**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**AMENDMENT
      NO. 1 TO**


**FORM
      10-KSB**





**ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d)**


**OF
      THE SECURITIES EXCHANGE ACT OF 1934**





**For
      the Fiscal Year Ended December 31, 2004**





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.
                EmployerOf
                Incorporation or
                Organization)
            Identification
                Number)1675
                East Prater Way, Suite 102, Sparks,
                Nevada
            89434(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-K or any amendment to
      this
      Form 10-K. |_|





The
      registrant had revenues of $1,560,419 for the year ended December 31, 2004.
      The
      registrant also had other income of $10,944 for the same period.





The
      aggregate market value of the voting common stock held by non-affiliates of
      the
      Registrant on March 15, 2005 was approximately $17.2 million, based on the
      average bid and asked prices on such date of $0.13.





The
      Registrant had 132,155,654 shares of common stock, no par value per share,
      outstanding on March 15, 2005.








**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 exploration, development and production 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
      corporate directors, officers, and managers are individuals with prior
      management experience who specialize in exploration and development with large
      and small mining companies. This team has in excess of 100 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 a production-stage
      company that operates its own mines. We intend to continue to explore and
      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





2








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.





The
      following table set forth the regulations Golden Phoenix is subject to and
      the
      costs associated with compliance of such regulations for the year 2004.


ComplianceName
                  of Regulation
              
              Fees
              
              Cost
              
              Type
                  of ComplianceNevada
                  Department of EnvironmentalProtection
                  Water Pollution Control
              
              $
              900
              
              $
              4,800
              
              
              Quarterly
                  water sampling & waste rock samplingNevada
                  Department of EnvironmentalProtection
                  Air Quality
              
              $
              1,250
              
              $
              2,000
              
              
              Air
                  quality monitoring of equipmentNevada
                  Department of EnvironmentalProtection
                  Reclamation
              
              $
              —
              
              $
              360,000
              
              
              ReclamationMining
                  Safety Health Association
              
              $
              —
              
              $
              5,667
              
              
              Safety
                  equipment and trainingTotal
              
              $
              2,150
              
              $
              372,467




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





There
      are
      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. These permits were received by
      Golden Phoenix in 2003 and are all in compliance. There are several mine safety
      permits that were renewed when Golden Phoenix notified MSHA that it was
      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 2004 gold prices ranged from a low of $375 to a high of $454.





**Capital
      Equipment**





In
      the
      next twelve months, we anticipate purchasing or leasing certain capital
      equipment for the Ashdown and Mineral Ridge mines, which would be support
      equipment for the underground operation and process/leach facilities. These
      items include underground hauling machines and muckers, 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 these capital equipment expenditures with funds
      we receive from any gold or molybdenum production revenues we may generate
      or
      from debt financing. 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





3








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.





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 Ashdown gold-molybdenum
      project is expected to go into production in 2005. Two other projects, the
      Contact copper-silver project and the Borealis gold-silver project were
      terminated or sold at the end of 2004 and early 2005, respectively.





**Golden
      Phoenix Probable Reserves**


Property
              
              Probable
                  Reserve
              
              Grade
              
              Reco
              very
              
              Price
              
              Recoverable
                  Metal*Mineral
                  Ridge Gold Project
              
              2,392,000
                  tons
              
              0.0758
                  opt
              
              80
              .8%
              
              $325/oz
              
              156,504
                  oz*Includes
                  10,000 ounces of gold recoverable from the existing leach
                  pad




**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 140 unpatented mining claims totaling
      nearly 3,880 acres, or 6 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 came 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 and a gold price of $325 per ounce, are 2,392,000
      tons averaging 0.0758 troy ounces of gold per ton for 146,504 ounces of
      recoverable gold at an 80.8% process recovery. Silver values are not
      economically significant in the mineralized material at Mineral Ridge and have
      not been included in these reserve calculations. The combined direct operating
      costs, royalties, property and net proceeds tax burden, and cost of capital
      (total costs) are estimated at $241.63 per ounce. The reserve was calculated
      using Minesight(TM) software and has been reviewed by Behre Dolbear &
Company, Inc., an outside consultant. In addition, there are an estimated 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, 2004, total expenditures, excluding acquisition costs, on the
      Mineral Ridge property have been $8,082,464.





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





4








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.





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, 2004, the Mineral Ridge property
      has sold 5,779 ounces of gold and 4,012 ounces of silver since acquisition
      by
      the Company, for a net value to the Company of $2,132,566.





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 140 unpatented mining claims
      totaling nearly 3,880 acres or 6 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., the 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.





5








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.





**Discussion
      on Golden Phoenix Minerals Operational Results**





On
      July
      29, 2003 Golden Phoenix Minerals, announced that it has begun Phase 1 operations
      at its Mineral Ridge gold mine in Esmeralda County, Nevada. This means chemicals
      were being added to the process solution, which enables gold to be extracted
      from the existing leach pad. Golden Phoenix also repaired the leach pad and
      the
      refinery along with drilling auger holes into the pad to enhance circulation.
      Golden Phoenix filed its $2.7 million reclamation bond with the State of Nevada
      in June 2003 allowing this work to move forward. Golden Phoenix also announced
      that it was taking the necessary steps to mine low-grade ore from the Drinkwater
      open pit and high-grade ore from the deeper levels of the Mary mine, both of
      which are at Mineral Ridge.





On
      July
      6, 2004 Golden Phoenix Minerals announced that it had signed two option
      agreements for a processing mill that will treat its high-grade gold ores from
      the Mineral Ridge mine. This acquisition set the stage for Golden Phoenix to
      fulfill its Phase 2 plans to move into greater gold production by milling the
      higher grade gold ores from Mineral Ridge. The mill and the land were jointly
      negotiated with two separate owners. Esmeralda Extraction Company, who owns
      the
      1,128 acres of private land that the mill sits on, agreed to an option to
      purchase for the property. The individual owner of the mill equipment also
      agreed to an option to purchase for the mill. The mill, which lies just north
      of
      Lone Mountain and about 15 miles west of Tonopah, was built in about 1981 at
      a
      cost of about $7 million. It operated for nearly 4 years processing tailings
      from the old Tonopah silver district. During its operation, it processed up
      to
      1,350 tons per day. When the mill was shut down for economic reasons because
      of
      falling silver prices, the operator decommissioned the facility so that it
      could
      be easily restarted when silver prices improved. Golden Phoenix plans to use
      the
      majority of the mill as it is presently designed, and will add a gravity and
      primary crushing circuit to handle the Mineral Ridge ore as metallurgical
      studies have defined. This reconditioning work along with the required permits
      may take up to a year before the mill can be commissioned. Once full operations
      are underway, the Company plans to truck Mineral Ridge high-grade ores
      approximately 43 miles to the mill. These ores will have an approximate economic
      cut-off grade of 0.1 ounces per ton and will be mined from the Drinkwater,
      Mary
      and other defined open pits as well as the Mary underground operation. The
      lower
      grade ores from the open pits will be crushed and put on the leach pad to
      maximize gold production from the mine.





Between
      August and October of 2004, the Company made good progress in improving its
      gold
      production through a number of activities, most importantly the contracting
      of a
      blast-hole drill rig, larger trucks for hauling waste, and leasing a large
      track
      mounted jaw crusher to reduce the ore to minus 4 inches. Other important
      activities included receiving the air quality permit allowing full crushed
      ore
      production. In addition the Company had repaired and upgraded the electro-win
      cells and carbon regeneration system to improve gold recovery. Work was also
      underway in the Mary underground mine developing some new gold ore shoots and
      extracting existing ore from old stopes. The Lone Mountain mill was being
      evaluated for necessary upgrades including checking all electrical motors.





On
      January 12, 2005 Golden Phoenix Minerals announced the inauguration of a
      comprehensive restructuring of all mining operations beginning with winter
      idling of the Mineral Ridge gold mine. The idling is designed to redeploy
      manpower and resources, improve cash flow, and accelerate the development of
      certain high-yield mine assets. Mineral Ridge is scheduled to resume full
      operations pending management evaluation of an engineering study commissioned
      to
      identify techniques for improving recovery rates from existing and newly
      uncovered higher-grade ore deposits. The Company placed the Mineral Ridge mine
      into a leach-only status, due in part to the higher costs of winter operation
      and sub-optimal gold recovery conditions. Mining and crushing operations are
      suspended for the time being and employees who conducted this work have been
      furloughed. Leaching operations will continue to extract gold from the leach
      pad
      during the coming months. Winterized piping has been installed to allow
      uninterrupted leaching despite freezing temperatures. Employees trained to
      maintain the leach pad and round-the-clock circulation of leach solutions have
      been retained. They will also ensure site security, environmental compliance
      and
      safety protocols.





**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 3.2-square
      miles and is controlled by 101 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 party's failure to perform. The first agreement was signed on
      September 19, 2003 where Golden Phoenix Minerals entered into a





6








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 give 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.





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 mineable
      molybdenum on the property. Past economic evaluations identified mineralized
      material of about 1.18 million tons grading 0.125 ounces per ton and, in a
      separate deposit, 146,000 tons grading 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 mineralization delineated to date is currently the subject of
      ongoing internal resource evaluations, and has not yet been the subject of
      a
      third party feasibility study and remains of uncertain economic potential;
      it
      therefore cannot be considered ore in any manner under SEC
      guidelines.





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 mill equipment and building has been transported
      to a site a short distance from the proposed milling site. 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 twenty years ago. It is estimated that
      considerable metal values lie in this stockpile. Golden Phoenix also plans
      to
      expand into a larger operation once production is underway.





During
      the summer the Company drilled nine holes, of which three intercepted high-grade
      molybdenite in the Sylvia zone. The other holes found that the molybdenite
      had
      been oxidized and no molybdenite remained, or in the case of hole #4, it
      intercepted the water-flooded tunnel from which the high-grade material was
      previously extracted.





The
      Company has a marketing agreement in place with Derek Raphael & Company
      Limited (DRC), London, which is an exclusive life-of-mine contract. When
      molybdenite production is underway, DRC will take delivery at the mine site
      and
      is responsible for placing it with buyers at a number of worldwide locations.





By
      the
      end of the 2004, permit applications were being reviewed by the agencies and
      include the Water Pollution Control Permit, Reclamation Plan, and Right of
      Way
      Permit. The Air Quality Permit is ready to be submitted, and the Storm Water
      Permit has been received. Permitting efforts for the larger mill and open pit
      mine includes writing the Plan of Operations and gathering base line information
      for the Environmental Assessment. Other permit applications will be prepared
      and
      submitted once the Plan of Operations is submitted to the Bureau of Land
      Management.





**Borealis
      Project, Mineral County, Nevada**





The
      Borealis property is held under a lease agreement with 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. The lease was entered into on January 24, 1997 and control
      of
      the property is maintained with monthly advanced royalty payments. On May 13,
      2003 the Company signed an Agreement in Principle to joint venture its Borealis
      gold project with Gryphon Gold Corporation, a private 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





7








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. On
      January 31, 2005 the Company closed an agreement to sell its 30% interest in
      the
      Borealis Gold Project to Borealis Mining Company/Gryphon Gold Corporation for
      a
      series of cash payments totaling $1,400,000. The terms of payment are as
      follows: $400,000 was paid on January 18, 2005, followed by four payments of
      $250,000, paid in 90-day increments. In accordance with the terms of the joint
      venture agreement to date, the parties agree that Borealis/Gryphon has earned
      70% of the overall joint venture. With the purchase of Golden Phoenix Mineral's
      30% interest, Borealis/Gryphon will own 100% of the project. In return, Gryphon
      Gold will guarantee Borealis Mining Company's payment obligation to Golden
      Phoenix Minerals by depositing as security 15% of Borealis Mining Company shares
      into escrow.





