-term needs and obligations.

      MINERAL RIDGE MINE

      At the Mineral ridge mine we have twenty full time employees and one
part-time employee. There are eight employees in the plant operations, ten
employees in the mining department, two in Engineering and one
office/janitorial. It is anticipated that more employees will be added at the
Mineral Ridge operation in the next twelve months as the operations at the mine
expand.

      OTHER PROPERTIES

      In the event the Company develops the Contact copper property and Ashdown
gold/molybdenum projects, we anticipate that we will need to hire mine managers,
geologists, and engineers to ensure proper development of the projects. It is
not known when these projects will be developed.

CERTAIN BUSINESS RISK FACTORS

      You should carefully consider the risks described below before purchasing
our common stock. The risks set forth below describe the material risks
presently known by the Company. If any of the following risks actually occur,
our business, financial condition, or results or operations could be materially
adversely affected, the trading of our common stock could decline, and you may
lose all or part of your investment. You should acquire shares of our common
stock only if you can afford to lose your entire investment.


WE HAVE A LIMITED OPERATING HISTORY WITH SIGNIFICANT LOSSES AND EXPECT LOSSES TO
CONTINUE FOR THE FORESEEABLE FUTURE

      We have yet to establish any history of profitable operations. We have
incurred net operating losses of $2,966,060 and $4,610,385 respectively,
during the years ended December 31, 2003 and 2002, respectively. As a result, at
December 31, 2003, we had an accumulated deficit of $18,722,260. Our revenues
have not been sufficient to sustain our operations. We expect that our revenues
will not be sufficient to sustain our operations for the foreseeable future. Our
profitability will require the successful commercialization of our gold mines.
We may not be able to successfully commercialize our gold mines or ever become
profitable.

THE SALE OF OUR COMMON STOCK TO FUSION CAPITAL WILL CAUSE DILUTION AND THE SALE
OF THE SHARES OF COMMON STOCK ACQUIRED BY FUSION CAPITAL COULD CAUSE THE PRICE
OF OUR COMMON STOCK TO DECLINE

      The purchase price for the common stock to be issued to Fusion Capital
pursuant to the common stock purchase agreement will fluctuate based on the
price of our common stock. Fusion Capital may sell none, some or all of the
shares of common stock purchased from us at any time. The sale of shares to
Fusion Capital pursuant to the common stock purchase agreement will have a
dilutive impact on our stockholders. As a result, our net income per share could
decrease in future periods, and the market price of our common stock could
decline. In addition, the lower our stock price is, the more shares of common
stock we will have to issue under the common stock purchase agreement to draw
down the full amount. If our stock price is lower, then our existing
stockholders would experience greater dilution.

THERE IS DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN DUE TO RECURRING
LOSSES FROM OPERATIONS, ACCUMULATED DEFICIT AND WORKING CAPITAL DEFICIT ALL OF
WHICH MEANS THAT WE MAY NOT BE ABLE TO CONTINUE OPERATIONS UNLESS WE USE FUNDING
OBTAINED FROM FUSION CAPITAL.

      Our independent auditors have added an explanatory paragraph to their
audit opinion issued in connection with the financial statements for the years
ended December 31, 2003 and 2002 with respect to their doubt about our ability
to continue as a going concern. As discussed in Note 2 to our financial
statements for the fiscal year ended December 31, 2003, we have generated losses
from operations, had an accumulated deficit of $18,722,260 and had a working
capital deficit of $4,016,372 at December 31, 2003, which together raises doubt
about our ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 2 to our financial statements for
the fiscal year ended December 31, 2003.


                                       9
<PAGE>

WE HAVE ACQUIRED ADDITIONAL FINANCING TO SUSTAIN OUR OPERATIONS AND WITHOUT IT
WE WILL NOT BE ABLE TO CONTINUE OPERATIONS.

      We currently have sufficient financial resources to fund our operations.
As of December 31, 2003, we had a working capital deficit of $4,016,372. Under a
common stock purchase agreement with Fusion Capital, we only have the right to
receive $15,000 per trading day under such agreement unless our stock price
equals or exceeds $0.40, in which case the daily amount may be increased under
certain conditions as the price of our common stock increases.

      If the $12.0 Million Common Stock Purchase agreement in not sufficient
financing from Fusion Capital or if we are unable to commercialize and sell our
gold, we will need to secure another source of funding in order to satisfy our
working capital needs. Even if we are able to access the full $12.0 million
under the common stock purchase agreement with Fusion Capital, we may still need
additional financing to fully implement our business, operating and development
plans if our future revenues are not sufficient to meet our working capital
needs. At this time, we cannot accurately predict the amount of additional
financing we may need to fully implement our business, operating and development
plans, as our mining operations are constantly evolving. Anticipated total
operating costs for the life of our mines exceed the funding available through
our agreement with Fusion Capital. We anticipate that the financing from Fusion
Capital should satisfy our liquidity needs for the next twelve months. As an
example, testing and engineering on Phase II of the Mineral Ridge property is
not currently complete and will require us to reevaluate our projection on a
regular basis as these results are obtained. The amount of additional financing
that we require is not known at this time as certain operational goals must be
met first in order to better estimate our capital requirements. In the event we
require additional financing in addition to the Fusion Capital financing to
sustain our working capital needs and if such additional financing be
unavailable or prohibitively expensive when we require it, we would be forced to
curtail or cease our business operations.

THE VALIDITY OF OUR UNPATENTED MINING CLAIMS COULD BE CHALLENGED, WHICH COULD
FORCE US TO CURTAIL OR CEASE OUR BUSINESS OPERATIONS

      A majority of our properties consist of unpatented mining claims, which we
own or lease. These claims are located on federal land or involve mineral rights
that are subject to the claims procedures established by the General Mining Law.
We must make certain filings with the county in which the land or mineral is
situated and with the Bureau of Land Management and pay an annual holding fee of
$100 per claim. If we fail to make the annual holding payment or make the
required filings, our mining claim could be void or voidable. Because mining
claims are self- initiated and self-maintained rights, they are subject to
unique vulnerabilities not associated with other types of property interests. It
is difficult to ascertain the validity of unpatented mining claims from public
property records and, therefore, it is difficult to confirm that a claimant has
followed all of the requisite steps for the initiation and maintenance of a
claim. The General Mining Law requires the discovery of a valuable mineral on
each mining claim in order for such claim to be valid, and rival mining
claimants and the United States may challenge mining claims. Under judicial
interpretations of the rule of discovery, the mining claimant has the burden of
proving that the mineral found is of such quality and quantity as to justify
further development, and that the deposit is of such value that it can be mined,
removed and disposed of at a profit. The burden of showing that there is a
present profitable market applies not only to the time when the claim was
located, but also to the time when such claim's validity is challenged. However,
only the federal government can make such challenges; they cannot be made by
other individuals with no better title rights than those of Golden Phoenix. It
is therefore conceivable that, during times of falling metal prices, claims that
were valid when they were located could become invalid if challenged. Title to
unpatented claims and other mining properties in the western United States
typically involves certain other risks due to the frequently ambiguous
conveyance history of those properties, as well as the frequently ambiguous or
imprecise language of mining leases, agreements and royalty obligations. No
title insurance is available for mining. In the event we do not have good title
to our properties, we would be forced to curtail or cease our business
operations.

ESTIMATES OF MINERAL RESERVES AND OF MINERALIZED MATERIAL ARE INHERENTLY
FORWARD-LOOKING STATEMENTS, SUBJECT TO ERROR, WHICH COULD FORCE US TO CURTAIL OR
CEASE OUR BUSINESS OPERATIONS

      Estimates of mineral reserves and of mineralized material are inherently
forward-looking statements subject to error. Although estimates of proven and
probable reserves are made based on a high degree of assurance in the estimates
at the time the estimates are made, unforeseen events and uncontrollable factors
can have significant adverse impacts on the estimates. Actual conditions will
inherently differ from estimates. The unforeseen adverse events and
uncontrollable factors include: geologic uncertainties including inherent sample
variability, metal price fluctuations, fuel price increases, variations in
mining and processing parameters, and adverse changes in environmental or mining
laws and regulations. The timing and effects of variances from estimated values
cannot be predicted.


                                       10
<PAGE>

o     GEOLOGIC UNCERTAINTY AND INHERENT VARIABILITY: Although the estimated
      reserves and additional mineralized material have been delineated with
      appropriately spaced drilling to provide a high degree of assurance in the
      continuity of the mineralization, there is inherent variability between
      duplicate samples taken adjacent to each other and between sampling points
      that cannot be reasonably eliminated. There may also be unknown geologic
      details that have not been identified or correctly appreciated at the
      current level of delineation. This results in uncertainties that cannot be
      reasonably eliminated from the estimation process. Some of the resulting
      variances can have a positive effect and others can have a negative effect
      on mining operations. Acceptance of these uncertainties is part of any
      mining operation.

o     METAL PRICE VARIABILITY: The prices for gold, silver, and copper fluctuate
      in response to many factors beyond anyone's ability to predict. The prices
      used in making the reserve estimates are disclosed and differ from daily
      prices quoted in the news media. The percentage change in the price of a
      metal cannot be directly related to the estimated reserve quantities,
      which are affected by a number of additional factors. For example, a 10
      percent change in price may have little impact on the estimated reserve
      quantities and affect only the resultant positive cash flow, or it may
      result in a significant change in the amount of reserves. Because mining
      occurs over a number of years, it may be prudent to continue mining for
      some period during which cash flows are temporarily negative for a variety
      of reasons including a belief that the low price is temporary and/or the
      greater expense incurred in closing a property permanently.

o     FUEL PRICE VARIABILITY: The cost of fuel can be a major variable in the
      cost of mining, one which is not necessarily included in the contract
      mining prices obtained from mining contractors but is passed on to the
      overall cost of operation. Although high fuel prices by historical
      standards have been used in making the reserve estimates included herein,
      future fuel prices and their impact are difficult to predict, but could
      force us to curtail or cease our business operations.

o     VARIATIONS IN MINING AND PROCESSING PARAMETERS: The parameters used in
      estimating mining and processing efficiency are based on testing and
      experience with previous operations at the properties or on operations at
      similar properties. While the parameters used have a reasonable basis,
      various unforeseen conditions can occur that may materially affect the
      estimates. In particular, past operations indicate that care must be taken
      to ensure that proper ore grade control is employed and that proper steps
      are taken to ensure that the leaching operations are executed as planned.
      The mining contracts for the mines include clauses addressing these issues
      to help ensure planned requirements are met. Nevertheless, unforeseen
      difficulties may occur in planned operations, which would force us to
      curtail or cease our business operations.

o     CHANGES IN ENVIRONMENTAL AND MINING LAWS AND REGULATIONS: Golden Phoenix
      believes that it currently complies with existing environmental and mining
      laws and regulations affecting its operations. The reserve estimates
      contain cost estimates based on requirements compliance with current laws
      and regulations. While there are no currently known proposed changes in
      these laws or regulations, significant changes have affected past
      operations and additional changes may occur in the future.

ENVIRONMENTAL CONTROLS COULD CURTAIL OR DELAY THE EXPLORATION AND DEVELOPMENT OF
OUR MINES AND IMPOSE SIGNIFICANT COSTS ON US

      We are required to comply with numerous environmental laws and regulations
imposed by federal and state authorities. At the federal level, legislation such
as the Clean Water Act, the Clean Air Act, the RCRA, CERCLA and the National
Environmental Policy Act impose effluent and waste standards, performance
standards, air quality and emissions standards and other design or operational
requirements for various components of mining and mineral processing, including
gold and copper ore mining and processing. In January 2001, the Bureau of Land
Management amended its surface management regulations to require bonding of all
hard rock mining and exploration operations involving greater than casual use to
cover the estimated cost of reclamation. The impact of bonding the Mineral Ridge
Mine has been significant. The estimated and agreed-upon reclamation cost of the
Mineral Ridge property increased from $1.64 million in 1996 to $2.7 million in
2003, an increase of approximately $1.06 million or 65%. The increase was not a
result of changes in the required work to be completed, but rather it was a
result of changes in the administrative costs of the reclamation and changes
with respect to how leach pads and tailing dams are reclaimed. In addition,
insurance companies are now requiring additional cash collateral from mining
companies in order for the insurance companies to issue the surety bond. This
addition of cash collateral for the bond has had a significant impact on our
ability to bring the Mineral Ridge property into production. We have satisfied
the initial cash collateral requirement for the surety bond and the bond is in
place. We had two remaining payments for the bond, totaling approximately
$337,000, and paid in March 2004, with annual premiums thereafter of
approximately $11,300, decreasing annually as the surety limits decrease. The
remaining two bond payments have been paid. We anticipate meeting these future
obligation from funds generated by any future revenue, our Fusion Capital
financing or through a possible payment plan set up with the insurance company.
In the event we are unable to meet remaining financial obligations for the
surety bond, the insurance company could force us to curtail or cease
operations.


                                       11
<PAGE>

      Many states, including the State of Nevada (where all of our properties
are located), have also adopted regulations that establish design, operation,
monitoring, and closing requirements for mining operations. Under these
regulations, mining companies are required to provide a reclamation plan and
financial assurance to insure that the reclamation plan is implemented upon
completion of mining operations. Additionally, Nevada and other states require
mining operations to obtain and comply with environmental permits, including
permits regarding air emissions and the protection of surface water and
groundwater. Although we believe that we are currently in compliance with
applicable federal and state environmental laws, changes in those laws and
regulations may necessitate significant capital outlays or delays, may
materially and adversely affect the economics of a given property, or may cause
material changes or delays in our intended exploration, development and
production activities. Any of these results could force us to curtail or cease
our business operations.

PROPOSED LEGISLATION AFFECTING THE MINING INDUSTRY COULD HAVE AN ADVERSE EFFECT
ON US

      During the past several years, the United States Congress considered a
number of proposed amendments to the General Mining Law of 1872, as amended,
which governs mining claims and related activities on federal lands. In 1992, a
holding fee of $100 per claim was imposed upon unpatented mining claims located
on federal lands. Beginning in October 1994, a moratorium on processing of new
patent applications was approved. In addition, a variety of legislation over the
years has been proposed by the sitting United States Congress to further amend
the General Mining Law. If any of this legislation is enacted, the proposed
legislation would, among other things, change the current patenting procedures,
limit the rights obtained in a patent, impose royalties on unpatented claims,
and enact new reclamation, environmental controls and restoration requirements.
The royalty proposal ranges from a two percent royalty on "net profits" from
mining claims to an eight percent royalty on modified gross income/net smelter
returns. The extent of any such changes that may be enacted is not presently
known, and the potential impact on us as a result of future congressional action
is difficult to predict. If enacted, the proposed legislation could adversely
affect the economics of developing and operating our mines because many of our
properties consist of unpatented mining claims on federal lands. Our financial
performance could therefore be materially and adversely affected by passage of
all or pertinent parts of the proposed legislation, which could force us to
curtail or cease our business operations.

THE DEVELOPMENT AND OPERATION OF OUR MINING PROJECTS INVOLVE NUMEROUS
UNCERTAINTIES

      Mine development projects, including our planned projects, typically
require a number of years and significant expenditures during the development
phase before production is possible.

      Development projects are subject to the completion of successful
feasibility studies, issuance of necessary governmental permits and receipt of
adequate financing. The economic feasibility of development projects is based on
many factors such as:

o     estimation of reserves;
o     anticipated metallurgical recoveries;
o     future gold prices; and
o     anticipated capital and operating costs of such projects.

      Our mine development projects may have limited relevant operating history
upon which to base estimates of future operating costs and capital requirements.
Estimates of proven and probable reserves and operating costs determined in
feasibility studies are based on geologic and engineering analyses.

      Any of the following events, among others, could affect the profitability
or economic feasibility of a project:


                                       12
<PAGE>

o     unanticipated changes in grade and tonnage of ore to be mined and
      processed;

o     unanticipated adverse geotechnical conditions;

o     incorrect data on which engineering assumptions are made;

o     costs of constructing and operating a mine in a specific environment;

o     availability and cost of processing and refining facilities;

o     availability of economic sources of power;

o     adequacy of water supply;

o     adequate access to the site;

o     unanticipated transportation costs;

o     government regulations (including regulations relating to prices,
      royalties, duties, taxes, restrictions on production, quotas on
      exportation of minerals, as well as the costs of protection of the
      environment and agricultural lands);

o     fluctuations in gold prices; and

o     accidents, labor actions and force majeure events.

      Any of the above referenced events may necessitate significant capital
outlays or delays, may materially and adversely affect the economics of a given
property, or may cause material changes or delays in our intended exploration,
development and production activities. Any of these results could force us to
curtail or cease our business operations.

GOLD EXPLORATION IS HIGHLY SPECULATIVE, INVOLVES SUBSTANTIAL EXPENDITURES, AND
IS FREQUENTLY NON-PRODUCTIVE

      Gold exploration involves a high degree of risk and exploration projects
are frequently unsuccessful. Few prospects that are explored end up being
ultimately developed into producing mines. To the extent that we continue to be
involved in gold exploration, the long-term success of our operations will be
related to the cost and success of our exploration programs. We cannot assure
you that our gold exploration efforts will be successful. The risks associated
with gold exploration include:

o     the identification of potential gold mineralization based on superficial
      analysis;

o     the quality of our management and our geological and technical expertise;
      and

o     the capital available for exploration and development.

      Substantial expenditures are required to determine if a project has
economically mineable mineralization. It may take several years to establish
proven and probable reserves and to develop and construct mining and processing
facilities. Because of these uncertainties, our current and future exploration
programs may not result in the discovery of reserves, the expansion of our
existing reserves or the further development of our mines.

MINERAL EXPLORATION IS HIGHLY SPECULATIVE

      Exploration for minerals is highly speculative and involves greater risks
than are inherent in many other industries. Many exploration programs do not
result in the discovery of mineralization, and any mineralization discovered may
not be of sufficient quantity or quality to be profitably mined. Also, because
of the uncertainties in determining metallurgical amenability of any minerals
discovered, the mere discovery of mineralization may not warrant the mining of
the minerals on the basis of available technology. The exploration targets on
the properties we own, lease or acquire in the future may not contain
commercially mineable mineral deposits.


                                       13
<PAGE>

THE PRICE OF GOLD, COPPER AND MOLYBDENUM ARE HIGHLY VOLATILE AND A DECREASE IN
THE PRICE OF GOLD, COPPER OR MOLYBDENUM CAN HAVE A MATERIAL ADVERSE EFFECT ON
OUR BUSINESS

      The profitability of mining operations is directly related to the market
prices of gold, copper and molybdenum. The market prices of gold, copper and
molybdenum fluctuate significantly and are affected by a number of factors
beyond our control, including, but not limited to, the rate of inflation, the
exchange rate of the dollar to other currencies, interest rates, and global
economic and political conditions. Price fluctuations of gold, copper and
molybdenum from the time development of a mine is undertaken to the time
production can commence can significantly affect the profitability of a mine.
Accordingly, we may begin to develop one or more of our mines at a time when the
price of gold, copper or molybdenum makes such exploration economically feasible
and, subsequently, incur losses because the price of gold, copper or molybdenum
decreases. Adverse fluctuations of the market prices of gold, copper and
molybdenum, respectively, may force us to curtail or cease our business
operations.

MINING RISKS AND INSURANCE COULD HAVE AN ADVERSE EFFECT ON OUR PROFITABILITY

      Our operations are subject to all of the operating hazards and risks
normally incident to exploring for and developing mineral properties, such as
unusual or unexpected geological formations, environmental pollution, personal
injuries, flooding, cave-ins, changes in technology or mining techniques,
periodic interruptions because of inclement weather and industrial accidents.
Although we currently maintain insurance to ameliorate some of these risks, more
fully described in the description of our business in this filing, such
insurance may not continue to be available at economically feasible rates or in
the future be adequate to cover the risks and potential liabilities associated
with exploring, owning and operating our properties. Either of these events
could cause us to curtail or cease our business operations.

WE ARE CURRENTLY NOT COMPLIANT WITH THE TERMS OF OUR INTERNATIONAL ENEXCO JOINT
VENTURE AND OUR F.W. LEWIS EXPLORATION LICENSE

      On January 28, 1998, we acquired the right to earn a 60% interest in the
International Enexco Limited patented mining claims with respect to the Contact
Project in Elko County, Nevada, through a combination of annual work commitments
totaling $2.6 million on the Enexco property and $4,000 per month payments to
Enexco totaling $313,000 over seven years. At December 31, 2003, our total
past-due liability for minimum work commitments to Enexco was $1,599,000. Enexco
has deferred the current late work commitments for a future unspecified date. In
the event we are unable to pay Enexco the monthly payments or fulfill the work
commitments if demanded, we could lose our investment in the Contact Project. In
addition, if we are found in default of any term of the agreement with Enexco,
our earn-in right will expire.

      On July 10, 1998, Golden Phoenix entered into a separate exploration
license and purchase option agreement for the SF Lewis Trust portion of the
Contact Project. The F. W. Lewis Inc. Exploration License with Option to
Purchase was acquired for an initial payment of $15,000 and 100,000 shares of
common stock. The agreement requires Golden Phoenix to make monthly cash
payments, initially at $1,500 per month and then escalating to $2,500 per month
and will total $149,000. In addition, Golden Phoenix was to issue F.W. Lewis
common shares with total cash value of $2.2 million over the 4-1/2 year option
term which ended December 31, 2002 and expend a total of $1,650,000 of minimum
work commitment related costs. On February 19, 2003 Lewis and Golden Phoenix
entered into a First Amendment to Exploration License with Option to Purchase,
which extended the term of the Agreement to December 31, 2007 and modified the
requirements for the stock distributions to 350,000 shares on January 1 and on
July 1 of each year and minimum annual work commitments of $100,000. Monthly
payments continue at $2,500. On May 7, 2003, the parties signed a second
amendment that clarified that expenditures for work performed by Golden Phoenix
on either the Lewis property or the adjoining International Enexco Ltd. property
shall be applied to Lewis' minimum work commitment. Additionally, the second
amendment clarified that Lewis holds a Production Royalty with respect to the
Enexco property. As of December 31, 2003, $215,500 has been paid toward the
monthly payments and 4,453,623 shares have been issued, which were valued at
$676,000. As of December 31, 2003, the total liability owed to F.W. Lewis was
$7,500 for the exploration license, $1,744,250 for the bi-annual stock
distribution and $1,217,000 for the minimum work commitment. In the event we are
unable to pay F.W. Lewis the amounts owed, we could lose our investment in the
SF Lewis Trust portion of the Contact Property.

WE ARE DEPENDENT ON KEY PERSONNEL, THE LOSS OF EITHER OF THEM MAY HAVE AN
ADVERSE EFFECT

      We are dependent on the services of certain key executives, including
Michael R. Fitzsimonds, President and Chairman of the Board of Directors, and
Steven D. Craig, Vice-President and Director. The loss of either of these
individuals could force us to curtail our business and operations. We currently
do not have key person insurance on these individuals.


