UNITED STATES
SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549
 
 FORM
10-KSB
 
 R
              ANNUAL REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934
 
 For
the Fiscal Year Ended December 31, 2007
 
 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
                Of
      Incorporation or Organization)
              (I.R.S.
      Employer 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)
 
 
 Check
whether this issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act. £
Yes  No R
 
 Check
whether the issuer  (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 (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. R
Yes £
No
 
 Check if
there is no disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is contained herein, and no disclosure will be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment of
this Form 10-KSB. £
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). £ Yes R
No
 
 State
issuer’s revenue for its most recent fiscal year. $10,398,361
 
 As of
March 24, 2008, the aggregate market value of the registrant’s common stock held
by non-affiliates of the registrant was $33.0 million based on the closing sale
price as reported on the OTC Electronic Bulletin Board under the symbol
"GPXM".
 
 Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
 
 Class
              Outstanding at March 24,
    2008Common
      Stock, no par value per share
              184,425,973
      shares
  DOCUMENT INCORPORATED BY REFERENCE
  1.        
Portions of the Proxy Statement for the 2008 Annual Meeting of Stockholders
(Part III)
   Transitional Small Business Disclosure Format (check
one)          Yes o 
No þ
   
 1
  TABLE
OF CONTENTS
 
 PART
      IITEM
      1.
              DESCRIPTION
      OF BUSINESS
              3ITEM
      2.
              DESCRIPTION
      OF PROPERTY
              17ITEM
      3.
              LEGAL
      PROCEEDINGS
              17ITEM
      4.
              SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
              18PART
      IIITEM
      5.
              MARKET
      FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
      PURCHASES OF EQUITY SECURITIES
              19ITEM
      6.
              MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
              20ITEM
      7.
              FINANCIAL
      STATEMENTS
              31ITEM
      8.
              CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL  DISCLOSURE
              31ITEM
      8A.
              CONTROLS
      AND PROCEDURES
              31ITEM
      8B.
              OTHER
      INFORMATION
              31PART
      IIIITEM
      9.
              DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
      16(a) OF THE EXCHANGE ACT
              32ITEM
      10.
              EXECUTIVE
      COMPENSATION
              32ITEM
      11.
              SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
              32ITEM
      12.
              CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
              32ITEM
      13.
              EXHIBITS
              32ITEM
      14.
              PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
              37SIGNATURES
              38EXHIBIT
      10.45EXHIBIT
      10.46EXHIBIT
      10.47EXHIBIT
      31.1EXHIBIT
      31.2EXHIBIT
      32.1EXHIBIT
      32.2
 
 
 
  2
  PART
I
 
 ITEM
      1.
              DESCRIPTION OF
      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, (1)
our estimates of mineral reserves and mineralized material, (2) our projected
sales and profitability, (3) our growth strategies, (4) anticipated trends in
our industry, (5) our future financing plans, (6) our anticipated needs for
working capital, (7) our lack of operational experience and (8) 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” 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 “Certain Business 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
 
 We are a
mineral exploration, development and production company, formed in Minnesota on
June 2, 1997. On September 21, 2007 our shareholders voted in favor of a Plan of
Merger to reincorporate from the State of Minnesota to the State of Nevada. We
expect to reincorporate into the State of Nevada within the next several
months.
 
 Our
business includes acquiring and consolidating mineral properties that we believe
have a high potential for new mineral discoveries and profitability. Our focus
is on properties containing gold, silver and molybdenum that are located in
Nevada.  As of February 25, 2008 we had proven reserves of molybdenum
of 2,773,908 pounds with a grade of 2.91% and probable reserves of 1,074,023
pounds with a grade of 0.78%.
 
 As
discussed below, our primary mining property assets are the Ashdown molybdenum
project operated by the Ashdown Project LLC (the “Ashdown LLC”), in which we
currently own a 60% member interest (and have claim to an additional 9.5%
interest), and the Mineral Ridge mine. Both properties are located in Nevada.
Management’s near-term goals are to extract molybdenum deposits at Ashdown and
to develop a plan for profitable production of gold and silver at Mineral
Ridge.
 
 Our
corporate directors, officers and managers have prior management experience with
large and small mining companies. We believe that Golden Phoenix has created the
basis for a competitive minerals exploration/development and operational company
through assembling a group of individuals with experience in target generation,
ore discovery, resource evaluation, mine development and mine
operations.
 
 In 2007
we transitioned from an exploration and development company into a production
stage company, and we intend to profitably operate our own mines. We also intend
to continue to explore and develop properties. We plan to provide joint venture
opportunities for 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
future 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 strategic 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 for success and growth.
 
  3
  Sources
of Available Land for Mining and Exploration
 
 There are
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
United States Forest Service, state and Canadian Provincial governments, tribal
governments, and individuals or entities who currently hold title to or lease
government and private lands.
 
 There are
numerous levels of government regulation associated with the activities of
exploration and mining companies. Permits, which we are maintaining and amending
include “Notice of Intent” to explore, “Plan of Operations” to explore, “Plan of
Operations” to mine, “Reclamation Permit”, “Air Quality Permit”, “Water Quality
Permit”, “Industrial Artificial Pond Permit”, and several other health and
safety permits. These permits are subject to amendment or renewal during our
operations. Although there is no guarantee that the regulatory agencies will
timely approve, if at all, the necessary permits for our current operations or
other anticipated operations, 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
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 twenty (20) acre mining claim
granted under the General Mining Law of 1872, as amended (the “General Mining
Law”). The Federal government still owns the surface estate even though the
subsurface can be controlled with a right to extract through claim staking.
Private fee lands are lands that are controlled by fee-simple title by private
individuals or corporations. These lands can be controlled for mining and
exploration activities by either leasing or purchasing the surface and
subsurface rights from the private owner. Unpatented mining claims located on
public land owned by another entity can be controlled by leasing or purchasing
the claims outright from the owners. Patented mining claims are claims that were
staked under the General 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 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.
 
 Competition
And Mineral Prices
 
 The
mining industry has historically been intensely competitive. and the increasing
price of gold since 2002 has led a number of companies to begin once again to
aggressively acquire claims and properties. Additionally, the rise in the price
of molybdenum in the past year has created opportunities for profitable mining
operations for this mineral as well.
 
 Capital
Equipment and Expenditures
 
 In the
next twelve (12) months, we anticipate purchasing or leasing certain capital
equipment for the Ashdown mine, which would be support equipment for the
underground operation and process facilities. These items include underground
hauling machines and muckers and various surface equipment including front-end
loaders, forklifts, and small haul trucks. Depending on whether we purchase new
or used equipment, these capital equipment items could cost between $200,000 and
$500,000 per unit. We anticipate funding these capital equipment expenditures
with funds we receive from molybdenum revenues we expect to generate and from
recent equity financing. All purchases at the Ashdown mine will be borne in
proportion to our equity percentage as operator in that project.
 
 We also
anticipate conducting drilling activities for approximately 60,000 feet of
drilling (estimated  cost of $1,400,000) at Mineral Ridge, completing
ongoing reserve calculations and feasibility work (estimated cost of $400,000)
at Mineral Ridge, completing the Company’s portion of 30,000 feet of drilling at
Ashdown (estimated cost of $500,000) and completing the development work,
engineering and feasibility work on expansion of the Ashdown operations
(estimated cost of $1,480,000).
 
  4
  Mining
Properties And Projects
 
 Our two
primary mining property assets are the Ashdown molybdenum project operated by
the Ashdown Project LLC (the “Ashdown LLC”), in which we currently own a 60%
member interest (and have claim to an additional 9.5% interest, though
contested, which would bring our total interest to 69.5%), and the Mineral Ridge
gold mine (Figure 1). Management’s near-term goal is to extract the known
molybdenum deposits at Ashdown and develop a plan for profitable production of
gold and silver at Mineral Ridge. The Ashdown molybdenum project represents all
of Golden Phoenix’s revenue.
 
 As
further discussed below, the Company completed a purchase agreement with four
individuals for the Northern Champion molybdenum property located in Ontario,
Canada (Figure 2), and plans to take bulk samples for metallurgical and market
testing, and to actively explore and delineate molybdenum mineralization on the
property later in 2008.
 
 The
Ashdown LLC commenced production in December 2006, and the Company is working to
put Ashdown into profitable production. As further discussed below, in 2003 we
identified economically feasible gold reserves that could be recovered using a
cyanide heap leaching process at the Mineral Ridge Project. We operated the
Mineral Ridge Project in 2004 and 2005, but did not obtain the results projected
in the engineering and feasibility study completed in 2003. Consequently, the
Mineral Ridge mine was idled pending full reviews of engineering and metallurgy,
and optimization of a revised mine and operations plan. We intend to commence
further exploration of numerous targets and development of identified economic
mineralization at Mineral Ridge in 2008. It is expected that this work, which
will be contracted with a third party, will identify and delineate additional
reserves for both open pit and underground deposits and ultimately extend the
life of the mine.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  5
  
 
 Figure 1.Map showing the
locations of the Nevada properties discussed in this Annual
Report.  Ashdown is the only active property, with Mineral Ridge idled
in 2005.
  6
  Ashdown
Project, Humboldt County, Nevada
 
 The
Ashdown molybdenum-gold project is located about 115 miles northwest of
Winnemucca in Humboldt County, Nevada (the “Ashdown mine”). The property covers
about nine (9) square miles and is controlled by 293 unpatented mining
claims.  As of February 25, 2008 we had proven reserves of molybdenum
(Mo) of 2,773,908 pounds with a grade of 2.91% and probable reserves of
1,074,023 pounds with a grade of 0.78%, pursuant to an independent third party
Technical Report and Feasibility Study.  We signed a Joint Venture
Agreement for the Ashdown property with Win-Eldrich on February 5, 2004. The
terms of the agreement gave us the right to earn in to 60%, as manager and
operator of the project, with Win-Eldrich retaining 40% as owner of the
property. We were eligible to earn an undivided vested 60% interest in the
project in either of two (2) ways: (1) by placing the project into profitable
production using a small mill, or (2) by spending $5,000,000 toward development
of the project. Upon signing, we paid Win-Eldrich $50,000, and beginning three
(3) months after signing we paid $5,000 per month through December 2006. In May
2006, we exceeded the $5,000,000 benchmark for development expenditures at
Ashdown mine and formally notified Win-Eldrich that we had vested our 60%
interest as provided under clause (2) of the Letter Agreement. We have claim to
an additional 9.5% interest in the Ashdown LLC, though contested, which would
bring our total interest to 69.5%.
 