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. Golden Phoenix had 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, 2004
      the
      total liability for the minimum work commitments to Enexco was $2,175,200 and
      $4,000 for the monthly lease payments. The agreement was terminated on December
      23, 2004.





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. 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 made other modifications to the original
      agreement. 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. As of December 31, 2004, $115,000 had been
      paid toward the monthly payments and 4,453,623 shares had been issued, which
      were valued at $676,000. As of December 31, 2004, the total liability owed
      to
      F.W. Lewis was $17,000 for the exploration license, $1,989,250 for the bi-annual
      stock distribution and $1,243,200 for the minimum work commitment not yet
      performed On December 23, 2004 the Company terminated the Exploration License
      and Purchase Option Agreement with F. W. Lewis, Inc.





The
      Company still retains six unpatented mining claims over a portion of the Banner
      Zone deposit and over the highest grade drill hole in the area.





**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 that commenced
      when
      the registration statement was filed 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,





8








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, if any, 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.





As
      of
      January 3, 2005 Fusion Capital had completed buying all of the common stock
      available under the common stock purchase agreement. The total number of shares
      purchased was 25 million and the aggregate purchase amount for all purchases
      made to this date was $5,459,893.93.





**Staffing**





**Corporate
      Office**





We
      have a
      staffing level of one key professional, a CFO, Operations Manager, and an
      accounting assistant in the Sparks 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 10 full time employees and these are in the plant
      operations. 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 are
      started back up.





**Ashdown
      Project**





The
      Company has an operations manager and senior chemist assigned to Ashdown
      gold/molybdenum project. We anticipate that we will need to hire mine managers,
      underground miners, and mill operators to ensure proper development of the
      project. Current plans for development is scheduled for the first half of 2005.





**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 annual
      operating losses of $6,470,008 and $2,966,060 respectively, during the years
      ended December 31, 2004 and 2003, respectively. As a result, at December 31,
      2004, we had an accumulated deficit of $25,192,268. 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.





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





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, 2004 and 2003 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, 2004, we have generated losses from operations, had
      an
      accumulated deficit of $25,192,268 and had a working capital deficit of
      $7,610,574 at December 31, 2004, 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, 2004.





9








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.





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.





10








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.





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.





11








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:





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.





12








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.





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
      Dependent On Key Personnel, The Loss Of Either Of Them May Have An Adverse
      Effect





During
      2004 we were dependent on the services of certain key executives, including
      Michael R. Fitzsimonds, President and Director, and Steven D. Craig,





13








Co-Chairman
      of the Board of Directors, Vice-President and Director. On February 18, 2005
      Mr.
      Fitzsimonds resigned his position and left the Company. The Board of Directors
      have since retained Ken Ridley as an Interim CEO to conduct the business of
      the
      Company. The loss of either Mr. Craig or Mr. Ridley could force us to curtail
      our business and operations. We currently do not have key person insurance
      on
      these individuals.





**Fatal
      Accident**





On
      June
      29, 2004, Mr. David Miller, Maintenance Supervisor and Senior Mechanic, with
      9
      years mining experience, was fatally injured at the Mineral Ridge gold mine.
      He
      was operating a water truck and apparently lost control as the vehicle as it
      was
      traveling down a grade. The Mine, Safety and Health Administration (MSHA) has
      issued their final report on their first investigation on the accident and
      they
      concluded that the accident was caused by the failure to maintain all braking
      systems on the truck in a functional condition. Equipment safety checks had
      not
      been routinely performed and the equipment had not been repaired or removed
      from
      operation. Golden Phoenix was fined a total of $58,000 for the accident, but
      this is currently being contested. In a second investigation, the MSHA
      investigator focused on management's role in the accident. The Company is still
      awaiting the results of that investigation. The Company feels that suits against
      it are highly improbable.





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, 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**





Our
      principal executive office is located at 1675 East Prater Way, Suite 102,
      Sparks, Nevada 89434.





The
      principal offices are leased from WDCI, Inc in Sparks Nevada. The lease has
      a 7
      year term and is renewable. 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





14








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 settlement in which each side agreed to pay its
      own
      legal fees and dismiss the suit.





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





None.





15








**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
                  2003
              
              High
              
              LowFirst
                  Quarter
              
              $
              0.34
              
              $
              0.17Second
                  Quarter
              
              $
              0.33
              
              $
              0.15Third
                  Quarter
              
              $
              0.44
              
              $
              0.25Fourth
                  Quarter
              
              $
              0.54
              
              $
              0.38Year
                  2004
              
              
              High
              
              
              LowFirst
                  Quarter
              
              $
              0.40
              
              $
              0.36Second
                  Quarter
              
              $
              0.32
              
              $
              0.28Third
                  Quarter
              
              $
              0.29
              
              $
              0.26Fourth
                  Quarter
              
              $
              0.25
              
              $
              0.22


On
      December 31, 2004, the closing price of our common stock as reported on the
      Over-the-Counter Bulletin Board was $0.17 per share. On December 31, 2004,
      we
      had in excess of 5000 holders of common stock and 132,155,654 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.





**Recent
      Sales Of Unregistered Securities**





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


Nature
                  of
              
              Shares
              
              Value
              
              Share
                  PriceServices
                  Performed
              
              Issued
              
              Received
              
              Per
                  ShareFirst
                  Quarter 2004Warrant
                  Exercise at $0.10
              
              
              
              
              
              2,550,000
              
              $
              255,000
              
              $
              0.100Warrant
                  Exercise at $0.15
              
              
              
              
              
              100,000
              
              
              15,000
              
              
              0.150Whitney
                  & Whitney Consulting
              
              
              Business
                  and FinancialServices
              
              
              Consulting
              
              
              7,652
              
              
              3,443
              
              
              0.450Whitney
                  & Whitney Consulting
              
              
              Business
                  and FinancialServices
              
              
              Consulting
              
              
              6,264
              
              
              2,819
              
              
              0.450Whitney
                  & Whitney Consulting
              
              
              Business
                  and FinancialServices
              
              
              Consulting
              
              
              7,016
              
              
              3,157
              
              
              0.450Whitney
                  & Whitney Consulting
              
              
              Business
                  and FinancialServices
              
              
              Consulting
              
              
              6,718
              
              
              3,023
              
              
              0.450Total
                  First Quarter 2004
              
              
              
              
              
              2,677,653
              
              $
              282,442
              
              $
              0.105





16










Nature
                  of
              
              Shares
              
              Value
              
              Share
                  PriceServices
                  Performed
              
              Issued
              
              Received
              
              Per
                  ShareSecond
                  Quarter 2004Warrant
                  Exercise at $0.10
              
              
              
              
              
              1,352,900
              
              $
              135,290
              
              $
              0.100Warrant
                  Exercise at $0.15
              
              
              
              
              
              1,716,662
              
              
              257,500
              
              
              0.150Directors
                  Compensation For BoardMeetings
              
              
              
              
              
              7,815
              
              
              2,190
              
              
              0.280Whitney
                  & Whitney Consulting
              
              
              Business
                  and FinancialServices
              
              
              Consulting
              
              
              6,266
              
              
              2,130
              
              
              0.340Whitney
                  & Whitney Consulting
              
              
              Business
                  and FinancialServices
              
              
              Consulting
              
              
              8,552
              
              
              2,737
              
              
              0.320Total
                  Second Quarter 2004
              
              
              
              
              
              3,092,200
              
              $
              399,847
              
              $
              0.129


Nature
                  of
              
              Shares
              
              Value
              
              Share
                  PriceServices
                  Performed
              
              Issued
              
              Received
              
              Per
                  ShareThird
                  Quarter 2004Warrant
                  Exercise at $0.10
              
              
              
              
              
              350,000
              
              $
              35,000
              
              $
              0.100Warrant
                  Exercise at $0.15
              
              
              
              
              
              3,008,333
              
              
              451,250
              
              
              0.150Whitney
                  & Whitney Consulting
              
              
              Business
                  and FinancialServices
              
              
              Consulting
              
              
              11,119
              
              
              2,335
              
              
              0.210Whitney
                  & Whitney Consulting
              
              
              Business
                  and FinancialServices
              
              
              Consulting
              
              
              9,526
              
              
              2,000
              
              
              0.210Whitney
                  & Whitney Consulting
              
              
              Business
                  and FinancialServices
              
              
              Consulting
              
              
              9,565
              
              
              2,965
              
              
              0.310Whitney
                  & Whitney Consulting
              
              
              Business
                  and FinancialServices
              
              
              Consulting
              
              
              14,487
              
              
              4,201
              
              
              0.290Whitney
                  & Whitney Consulting
              
              
              Business
                  and FinancialServices
              
              
              Consulting
              
              
              11,171
              
              
              3,240
              
              
              0.290Whitney
                  & Whitney Consulting
              
              
              Business
                  and FinancialServices
              
              
              Consulting
              
              
              7,502
              
              
              2,176
              
              
              0.290Whitney
                  & Whitney Consulting
              
              
              Business
                  and FinancialServices
              
              
              Consulting
              
              
              7,806
              
              
              2,264
              
              
              0.290Whitney
                  & Whitney Consulting
              
              
              Business
                  and FinancialServices
              
              
              Consulting
              
              
              88
              
              
              26
              
              
              0.290Total
                  Third Quarter 2004
              
              
              
              
              
              3,429,517
              
              $
              505,457
              
              $
              0.147


Nature
                  of
              
              Shares
              
              Value
              
              Share
                  PriceServices
                  Performed
              
              Issued
              
              Received
              
              Per
                  ShareFourth
                    Quarter 2004Warrant
                  Exercise at $0.10
              
              
              
              
              
              317,647
              
              $
              31,765
              
              $
              0.100Warrant
                Exercise @ $0.15
              
              
              
              
              
              100,000
              
              
              15,000
              
              
              0.150Whitney
                & Whitney Consulting
              
              
              Business
                  and FinancialServices
              
              
              Consulting
              
              
              9,466
              
              
              2,272
              
              
              0.240Total
                  Fourth Quarter 2004
              
              
              
              
              
              427,113
              
              $
              49,037
              
              $
              0.115


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."





17





**Overview**





Golden
      Phoenix Minerals, Inc. is a mineral exploration, development and production
      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 and the Ashdown gold-molybdenum project. The Company terminated
      its joint venture with International Enexco, Ltd. and its exploration license
      and option to purchase with F. W. Lewis, Inc. on December 23, 2004 at its
      Contact project. On January 31, 2005 the Company closed the sale of its Borealis
      project to Gryphon Gold Inc. for $1.4 million.











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 began 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.





On
      January 12, 2005 Golden Phoenix Minerals announced the inauguration of a
      comprehensive restructuring of all mining operations beginning with the winter
      idling of the Mineral Ridge gold mine. The idling is designed to redeploy
      manpower and resources, improve cash flow, and accelerate the development of
      certain high-yield mine assets. Mineral Ridge is scheduled to resume full
      operations pending management evaluation of an engineering study commissioned
      to
      identify techniques for improving recovery rates from existing and newly
      uncovered higher-grade ore deposits. The Company placed the Mineral Ridge mine
      into a leach-only status, due in part to the higher costs of winter operation
      and sub-optimal gold recovery conditions. Mining and crushing operations are
      suspended for the time being and employees who conducted this work have been
      furloughed. Leaching operations will continue to extract gold from the leach
      pad
      during the coming months. Winterized piping has been installed to allow
      uninterrupted leaching despite freezing temperatures. Employees trained to
      maintain the leach pad and round-the-clock circulation of leach solutions have
      been retained. They will also ensure site security, environmental compliance
      and
      safety protocols.