                                       14
<PAGE>

THE MARKET PRICE OF OUR COMMON STOCK IS HIGHLY VOLATILE, WHICH COULD HINDER OUR
ABILITY TO RAISE ADDITIONAL CAPITAL

      The market price of our common stock has been and is expected to continue
to be highly volatile. Factors, including regulatory matters, concerns about our
financial condition, operating results, litigation, government regulation,
developments or disputes relating to agreements, title to our properties or
proprietary rights, may have a significant impact on the market price of our
stock. The range of the high and low bid prices of our common stock over the
last 3 years has been between $0.56 and $0.09. In addition, potential dilutive
effects of future sales of shares of common stock by shareholders and by the
Company, including Fusion Capital and subsequent sale of common stock by the
holders of warrants and options could have an adverse effect on the price of our
securities, which could hinder our ability to raise additional capital to fully
implement our business, operating and development plans.

PENNY STOCK REGULATIONS AFFECT OUR STOCK PRICE, WHICH MAY MAKE IT MORE DIFFICULT
FOR INVESTORS TO SELL THEIR STOCK

      Broker-dealer practices in connection with transactions in "penny stocks"
are regulated by certain penny stock rules adopted by the Securities and
Exchange Commission. Penny stocks generally are equity securities with a price
of less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on the Nasdaq system, provided that current price
and volume information with respect to transactions in such securities is
provided by the exchange or system). The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document that provides
information about penny stocks and the risks in the penny stock market. The
broker-dealer must also provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
the penny stock rules generally require that prior to a transaction in a penny
stock the broker-dealer make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for a
stock that becomes subject to the penny stock rules. Our securities are subject
to the penny stock rules, and investors may find it more difficult to sell their
securities.

ITEM 2.  PROPERTIES

      The Company currently has interests in various mineral properties. See
Item I, Business, Mining Properties and Projects.

      Our principal executive office is located at 3595 Airway Drive, Suite 405,
Reno, Nevada 89511.

      The principal offices are leased from Longley Business Park in Reno
Nevada. The lease is a renewable lease, which the Company has maintained since
July 1997. The last renewal was signed in July 2002 and will expire on July 31,
2004.

      We consider our existing facilities to be adequate for our foreseeable
needs.

ITEM 3.  LEGAL PROCEEDINGS

      On March 5, 2003, William F. Matlack, a former shareholder of Golden
Phoenix, filed a complaint in the Second Judicial District Court in and for
Washoe County, Nevada against Golden Phoenix. The complaint relates to a former
subsidiary of Golden Phoenix, Golden Phoenix Alaska, and alleges, among other
things, breach of contract, dealing in bad faith, fraud, fraudulent
misrepresentation, negligence, negligent misrepresentation, breach of fiduciary
duty and breach of covenant of dealing fairly and in good faith. The complaint
seeking (i) economic damages in excess of $10,000, (ii) compensatory damages in
excess of $10,000, (iii) punitive damages at the amount of $500,000, (iv)
interest on economic damages at the rate established by law and (v) reasonable
fees and costs related to the action. On July 2, 2003, Golden Phoenix filed its
response with respect to this complaint. On April 6, 2004 Golden Phoenix
Minerals, Inc. and Mr. Matlack verbally agreed to a dismissal with prejudice of
the lawsuit and a mutual release of all claims, with each side to pay its own
legal fees and costs.


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

         None.


                                       15
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      Our common stock has been publicly traded since August 6, 1997. The
securities are traded on the over-the-counter market, and quoted on the Nasdaq
Electronic Bulletin Board under the symbol "GPXM." The following table sets
forth for the periods indicated the range of high and low closing bid quotations
per share as reported by the over-the-counter market for the past two years.
These quotations represent inter-dealer prices, without retail markups,
markdowns or commissions and may not necessarily represent actual transactions.

                 YEAR 2000                           HIGH             LOW
                 First quarter                        $0.40           $0.20
                 Second quarter                       $0.24           $0.15
                 Third quarter                        $0.19           $0.14
                 Fourth quarter                       $0.17           $0.11

                 YEAR 2001                           HIGH             LOW
                 First quarter                        $0.15           $0.09
                 Second quarter                       $0.21           $0.10
                 Third quarter                        $0.16           $0.10
                 Fourth quarter                       $0.13           $0.09

                 YEAR 2002                           HIGH             LOW
                 First quarter                        $0.25           $0.09
                 Second quarter                       $0.55           $0.18
                 Third quarter                        $0.46           $0.23
                 Fourth quarter                       $0.31           $0.17
                 YEAR 2003                           HIGH             LOW
                 First Quarter                        $0.34           $0.17
                 Second Quarter                       $0.33           $0.15
                 Third Quarter                        $0.44           $0.25
                 Fourth Quarter                       $0.54           $0.38

      On December 31, 2003, the closing price of our common stock as reported on
the Over-the-Counter Bulletin Board was $0.46 per share. On April 1, 2004 we had
in excess of 500 holders of common stock and 104,779,533 shares of our common
stock were issued and outstanding. Many of our shares are held in brokers'
accounts, so we are unable to give an accurate statement of the number of
shareholders.

DIVIDENDS

      We have not paid any dividends on our common stock and do not anticipate
paying any cash dividends in the foreseeable future. We intend to retain any
earnings to finance the growth of the business. We cannot assure you that we
will ever pay cash dividends. Whether we pay any cash dividends in the future
will depend on the financial condition, results of operations and other factors
that the Board of Directors will consider.


                                       16
<PAGE>

<TABLE>
<CAPTION>

RECENT SALES OF UNREGISTERED SECURITIES

      The following table provides the sales of unregistered securities for the
past year.

                                        NATURE                                                                  SHARE PRICE
                                  OF SERVICES PERFORMED                  SHARES ISSUED      VALUE RECEIVED       PER SHARE

FIRST QUARTER 2002
<S>                               <C>                                      <C>               <C>               <C>
Private Placement For Cash                                                 4,640,000         $  464,000         $   0.100
Exchange Of Stock For Part Of
  Interim Reclamation Bond                                                 1,257,862            200,000             0.160
Lease - Borealis Paid In Stock                                               328,235             27,900             0.090
Jeffrey Baclet Investor Relations  Investor Relations                        100,000             18,500             0.185
The Eversull Group Investor
  Relations                        Investor Relations                        100,000             17,000             0.170
                                                                          ----------         ----------        ----------
  Total First Quarter 2002                                                 6,426,097         $  727,400         $   0.113
                                                                          ==========         ==========        ==========
SECOND QUARTER 2002
Private Placement For Cash $0.10                                           3,060,002         $  306,000         $   0.100
Private Placement For Cash $0.15                                           5,692,504            851,375             0.150
Warrant Exercise                                                             827,100             82,710             0.100
Directors Compensation For Board
  Meetings                                                                   109,448             43,779             0.400
Payments For BO Lease              Lease Payments                            201,333             30,200             0.150
Fusion Capital Fund II LLC                                                   250,000             46,250             0.185
Jeffrey Baclet Investor Relations  Investor Relations                        115,000             51,750             0.450
Taylor Hard Money Advisors
  Public Relations                 Public Relations                          400,000            202,000             0.505
The Eversull Group Investor
  Relations                        Investor Relations                        100,000             35,000             0.350
Thomas Mancuso Consulting
  Services                         Geological Consulting                      20,000              4,700             0.235
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                              114,198             18,843             0.165
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                              400,000             74,000             0.185
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                                4,459                870             0.195
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                              112,786             21,993             0.195
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                               61,442             11,367             0.185
Newmex Nevada Inc. Debt Service                                              392,963             39,296             0.100
Richard Cavell Family Trust Debt
  Service                                                                     86,133             25,840             0.300
Craig & Diana B Drossell Debt
  Service                                                                    399,263             63,186             0.160
                                                                          ----------         ----------        ----------
  Total Second Quarter 2002                                               12,346,631        $ 1,909,159         $   0.155
                                                                          ==========         ==========        ==========
</TABLE>

                                       17
<PAGE>

<TABLE>
<CAPTION>
                                        NATURE                                                                  SHARE PRICE
                                  OF SERVICES PERFORMED                  SHARES ISSUED      VALUE RECEIVED       PER SHARE
                                 -----------------------                 -------------      -----------
THIRD QUARTER 2002
<S>                              <C>                                         <C>            <C>                <C>
Private Placement For Cash $0.15                                              83,334         $   12,500         $   0.150
Warrant Exercise                                                             500,000             50,000             0.100
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                               99,141             34,699             0.350
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                               98,039             17,647             0.180
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                               60,435             23,570             0.390
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                              110,582             36,492             0.330
Whitney & Whitney Debt Conversion                                            350,000             35,000             0.100
Fusion Capital LLC Commitment Fee                                          1,587,302            300,000             0.189
                                                                          ----------         ----------        ----------
  Total Third Quarter 2002                                                 2,888,833         $  509,908         $   0.177
                                                                          ==========         ==========        ==========

FOURTH QUARTER 2002
Warrant Exercise                                                             100,000         $   10,000         $   0.100
David Caldwell Director
  Compensation                                                               100,000             22,000             0.220
Allan Marter Director
  Compensation                                                               100,000             22,000             0.220
Contact Lease Payment              Lease Payment                           2,753,623            605,797             0.220
Payments For BO Lease              Lease Payment                              78,400             16,464             0.210
Chuck DuCharme Finders Fee                                                    50,333             27,683             0.550
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                               25,570              5,370             0.210
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                               57,403             12,055             0.210
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                               52,947              9,530             0.180
Fusion Capital Fund Debt For
  Professional Services                                                      200,000             36,000             0.180
Whitney & Whitney Debt Conversion                                            350,000             35,000             0.100
Convertible Note Conversion                                                   44,323             13,297             0.280
Fusion Capital Fund Advance
  Against Equity Line                                                      2,000,000            540,000             0.270
                                                                          ----------         ----------        ----------
  Total Third Quarter 2002                                                 5,912,599        $ 1,355,196         $   0.229
                                                                          ==========         ==========        ==========

FIRST QUARTER 2003
Warrant Exercise At $0.10                                                  9,414,137          $ 941,414         $   0.100
Warrant Exercise At $0.15                                                    446,668             64,500             0.150
Payments For BO Lease                                                        253,800             42,600             0.170
                                                                          ----------         ----------        ----------
  Total First Quarter 2003                                                10,114,605        $ 1,048,514         $   0.100
                                                                          ==========         ==========        ==========

</TABLE>


                                       18
<PAGE>

<TABLE>
<CAPTION>

SECOND QUARTER 2003
<S>                 <C>                                                    <C>               <C>                <C>
Warrant Exercise at $0.10                                                  1,370,000         $  137,000         $   0.100
Warrant Exercise at $0.15                                                    248,500             37,275             0.150
Directors' Compensation for
  Board Meetings                                                              33,210             10,295             0.310
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                               15,605              2,573             0.170
                                                                          ----------         ----------        ----------
  Total Second Quarter 2003                                                1,667,315         $  187,143         $   0.112
                                                                          ===============================================

  THIRD QUARTER 2003
Warrant Exercise at $0.10                                                    460,000         $   46,000         $   0.100
Warrant Exercised at $0.15                                                   175,000             26,250             0.150
Warrant Exercised at $0.20                                                   163,200             32,640             0.200
Fusion Capital Fund                                                          545,517         160,000.14           0.29330
Fusion Capital Fund                                                          337,075         100,000.04           0.29667
Fusion Capital Fund                Consulting Agreement                    1,500,000         525,000.00              .350
Larry Bigler                       Financial Consulting                        1,052             399.76              0.38
Whitney & Whitney                  Business and Financial
    Consulting Services               Consulting                              12,396           2,517.63           0.20310
Whitney & Whitney                  Business and Financial
   Consulting Services                Consulting                               9,991            2573.18           0.25755
Whitney & Whitney                  Business and Financial
   Consulting Services                Consulting                              10,073           2,500.00           0.24819
                                                                          -----------------------------------------------
   Total Third Quarter 2003                                                3,214,304        $897,880.75
                                                                          ===============================================

   FOURTH QUARTER 2003
Warrant Exercised at $0.10                                                   746,667       $  74,666.70         $   0.100
Warrant Exercised at $0.15                                                   173,334          26,000.10             0.150
Warrant Exercised at $0.25                                                    13,333           3,333.25             0.250
Mintec                             Computer Services                          55,180          22,072.00             0.400
Fusion Capital Fund                                                        1,000,000         300,000.00             0.300
Fusion Capital Fund                                                          588,236         200,000.24             0.340
Fusion Capital Fund                                                        1,250,000         500,000.00             0.400
Fusion Capital Fund                                                        1,190,477         500,000.34             0.420
Whitney & Whitney                  Business and Financial
   Consulting Services                Consulting                             252,457          42,885.04             0.169
                                                                          -----------------------------------------------
   Total Fourth Quarter 2003                                               5,269,684      $1,668,957.67
                                                                          ===============================================
</TABLE>

      The registrant believes that all transactions were transactions not
involving any public offering within the meaning of Section 4(2) of the
Securities Act of 1933, since (a) each of the transactions involved the offering
of such securities to a substantially limited number of persons; (b) each person
took the securities as an investment for his own account and not with a view to
distribution; (c) each person had access to information equivalent to that which
would be included in a registration statement on the applicable form under the
Act; (d) each person had knowledge and experience in business and financial
matters to understand the merits and risk of the investment; therefore no
registration statement need be in effect prior to such issuances.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

      Except for historical information, the following Management's Discussion
and Analysis contains forward-looking statements based upon current expectations
that involve certain risks and uncertainties. Our actual results could differ
materially from those reflected in these forward-looking statements as a result
of certain factors that include, but are not limited to, the risks discussed in
the Section entitled "Risk Factors". Please see the statements contained under
the Section entitled "Forward-Looking Statements."


                                       19
<PAGE>

OVERVIEW

      Golden Phoenix Minerals, Inc. is a mineral-property development company,
formed in Minnesota on June 2, 1997, specializing in acquiring and consolidating
mineral properties with production potential and future growth through
exploration discoveries. Acquisition emphasis is focused on properties
containing gold, silver, copper, and other strategic minerals that are located
in Nevada. Presently our primary mining property asset is the operating Mineral
Ridge gold mine. The other three key properties are the Borealis gold-silver
project, Contact copper-silver project, and the Ashdown gold-molybdenum project.

      Golden Phoenix purchased the Mineral Ridge mine in late 2000 out of
bankruptcy for $225,000 cash and the assumption of a $382,000 liability to
Sierra Pacific Power Co. for a facility charge for the installation of a grid
power line. Additional commitments were also assumed, including obligations to
pay advanced royalty payments of $60,000 per year and the annual permit cost for
the Nevada Department of Environmental Protection of approximately $20,000
during the time the permits were being transferred to Golden Phoenix from the
previous operator. Golden Phoenix filed a $1.8 million interim reclamation bond,
which allowed us to hold the Mineral Ridge property while other permitting was
underway. The reclamation permit, which was in place when Golden Phoenix bought
the property out of bankruptcy, was not transferable and the company holding the
surety bond refused to write a new bond for a startup company. We were required
to post a new bond, but this could not be completed until a new reclamation plan
and permit was completed. The bond was due for a three-year review by the Bureau
of Land Management and Nevada Department of Environmental Protection. This
review changed the cost of the bond from $1.64 million to $3.2 million for the
same plan. The previous bonding company wanted to be released from the bond held
by the Bureau of Land Management; however, without a replacement bond, the only
method of release would have been by reclaiming the property. To avoid loss of
the property value due to destruction of the infrastructure, Golden Phoenix
needed to bring the property back into production. We negotiated an interim bond
amount to keep the project in a status-quo status until a new plan and bond
amount could be negotiated. The source for the cash bond was from the two
previous operators and one of our shareholders. On May 8, 2003, Golden Phoenix
obtained a new amended operating permit and on June 23, 2003, we filed a $2.7
million reclamation bond with the Bureau of Land Management with respect to the
Mineral Ridge mine. Now that the new permit and bond are in place the company
assumes its reclamation obligation to be $2.7 million. We have begun mine
operations and gold production from the leach pad through the addition of new
cyanide to the regular leach fluids and from initiating open pit mining and
stockpile transfers to the pad. Pursuant to our internally generated feasibility
study for Mineral Ridge, which was evaluated and reported by Behre Dolbear &
Company, Inc. an independent mineral auditing consultant, the total value of the
gold sales over the six-year mine life, at a $325 gold price, is estimated to be
$59 million. The total operating cost, which includes royalty payments, refining
costs, mining costs, milling costs, reclamation costs, and operating expenses,
is estimated to be $36 million. Capital cost, including reclamation bonding, is
estimated to be $6 million. The net income after taxes is estimated to be $12
million.

      The Borealis property is held under a lease agreement with the Borealis
Partnership, which consists of three separate individuals who entered an
exploration partnership to facilitate leasing the entire mineralized zone owned
by the three partners. On July 18, 2003 the Company signed a Joint Venture
agreement for its Borealis gold project with Gryphon Gold Corporation, a Nevada
incorporated company. Under the terms of the agreement Gryphon Gold has the
right to acquire a 50% interest in the property after incurring qualified
expenditures on work programs or making payments to Golden Phoenix in the
aggregate of five million dollars over a four-year period. Gryphon Gold has the
right to acquire an additional 20% by delivering to Golden Phoenix a feasibility
study for mine production based on a mineable reserve of 500,000 ounces of gold
or gold equivalent or by incurring an additional four million dollars in
expenditures. Gryphon has paid Golden Phoenix $25,000 in consideration of a
75-day due diligence period and has also paid an additional $100,000 upon
signing the definitive joint venture agreement. Gryphon Gold is now managing the
project and making plans for drilling, metallurgy, and other exploration
activities. They have also taken over paying the monthly lease payments to the
Borealis Partnership.

      The Contact property is held through agreements with two separate
entities, the International Enexco Joint Venture and F. W. Lewis, Inc. Golden
Phoenix's operating control over property owned by these two entities allows it
to combine deposits within the district allowing for economic mining, which was
previously not possible. Mining is planned to be done by open pit and processing
by solvent extraction-electro-wining leaching.

      The Ashdown property was originally held through a Letter Agreement with
PRS Enterprises with Golden Phoenix managing the project. PRS also had a Letter
Agreement with Win-Eldridge Mines, Ltd., which grants the Ashdown property to
the three-company venture. This agreement expired on about December 15, 2003 due
to the inability of PRS to fulfill their contractual obligations. Negotiations
with Win-Eldrich Mines continued, which resulted in a joint venture agreement
being signed on February 5, 2004. The terms of the agreement gives 60% to Golden
Phoenix, as manager/operator of project, and 40% to Win-Eldrich Mines, as owner
of the property. Golden Phoenix will earn an undivided vested 60% interest in
the project in either of two ways: by placing the project into profitable
production using a small pilot mill, or spending $5 million toward development
of the project. The Company has four years to complete vesting into the project.
Upon signing the agreement, Golden Phoenix paid Win-Eldrich $50,000, and
beginning in three months after the signing, it will pay $5,000 per month until
a cash distribution through profitable production is achieved.


                                       20
<PAGE>

      The Company has a history of operating losses, and we expect to continue
to incur operating losses in the near future as we initiate mining operations at
our four mines and conduct additional exploration in their vicinity. As a
development stage company we have been funded primarily through stock sales and
loans from officers and shareholders with the addition of revenue from gold
sales through the production from the Mineral Ridge mine and the common stock
purchase agreement with Fusion Capital. We intend to develop and mine existing
reserves and to further delineate additional, identified mineral deposits at our
three mines. We also intend to explore for undiscovered deposits on these four
properties and to acquire and explore new properties, all with the view to
enhancing the value of such properties. We have been open to and will continue
to entertain possible joint ventures with other mining company partners. We
currently have a Letter Agreement to Joint Venture Agreement executed on January
28, 1998 for the Contact project, a Joint Venture Agreement executed July 19,
2003 with Gryphon Gold Corporation for the Borealis project, a Letter Agreement
to Joint Venture executed December 5, 2003 with Win-Eldrich Mines for the
Ashdown project. No other joint ventures have been entered into.

      Our ability to satisfy the cash requirements of our mining development and
exploration operations will be dependent upon future financing and cash flow
from the Mineral Ridge gold mine. We anticipate that additional financing will
be obtained, although no assurance can be made that funds will be available on
terms acceptable to us.

GOING CONCERN

      The report of our independent accountants on our December 31, 2003
financial statements includes an explanatory paragraph indicating that there is
doubt about our ability to continue as a going concern due to recurring losses
from operations and accumulated deficit and working capital deficit. Our ability
to continue as a going concern will be determined by our ability to commence and
maintain successful operations. Our financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

CRITICAL ACCOUNTING POLICIES

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make a wide variety of estimates and assumptions that affect (i)
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities as of the date of the financial statements, and (ii) the
reported amounts of revenues and expenses during the reporting periods covered
by the financial statements. Our management routinely makes judgments and
estimates about the effect of matters that are inherently uncertain. As the
number of variables and assumptions affecting the future resolution of the
uncertainties increases, these judgments become even more subjective and
complex. We have identified certain accounting policies that are most important
to the portrayal of our current financial condition and results of operations.
Our significant accounting policies are disclosed in Note 1 of the Notes to the
Financial Statements.

      Several of those critical accounting policies are as follows:

      PROVEN AND PROBABLE ORE RESERVES. On a periodic basis, management reviews
the reserves that reflect estimates of the quantities and grades of ore at our
mineral properties which management believes can be recovered and sold at prices
in excess of the total cost associated with extraction and processing the ore.
Management's calculations of proven and probable ore reserves are based on,
along with independent consultant evaluations, in-house engineering and
geological estimates using current operating costs, metals prices and demand for
our products. Periodically, management obtains external determinations of
reserves.

      In early 2003 Behre Dolbear & Company, Inc., Denver, Colorado was
contracted to do an independent technical review of our reported mine reserves
at Mineral Ridge, Borealis and Contact. In conducting the assignment, they
reviewed and examined geologic, geostatistical, mining, processing,
environmental, and economic information and data supplied by Golden Phoenix.
While Behre Dolbear discussed this information and data with Golden Phoenix's
staff and other consultants, it has independently satisfied itself that the
parameters used are reasonable in accord with industry-accepted practice. Based
on this review, Behre Dolbear believes that Golden Phoenix has reasonable basis
for concluding that reserves exist at the Mineral Ridge project. The estimated
reserves at the Mineral Ridge Project include some proven reserves, which have
not been separated from the probable reserves. For the Contact Project, Behre
Dolbear found that enough information exists to delineate mineralized material
under the SEC terminology. They further found that further exploration and
testing work may result in the delineation of copper reserves.


                                       21
<PAGE>

      Reserve estimates will change as existing reserves will be depleted
through production, as well as changes in estimates caused by changing
production cost and/or metals prices. Changes in reserves may also require
revision based on actual production experience once production commences.