 On
September 28, 2006, we entered into the Ashdown Project LLC Operating Agreement
with Win-Eldrich Gold, Inc. in order to govern the management of the Ashdown LLC
and the future mineral exploration, evaluation, development and mining
operations by the Ashdown LLC on the real property contributed by us and
Win-Eldrich Gold, Inc. and all other real property within the area of interest
that is acquired by the Ashdown LLC. We will continue to serve as the initial
Manager of the Ashdown LLC until such a time that the Management Committee
determines that the Ashdown LLC should manage itself with the Mine General
Manager, and the other officers of the Ashdown LLC being responsible for the
day-to-day operations. Additionally, on September 28, 2006, we entered into a
Contribution Agreement with the Ashdown LLC in order to recognize that we had
incurred actual expenditures at the Ashdown mine of not less than $5,000,000 and
to contribute all of our right, title and interest in the Ashdown mine,
encumbered as set forth in the Settlement Agreement, dated August 26, 2005 by
and between us, Earl Harrison, dba Western Mine Development, Retrievers LLC,
John Tingue and Kris Tingue, to the Ashdown LLC. We agreed with the Ashdown LLC
that value of our contribution was $5,000,000, which resulted in a sixty percent
(60%) ownership interest in the Ashdown LLC. Simultaneously with the entry into
the Contribution Agreement by us, Win-Eldrich Gold, Inc. entered into a
Contribution Agreement with the Ashdown LLC in order to contribute all of its
right, title and interest in and to certain personal property and certain
unpatented mining claims situated in Humboldt County, Nevada in exchange for a
forty percent (40%) ownership interest in the Ashdown LLC at an agreed-upon
value of the contribution of $3,333,333.
 
 Because
the mineral property operated by the Ashdown LLC did not have proven or probable
reserves supported by a current third-party feasibility study until February 25,
2008, the $5,000,000 in development expenditures incurred by us at the Ashdown
mine have been expensed by us as incurred, with the exception of the cost of the
mill and other tangible property and equipment, along with certain reclamation
bonds and deposits contributed by us to the Ashdown LLC.
 
 Because
of our 60% ownership in the Ashdown LLC, we have consolidated the financial
statements of the Ashdown LLC with those of the Company, effective October 1,
2006.
 
 In May
2006, we completed permitting a mill designed to run about 100 tons per day of
mine production. Construction on the mill and tailings impoundment was completed
in 2006, and the facility is currently processing material as it is produced and
delivered by the mine to the mill. We plan to assess expansion into a larger
operation.
 
 Currently
the Ashdown mine produces a molybdenite concentrate product, which generally
averages over 50% elemental molybdenum. We have a marketing agreement that
facilitates the sale of the molybdenite concentrates (FOB mine) to an
international metals broker, Derek Raphael & Company of London, England. We
are not required to provide roasted material to the market, or locate a third
party roasting capacity under this agreement.
 
 Molybdenum
is a base metal used in the manufacture of a wide variety of products, including
steel production, catalytic converters, and specialty lubricants. It is used as
a strengthening component in alloys, provides corrosion resistance in acidic
environments, used as a hardener in the manufacture of machine tools, drill
equipment, and pipelines, and is an essential component of stainless
steel.
 
  7
  The
molybdenum concentrate is produced by a flotation process at the Ashdown mine,
and then bagged in Super Sacks, each weighing approximately 3,950 pounds. The
concentrate is a molybdenum disulfide, which requires roasting at an outside
facility to convert to a molybdenum oxide, the international standard form for
its sale. The molybdenum disulfide product is shipped by truck from the mill in
lots containing 12 Super Sacks. Once the product leaves the mill, it is
transferred to a roasting facility of the broker’s choice, converted to
molybdenum oxide and then sold on the world markets.
 
 The
broker takes custody and ownership of the product at the Ashdown mine and at our
discretion makes 80% to 90% payment of the assayed value of the shipment at that
time. The balance of approximately 10% to 20% is settled following processing of
the shipment at the outside roasting facility and Final Assay, which can take
between two and four months to complete.
 
 On
October 30, 2006, a Finding of No Significant Impact and Decision Record were
signed under the 43 CFR 3715 Surface Occupancy Regulations, and the proposed
occupancy was found to meet the requirement of §§ 3715.2, 3715.2-1, and 3715.2-2
and was approved subject to certain stipulations. Similarly the Plan of
Operations/Environmental Assessment (“POA”) was approved under the 43 CFR 3809
Surface Management Regulations subject to certain stipulations. As of September
2006 we have been allowed to proceed with the proposed project, its occupancy
and use as described in the POA. These represent the final permits required that
allowed us to initiate full-scale mining operations in December 2006. The
Ashdown LLC has also received regulatory approval for reclamation plans and cost
estimates for the Ashdown mine site and the mill and tailings pond, and has
deposited approximately $340,000 for reclamation bonds.
 
 Interim
progress at the mine was accomplished under a Notice of Intent level permit that
allowed for the removal, test processing and marketing of a 1,000-ton sample.
The activities undertaken to access the bulk sample are the same as those that
would have occurred under the full POA, and the delays in the permitting process
did not substantially impact our operations. The Ashdown LLC completed the first
sale of molybdenite concentrates produced at the Ashdown mine and mill in
December 2006. Over the twelve months ended December 31, 2007 Ashdown produced
783,304 lbs of concentrate, containing 412,856 lbs saleable molybdenite for
gross revenues of about $12.5 million.  As discussed below under
“Financing Agreements”, the Company’s share of production distributions from the
Ashdown LLC are encumbered by financing agreements pursuant to which funds were
raised to develop the Ashdown mine.
 
 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 (“Mineral
Ridge”). 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 from the west entrance by way of state
highway 264, which connects to state highway 773 and U. S. highway 6. We also
control three (3) private land parcels, which are located outside the main
Mineral Ridge 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. The total combined acreage controlled by
Golden Phoenix is equal to approximately 6.78 square miles.
 
 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.
We believe that 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.
 
 
  8
  The
Mineral Ridge property holds three separate potentially economic mineable gold
deposits, the Drinkwater, Mary, and Brodie. We believe that the property holds
further mineral potential with identified targets potentially containing
additional gold mineralization. Our operations have yielded certain amounts of
precious metal product (dore, a mixture of gold and silver) that has been sold
resulting in revenues of approximately $2.3 million in 2005 and 2004. In January
2005, we temporarily idled the mine pending full reviews of engineering and
metallurgy, and optimization of a revised mine and operations plan. We intend to
commence further exploration of numerous targets and development of identified
economic mineralization at Mineral Ridge in 2008. It is expected that this work,
consisting of over 60,000 feet of planned drilling, will identify and delineate
reserves for both open pit and underground deposits and ultimately extend the
life of the mine.
 
 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.
We negotiated an interim bond amount to keep the project at status quo until a
new plan and bond amount could be negotiated. 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 to
acquire the bond. The program structure includes an insurance policy that will
pay reclamation expenses as they occur. The insurance enabled us to acquire the
necessary reclamation bond at a fixed and discounted rate for a term of twelve
(12) years. It also allows us the flexibility to increase our bond in the future
as we recommence operations at Mineral Ridge. Operations began in 2003 once the
bond was in place, including adding chemicals to the process solutions, plumbing
the pad with drip lines and main trunk pipes, and mining both new and old
stockpiled materials.
 
 Mineral
Ridge Royalty Obligations
 
 We are
obligated to honor two (2) prior royalty agreements. The first is to Mary Mining
Company, which includes annual advance minimum royalty payments of $60,000, and
a sliding-scale production royalty based on gold price divided by 100 in $50
increments with a cap at 8.5% (i.e. above a $850 per ounce gold
price).  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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  9
  
 
 Figure 2.Map showing the
Northern Champion property located within the Province of Ontario, Canada. The
acquisition of this property was completed in February 2007.
  10
  Northern
Champion Property, Ontario, Canada
 
 The
Northern Champion Property is approximately 880 acres in Griffith and Brougham
Townships in the Province of Ontario, Canada (“Northern Champion Property”). On
April 18, 2006, we executed a Purchase Agreement with Robert R. Robitaille,
Douglas Lalonde, Sheldon Davis and Ronald E. Dockweiler (collectively, the
“Vendors”) to acquire five (5) registered claims totaling 22 units on the
Northern Champion Property together with a NI 43-101 Technical Report and
Feasibility Study describing a molybdenite deposit within the area of the
claims.
 
 Pursuant
to the terms of the agreement, we were obligated to pay $125,000 in four (4)
equal quarterly installments of $31,250 commencing on August 15, 2006. Each
payment was to be distributed as follows, $9,991.50 to Mr. Lalonde, $9,247.45 to
each of Messrs. Robitaille and Davis, and $2,763.61 to Mr. Dockweiler. In
addition, the agreement provided that we would issue 735,000 shares of our
common stock to the Vendors. Mr. Lalonde received 235,000 shares, each of
Messrs. Robitaille and Davis received 217,500 shares and Mr. Dockweiler received
65,000 shares. The agreement also provides that the Vendors will retain a 3.3%
Net Smelter Return (“NSR”) on the sales of minerals taken from the Northern
Champion Property. Each of Messrs. Lalonde, Robitaille and Davis will be
entitled to receive 1% of the Net Smelter Return and Mr. Dockweiler will be
entitled to receive 0.3% of the Net Smelter Return. Additionally, we will have
the right of first refusal to purchase 1.65% of said Net Smelter Return from the
Vendors for $1,650,000. We will have the ability to purchase 0.5% of said Net
Smelter Return from each of Messrs. Lalonde, Robitaille and Davis and 0.15% of
said Net Smelter Return from Mr. Dockweiler.
 
 On
February 12, 2007, the parties agreed to convert the remaining cash payments to
an equivalent number of restricted shares of our common stock valued at the
market close of $0.295 per share on that date. On February 16, 2007, 423,729
restricted shares of our common stock were issued to the Vendors and the
purchase was completed. We now own 100% of the Northern Champion Property
subject to the NSR reserved by the Vendors.
 
 Alaskan
Royalties
 
 We own a
1% net smelter return royalty on two properties located in Alaska, Glory Creek
and Uncle Sam. We are not required to perform any work or make any payments for
these royalties.
 
 The Glory
Creek 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. We do not
know if or when a discovery of gold mineralization will be made.
 
 The Uncle
Sam property is also 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. We do not know if or when a discovery of gold mineralization will be
made.
 
 Employees
 
 Corporate
Office
 
 We have
six (6) key professionals and six (6) support staff to perform management,
accounting and permitting functions. We intend to employ independent contractors
to fulfill short-term needs and obligations, and may staff further with
professionals as we bring Mineral Ridge and Northern Champion on line over the
next twelve (12) to twenty-four (24) months.
 