The
      Borealis property was 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





18








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 paid Golden Phoenix $25,000 in consideration of a 75-day
      due diligence period and also paid an additional $100,000 upon signing the
      definitive joint venture agreement. On January 31, 2005 the Company closed
      an
      agreement to sell its 30% interest in the Borealis Gold Project to Borealis
      Mining Company/Gryphon Gold Corporation for a series of cash payments totaling
      $1,400,000. The terms of payment are as follows: $400,000 paid on January 18,
      2005, followed by four payments of $250,000, paid in 90-day increments. In
      accordance with the terms of the joint venture agreement to date, the parties
      agree that Borealis/Gryphon has earned 70% of the overall joint venture. With
      the purchase of Golden Phoenix Mineral's 30% interest, Borealis/Gryphon will
      own
      100% of the project. In return, Gryphon Gold will guarantee Borealis Mining
      Company's payment obligation to Golden Phoenix Minerals by depositing as
      security 15% of Borealis Mining Company shares into escrow.





The
      Contact property was 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 allowed it to
      combine deposits within the district allowing for economic mining, which was
      previously not possible. On December 23, 2004, Golden Phoenix Minerals
      terminated the Joint Venture Agreement dated January 28, 1998, by and between
      the Company and International Enexco Ltd. and the Exploration License and Option
      to Purchase Agreement dated July 10, 1998, by and between the Company and F.W.
      Lewis, Inc.





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. By the end of
      the
      2004, permit applications were being reviewed by the agencies and include the
      Water Pollution Control Permit, Reclamation Plan, and Right of Way Permit.
      The
      Air Quality Permit is ready to be submitted, and the Storm Water Permit has
      been
      received. Permitting efforts for the larger mill and open pit mine includes
      writing the Plan of Operations and gathering base line information for the
      Environmental Assessment. Other permit applications will be prepared and
      submitted once the Plan of Operations is submitted to the Bureau of Land
      Management.





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 February 5, 2004
      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 and any questions from the Ashdown property
      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, 2004 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





19








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.





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





20








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, 2002. 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:





On
      December 16, 2004 the FASB issued SFAS No. 123(R), Share-Based Payment, which
      is
      an amendment to SFAS No. 123, Accounting for Stock-Based Compensation. This
      new
      standard eliminates the ability to account for share-based compensation
      transactions using Accounting Principles Board ("APB") Opinion No. 25,
      Accounting for Stock Issued to Employees, and generally requires such
      transactions to be accounted for using a fair-value-based method and the
      resulting cost recognized in our financial statements. This new standard is
      effective for awards that are granted, modified or settled in cash in interim
      and annual periods beginning after June 15, 2005. In addition, this new standard
      will apply to unvested options granted prior to the effective date. We will
      adopt this new standard effective for the fourth fiscal quarter of 2005, and
      have not yet determined what impact this standard will have on our financial
      position or results of operations.





This
      Statement requires that those items be recognized as current-period charges
      regardless of whether they meet the criterion of "so abnormal." In addition,
      this Statement requires that allocation of fixed production overheads to the
      costs of conversion be based on the normal capacity of the production
      facilities. This statement is effective for inventory costs incurred during
      fiscal years beginning after June 15, 2005. Management does not believe the
      adoption of this Statement will have any immediate material impact on the
      Company.





In
      December 2004, the FASB issued SFAS No. 152, Accounting for Real Estate
      Time-sharing Transactions, which amends FASB statement No. 66, Accounting for
      Sales of Real Estate, to reference the financial accounting and reporting
      guidance for real estate time-sharing transactions that is provided in AICPA
      Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing
      Transactions. This statement also amends FASB Statement No. 67, Accounting
      for
      Costs and Initial Rental Operations of Real Estate Projects, to state that
      the
      guidance for (a) incidental operations and (b) costs incurred to sell real
      estate projects does not apply to real estate time-sharing transactions. The
      accounting for those operations and costs is subject to the guidance in SOP
      04-2. This Statement is effective for financial statements for fiscal years
      beginning after June 15, 2005. Management believes the adoption of this
      Statement will have no impact on the financial statements of the Company.





In
      December 2004, the FASB issued SFAS No. 153, Exchange of Nonmonetary Assets.
      This Statement addresses the measurement of exchanges of nonmonetary assets.
      The
      guidance in APB Opinion No. 29, Accounting for Nonmonetary Transactions, is
      based on the principle that exchanges of nonmonetary assets should be measured
      based on the fair value of the assets exchanged. The guidance in that Opinion,
      however, included certain exceptions to that principle. This Statement amends
      Opinion 29 to eliminate the exception for nonmonetary exchanges of similar
      productive assets and replaces it with a general exception for exchanges of
      nonmonetary assets that do not have commercial substance. A nonmonetrary
      exchange has commercial substance if the future cash flows of the entity are
      expected to change significantly as a result of the exchange. This Statement
      is
      effective for financial statements for fiscal years beginning after





21





June
      15,
      2005. Earlier application is permitted for nonmonetary asset exchanges incurred
      during fiscal years beginning after the date of this statement is issued.
      Management believes the adoption of this Statement will have no impact on the
      financial statements of the Company.





The
      implementation of the provisions of these pronouncements are not expected to
      have a significant effect on the Company's consolidated financial statement
      presentation.





**Results
      Of Operations**





Results
      Of Operations For The Fiscal Year Ended December 31, 2004 Compared To Fiscal
      Year Ended December 31, 2003.





We
      generated revenue of $1,560,419 for the fiscal year ended December 31, 2004,
      as
      compared to $98,097 revenue for the fiscal year ended December 31, 2003.





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, 2004 compared to fiscal year ended December 31, 2003.


Description
              
              2004
              
              2003
              
              DifferenceFinance
                  Charges (1)
              
              $
              121,451
              
              $
              141,969
              
              $
              (20,518
              )Plant
                  Operations (2)
              
              
              3,289,569
              
              
              296,725
              
              
              2,992,844Bad
                  Debt (3)
              
              
              0
              
              
              0
              
              
              0Consultants
                  (4)
              
              
              445,374
              
              
              740,526
              
              
              (295,152
              )Directors
                  Fees (5)
              
              
              10,000
              
              
              7,500
              
              
              2,500Investor
                  Relations (6)
              
              
              78,646
              
              
              103,523
              
              
              (24,877
              )Lease
                  payments (7)
              
              
              109,256
              
              
              621,810
              
              
              (512,554
              )License
                  & Permits (8)
              
              
              22,381
              
              
              44,404
              
              
              (22,023
              )Payroll
                  (9)
              
              
              752,356
              
              
              796,744
              
              
              (44,388
              )Professional
                  Fees (10)
              
              
              149,770
              
              
              412,194
              
              
              (262,424
              )


(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
      increased equipment costs, plus eleven months of full or near full mining
      operations that included substantial drilling, blasting and fuel costs.





(3)
      There
      was no bad debt incurred in 2004.





(4)
      During the year we had termination costs for contracts with Whitney and Whitney.





(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 2004. These lower fees were the result of the
      elimination of outside groups.





(7)
      The
      decrease in lease payments can be attributed to renegotiated contract with
      F.W.
      Lewis.





(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
      decrease in payroll is due to lowering the hourly overtime paid in 2004.





(10)
      The
      change in professional fees for the year is due to legal and accounting fee
      decreases and the elimination of exploration and financing fees.




22





**Liquidity
      And Capital Resources**





Since
      Golden Phoenix's incorporation in June 1997, our expenses have exceeded sales
      resulting in an accumulated deficit of approximately $25 million at December
      31,
      2004 and approximately $18.7 million at December 31, 2003.





As
      of
      December 31, 2004, we had $(41,600) in cash and cash equivalents and a working
      capital deficit of $7,610,574. A significant portion of the cash is allocated
      to
      be used for the Mineral Ridge mine. We anticipate expenditures for year 2005
      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 $100,000 for the Mineral Ridge
      gold mine, $50,000 for future Nevada land holding costs and $20,000 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. As
      of
      December 31, 2004, the total liability for monthly payments and work commitments
      to Enexco was $2,175,200 and $4,000 for the monthly lease payment. As of
      December 31, 2004, the total liability owed to F.W. Lewis was $17,000 for the
      exploration license, $1,989,250 for the bi-annual stock distribution and
      $1,243,000 for the minimum work commitment. Qualifying Enexco work commitment
      expenditures can be applied to the F.W. Lewis work commitment. As of December
      23, 2004 both the Enexco and Lewis agreements were terminated. 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 Ashdown and Mineral Ridge mines, which would be support
      equipment for the underground operation and process/leach facilities. These
      items include underground hauling machines and muckers, 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 these capital equipment expenditures with funds
      we receive from any gold or molybdenum production revenues we may generate
      or
      from debt financing.





During
      2004, our liquidity needs were met from: (i) the issuance of stock to vendors
      and employees for services valued at $45,682 (ii) the conversion of warrants
      to
      common stock of $1,195,805 and (iii) the sale of common stock under the Fusion
      Capital common stock agreement with net proceeds of $2,410,341. As of March
      15,
      2005 the Company had 132,155,654 shares of common stock outstanding, which
      the
      Company has recognized as $21,870,270 of paid in capital including cash and
      services. As of December 31, 2004, the Company had current assets of $248,277
      compared to current liabilities of $7,858,851 resulting in a working capital
      deficit of $7,610,574. 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 loans and any future
      revenue we may generate, as well as other possible 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 years ended December 31, 2004 and 2003 and the period from inception through
      December 31, 2004, we made precious metal sales of $1,560,419, $98,097 and
      $248,695, respectively to Itronics Metallurgical, Inc. (Itronics), Sierra Coin
      and Johnson Matthey Inc. Itronics acted as a intermediary for the sale of our
      precious metals with an outside refinery acquiring the metals based on their
      quoted price. Itronics is a company owned by Dr. John W. Whitney, who is a
      significant shareholder of Golden Phoenix. Sierra Coin and Johnson Matthey
      are
      independent of the Company.





Before
      joint venturing the Borealis Property with Gryphon Gold, we leased the 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, 2004 and 2003 and the
      period from inception through December 31, 2004, we have made payments of $0,
      and $30,290, respectively to Dr. Whitney for a portion of its lease obligation
      on the Borealis property.





23








We
      have a
      consulting agreement with Whitney & Whitney which has a term of three years
      beginning March 1, 1999 and may be extended for an additional three years.
      The
      consulting agreement calls for Whitney & Whitney to provide metallurgical,
      geological and plant design services related to our projects along with
      assistance related to general business and financial matters. The agreement
      also
      calls for payments by Golden Phoenix of a minimum of $2,500 per month in
      restricted shares of common stock. The agreement was terminated by Golden
      Phoenix with a 90 day written notice.





The
      President of Whitney & Whitney, Inc., Dr. Whitney, is not a significant
      shareholder of Golden Phoenix. At December 31, 2004, he owned directly or
      beneficially approximately 1% of Golden Phoenix `s outstanding common stock.





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 that commences
      upon
      the effectiveness of the 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 used the proceeds from the sale of our common stock
      to
      Fusion Capital for working capital and general corporate purposes. The terms
      of
      the agreement were fulfilled on January 3, 2005.





During
      the twelve months ended December 31, 2004, we raised approximately $45 thousand
      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. On January 31, 2005 the company closed
      an
      agreement to sell its 30% interest in the Borealis Gold Project to Borealis
      Mining Company/Gryphon Gold Corporation for a series of cash payments totaling
      $1,400,000. The terms of payment are as follows: $400,000 payable on January
      18,
      2005, followed by four payments of $250,000, paid in 90-day increments. In
      accordance with the terms of the joint venture agreement to date, the parties
      agree that Borealis/Gryphon has earned 70% of the overall joint venture. With
      the purchase of Golden Phoenix Mineral's 30% interest, Borealis/Gryphon will
      own
      100% of the project. In return, Gryphon Gold will guarantee Borealis Mining
      Company's payment obligation to Golden Phoenix Minerals by depositing as
      security 15% of Borealis Mining Company shares into escrow.