      Declines in the market price of metals, as well as increased production or
capital costs or reduced recovery rates, may render ore reserves uneconomic to
exploit. Should that occur, restatements or reductions in reserves and asset
write-downs in the applicable accounting periods may be required. Reserves
should not be interpreted as assurances of mine life or of the profitability of
current or future operations. No assurance can be given that the estimate of the
amount of metal or the indicated level of recovery of these metals will be
realized.

      DEPRECIATION AND DEPLETION. Depreciation is based on the estimated useful
lives of the assets and is computed using the straight-line method.

      IMPAIRMENT OF LONG-LIVE ASSETS. Management reviews the net carrying value
of all property and equipment and other long-lived assets, including mineral
properties, on a periodic basis. We estimate the net realizable value of asset
based on the estimated undiscounted future cash flows that will be generated
from operations at each property, the estimated salvage value of the surface
plant and equipment and the value associated with property interests. These
estimates of undiscounted future cash flows are dependent upon the estimates of
metal to be recovered from proven and probable ore reserves, future production
cost estimates and future metals price estimates over the estimated remaining
life of the mineral property. If undiscounted cash flows are less than the
carrying value of a property, an impairment loss will be recognized based upon
the estimated expected future cash flows from the property discounted at an
interest rate commensurate with the risk involved.

      Management's estimates of metals prices, recoverable proven and probable
ore reserves, and operating, capital and reclamation costs are subject to risks
and uncertainties of change affecting the recoverability of our investment in
various projects. Although management believes it has made a reasonable estimate
of these factors based on current conditions and information, it is reasonably
possible that changes could occur in the near term which could adversely affect
management's estimate of net cash flows expected to be generated from our
mineral properties and the need for asset impairment write-downs.

      ENVIRONMENT MATTERS. When it is probable that such costs will be incurred
and they are reasonably estimable, we accrue costs associated with environmental
remediation obligations at the most likely estimate. Accruals for estimated
losses from environmental remediation obligations generally are recognized no
later than completion of the remedial feasibility study for the mineral
property. Accruals are expensed when the closure of operations and environmental
matters are acknowledged. We periodically review our accrued liabilities for
such remediation costs as evidence becomes available indicating that our
remediation liability has potentially changed. Such costs are based on
management's current estimate of amounts that are expected to be incurred when
the remediation work is performed within current laws and regulations.

      Future closure, reclamation and environment-related expenditures are
difficult to estimate in many circumstances due to the early stages of
investigation, uncertainties associated with defining the nature and extent of
environmental contamination, the uncertainties relating to specific reclamation
and remediation methods and costs, application and changing of environmental
laws, regulations and interpretations by regulatory authorities and the possible
participation of other potentially responsible parties. Reserves for closure
costs, reclamation and environmental matters totaled approximately $1,820,000 at
December 31, 2003. On May 8, 2003, we received the new amended operating permit
and on June 23, 2003, we filed a $2.7 million reclamation bond with the Bureau
of Land Management with respect to the Mineral Ridge mine. We utilized an
insurance-backed financial assurance program produced by IMA Environmental
Insurance of Denver, Colorado, and underwritten by AIG Environmental, to acquire
the bond. The program structure includes an insurance policy that will pay
reclamation expenses as they occur. The insurance enables us to acquire the
necessary reclamation bond at a fixed and discounted rate for a term of twelve
years. Now that the new permit and bond are in place the company assumes its
reclamation obligation to be $2.7 million. We anticipate that expenditures
relating to these reserves will be made over the next five to ten years. It is
reasonably possible the ultimate cost of remediation could change in the future
and that changes to these estimates could have a material effect on future
operating results as new information becomes known.

NEW ACCOUNTING PRONOUNCEMENTS

      New accounting pronouncements that have a current or future potential
impact on our financial statements are as follows:


                                       22
<PAGE>

      SFAS NO. 143 - In August 2001, the FASB issued SFAS No. 143, Accounting
for Asset Retirement Obligations, which established a uniform methodology for
accounting for estimated reclamation and abandoned costs. The statement was
adopted January 1, 2003, at which time the Company recorded the estimated
present value of reclamation liabilities totaling $1,269,472, including
accretion of the discounted liability from the date the property was acquired,
and recognized the carrying amount of the related retirement asset in the amount
of $1,063,300, all related to the Mineral Ridge property. Subsequently, the
reclamation costs will be allocated to expense over the life of the related
assets on a units of production basis and will be adjusted for changes resulting
from the passage of time and revisions to either the timing or amount of the
original present value estimate. The cumulative effect of this change in
accounting principle as a result of the adoption of SFAS No. 143 was $693,828.
The Company has no other reclamation obligations or liabilities related to its
other mineral properties.

      SFAS NO. 145 - On April 30, 2002, the FASB issued FASB Statement No. 145
(SFAS 145), "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections." SFAS 145 rescinds both FASB
Statement No. 4 (SFAS (4), "Reporting Gains and Losses from Extinguishment of
Debt," and the amendment to SFAS 4, FASB Statement No. 64 (SFAS 64),
"Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements." Through
this rescission, SFAS 145 eliminates the requirement (in both SFAS 4 and SFAS
64) that gains and losses from the extinguishment of debt be aggregated and, if
material, classified as an extraordinary item, net of the related income tax
effect. However, an entity is not prohibited from classifying such gains and
losses as extraordinary items, so long as it meets the criteria in paragraph 20
of Accounting Principles Board Opinion No. 30, Reporting the Results of
Operations Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions.
Further, SFAS 145 amends paragraph 14(a) of FASB Statement No. 13, "Accounting
for Leases", to eliminate an inconsistency between the accounting for
sale-leaseback transactions and certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. The amendment requires
that a lease modification (1) results in recognition of the gain or loss in the
9 financial statements, (2) is subject to FASB Statement No. 66, "Accounting for
Sales of Real Estate," if the leased asset is real estate (including integral
equipment), and (3) is subject (in its entirety) to the sale-leaseback rules of
FASB Statement No. 98, "Accounting for Leases: Sale-Leaseback Transactions
Involving Real Estate, Sales-Type Leases of Real Estate, Definition of the Lease
Term, and Initial Direct Costs of Direct Financing Leases." Generally, FAS 145
is effective for transactions occurring after May 15, 2002. The Company does not
expect that the adoption of SFAS 145 will have a material effect on its
financial performance or results of operations.

      SFAS NO. 146 - In June 2002, the FASB issued SFAS No. 146, "Accounting for
Exit or Disposal Activities" (SFAS 146). SFAS 146 addresses significant issues
regarding the recognition, measurement, and reporting of costs that are
associated with exit and disposal activities, including restructuring activities
that are currently accounted for under EITF No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." The scope of SFAS 146
also includes costs related to terminating a contract that is not a capital
lease and termination benefits that employees who are involuntarily terminated
receive under the terms of a one-time benefit arrangement that is not an ongoing
benefit arrangement or an individual deferred-compensation contract. SFAS 146
will be effective for exit or disposal activities that are initiated after
December 31, 2002 and early application is encouraged. The provisions of EITF
No. 94-3 shall continue to apply for an exit activity initiated under an exit
plan that met the criteria of EITF No. 94-3 prior to the adoption of SFAS 146.
The effect on adoption of SFAS 146 will change on a prospective basis the timing
of when the restructuring charges are recorded from a commitment date approach
to when the liability is incurred. The Company does not expect that the adoption
of SFAS 146 will have a material effect on its financial performance or results
of operations.

      SFAS NO. 148 - In December 2002, the FASB issued SFAS No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure"(SFAS 148"). SFAS 148
amends SFAS No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123"), to
provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. SFAS 148 is effective for fiscal years
beginning after December 15, 2002. The interim disclosure provisions are
effective for financial reports containing financial statements for interim
periods beginning after December 15, 2002.

      SFAS NO. 149 - In April 2003, the FASB issued Statement of Financial
Accounting Standards No. 149 ("SFAS 149"), Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, to provide clarification on the
meaning of an underlying, the characteristics of a derivative that contains
financing components and the meaning of an initial net investment that is
smaller than would be required for other types of contracts that would be
expected to have a similar response to changes in market factors. This statement
will be applied prospectively and is effective for contracts entered into or
modified after June 30, 2003. The statement will be applicable to existing
contracts and new contracts relate to forward purchases or sales of when-issued
securities or other securities that do not yet exist. The Company does not
expect that the adoption of SFAS 149 will have a material effect on the
Company's financial statements.


                                       23
<PAGE>

      SFAS NO. 150 - In May 2003, the FASB issued Statement of Financial
Accounting Standards No. 150 ("SFAS 150"), Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." This Statement
establishes standards for how a company classifies and measures certain
financial instruments with characteristics of both liabilities and equity. This
statement 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 beginning after June 15, 2003. The statement will be implemented by
reporting the cumulative effect of a change in accounting principle for
financial instruments created before the issuance date of the statement and
still existing at the beginning of the period of adoption. The Company does not
expect that the adoption of SFAS 150 will have a material effect on the
Company's financial statements.

RESULTS OF OPERATIONS


RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003 COMPARED TO
FISCAL YEAR ENDED DECEMBER 31, 2002

      We generated revenue of $98,097 for the fiscal year ended December 31,
2003, as compared to no revenue for the fiscal year ended December 31, 2002.

      Costs have been incurred in connection with just the properties in Nevada.
These costs have been incurred for the location of mining claims, and field
examinations to determine the potential occurrence of economic mineralization on
the different properties. Other costs include the compilation of historic data
on the properties to assist in the evaluation of the properties and the planning
of further development and exploration.

      The following table describes the results of operations for the fiscal
year ended December 31, 2003 compared to fiscal year ended December 31, 2002.

DESCRIPTION                        2003                2002           DIFFERENCE
--------------------------------------------------------------------------------
Finance Charges (1)         $     141,969       $     253,231        $ (111,262)
Plant Operations (2)              665,991             308,637           357,354
Bad Debt (3)                            0              52,203           (52,203)
Consultants (4)                   740,526             108,518           632,008
Directors Fees (5)                  7,500              43,779           (36,279)
Investor Relations (6)            103,523             429,092          (325,569)
Lease payments (7)                621,810             930,620          (308,810)
License & Permits (8)              44,404              68,901           (24,497)
Payroll (9)                       796,744             311,270           485,474
Professional Fees (10)            412,194             194,239           217,955
--------------------------------------------------------------------------------

(1)   The change in the finance charge is primarily due to debt reductions as a
      result of equity financing.

(2)   The change in the plant operation cost is due to adjustment of hourly
      rates and staffing increases as well as the start-up of leach pad
      operations.

(3)   During 2002 it was decided to write off an investment in an industrial
      mineral company that continues to have problems with permitting and
      raising sufficient capital to sustain its self.

(4)   During the year we have undertaken several engineering studies for all of
      our properties. These include evaluation of changing the recovery process
      at the mine from a heap leach operation to a full gravity/cyanide vat
      leach mill. We also started and completed mineralization studies for all
      properties.

(5)   Up until 2002 the Company had not directly compensated its directors with
      anything other than stock options. With the changes in disclosure laws and
      the additional liability the directors are responsible for it was felt
      that they deserved some direct compensation. This was a plan that has been
      formulated over the past couple of years and was implemented during 2002.
      The directors are compensated at a rate of $500 per Board of Directors
      meeting that they participate in which is paid in restricted common stock
      which is valued at the average price for the month in which the meeting
      occurs.

(6)   The decrease in public relations is primarily due to lower costs for
      investor relations activities during 2003. These lower fees were the
      result of the elimination of outside groups in connection with the
      Company's private placements that allowed the company to operate the
      Mineral Ridge mine and post the interim reclamation bond.

(7)   The decrease in lease payments can be attributed to a payment $450,000 in
      common stock during the fourth quarter for the Contact property during the
      prior year. This was a scheduled payment that we were asked to hold by the
      owner since it was in common stock.

(8)   The decrease in license and permits can be attributed to Joint Venture
      agreements and one time costs at the Mineral Ridge Mine.

(9)   The increase in payroll is due proportionate to the increase in staffing
      at the Mineral Ridge Mine, and includes accrued payroll costs.


                                       24
<PAGE>

(10)  The change in professional fees for the year is due to legal and
      accounting fees associated with requirements for completion of the Fusion
      Capital common stock agreement.

      Operating expenses totaled $3,408,449 for 2003, compared to $3,944,312 for
2002. The decrease is primarily attributable to reductions in professional and
consulting fees.

      For the year ended December 31, 2003, we had precious metal by-product
sales net of related costs of $(369,266) as compared to $(164,142) for the year
ended December 31, 2002.

LIQUIDITY AND CAPITAL RESOURCES

      Since Golden Phoenix's incorporation in June 1997, our expenses have
exceeded sales resulting in an accumulated deficit of approximately $18.7
million at December 31, 2003 and approximately $15.7 million at December 31,
2002.

      As of December 31, 2003, we had $442,262 in cash and cash equivalents and
a working capital deficit of $4,016,372. A significant portion of the cash is
allocated to be used for the Mineral Ridge mine. We anticipate expenditures for
year 2004 for general and administrative expenses to be approximately $370,000
and approximately $1,000,000 for exploration and property holding costs.
Exploration and holding expenditures are expected to include $200,000 for the
Mineral Ridge gold mine, $300,000 for the Contact Property, $150,000 for the
International Enexco Contact joint venture, $150,000 for future Nevada land
holding costs and $40,000 for generative exploration. These amounts could
increase or decrease significantly, at any time during the fiscal year, based on
exploration results and decisions about releasing or acquiring additional
properties, among other factors. The total Contact payment is $6,500 per month,
which is divided as $2,500 for F. W. Lewis Inc. lease and $4,000 for the
International Enexco joint venture. In addition, we have minimum work
commitments to Enexco and F.W. Lewis. As of December 31, 2003, the total
liability for monthly payments and work commitments to Enexco was $1,599,000.
The monthly payments are payable in cash. As of December 31, 2003, the total
liability owed to F.W. Lewis was $7,500 for the exploration license, $1,744,250
for the bi-annual stock distribution and $1,217,000 for the minimum work
commitment. Qualifying Enexco work commitment expenditures can be applied to the
F.W. Lewis work commitment. Please see the additional description contained
under the section entitled "Business - Mining Property and Projects."

      In May 2003, we entered into an insurance-backed financial assurance
program for a surety bond, to secure the $2.7 million reclamation bond for the
Mineral Ridge property. The program structure includes an insurance policy that
will pay reclamation expenses as they occur. During June 2003, we transferred
approximately $1,800,000 of the reclamation cash deposits that had been
presented as restricted cash for the reclamation of the Mineral Ridge property
to the insurance company and removed the accrued reclamation obligation due to
the insurance policy entered into that will pay the future reclamation costs
during the term of the policy. We are obligated to pay an additional $11,311
annually.

      In the next twelve months, we anticipate purchasing or leasing certain
capital equipment for the Mineral Ridge mine, which would be support equipment
for the process and leach facilities, including a small dozer, front-end loader,
forklift, and a small haul truck. Depending on whether we purchase new or used
equipment, these capital equipment items could cost between $50,000 and
$200,000. We anticipate funding the purchases of these capital equipment items
through funding we receive from our Fusion Capital financing, other sales of
common stock and any revenue we may generate. Match to earlier statement on
capital expenditures

      During 2003, our liquidity needs were met from: (i) a private placement of
restricted shares of $760,000, (ii) the issuance of stock to vendors and
employees for services valued at $653,417, (iii) the conversion of warrants to
common stock of $1,389,079 and (iv) the sale of common stock under the Fusion
Capital common stock agreement $1,000,000. As of April 1, 2004 the Company had
104,779,533 shares of common stock outstanding, which the Company has recognized
as $18,695,646 of paid in capital including cash and services. As of December
31, 2003, the Company had current assets of $791,196 compared to current
liabilities of $4,807,568 resulting in a working capital deficit of $4,016,372.
Due to the sale of shares of our common stock, we were able to generate cash
that was used to partially meet our working capital needs. As a result of the
additional issuances of our shares of common stock, any net income per share
would be lower in future periods. We anticipate funding our working capital
needs through funding we receive from our Fusion Capital financing and any
future revenue we may generate, as well as other sales of our common stock. In
the event we fund our working capital needs through the issuance of equity, our
existing and future shareholders will be diluted and any net income per share
would be lower in future periods.

      During the year ended December 31, 2003, we made precious metal sales of
$98,097 to Johnson Matthey Inc.



                                       25
<PAGE>


      On November 12, 2002, we entered into a common stock purchase agreement
with Fusion Capital Fund II, LLC, for the issuance and purchase of our common
stock. Under the common stock purchase agreement, Fusion Capital committed to
purchase up to $12.0 million of our common stock over a forty-month period
commencing with the effectiveness of a registration statement required to be
filed pursuant to the common stock purchase agreement. Upon effectiveness of
such registration statement and subject to certain conditions, Fusion Capital is
to purchase $15,000 of our common stock on each trading day during the term of
the agreement, subject to our right to increase, decrease or suspend purchases
by Fusion Capital. The purchase price of the shares of common stock will be
equal to a price based upon the future market price of the common stock without
any fixed discount to the market price. However, Fusion Capital does not have
the right and is not obligated to purchase our stock in the event that the
purchase price is below $0.10. We intend to use the proceeds from the sale of
our common stock to Fusion Capital for working capital and general corporate
purposes, if market conditions are favorable. The related registration statement
became effective with the Securities and Exchange Commission in November 2003
and through April 1, 2004, we have issued a total of 9,342,613 shares of common
stock pursuant to this agreement for total proceeds of $2,966,340.

      During the twelve months ended December 31, 2003, we raised approximately
$1.4 million from the sale of restricted shares of common stock. The funds were
used to reduce outstanding debt and continue improvements, repairs at Mineral
Ridge.

      We cannot assure you that the additional capital we may require to finance
our operations will be available on acceptable terms, if at all. Any failure to
secure additional financing will force us to modify our business plan. In
addition, we cannot assure you that we will achieve profitability in the future.

      On July 18, 2003, the Company signed a Joint Venture Agreement for its
Borealis gold project with Gryphon Gold Corporation, a Nevada corporation.
Gryphon is not an affiliate of the Company. Under the terms of the agreement
Gryphon Gold has the right to acquire a 50% interest in the property after
incurring qualified expenditures on work programs or making payments to Golden
Phoenix in the aggregate of five million dollars over a four-year period.
Gryphon Gold has the right to acquire an additional 20% by delivering to Golden
Phoenix a feasibility study for mine production based on a mineable reserve of
500,000 ounces of gold or gold equivalent or by incurring an additional four
million dollars in expenditures. Gryphon has paid Golden Phoenix $25,000 in
consideration of a 75-day due diligence period and an additional $100,000 upon
signing the definitive joint venture agreement. Gryphon Gold is now managing the
project and making plans for drilling, metallurgy, engineering and design.

      Subsequent to December 31, 2002, the Company entered into two additional
amendments to the Exploration License with Option to Purchase Agreement with
F.W. Lewis, Inc. that extended the term of the exploration license and clarified
certain minimum work commitments of the Company. See Note 11 to the December 31,
2003 financial statements for additional details.

      We are also investigating other potential financing sources and we are in
discussions with potential joint venture partners, including a potential joint
venture in Mineral Ridge. This potential joint venture could result in the
venture paying fees to Golden Phoenix for the right to certain interests in the
Mineral Ridge property.


                                       26
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




                                       27
<PAGE>

         Our consolidated financial statements appear beginning at page F-1.


                          GOLDEN PHOENIX MINERALS, INC.

                              FINANCIAL STATEMENTS

                                DECEMBER 31, 2003


<PAGE>

                                 C O N T E N T S
                                 ---------------



Independent Auditors' Report..............................................   F-3

Balance Sheet.............................................................   F-4

Statements of Operations and Other Comprehensive Loss.....................   F-6

Statements of Stockholders' Equity (Deficit)..............................   F-8

Statements of Cash Flows..................................................  F-11

Notes to the Financial Statements.........................................  F-13

<PAGE>

                          INDEPENDENT AUDITOR'S REPORT
                          ----------------------------


To the Board of Directors and Stockholders
Golden Phoenix Minerals, Inc.
Reno, Nevada

We have audited the accompanying balance sheet of Golden Phoenix Minerals,  Inc.
as of December 31, 2003,  and the related  statements  of  operations  and other
comprehensive loss, stockholders' equity (deficit), and cash flows for the years
ended  December  31,  2003  and  2002.   These  financial   statements  are  the
responsibility of the Company's management.

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 Golden Phoenix Minerals,  Inc.
at December 31, 2003 and the results of its operations  and other  comprehensive
loss and its cash  flows for the years  ended  December  31,  2003 and 2002,  in
conformity with accounting principles generally accepted in the United Stated of
America.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue  as a going  concern.  As  discussed  in Note 2 to the  financial
statements, the Company has generated significant losses from operations, has an
accumulated  deficit  of  $18,722,260  and  has a  working  capital  deficit  of
$4,016,372 at December 31, 2003, which together raises doubt about the Company's
ability to continue as a going  concern.  Management's  plans in regard to these
matters are also  described in Note 2. The  financial  statements do not include
any adjustments that might result from the outcome of this uncertainty.