 Drilling
Services Division
 
 In fourth
quarter of 2007, we established a drilling services extension to our Technical
Services Group.  In 2008, this division has purchased a new Ingersol
Rand TH60 drill rig and support equipment and has retained a lead driller (1)
and two (2) support drillers to staff the rig.  Drilling Services is
expected to support exploration and development work at Ashdown, Mineral Ridge
and in other corporate opportunities as they present themselves.
 
  11
  Mineral
Ridge Mine
 
 At the
Mineral Ridge mine we have two (2) employees overseeing security during the idle
phase. It is anticipated that more employees will be added at the Mineral Ridge
operation in the next twelve (12) to twenty four (24) months as the operations
at the mine are started back up.
 
 Ashdown
Project
 
 We
currently have approximately sixty-six (66) employees at the Ashdown Mine. On
December 25, 2006, all employees were converted to direct employment with the
Ashdown LLC that was formed to operate the mine.
 
 Risk
Factors
 
 The risks
described below are the ones we believe are most important for you to consider.
These risks are not the only ones that we face.  If events anticipated
by any of the following risks actually occur, our business, operating results or
financial condition could suffer and the price of our common stock could
decline.
 
 We Have A Limited Operating History
With Significant Losses And Expect Losses To Continue For The Foreseeable
Future.
 
 We have
yet to establish any history of profitable operations. We have incurred net
losses of $2,350,435 and $4,080,554 for the years ended December 31, 2007 and
2006, respectively. As a result, at December 31, 2007 we had an accumulated
deficit of $37,565,720 and a total stockholders’ equity of
$126,735.  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 mines. We may not be able to successfully
commercialize our 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, 2007 and 2006 with respect to their doubt about our ability to continue as a
going concern. As discussed in Note 2 to our consolidated financial statements
for the year ended December 31, 2007, we have generated significant losses from
operations, and had an accumulated deficit of $37,565,720 and a working capital
deficit of $739,673 at December 31, 2007, 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 consolidated financial statements
for the year ended December 31, 2007.
 
 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 annual holding fees of
$133.50 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 us. 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.
 
  12
  Environmental Controls Could Curtail
Or Delay 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 Resource Conservation and Recovery Act,
the Comprehensive Environmental Response Compensation Liability Act 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 molybdenum, gold and silver mining and processing. In
addition, insurance companies are now requiring additional cash collateral from
mining companies in order for the insurance companies to issue a surety bond.
This addition of cash collateral for a bond could have a significant impact on
our ability to bring properties into production.
 
 Many
states, including the State of Nevada (where our Mineral Ridge and Ashdown
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 ensure 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, which governs mining
claims and related activities on federal lands. For example, a broad based bill
to reform the General Mining Law of 1872, the Hardrock Mining and Reclamation
Act of 2007 (H.R. 2262) was introduced in the U.S. House of Representatives on
May 10, 2007 and was passed by the U.S. House of Representatives on November 1,
2007, and has been submitted to the U.S. Senate where no action has been taken
to date.
 
 In 1992,
a federal holding fee of $100 per claim was imposed upon unpatented mining
claims located on federal lands. This fee was increased to $125 per claim in
2005 ($133.50 total with the accompanying County fees included). 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 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.
 
 For
example, The Hardrock Mining and Reclamation Act of 2007 (H.R. 2262), if
enacted, would have several negative impacts on the Company including but not
limited to: requiring royalty payments of 8% of gross income from mining a claim
on Federal land, or 4% of claims on Federal land that existed prior to the
passage of this act; and prohibition of certain areas from being open to the
location of mining claims, including wilderness study areas, areas of critical
environmental concern, areas included in the National Wild and Scenic Rivers
System, and any area included in maps made for the Forest Service Roadless Area
Conservation Final Environmental Impact Statement.
 
 
  13
  The
extent of any such changes to the General Mining Law of 1872 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:
 
 •
              estimation
      of reserves;
 
 •
              anticipated
      metallurgical recoveries;
 
 •
              future
      molybdenum, gold and silver prices;
and
 
 •
              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:
 
 •
              unanticipated
      changes in grade and tonnage of material to be mined and
      processed;
 
 •
              unanticipated
      adverse geotechnical conditions;
 
 •
              incorrect
      data on which engineering assumptions are
made;
 
 •
              costs
      of constructing and operating a mine in a specific
      environment;
 
 •
              availability
      and cost of processing and refining
facilities;
 
 •
              availability
      of economic sources of power;
 
 •
              adequacy
      of water supply;
 
 •
              adequate
      access to the site;
 
 •
              unanticipated
      transportation costs;
 
 •
              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);
 
 •
              fluctuations
      in metal prices; and
 
 •
              accidents,
      labor actions and force majeure
events.
 
  14
  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.
 
 Mineral Exploration Is Highly
Speculative, Involves Substantial Expenditures, And Is Frequently
Non-Productive.
 
 Mineral
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
mineral 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
mineral exploration efforts will be successful. The risks associated with
mineral exploration include:
 
 •
              The
      identification of potential economic mineralization based on superficial
      analysis;
 
 •
              the
      quality of our management and our geological and technical expertise;
      and
 
 •
              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.
 
 The Price Of Molybdenum, Gold and
Silver are Highly Volatile And A Decrease In The Price Of Molybdenum, Gold or Silver
Would Have A Material Adverse Effect On Our Business.
 
 The
profitability of mining operations is directly related to the market prices of
metals. The market prices of metals 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
metals 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
metals makes such exploration economically feasible and, subsequently, incur
losses because the price of metals decreases. Adverse fluctuations of the market
prices of metals may force us to curtail or cease our business
operations.
 
 Our Mineral Reserve Estimates are
Potentially Inaccurate.
 
 We
estimate our mineral reserves on our properties as either “proven reserves”
or “probable reserves.” Our mineral reserve figures and costs are primarily
estimates and are not guarantees that we will recover the indicated quantities
of these metals. We estimate proven reserve quantities based on sampling and
testing of sites conducted by us and by independent companies hired by us.
Probable reserves are based on information similar to that used for proven
reserves, but the sites for sampling are less extensive, and the degree of
certainty is less. Reserve estimation is an interpretive process based upon
available geological data and statistical inferences and is inherently imprecise
and may prove to be unreliable.
  Our
reserves are reduced as existing reserves are depleted through production.
Reserves may be reduced due to lower than anticipated volume and grade of
reserves mined and processed and recovery rates.
  Reserve
estimates are calculated using assumptions regarding metals prices. These prices
have fluctuated widely in the past. Declines in the market price of metals, as
well as increased production costs, capital costs and reduced recovery rates,
may render reserves uneconomic to exploit. Any material reduction in our
reserves may lead to increased net losses, reduced cash flow, asset write-downs
and other adverse effects on our results of operations and financial condition.
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 amount of metal estimated will be produced or the indicated level of
recovery of these metals will be realized.
  
  15
  We May Not be Able to Control the
Decisions, Strategy and Results of the Ashdown Project LLC to Which We Are a
Majority Member.
 
 The two
Ashdown Project LLC (“Ashdown LLC”) members are Golden Phoenix Minerals, Inc.
and Win-Eldrich Gold Inc. (“WEG”). Because we share ownership in the Ashdown LLC
with another company, we are subject to the risks normally associated with the
conduct of limited liability companies with more than one member (owner). The
existence or occurrence of one or more of the following circumstances and events
could have a material adverse impact on our profitability or the viability of
our interests held through the joint venture, which could have a material
adverse impact on our business, financial condition and results of
operations:
 
 •
              inability
      to exert influence over certain strategic decisions made in respect of
      joint venture operations;
 
 •
              inability
      of the members to meet their obligations to the Ashdown LLC or third
      parties; and
 
 •
              disagreements
      or litigation between members regarding LLC
  matters.
 
 Further,
there currently is a dispute between Ashdown LLC members Golden Phoenix and WEG.
Golden Phoenix is claiming that WEG did not timely fund its required share of
the budget of the Ashdown LLC, failed to pay Golden Phoenix its share of
revenues and remains in default on these matters. WEG disputes the amount and
timing of certain expenditures made by Golden Phoenix on the Ashdown property.
Prior to the dispute Golden Phoenix held a 60% membership interest in the
Ashdown LLC and WEG held a 40% membership interest. However, Golden Phoenix now
believes that it has a 69.5% membership interest due to WEG’s default and the
result of such default under the terms of the Ashdown LLC Operating Agreement;
that is WEG’s membership interest has been diluted due to its default. WEG is
contesting the dilution of its membership interest in the Ashdown LLC. This
dispute was mediated on April 4, 2007, which did not resolve the dispute. Golden
Phoenix has demanded arbitration pursuant to the terms of the Ashdown LLC
Operating Agreement and anticipates that this dispute will proceed to
arbitration in 2008. In addition, WEG has notified Golden Phoenix of certain
provisions in the Operating Agreement that it contends Golden Phoenix has
breached. The Ashdown LLC is an important component of Golden Phoenix’s business
and currently represents all of its operating revenue. Although the operations
of the Ashdown LLC have not been adversely affected by the dispute to date, any
disruption in the operations of the Ashdown LLC would have a material adverse
affect on Golden Phoenix’s business, financial condition, and results of
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.
 
 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 three (3) years has been between $0.53 and $0.09. In addition, potential
dilutive effects of future sales of shares of common stock by shareholders and
by us, 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.
 
  16
  The Number of Shares Being Registered
for Sale in a Registration Statement Filed and Dated February 28, 2008, and in a
Prospectus Dated January 22, 2008, are Significant in Relation to our Trading Volume and may Depress
our Share Price.
 
 The
shares being registered in a registration statement filed and dated February 28,
2008, 19,190,580, if sold in the market all at once or at about the same time,
could depress the market price during the period the registration statement
remains effective and also could affect our ability to raise equity
capital.  Further, the market price may be additionally depressed by
the sale of shares offered in a prospectus dated January 22, 2008, and filed
with the Securities and Exchange Commission on January 23, 2008, wherein the
Company registered 15,484,600 additional shares of common stock, of which
5,484,600 shares were being registered for a selling shareholder and 10,000,000
shares of common stock were being registered for sale for cash or conversion of
some or all of a certain cash obligation that may be due to the Ashdown Milling
Company LLC.
 
 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 SEC. Penny stocks generally are equity
securities with a price per share of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
Stock Market, 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.
              DESCRIPTION OF
      PROPERTY
 
 Our principal executive office consists
of 7,000 square feet 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 seven (7) year term signed May 12, 2004, and is
renewable.  We consider our existing facilities to be adequate for our
foreseeable needs.  See the discussion above for a description of our
mineral properties.
 