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.





**ITEM
      7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**





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





**ITEM
      8. 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).





24








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.





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.





25








**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, 2005:


Name
              
              Age
              
              PositionWilliam
                  Thomas
              
              59
              
              Chief
                  Financial OfficerSteven
                  D. Craig
              
              57
              
              Chairman,
                  Vice President, Secretary and DirectorDavid
                  A. Caldwell
              
              44
              
              DirectorRonald
                  L. Parratt
              
              55
              
              Director
 The
        only
        director who served in their stated capacity since the inception of the Company
        is David Caldwell. Mr. Craig became secretary and a director in September
        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.





William
      L. Thomas. Mr. Thomas is Chief Financial Officer of Golden Phoenix Minerals
      and
      was appointed on November 16, 2004. Previously, he was Controller at Golden
      Phoenix Minerals since 2003, reporting directly to the President. As Chief
      Financial Officer he reports to the Audit Committee of the Board of Directors.
      Prior to joining Golden Phoenix, Mr. Thomas was Chief Financial Officer for
      O'Hara Resources Ltd., a mining and petroleum company from 2000 through 2003,
      and Patterson Inc., a natural resource manufacturing company from 1993 through
      2000. He also served as Executive Vice President for Placer Management Group,
      and was Controller for Kennecott Copper at its Utah Smelter. He earned an
      Accounting Degree from Stevens Henagar College, Utah, and an Economics and
      Business Administration degree from Westminster College, Salt Lake City.





Steven
      D.
      Craig. Mr. Craig is Chairman of the Board, taking this position in January
      2005
      and Vice President, Corporate Secretary and a Director and has served in this
      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.





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.





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 Homestead 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.





26








Pursuant
      to our Bylaws, a majority of directors may appoint a successor to fill any
      vacancy on the Board of Directors. Steven D. Craig, our Vice-President and
      Secretary, is an executive officer of Golden Phoenix was appointed Chairman
      of
      the Board on December 28, 2004. The Board currently has two vacancies.





**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
              
              MembersAudit
                  Committee
              
              Steven
                  D. Craig, for the Board
              
              Ronald
                  Parratt, David CaldwellCompensation
                  Committee
              
              David
                  Caldwell
              
              Ronald
                  Parratt, David CaldwellGovernance
                  Committee
              
              Ronald
                  Parratt
              
              Ronald
                  Parratt, David Caldwell
 **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 regularly scheduled
      meeting and $250 for specially called meetings 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
      five-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 that was filed as an exhibit
      to the Company's Annual Report for the year ended December 31, 2003.





**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, 2004 did
      not exceeded $100,000:


Annual
                  Compensation
              
              Long
                  Term CompensationAwards
              
              PayoutsName
                      andPrincipalPosition
              
              Year
              
              Salary($)
              
              Bonus
                  ($)
              
              Other
                Annual
                Compensation
                (4)
              
              Restricted
                Stock
                Awards(s)
              
              Securities
                  Underlying
                  Options/
                    SARs(#)
              
              LTIP
                  Payouts($)
              
              All
                    OtherCompensation(a)
              
              (b)
              
              (c)
              
              (d)
              
              (e)
              
              (f)
              
              (g)
              
              (h)
              
              (i)Michael
              
              
              2004
              
              $
              95,000
              
              
              —
              
              
              —
              
              
              500
              
              
              —
              
              
              —
              
              
              —Fitzsimonds,
                  CEO
              
              
              2003
              
              $
              95,000
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
 (1)
        Of
        the $95,000 in 2004 annual compensation, $35,000 was accrued at December
        31,
        2003 and remains unpaid.





(2)
      Of
      the $95,000 in 2003 annual compensation, $35,000 was accrued at December 31,
      2002 and remains unpaid.





27








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.





**Option
      Grants In Last Fiscal Year**


Number
                  of
              
              %
                    of TotalSecurities
              
              Granted
                  toUnderlying
              
              Employees
                    in
              
              Exercise
                  orName
              
              Options
                  Granted
              
              Fiscal
                  Year
              
              Base
                  Price
              
              Expiration
                  DateMichael
                  Fitzsimonds
              
              None
              
              0
              
              —
              
              —
 Aggregated
        Option Exercises in Last Fiscal Year and Fiscal Year End Option
        Values


Options
        Exercised:
  Shares
                  AcquiredName
              
              On
                  Exercise(#)
              
              Value
                  RealizedMichael
                  R. Fitzsimonds
              
              None
              
              —





**Options
      Unexercised:**


Number
                  of Securities
                UnderlyingUnexercised
                Options
                  at 12/31/03
              
              Value
                  of Unexercised
                In-the-Money
                  Options
                At
                  12/31/03Name
              
              Exercisable
              
              Unexercised
              
              Exercisable
              
              UnexercisedMichael
                  R. Fitzsimonds
              
              
              2,818,940
              
              
              2,818,940
              
              $
              539,741
              
              $
              539,741
 **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 served as
      President of Golden Phoenix. The initial term of the Employment Agreement was
      for one (1) year and automatically renewed 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 was to be paid in bi-monthly installments, with the remaining $35,000
      deferred. On February 18, 2005, Mr. Michael Fitzsimonds resigned his positions
      as Chairman of the Board and as Company President. The Board of Directors agreed
      on terms of separation salary and benefits for one year. At the conclusion
      of
      the termination agreement, the Company will begin payments of deferred salary
      from prior years activities and on a loan furnished to the Company during 1997
      and 1998.





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





28








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.





**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 March 15, 2005 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 132,155,654 common shares issued
      and outstanding at March 15, 2005 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 March 15, 2005 as issued and outstanding. Unless
      otherwise indicated, each person has sole voting and investment power over
      such
      shares.


ExercisableOptions/Shares
                  owned
              
              
              Warrants
              
              
              PercentageFrank
                  Diegman
              
              
              11,083,333
              
              
              0
              
              
              8
              %1986
                  E Football BlvdPasadena,
                  CA 91107John
                  W. Whitney
              
              
              1,597,700
              
              
              379,400
              
              
              1.5
              %P.O.
                  Box 10725Reno,
                  NevadaMichael
                  Fitzsimonds
              
              
              2,105,478
              
              
              2,497,940
              
              
              3.4
              %1675
                  E. Prater WaySuite
                  102Sparks,
                  NV 89434Steven
                  D. Craig
              
              
              44,928
              
              
              2,270,300
              
              
              1.7
              %1675
                  E. Prater WaySuite
                  102Sparks,
                  NV 89434David
                  Caldwell
              
              
              143,291
              
              
              340,000
              
              
              *1675
                  E. Prater WaySuite
                  102Sparks,
                  NV 89434Ronald
                  L. Parratt
              
              
              17,566
              
              
              200,000
              
              
              *1675
                  E. Prater WaySuite
                  102Sparks,
                  NV 89434William
                  L. Thomas
              
              
              13,333
              
              
              253,000
              
              
              *1675
                  E. Prater WaySuite
                  102Sparks,
                  NV 89434All
                  directors and officers as a group (5 persons)
              
              
              219,118
              
              
              3,063,300
              
              
              2.4
              %


29







*
      Represents less than 1%.





(1)
      Included in Mr. Whitney's shares are 1,263,752 restricted common shares owned
      by
      Whitney & Whitney, Inc. Mr. Whitney is President of Whitney & Whitney,
      Inc. and a greater than 10% shareholder of its parent company, Itronics Inc.
      Mr.
      Whitney's options and warrants are exercisable at $0.10 per share.





(2)
      Mr.
      Fitzsimonds has conversion rights on options for 1,670,000 common shares
      exercisable at $0.22, and options for 1,148,940 common shares exercisable at
      $0.147.





(3)
      Mr.
      Craig holds options for 1,281,049 common shares exercisable at $0.22 per share
      and options for 984,300 common shares exercisable at $0.147.





(4)
      Mr.
      Caldwell holds options for 240,000 common shares exercisable at $0.22 per share.





(6)
      Mr.
      Parratt holds options for 100,000 common shares exercisable at $0.22 per share.





**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED PARTIES**





At
      December 31, 2004 there were no related party transactions.


Number
                  Of Shares
              
              Value
                  OfCompensationYear
              
              Of
                  Common Stock
              
              Including CashPayments2001
              
              
              1,208,248
              
              $
              120,7762002
              
              
              1,847,002
              
              $
              239,2682003
              
              
              0
              
              $
              0Total
              
              
              3,055,250
              
              $
              360,044
 The
        Company has paid the following amounts to Mr.
        Whitney for a portion of its lease obligation on the Borealis property.


Number
                  Of SharesYear
              
              Of
                  Common Stock
              
              Amounts
                  Paid2001
              
              
              220,547
              
              $
              20,2902002
              
              
              247,498
              
              $
              31,7312003
              
              
              29,400
              
              $
              5,880Total
              
              
              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
                  PaidYear
              
              Of
                  Common Stock
              
              On
                  Exercise Of Warrants2001
              
              
              550,000
              
              $
              55,0002002
              
              
              800,000
              
              $
              80,0002003
              
              
              0
              
              $
              0Total
              
              
              1,350,000
              
              $
              135,000


30





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


Number
                  Of SharesYear
              
              Of
                  Common Stock
              
              Amounts
                  Invested2001
              
              
              1,978,795
              
              $
              196,0662002
              
              
              2,894,500
              
              $
              350,9992003
              
              
              29,400
              
              $
              5,880Total
              
              
              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 SharesYear
              
              Of
                  Common Stock
              
              Amounts
                  Invested


2001
              
              
              3,250,000
              
              $
              275,0002002
              
              
              4,583,333
              
              $
              625,0002003
              
              
              3,000,000
              
              $
              300,000Total
              
              
              10,333,333
              
              $
              1,200,000


**ITEM
      13. PRINCIPAL ACCOUNTANT FEES AND SERVICES**





The
      Company's principal independent accountants for the performance of the audits
      for the years ended December 31, 2004 and 2003 were HJ & Associates, LLC.





(a)
      Audit
      Fees. For the fiscal years ended 2004 and 2003, the aggregate fees billed of
      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 and registration statements filed
      with the United States Securities and Exchange Commission was $172,000.





(b)
      Audit-Related Fees. For the fiscal years ended December 31, 2004 and 2003,
      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 2004 and 2003, there were no fees billed for
      the compliance services and there was no tax-planning advice provided.





(e)
      Other
      Fees. For the fiscal years ended 2004 and 2003 there were no fees billed for
      services other than services described above.