HJ & Associates, LLC
Salt Lake City, Utah
March 29, 2004

                                      F-3
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                                  Balance Sheet

                                     ASSETS
                                     ------

                                                                   December 31,
                                                                       2003
                                                                   ------------
CURRENT ASSETS

   Cash and cash equivalents                                       $    442,262
   Receivables                                                            1,500
   Prepaid expenses                                                     135,973
   Precious metals inventory                                            195,476
   Materials and supplies inventory                                      15,985
                                                                   ------------

     Total Current Assets                                               791,196
                                                                   ------------

PROPERTY AND EQUIPMENT (Note 1)

   Land                                                                  57,600
   Buildings                                                            103,000
   Vehicles                                                             175,727
   Computer equipment                                                    98,016
   Office furniture and equipment                                        16,516
   Mining equipment and rolling stock                                   747,196
   Accumulated depreciation                                            (387,437)
                                                                   ------------

     Total Property and Equipment, Net                                  810,618
                                                                   ------------

OTHER ASSETS

   Restricted funds - reclamation obligations (Note 5)                1,818,899
   Reclamation asset, net (Note 4)                                    1,879,854
   Prepaid bond insurance premiums                                      475,330
   Deposits                                                              21,034
                                                                   ------------

     Total Other Assets                                               4,195,117
                                                                   ------------

     TOTAL ASSETS                                                  $  5,796,931
                                                                   ============

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

                                       F-4
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                            Balance Sheet (Continued)

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                 ----------------------------------------------

                                                                   December 31,
                                                                       2003
                                                                   ------------
CURRENT LIABILITIES

   Accounts payable                                                $    259,148
   Accrued liabilities (Note 7)                                       4,086,191
   Current portion of long term debt (Note 9)                           105,915
   Capital lease obligations-current portion (Note 8)                    34,807
   Amounts due to related parties (Note 6)                              321,507
                                                                   ------------

     Total Current Liabilities                                        4,807,568
                                                                   ------------

LONG-TERM LIABILITIES

   Reclamation obligation (Note 4)                                    2,218,728
   Convertible notes payable and related accrued
     interest (Note 10)                                                 696,001
   Long-term debt (Note 9)                                               57,897
   Capital lease obligations (Note 8)                                    43,038
                                                                   ------------

     Total Long-Term Liabilities                                      3,015,664
                                                                   ------------

     Total Liabilities                                                7,823,232
                                                                   ------------

COMMITMENTS AND CONTINGENCIES (NOTE 11)

STOCKHOLDERS' EQUITY (DEFICIT)

   Preferred stock, no par value, 50,000,000 shares
    authorized, no shares issued and outstanding                             --
   Common stock, no par value, 150,000,000 shares
    authorized, 99,333,470 issued and outstanding                    17,287,209
   Deferred costs                                                      (591,250)
   Deficit accumulated during the development stage                 (18,722,260)
                                                                   ------------

     Total Stockholders' Equity (Deficit)                            (2,026,301)
                                                                   ------------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)          $  5,796,931
                                                                   ============

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

                                      F-5
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
              Statements of Operations and Other Comprehensive Loss

                                                       For the Years Ended
                                                           December 31,
                                                  -----------------------------
                                                      2003             2002
                                                  ------------     ------------
REVENUES

   Sale of precious metals                        $     98,097     $         --
                                                  ------------     ------------

EXPENSES

   Cost of mining operations                           296,725               --
   Exploration, mineral property leases, and
     minimum work commitment expenses                  917,363        2,028,893
   Accretion expense                                   118,532               --
   General and administrative                        1,099,717          850,118
   Investor relations and professional fees            533,218          662,110
   Salaries and wages                                  357,377          273,477
   Depreciation and depletion                           85,517          129,714
                                                  ------------     ------------

     Total Expenses                                  3,408,449        3,944,312
                                                  ------------     ------------

LOSS FROM OPERATIONS                                (3,310,352)      (3,944,312)
                                                  ------------     ------------

OTHER INCOME (EXPENSE)

   Interest income                                      20,955           40,092
   Interest expense                                   (141,969)        (253,231)
   Loss on extinguishment of debt                           --         (275,333)
   Realized gain on available-for-sale
     securities                                          1,290              523
   Loss on impairment of investments                        --          (10,742)
   Sale of interest in mineral property                125,000               --
   Precious metal by-product sales net
     of related costs                                 (369,266)        (164,142)
   Other income (expense), net                          14,454           (1,803)
                                                  ------------     ------------

     Total Other Income (Expense)                     (349,536)        (664,636)
                                                  ------------     ------------

LOSS BEFORE INCOME TAXES                          $ (3,659,888)    $ (4,608,948)
                                                  ============     ============

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

                                       F-6
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
        Statements of Operations and Other Comprehensive Loss (Continued)

                                                       For the Years Ended
                                                           December 31,
                                                  -----------------------------
                                                      2003             2002
                                                  ------------     ------------

LOSS BEFORE INCOME TAXES                          $ (3,659,888)    $ (4,608,948)

INCOME TAXES                                                --               --
                                                  ------------     ------------

LOSS BEFORE CUMULATIVE CHANGE IN
  ACCOUNTING PRINCIPLE                              (3,659,888)      (4,608,948)

   Cumulative effect of change in accounting
     principle, net of no income taxes                 693,828               --
                                                  ------------     ------------

NET LOSS                                            (2,966,060)      (4,608,948)

OTHER COMPREHENSIVE LOSS

   Unrealized loss on available-for-sale
    securities                                              --           (1,437)
                                                  ------------     ------------

     Total Other Comprehensive Loss                         --           (1,437)
                                                  ------------     ------------

COMPREHENSIVE LOSS                                $ (2,966,060)    $ (4,610,385)
                                                  ============     ============

BASIC LOSS PER SHARE
   Basic loss per share                           $      (0.03)    $      (0.07)
                                                  ============     ============

WEIGHTED AVERAGE NUMBER
 OF SHARES OUTSTANDING                              89,435,621       61,842,556
                                                  ============     ============

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

                                      F-7
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                  Statements of Stockholders' Equity (Deficit)

<TABLE>
<CAPTION>
                                         Preferred Stock               Common Shares            Stock
                                      ---------------------      --------------------------  Subscription  Deferred   Accumulated
                                        Shares      Amount         Shares         Amount      Receivable    Costs        Deficit
                                      ---------    --------      ----------    ------------    --------    -------    ------------
<S>                                   <C>          <C>           <C>           <C>             <C>         <C>        <C>
Balance, December 31, 2001              151,300    $    605      45,185,056    $  7,932,398    $(44,500)   $    --    $(11,147,252)

Cash received on stock
  subscription receivable                    --          --              --              --      44,500         --              --

Issuance of common stock for services        --          --       5,035,938       1,075,297          --         --              --

Issuance of common stock for cash            --          --      13,061,673       1,600,431          --         --              --

Issuance of common stock for
  exploration and property costs             --          --       3,160,258         681,344          --         --              --

Issuance of common stock for stock
  options and warrants exercised             --          --       3,958,896         453,081      (5,625)        --              --

Preferred stock converted to
  common shares                        (151,300)   $   (605)      1,513,000         151,905          --         --              --

Issuance of common stock for
  extinguishment of debt                     --          --         777,656         398,630          --         --              --

Issuance of common stock for
  conversion of convertible debt             --          --         152,063          39,023          --         --              --
                                      ---------    --------      ----------    ------------    --------    -------    ------------

Balance Forward                              --    $     --      72,844,540    $ 12,332,109    $ (5,625)   $    --    $(11,147,252)
                                      ---------    --------      ----------    ------------    --------    -------    ------------
</TABLE>

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

                                      F-8
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
            Statements of Stockholders' Equity (Deficit) (Continued)

<TABLE>
<CAPTION>
                                         Preferred Stock             Common Shares            Stock
                                      ---------------------    --------------------------  Subscription   Deferred     Accumulated
                                        Shares      Amount       Shares         Amount      Receivable      Costs        Deficit
                                      ---------    --------    ----------    ------------    ---------    ---------    ------------
<S>                                   <C>          <C>         <C>           <C>             <C>          <C>          <C>
Balance Forward                              --    $   --      72,844,540    $ 12,332,109    $  (5,625)   $      --    $(11,147,252)

Issuance of common stock for
  deferred stock offering costs              --        --       1,587,302         300,000           --     (300,000)             --

Issuance of common stock for cash
  and stock subscription receivable          --        --       2,450,000         632,722     (596,322)          --              --

Vehicle received as payment for
  stock subscription receivable              --        --              --              --        5,865           --              --

Cash received on stock subscription
  receivable                                 --        --              --              --      105,625           --              --

Fair value of options granted
  for services                               --        --              --          44,168           --           --              --

Stock offering costs                         --        --              --         (60,913)          --           --              --

Net loss for the year ended
  December 31, 2002                          --        --              --              --           --           --      (4,608,948)
                                      ---------    ------      ----------    ------------    ---------    ---------    ------------

Balance, December 31, 2002                   --        --      76,881,842      13,248,089     (490,457)    (300,000)    (15,756,200)

Issuance of common stock for services        --        --         743,674         269,073           --           --              --

Issuance of common stock for cash            --        --       4,911,305       1,760,000           --           --              --

Issuance of common stock for
  exploration and property costs             --        --         253,800          58,827           --           --              --
                                      ---------    ------      ----------    ------------    ---------    ---------    ------------

Balance Forward                              --    $   --      82,790,621    $ 15,335,989    $(490,457)   $(300,000)   $(15,756,200)
                                      ---------    ------      ----------    ------------    ---------    ---------    ------------
</TABLE>

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

                                      F-9
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
            Statements of Stockholders' Equity (Deficit) (Continued)

<TABLE>
<CAPTION>
                                         Preferred Stock               Common Shares            Stock
                                      ---------------------      --------------------------  Subscription  Deferred   Accumulated
                                        Shares      Amount         Shares         Amount      Receivable    Costs        Deficit
                                      ---------    --------      ----------    ------------    ---------   -------    ------------
<S>                                   <C>          <C>           <C>           <C>             <C>         <C>        <C>
Balance Forward                              -     $     --      82,790,621    $ 15,335,989    $(490,457)  $(300,000) $(15,756,200)

Issuance of common stock for
  warrants exercised                         -           --      14,940,839       1,563,413      (60,000)         --            --

Issuance of common stock pursuant
  to a consulting agreement                  -           --       1,500,000         525,000           --    (525,000)           --

Issuance of common stock for
  directors fees                             -           --          46,830          16,560           --          --            --

Issuance for common stock for
  software maintenance and
  extinguishments of debt                    -           --          55,180          22,072           --          --            --

Cash received on stock subscription
  receivable                                 -           --              --              --      376,430          --            --

Change in deferred costs and
  subscription receivable                    -           --              --        (155,000)     174,027     233,750            --

Stock offering costs                         -           --              --         (20,825)          --          --            --

Net loss for the year ended,
  December 31, 2003                          -           --              --              --           --          --    (2,966,060)
                                      ---------    --------      ----------    ------------    ---------   ---------  ------------

Balance, December 31, 2003                   -     $     --      99,333,470    $ 17,287,209    $      --   $(591,250) $(18,722,260)
                                      ---------    --------      ----------    ------------    ---------   ---------  ------------
</TABLE>

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

                                      F-10
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                               For the Years Ended
                                                                   December 31,
                                                              2003             2002
                                                          ------------     ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                       <C>              <C>
Net Loss                                                  $ (2,966,060)    $ (4,608,948)
Adjustments to reconcile net loss to net
 cash used by operating activities:
  Depreciation and depletion                                    85,517          129,714
  Accretion expense                                            118,532               --
  Bad debt expense                                                  --           52,203
  Realized gain on available-for-sale securities                    --             (523)
  Loss on extinguishment of debt                                    --          275,333
  Cumulative effect of change in accounting principles        (693,828)              --
  Common stock issued for services                             285,634          804,161
  Common stock issued for exploration and
    property costs                                              80,899          952,478
  Amortization of deferred costs                               218,750               --
  Fair value of options and warrants granted                        --           44,168
Changes in operating assets and liabilities:
  (Increase) in accounts and other receivables                  (1,500)          (6,492)
  (Increase) in prepaid expenses                              (568,869)          (6,558)
  (Increase) in inventories                                   (211,461)              --
  (Increase) in reclamation asset                           (1,200,196)              --
  (Increase) decrease in restricted cash                         2,918           (1,177)
  (Increase) in deposits                                        (5,423)         (10,000)
  Increase (decrease)in accounts payable                      (125,990)         113,141
  Increase in accrued liabilities                              725,850          709,222
  Increase in reclamation obligation                         1,200,196               --
                                                          ------------     ------------

    Net Cash Used by Operating Activities                   (3,055,031)      (1,553,278)
                                                          ------------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES

  Purchase of property and equipment                          (100,583)         (54,482)
  Proceeds from sale of investments                                 --            2,223
                                                          ------------     ------------

    Net Cash Used by Investing Activities                 $   (100,583)    $    (52,259)
                                                          ------------     ------------
</TABLE>

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

                                      F-11
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                      Statements of Cash Flows (Continued)

<TABLE>
<CAPTION>
                                                                               For the Years Ended
                                                                                   December 31,
                                                                              2003             2002
                                                                          ------------     ------------
CASH FLOWS FROM FINANCING ACTIVITIES
<S>                                                                       <C>                   <C>
   Principal payments on capital lease obligations                        $    (45,388)         (32,702)
   Payments on notes payable and long-term debt                                (31,394)        (456,281)
   Proceeds from notes payable and long-term debt                                   --           12,000
   Cash receipts on stock subscription receivable                              410,457          150,125
   Proceeds from exercise of options and warrants                            1,496,412          318,585
   Proceeds from the conversion of preferred stock                                  --           51,300
   Stock offering costs                                                        (20,825)         (38,780)
   Net proceeds from sale of common stock                                    1,760,000        1,629,561
                                                                          ------------     ------------

     Net Cash Provided by Financing Activities                               3,569,262        1,633,808
                                                                          ------------     ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                      413,648           28,271

CASH AND CASH EQIVALENTS AT BEGINNING OF YEAR                                   28,614              343

CASH AND CASH EQUIVALENTS AT END OF YEAR                                  $    442,262     $     28,614
                                                                          ============     ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

   Cash Paid for Interest                                                 $         --     $    239,681
   Cash Paid for Income Taxes                                             $         --     $         --


SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

   Common stock issued for services                                       $    285,634     $    804,161
   Common stock issued for exploration and
     property costs                                                       $     80,899     $    952,478
   Debt applied for the exercise of stock options and
     warrants                                                             $      7,000     $    134,496
   Debt applied to the conversion of preferred stock
     into common stock                                                    $         --     $    100,000
   Conversion of preferred stock into common stock                        $         --     $        605
   Common stock issued for stock subscription
     receivable                                                           $         --     $    601,947
   Asset received and applied to stock subscription
     receivable                                                           $         --     $      5,865
</TABLE>

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

                                      F-12
<PAGE>
                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 1 -  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Organization
          ------------

          Golden Phoenix Minerals, Inc. (the Company) was incorporated under the
          laws and of the state of  Minnesota  on June 2, 1997.  The  Company is
          engaged  in the  operation,  exploration  and  development  of mineral
          properties in Nevada and other parts of the western United States. The
          Company controls its mineral  property  interests  through  ownership,
          leases,  and mining claims.  The Company is planning  exploration  and
          development  of  selected  properties  with the  intent of  conducting
          precious  and base mining and  production  operations.  The Company is
          continually   investigating  new  mineral   properties  for  potential
          exploration,  development and operation. The Company will also provide
          joint venture  opportunities  to other large mining  companies to work
          with the Company in these activities.  In mid-2003,  the Company began
          formal operation of its Mineral Ridge property.

          Presentation
          ------------

          Certain 2002  balances have been  reclassified  to conform to the 2003
          presentation.

          Accounting Method
          -----------------

          The  Company's  financial  statements  are prepared  using the accrual
          method of accounting. The Company has elected a December 31, year-end.

          Cash and Cash Equivalents
          -------------------------

          Cash and cash  equivalents  consist of cash  balances and  instruments
          with maturities of three months or less at the time of purchase.

          Concentrations
          --------------

          Concentration of Credit Risk - Financial instruments which potentially
          subject the Company to credit risk consist  primarily of cash in bank.
          The Company  maintains its cash in a bank deposit  account  insured by
          the Federal Deposit Insurance  Corporation (FDIC) up to $100,000.  The
          Company's account at times, may exceed federally insured limits.

          Concentration of Operations - The Company's operations are all related
          to the minerals and mining industry.  A reduction in mineral prices or
          other disturbances in the minerals market could have an adverse effect
          on the Company's operations.

          During 2003, 100% of revenues consisted of precious metal sales to one
          party.

                                      F-13
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 1 -  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
          (Continued)

          Use of Estimates
          ----------------

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

          Basic Loss Per Share
          --------------------

          The  computation  of basic loss per share of common  stock is based on
          the weighted average number of shares outstanding during the period.

          Net loss per share from operations:

                                                       For the Years Ended
                                                           December 31,
                                                   ----------------------------
                                                       2003            2002
                                                   ------------    ------------

          Numerator - loss                         $ (2,966,060)   $ (4,608,948)

          Denominator -
            weighted average shares outstanding      89,435,621      61,842,556
                                                   ------------    ------------

          Basic loss per share                     $      (0.03)   $      (0.07)
                                                   ============    ============

          The Company's  outstanding common stock options and warrants have been
          excluded  from  the  basic  loss  per  share  calculation  as they are
          anti-dilutive.  The Company has  excluded  18,875,618  of common stock
          equivalents at December 31, 2003.

          Provision for Taxes
          -------------------

          Deferred taxes are provided on a liability method whereby deferred tax
          assets  are  recognized  for  deductible  temporary   differences  and
          operating  loss  and  tax  credit   carryforwards   and  deferred  tax
          liabilities   are  recognized  for  taxable   temporary   differences.
          Temporary differences are the differences between the reported amounts
          of assets and liabilities and their tax bases. Deferred tax assets are
          reduced by a valuation  allowance  when, in the opinion of management,
          it is more  likely that not that some  portion or all of the  deferred
          tax assets will not be realized.  Deferred tax assets and  liabilities
          are  adjusted  for the effects of changes in tax laws and rates on the
          date of enactment.

                                       F-14
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 1 -  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
          (Continued)

          Provision for Taxes (Continued)
          -------------------------------

          Net  deferred tax assets  consist of the  following  components  as of
          December 31, 2003 and 2002:

                                            2003             2002
                                        ------------     ------------
          Deferred tax assets:
            NOL Carryover               $  5,071,800     $  3,739,400
            Accrued Expenses                 233,700               --

          Deferred tax liabilities:               --               --
            Depreciation                     (48,900)         (18,100)

          Valuation allowance             (5,256,600)      (3,721,300)
                                        ------------     ------------

          Net deferred tax asset        $         --     $         --
                                        ============     ============

          The  income  tax  provision  differs  from the  amount of  income  tax
          determined  by  applying  the U.S.  federal  income tax rate of 39% to
          pretax income from continuing  operations for the years ended December
          31, 2003 and 2002 due to the following:

                                                    2003             2002
                                                ------------     ------------

          Book loss                             $ (1,151,240)    $ (1,797,490)
          Accrued compensation                        (1,255)          29,660
          Depreciation                               (27,520)          21,497
          Other                                        1,120            5,200
          Stock for services/options expense         142,950          593,512
          Valuation allowance                      1,035,945        1,147,621
                                                ------------     ------------

          Net tax provision                     $         --     $         --
                                                ============     ============

                                      F-15
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 1 -  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
          (Continued)

          Provision for Taxes (Continued)
          -------------------------------

          At December 31, 2003, the Company had net operating loss carryforwards
          of approximately $13,000,000 that may be offset against future taxable
          income  from the year  2003  through  2023.  No tax  benefit  has been
          reported in the  December  31,  2003  financial  statements  since the
          potential  tax benefit is offset by a valuation  allowance of the same
          amount.

          Due to the  change in  ownership  provisions  of the Tax Reform Act of
          1986,  net  operating  loss   carryforwards  for  Federal  income  tax
          reporting purposes are subject to annual limitations.  Should a change
          in ownership occur, net operating loss carryforwards may be limited as
          to use in the future years.

          Inventories
          -----------

          Precious  metals  inventories  consists of concentrate  ore and dore',
          including that which is on deposit at a refinery awaiting instructions
          to sell from the Company.  All  inventories are valued at the lower of
          cost or  market,  with  cost  being  determined  using  the  first-in,
          first-out methods.

          Revenue Recognition
          -------------------

          Revenue from the sale of precious  metals is recognized when title and
          risk of loss passes to the buyer.  Currently,  all precious metals are
          delivered  to a refinery  where they are held until sell  instructions
          are given by the Company at which time revenue is recognized.

          Property and Equipment
          ----------------------

          Property  and  equipment  are  stated  at  cost.  Depreciation,  which
          includes  depreciation of assets acquired  through capital leases,  is
          calculated  using the straight line method over estimated useful lives
          as follows:

               Mining equipment                5-7 years
               Computer equipment              3-5 years
               Furniture and equipment         5-7 years
               Vehicles                          5 years
               Buildings                        40 years

          For the years ended December 31, 2003 and 2002,  the Company  recorded
          depreciation expense of $71,347 and $129,714,  respectively related to
          property and equipment.

                                      F-16
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 1 -  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
          (Continued)

          Valuation and Measurement of Equity Instruments
          -----------------------------------------------

          Except for  transactions  with  employees that are within the scope of
          APB Opinion 25, all  transactions  in which goods or services  are the
          consideration  received  for the  issuance of equity  instruments  are
          accounted for based on the fair value of the consideration received or
          the fair value of the equity  instruments  issued,  whichever  is more
          reliably measurable.  Additionally, in accordance with EITF 96-18, the
          Company has  determined  that the dates used to value the  transaction
          are either (1) The date at which a commitment  for  performance by the
          counterparty to earn the equity instruments is reached (a "performance
          commitment");  or (2) The date at which the counterparty's performance
          is complete.

          Stock Options
          -------------

          As permitted by FASB  Statement  123 as amended by FASB  Statement 148
          "Accounting for Stock Based Compensation",  the Company has elected to
          measure and record compensation cost relative to employee stock option
          costs in accordance with Accounting  Principles  Board ("APB") Opinion
          25,   "Accounting   for  Stock  Issued  to  Employees,"   and  related
          interpretations  and  make  proforma  disclosures  of net  income  and
          earnings  per  share as if the fair  value  method  of  valuing  stock
          options had been applied.  Under APB Opinion 25,  compensation cost is
          recognized  for stock  options  granted to  employees  when the option
          price is less that the market price of the underlying  common stock on
          the date of grant.

          Property Acquisition and Deferred Mineral Property Development Costs
          --------------------------------------------------------------------

          Property  acquisition and deferred mineral property  development costs
          are recorded at cost and will be capitalized  once  determination  has
          been made that a mineral property has proven or probable reserves.  On
          the commencement of commercial  production,  depletion of each mineral
          property  and  associated  accumulated  costs will be  provided on the
          units of production basis using estimated proven and probable reserves
          as the depletion basis.

          Proven and Probable Ore Reserves
          --------------------------------

          On a periodic  basis,  management  reviews the  reserves  that reflect
          estimates  of  the  quantities  and  grades  of  ore  at  our  mineral
          properties  which  management  believes can be  recovered  and sold at
          prices in excess of the total  cost  associated  with  extraction  and
          processing the ore.  Management's  calculations of proven and probable
          ore  reserves  are  based  on,  along  with   independent   consultant
          evaluations,  in-house  engineering  and  geological  estimates  using
          current  operating  costs,  metals prices and demand for our products.
          Periodically, management obtains external determinations of reserves.

          Reserve  estimates  will  change as  existing  reserves  are  depleted
          through production, as well as changes in estimates caused by changing
          production  costs and/or metals  prices.  Reserves may also be revised
          based on actual production experience once production commences.

                                      F-17
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 1 -  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
          (Continued)

          Proven and Probable Ore Reserves (Continued)
          --------------------------------------------

          Declines  in  the  market  price  of  metals,  as  well  as  increased
          production or capital costs or reduced  recovery rates, may render ore
          reserves  uneconomic to exploit.  Should that occur,  restatements  or
          reductions  in  reserves  and  asset  write-downs  in  the  applicable
          accounting periods may be required. Reserves should not be interpreted
          as  assurances  of mine life or of the  profitability  of  current  or
          future operations.  No assurance can be given that the estimate of the
          amount of metal or the  indicated  level of recovery  of these  metals
          will be realized.