 
 ITEM
      3.
              LEGAL
      PROCEEDINGS
 
 Steven D.
Craig — On August 30, 2006, Steven D. Craig filed a Complaint against Golden
Phoenix Minerals, Inc. in the Second Judicial District for the State of Nevada
in the County of Washoe. The Complaint alleges Breach of Contract regarding the
failure to permit the exercise of stock options, failure to repay non-reimbursed
business expenses, and failure to pay and account for the accrual of interest of
deferred compensation. Steven D. Craig was seeking stock options from
Golden Phoenix Minerals, Inc. with regard to back salaries allegedly owed
in the following amounts: 984,300 shares at 15 cents per share; 340,000 shares
at 37 cents per share; and 250,000 shares at 15 cents per share. Steven D. Craig
was also seeking $5,500 for non-reimbursed expenses and $243,625 in
deferred salaries with interest for both amounts.  Payments of
deferred salaries totaling approximately $130,000 were made to Mr. Craig through
December 31, 2007, resulting in a balance payable to Mr. Craig included in the
consolidated balance sheet as of December 31, 2007 of approximately
$130,000.
 
  17
  On
September 20, 2006, Golden Phoenix Minerals, Inc. filed an Answer to the Summons
and Complaint. On September 29, 2006, Golden Phoenix Minerals, Inc. filed a
Third-Party Complaint naming Collette Crater-Craig as an interested party with
regard to community property issues due to the recent termination of marriage
between her and Steven D. Craig. The Third-Party Complaint sought declaratory
relief to ascertain the respective parties’ rights and obligations with regard
to the damages sought by the subject Complaint.  Collette Carter-Craig
since became deceased on December 3, 2006.
 
 On
September 14, 2007 the parties reached a tentative settlement, and on March 21,
2008 reached a final settlement wherein the Company issued stock options for
984,300 shares of our Common Stock, with the underlying shares to
be registered with the SEC. 492,150 stock options were issued to Mr.
Craig and 492,150 stock options were issued to the Estate of Collette
Carter-Craig.  We expect that a dismissal of this matter with
prejudice will be filed within the next several months.
 
 Win-Eldrich
Gold, Inc. — On April 4, 2007, Golden Phoenix participated in mediation
proceedings with Win-Eldrich Gold, Inc. (“WEG”). The dispute arises from Golden
Phoenix’s November 2, 2006 formal notice of default to WEG that it failed to
timely fund its share of the Program and Budget for the Ashdown mine, due on
October 15, 2006. Payment was due pursuant to the Ashdown Project LLC Operating
Agreement between WEG and Golden Phoenix dated September 28, 2006 and a related
letter agreement of the same date. The amount claimed to be owed by Golden
Phoenix under the agreement is $115,755. Additionally, by the same notice of
default, Golden Phoenix reminded WEG that it did not timely pay to Golden
Phoenix its share of revenues received by WEG for ore from stockpiles as
required by the above-mentioned letter agreement. Golden Phoenix’s share of
these monies was $193,391. The total amount in default totals $309,146. Pursuant
to the agreements, interest accrues on these amounts at a rate equal to two
percentage points over the Prime Rate to the maximum allowed by law. The
agreement permits a defaulting party to cure if they pay the defaulted amount,
plus interest at a rate of Prime plus 7%. WEG did not cure its default.
Consequently, Golden Phoenix elected, as permitted under the agreement, to
dilute WEG’s membership interest in the Ashdown LLC by notice dated December 20,
2006. Pursuant to a calculation formula contained in the agreement, Golden
Phoenix contends WEG’s membership interest has been reduced from 40% to 30.5%.
WEG is currently contesting this dilution of its interest in the Ashdown LLC.
WEG has disputed and continues to dispute the amount and timing of certain
expenditures incurred by Golden Phoenix on the Ashdown property. As of the date
of this Report, the mediation has not resolved the dispute and we plan to
proceed to arbitration pursuant to the terms of the Operating Agreement. Golden
Phoenix expects this arbitration to be conducted later this year. In addition,
WEG has notified Golden Phoenix of certain provisions in the Operating Agreement
that it contends Golden Phoenix has breached. As of the date of this Report,
Golden Phoenix does not believe any of WEG’s allegations are material. The
outcome of these matters cannot currently be determined. The consolidated
financial statements of Golden Phoenix filed with this Report reflect Golden
Phoenix’s ownership in the Ashdown LLC at 60% and do not reflect the potential
impact of any ultimate resolution or arbitration.
 
 
 ITEM
      4.
              SUBMISSION OF MATTERS TO A
      VOTE OF SECURITY HOLDERS
 
 No matters were submitted to a vote of
security holders during the fourth quarter of 2007.
 
 
 
 
 
 
 
 
 
 
 
 
  18
  PART
II
 
 ITEM 5.
              MARKET FOR
      COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
      PURCHASES OF EQUITY
SECURITIES
 
 Our
common stock has been publicly traded since August 6, 1997. The securities are
traded on the OTC Bulletin Board, and quoted on the OTC Bulletin Board under the
symbol “GPXM.OB”. The following table sets forth for the periods indicated the
range of high and low bid quotations per share as reported by the OTC Bulletin
Board for our past two (2) years. These quotations represent inter-dealer
prices, without retail markups, markdowns or commissions and may not necessarily
represent actual transactions.
 
 Year
      2006
              
              High
              
              
              LowFirst
      Quarter
              
              $
              0.48
              
              
              $
              0.17Second
      Quarter
              
              $
              0.53
              
              
              $
              0.35Third
      Quarter
              
              $
              0.47
              
              
              $
              0.30Fourth
      Quarter
              
              $
              0.44
              
              
              $
              0.34
 
 Year
      2007
              
              High
              
              
              LowFirst
      Quarter
              
              $
              0.37
              
              
              $
              0.29Second
      Quarter
              
              $
              0.53
              
              
              $
              0.30Third
      Quarter
              
              $
              0.43
              
              
              $
              0.23Fourth
      Quarter
              
              $
              0.34
              
              
              $
              0.21
 
 Holders
 
 On March
24, 2008, the closing price of our common stock as reported on the
Over-the-Counter Bulletin Board was $0.20 per share. On March 24, 2008, we had
approximately 265 holders of record of common stock and 184,425,973 shares of
our common stock were issued and outstanding, plus an additional 18,011,573
shares issuable upon the exercise of outstanding options and warrants. Many of
our shares are held in brokers’ accounts, so we are unable to give an accurate
statement of the number of shareholders.
 
 Dividend
Policy
 
 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.
 
 Securities
Authorized for Issuance under Equity Compensation Plans
 
 In April
1998, the Board approved the Golden Phoenix Minerals, Inc. Stock Option
Incentive Plan (the “1997 Stock Option Incentive Plan”), under which employees
and directors of the Company are eligible to receive grants of stock options.
The Company has reserved a total of 1,000,000 shares of common stock under the
1997 Stock Option Incentive Plan. Subsequent to this, the Employee Stock
Incentive Plan of 2002 amended the 1997 Stock Option Incentive Plan and allows
for up to 4,000,000 options to be granted (the “2002 Stock Option Incentive
Plan”). In addition to these qualified plans, the Company created a class of
non-registered, non-qualifying options in 2000 to compensate its three principal
employees for deferred salaries. The Company’s executive management administers
the plan. Subject to the provisions of the 2002 Stock Option Incentive Plan, the
Board 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.
 
 On
October 23, 2006, the Board approved the 2006 Non-Employee Director Stock Option
Plan providing for 2,000,000 shares of the Company’s common stock to be reserved
for issuance of awards of non-qualified stock options to non-employee directors
of the Company pursuant to the terms and conditions set forth in the
plan.
 
 
  19
  On
September 21, 2007, our shareholders approved the 2007 Equity Incentive Plan
(the “2007 Plan”) providing nine percent (9%) of the total number of outstanding
shares of common stock of the Company to be reserved and available for grant and
issuance at the effective date of the 2007 Plan, with an increase at the
beginning of each year if additional shares of common stock were issued in the
preceding year so that the total number of shares reserved and available for
grant and issuance, not including shares that are subject to outstanding awards,
will be nine percent (9%) of the total number of outstanding shares of common
stock of the Company on that date. No more than two million (2,000,000) shares
of common stock shall be granted in the form of Incentive Stock Options. Under
the 2007 Plan, grants may be made to any director, officer or employee of the
Company or other person who, in the opinion of the Board, is rendering valuable
services to the Company, including without limitation, an independent
contractor, outside consultant, or advisor to the Company.
  The
Company has also issued stock options on a stand-alone basis under no specific
plan, which have been approved by the Board.
  The
following table presents information concerning outstanding stock options and
warrants issued by the Company as of March 20, 2008.
 
 Plan
      Category
              
              (a)
      Number of
                securities
      to be
                issued
      upon
                exercise
      of
                of
      outstanding
                options,
      warrants
                and
      right
              
              Weighted-average
                exercise
      price of
                outstanding
      options
                warrants
      and rights
              
              Number
      of securities
                remaining
      available for
                future
      issuance under
                equity
      compensation
                plans
      (excluding
                securities
      reflected
                in
      column (a))Equity
      Compensation Plans approved by security holders
              
              —
              
              —
              
              —Equity
      Compensation Plans not approved by security holders
              
              18,011,573(1)
              
              $0.33
              
              NoneTotal
              
              18,011,573
              
              $0.33
              
              None
 ____________
 
 (1)
              Includes
      5,911,573 shares issuable upon exercise of stock options and 12,100,000
      shares issuable upon exercise of
warrants.
 
  Recent
Sales Of Unregistered Securities
  There were no sales of unregistered
securities during the fourth quarter of the year ended December 31,
2007.
 
 Purchase
of Equity Securities by the Small Business Issuer and Affiliated
Purchasers
 
 During the fourth quarter of the year
ended December 31, 2007, neither the Company nor any of its affiliates purchased
any equity securities of the Company.
 
 
 ITEM
      6.
              MANAGEMENT’S DISCUSSION AND
      ANALYSIS OR PLAN OF
OPERATION
 
 Forward
Looking Statements
 
 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. 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 or Plan of Operations” and “Description of Business,” as
well as in this Report 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 Report generally. In light of these risks and
uncertainties, there can be no assurance that the forward-looking statements
contained in this Report will in fact occur as projected.
 
  20
  Overview
 
 Golden
Phoenix Minerals, Inc. is a mineral exploration, development and production
company specializing in acquiring and consolidating mineral properties with
potential production and future growth through exploration discoveries.
Acquisition emphasis is focused on properties containing gold, silver,
molybdenum and other strategic minerals that present low political and financial
risk and exceptional upside potential. Our main focus is in Nevada.
 