31








**ITEM
      14. 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:


Exhibit
                No.
              Description
              Location3.1
              Articles
                  of Incorporation 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, 19973.2
              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, 199710.1
              Agreement,
                  dated July 22, 1997, by and between J.D. Welsh & Associates, Inc. and
                  Golden Phoenix Minerals, Inc.
              Company's
                  Registration Statement on Form 10SB12G/A as filed with the SEC
                  on October
                  22, 199710.2
              Kennecott
                  Agreement - Option to Purchase with Exploration Rights, dated September
                  19,1997, by and between Kennecott Exploration Company and Golden
                  Phoenix
                  Minerals, Inc.
              Incorporated
                  by reference to Exhibit 10.3 to the Company's Registration Statement
                  on
                  Form 10SB12G/A as filed with the SEC on October 22,
                  199710.3
              Option
                  Agreement, dated September 1997, by and between S.F. Lewis Trust
                  and
                  Golden Phoenix Minerals, Inc.
              Incorporated
                  by reference to Exhibit 10.1 to the Company's Quarterly Report
                  on Form
                  10-Q for the period ended September 30, 1997 as filed with the
                  SEC on
                  November 10, 199710.4
              Amended
                  Supplemental Agreement, dated November 15, 1997, by and between
                  J. D.
                  Welsh & Associates, Inc. and Golden Phoenix Minerals,
                  Inc.
              Incorporated
                  by reference to Exhibit 10.2A to the Company's Registration Statement
                  on
                  Form 10SB12G/A, as filed with the SEC on December 29,
                  199710.5
              Mineral
                  Lease Agreement and Option to Purchase, by and between Erik Hansen
                  and
                  Golden Phoenix Minerals, Inc.
              Incorporated
                  by reference to Exhibit 10.4 to the Company's Registration Statement
                  on
                  Form 10SB12G/A, as filed with the SEC on December 29,
                  199710.6
              Mineral
                  Lease Agreement and Option to Purchase, dated December 1, 1997,
                  by and
                  between Mack Rife and Golden Phoenix Minerals, Inc.
              Incorporated
                  by reference to Exhibit 10.5 to the Company's Registration Statement
                  on
                  Form 10SB12G/A, as filed with the SEC on December 29,
                  199710.7
              Financial
                  Consulting Agreement, dated March, 1998, by and between Market
                  Survey's
                  International, Inc. and Golden Phoenix Minerals, Inc.
              Incorporated
                  by reference to Exhibit 4.1 to the Company's Registration Statement
                  on
                  Form S-8, as filed with the SEC on April 27, 199810.8
              Financial
                  Consulting Agreement, by and between Steven Heard and Golden Phoenix
                  Minerals, Inc.
              Incorporated
                  by reference to Exhibit 4.1 to the Company's Registration Statement
                  on
                  Form S-8 as filed with the SEC on September 1, 199810.9
              Financial
                  Consulting Agreement, by and between Jason Bahnman and Golden Phoenix
                  Minerals, Inc.
              Incorporated
                  by reference to Exhibit 4.2 to the Company's Registration Statement
                  on
                  Form S-8 as filed with the SEC on September 1, 1998





32







Exhibit
                No.
              Description
              Location10.10
              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,
                  199910.11
              Mineral
                  Ridge Mine Sale Agreement, dated October9, 2000, by and between
                  Thomas L.
                  Minsic (Trustee for the Chapter 11 bankruptcy estate of Mineral
                  Ridge
                  Resources, Inc.) and Golden Phoenix Minerals, Inc.
              Incorporated
                  by reference to Exhibit 2.1 to the Company's Current Report on
                  Form 8-K
                  for the period ended November 7, 2000, as filed with the SEC on
                  November
                  22, 200010.12
              Common
                  Stock Purchase Agreement, dated November12, 2002, by and between
                  Golden
                  Phoenix Minerals, Inc. and Fusion Capital Fund II, Inc.
              Incorporated
                  by reference to Exhibit 10.1 to the Company's Quarterly Report
                  on Form
                  10-QSB for the period ended September 30, 2002, as filed with the
                  SEC on
                  November 19, 200210.13
              Agreement,
                  dated July 21, 2003, by and between Golden Phoenix Minerals, Inc.
                  and
                  Borealis Mining Company
              Incorporated
                  by reference to the Company's Amendment No. 1 to Form SB-2 Registration
                  Statement filed with the SEC on July 11, 200321
              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,
                  199931.1
              Certification
                  Pursuant to Section 302
              Provided
                  herewith31.2
              Certification
                  Pursuant to Section 302
              Provided
                  herewith32.1
              Certification
                  Pursuant to 18 U.S.C. Section 1350
              Provided
                  herewith32.2
              Certification
                  Pursuant to 18 U.S.C. Section 1350
              Provided
                  herewith








(b)
      Reports on Form 8-K:





On
      November 24, 2004 Golden Phoenix filed a Form 8-K with respect to Item 9
      -
      Appointment of William Thomas as Registrant's Chief Financial Officer





On
      January 4, 2005 Golden Phoenix filed a Form 8-K with respect to Item 9 -
      Resignation of Michael Fitzsimonds as Chairman of the Board and Chief Executive
      Officer.





On
      January 31, 2005 Golden Phoenix filed a Form 8-K with respect to Item - Sale
      of
      its interests in the Borealis Project for $1.4 million.





On
      February 1, 2005 Golden Phoenix filed a Form 8-K with respect to Item -
      Termination of its interests in the definitive Contact agreements with
      International Enexco Ltd. and F. W. Lewis Inc.





33








**SIGNATURES**





Pursuant
      to the requirements of Sections 13 or 15(d) of the Securities Exchange Act
      of
      1934, the registrant has duly caused this Amendment No. 1 to the Company’s
      Annual Report on Form 10-KSB to be signed on its behalf by the undersigned,
      thereto duly authorized.




GOLDEN
              PHOENIX
              MINERALS, INC.Date: January
              18, 2006
            By:
            /s/ Kenneth S. RipleyKenneth
              S. RipleyInterim
              Chief Executive Officer




By:
            /s/ Larry A. KitchenLarry
              A. KitchenPrincipal
              Financial Officer





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/
                  David A. CaldwellDavid
                  A. Caldwell
              
              Director
              
              January
                  18, 2006/s/ Ronald
                L. ParrattRonald
                  L. Parratt
              
              Director
              
              January
                      18, 2006/s/ Jeffery
                TissierJeffery
                  Tissier
              
              Director
              
              January
                      18, 2006


34





**GOLDEN
      PHOENIX MINERALS, INC.**





**FINANCIAL
      STATEMENTS**





DECEMBER
      31, 2004





**C
      O N T E N T S**


Report
                  of Independent Registered Public Accounting Firm
              
              3Balance
                  Sheet
              
              4Statements
                  of Operations
              
              6Statements
                  of Stockholders' Equity (Deficit)
              
              8Statements
                  of Cash Flows
              
              11Notes
                  to the Financial Statements
              
              13


ii








**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





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, 2004, and the related statements of operations, stockholders'
      equity (deficit), and cash flows for the years ended December 31, 2004 and
      2003.
      These financial statements are the responsibility of the Company's management.





We
      conducted our audits in accordance with auditing standards of the Public Company
      Accounting Oversight Board (United States). 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, 2004 and the results of its operations and its cash flows for
      the
      years ended December 31, 2004 and 2003, in conformity with United States
      generally accepted accounting principles.





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 $25,192,268 and has a working capital deficit of $7,610,574 at
      December 31, 2004, 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,
      2005





1








**GOLDEN
      PHOENIX MINERALS, INC.**


**Balance
      Sheet**




**ASSETS**


**CURRENT
      ASSETS**


December
                  31,2004Prepaid
                  expenses and other current assets
              
              $
              117,045Precious
                  metals inventory
              
              
              114,803Materials
                  and supplies inventory
              
              
              16,429Total
                  Current Assets
              
              
              248,277PROPERTY
                  AND EQUIPMENT (Note 1)Land
              
              
              57,599Buildings
              
              
              116,020Vehicles
              
              
              266,464Computer
                  equipment
              
              
              107,104Office
                  furniture and equipment
              
              
              18,221Mining
                  and milling equipment and rolling stock
              
              
              1,380,427Accumulated
                  depreciation
              
              
              (521,828
              )Total
                  Property and Equipment, Net
              
              
              1,424,007OTHER
                  ASSETSRestricted
                  funds - reclamation obligations (Note 4)
              
              
              1,848,823Reclamation
                  asset, net (Note 4)
              
              
              1,843,698Prepaid
                  bond insurance premiums
              
              
              406,912Deposits
              
              
              15,464Total
                  Other Assets
              
              
              4,114,897TOTAL
                  ASSETS
              
              $
              5,787,181
  The
        accompanying notes are an integral part of these financial statements.





2








**GOLDEN
      PHOENIX MINERALS, INC.**


**Balance
      Sheet (Continued)**


December
                  31,2004LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)CURRENT
                  LIABILITIESBank
                  overdraft
              
              $
              41,601Accounts
                  payable
              
              
              1,757,459Accrued
                  liabilities (Note 7)
              
              
              4,787,546Current
                  portion of long term debt (Note 9)
              
              
              89,575Capital
                  lease obligations-current portion (Note 8)
              
              
              33,929Convertible
                  notes payable and related accrued interest (Note 10)
              
              
              779,521Amounts
                  due to related parties (Note 6)
              
              
              369,220Total
                  Current Liabilities
              
              
              7,858,851LONG-TERM
                  LIABILITIESReclamation
                  obligation (Note 4)
              
              
              2,352,235Long-term
                  debt (Note 9)
              
              
              77,029Capital
                  lease obligations (Note 8)
              
              
              7,004Total
                  Long-Term Liabilities
              
              
              2,436,268Total
                  Liabilities
              
              
              10,295,119COMMITMENTS
                  AND CONTINGENCIES (NOTE 11)STOCKHOLDERS'
                  EQUITY (DEFICIT)Preferred
                  stock, no par value, 50,000,000 shares authorized, noshares
                  issued and outstanding
              
              
              —Common
                  stock, no par value, 150,000,000 shares authorized,119,721,984
                  issued and outstanding
              
              
              20,684,330Accumulated
                  deficit
              
              
              (25,192,268
              )Total
                  Stockholders' Equity (Deficit)
              
              
              (4,507,938
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
              
              $
              5,787,181The
                  accompanying notes are an integral part of these financial
                  statements





3








**GOLDEN
      PHOENIX MINERALS, INC.**


**Statements
      of Operations**


For
                  the Years Ended
                December
                  31,2004
              
              2003REVENUESSale
                  of precious metals
              
              $
              1,560,419
              
              $
              98,097EXPENSESCost
                  of mining operations
              
              
              3,289,569
              
              
              296,725Exploration,
                  mineral property leases, and minimum work commitment
                  expenses
              
              
              1,483,255
              
              
              917,363Accretion
                  expense
              
              
              133,507
              
              
              118,532General
                  and administrative
              
              
              1,862,699
              
              
              1,099,717Investor
                  relations and professional fees
              
              
              228,415
              
              
              533,218Salaries
                  and wages
              
              
              752,356
              
              
              357,377Depreciation
                  and depletion
              
              
              170,547
              
              
              85,517Total
                  Expenses
              
              
              7,920,348
              
              
              3,408,449LOSS
                  FROM OPERATIONS
              
              
              (6,359,929
              )
              
              (3,310,352
              )OTHER
                  INCOME (EXPENSE)Interest
                  income
              
              
              428
              
              
              20,955Interest
                  expense
              
              
              (121,451
              )
              
              (141,969
              )Loss
                  on extinguishment of debt
              
              
              —
              
              
              —Realized
                  gain on available-for-sale securities
              
              
              —
              
              
              1,290Loss
                  on impairment of investments
              
              
              —
              
              
              —Sale
                  of interest in mineral property
              
              
              —
              
              
              125,000Precious
                  metal by-product sales net of related costs
              
              
              —
              
              
              (369,266
              )Other
                  income, net
              
              
              10,944
              
              
              14,454Total
                  Other Income (Expense)
              
              
              (110,079
              )
              
              (349,536
              )LOSS
                  BEFORE INCOME TAXES
              
              $
              (6,470,008
              )
              $
              (3,659,888
              )
   The
        accompanying notes are an integral part of these financial statements.