          Properties Under Development
          ----------------------------

          Upon  determination  that  a  mineral  property  can  be  economically
          developed and proven and probable reserves have been determined, costs
          incurred will be capitalized  until the assets are put in service,  at
          which time the  capitalized  costs will be depreciated and depleted in
          accordance with the policies previously described.

          Financing costs,  including interest,  are capitalized on the basis of
          expenditures incurred for the acquisition and development of projects,
          without restriction to specific  borrowings for these projects,  while
          the  projects  are actively  being  prepared for proposed  production.
          Capitalization  is  discontinued  when  the  asset  is  ready  for its
          intended use.

          Exploration Properties
          ----------------------

          Mineral  exploration  expenditures are expensed as incurred.  Property
          acquisition costs relating to exploration properties are also expensed
          until the economic  viability of the project is determined  and proven
          and probable reserves  quantified.  Costs associated with economically
          viable  projects are  depreciated and amortized in accordance with the
          policies  described above. If a project is not viable, the accumulated
          project  costs are charged to  operations  in the period in which that
          determination is made.

          Closure, Reclamation and Remediation Costs
          ------------------------------------------

          Current laws and regulations require certain closure,  reclamation and
          remediation  work to be done on  mineral  properties  as a  result  of
          exploration,   development  and  operating  activities.   The  Company
          periodically   reviews  the   activities   performed  on  its  mineral
          properties and makes estimates of closure, reclamation and remediation
          work that will need to be  performed  as  required  by those  laws and
          regulations  and makes  estimates  of amounts  that are expected to be
          incurred  when  the  closure,  reclamation  and  remediation  work  is
          expected   to  be   performed.   Future   closure,   reclamation   and
          environmental  related  expenditures are difficult to estimate in many
          circumstances due to the early stages of investigation,  uncertainties
          associated  with  defining  the  nature  an  extent  of  environmental
          contamination, the uncertainties

                                      F-18
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 1 -  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
          (Continued)

          Closure, Reclamation and Remediation Costs (Continued)
          ------------------------------------------------------

          relating to specific  reclamation and  remediation  methods and costs,
          application  and  changing  of  environmental  laws,  regulations  and
          interpretation   by   regulatory    authorities   and   the   possible
          participation of other potentially responsible parties.

          Presently,  the  Company  does not have any  closure,  reclamation  or
          remediation  obligations  with  respect to any of its current  mineral
          properties  with the  exception  of the Mineral  Ridge  Property.  The
          Company has estimated costs  associated with closure,  reclamation and
          environmental  reclamation  of the Mineral Ridge  Property  which have
          been  reflected  in  its  financial   statements  in  accordance  with
          generally accepted  accounting  principles,  including the adoption of
          SFAS 143,  Accounting  for  Asset  Retirement  Obligations,  which the
          Company  adopted  effective  January 1, 2003. See Note 4 for a related
          discussion.

          Property Evaluations
          --------------------

          The Company reviews and evaluates the recoverability of its properties
          when events or changes in  circumstances  indicate  that the  carrying
          amount of a property may not be recoverable. Estimated future net cash
          flows, on an undiscounted  basis, from a property are calculated using
          estimated  recoverable ounces of minerals  (considering current proven
          and probable reserves and mineralization  expected to be classified as
          reserves);  estimated  future mineral price  realization  (considering
          historical and current prices, price trends and related factors);  and
          operating,  capital and reclamation  costs.  Reduction in the carrying
          value of property, plant and equipment, with a corresponding charge to
          earnings,  are  recorded to the extent that the  estimated  future net
          cash flows are less than the carrying value.

          Estimates of future cash flows are subject to risks and uncertainties.
          It is reasonably  possible that changes in  circumstances  could occur
          which may affect the recoverability of the Company's properties.

          Impairment of Long-Lived Assets
          -------------------------------

          Management  reviews  the  net  carrying  value  of  all  property  and
          equipment and other long-lived assets,  including mineral  properties,
          on a periodic  basis.  We estimate the net  realizable  value of asset
          based on the  estimated  undiscounted  future  cash flows that will be
          generated  from  operations at each  property,  the estimated  salvage
          value of the surface plant and equipment and the value associated with
          property interests.  These estimates of undiscounted future cash flows
          are dependent  upon the estimates of metal to be recovered from proven
          and probable ore reserves, future production cost estimates and future
          metals  price  estimates  over  the  estimated  remaining  life of the
          mineral  property.  If  undiscounted  cash  flows  are  less  than the
          carrying  value of a property,  an impairment  loss will be recognized
          based upon the estimated  expected future cash flows from the property
          discounted at an interest rate commensurate with the risk involved.

                                      F-19
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 1 -  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
          (Continued)

          Impairment of Long-Lived Assets (Continued)
          -------------------------------------------

          Management's  estimates  of  metals  prices,  recoverable  proven  and
          probable ore reserves,  and operating,  capital and reclamation  costs
          are  subject  to risks  and  uncertainties  of  change  affecting  the
          recoverability  of  our  investment  in  various  projects.   Although
          management believes it has made a reasonable estimate of these factors
          based on current conditions and information, it is reasonably possible
          that changes could occur in the near term which could adversely affect
          management's  estimate of net cash flows expected to be generated from
          our mineral properties and the need for asset impairment write-downs.

          Newly Issued Accounting Pronouncements
          --------------------------------------

          New accounting  pronouncements that have a current or future potential
          impact on our financial statements are as follows:

          SFAS NO. 145 -- On April 30, 2002,  the FASB issued FASB Statement No.
          145 (SFAS  145),  "Rescission  of FASB  Statements  No. 4, 44, and 64,
          Amendment of FASB Statement No. 13, and Technical  Corrections."  SFAS
          145 rescinds both FASB Statement No. 4 (SFAS 4),  "Reporting Gains and
          Losses from Extinguishment of Debt," and the amendment to SFAS 4, FASB
          Statement No. 64 (SFAS 64),  "Extinguishments  of Debt Made to Satisfy
          Sinking-Fund   Requirements."   Through  this  rescission,   SFAS  145
          eliminates the requirement (in both SFAS 4 and SFAS 64) that gains and
          losses from the extinguishment of debt be aggregated and, if material,
          classified as an  extraordinary  item,  net of the related  income tax
          effect.  However,  an entity is not prohibited from  classifying  such
          gains  and  losses  as  extraordinary  items,  so long as it meets the
          criteria in paragraph 20 of  Accounting  Principles  Board Opinion No.
          30,  Reporting  the  Results of  Operations  Reporting  the Effects of
          Disposal of a Segment of a Business,  and  Extraordinary,  Unusual and
          Infrequently  Occurring  Events and  Transactions.  Further,  SFAS 145
          amends  paragraph  14(a) of FASB  Statement  No. 13,  "Accounting  for
          Leases",  to eliminate an  inconsistency  between the  accounting  for
          sale-leaseback  transactions and certain lease modifications that have
          economic effects that are similar to sale-leaseback transactions.  The
          amendment   requires  that  a  lease   modification   (1)  results  in
          recognition of the gain or loss in the 9 financial statements,  (2) is
          subject  to FASB  Statement  No.  66,  "Accounting  for  Sales of Real
          Estate,"  if the  leased  asset  is real  estate  (including  integral
          equipment), and (3) is subject (in its entirety) to the sale-leaseback
          rules of FASB Statement No. 98, "Accounting for Leases: Sale-Leaseback
          Transactions Involving Real Estate,  Sales-Type Leases of Real Estate,
          Definition  of the Lease  Term,  and  Initial  Direct  Costs of Direct
          Financing  Leases."  Generally,  FAS 145 is effective for transactions
          occurring  after May 15, 2002. The adoption of SFAS 145 did not have a
          material effect on the Company's financial statements.

                                      F-20
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 1 -  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
          (Continued)

          Newly Issued Accounting Pronouncements (Continued)
          --------------------------------------------------

          SFAS  NO.  146  -- In  June  2002,  the  FASB  issued  SFAS  No.  146,
          "Accounting  for Exit or Disposal  Activities"  (SFAS  146).  SFAS 146
          addresses  significant issues regarding the recognition,  measurement,
          and  reporting  of costs that are  associated  with exit and  disposal
          activities,  including  restructuring  activities  that are  currently
          accounted for under EITF No. 94-3, "Liability  Recognition for Certain
          Employee  Termination  Benefits  and Other  Costs to Exit an  Activity
          (including Certain Costs Incurred in a  Restructuring)."  The scope of
          SFAS 146 also includes costs related to terminating a contract that is
          not a capital lease and  termination  benefits that  employees who are
          involuntarily terminated receive under the terms of a one-time benefit
          arrangement  that  is  not  an  ongoing  benefit   arrangement  or  an
          individual  deferred-compensation contract. SFAS 146 will be effective
          for exit or disposal  activities that are initiated after December 31,
          2002 and early  application is encouraged.  The provisions of EITF No.
          94-3 shall continue to apply for an exit activity  initiated  under an
          exit plan that met the criteria of EITF No. 94-3 prior to the adoption
          of SFAS 146.  The  effect  on  adoption  of SFAS 146 will  change on a
          prospective  basis the timing of when the  restructuring  charges  are
          recorded  from a  commitment  date  approach to when the  liability is
          incurred.  The adoption of SFAS 146 did not have a material  effect on
          the Company's financial statements.

          SFAS NO.  148 -- In  December  2002,  the FASB  issued  SFAS No.  148,
          "Accounting   for   Stock-Based   Compensation   --   Transition   and
          Disclosure"(SFAS  148").  SFAS 148 amends SFAS No. 123 "Accounting for
          Stock-Based Compensation" ("SFAS 123"), to provide alternative methods
          of transition for a voluntary change to the fair value based method of
          accounting for stock-based employee  compensation.  In addition,  SFAS
          148  amends  the  disclosure  requirements  of  SFAS  123  to  require
          prominent  disclosures in both annual and interim financial statements
          about the method of accounting for stock-based  employee  compensation
          and the effect of the method  used on  reported  results.  SFAS 148 is
          effective  for fiscal years  beginning  after  December 15, 2002.  The
          interim  disclosure  provisions  are effective  for financial  reports
          containing  financial  statements for interim periods  beginning after
          December  15,  2002.  The adoption of SFAS 148 did not have a material
          effect on the Company's financial statements.

          SFAS NO. 149 - In April 2003,  the FASB issued  Statement of Financial
          Accounting Standards No. 149 ("SFAS 149"),  Amendment of Statement 133
          on  Derivative   Instruments  and  Hedging   Activities,   to  provide
          clarification on the meaning of an underlying,  the characteristics of
          a derivative that contains financing  components and the meaning of an
          initial net  investment  that is smaller  than would be  required  for
          other  types of  contracts  that would be  expected  to have a similar
          response to changes in market factors.  This statement will be applied
          prospectively  and is effective for contracts entered into or modified
          after June 30, 2003.  The  statement  will be  applicable  to existing
          contracts  and new contracts  relate to forward  purchases or sales of
          when-issued  securities or other securities that do not yet exist. The
          adoption of SFAS 149 did not have a material  effect on the  Company's
          financial statements.

                                      F-21
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 1 -  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
          (Continued)

          Newly Issued Accounting Pronouncements (Continued)
          --------------------------------------------------

          SFAS NO. 150 -- In May 2003, the FASB issued SFAS No. 150, "Accounting
          for  Certain  Financial   Instruments  with  Characteristics  of  both
          Liabilities  and Equity" which is effective for financial  instruments
          entered  into  or  modified  after  May  31,  2003,  and is  otherwise
          effective at the beginning of the first interim period beginning after
          June 15, 2003. This Statement  establishes standards for how an issuer
          classifies and measures in its statement of financial position certain
          financial  instruments  with  characteristics  of both liabilities and
          equity.  It requires  that an issuer  classify a financial  instrument
          that  is  within  its  scope  as a  liability  (or an  asset  in  some
          circumstances)   because  that   financial   instrument   embodies  an
          obligation of the issuer.  The adoption of SFAS No. 150 did not have a
          material effect on the financial statements of the Company.

          FASB  INTERPRETATION NO. 45 -- "Guarantor's  Accounting and Disclosure
          Requirements  for  Guarantees,   Including   Indirect   Guarantees  of
          Indebtedness of Others - an  Interpretation  of FASB Statements No. 5,
          57  and  107".  The  initial   recognition  and  initial   measurement
          provisions of this  Interpretation are to be applied  prospectively to
          guarantees  issued or modified after December 31, 2002. The disclosure
          requirements  in  the  Interpretation  were  effective  for  financial
          statements  of interim or annual  periods  ending  after  December 15,
          2002.  The  adoption  of FASB  Interpretation  No.  45 did not  have a
          material effect on the financial statements of the Company.

          FASB  INTERPRETATION  NO. 46 -- In January 2003,  the FASB issued FASB
          Interpretation  No. 46 "Consolidation of Variable Interest  Entities."
          FIN 46 provides  guidance on the  identification of entities for which
          control is achieved  through means other than through  voting  rights,
          variable  interest  entities,  and how to  determine  when  and  which
          business  enterprises should  consolidate  variable interest entities.
          This interpretation  applies immediately to variable interest entities
          created after January 31, 2003. It applies in the first fiscal year or
          interim  period  beginning  after June 15, 2003, to variable  interest
          entities  in which an  enterprise  holds a variable  interest  that it
          acquired  before February 1, 2003. The adoption of FIN 46 did not have
          a material impact on the Company's financial statements.

          During the year ended  December  31,  2003,  the  Company  adopted the
          following Emerging Issues Task Force Consensuses: EITF Issue No. 00-21
          "Revenue Arrangements with Multiple  Deliverables",  EITF Issue No. 01
          -8 " Determining Whether an Arrangement  Contains a Lease", EITF Issue
          No. 02-3  "Issues  Related to  Accounting  for  Contracts  Involved in
          Energy Trading and Risk  Management  Activities",  EITF Issue No. 02-9
          "Accounting  by a Reseller for Certain  Consideration  Received from a
          Vendor",  EITF Issue No. 02-17,  "Recognition of Customer Relationship
          Intangible Assets Acquired in a Business Combination",  EITF Issue No.
          02-18  "Accounting  for  Subsequent  Investments  in an Investee after
          Suspension  of Equity Method Loss  Recognition",  EITF Issue No. 03-1,
          "The Meaning of Other Than  Temporary and its  Application  to Certain
          Instruments", EITF Issue No. 03-5,

                                      F-22
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 1 -  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
          (Continued)

          Newly Issued Accounting Pronouncements (Continued)
          --------------------------------------------------

          "Applicability of AICPA Statement of Position 9702,  `Software Revenue
          Recognition' to Non-Software Deliverables in an Arrangement Containing
          More Than Incidental Software",  EITF Issue No. 03-7,  "Accounting for
          the  Settlement of the Equity  Settled  Portion of a Convertible  Debt
          Instrument  That  Permits  or  Requires  the  Conversion  Spread to be
          Settled in Stock",  EITF Issue No. 03-10,  "Application  of EITF Issue
          No.  02-16 by Resellers  to Sales  Incentives  Offered to Consumers by
          Manufacturers.

          Preferred Stock
          ---------------

          The  Company  has  authorized   50,000,000  shares  of  no  par  value
          non-voting  convertible  preferred stock. In 1997, the Company's board
          of directors  authorized the designation of a class of preferred stock
          convertible  into  ten  shares  of  common  stock  for  each  share of
          preferred  stock at a conversion  rate of $0.10 per common share for a
          period of ten years from June 12, 1997.  The Company did not determine
          any  dividend  rights,   dividend  rates,   liquidation   preferences,
          redemption provisions, and other rights,  preferences,  privileges and
          restrictions.  At  December  31,  2003,  the  Company had no shares of
          preferred stock issued and outstanding.

          Advertising Expense
          -------------------

          The Company  expenses  advertising  expenses as incurred in accordance
          with SOP 93-7.  The Company had no  advertising  expense for the years
          ended December 31, 2003 and 2002.

NOTE 2 -  GOING CONCERN

          The  Company's  financial  statements  are prepared  using  accounting
          principles   generally  accepted  in  the  United  States  of  America
          applicable to a going concern which  contemplates  the  realization of
          assets  and  liquidation  of  liabilities  in  the  normal  course  of
          business.  However,  the  Company  has  experienced  losses  since its
          inception in 1997,  and it has not  generated  revenues  sufficient to
          cover its operating costs,  has an accumulated  deficit of $18,708,090
          and a working  capital  deficit of  $4,016,372  at December  31, 2003,
          which raises  doubt about its ability to continue as a going  concern.
          The accompanying  financial  statements do not include any adjustments
          that might result from the outcome of this uncertainty.

          Management  has  obtained  debt  and  equity  financing  to  fund  the
          Company's  activities until sufficient  revenues can be generated from
          operations.  The Company has a common stock  purchase  agreement for a
          commitment  to purchase  up to $12  million of common  stock by Fusion
          Capital,  with  a  related  registration   statement  filed  with  the
          Securities  Exchange  Commission  declared effective in November 2003.
          The  Company  also  plans to obtain  funds  through  the  exercise  of
          outstanding  stock  warrants  which would provide  additional  working
          capital to cover the costs of its mineral property and other corporate
          expenses.

                                      F-23
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 2 -  GOING CONCERN (Continued)

          The Company will  continue to seek joint  ventures for its  properties
          with third parties in order to alleviate some of the costs  associated
          with it's  current  and  future  exploration,  development  and mining
          operation  activities.  Finally during 2003, the Company  received the
          final  permits  from  the  state  of  Nevada  and the  Bureau  of Land
          Management  for its  Mineral  Ridge  Mine and the  Company  posted the
          required reclamation bond which allowed the Company to begin operation
          and recovery of gold at that property.

NOTE 3 -  MINERAL PROPERTIES

          Mineral Ridge Property
          ----------------------

          On November 7, 2000 the Company  purchased the Mineral Ridge gold mine
          and related  land,  property and  equipment  located near Silver Peak,
          Nevada.

          Previously  existing permits  associated with the Mineral Ridge mining
          operations  had either  expired  or were under  review by the State of
          Nevada and the Bureau of Land  Management  (BLM) with the obtaining of
          new  permits  dependent  upon the  Company's  proposed  plan of mining
          operations.  Accordingly,  the  Mineral  Ridge  mine  has not  been in
          operation  since it was acquired with minimum  maintenance  activities
          being  conducted  subsequently.   Those  maintenance  operations  have
          yielded  certain  amounts of precious metal product that has been sold
          resulting in revenues of $11,101 in 2003 and  $118,007 in 2002.  Costs
          associated with these maintenance  activities totaled $380,367 in 2003
          and $282,149 in 2002. The proceeds from the sale of the precious metal
          have been reflected net of the associated  property  maintenance costs
          as part of other  income  and  expense in the  accompanying  financial
          statement.

          Based on the Company's  proposed mine operating  plan, the Company had
          been in the process of obtaining new mine operation permits, including
          a current  reclamation  permit.  In May 2003,  the new  operating  and
          reclamation permits were granted, specifying an increase in the amount
          of  the  dedicated  reclamation  funds  to  approximately  $2,693,000.
          Accordingly,  the  Company  obtained a  reclamation  surety bond for a
          corresponding  amount (See Note 5). The Company began formal operation
          of the Mineral Ridge property in September 2003.

          The mining  operations on the property  currently  uses a cyanide heap
          leaching process to extract the precious metals, principally gold with
          some silver by-product.

          The Company has  determined,  with the assistance of  independent  and
          qualified consultants, that the Mineral Ridge mine and related mineral
          property has economically feasible proven and probable ore reserves of
          2,400,000 tons averaging 0.076 troy ounces of gold per ton for 181,400
          ounces of recoverable  gold at an 81 percent  recovery.  There were an
          additional 10,000 ounces estimated to be on the leach pad.

                                      F-24
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 3 -  MINERAL PROPERTIES (Continued)

          Borealis Property
          -----------------

          The Company has a 100%  interest  in a mineral  property,  situated in
          Mineral  County,  Nevada,  known as the Borealis  Property  ("Borealis
          Property").

          On May 8, 2003,  the Company  signed an Agreement in Principle for the
          assignment  of a 50% interest in its Borealis Gold Property to Gryphon
          Gold  Corporation  ("Gryphon"),  a Nevada  Corporation.  To earn a 50%
          interest in the Borealis Gold Property,  Gryphon must incur  qualified
          expenditures  on the  property or make  payments to the Company in the
          aggregate of $5,000,000 during the first  forty-eight  months from the
          date of the  Agreement.  Gryphon  also has an  option  to  acquire  an
          additional 20% interest by incurring additional qualified expenditures
          of $4,000,000 on the property (or paying the amount to the Company) or
          producing a qualifying feasibility study.

          The Company has  determined  with the  assistance of  independent  and
          qualified   consultants,   that  the  Borealis  Mineral  Property  has
          mineralized  material without  sufficient proven or probable reserves.
          Accordingly,  the Borealis Mineral Property is considered to be in the
          exploration  stage  with all  related  costs  and  expenditures  being
          expensed as incurred.

          Contact Copper Property
          -----------------------

          On January 28, 1998 the Company entered into a joint venture agreement
          with International Enexco Ltd. ("Enexco").  The Company has the option
          to  purchase  60% of the rights to  Enexco's  interest  in the Contact
          Copper  Property for a total of  $2,600,000 in Work  Requirements  and
          $313,000 in lease payments over a seven-year period.

          On July 10,  1998,  the Company  entered into an  Exploration  License
          Agreement (the Agreement) with F.W. Lewis,  Inc.  granting the Company
          the exclusive right and license to explore the Contact Copper Property
          terminating   December  31,  2002.   The  agreement   required   stock
          distributions  of  $2,200,000 of Golden  Phoenix  common stock minimum
          work requirements totaling $750,000 and monthly $2,500 lease payments.
          During 2003,  the parties  entered into  amendments  to the  agreement
          extending  the  term of the  exploration  license  through  2007  with
          $100,000 annual minimum work  requirements  and continuing the monthly
          $2,500 lease payments.

          The Contact Copper  Property  currently does not have proven  probable
          ore  reserves.  Accordingly,  this property is considered to be in the
          exploration  stage  with all  related  costs  and  expenditures  being
          expensed as incurred.