 We were
formed in Minnesota on June 2, 1997. On September 21, 2007 our shareholders
voted in favor of a Plan of Merger to reincorporate from the State of Minnesota
to the State of Nevada. We expect to reincorporate into the State of Nevada
within the next several months.
 
 Presently
our primary mining property assets are the Ashdown molybdenum project operated
by the Ashdown LLC, of which we currently own 60% (and have claim to an
additional 9.5% interest, though contested, which would bring our total interest
to 69.5%), and the (idled) Mineral Ridge gold mine (Figure 1). Management’s
near-term goal is to continue to extract molybdenum deposits at Ashdown and to
pursue profitable production of gold and silver at Mineral Ridge. As further
discussed below, the Company completed a purchase agreement with four
individuals for the Northern Champion molybdenum property located in Ontario,
Canada (Figure 2), and plans to take bulk samples for metallurgical and market
testing, and to actively explore and delineate molybdenum mineralization on the
property later in 2008.
 
 As
discussed previously, we currently own a 60% interest in the Ashdown LLC and
function as manager and operator of the project. Because of our 60% ownership,
the consolidated financial statements of the Company include the accounts of the
Ashdown LLC, effective October 1, 2006.
 
 Going
Concern
 
 Our
independent auditors have added an explanatory paragraph to their audit opinion
issued in connection with our consolidated financial statements for the years
ended December 31, 2007 and 2006 with respect to their doubt about our ability
to continue as a going concern due to our recurring losses from operations and
our accumulated deficit. The Company has a history of operating losses since its
inception in 1997, and has an accumulated deficit of $37,565,720 and a working
capital deficit of $739,673 at December 31, 2007, which together raises doubt
about the Company’s ability to continue as a going concern. Our ability to
continue as a going concern will be determined by our ability to increase sales,
sustain a successful level of operations and to continue to raise debt or equity
capital. The accompanying consolidated 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: (1) the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities as
of the date of the financial statements, and (2) 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 Consolidated
Financial Statements, and several of those critical accounting policies are as
follows:
 
 
  21
  Minority
Interest.As of December 31, 2007, the minority interest
balance is comprised of the portion of the members’ equity in the Ashdown LLC
not owned by the Company.  The operating income of the Ashdown LLC for
the year ended December 31, 2007 was allocated 40% to Win-Eldrich Gold, Inc.,
the minority member, based on its equity ownership percentage, thereby
increasing the Company’s net loss.  Similarly, the operating income
loss of the Ashdown LLC for the year ended December 31, 2006 was allocated 40%
to Win-Eldrich Gold, Inc., thereby reducing the Company’s net loss.
 
 Accounts
Receivable.Trade receivables are carried at original invoice
amount less an estimate made for doubtful accounts.  The Company
maintains an allowance for doubtful accounts based upon historical collection
experience and expected collectibility of all accounts receivable.  The
Company’s allowance for doubtful accounts was $116,407 at December 31,
2007.  Trade receivables are written off when deemed
uncollectible.  Recoveries of trade receivables previously written off
are recorded as income when received.
 
 Inventories.Materials and
supplies inventories are stated at the lower of cost (using the average cost
method) or market.  Market is determined on the basis of estimated
realizable values.
 
 Molybdenite
concentrate finished goods inventories are stated at the lower of cost (using
current period production costs) or market.  Market is determined on
the basis of current sales prices per pound of the molybdenite
concentrates.
 
 Marketable Securities.Marketable securities consist of shares of International Enexco Ltd.
common stock received in the sale of mineral properties. The Company intends on
holding these shares for the foreseeable future, and accordingly, the shares are
accounted for as securities held-for-sale in accordance with Statement of
Financial Accounting Standards (SFAS) No. 115, Accounting for Certain
Investments in Debt and Equity Securities. The marketable securities are stated
at fair value based on market quotes. Unrealized gains and losses are recorded
as other comprehensive income, a component of stockholders’ deficit in our
consolidated balance sheet. The total net unrealized loss on this investment for
the year ended December 31, 2007 was $41,985, and the total net unrealized gain
on this investment for the year ended December 31, 2006 was
$43,902.
 
 Property and Equipment.Property and equipment are stated at cost. Depreciation and amortization
are calculated using the straight-line method over the respective estimated
useful lives of the assets.
 
 Mine
development costs are capitalized after proven and probable reserves have been
identified. Amortization of mine development costs will be calculated using the
units-of-production method over the expected life of the operation based on the
estimated proven and probable reserves. As of December 31, 2007, the Company had
no proven or probable reserves. Accordingly, mining equipment and buildings are
currently being depreciated on a straight-line basis over their estimated
economic useful life rather than on a units-of-production method.
 
 Property Acquisition and Deferred
Mineral Property Development Costs. Mineral 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 that can be produced profitably. On the commencement of
profitable commercial production, depletion of each mineral property acquisition
and associated deferred property development costs will be computed on the units
of production basis using estimated proven and probable reserves.
 
 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.
 
 Stripping Costs.On March 30,
2005, the Financial Accounting Standards Board (FASB) ratified the consensus of
the Emerging Issues Task Force (EITF) Issue 04-06 that stripping costs incurred
during the production phase of a mine are variable costs that should be included
in the costs of the inventory produced during the period that the stripping
costs are incurred. The Company will utilize this accounting policy for
stripping costs incurred in its mining operations where applicable.
 
  22
  Proven and Probable Ore Reserves.On a periodic basis, management reviews the reserves that reflect
estimates of the quantities and grades of metals at our mineral properties which
management believes can be recovered and sold at prices in excess of the total
cost associated with mining and processing the mineralized material.
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. 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.
 
 As of
February 25, 2008, the Company had proven reserves of molybdenum (Mo) of
2,773,908 pounds with a grade of 2.91% and probable reserves of 1,074,023 pounds
with a grade of 0.78% pursuant to an independent third party Technical Report
and Feasibility Study.
 
 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 and
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.
 
 The
Company has estimated costs associated with closure, reclamation and
environmental reclamation of the Mineral Ridge and Ashdown properties which are
reflected in its consolidated 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. Because
we were unable to operate the Mineral Ridge mine profitably in accordance with
the feasibility study completed in 2003 and have idled the project, and because
we had not established proven or probable reserves at the Ashdown project until
February 25, 2008, we have not recorded any reclamation assets pursuant to the
requirements of SFAS No. 143.
 
 Property Evaluations and Impairment
of Long-Lived Assets. The Company reviews and evaluates the carrying
amounts of its mining properties and related buildings and equipment, and other
long-lived assets when events or changes in circumstances indicate that the
carrying amount may not be recoverable. Estimated future net cash flows, on an
undiscounted basis, from a property or asset are calculated using estimated
recoverable minerals (considering current proven and probable reserves and
mineralization expected to be classified as reserves where applicable);
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, or other long-lived assets, 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 and long-lived assets.
 
 Revenue Recognition.Revenue
from the sale of molybdenite concentrates and precious metals is recognized when
title and risk of ownership passes to the buyer and the collection of sales
proceeds is assured. Molybdenite concentrates from the Ashdown LLC are currently
sold FOB mine site pursuant to the terms of a long-term agreement with a buyer.
Title transfers upon the buyer’s acceptance of each twelve (12) sack lot when
the material is loaded onto the buyer’s transport.
 
  23
  Income Taxes.The Company
recognizes a liability or asset for deferred tax consequences of all temporary
differences between the tax bases of assets and liabilities and their reported
amounts in the consolidated financial statements that will result in taxable or
deductible amounts in future years when the reported amounts of the assets and
liabilities are recovered or settled. Deferred tax items mainly relate to net
operating loss carry forwards and accrued expenses. These deferred tax assets or
liabilities are measured using the enacted tax rates that will be in effect when
the differences are expected to reverse. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. Deferred tax assets are reviewed periodically for
recoverability, and valuation allowances are provided when it is more likely
than not that some or all of the deferred tax assets may not be realized. As of
December 31, 2007, the Company had reduced its deferred tax assets by recording
a valuation allowance of $9,552,000
 
 Stock-Based Compensation and Equity
Transactions.We account for stock-based compensation pursuant to SFAS
No. 123R, Share-Based
Payment, an amendment of FASB Statements 123 and 95, which requires us to
measure the compensation cost of stock options and other stock-based awards to
employees and directors at fair value at the grant date and recognize
compensation expense over the requisite service period for awards expected to
vest.
 
 Except
for transactions with employees and directors that are within the scope of SFAS
123R, 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 established; or (2) the date
at which the counter party’s performance is complete.
 
 Recent
Accounting Pronouncements
 
 In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities.  This statement changes the disclosure
requirements for derivative instruments and hedging
activities.  Entities are required to provide enhanced disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, and its related
interpretations, and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash
flows.  This statement is effective for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008, or the
Company’s fiscal year beginning January 1, 2009, with early application
encouraged.  This statement encourages, but does not require,
comparative disclosures for earlier periods at initial adoption.  The
Company is unable to determine what impact the future application of this
pronouncement may have on its consolidated financial statements.
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
Combinations.  This statement replaces SFAS No. 141, Business
Combinations and applies to all transactions or other events in which an entity
(the acquirer) obtains control of one or more businesses (the acquiree),
including those sometimes referred to as “true mergers” or “mergers of equals”
and combinations achieved without the transfer of consideration.  This
statement establishes principles and requirements for how the acquirer: a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree; b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and c) determines what
information to disclose to enable users of the financials statements to evaluate
the nature and financial effects of the business combination.  This
statement will be effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008, or the Company’s fiscal
year beginning January 1, 2009.  Earlier adoption is
prohibited.  The Company currently is unable to determine what impact
the future application of this pronouncement may have on its consolidated
financial statements.
 
  24
  In
December 2007, the FASB issued SFAS 160, Noncontrolling Interests in
Consolidated Financial Statements.  This statement applies to all
entities that prepare consolidated financial statements, except not-for-profit
organizations, and amends Accounting Research Bulletin (“ARB”) 51 to establish
accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary.  It also
amends certain of ARB 51’s consolidation procedures for consistency with the
requirements of SFAS No. 141 (revised 2007).  This statement will be
effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008, or the Company’s fiscal year beginning
January 1, 2009.  Earlier adoption is prohibited.  The
Company currently is unable to determine what impact the future application of
this pronouncement may have on its consolidated financial
statements.
 
 In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities – Including an Amendment of FASB Statement No.
115. This statement permits entities to choose to measure many financial
instruments and certain other items at fair value.  Most of the
provisions of SFAS No. 159 apply only to entities that elect the fair value
option.  However, the amendment to SFAS No. 115 Accounting for Certain
Investments in Debt and Equity Securities applies to all entities with
available-for-sale and trading securities.  SFAS No. 159 is effective
as of the beginning of an entity’s first fiscal year that begins after November
15, 2007.  The Company adopted SFAS No. 159 on January 1, 2008,
resulting in no financial statement impact.
 