4








**GOLDEN
      PHOENIX MINERALS, INC.**


**Statements
      of Operations (Continued)**


For
                  the Years Ended
                December
                  31,2004
              
              
              2003LOSS
                  BEFORE INCOME TAXES
              
              $
              (6,470,008
              )
              $
              (3,659,888
              )INCOME
                  TAXES
              
              
              —
              
              
              —LOSS
                  BEFORE CUMULATIVE CHANGE IN ACCOUNTING PRINCIPLE
              
              
              (6,470,008
              )
              
              (3,659,888
              )Cumulative
                  effect of change in accounting principle, net of no income
                  taxes
              
              
              —
              
              
              693,828NET
                  LOSS
              
              $
              (6,470,008
              )
              $
              (2,966,060
              )BASIC
                  LOSS PER SHAREBasic
                  loss per share
              
              $
              (0.06
              )
              $
              (0.03
              )WEIGHTED
                  AVERAGE NUMBER OF SHARES OUTSTANDING
              
              
              108,928,872
              
              
              89,435,621


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





5








**GOLDEN
      PHOENIX MINERALS, INC.**


**Statements
      of Stockholders' Equity (Deficit)**


Preferred
                  Stock
              
              Common
                  SharesShares
              
              Amount
              
              Shares
              
              Amount
              
              Stock
                  Subscription Receivable
              
              Deferred
                  Costs
              
              Accumulated
                  DeficitBalance,
                  December 31,2002
              
              
              --
              
              $
              --
              
              
              76,881,842
              
              $
              13,248,089
              
              $
              (490,457
              )
              $
              (300,000
              )
              $
              (15,756,200
              )Issuance
                  of common stockfor
                  services
              
              
              --
              
              
              --
              
              
              743,674
              
              
              269,073
              
              
              --
              
              
              --
              
              
              --Issuance
                  of common stockfor
                  cash
              
              
              --
              
              
              --
              
              
              4,911,305
              
              
              1,760,000
              
              
              --
              
              
              --
              
              
              --Issuance
                  of common stockfor
                  exploration andproperty
                  costs
              
              
              --
              
              
              --
              
              
              253,800
              
              
              58,827
              
              
              --
              
              
              --
              
              
              --Issuance
                  of common stockfor
                  warrants exercised
              
              
              --
              
              
              --
              
              
              14,940,839
              
              
              1,563,413
              
              
              (60,000
              )
              
              --
              
              
              --Issuance
                  of common stockpursuant
                  to aconsulting
                  agreement
              
              
              --
              
              
              --
              
              
              1,500,000
              
              
              525,000
              
              
              --
              
              
              (525,000
              )
              
              --Issuance
                  of common stockfor
                  directors fees
              
              
              --
              
              
              --
              
              
              46,830
              
              
              16,560
              
              
              --
              
              
              --
              
              
              --Issuance
                  for commonstock
                  for softwaremaintenance
                  andextinguishments
                  of debt
              
              
              --
              
              
              --
              
              
              55,180
              
              
              22,072
              
              
              --
              
              
              --
              
              
              --Cash
                  received on stocksubscription
                  receivable
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              376,430
              
              
              --
              
              
              --Balance
                  Forward
              
              
              --
              
              $
              --
              
              
              99,333,470
              
              $
              17,463,034
              
              $
              (174,027
              )
              $
              (825,000
              )
              $
              (15,756,200
              )




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





6








**GOLDEN
      PHOENIX MINERALS, INC.**


**Statements
      of Stockholders' Equity (Deficit) (Continued)**


Preferred
                  Stock
              
              Common
                  SharesShares
              
              Amount
              
              Shares
              
              Amount
              
              Stock
                  Subscription Receivable
              
              Deferred
                  Costs
              
              Accumulated
                  DeficitBalance
                  Forward
              
              
              --
              
              $
              --
              
              
              99,333,470
              
              $
              17,463,034
              
              $
              (174,027
              )
              $
              (825,000
              )
              $
              (15,756,200
              )Cash
                  received on stocksubscriptions
                  receivable
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              174,027
              
              
              --
              
              
              --Amortization
                  of deferredcosts
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              233,750
              
              
              --Stock
                  offering costs
              
              
              --
              
              
              --
              
              
              --
              
              
              (175,825
              )
              
              --
              
              
              --
              
              
              --Net
                  loss for the yearended,
                  December 31, 2003
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              (2,966,060
              )Balance,
                  December 31, 2003
              
              
              --
              
              $
              --
              
              
              99,333,470
              
              $
              17,287,209
              
              $
              --
              
              $
              (591,250
              )
              $
              (18,722,260
              )








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





7








**GOLDEN
      PHOENIX MINERALS, INC.**


**Statements
      of Stockholders' Equity (Deficit) (Continued)**


Preferred
                  Stock
              
              Common
                  SharesShares
              
              Amount
              
              Shares
              
              Amount
              
              Stock
                  Subscription Receivable
              
              Deferred
                  Costs
              
              Accumulated
                  DeficitBalance
                  December 31, 2003
              
              
              --
              
              $
              --
              
              
              99,333,470
              
              $
              17,287,209
              
              $
              --
              
              $
              (591,250
              )
              $
              (18,722,260
              )Issuance
                  of commonstock
                  for warrantsexercised
              
              
              --
              
              
              --
              
              
              9,728,884
              
              
              1,230,805
              
              
              --
              
              
              --
              
              
              --Issuance
                  of commonstock
                  for cash
              
              
              --
              
              
              --
              
              
              10,528,587
              
              
              2,410,341
              
              
              --
              
              
              --
              
              
              --Issuance
                  of commonstock
                  for directorsfees
              
              
              --
              
              
              --
              
              
              7,815
              
              
              2,190
              
              
              --
              
              
              --
              
              
              --Issuance
                  for commonstock
                  for services -
              
              
              --
              
              
              123,228
              
              
              38,785
              
              
              --
              
              
              --
              
              
              --Amortization
                  ofdeferred
                  costs
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              306,250
              
              
              --Stock
                  offering costs
              
              
              --
              
              
              --
              
              
              --
              
              
              (285,000
              )
              
              --
              
              
              285,000
              
              
              --Net
                  loss for the yearended,
                  December 31, 2004
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              --
              
              
              (6,470,008
              )Balance,
                  December 31, 2004
              
              
              --
              
              $
              --
              
              
              119,721,984
              
              $
              20,684,330
              
              $
              --
              
              $
              --
              
              $
              (25,192,268
              )




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





8








**GOLDEN
      PHOENIX MINERALS, INC.**


**Statements
      of Cash Flows**


For
                  the Years Ended December 31,2004
              
              2003CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  Loss
              
              $
              (6,470,008
              )
              $
              (2,966,060
              )Adjustments
                  to reconcile net loss to net cash used by operating
                  activities:Depreciation
                  and depletion
              
              
              70,547
              
              
              85,517Accretion
                  expense
              
              
              133,507
              
              
              118,532Cumulative
                  effect of change in accounting principles
              
              
              --
              
              
              (693,828
              )Common
                  stock issued for services
              
              
              40,975
              
              
              285,634Common
                  stock issued for exploration and property costs
              
              
              --
              
              
              80,899Amortization
                  of deferred costs
              
              
              306,250
              
              
              218,750Changes
                  in operating assets and liabilities:(Increase)
                  in accounts and other receivables
              
              
              1,500
              
              
              (1,500
              )(Increase)
                  in prepaid expenses and other current assets
              
              
              87,346
              
              
              (568,869
              )(Increase)
                  in inventories
              
              
              80,229
              
              
              (211,461
              )(Increase)
                  in reclamation asset
              
              
              --
              
              
              (1,200,196
              )(Increase)
                  decrease in restricted cash
              
              
              (29,924
              )
              
              2,918(Increase)
                  in deposits
              
              
              5,570
              
              
              (5,423
              )Increase
                  (decrease)in accounts payable
              
              
              1,498,311
              
              
              (125,990
              )Increase
                  in accrued liabilities
              
              
              765,129
              
              
              725,850Increase
                  in reclamation obligation
              
              
              --
              
              
              1,200,196Net
                  Cash Used by Operating Activities
              
              
              (3,410,568
              )
              
              (3,055,031
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESPurchase
                  of property and equipment
              
              
              (582,041
              )
              
              (100,583
              )Net
                  Cash Used by Investing Activities
              
              $
              (582,041
              )
              $
              (100,583
              )








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





9








**GOLDEN
      PHOENIX MINERALS, INC.**


**Statements
      of Cash Flows (Continued)**


For
                  the Years Ended December 31,2004
              
              2003CASH
                  FLOWS FROM FINANCING ACTIVITIESBank
                  Overdraft
              
              $
              41,601
              
              $
              --Principal
                  payments on capital lease obligations
              
              
              (36,912
              )
              
              (45,388
              )Payments
                  on notes payable and long-term debt
              
              
              (93,784
              )
              
              (31,394
              )Proceeds
                  from notes payable and long-term debt
              
              
              33,296
              
              
              --Cash
                  receipts on stock subscription receivable
              
              
              --
              
              
              410,457Proceeds
                  from exercise of options and warrants
              
              
              1,195,805
              
              
              1,496,412Proceeds
                  from the conversion of preferred stock
              
              
              --
              
              
              --Stock
                  offering costs
              
              
              --
              
              
              (20,825
              )Net
                  proceeds from sale of common stock
              
              
              2,410,341
              
              
              1,760,000Net
                  Cash Provided by Financing Activities
              
              
              3,550,347
              
              
              3,569,262NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              (442,262
              )
              
              413,648CASH
                  AND CASH EQIVALENTS AT BEGINNING OF YEAR
              
              
              442,262
              
              
              28,614CASH
                  AND CASH EQUIVALENTS AT END OF YEAR
              
              $
              --
              
              $
              442,262SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:Cash
                  Paid for Interest
              
              $
              7,848
              
              $
              14,948Cash
                  Paid for Income Taxes
              
              $
              --
              
              $
              --SUPPLEMENTAL
                  DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:Common
                  stock issued for services
              
              $
              40,975
              
              $
              285,634Common
                  stock issued for exploration and property costs
              
              $
              --
              
              $
              80,899Debt
                  applied for the exercise of stock options and warrants
              
              $
              --
              
              $
              7,000$
              --
              
              $
              --








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





10








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**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 intends to attempt to 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.
      As
      of December 31, 2004, the operations of the Mineral Ridge Mine has been
      winter-idled.





**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
      2004, 100% of revenues consisted of precious metal sales to one party.





11








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**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.


For
                  the Years Ended December
                  31,2004
              
              2003Net
                loss per share from operations:Numerator
                  - net loss
              
              $
              (6,470,008
              )
              $
              (2,966,060
              )Denominator
                  - weighted average shares outstanding
              
              
              108,923,872
              
              
              89,435,621Basic
                  loss per share
              
              $
              (0.06
              )
              $
              (0.03
              )
 
 The
        Company's outstanding common stock options and warrants have been excluded
        from
        the basic loss per share calculation as they are anti-dilative. The Company
        has
        excluded 7,531,153 common stock equivalents at December 31, 2004.





**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 carry-forwards 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.





12








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**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,
      2004
      and 2003:


2004
              
              
              2003Deferred
                  tax assets:NOL
                  Carryover
              
              $
              7,644,580
              
              $
              5,071,800Accrued
                  Expenses
              
              
              233,615
              
              
              233,700Depreciation
              
              
              282,095Deferred
                  tax liabilities:Depreciation
              
              
              —
              
              
              (48,900
              )Valuation
                  allowance
              
              
              (8,160,290
              )
              
              (5,256,600
              )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, 2004 and 2003 due
        to the
        following:


2004
              
              
              2003Book
                  loss
              
              $
              (2,523,300
              )
              $
              (1,151,240
              )Accrued
                  compensation
              
              
              —
              
              
              (1,255
              )Depreciation
              
              
              —
              
              
              (27,520
              )Other
              
              
              1,385
              
              
              1,120Stock
                  for services/options expense
              
              
              18,775
              
              
              142,950Valuation
                  allowance
              
              
              2,503,140
              
              
              1,035,945Net
                  tax provision
              
              $
              —
              
              $
              —
 At
        December 31, 2004, the Company had net operating loss carry-forwards of
        approximately $19,000,000 that may be offset against future taxable income
        from
        the year 2004 through 2024. No tax benefit has been reported in the December
        31,
        2004 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 carry-forwards for Federal income tax reporting purposes are subject to
      annual limitations. Should a change in ownership occur, net operating loss
      carry-forwards may be limited as to use in the future years.