                                      F-25
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 4 -  RECLAMATION ASSET AND OBLIGATION

          Effective  January 1, 2003,  the Company became subject to and adopted
          SFAS No.  143,  Accounting  for Asset  Retirement  Obligations,  which
          establishes  a  uniform   methodology  for  accounting  for  estimated
          reclamation and abandoned  costs. As of December 31, 2002, the Company
          had recognized a reclamation  liability of $900,000  representing  the
          net present  value of the estimated  reclamation  costs related to the
          Mineral Ridge  property given its condition at the time of acquisition
          in October 2000. No additional liability was recorded from the time of
          acquisition  through  December  31, 2002 since the property was not in
          production and existing generally accepted  accounting  principles did
          not provide for the  recognition  of  addition  liability  under those
          circumstances.  SFAS  No.  143  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.  Fair value is determined by  estimating  the  retirement
          obligations  in the  period  the asset is first  placed in  service or
          acquired and then  adjusted for the amount of estimated  inflation and
          market risk  contingencies  to the  projected  settlement  date of the
          liability.  The result is then  discounted to a present value from the
          projected  settlement  date to the date the asset was first  placed in
          service  or  acquired.  The  present  value  of the  asset  retirement
          obligation is recorded as an additional  property cost and as an asset
          retirement liability. The amortization of the additional property cost
          (using  the  units  of  production   method)  is  being   included  in
          depreciation  expense and the accretion of the discounted liability is
          being  recorded  as a  separate  operating  expense  in the  Company's
          statement  of  operations  with  a   corresponding   increase  in  the
          reclamation  liability.  On this basis,  using a credit  adjusted risk
          free interest rate of 8.5%, the Company determined a reclamation asset
          of $1,063,300 and related  reclamation  obligation at October 2000 and
          eliminated the existing $900,000 recorded obligation. Accretion of the
          discounted  liability  through  December  31,  2002  totaled  $206,172
          resulting in a reclamation  liability  totaling  $1,269,472  and a net
          gain of $693,828 as a result of the cumulative effect of the change in
          this accounting  principle which amount has been reflected  separately
          as other  income  (expense)  during the year ended  December 31, 2003.
          Since  the  Mineral  Ridge  property  was not in  production  prior to
          December 31, 2002, no depreciation  of the reclamation  asset has been
          considered  pursuant  to the  adoption  of SFAS No. 143 for the period
          from October 2000 through December 31, 2002.

          In connection  with the new  reclamation  permit obtained in May 2003,
          the Company increased its estimated reclamation costs based on the new
          operating plan for the Mineral Ridge property. Accordingly, on June 1,
          2003,  the Company  increased the Mineral Ridge  property  reclamation
          asset by $830,724 to $1,894,024  based on the revised estimate using a
          credit  adjusted risk free interest rate of 8.5% with a  corresponding
          increase in the related  reclamation  obligation.  Depreciation of the
          reclamation  asset was recognized for the year ended December 31, 2003
          in the amount of $14,170 using the units-of-production method.

          Accretion  expense related to the reclamation  obligation for the year
          ended December 31, 2003, was $118,532.

                                      F-26
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 4 -  RECLAMATION ASSET AND OBLIGATION (Continued)

          The following is a description  of the changes to the Company's  asset
          retirement obligation from January 1 through December 31, 2003:

          Reclamation Obligation (asset retirement obligation)
            as reported at December 31, 2002                       $    900,000
          Impact of adopting SFAS No. 143                               369,472
          Accretion expense - January 1, 2003 through
            May 31, 2003                                                 44,332
          Revision in reclamation cost estimates                        830,724
          Accretion expense - June 1, 2003 through
            December 31, 2003                                            74,200
                                                                   ------------
          Reclamation Obligation at December 31, 2003              $  2,218,728
                                                                   ============


          In addition,  had the Company  adopted the  provisions of SFAS No. 143
          prior to January 1, 2003, the amount of the reclamation  obligation on
          a pro forma basis would have been as follows:

          January 1, 2002                                          $  1,170,021
                                                                   ============

          December 31, 2002                                        $  1,269,475
                                                                   ============

          The following  table  summarizes the pro forma effects on net loss and
          per share amounts before  cumulative  effect of a change in accounting
          principle  for the year ended  December 31, 2002 as if the Company had
          adopted SFAS No. 143 on January 1, 2002:

                                                                    Year Ended
                                                                    December 31,
                                                                        2002
                                                                   ------------
          Net loss as reported                                     $ (4,608,948)
          Accretion expense                                             (98,060)
                                                                   ------------

          Pro form net loss                                        $ (4,707,008)
                                                                   ============

          Basic loss per share -

             As reported                                           $      (0.07)
                                                                   ============

             Pro forma                                             $      (0.08)
                                                                   ============

                                      F-27
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 4 -  RECLAMATION ASSET AND OBLIGATION (Continued)

          There would have been no pro forma  impact on the year ended  December
          31,  2003 as a  result  of the  application  of SFAS  No.  143 with no
          changes  to  the  reclamation   obligation  recognized  prior  to  the
          application  of SFAS No.  143  subsequent  to the  acquisition  of the
          Mineral Ridge property through December 31, 2002.

NOTE 5 -  RECLAMATION SURETY BOND

          During  May  2003,  The  Company  entered  into  an  insurance  backed
          financial   assurance  program  for  a  surety  bond,  to  secure  the
          $2,693,000  reclamation  bond  for the  Mineral  Ridge  property.  The
          program   structure   includes  an  insurance  policy  that  will  pay
          reclamation  expenses  as they occur.  During  June 2003,  the Company
          transferred to the insurance company  approximately  $1,800,000 of the
          reclamation  cash deposits that had been presented in previous periods
          as restricted  cash for the reclamation of the Mineral Ridge property.
          The  Company  has  paid an  additional  $356,716  of  premiums  on the
          reclamation  bond  policy  during  2003 with an  obligation  to pay an
          additional  $169,789  subsequent to December 31, 2003.  The Company is
          obligated  to pay $11,311  annually  thereafter  which  amount will be
          expensed during the year incurred.

          Of the total initial  premium of $2,326,505,  $1,796,652  represents a
          Reclamation  Experience  Account which funds are directly available to
          the Company to use for closure, reclamation and remediation activities
          once  they  commence  based on the  existing  known  condition  of the
          Mineral Ridge property.  This amount has been reflected as part of the
          Restricted  Funds-Reclamation  Obligations  asset in the  accompanying
          financial  statements.  The remaining  amount  consists of the initial
          $11,311 annual  insurance  premium which is being  amortized over a 12
          month period  beginning June 1, 2003 and $518,542 which represents the
          portion of the  premium to be  amortized  over the 12 year term of the
          policy. At December 31, 2003, the total current portion of the prepaid
          insurance  premiums  related to this  policy  totaled  $22,718 and the
          long-term portion totaling $475,330.

          The insurance enabled the Company to acquire the necessary reclamation
          bond at a fixed and  discounted  rate for a term of twelve  years.  It
          also allowed the Company the  flexibility  to increase its bond in the
          future to an aggregate limit of $4 million as it moves into Phase 2 of
          its  operations at Mineral Ridge.  With the filing of the  reclamation
          bond,  the Company has begun Phase 1 of its operating  plan to produce
          gold from the mine.  This included the restart of the leaching of gold
          from the existing leach pad which has already commenced.

NOTE 6 -  AMOUNTS DUE TO RELATED PARTIES

          At  various  times  officers  and  shareholders  of the  Company  have
          advanced funds to pay operating, general and administration costs with
          the Company making partial repayments periodically. As of December 31,
          2003,  a total of  $260,241  was  payable  to these  related  parties.
          Interest  has been imputed at a rate of 8% on amounts  outstanding  in
          excess of twelve  months.  As of  December  31,  2003,  total  accrued
          interest of $61,266 has been recognized. These advances along with the
          imputed accrued interest are unsecured and due on demand.

                                      F-28
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 6 -  AMOUNTS DUE TO RELATED PARTIES (Continued)

          The Company  incurred  related party  interest  expense of $21,831 and
          $32,351 for the years ended December 31, 2003 and 2002, respectively.

NOTE 7 -  ACCRUED LIABILITIES

          Accrued liabilities consisted of the following at December 31, 2003:


          Contact Property lease payable (Note 10)                 $  1,744,250
          Contact Property minimum work commitment
            payable (Note 10)                                         1,599,000
          Officers accrued salaries and deferred compensation           494,519
          Accrued bond premium                                          169,789
          Accrued payroll and related expenses                           43,456
          Accrued interest                                               28,411
          Other accrued liabilities                                       6,766
                                                                   ------------

                                                                   $  4,086,191
                                                                   ============

NOTE 8 -  CAPITAL LEASES

          The Company leases certain computer  software and equipment with lease
          terms through July 2006.  Obligations  under these capital leases have
          been recorded in the accompanying  financial statements at the present
          value of future minimum lease payments.

          Obligations under capital leases at December 31, 2003 consisted of the
          following:

          Capital lease payable to Hewlett Packard Financial
          Service Co., dated August 1, 2001, payable at
          $1,596 per month, including taxes and fees and
          interest imputed at 17.18% per annum, maturity
          August 1, 2005, secured partially by certain
          computer equipment                                       $     23,860

          Capital lease payable to CIT Financial Services,
          dated August 21, 2001, payable at $1,409 per
          month, including interest imputed at 20.48% per
          annum, maturity August 5, 2005, secured partially
          by certain computer equipment                                  21,682

          Capital lease payable to Heller Financial Leasing,
          dated July 5, 2001, payable at $1,195 per month,
          including interest imputed at 18.9% per annum,
          maturity July 5, 2006, secured by certain computer
          equipment                                                      32,303
                                                                   ------------

                           Total                                         77,845

                           Less: Current Portion                         34,807
                                                                   ------------

                           Long-term portion                       $     43,038
                                                                   ============

                                      F-29
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 8 -  CAPITAL LEASES (Continued)

          The future  minimum lease  payments under these capital leases and the
          net present value of the future minimum lease payments are as follows:

                   Year Ended
                  December 31,
                  ------------

                      2004                                         $     42,373
                      2005                                               37,724
                      2006                                                8,368
                      2007                                                   --
               2008 and thereafter                                           --
                                                                   ------------

               Total future minimum lease payments                       88,465

               Less: Amount representing interest                        10,620
                                                                   ------------

               Present value of future minimum
                 lease payments                                    $     77,845
                                                                   ============

          The Company recorded depreciation expense of $6,372 and $8,039 for the
          years ended  December 31, 2003 and 2002 for  equipment  under  capital
          leases.

NOTE 9 -  LONG TERM DEBT

          Long term debt consisted of the following at December 31, 2003:

          Note payable to GMAC, dated November 17, 2000,
          payable at $672 per month including interest at
          3.9% per annum through December, 2004, secured by
          a 2001 GMC Sierra truck.                                 $     10,777


          Note payable to GMAC, dated November 17, 2000,
          payable at $672 per month including interest at
          3.9% per annum through December, 2004, secured by
          a 2001 GMC Sierra truck.                                       10,864

          Note payable to GMAC, dated November 17, 2000,
          payable at $599 per month including interest at
          3.9% per annum through December, 2004, secured by
          a 2001 GMC Sierra truck.                                        9,606

          Note payable to GMAC, dated November 17, 2000,
          payable at $598 per month including interest at
          3.9% per annum through December, 2004, secured by
          a 2000 GMC Sierra truck.                                        9,583

          Note payable to Arcadia Financial Ltd., dated
          August 12, 2003, Payable at $468 per month
          including interest at 12% per annum through
          February 2008, secured by a 1999 Chevrolet truck               18,260
                                                                   ------------

          Balance Forward                                          $     59,090
                                                                   ============

                                      F-30
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 9 - LONG TERM DEBT (Continued)

          Balance Forward                                          $     59,090

          Note payable to Komatsu Financial, dated December
          10, 2003, Payable at $1,798 per month through
          December 2006 with no Interest, secured by a
          Komatsu crawler dozer                                          64,722

          Note payable to an individual, dated August 28,
          2001, payable upon demand, including interest at
          15% per annum, unsecured.                                      40,000
                                                                   ------------

                  Total                                                 163,812

                  Less: Current portion of long term debt               105,915
                                                                   ------------

                  Total Long-term debt                             $     57,897
                                                                   ============

          Maturities on long term debt are as follows:

           Year Ended
           December 31,
           ------------

               2004                                                $    105,915
               2005                                                      25,645
               2006                                                      26,161
               2007                                                       5,168
          2008 and thereafter                                               923
                                                                   ------------

                Total                                              $    163,812
                                                                   ============

NOTE 10 - CONVERTIBLE NOTES PAYABLE

          At December 31, 2003, the Company had twelve convertible notes payable
          totaling  $455,000.  These notes  originated  in April 2000 and accrue
          interest at 12% per annum.  Principal  and  interest  are due in 2005,
          five years from the date of issue.  The  principal and interest on the
          notes are  convertible  into  common  stock of the Company at $0.20 to
          $0.30 per share.  As of December 31, 2003,  accrued  interest on these
          convertible notes totaled $241,001.

          The Company  recognized a  beneficial  conversion  feature  expense of
          $92,666 during the year ended December 31, 2000 because the notes were
          convertible immediately. The beneficial conversion feature expense was
          calculated by subtracting the conversion price from the closing market
          price on the note date multiplied by the convertible number of shares.
          If the  principal  and  interest  on the notes  were  converted  as of
          December  31,  2003,  the  Company  would have been  required to issue
          2,993,200  shares of common  stock to the  holders of the  convertible
          notes.

                                      F-31
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 11 - COMMITMENTS AND CONTINGENCIES

          Leases
          ------

          The Company leased its  facilities  under a  non-cancelable  operating
          lease which expired July 31, 2002. During July 2002, a lease extension
          was signed for an  additional  24 months  through July 31,  2004.  The
          monthly rent remains at $2,389 per month. The following is a schedule,
          by years, of the future minimum lease payments under operating leases,
          as of December 31, 2003.

                Year Ended
               December 31,
               ------------

                   2004                                            $     28,668
                   2005                                                  16,723
                                                                   ------------

                       Total                                       $     45,391
                                                                   ============

          In addition,  during 2003, the Company entered into various  operating
          lease  agreements  to rent heavy  equipment  to be used at the Mineral
          Ridge Mineral  Property.  The  equipment  operating  lease  agreements
          provide  for  month to month  rental  payments  totaling  $34,192  and
          provide for the Company to acquire the equipment on unspecified terms.

          Rental  expense for all  operating  leases was $87,915 and $31,967 for
          the years ended December 31, 2003 and 2002, respectively.

          Employment Agreements
          ---------------------

          Effective  May 15,  1998,  the  Company  entered  into  an  Employment
          Agreement  with  Michael  Fitzsimonds.   Pursuant  to  the  Employment
          Agreement,  Mr.  Fitzsimonds  serves as President of the Company.  The
          initial  term of the  Employment  Agreement  was for one (1)  year and
          automatically  renews  for an  additional  one (1)  year  term on each
          successive  annual  anniversary  of the Employment  Agreement,  unless
          terminated  pursuant  to the terms of the  Employment  Agreement.  Mr.
          Fitzsimonds' Employment Agreement provides for $95,000 in total annual
          salary,  of which  $60,000 is to be paid in  bi-monthly  installments,
          with  the  remaining  $35,000  deferred.  In the  event  the  Board of
          Directors elects to terminate the Employment  Agreement without cause,
          the Company must pay a severance to Mr.  Fitzsimonds  equal to one (1)
          year's then-current  salary and one (1) year's then-current  benefits.
          The Board of Directors must provide Mr.  Fitzsimonds thirty (30) days'
          notice of its intent to terminate Mr. Fitzsimonds'  employment without
          cause. In lieu of thirty (30) days' notice, the Board of Directors may
          elect to provide Mr. Fitzsimonds an

                                      F-32
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 11 - COMMITMENTS AND CONTINGENCIES

          Employment Agreements (Continued)
          ---------------------------------

          additional  thirty (30) days of salary and benefits.  In the event 40%
          or more of the  outstanding  shares of the  Company  are  acquired  by
          someone  other than the  Company or Mr.  Fitzsimonds,  the  Employment
          Agreement terminates immediately.  Upon this type of termination,  the
          Company  must  pay a  severance  to Mr.  Fitzsimonds  equal to two (2)
          years' then-current  salary and two (2) years' then-current  benefits.
          Mr.  Fitzsimonds  may elect to take a cash  payment in lieu of his two
          (2) years' then-current benefits.

          Effective  May 15,  1998,  the  Company  entered  into  an  Employment
          Agreement with Steven Craig. Pursuant to the Employment Agreement, Mr.
          Craig  serves  as  Vice-President  of  Corporate  Development  of  the
          Company.  The initial term of the Employment Agreement was for one (1)
          year and  automatically  renews for an additional one (1) year term on
          each successive annual anniversary of the Employment Agreement, unless
          terminated  pursuant  to the terms of the  Employment  Agreement.  Mr.
          Craig's  Employment  Agreement  provides  for $85,000 in total  annual
          salary,  of which  $60,000 is to be paid in  bi-monthly  installments,
          with  the  remaining  $25,000  deferred.  In the  event  the  Board of
          Directors elects to terminate the Employment  Agreement without cause,
          the Company  must pay a severance to Mr. Craig equal to one (1) year's
          then-current  salary and one (1)  year's  then-current  benefits.  The
          Board of Directors  must provide Mr. Craig thirty (30) days' notice of
          its intent to terminate Mr. Craig's  employment without cause. In lieu
          of thirty  (30)  days'  notice,  the Board of  Directors  may elect to
          provide  Mr.  Craig an  additional  thirty  (30)  days of  salary  and
          benefits.  In the event 40% or more of the  outstanding  shares of the
          Company are acquired by someone  other than the Company or Mr.  Craig,
          the Employment  Agreement  terminates  immediately.  Upon this type of
          termination,  the Company  must pay a severance  to Mr. Craig equal to
          two (2) years'  then-current  salary  and two (2) years'  then-current
          benefits.  Mr.  Craig may elect to take a cash  payment in lieu of his
          two (2) years' then-current benefits.

          Effective  September 1, 2002,  the Company  entered into an Employment
          Agreement with Joe Risley.  Pursuant to the Employment Agreement,  Mr.
          Risley serves as Junior Mining  Engineer of the Company at the Mineral
          Ridge Mine. Mr. Risley's Employment  Agreement provides for $40,000 in
          total annual salary,  which is to be paid at regular payroll  periods.
          In the event the Company elects to terminate the Employment  Agreement
          without cause,  the Company must provide Mr. Risley fifteen (15) days'
          written notice. If the Company  requests,  Mr. Risley will continue to
          perform  his duties and be paid his  regular  salary up to the date of
          the  termination.  If  Mr.  Risley  terminates,   without  cause,  his
          employment upon fifteen (15) days' written notice to the Company,  Mr.
          Risley  may be  required  to  perform  his duties and will be paid the
          regular  salary to the date of  termination  but  shall not  receive a
          severance allowance.

                                      F-33
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

          Mineral Property Lease - Borealis Property
          ------------------------------------------

          The Company leases mineral property in Mineral County,  Nevada,  known
          as the  Borealis  Property.  The lease is  cancelable  within 90 days.
          Future  lease  payments  are  at a  rate  of  $8,000  per  month  with
          adjustments based upon the consumer price index, with no expiration of
          the lease  specified.  As  discussed in Note 12, Dr. John W. Whitney a
          shareholder of the Company,  is one of the  individual  lessors of the
          Borealis Property.

          Mineral Property Lease - F.W. Lewis Contact Property
          ----------------------------------------------------

          The Company leases mining  property in Elko County,  Nevada,  known as
          the Contact Property,  as part of a exploration license agreement (See
          Note 3). During  February 2003,  the parties signed a first  amendment
          extending  the term of the  exploration  license to December 31, 2007.
          The  Company is to continue  making  exploration  license  payments of
          $2,500  per  month,  stock  distributions  of  350,000  shares  of the
          Company's common stock on January 1 and July 1 of each year and yearly
          minimum  work  commitment  of  $100,000.  On May 7, 2003,  the parties
          signed a second  amendment that clarified that  expenditures  for work
          performed by the Company on either the Lewis property or the adjoining
          International Enexco, Ltd. property shall be applied to Lewis' minimum
          work commitment.  Additionally,  the second  amendment  clarified that
          Lewis holds a Production Royalty with respect to the Enexco Property.

          At December 31, 2003, the Company had a total  liability of $2,968,750
          on the lease which consists of $1,744,250 of property lease  payments,
          $1,217,000  of  minimum  work  commitment  expenditures  and $7,500 in
          monthly   exploration   license  payments.   Since  the  minimum  work
          commitment  liability  associated with the International  Enexco, Ltd.
          lease exceeds the minimum work commitment  liability  pursuant to this
          the  F.W.  Lewis  agreement  and  the  required  expenditures  for the
          adjoining  International Enexco, Ltd property may be applied to Lewis'
          minimum  work  commitment,  the F.W.  Lewis  minimum  work  commitment
          liability has not been  recognized as an  additional  liablility.  The
          lease is cancelable within thirty days.

          Future minimum cash lease payments are as follows:

                   Year Ended
                  December 31,
                  ------------

                      2004                                         $     30,000
                      2005                                               30,000
                      2006                                               30,000
                      2007                                               30,000
               2008 and thereafter                                           --
                                                                   ------------

                      Total                                        $    120,000
                                                                   ============

                                      F-34
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

          Mineral  Property  Lease -  International  Enexco  Limited  -  Contact
          ----------------------------------------------------------------------
          Property
          --------

          The Company also leases mineral property in Elko County, Nevada, known
          as the Contact  Property  as part of a joint  venture  agreement  with
          International Enexco (See Note 3). The lease includes monthly payments
          of  $4,000  and  minimum  work in  qualifying  expenses  ranging  from
          $550,000-$650,000 for exploration, development, or mining. At December
          31, 2003,  the Company was current with the monthly lease payments and
          had a  liability  totaling  $1,599,000  in  unsatisfied  minimum  work
          commitments.  The lease is cancelable within thirty days. Future lease
          payments as of December 31, 2003 total  $48,000  through  December 31,
          2004 at which time the lease expires.

          Royalty Agreement - Mary Mining Company, Inc.
          ---------------------------------------------

          As part of the purchase of the Mineral Ridge Mine, the Company assumed
          a net smelter returns royalty agreement with Mary Mining Company, Inc.
          The  agreement  calls  for a  production  royalty  of the net  smelter
          returns. The royalty percentage rate is based on the price of gold per
          troy ounce.

                                                                     Royalty
          Price of Gold per Troy Ounce                           Percentage Rate

              Less than or equal to $300 U.S.                          2.5%
              Greater than $300, but less than or equal to $325          3%
              Greater than $325, but less than or equal to $350        3.5%
              Greater than $350, but less than or equal to $375          4%
              Greater than $375, but less than or equal to $400        4.5%
              Greater than $400, but less than or equal to $500          5%
              Greater than $500, but less than or equal to $600        5.5%
              Greater than $600, but less than or equal to $800          6%
              Greater than $800, but less than or equal to $1,000        7%
              Greater than $1,000                                        8%

          The Company is required  to pay a minimum  advance  royalty of $60,000
          per year due July of each year,  which shall be credited  cumulatively
          against the production royalty payments.