 In
September 2006, the FASB issued SFAS Statement No. 158, Employers’ Accounting
for Defined Benefit Pension and Other Postretirement Plans.  This new
standard will require employers to fully recognize the obligations associated
with single-employer defined benefit pension, retiree healthcare and other
postretirement plans in their financial statements.  The Company
adopted SFAS No. 158 on December 31, 2007, resulting in no financial statement
impact since the Company currently does not sponsor the defined benefit pension
or postretirement plans within the scope of the standard.
 
 In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No.
157 defines fair value, establishes a framework for measuring fair value, and
requires enhanced disclosures about fair value measurements.  SFAS No.
157 requires companies to disclose the fair value of their financial instruments
according to a fair value hierarchy as defined in the
standard.  Additionally, companies are required to provide enhanced
disclosure regarding financial instruments in one of the categories, including a
reconciliation of the beginning and ending balances separately for each major
category of assets and liabilities.  In February 2008, the FASB issued
FASB Staff Position (FSP) No. FAS 157-2, which delays by one year the effective
date of SFAS No. 157 for certain types of non-financial assets and non-financial
liabilities.  As a result, SFAS No. 157 will be effective for
financial statements issued for fiscal years beginning after November 15, 2007,
or the Company’s fiscal year beginning January 1, 2008, for financial assets and
liabilities carried at fair value on a recurring basis, and on January 1, 2009,
for non-recurring non-financial assets and liabilities that are recognized or
disclosed at fair value.  The Company adopted SFAS No. 157 on January
1, 2008, for financial assets and liabilities carried at fair value on a
recurring basis, with no material impact on its consolidated financial
statements.  The Company is currently unable to determine what impact
the application of SFAS No. 157 on January 1, 2009, for non-recurring
non-financial assets and liabilities that are recognized or disclosed at fair
value, will have on its consolidated financial statements.
 
 In March
2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial
Assets.  This statement amends SFAS 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, a replacement
of FASB Statement 125, or SFAS 140, regarding (1) the circumstances under
which a servicing asset or servicing liability must be recognized, (2) the
initial and subsequent measurement of recognized servicing assets and
liabilities, and (3) information required to be disclosed relating to
servicing assets and liabilities.  The Company adopted this standard
on January 1, 2007, with no impact on its consolidated financial
statements.
 
 In
February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid
Financial Instruments, or SFAS 155.  This statement amends SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities, to
narrow the scope exception for interest-only and principal-only strips on debt
instruments to include only such strips representing rights to receive a
specified portion of the contractual interest or principal cash
flows.  SFAS 155 also amends SFAS 140 to allow qualifying
special-purpose entities to hold a passive derivative financial instrument
pertaining to beneficial interests that itself is a derivative financial
instrument. The Company adopted this standard on January 1, 2007, with no impact
on its consolidated financial statements.
 
  25
  The FASB
has issued Financial Interpretation No. 48, Accounting for Uncertainty in Income
Taxes – An Interpretation of FASB Statement No. 109 (FIN 48).  FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with FASB Statement No. 109,
Accounting for Income Taxes.  FIN 48 also prescribes a recognition
threshold and measurement standard for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax
return.  In addition, FIN 48 provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.  The Company adopted FIN 48 on January 1,
2007, and the provisions of FIN 48 were applied to all tax positions upon
initial adoption of this standard.  There was no financial statement
impact of adopting FIN 48.
 
 EITF No.
07-3, Accounting for Nonrefundable Advance Payments for Goods or Services
Received for Use in Future Research and Development Activities, was issued in
June 2007.  The EITF reached a consensus that nonrefundable payments
for goods and services that will be used or rendered for future research and
development activities should be deferred and capitalized.  Such
amounts should be recognized as an expense as the related goods are delivered
and the related services are performed.  Entities should continue to
evaluate whether they expect the goods to be delivered or services to be
rendered.  If the entity does not expect the goods to be delivered or
services to be rendered, the capitalized advance payment should be charged to
expense.  This pronouncement is effective for financial statements
issued for fiscal years beginning after December 15, 2007 (the Company’s fiscal
year beginning January 1, 2008) and interim periods within those fiscal
years.  Earlier application is not permitted.  Entities are
required to report the effects of applying this pronouncement prospectively for
new contracts entered into on or after the effective date of this
pronouncement.  The Company currently is not a party to research and
development arrangements that include nonrefundable advance
payments.  To the extent that the Company enters into research and
development arrangements in the future that include nonrefundable advance
payments, the future application of this pronouncement may have a material
effect on its financial condition and results of operations.
 
 
 RESULTS
OF OPERATIONS
 
 Results of Operations for the Year
Ended December 31, 2007 Compared to the Year Ended December
31, 2006
 
 Sales
 
 We
generated sales of $10,398,361 for the year ended December 31, 2007 and sales of
$176,777 for the year ended December 31, 2006, consisting of sales of
molybdenite concentrates produced by the Ashdown LLC.  The Ashdown LLC
commenced operations and had its first sale of molybdenite concentrates in
December 2006.  No sales were recorded prior to December 2006, as the
operations at the Mineral Ridge mine, a source of sales in prior years, had been
temporarily idled pending a re-engineering study designed to maximize gold
recoveries through the addition of a milling and vat leaching
circuit.
 
 Operating
Costs and Expenses
 
 Cost of
mining operations for the years ended December 31, 2007 and 2006 were $8,868,308
and $1,593,607, respectively. The increase in cost of mining operations in the
current year resulted from operating costs and expenses incurred by the Ashdown
LLC, which commenced production of molybdenite concentrates in December 2006,
and as described above, has generated sales during the year ended December 31,
2007. Cost of mining operations for the years ended December 31, 2007 and 2006
also include expenditures to maintain the Mineral Ridge project on standby
status.
 
 Exploration,
development and mineral property lease expenses were $449,598 and $2,909,404 for
the years ended December 31, 2007 and 2006, respectively. Current year levels of
these expenses have decreased significantly as efforts have been directed to the
production activities of the Ashdown LLC.  In May 2006, we exceeded
the $5,000,000 benchmark for development expenditures at Ashdown and earned in
our 60% ownership interest in the Ashdown LLC.  Subsequent to this
earn in, our joint venture partner was required to fund 40% of the expenditures
on the Ashdown Project.  Exploration, development and mineral property
lease expenses for 2006 also include $521,278 of exploration expenses recorded
for the Northern Champion property, including the acquisition cost of the
property of $498,380.  Such expenses for the Northern Champion
property in 2007 totaled $13,145.
 
  26
  General
and administrative expenses were $3,194,094 and $2,431,518 for the years ended
December 31, 2007 and 2006, respectively.  General and administrative
expenses include investor relations, salaries and wages of officers and office
personnel, legal and professional fees, and stock-based compensation
expense.  The increase in the current year is primarily the result of
increases in legal and professional fees and additional compensation for
executives that were put under contract in 2006.
 
 Accretion
expense and depreciation and amortization expense for the year ended December
31, 2007 increased from levels recorded for the year ended December 31, 2006
primarily due to the operations of the Ashdown LLC.
 
 Because
we were unable to operate the Mineral Ridge mine profitably in accordance with
the feasibility study completed in 2003 and have idled the project, we wrote off
the reclamation asset recorded pursuant to the requirements of SFAS No. 143,
resulting in an expense of $1,826,140 in the year ended December 31,
2006.  We had no similar write down of reclamation costs in
2007.
 
 Other
Income (Expense)
 
 During
the year ended December 31, 2007, interest income increased to $121,822 from
$6,463 for the year ended December 31, 2006.  The increase in interest
income in the current year is due to increased interest-bearing deposits
resulting primarily from the sale of our common stock in a private offering in
April 2007.
 
 During
the year ended December 31, 2007, interest expense decreased to $275,981 from
$1,152,607 for the year ended December 31, 2006.  This decrease
resulted from two factors.  First, a portion of the $2,000,000 premium
obligation recorded as interest expense in the Schnack financing agreement was
expensed in the first nine months of 2006.  In addition, during the
current year, we have repaid $802,275 of notes payable and long-term debt and
$250,000 of amounts due related parties.
 
 Our other
income has been favorably impacted by our continued efforts to extinguish
accounts payable and debt, resulting at times in a gain on extinguishment of
debt.  During the year ended December 31, 2007, we reported a net gain
on extinguishment of debt of $537,309, resulting from the elimination of amounts
payable pursuant to the Schnack financing agreement, subsequent conversion of
certain amounts to a production payment obligation to Crestview, and from
agreements reached to extinguish certain accounts payable.  During the
year ended December 31, 2006, we extinguished certain obligations related to the
Contact Mine, the Mineral Ridge property and amounts payable to related
parties.  We reached agreement with various parties pursuant to which
a total of $6,143,692 of debt has been extinguished.  Net of a loss on
extinguishment of amounts due to related parties of $830,839 from the issuance
of common shares where the market value of the common stock exceeded the
recorded amount of the debt paid on the date the shares were issued, we
recognized a gain on extinguishment of debt of $5,312,853.  The
extinguishment of debt has significantly improved the working capital position
of the Company.
 
 During
the year ended December 31, 2006 we reported a gain on the sale of mineral
properties of $162,041 related to the execution of a quitclaim deed conveying
our interest in and to certain unpatented mining claims at the Contact Property
in exchange for common shares of Enexco valued at $162,041.  We did
not sell any mineral properties in the year ended December 31,
2007.
 
 The
remaining other income (expense) amounts reported in the years ended December
31, 2007 and 2006 consisted of gain or loss on disposal of property and
equipment and other income incidental to our operations, and were not
material.
 
 Net
Income (Loss)
 
 After
adding our minority interest member’s share of net income from the Ashdown LLC,
our net loss for the year ended December 31, 2007 was $2,350,435.  For
the year ended December 31, 2006, after excluding our minority interest member’s
share of net loss from the Ashdown LLC, our net loss for the year ended December
31, 2006 was $4,080,554.
 
 
  27
  Liquidity
And Capital Resources
 
 The
Company has a history of operating losses since its inception in 1997, and had
an accumulated deficit of $37,565,720 and a working capital deficit of $739,673
at December 31, 2007.
 