13








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





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


(Continued)





**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
                  yearsComputer
                  equipment
              
              3-5
                  yearsFurniture
                  and equipment
              
              5-7
                  yearsVehicles
              
              5
                  yearsBuildings
              
              40
                  years
 For
        the
        years ended December 31, 2004 and 2003, the Company recorded depreciation
        expense of $134,391 and $71,347, respectively related to property and equipment.





**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 counter
      party to earn the equity instruments is reached (a "performance commitment");
      or
      (2) The date at which the counter party's performance is complete.





14








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





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


(Continued)





**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.





15








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**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.





16








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





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


(Continued)





**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 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.





17








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





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


(Continued)





**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.





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.





**New
      Accounting Pronouncements**





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





On
      December 16, 2004 the FASB issued SFAS No. 123(R), Share-Based Payment, which
      is
      an amendment to SFAS No. 123, Accounting for Stock-Based Compensation. This
      new
      standard eliminates the ability to account for share-based compensation
      transactions using Accounting Principles Board ("APB") Opinion No. 25,
      Accounting for Stock Issued to Employees, and generally requires such
      transactions to be accounted for using a fair-value-based method and the
      resulting cost recognized in our financial statements. This new standard is
      effective for awards that are granted, modified or settled in cash in interim
      and annual periods beginning after June 15, 2005. In addition, this new standard
      will apply to unvested options granted prior to the effective date. We will
      adopt this new standard effective for the fourth fiscal quarter of 2005, and
      have not yet determined what impact this standard will have on our financial
      position or results of operations.





18











**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





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


(Continued)





**New
      Accounting Pronouncements (Continued)**





This
      Statement requires that those items be recognized as current-period charges
      regardless of whether they meet the criterion of "so abnormal." In addition,
      this Statement requires that allocation of fixed production overheads to the
      costs of conversion be based on the normal capacity of the production
      facilities. This statement is effective for inventory costs incurred during
      fiscal years beginning after June 15, 2005. Management does not believe the
      adoption of this Statement will have any immediate material impact on the
      Company.





In
      December 2004, the FASB issued SFAS No. 152, Accounting for Real Estate
      Time-sharing Transactions, which amends FASB statement No. 66, Accounting for
      Sales of Real Estate, to reference the financial accounting and reporting
      guidance for real estate time-sharing transactions that is provided in AICPA
      Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing
      Transactions. This statement also amends FASB Statement No. 67, Accounting
      for
      Costs and Initial Rental Operations of Real Estate Projects, to state that
      the
      guidance for (a) incidental operations and (b) costs incurred to sell real
      estate projects does not apply to real estate time-sharing transactions. The
      accounting for those operations and costs is subject to the guidance in SOP
      04-2. This Statement is effective for financial statements for fiscal years
      beginning after June 15, 2005. Management believes the adoption of this
      Statement will have no impact on the financial statements of the Company.





In
      December 2004, the FASB issued SFAS No.153, Exchange of Nonmonetary Assets.
      This
      Statement addresses the measurement of exchanges of nonmonetary assets. The
      guidance in APB Opinion No. 29, Accounting for Nonmonetary Transactions, is
      based on the principle that exchanges of nonmonetary assets should be measured
      based on the fair value of the assets exchanged. The guidance in that Opinion,
      however, included certain exceptions to that principle. This Statement amends
      Opinion 29 to eliminate the exception for nonmonetary exchanges of similar
      productive assets and replaces it with a general exception for exchanges of
      nonmonetary assets that do not have commercial substance. A nonmonetrary
      exchange has commercial substance if the future cash flows of the entity are
      expected to change significantly as a result of the exchange. This Statement
      is
      effective for financial statements for fiscal years beginning after June 15,
      2005. Earlier application is permitted for nonmonetary asset exchanges incurred
      during fiscal years beginning after the date of this statement is issued.
      Management believes the adoption of this Statement will have no impact on the
      financial statements of the Company.





The
      implementation of the provisions of these pronouncements are not expected to
      have a significant effect on the Company's consolidated financial statement
      presentation.





19








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





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


(Continued)





**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, 2004, 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, 2004
      and
      2003.





**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 $25,192,268 and a working capital
      deficit of $7,610,574 at December 31, 2004, 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.





20








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**NOTE
      2 - GOING CONCERN (Continued)**





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. The Company is in the process
      of attempting to sell additional debt and equity financing from other sources.
      The Company intends to 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. As of December 31, 2004, the
      operations at the Mineral Ridge Mine had been winter idled. The Company expects
      to place the Ashdown Property into operation during 2005 and anticipate
      generating revenues from those operations.





**NOTE
      3 - MINERAL PROPERTIES**





**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 101 unpatented mining claims.





The
      Company has signed two agreements for the Ashdown property; the first terminated
      due to the other party's failure to perform. These funds were not obtained
      and
      the agreement terminated. The second agreement is 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 the agreement, Golden Phoenix
      paid Win-Eldrich $50,000, and beginning in three months after the signing,
      began
      paying $5,000 per month until a cash distribution through profitable production
      is achieved.





21








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**NOTE
      3 - MINERAL PROPERTIES (Continued)**





**Ashdown
      Project, Humboldt County, Nevada (Continued)**





Golden
      Phoenix has begun an 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 mill equipment and building has been transported to a site
      a
      short distance from the proposed milling site. Molybdenum ore is currently
      stockpiled at the mine site and was previously mined for a large metallurgical
      test conducted more than twenty years ago. It is estimated that considerable
      metal values lie in this stockpile. Golden Phoenix also plans to expand into
      a
      larger operation once production is underway.





During
      2004, the Company conducted additional exploration drilling on the property.





The
      Company has a marketing agreement in place, which is an exclusive life-of-mine
      contract. When molybdenite production is underway, will take delivery at the
      mine site and is responsible for placing it with buyers at a number of worldwide
      locations.





By
      the
      end of the 2004, permit applications were being reviewed by the agencies and
      include the Water Pollution Control Permit, Reclamation Plan, and Right of
      Way
      Permit. The Air Quality Permit is ready to be submitted, and the Storm Water
      Permit has been received. Permitting efforts for the larger mill and open pit
      mine includes writing the Plan of Operations and gathering base line information
      for the Environmental Assessment. Other permit applications will be prepared
      and
      submitted once the Plan of Operations is submitted to the Bureau of Land
      Management.





During
      2004, the Company had spent $658,596 on this project and assumed long term
      debt
      of approximately $82,500.





**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 was
      placed in operation during the spring of 2004. The mine was acquired with
      minimum maintenance activities being conducted. Operations have yielded certain
      amounts of precious metal product that has been sold resulting in revenues
      of
      $1,560,419 in 2004 and $98,097 in 2003. Costs associated with these activities
      totaled $3,289,569 in 2004 and $296,725 in 2003. 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.





22








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**NOTE
      3 - MINERAL PROPERTIES (Continued)**





**Mineral
      Ridge Property (Continued)**





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 and concluded full operations during
      the spring of 2004. During December 2004, the company suspended operations
      of
      the Mineral Ridge Mine, and is currently processing the heap leach pads. Gold
      and silver continue to be recovered.





The
      recovery operation 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. The combined reserves,
      at a 0.030 troy ounces of gold per ton cut off grade and a gold price of $325
      per ounce, are 2,392,000 tons averaging 0.0758 troy ounces of gold per ton
      for
      146,504 ounces of recoverable gold at an 80.8% process recovery. There are
      an
      additional 10,000 recoverable ounces estimated to be on the leach pad. Silver
      values are not economically significant in the mineralized material at Mineral
      Ridge and have not been included in these reserve calculations. The combined
      direct operating costs, royalties, property and net proceeds tax burden, and
      cost of capital (total costs) are estimated at $241.63 per ounce. As of December
      31, 2004, the operations at the Mineral Ridge Mine had been winter
      idled.





**Borealis
      Property**





The
      Company had 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.





23








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**NOTE
      3 - MINERAL PROPERTIES (Continued)**





**Borealis
      Property (Continued)**





In
      the
      fourth quarter of 2004 the Company and Gryphon Gold entered into negotiations
      for the sale of Borealis to Gryphon. An agreement was made during January of
      2005 for the sale of all Borealis rights held by the Company to Gryphon. The
      agreement is for cash payments of $1,400,000, with the first payment of $400,000
      due on the agreement signing date. Payments of $250,000 are due every three
      months until full payment has been completed. Gryphon Gold is current on its
      payments.





**Contact
      Copper Property**





On
      January 28, 1998 the Company entered into a joint venture agreement with
      International Enexco Ltd. ("Enexco"). The Company had 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.





Both
      the
      Enexco and Lewis contracts were terminated by the Company on December 23, 2004.
      Under the contracts, stock and exploration liabilities remain in place.
      Reduction or elimination of these liabilities have been broached by the Company
      with both contract parties and discussions are continuing.





The
      Company retains six unpatented mining claims over a portion of what is known
      as
      the Banner Zone deposit. To date, these claims have the highest drill hold
      ore
      grades in the area of interest.





24








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**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 and $36,156 for the year ended December 31,
      2004, using the units-of-production method.





Accretion
      expense related to the reclamation obligation for the year ended December 31,
      2004, and 2003 was $133,507 and 118,532, respectively.





25








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**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, 2004:


Reclamation
                  obligation (asset retirement
                  obligation)as reported
                  at December 31, 2003
              
              $
              2,218,728Impact
                  of adopting SFAS No. 143
              
              
              —Accretion
                  expense:Revision
                  in reclamation cost estimates
              
              
              —Accretion
                  expense - January 1, 2004 throughDecember
                  31, 2004
              
              
              133,507Reclamation
                  obligation at December 31, 2004
              
              $
              2,352,235
 **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 $526,505 of premiums on the reclamation bond policy through December
      31, 2004. 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 an $11,311
      annual insurance premium, which is being amortized over a 12-month period and
      $518,542, which represents the portion of the premium to be amortized over
      the
      12-year term of the policy. At December 31, 2004, the total current portion
      of
      the prepaid insurance premiums related to this policy totaled $47,925 and the
      long-term portion totaling $406,912.





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, should it move 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. As
      of
      December 31, 2004, the operations at the Mineral Ridge Mine had been winter
      idled.





26








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**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, 2004, a total of $208,962 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, 2004, total
      accrued interest of $76,710 has been recognized. These advances along with
      the
      imputed accrued interest are unsecured and due on demand.





In
      addition to the above related party notes, one long term note payable was issued
      for the purchase of what is known as the Ashdown Pilot Mill for $200,000. The
      note has had payments made with a balance now due of $83,548. After the note
      was
      issued the holder became an employee of the company.





The
      Company incurred related party interest expense of $20,902 and $21,831 for
      the
      years ended December 31, 2004 and 2003, respectively.





**NOTE
      7 - ACCRUED LIABILITIES**


Accrued
                  liabilities consisted of the following atDecember
                  31, 2004:Contact
                  Property lease payable (Note 11)
              
              $
              1,764,807Contact
                  Property minimum work commitment payable (Note 11)
              
              
              2,420,643Officers
                  accrued salaries and deferred compensation
              
              
              506,144Accrued
                  payroll and related expenses
              
              
              92,872Accrued
                  interest
              
              
              3,080$
              4,787,546
 **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.