                                      F-35
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

          Environmental Obligations
          -------------------------

          As part of the purchase of the Mineral Ridge Mine and related  assets,
          the  Company  is  responsible  for  future  closure,  reclamation  and
          remediation  costs  (See Notes 1 and 3). The  Company  has  prepared a
          reclamation  plan for  $2,693,000  which was  approved  by the  Nevada
          Department  of  Environmental   Protection  and  the  Bureau  of  Land
          Management  in  May  2003.  The  estimated   future   reclamation  and
          remediation   cost  and  related  assets  and  liabilities  have  been
          recognized  in the financial  statements  in accordance  with SFAS 143
          (See Note 4).

          The Company has obtained a reclamation  surety bond in connection with
          this obligation (See Note 5).

          Common Stock Purchase Agreement
          -------------------------------

          On November 12, 2002, the Company entered into a common stock purchase
          agreement  with Fusion  Capital  Fund II, LLC.  Under the common stock
          purchase  agreement,  Fusion Capital committed to purchase up to $12.0
          million of our common stock over a forty-month  period that  commences
          when a  registration  statement  filed  with the U.S.  Securities  and
          Exchange  Commission  becomes  effective.  Pursuant to the  agreement,
          Fusion Capital is to purchase $15,000 of the Company's common stock on
          each  trading  day  during the term of the  agreement,  subject to the
          Company's right to increase,  decrease or suspend  purchases by Fusion
          Capital.  The  purchase  price for each  purchase  of shares of common
          stock will be equal to a price based upon the future  market  price of
          the common  stock  without  any fixed  discount  to the market  price.
          However,  Fusion  Capital does not have the right and is not obligated
          to purchase the Company's  stock in the event that the purchase  price
          per share of common stock is below $0.10.  The Company  intends to use
          the proceeds  from the sale of the common stock to Fusion  Capital for
          working capital and general corporate purposes. In connection with the
          common  stock  purchase   agreement,   the  Company  issued  1,587,302
          restricted shares of common stock valued at $300,000 to Fusion Capital
          as a commitment fee and 250,000  restricted  shares of stock valued at
          $46,250 as  reimbursement  for  certain  expenses  incurred  by Fusion
          Capital. Additionally, Fusion Capital paid cash of $37,000 for 200,000
          restricted   shares  of  stock  in  November  2002.  The  registration
          statement was declared effective in November 2003 and through December
          31, 2003, the Company has issued  6,574,230 shares of common stock for
          cash proceeds of $2,060,000 pursuant to the Fusion Capital agreement.

                                      F-36
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

          Litigation
          ----------

          On March 5, 2003,  William F. Matlack  filed a complaint in the Second
          Judicial  District  Court in and for  Washoe  County,  Nevada  against
          Golden Phoenix. The complaint alleges,  among other things,  breach of
          contract,  dealing in bad faith, fraud, fraudulent  misrepresentation,
          negligence, negligent misrepresentation,  breach of fiduciary duty and
          breach of covenant of dealing fairly and in good faith.  The complaint
          seeking (i) economic damages in excess of $10,000,  (ii)  compensatory
          damages in excess of $10,000,  (iii) punitive damages at the amount of
          $500,000, (iv) interest on economic damages at the rate established by
          law and (v) reasonable fees and costs related to the action.  On April
          16,  2003,  Golden  Phoenix  served  on Mr.  Matlack a motion to quash
          service of process.  Golden Phoenix intends to vigorously  defend this
          matter.  On July 2,  2003,  Golden  Phoenix  filed its  response  with
          respect to this complaint.  On April 6, 2004 Golden Phoenix  Minerals,
          Inc.  and Mr.  Matlack  agreed to a dismissal  with  prejudice  of the
          lawsuit and a mutual release of all claims,  with each side to pay its
          own legal fees and costs.

NOTE 12 - RELATED PARTY TRANSACTIONS

          The Company  leases mineral  property  known as the Borealis  Property
          from the  Borealis  Partnership,  which  consists  of  three  separate
          individuals  who combined  their  separate  properties  to  facilitate
          leasing the entire  mineralized zone covered by the three  properties.
          Dr. Whitney is an underlying owner of the Borealis project. During the
          years ended  December 31, 2003 and 2002, the Company has made payments
          of $6,009 and $18,620,  respectively  to Dr.  Whitney for a portion of
          its lease obligation on the Borealis property. (See Note 11).

          The Company has a consulting  agreement  with Whitney & Whitney  which
          has a term of three years beginning March 1, 1999 and has continued on
          a  month-to-month  basis upon  expiration  of the  initial  term.  The
          consulting   agreement   calls  for   Whitney  &  Whitney  to  provide
          metallurgical,  geological  and plant design  services  related to the
          Company's  projects along with assistance  related to general business
          and  financial  matters.  The  agreement  also calls for  payments the
          Company  of a minimum  of $2,500  per  month in  restricted  shares of
          common stock.  The agreement may be terminated by either party upon 90
          days  written  notice.  The amount of  services  provided by Whitney &
          Whitney were $154,599 for 2003 and $239,268 for 2002. The President of
          Whitney & Whitney, Inc., Dr. Whitney, is a significant  shareholder of
          the Company.

                                      F-37
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 13 - OUTSTANDING STOCK OPTIONS

          The Company applies  Accounting  Principles  Board ("APB") Opinion 25,
          "Accounting    for   Stock   Issued   to   Employees,"   and   related
          Interpretations  in accounting  for all stock option plans.  Under APB
          Opinion 25,  compensation cost is recognized for stock options granted
          to  employees  when the option  price is less than the market price of
          the underlying common stock on the date of grant.

          FASB Statement 123 as amended by FASB Statement 148,  "Accounting  for
          Stock-Based  Compensation",  requires the Company to provide  proforma
          information  regarding  net  income  and net  income  per  share as if
          compensation  costs for the  Company's  stock  option  plans and other
          stock awards had been  determined  in  accordance  with the fair value
          based method prescribed.  The Company estimates the fair value of each
          stock  award at the  grant  date by  using  the  Black-Scholes  option
          pricing model with the following weighted average assumptions used for
          grants  during  2003:   dividend  yield  of  zero  percent;   expected
          volatility of 101% risk-free interest rate of 3.5 percent percent; and
          expected life of 5 years.

          Had  compensation  cost for the  Company's  stock  options  granted to
          officers,  directors,  and employees been determined based on the fair
          value at the grant date under the  accounting  provisions  of SFAS No.
          123 and SFAS 148 the Company would have recorded an additional expense
          of $582,367. Also under these same provisions,  the Company's net loss
          would have been changed by the pro forma amounts indicated below:

                                                     December 31,
                                            -----------------------------
                                                2003             2002
                                            ------------     ------------
          Net loss:
            As reported                     $ (2,966,060)    $ (4,608,948)
            Pro forma                       $ (3,548,427)    $ (4,804,249)

          Basic income (loss) per share:
            As reported                     $      (0.03)    $      (0.07)
            Pro forma                       $      (0.04)    $      (0.07)

          A summary  of the status of the  Company's  stock  option  plans as of
          December 31, 2003 and changes during the year is presented below:

                                                              Weighted
                                                               Average
                                               Shares       Exercise Price
                                            ------------     ------------
          Outstanding, December 31, 2002       6,196,764     $       0.19

              Granted                          2,064,000             0.37
              Canceled/Expired                (2,030,049)            0.22
              Exercised                               --               --
                                            ------------     ------------

          Outstanding, December 31, 2003       6,230,715     $       0.24
                                            ============     ============

          Exercisable, December 31, 2003       6,230,715     $       0.24
                                            ============     ============

                                      F-38
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 13 - OUTSTANDING STOCK OPTIONS (Continued)

<TABLE>
<CAPTION>
                                           Outstanding                    Exercisable
                             ------------------------------------   ------------------------
                                            Weighted
                                             Average    Weighted                   Weighted
                               Number       Remaining   Average       Number       Average
                             Outstanding   Contractual  Exercise    Exercisable    Exercise
          Exercise Prices    at 12/31/03      Life       Price      at 12/31/03      Price
<S>                           <C>             <C>     <C>            <C>          <C>
          $     0.15          2,465,715        (a)    $     0.15     2,465,715    $     0.15
                0.20          1,701,000       2.25          0.20     1,701,000          0.20
                0.37          2,064,000       5.68          0.37     2,064,000          0.37
                              ---------       ----    ----------     ---------    ----------
          $ 0.15 - 0.37       6,230,715       4.13    $     0.19     6,230,715    $     0.19
                              =========       ====    ==========     =========    ==========
</TABLE>

          (a) The term of these  options is from the grant date until six months
          after all loans,  advances  or other  debts due to  employees  granted
          these options have been paid in full.

          During the year ended December 31, 2003, the Company granted 1,065,352
          stock options to various outside  consultants  for services  rendered.
          These  options were issued with exercise  prices  ranging from $0.10 -
          $0.25  per  share.  All of these  options  vest  immediately  and have
          maturity dates of two and three years.

NOTE 14 - OUTSTANDING STOCK WARRANTS

          A summary of the status of the Company's stock warrants as of December
          31, 2003 and changes during the year is presented below:

                                                                Weighted
                                                                 Average
                                                Shares       Exercise Price
                                             -----------       ---------
          Outstanding, December 31, 2002      25,883,856       $    0.11

              Granted                          1,065,352            0.22
              Canceled / Expired              (2,525,000)           0.10
              Exercised                      (11,779,305)           0.10
                                             -----------       ---------
          Outstanding, December 31, 2003      12,644,903       $    0.13
                                             ===========       =========

                                      F-39
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 14 - OUTSTANDING STOCK WARRANTS (Continued)

          The following  summarizes  the exercise price per share and expiration
          date of the Company's outstanding warrants to purchase common stock at
          December 31, 2003:

          Expiration Date                  Price             Number
          ---------------                 ------           ----------
           2004                           $0.100            5,442,900
           2004                            0.150            6,093,671
           2004                            0.085              117,647
           2005                            0.150               65,333
           2006                             0.25              925,352
                                                           ----------
                                                           12,644,903
                                                           ==========

NOTE 15 - SUBSEQUENT EVENTS

          Subsequent  to December  31,  2003,  the Company has issued  2,750,000
          shares of common stock for stock  options and warrants  exercised  for
          cash proceeds of $275,000,  40,932 shares of common stock for services
          rendered valued at $15,183,  and 2,768,383  shares of common stock for
          cash proceeds of $906,340  related to the Fusion  Capital common stock
          purchase agreement discussed in Note 11.

          Subsequent  to December  31, 2002  through May 10,  2003,  the Company
          granted 925,352 warrants. These warrants were granted as inducement to
          exercise  warrants  previously  outstanding.  For every five  warrants
          exercised,  the warrant holder  received one warrant  exercisable  for
          three  years with an  exercise  price of $0.25 per share.  The warrant
          holders exercised  9,740,805 warrants for cash process of $938,914 and
          application of $7,000 in debt as a result of this inducement.

          Subsequent  to December 31,  2003,  the Company has granted to certain
          employees options to acquire a total of $38,267 shares of common stock
          at an exercise price of $0.44 per share.  The options vest immediately
          and have a term of 5 years.

          Also subsequent to December 31, 2003, the Company has acquired various
          assets  for use in its  general  operations  as well as for use at its
          various  mineral  properties.  Of these  assets  acquired,  a total of
          $85,009 was expended or incurred for the  acquisition  of 4 pierces of
          heavy equipment.

          The Company  has entered  into two  agreements  regarding  the Ashdown
          gold-molybdenum  project. That mineral property is located in Humboldt
          County, Nevada and consists of 196 unpatented mining claims. The first
          agreement  was  signed  on  September  19,  2003 and was  subsequently
          terminated  prior to December  31, 2003 as the funding  terms were not
          met by the other party to the agreement.  Subsequently, on February 5,
          2004,  the Company  entered into a joint  venture  agreement  with the
          owner of the property wherein the Company has the ability to

                                      F-40
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2003 and 2002


NOTE 15 - SUBSEQUENT EVENTS (Continued)

          acquire an  undivided  vested 60% interest in the project in either of
          two ways: by placing the project into  profitable  production  using a
          small pilot mill,  or spending $5 million  toward  development  of the
          project.  The  Company  has four years to  complete  vesting  into the
          project.  Upon signing the agreement Letter,  the Company paid $50,000
          to the  property  owner,  and  beginning  in three  months  after  the
          signing, the Company is obligated to pay $5,000 per month until a cash
          distribution through profitable production is achieved.

                                      F-41

<PAGE>


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

      a)    Previous Independent Accountants

            (1) (i) Effective February 25, 2003, Golden Phoenix confirmed with
is auditors, Albright, Persing & Associates, Ltd. ("Albright Persing") that the
firm would no longer be representing Golden Phoenix as its accountants. As of
that date, Albright Persing informed Golden Phoenix that it would decline to
stand for re-election as the Company's accountants.

            (ii) Albright Persing's report on Golden Phoenix's financial
statements for the Previous two fiscal years did not contain an adverse opinion
or a disclaimer of opinion, and was not qualified as to uncertainty, audit
scope, or accounting principles: however, the report was modified as to
uncertainty to include an explanatory paragraph wherein Albright Persing
expressed substantial doubt about the Company's ability to continue as a going
concern and an explanatory paragraph with respect to the reclamation
liabilities.

            (iii) The change of independent accountants was approved by the
Company's Board of Directors on February 25, 2003.

            (iv) During Golden Phoenix's fiscal year 2002, as well as the
subsequent interim period through February 25, 2003, there were no disagreements
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures, which disagreements if not resolved
to their satisfaction would have caused them to make reference in connection
with their opinion to the subject matter of the disagreement.

      (2) During Golden Phoenix's most recent two years, as well as the
subsequent interim period through February 25, 2003, Albright Persing did not
advise the Company of any of the matters identified in paragraph (a)(1)(iv)(B)
of Item 304 of Regulation S-B.

      (3) Golden Phoenix requested Albright Persing to furnish a letter
addressed to the SEC, stating whether it agrees with the statements made by the
Registrant and, if not, stating the respects in which it does not agree.

      b)    New Independent Accountants

      On February 25, 2003, Golden Phoenix engaged HJ & Associates, LLC ("HJ &
Associates") as its principal accountant to audit the Company's financial
statements. Golden Phoenix did not consult with HJ & Associates on any matters
described in paragraphs (a)(1)(i) and (a)(1)(ii) of Regulation S-B during the
Company's fiscal years 2001 and 2002 or any subsequent interim period prior to
engaging HJ & Associates.

ITEM 8A.  CONTROLS AND PROCEDURES

      ANNUAL EVALUATION OF THE COMPANY'S DISCLOSURE CONTROLS AND INTERNAL
CONTROLS. Within the 90 days prior to the date of this Annual Report on Form
10-QSB, the Company evaluated the effectiveness of the design and operation of
its "disclosure controls and procedures" (Disclosure Controls), and its
"internal controls and procedures for financial reporting" (Internal Controls).
This evaluation was done under the supervision and with the participation of
management, including our Chief Executive Officer (CEO)/Chief Financial Officer
(CFO). Rules adopted by the SEC require that in this section of the Annual
Report we present the conclusions of the CEO/CFO about the effectiveness of our
Disclosure Controls and Internal Controls based on and as of the date of the
Controls Evaluation.

      CEO/CFO CERTIFICATION. Appearing immediately following the Signatures
section of this Annual Report there are two separate forms of "Certifications"
of the CEO/CFO. The second form of Certification is required in accord with
Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certification).
This section of the Annual Report which you are currently reading is the
information concerning the Controls Evaluation referred to in the Section 302
Certifications and this information should be read in conjunction with the
Section 302 Certifications for a more complete understanding of the topics
presented.


                                       27
<PAGE>

      DISCLOSURE CONTROLS AND INTERNAL CONTROLS. Disclosure Controls are
procedures that are designed with the objective of ensuring that information
required to be disclosed in our reports filed under the Securities Exchange Act
of 1934 (Exchange Act), such as this Annual Report, is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's (SEC) rules and forms. Disclosure Controls are also
designed with the objective of ensuring that such information is accumulated and
communicated to our management, including the CEO/CFO, as appropriate to allow
timely decisions regarding required disclosure. Internal Controls are procedures
which are designed with the objective of providing reasonable assurance that (1)
our transactions are properly authorized; (2) our assets are safeguarded against
unauthorized or improper use; and (3) our transactions are properly recorded and
reported, all to permit the preparation of our financial statements in
conformity with generally accepted accounting principles.

      SCOPE OF THE CONTROLS EVALUATION. The CEO/CFO evaluation of our Disclosure
Controls and our Internal Controls included a review of the controls' objectives
and design, the controls' implementation by the Company and the effect of the
controls on the information generated for use in this Annual Report. In the
course of the Controls Evaluation, we sought to identify data errors, controls
problems or acts of fraud and to confirm that appropriate corrective action,
including process improvements, were being undertaken. This type of evaluation
will be done on a quarterly basis so that the conclusions concerning controls
effectiveness can be reported in our Quarterly Reports on Form 10-QSB and Annual
Report on Form 10-KSB. The overall goals of these various evaluation activities
are to monitor our Disclosure Controls and our Internal Controls and to make
modifications as necessary; our intent in this regard is that the Disclosure
Controls and the Internal Controls will be maintained as dynamic systems that
change (including with improvements and corrections) as conditions warrant.

      In accord with SEC requirements, the CEO/CFO notes that, since the date of
the Controls Evaluation to the date of this Annual Report, there have been no
significant changes in Internal Controls or in other factors that could
significantly affect Internal Controls, including any corrective actions with
regard to significant deficiencies and material weaknesses.

      CONCLUSIONS. Based upon the controls evaluation, our CEO/CFO has concluded
that, subject to the limitations noted above, our Disclosure Controls are
effective to ensure that material information relating to the Company is made
known to management, including the CEO/CFO, particularly during the period when
our periodic reports are being prepared, and that our internal controls are
effective to provide reasonable assurance that (1) our transactions are properly
authorized, (2) our assets are safeguarded against unauthorized or improper use,
and (3) our transactions are properly recorded and reported, all to permit the
preparation of our financial statements in conformity with generally accepted
accounting principals.



                                       28
<PAGE>


                                    PART III


ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The following are the directors and executive officers of Golden Phoenix
as of April 1, 2004:

   NAME                              AGE         POSITION
   Michael R. Fitzsimonds            48          President and Director
   Steven D. Craig                   56          Vice President, Corporate
                                                 Secretary and Director
   Allan J. Marter                   56          Director
   David A. Caldwell                 43          Director
   Ronald L. Parratt                 55          Director

      The officers and directors who have served in their stated capacities
since the inception of the Company are Michael Fitzsimonds and David Caldwell.
Mr. Craig became secretary and a director in September 1998, Mr. Marter, became
a director in February 1998 and Mr. Parratt became a director in July 2002. For
directors, the term of office is until the next annual meeting of shareholders
and their successors are duly elected and qualified. For officers, unless
terminated earlier by the Board of Directors, the term of office is until the
next annual meeting of the Board of Directors, presently scheduled to be held
immediately following the annual meeting of the shareholders.

      MICHAEL R. FITZSIMONDS. Mr. Fitzsimonds is President, CEO and Chairman of
the Board of Directors of Golden Phoenix Minerals, Inc. and has served in his
capacity since 1997. Mr. Fitzsimonds is responsible for all administrative and
corporate finance activities at Golden Phoenix. Mr. Fitzsimonds also directs the
Company's Mineral Ridge operations and development work including resource
evaluations and permitting requirements. He has more than 26 years of mining
industry experience as a geological engineer, including experience evaluating
complex gold deposits. From 1987 to 1997, Mr. Fitzsimonds served as Project
Services Manager and Senior Geologist for Santa Fe Pacific Gold, Inc., and was
responsible for the company's initial resource evaluations and due diligence of
all mine operation projects and acquisitions worldwide. Mr. Fitzsimonds has
experience in many aspects of the minerals industry, ranging from grass roots
exploration and project development to mine start-up. Mr. Fitzsimonds was a
member of the startup team for the Alligator Ridge Mine in White Pine County,
Nevada, his primary responsibilities included development of new reserves for
the mine, grade control, reserve analysis, managed the mine assay laboratory,
and worked with engineering on the mine development. As part of his duties while
working with Santa Fe Pacific Gold for eleven years, Mr. Fitzsimonds did all of
the preliminary reserve estimates for all of the projects that Santa Fe Pacific
Gold made into mines in Nevada. As part of the project services group for Santa
Fe Pacific Gold, Mr. Fitzsimonds worked as the liaison between mine development
and exploration to assist in the development of these projects. Mr. Fitzsimonds
earned his B. Sc. in Geological Engineering, Mining and Exploration from the
University of Arizona.

      STEVEN D. CRAIG. Mr. Craig is Vice President, Corporate Secretary and a
Director and has served in his capacity since 1998. He is an experienced
economic geologist specializing in the discovery of ore deposits and building
exploration teams to facilitate discoveries. Mr. Craig has more than 30 years of
diversified exploration experience including, 7 years with Golden Phoenix and
the prior 23 years with Kennecott Exploration Company, and its affiliates, as
manager of a gold exploration team headquartered in Reno, Nevada. His
international experience includes gold exploration in New Guinea, South America
and Mexico. Mr. Craig earned his M.S. in Economic Geology from Colorado State
University. His responsibilities at Golden Phoenix include directing of the
Company's exploration program and assisting in administrative functions.

      ALLAN J. MARTER. Mr. Marter is a Director of Golden Phoenix and has served
in his capacity since 1998. He is Senior Vice President and Chief Financial
Officer of Golden Star Resources Ltd., Denver, Colorado, where he has served for
the past four years. Prior to that, Mr. Marter was President of Waiata
Resources. Mr. Marter has more than 25 years experience of financial management
in the mining industry including as CFO and a Director of a number of small to
mid-sized mining and exploration companies, including in Denver and Vancouver,
Canada.

      DAVID A. CALDWELL. Mr. Caldwell is a Director of Golden Phoenix and has
served in his capacity since 1997. Mr. Caldwell has more than 18 years
experience as a geologist and geophysicist specializing in the discovery,
delineation and economic evaluation in gold exploration, base metal and sulfur.
Mr. Caldwell is Senior Geologist for Nevada Pacific Gold Corporation, Elko,
Nevada, which he co-founded in 1997. Prior to that, Mr. Caldwell has also served
in a senior management role, and has had roles in project management and
development at Santa Fe Pacific Gold Corporation and the Gold Fields Mining
Company.


                                       29
<PAGE>

         RONALD L. PARRATT.  Mr. Parratt is a Director of Golden Phoenix and has
served in his capacity since 2001. Mr. Parratt has more than 30 years experience
as a geologist,  exploration  manager and  developer  of gold  deposits in North
America.  Mr.  Parratt is  currently  President of AuEx,  LLC, a  non-affiliated
private mineral  exploration  company.  For the past five years, Mr. Parratt has
served as Exploration Manager for the Homestake Mining Company.  Until 1997, Mr.
Parratt served as Vice  President of  Exploration  for the Santa Fe Pacific Gold
Corporation,  where he was responsible for intensive  exploration  activities in
the U.S., Brazil and Central Asia.  During this tenure,  Mr. Parratt oversaw the
exploration and  development of 15 million ounces of gold reserves.  Mr. Parratt
earned his M.S. degree in Economic Geology from Purdue  University.  Mr. Parratt
is currently serving on Nevada's Commission on Mineral Resources.