 Primarily
as a result of the completion of our private offering of common stock in April
2007, we had $2,173,811 in cash and cash equivalents at December 31, 2007. We
believe our current cash and cash equivalents will not be sufficient for our
current level of operations in the near term, unless the Ashdown LLC can reach a
successful level of operations and sales.  We anticipate expenditures
for 2008 will exceed the levels incurred in 2007, particularly at the Ashdown
mine.  Our operating costs and expenses could increase or decrease
significantly, at any time during the next twelve months, based on exploration
results and decisions about releasing or acquiring additional properties, among
other factors. We believe that in the short-term the Ashdown LLC will retain
significant portions of the proceeds from the sale of molybdenite concentrates
to expand and improve operations at the Ashdown mine and mill.  In
addition, as more fully described in the notes to the consolidated financial
statements, the Company’s share of production distributions from the Ashdown LLC
are encumbered by significant production payment obligations entered into to
provide development funds for the Ashdown project. Consequently, we will require
additional funding from debt and equity financing to finance our operations,
including any cash call obligations of the Ashdown LLC.  We also
intend to commence further exploration of numerous targets and development of
identified economic mineralization at Mineral Ridge in 2008, including over
60,000 feet of planned drilling.
 
 We cannot
assure that additional capital required to finance our operations will be
available on acceptable terms, if at all.  Any failure to secure
additional financing may force us to modify our business plan.  In
addition, we cannot be assured of profitability in the future.
 
 In May
2003, we entered into an insurance-backed financial assurance program for a
surety bond, to secure the reclamation bond for approximately $2,700,000 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. The total bond amount is reviewed by BLM every
three years, and their audit for this period was completed on August 28, 2006
with a finding that the bond amount be increased to approximately $2,800,000 to
remain in compliance with our reclamation obligations. We have posted this
additional amount.  We are also obligated to pay an additional $11,311
annually to keep this insurance policy in force.
 
 In the
next 12 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 surface process facilities.  These items
include underground hauling machines and muckers and various surface equipment
including front-end loaders, forklifts, drilling equipment and small haul
trucks.  Depending on whether we purchase new or used equipment, these
capital equipment items could cost between $200,000 and $500,000 per
unit.  We anticipate funding these capital equipment expenditures with
funds we receive from any molybdenum, gold and silver production revenues we may
generate or from debt and equity financing.  All purchases at the
Ashdown mine will be borne in proportion to our equity percentage as operator in
that project.  The pickup trucks we intend to purchase will be for our
staff professionals only. All contractors will provide their own
vehicles.
 
 We also
anticipate conducting drilling activities for approximately 60,000 feet of
drilling (estimated  cost of $1,400,000) at Mineral Ridge, completing
ongoing reserve calculations and feasibility work (estimated cost of $400,000)
at Mineral Ridge, completing the Company’s portion of 30,000 feet of drilling at
Ashdown (estimated cost of $500,000) and completing the development work,
engineering and feasibility work on expansion of the Ashdown operations
(estimated cost of $1,480,000).
 
 During
the year ended December 31, 2007, we used net cash of $2,285,886 in operating
activities, compared to $4,919,742 net cash used in operating activities during
the year ended December 31, 2006.  The decrease in net cash used in
operating activities in the current fiscal year was attributed to the increased
sales at the Ashdown LLC.
 
  28
  During
the year ended December 31, 2007, net cash used in investing activities was
$754,600, comprised of $360,000 cash contributed to capital by our minority
interest member of the Ashdown LLC and $40,000 proceeds from the sale of
property and equipment, net of cash used to purchase property and equipment of
$654,600, primarily for the Ashdown project, and $500,000 cash distributions to
our minority interest member of the Ashdown LLC.  Net cash provided by
investing activities for the year ended December 31, 2006 was $332,473,
consisting of $440,000 cash contributed to capital by our minority interest
member of the Ashdown LLC and $86,075 proceeds from the sale of property and
equipment, partially offset by the purchase of property and equipment of
$193,602.
 
 During
the year ended December 31, 2007, net cash provided by financing activities was
$4,735,265.  Our liquidity needs were primarily met from the net
proceeds of $6,744,505 from the sale of 23,441,066 of our common shares in a
private offering in April 2007 and pursuant to the Common Stock Purchase
Agreement with Fusion Capital.  In addition, we received $186,045 in
cash proceeds from the exercise of common stock warrants.  The cash
provided by these financing sources was partially offset by the payment of
severance obligations of $338,469, notes payable and long-term debt of $802,275,
amounts due to related parties of $250,000 and the payments of production
payment obligation – related party of $804,541.
 
 During
the year ended December 31, 2006, net cash provided by financing activities was
$5,056,126, consisting of $4,177,504 from the sale of common stock, $139,610
from the exercise of options and warrants, $145,000 proceeds from amounts due
related parties, $265,000 proceeds from notes payable and $650,000 proceeds from
the production payment purchase agreement, partially offset by payments of
amounts due related parties of $273,048 and notes payable and long-term debt of
$47,940.
 
 On July
13, 2005, the Company entered into a Common Stock Purchase Agreement (the
“Original Purchase Agreement”) with Fusion Capital Fund II, LLC (“Fusion
Capital”), pursuant to which Fusion Capital had agreed, under certain
conditions, to purchase on each trading day $12,500 of the Company’s common
stock up to an aggregate of $6 million over a twenty-four (24) month
period.  On January 19, 2006, the Company and Fusion Capital entered
into a Termination Agreement whereby the parties terminated the Original
Purchase Agreement.  On January 20, 2006, the Company entered into a
new Common Stock Purchase Agreement (“Purchase Agreement”) with Fusion
Capital.  Under the Purchase Agreement, Fusion Capital committed to
purchase up to $6 million of the Company’s common stock over a twenty-four (24)
month period.  On April 23, 2007, the Company terminated the Purchase
Agreement.
 
 On
April 24, 2007, the Company completed its private offering of 20,000,000
units of its common stock and warrants to purchase common stock (the “Private
Offering”) to certain institutional and accredited investors.  Each
unit consists of one share of common stock, no par value per share, and one-half
(1/2) of one two year warrant to purchase common stock, with each whole warrant
entitling the holder to purchase one share of common stock at an exercise price
of $0.40 per share. The units were sold at a per unit price of $0.30. The
Company raised an aggregate amount of $6,000,000 from this Private Offering,
less a placement fee of $210,000 and other offering expenses of
$140,494.
 
 Further,
in connection with the Private Offering, the Company issued to its placement
agent 150,000 shares of common stock and two-year warrants to purchase 600,000
shares of common stock at an exercise price of $0.40 per share.
 
 On
September 26, 2005, the Company entered into a Production Payment Purchase
Agreement with Ashdown Milling Co LLC (“Ashdown Milling”).  Under the
terms of the agreement, Ashdown Milling agreed to purchase a production payment
to be paid from the Company’s share of production from the Ashdown mine for a
minimum of $800,000.  In addition, Ashdown Milling is to receive one
share of the Company’s common stock and one warrant to purchase one share of the
Company’s common stock at $0.20 per share for each dollar paid to the
Company.  In addition, the Production Payment Purchase Agreement
provides that, upon the request of the Company for additional funds, Ashdown
Milling has the right, but not the obligation, to increase its investment in the
production payment up to an additional $700,000 for a maximum purchase price of
$1,500.000.  The amount of the production payment to be paid to
Ashdown Milling is equal to a 12% net smelter returns royalty on the minerals
produced from the mine until an amount equal to 240% of the total purchase price
has been paid.  Robert P. Martin, President of the Company, and
Kenneth S. Ripley, a former Chief Executive Officer of the Company, are
co-managers and two of the five members of Ashdown Milling.  The
Company’s Board approved the transaction.
 
  29
  Because
production payments from the Ashdown mine were not assured at the time of the
agreement with Ashdown Milling, the transaction was originally accounted for as
the sale of an interest in mineral properties with the related gain to be
deferred until the Company began making payments according the terms of the
agreement.  During 2005 and 2006, $1,500,000 was advanced to the
Company pursuant to this agreement, with $904,567 of the proceeds allocated to
deferred revenue – related party, a current liability.  With the
commencement of mining operations at the Ashdown mine, the Company has
reclassified the deferred revenue to a production payment obligation, a current
liability, to be repaid from the Company’s share of production distributions
received from the Ashdown LLC.  During the year ended December 31
2007, we made payments totaling $804,541, reducing the obligation to a balance
of $100,026 at December 31, 2007.  Including the $904,567 obligation,
the total amount of the production payment to be paid to Ashdown Milling is
equal to a 12% net smelter returns royalty on the minerals produced from the
mine until an amount equal to 240% of the total purchase price has been
paid.
 
 On
February 6, 2008 the Company bought out the membership interests of two members
of Ashdown Milling, in exchange for 1,866,667 shares of its common stock and
$139,092 cash paid to each of them.  As a result their membership
interests in Ashdown Milling were extinguished and the Company’s production
payment to be paid to Ashdown Milling was reduced from a 12% net smelter returns
royalty on the minerals produced to 7.2%.
 
 At
December 31, 2007, we had a production payment obligation of $1,974,456 to
Crestview Capital Master, LLC (“Crestview”) resulting from the June 13, 2007,
Production Payment Purchase Agreement and Assignment (the “Purchase Agreement”)
by and between the Company and Crestview.  Pursuant to the terms of
the Purchase Agreement, Crestview acquired from the Company the assignment of
the Company’s purchase rights under the Schnack Restructuring Agreement in
consideration of Crestview paying the seven hundred fifty thousand dollar
($750,000) payment due Schnack and Crestview immediately exercising the
Company’s purchase rights to acquire the production payment, along with certain
amendments to the Restructuring Agreement, for a combined purchase amount paid
by Crestview to Schnack equal to one million seven hundred ninety-four thousand
nine hundred sixty dollars ($1,794,960).
 
 Further
terms of the Purchase Agreement include: (i) that the aggregate amount of the
production payment will be equal to one million nine hundred seventy four
thousand four hundred fifty six dollars ($1,974,456), representing 110% of the
actual cash paid by Crestview to satisfy the Company’s obligations to Schnack;
(ii) that the production payment will be paid in an amount equal to a five
percent (5%) net smelter (refinery) returns (“NSR”) paid solely from the
Company’s share of production distributed to the Company pursuant to the Ashdown
Project LLC Operating Agreement; and (iii) that so long as the production
payment remains outstanding, the production payment shall be convertible, in
whole or in part, into shares of the Company’s Common Stock at the option of
Crestview or its assignee.
 
 As a
result of the Purchase Agreement and related agreements, the liabilities of the
Company were reduced by five hundred twenty thousand five hundred four dollars
($520,504), which has been recorded as a gain on extinguishment of debt in the
accompanying consolidated statement of operations for the year ended December
31, 2007.
 