27








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**NOTE
      8 - CAPITAL LEASES (Continued)**





Obligations
      under capital leases at December 31, 2004 consisted of the following:


Capital
                  lease payable to Hewlett Packard Financial Service Co., dated August
                  1,
                  2001, payable at $1,596per
                  month, including taxes and fees and interest imputed at 17.18%
                  per annum,
                  maturity August 1, 2005,secured
                  partially by certain computer equipment
              
              $
              11,361Capital
                  lease payable to CIT Financial Services, dated August 21, 2001,
                  payableat
                  $1,409 per month, including interest imputed at 20.48% per annum,
                  maturityAugust
                  5, 2005, secured partially by certain computer equipment
              
              
              10,455Capital
                  lease payable to Heller Financial Leasing, dated July 5, 2001,
                  payableat
                  $1,195 per month, including interest imputed at 18.9% per annum,
                  maturityJuly
                  5, 2006, secured by certain computer equipment
              
              
              19,117Total
              
              
              40,933Less:
                  Current Portion
              
              
              33,929Long-term
                  portion
              
              $
              7,004
 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 31,2005
              
              $
              36,5282006
              
              
              7,1732007
              
              
              —2008
              
              
              —2009
                  and thereafter
              
              
              —Total
                  future minimum lease payments
              
              
              43,701Less:
                  Amount representing interest
              
              
              2,768Present
                  value of future minimum lease payments
              
              $
              40,933


The
      Company recorded depreciation expense of $6,372 and $6,372 for the years ended
      December 31, 2004 and 2003 for equipment under capital leases.





28








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**NOTE
      9 - LONG TERM DEBT**


Long
                  term debt consisted of the following at December 31, 2004:Note
                  payable to GMAC, dated November 17, 2000, payable at $672 per month
                  including interest at 3.9% perannum
                  through December, 2004, secured by a 2001 GMC Sierra truck
              
              $
              2,999Note
                  payable to GMAC, dated November 17, 2000, payable at $672 per month
                  including interest at 3.9% perannum
                  through December, 2004, secured by a 2001 GMC Sierra truck
              
              
              2,999Note
                  payable to GMAC, dated November 17, 2000, payable at $599 per month
                  including interest at 3.9% perannum
                  through December, 2004, secured by a 2001 GMC Sierra truck
              
              
              2,677Note
                  payable to GMAC, dated November 17, 2000, payable at $598 per month
                  including interest at 3.9% perannum
                  through December, 2004, secured by a 2000 GMC Sierra truck
              
              
              2,671Note
                  payable to Arcadia Financial Ltd., dated August 12, 2003, payable
                  at $468
                  per month includinginterest
                  at 12% per annum through February 2008, secured by a 1999 Chevrolet
                  truck
              
              
              14,702Note
                  payable to Komatsu Financial, dated December 10, 2003, payable
                  at $1,798
                  per month through December2006
                  with no interest, secured by a Komatsu crawler dozer
              
              
              44,946Note
                  payable to an individual, dated August 28, 2001, payable upon demand,
                  including interest at 15% perannum,
                  unsecured
              
              
              37,540Note
                  payable to GMAC, dated May 11, 2004, payable at $558 per month
                  with no
                  interest, through May 2009,secured
                  by a 2004 GMC Sierra truck
              
              
              29,580Note
                  payable to GMAC, dated May 11, 2004, payable at $538 per month
                  with no
                  interest, through May 2009,secured
                  by a 2004 GMC Sierra truck
              
              
              28,490Total
              
              
              166,604Less:
                  Current portion of long term debt
              
              
              89,575Total
                  Long-term debt
              
              $
              77,029


29








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**NOTE
      9 - LONG TERM DEBT**





Maturities
      on long term debt are as follows:





Year
      Ended December 31,


2005
              
              $
              89,5752006
              
              
              39,3092007
              
              
              18,3162008
              
              
              13,9262009
                  and thereafter
              
              
              5,478Total
              
              $
              166,604
 **NOTE
        10 - CONVERTIBLE NOTES PAYABLE**





At
      December 31, 2004, 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 April, 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, 2004,
      accrued interest on these convertible notes totaled $324,521.





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, 2004, the Company would have been required
      to
      issue 2,993,200 shares of common stock to the holders of the convertible notes.





30








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**NOTE
      11 - COMMITMENTS AND CONTINGENCIES**





**Leases**





The
      Company leased its facilities under a non-cancelable operating lease which
      expires July 31, 2011. The monthly rent is based on an escalating scale based
      on
      an average increase of three cents per square foot. The current 12 month rate
      is
      $6510 per month. The following is a schedule, by years, of the future minimum
      lease payments under operating leases, as of December 31, 2004.





Year
      Ended December 31,


2005
              
              $
              79,1702006
              
              
              82,1102007
              
              
              84,2102008
              
              
              86,7302009
              
              
              89,2502010
              
              
              91,7702011
              
              
              54,360Total
              
              $
              567,600


In
      addition, during 2004, 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 $107,445 and $87,915 for the years ended
      December 31, 2004 and 2003, respectively.





31








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**NOTE
      11 - COMMITMENTS AND CONTINGENCIES (Continued)**





**Employment
      Agreements**





Effective
      May 15, 1998, the Company entered into an Employment Agreement with Michael
      Fitzsimonds. Pursuant to the Employment Agreement, Mr. Fitzsimonds served as
      President of the Company. The initial term of the Employment Agreement was
      for
      one (1) year and automatically renewed 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 provided 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. Mr Fitzsimonds resigned during February of 2005 and the above
      agreement is in effect. On February 18, 2005 Mr. Michael Fitzsimonds resigned
      his positions as Chairman of the Board and as Company President. The Board
      of
      Directors agreed on terms of separation salary and benefits for one year. At
      the
      conclusion of the termination agreement, the Company will begin payments of
      deferred salary from prior years activities and on a loan furnished to the
      company during 1997 and 1998.





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.





32








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**NOTE
      11 - COMMITMENTS AND CONTINGENCIES (Continued)**





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





The
      Company leased 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, 2004, the Company had a total liability of $3,249,450 on the lease
      which consists of $1,989,250 of property lease payments, $1,243,200 of minimum
      work commitment expenditures and $17,000 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. The lease was cancelled on December 23, 2004.





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





The
      Company also leased 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, 2004, the Company has accrued $4,000 of the monthly
      lease payments and had a liability totaling $2,175,200 in unsatisfied minimum
      work commitments. The lease is cancelable within thirty days and has been
      cancelled at year end of 2004. The lease was cancelled on December 23, 2004.





**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.





33








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**NOTE
      11 - COMMITMENTS AND CONTINGENCIES (Continued)**


Royalty
        Agreement - Mary Mining Company, Inc. (Continued)


RoyaltyPercentagePrice
                of Gold per Troy Ounce
              
              
              RateLess
                  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.





**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).





34








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**NOTE
      11 - COMMITMENTS AND CONTINGENCIES (Continued)**





**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 non-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, 2004, the Company has issued 17,232,442 shares of common stock
      for
      cash proceeds of $4,563,000 pursuant to the Fusion Capital agreement. As of
      January 3, 2005, Fusion Capital had completed buying all of the common stock
      available under the common stock purchase agreement.





**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.





35








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**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, 2004 and 2003, it was the
      responsibility of Gryphon Gold, as managing partner of the Borealis Joint
      Venture, to make all payments (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 President of Whitney & Whitney, Inc., Dr. Whitney, is no longer
      a significant shareholder of the Company, with less than one percent (-1%)
      ownership. Under the terms of the Whitney & Whitney agreement, the Company
      gave to Whitney a written 90 notice of termination. The termination is effective
      March 30, 2005.





**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
      2004: dividend yield of zero percent; expected volatility of 101% risk-free
      interest rate of 3.5 percent and expected life of 5 years.





36








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**NOTE
      13 -OUTSTANDING STOCK OPTIONS (Continued)**





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 not have recorded an additional expense. Also under these same provisions,
      the Company's net loss would not have been changed by the pro forma amounts
      indicated below:


December
                  31,2004
              
              2003Net
                  loss:As
                  reported
              
              $
              (6,470,008
              )
              $
              (2,966,060
              )Pro
                  forma
              
              $
              (6,470,008
              )
              $
              (3,548,427
              )Basic
                  income (loss) per share:As
                  reported
              
              $
              (0.06
              )
              $
              (0.03
              )Pro
                  forma
              
              $
              (0.06
              )
              $
              (0.04
              )


Outstanding
              
              ExercisableExercises
                  Prices
              
              Number
                Outstanding
                at12/31/04
              
              Weighted
                  Average
                Remaining
                Contractual
                  Life
              
              Weighted
                  Average
                Exercise
                  Price
              
              Number
                  Exercisable
                at
                  12/31/04
              
              Weighted
                  Average
                Exercise
                  price0.44
              
              
              38,267
              
              
              2.50
              
              
              0.44
              
              
              38,267
              
              $
              0.440.15
              
              
              2,465,715
              
              
              (a
              )
              $
              0.15
              
              
              2,465,715
              
              $
              0.150.20
              
              
              1,701,000
              
              
              0.25
              
              
              0.20
              
              
              1,701,000
              
              
              0.200.37
              
              
              2,064,000
              
              
              2.50
              
              
              0.37
              
              
              2,064,000
              
              
              0.37$0.24
              
              
              6,268,982
              
              
              2.40
              
              $
              0.24
              
              
              6,268,982
              
              $
              0.24
 
 (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, 2004, the Company granted 38,267 stock options
      to
      various employees. These options were issued with exercise prices of $0.44
      per
      share. All of these options vest immediately and have maturity date of three
      and
      one half years.





37








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**NOTE
      14 - OUTSTANDING STOCK WARRANTS**





A
      summary
      of the status of the Company's stock warrants as of December 31, 2004 and
      changes during the year is presented below:


WeightedAverageExerciseShares
              
              
              PriceOutstanding,
                  December 31, 2003
              
              
              12,618,236
              
              $
              0.13GrantedCanceled
                  / Expired
              
              
              (990,333
              )
              
              0.12Exercised
              
              
              (10,352,551
              )
              
              0.13Outstanding,
                  December 31, 2004
              
              
              1,275,352
              
              $
              0.24
 The
        following summarizes the exercise price per share and expiration date of
        the
        Company's outstanding warrants to purchase common stock at December 31, 2004:




Expiration
                Date
              
              Price
              
              Number2006
              
              
              0.20
              
              
              350,0002006
              
              
              0.25
              
              
              925,3521,275,352
 **NOTE
        15 - SUBSEQUENT EVENTS**





Subsequent
      to December 31, 2004, the Company has issued 3,312,392 shares of common stock
      for stock options and warrants exercised for cash proceeds of $620,261, 121,994
      shares of common stock for services rendered valued at $21,058, and 9,354,860
      shares of common stock for cash proceeds of $895,945 related to the Fusion
      Capital common stock purchase agreement discussed in Note 11.





38








**GOLDEN
      PHOENIX MINERALS, INC.**


Notes
      to
      the Financial Statements


December
      31, 2004 and 2003





**NOTE
      15 - SUBSEQUENT EVENTS (Continued)**





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, 2004
      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
      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. A formal contract for
      the joint venture had not been signed by the end of 2004 and continues to be
      negotiated.





On
      February 18, 2005 Mr. Michael Fitzsimonds resigned his positions as Chairman
      of
      the Board and as Company President. The Board of Directors agreed on terms
      of
      separation salary and benefits for one year. At the conclusion of the
      termination agreement, the Company will begin payments of deferred salary from
      prior years activities and on a loan furnished to the company during 1997 and
      1998.





On
      February 18, 2005 Mr. Kenneth Ripley was appointed as Acting Manager, with
      the
      temporary title of Chief Executive Officer. The Board of Directors continues
      to
      negotiate terms of employment. Mr. Ripley has been on Company sites as Acting
      Manager since February 18, 2005.





39