DIRECTORS

      Our Board of Directors consists of five seats. Directors serve for a term
of one year and stand for election at our annual meeting of stockholders.
Pursuant to our Bylaws, a majority of directors may appoint a successor to fill
any vacancy on the Board of Directors. Michael R. Fitzsimonds, our President,
and Steven D. Craig, our Vice-President and Secretary, are also executive
officers of Golden Phoenix.

COMMITTEES

      The Board of Directors has set up three committees as part of the
compliance with new reporting regulations that were enacted during 2002 under
the Oxley-Sarbanes Act. The following is a list of committees that are presently
active and staffed by independent directors of the company.

COMMITTEE                     CHAIRPERSON        MEMBERS

Audit Committee               Allan Marter       Ronald Parratt, David Caldwell
Compensation Committee        Allan Marter       Ronald Parratt, David Caldwell
Governance Committee          Ronald Parratt     Allan Marter, David Caldwell

      The Board of Directors has determined that Mr. Marter is an Audit
Committee financial expert and that he is "independent" under the securities
Exchange Act of 1934.

COMPENSATION OF DIRECTORS

CASH COMPENSATION. At the present time the Board of Directors is not compensated
in cash.

      SHARE-BASED COMPENSATION. The Board of Directors is compensated $500 per
meeting that is paid in restricted stock valued at the average price for the
month that the meeting occurs. The Board of Directors is also allocated stock
options on a yearly basis that have a three-year expiration limit.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES ACT OF 1934

      Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers, and persons who own more than 10% of a
registered class of our equity securities to file with the Securities and
Exchange commission initial reports of ownership and reports of changes in
ownership of Common Stock and other of our equity securities. Officers,
directors and greater than 10% shareholders are required by SEC regulations to
furnish us copies of all Section 16(a) forms they file.

      Based on available information, we believe that all filings with respect
to Section 16(a) are now current.

CODE OF ETHICS

      Golden Phoenix has adopted a formal code of ethics that applies to our
principal executive officer and principal accounting officer. Our Code of Ethics
is attached to this filing.


                                       30
<PAGE>

ITEM 10.  EXECUTIVE COMPENSATION

      The following table sets forth information as to the compensation of the
Chief Executive Officer whose compensation for the year ended December 31, 2003
did not exceeded $100,000:

<TABLE>
<CAPTION>

                                 ANNUAL COMPENSATION                           LONG TERM COMPENSATION
                                                                    AWARDS                           PAYOUTS

                                                                                       SECURITIES
                                                                                       UNDERLYING
NAME AND                                                     OTHER ANNUAL   RESTRICTED  OPTIONS/     LTIP
PRINCIPAL                        SALARY           BONUS      COMPENSATION   STOCK        SARS       PAYOUTS      ALL OTHER
POSITION              YEAR        ($)              ($)           ($)        AWARD(S)      (#)         ($)      COMPENSATION
   (A)                (B)         (C)              (D)           (E)         (F)          (G)         (H)           (I)
---------------------------------------------------------------------------------------------------------------------------
<S>                  <C>      <C>                   <C>         <C>          <C>        <C>          <C>            <C>
Michael               2003    $95,000(1)            --            --          --          --          --             --
Fitzsimonds, CEO      2002    $95,000(2)            --            --          --          --          --             --
                      2001    $95,000(3)            --            --          --                      --             --
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   Of the $95,000 in 2003 annual compensation, $35,000 was accrued at
      December 31, 2003 and remains unpaid.

(2)   Of the $95,000 in 2002 annual compensation, $35,000 was accrued at
      December 31, 2002 and remains unpaid.

(3)   Of the $95,000 in 2001 annual compensation, $35,000 was accrued at
      December 31, 2001 and remains unpaid.

      There is no employee that was paid $100,000 per year in cash compensation.
An executive compensation contract for the payment of salary was initiated in
May of 1998. We have agreed to pay Mr. Fitzsimonds the sum of $60,000 per year
in cash compensation and deferred compensation of $35,000.

<TABLE>
<CAPTION>

OPTION GRANTS IN LAST FISCAL YEAR

                           NUMBER OF        % OF TOTAL
                           SECURITIES       GRANTED TO
                           UNDERLYING      EMPLOYEES IN      EXERCISE OR
NAME                    OPTIONS GRANTED     FISCAL YEAR       BASE PRICE     EXPIRATION DATE
--------------------------------------------------------------------------------------------
<S>                          <C>               <C>               <C>             <C>    <C>             <C>
Michael Fitzsimonds            None               0%              --               --
--------------------------------------------------------------------------------------------

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES

OPTIONS EXERCISED:

                                 SHARES ACQUIRED
NAME                             ON EXERCISE(#)           VALUE REALIZED
------------------------------------------------------------------------
Michael R. Fitzsimonds           None                     --
------------------------------------------------------------------------



OPTIONS UNEXERCISED:

----------------------------------------------------------------------------------------------------------------------
                                                                                             VALUE OF UNEXERCISED
                                               NUMBER OF SECURITIES UNDERLYING               IN-THE-MONEY OPTIONS
                                               UNEXERCISED OPTIONS AT 12/31/03                    AT 12/31/03
NAME                                           EXERCISABLE          UNEXERCISED        EXERCISABLE         UNEXERCISED
Michael R. Fitzsimonds                           2,818,940          2,818,940           $539,741              $539,741
----------------------------------------------------------------------------------------------------------------------

</TABLE>


                                       31
<PAGE>

STOCK OPTION PLAN

      In April 1998, the Board of Directors approved the Golden Phoenix
Minerals, Inc. Stock Option Incentive Plan, under which employees and directors
of the Company are eligible to receive grants of stock options. Golden Phoenix
has reserved a total of 1,000,000 shares of common stock under the Stock Option
Incentive Plan. The plan is presently administered by Golden Phoenix's Chief
Executive Officer. Subject to the provisions of the Stock Option Incentive Plan,
the Board of Directors has full and final authority to select the individuals to
whom options will be granted, to grant the options, and to determine the terms
and conditions and the number of shares issued pursuant thereto.

EMPLOYMENT AGREEMENTS

      Effective May 15, 1998, Golden Phoenix entered into an Employment
Agreement with Michael Fitzsimonds. Pursuant to the Employment Agreement, Mr.
Fitzsimonds serves as President of Golden Phoenix. The initial term of the
Employment Agreement was for one (1) year and automatically renews for an
additional one (1) year term on each successive annual anniversary of the
Employment Agreement, unless terminated pursuant to the terms of the Employment
Agreement. Mr. Fitzsimonds' Employment Agreement provides for $95,000 in total
annual salary, of which $60,000 is to be paid in bi-monthly installments, with
the remaining $35,000 deferred. In the event the Board of Directors elects to
terminate the Employment Agreement without cause, Golden Phoenix must pay a
severance to Mr. Fitzsimonds equal to one (1) year's then-current salary and one
(1) year's then-current benefits. The Board of Directors must provide Mr.
Fitzsimonds thirty (30) days' notice of its intent to terminate Mr. Fitzsimonds'
employment without cause. In lieu of thirty (30) days' notice, the Board of
Directors may elect to provide Mr. Fitzsimonds an additional thirty (30) days of
salary and benefits. In the event 40% or more of the outstanding shares of
Golden Phoenix are acquired by someone other than Golden Phoenix or Mr.
Fitzsimonds, the Employment Agreement terminates immediately. Upon this type of
termination, Golden Phoenix must pay a severance to Mr. Fitzsimonds equal to two
(2) years' then-current salary and two (2) years' then-current benefits. Mr.
Fitzsimonds may elect to take a cash payment in lieu of his two (2) years'
then-current benefits.

      Effective May 15, 1998, Golden Phoenix entered into an Employment
Agreement with Steven Craig. Pursuant to the Employment Agreement, Mr. Craig
serves as Vice-President of Corporate Development of Golden Phoenix. The initial
term of the Employment Agreement was for one (1) year and automatically renews
for an additional one (1) year term on each successive annual anniversary of the
Employment Agreement, unless terminated pursuant to the terms of the Employment
Agreement. Mr. Craig's Employment Agreement provides for $85,000 in total annual
salary, of which $60,000 is to be paid in bi-monthly installments, with the
remaining $25,000 deferred. In the event the Board of Directors elects to
terminate the Employment Agreement without cause, Golden Phoenix must pay a
severance to Mr. Craig equal to one (1) year's then-current salary and one (1)
year's then-current benefits. The Board of Directors must provide Mr. Craig
thirty (30) days' notice of its intent to terminate Mr. Craig's employment
without cause. In lieu of thirty (30) days' notice, the Board of Directors may
elect to provide Mr. Craig an additional thirty (30) days of salary and
benefits. In the event 40% or more of the outstanding shares of Golden Phoenix
are acquired by someone other than Golden Phoenix or Mr. Craig, the Employment
Agreement terminates immediately. Upon this type of termination, Golden Phoenix
must pay a severance to Mr. Craig equal to two (2) years' then-current salary
and two (2) years' then-current benefits. Mr. Craig may elect to take a cash
payment in lieu of his two (2) years' then-current benefits.


                                       32
<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL SHAREHOLDERS

      The following table presents certain information regarding the beneficial
ownership of all shares of common stock at April 1, 2004 for each executive
officer and director of our Company and for each person known to us who owns
beneficially more than 5% of the outstanding shares of our common stock. The
percentage ownership shown in such table is based upon the 104,779,533 common
shares issued and outstanding at April 1, 2004 and ownership by these persons of
options or warrants exercisable within 60 days of such date. Also included is
beneficial ownership on a fully diluted basis showing all authorized, but
unissued, shares of our common stock at April 1, 2004 as issued and outstanding.
Unless otherwise indicated, each person has sole voting and investment power
over such shares.

<TABLE>
<CAPTION>
                                                                             EXERCISABLE
                                                                              OPTIONS/
                                                        SHARES OWNED          WARRANTS            PERCENTAGE

<S>                                                      <C>                   <C>                     <C>
Frank Diegman                                            11,083,333            3,333,333               13.8%
1986 E Football Blvd
Pasadena, CA 91107

Michael Fitzsimonds                                       2,074,414            2,497,940(1)             4.4%
3595 Airway Drive
Suite 405
Reno, NV 89511

Steven D. Craig                                              36,728            2,270,300(2)             2.2%
3595 Airway Drive
Suite 405
Reno, Nevada 89511

David Caldwell(4)                                           141,728              340,000(3)                *
3595 Airway Drive
Suite 405
Reno, Nevada  89511

Allan Marter(5)                                             136,728              340,000(4)                *
3595 Airway Drive
Suite 405
Reno, Nevada  89511

Ronald L. Parratt                                             9,366              200,000(5)                *
3595 Airway Drive
Suite 405
Reno, Nevada  89511

All directors and officers as a group (5 persons)         2,398,964            5,648,240                7.7%
</TABLE>

*     Represents less than 1%.
(1)   Mr. Fitzsimonds has conversion rights on options for 1,148,940 common
      shares exercisable at $0.15, options for 275,000 common shares exercisable
      at $0.20, and options for 1,074,000 common shares exercisable at $0.37.

                                       33
<PAGE>

(2)   Mr. Craig holds options for 984,300 common shares exercisable at $0.15 per
      share, options for 946,000 common shares exercisable at $0.20, and options
      for 340,000 common shares exercisable at $0.37.
(3)   Mr. Caldwell holds options for 140,000 common shares exercisable at $0.20
      per share and options for 200,000 common shares exercisable at $0.37.
(4)   Mr. Marter holds options for 140,000 common shares exercisable at $0.20
      per share and options for 200,000 common shares exercisable at $0.37.
(5)   Mr. Parratt holds options for 200,000 common shares exercisable at $0. per
      share.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED PARTIES

         The Company has an on going consulting agreement with Whitney & Whitney
Inc. for metallurgical,  geological and plant design consulting for our projects
and related  business and financial  matters.  This contract is structured  such
that  the  Company  can at its  election  pay a  majority  of  these  fees  with
restricted stock of the Company. John Whitney is President at Whitney & Whitney,
Inc. an investor in our Company, an underlying owner of the Borealis project and
President of Whitney & Whitney Inc. The Company has paid the  following  amounts
to Whitney&  Whitney Inc. over the past two fiscal years and the current year to
date.

                                  NUMBER OF SHARES       VALUE OF COMPENSATION
                  YEAR            OF COMMON STOCK       INCLUDING CASH PAYMENTS
                 ---------------------------------------------------------------
                  2001              1,208,248                     $120,776
                  2002              1,847,002                     $239,268
                  2003                329,992                      $53,049
                  Total             3,385,242                     $413,093

         The Company has paid the following amounts to Mr. Whitney for a portion
of its lease obligation on the Borealis property.

                                  NUMBER OF SHARES
                 YEAR             OF COMMON STOCK               AMOUNTS PAID
                 ---------------------------------------------------------------
                 2001                 220,547                      $20,290
                 2002                 247,498                      $31,731
                 2003                  29,400                       $5,880
                 Total                497,445                      $57,901

      Mr. Whitney has purchased either through a placement agreement or the
exercise of warrants issued with the private placement the following shares.

                                  NUMBER OF SHARES             AMOUNTS PAID
                 YEAR             OF COMMON STOCK        ON EXERCISE OF WARRANTS
                 ---------------------------------------------------------------
                 2001                 550,000                      $55,000
                 2002                 800,000                      $80,000
                 2003                 720,000                      $72,000
                 Total              2,070,000                     $207,000

      The total related party transactions for Mr. Whitney and Whitney & Whitney
Inc. is as follows.

                                                            TOTAL OF ABOVE
                                 NUMBER OF SHARES     RELATED PARTY TRANSACTIONS
                 YEAR             OF COMMON STOCK          FOR MR. WHITNEY
                 ---------------------------------------------------------------
                 2001               1,978,795                     $196,066
                 2002                2,894,500                    $350,999
                 2003                  29,400                      $ 5,880
                 Total              4,902,695                     $552,935

      Dr. Frank Diegman has become our largest investor over the past few years
through investments in private placements in the company. The following is a
summary of the shares that have been purchased through either private placements
or exercise of warrants associated with the private placements.


                                 NUMBER OF SHARES
                 YEAR            OF COMMON STOCK            AMOUNTS INVESTED
                 ---------------------------------------------------------------
                 2001               3,250,000                    $ 275,000
                 2002               4,583,333                    $ 625,000
                 2003               3,000,000                    $ 300,000
                 Total             10,333,333                   $1,200,000

                                       34
<PAGE>


ITEM 13.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

      (A)(1)(2) FINANCIAL STATEMENTS. See index to consolidated financial
statements and supporting schedules.

      (A)(3) EXHIBITS.

<TABLE>
<CAPTION>

EXHIBIT NO.         DESCRIPTION                                          LOCATION
-----------         ---------------                                      ------------
<S>                <C>                                                   <C>
3.1                 Articles of Incorporation of Golden Phoenix          Incorporated by reference to Exhibit 2.1 to the
                    Minerals, Inc.                                       Company's Registration Statement on Form 10SB12G
                                                                         as filed with the SEC on July 30, 1997

3.2                 Bylaws of Golden Phoenix Minerals, Inc.              Incorporated by reference to Exhibit 2.1 to the
                                                                         Company's Registration Statement on Form 10SB12G
                                                                         as filed with the SEC on July 30, 1997

10.1                Agreement, dated July 22, 1997, by and between       Incorporated by reference to Exhibit 10.2 to the
                    J.D. Welsh & Associates, Inc. and Golden Phoenix     Company's Registration Statement on Form
                    Minerals, Inc.                                       10SB12G/A as filed with the SEC on October 22,
                                                                         1997
10.2                Kennecott Agreement - Option to Purchase with        Incorporated by reference to Exhibit 10.3 to the
                    Exploration Rights, dated September 19,1997, by      Company's Registration Statement on Form
                    and between Kennecott Exploration Company and        10SB12G/A as filed with the SEC on October 22,
                    Golden Phoenix Minerals, Inc.                        1997

10.3                Option Agreement, dated September 1997, by and       Incorporated by reference to Exhibit 10.1 to the
                    between S.F. Lewis Trust and Golden Phoenix          Company's Quarterly Report on Form 10-Q for the
                    Minerals, Inc.                                       period ended September 30, 1997 as filed with the
                                                                         SEC on November 10, 1997

10.4                Amended Supplemental Agreement, dated November 15,   Incorporated by reference to Exhibit 10.2A to the
                    1997, by and between J. D. Welsh & Associates,       Company's Registration Statement on Form
                    Inc. and Golden Phoenix Minerals, Inc.               10SB12G/A, as filed with the SEC on December 29,
                                                                         1997

10.5                Mineral Lease Agreement and Option to Purchase, by   Incorporated by reference to Exhibit 10.4 to the
                    and between Erik Hansen and Golden Phoenix           Company's Registration Statement on Form
                    Minerals, Inc.                                       10SB12G/A, as filed with the SEC on December 29,
                                                                         1997

10.6                Mineral Lease Agreement and Option to Purchase,      Incorporated by reference to Exhibit 10.5 to the
                    dated December 1, 1997, by and between Mack Rife     Company's Registration Statement on Form
                    and Golden Phoenix Minerals, Inc.                    10SB12G/A, as filed with the SEC on December 29,
                                                                         1997

10.7                Financial Consulting Agreement, dated March, 1998,   Incorporated by reference to Exhibit 4.1 to the
                    by and between Market Survey's International, Inc.   Company's Registration Statement on Form S-8, as
                    and Golden Phoenix Minerals, Inc.                    filed with the SEC on April 27, 1998

10.8                Financial Consulting Agreement, by and between       Incorporated by reference to Exhibit 4.1 to the
                    Steven Heard and Golden Phoenix Minerals, Inc.       Company's Registration Statement on Form S-8 as
                                                                         filed with the SEC on September 1, 1998

10.9                Financial Consulting Agreement, by and between       Incorporated by reference to Exhibit 4.2 to the
                    Jason Bahnman and Golden Phoenix Minerals, Inc.      Company's Registration Statement on Form S-8 as
                                                                         filed with the SEC on September 1, 1998
</TABLE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Company's principal independent accountants for the performance of the our
audit for the year ended December 31, 2002 and for the full fiscal December 31,
2003 were HJ & Associates, LLC. The Company's previous independent accountants,
Albright Persing & Associates, LLP, performed the reviews of the Company's
financial statements for the three quarters March 31, 2002, June 30, 2002 and
September 30, 2002. Fees incurred to 2003 and 2002 include services performed
and fees charged by both firms.

(a)      Audit fees. For the fiscal years ended 2003 and 2002, the aggregate
         fees billed for services rendered for the audits of the annual
         financial statements and the review of the financial statements
         included in the quarterly reports on Form 10-QSB and the services
         provided in connection with the statutory and regulatory filings or
         engagements for those fiscal years was $123,000.

(b)      Audit-Related Fees. For the fiscal years ended December 31, 2003 and
         2002, there were no fees billed for the audit or review of the
         financial statements that are not reported above under Audit Fees.

(c)      Tax Fees. For the fiscal years ended 2003 and 2002 there were no fees
         billed for tax compliance services and there was no tax-planning advice
         provided.

(d)      Other Fees. For the fiscal years ended 2003 and 2002 the aggregate fees
         billed for services other than services described above totaled
         $43,600. These fees related primarily to review and input associated
         with the Company's registration statements filed with the US Securities
         and Exchange Commission.


                                       36
<PAGE>

<TABLE>
<CAPTION>

EXHIBIT NO.         DESCRIPTION                                          LOCATION
-----------         ---------------                                      ------------
<S>                <C>                                                   <C>

10.10               Form of General Executive Compensation Contract      Incorporated by reference to Exhibit 14.1 to the
                                                                         Company's Annual Report on Form 10-KSB for the
                                                                         year ended December 31, 1998, as filed with the
                                                                         SEC on October 27, 1999

10.11               Mineral Ridge Mine Sale Agreement, dated October     Incorporated by reference to Exhibit 2.1 to the
                    9, 2000, by and between Thomas L. Minsic (Trustee    Company's Current Report on Form 8-K for the
                    for the Chapter 11 bankruptcy estate of Mineral      period ended November 7, 2000, as filed with the
                    Ridge Resources, Inc.) and Golden Phoenix            SEC on November 22, 2000
                    Minerals, Inc.

10.12               Common Stock Purchase Agreement, dated November      Incorporated by reference to Exhibit 10.1 to the
                    12, 2002, by and between Golden Phoenix Minerals,    Company's Quarterly Report on Form 10-QSB for the
                    Inc. and Fusion Capital Fund II, Inc.                period ended September 30, 2002, as filed with
                                                                         the SEC on November 19, 2002

10.13               Agreement, dated July 21, 2003, by and between       Incorporated by reference to the Company's
                    Golden Phoenix Minerals, Inc. and Borealis Mining    Amendment No. 1 to Form SB-2 Registration
                    Company                                              Statement filed with the SEC on July 11, 2003

21                  Subsidiaries of Golden Phoenix Minerals, Inc.        Incorporated by reference to Exhibit 21 to the
                                                                         Company's Annual Report on Form 10-KSB for the
                                                                         year ended December 31, 1998, as filed with the
                                                                         SEC on October 27, 1999

31.1                Certification Pursuant to Section 1350               Provided herewith

31.2                Certification Pursuant to Section 302                Provided herewith

32.1                Certification Pursuant to 18 U.S.C. Section 1350     Provided herewith

32.2                Certification Pursuant to 18 U.S.C. Section 1350     Provided herewith

</TABLE>

                                       37
<PAGE>

                                   SIGNATURES

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

Date: April 13, 2004                         GOLDEN PHOENIX MINERALS, INC.

                                             By: /s/ Michael R. Fitzsimonds
                                                 -------------------------------
                                                 Michael R. Fitzsimonds
                                                 President, Chief Financial
                                                 Officer and Director

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

SIGNATURE                        TITLE                           DATE
---------                        -----                           ----

/s/ Michael R. Fitzsimonds       Director, President and         April 13, 2004
------------------------------   Chief Financial Officer
Michael R. Fitzsimonds

/s/ Steven D. Craig              Director, Vice President        April 13, 2004
------------------------------   and Secretary
Steven D. Craig

/s/ Allan J. Marter              Director                        April 13, 2004
------------------------------
Allan J. Marter

/s/ David A. Caldwell            Director                        April 13, 2004
------------------------------
David A. Caldwell

/s/ Ronald L. Parratt            Director                        April 13, 2004
------------------------------
Ronald L. Parratt




                                       38