 The
production payment obligation to Crestview of $1,974,456 has been recorded as a
current liability in the accompanying consolidated balance sheet at December 31,
2007.  So long as the production payment obligation remains
outstanding, it may be converted in whole or in part into shares of the
Company’s common stock at the option of Crestview.  The number of
shares of the Company’s common stock to be issued upon conversion of the
production payment shall be calculated by dividing the remaining amount of the
production payment by the number derived by multiplying the average of the
volume weighted average price of the Company’s common stock for a period of ten
(10) trading days prior to exercise of this conversion right by 0.80, but in no
case less than $0.36 per share nor more than $0.46 per
share.  Provided that the shares of common stock underlying the
conversion right have been registered with the U.S. Securities and Exchange
Commission, the production payment shall automatically convert into shares of
the Company’s common stock if the closing price of the Company’s common stock on
the OTC Bulletin Board or other public trading market is greater than or equal
to $0.65 per share for ten consecutive trading days.
 
  30
  We
continue to investigate other potential financing sources, and to entertain
potential joint venture partners for the Mineral Ridge mine.
 
 ITEM
      7.
              FINANCIAL
      STATEMENTS
 
 Our
consolidated financial statements appear beginning at page F-1.
 
 ITEM 8.
              CHANGES IN
      AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL
      DISCLOSURE
 
 None.
 
 ITEM 8A.
              CONTROLS
      AND PROCEDURES
 
 Evaluation
of Disclosure Controls and Procedures
 
 The
Company’s management, under the supervision and with the participation of its
chief executive officer and chief financial officer, evaluated the effectiveness
of the design and operation of the Company’s disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of
December 31, 2007.  Based on that evaluation, the Company’s chief
executive officer and chief financial officer concluded that the disclosure
controls and procedures employed at the Company are effective to ensure that the
information required to be disclosed by the Company in the reports that it files
or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in SEC rules and
forms.
 
 Management’s
Report on Internal Control Over Financial Reporting
 
 Management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined under Exchange Act Rules
13a-15(f).  The Company’s internal control system is designed to
provide reasonable assurance to its management and board of directors regarding
the preparation and fair presentation of published financial
statements.  Under the supervision and with the participation of our
management, including our principal executive officer and principal financial
officer, we conducted an evaluation of the effectiveness of our internal control
over financial reporting based on the framework in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.  Based on our evaluation under that framework,
management concluded that our internal control over financial reporting was
effective as of December 31, 2007.
 
 This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial
reporting.  The Company’s internal control over financial reporting
was not subject to attestation by the Company’s registered public accounting
firm pursuant to temporary rules of the Securities and Exchange Commission that
permit the Company to provide only management’s report in this annual
report.
 
 Change
in Internal Control Over Financial Reporting
 
 There was
no change in the Company’s internal control over financial reporting during the
fourth fiscal quarter, that materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
 
 ITEM
      8B.
              OTHER
      INFORMATION
 
 None.
 
  31
  PART
III
 
 ITEM 9.
              DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;COMPLIANCE
      WITH SECTION 16(a) OF THE EXCHANGE
ACT
 
 Information
regarding our directors appears under “Proposal No. 1 - Election of Directors”
in our Proxy Statement for the 2008 Annual Meeting of Stockholders to be filed
(the “Proxy Statement”). Information regarding our executive officers appears
under “Executive Officers” in our Proxy Statement. Information about compliance
with Section 16(a) of the Exchange Act appears under “Section 16(a) Beneficial
Ownership Reporting Compliance” in the Proxy Statement. Information regarding
our Audit Committee and our Audit Committee’s financial expert appears under
“Audit Committee Report” in our Proxy Statement. These portions of the Proxy
Statement are incorporated by reference into this report.
  There
were no material changes to the procedures by which security holders may
recommend nominees to our Board of Directors.
 
 ITEM
      10.
              EXECUTIVE
      COMPENSATION
 
 Information
about compensation of our named executive officers appears under “Executive
Compensation” in the Proxy Statement.  That portion of the Proxy
Statement is incorporated by reference into this report.
 
 ITEM
      11.
              SECURITY OWNERSHIP OF CERTAIN
      BENEFICIAL OWNERS AND
MANAGEMENT
 
 Information
about security ownership of certain beneficial owners and management appears
under “Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters” in the Proxy Statement. That portion of the Proxy
Statement is incorporated by reference into this report.
 
 ITEM
      12.
              CERTAIN RELATIONSHIPS AND
      RELATED TRANSACTIONS, AND DIRECTOR
  INDEPENDENCE
 
 Information
about certain relationships and related transactions appears under “Certain
Relationships and Related Transactions” in the Proxy Statement. That portion of
the Proxy Statement is incorporated by reference into this report.
 
 ITEM 13.
              EXHIBITS
 
 (a)(1)(2)
Financial Statements: See index to consolidated financial statements and
supporting schedules.
 
 (a)(3)
Exhibits:
 
 (a)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.
              
              Incorporated
      by reference to Exhibit 10.2 to the Company’s Registration Statement on
      Form 10SB12G/A as filed with the SEC on October 22,
  1997
   32
  10.2
              
              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 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, 199810.10
              
              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 October 9, 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 November 12, 2002, by and between Golden
      Phoenix Minerals, Inc. and Fusion Capital Fund II, LLC
              
              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,
2003
   33
  10.14
              
              Common
      Stock Purchase Agreement, dated January 20, 2006, by and between Golden
      Phoenix Minerals, Inc. and Fusion Capital Fund II, LLC
              
              Incorporated
      by reference to Exhibit 10.4 to the Company’s Registration Statement on
      Form SB-2, as filed with the SEC on January 23, 200610.15
              
              Registration
      Rights Agreement, dated January 20, 2006, by and between Golden Phoenix
      Minerals, Inc. and Fusion Capital Fund II, LLC
              
              Incorporated
      by reference to Exhibit 10.5 to the Company’s Registration Statement on
      Form SB-2, as filed with the SEC on January 23, 200610.16
              
              Termination
      Agreement, dated January 19, 2006, by and between Golden Phoenix Minerals,
      Inc. and Fusion Capital Fund II, LLC
              
              Incorporated
      by reference to Exhibit 10.6 to the Company’s Registration Statement on
      Form SB-2, as filed with the SEC on January 23, 200610.17
              
              Long
      Term Agreement, dated August 18, 2004, by and between Golden Phoenix
      Minerals, Inc. and Derek Raphael & Company Limited
              
              Incorporated
      by reference to Exhibit 10.17 to the Company’s Annual Report on Form
      10-KSB for the year ended December 31, 2005, as filed with the SEC on
      April 17, 200610.18
              
              Settlement
      Agreement, dated August 26, 2005 by and between Golden Phoenix Minerals,
      Inc., Earl Harrison, dba Western Mine Development, Retrievers LLC, John
      Tingue and Kris Tingue
              
              Incorporated
      by reference to Exhibit 10.18 to the Company’s Annual Report on Form
      10-KSB for the year ended December 31, 2005, as filed with the SEC on
      April 17, 200610.19
              
              Payment
      Production Purchase Agreement, September 26, 2005, by and between Golden
      Phoenix Minerals, Inc. and Ashdown Milling Company, LLC
              
              Incorporated
      by reference to Exhibit 10.19 to the Company’s Annual Report on Form
      10-KSB for the year ended December 31, 2005, as filed with the SEC on
      April 17, 200610.20
              
              Second
      Addendum to Long Term Agreement, October 25, 2005, by and between Golden
      Phoenix Minerals, Inc. and Derek Raphael & Company
    Limited
              
              Incorporated
      by reference to Exhibit 10.20 to the Company’s Annual Report on Form
      10-KSB for the year ended December 31, 2005, as filed with the SEC on
      April 17, 200610.21
              
              Employment
      Agreement, dated February 22, 2006, by and between Golden Phoenix
      Minerals, Inc. and David A. Caldwell
              
              Incorporated
      by reference to Exhibit 10.21 to the Company’s Annual Report on Form
      10-KSB for the year ended December 31, 2005, as filed with the SEC on
      April 17, 200610.22
              
              Employment
      Agreement, dated March 8, 2006, by and between Golden Phoenix Minerals,
      Inc. and Robert P. Martin
              
              Incorporated
      by reference to Exhibit 10.22 to the Company’s Annual Report on Form
      10-KSB for the year ended December 31, 2005, as filed with the SEC on
      April 17, 200610.23
              
              Employment
      Agreement, dated March 13, 2006, by and between Golden Phoenix Minerals,
      Inc. and Kenneth S. Ripley
              
              Incorporated
      by reference to Exhibit 10.23 to the Company’s Annual Report on Form
      10-KSB for the year ended December 31, 2005, as filed with the SEC on
      April 17, 200610.24
              
              Employment
      Agreement, dated March 22, 2006, by and between Golden Phoenix Minerals,
      Inc. and Larry A. Kitchen
              
              Incorporated
      by reference to Exhibit 10.24 to the Company’s Annual Report on Form
      10-KSB for the year ended December 31, 2005, as filed with the SEC on
      April 17, 200610.25
              
              Golden
      Phoenix/Schnack Agreement, dated May 10, 2005, by and between the Company
      and William D. and Candida Schnack
              
              Incorporated
      by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K
      for May 10, 2005, as filed with the SEC on May 18,
  2005
   34
  10.26
              
              Letter
      of Extension, dated November 4, 2005, by and between the Company and
      William D. and Candida Schnack
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      for November 4, 2005, as filed with the SEC on November 15,
      200510.27
              
              Purchase
      Agreement, dated April 18, 2006, by and between the Company, Robert R.
      Robitaille, Douglas Lalonde, Sheldon Davis and Ronald E.
      Dockweiler
              
              Incorporated
      by reference to Exhibit 10.27 to the Company’s Quarterly Report on Form
      10-QSB for the quarter ended March 31, 2006, as filed with the SEC on May
      19, 200610.28
              
              Termination
      Agreement, dated June 27, 2006, by and between the Company and
      International Enexco Ltd.
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      for June 27, 2006, as filed with the SEC on July 7,
200610.29
              
              Quitclaim
      Deed, dated June 27, 2006, granted by the Company in favor of
      International Enexco Ltd.
              
              Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      for June 27, 2006, as filed with the SEC on July 7,
200610.30
              
              Employment
      Agreement, dated August 14, 2006, by and between the Company and Donald R.
      Prahl
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      for August 14, 2006, as filed with the SEC on August 17,
    200610.31
              
              Letter
      Agreement, dated September 29, 2006, by and between the Company and
      Win-Eldrich Gold, Inc.
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      for August 29, 2006, as filed with the SEC on August 30,
    200610.32
              
              Ashdown
      Project LLC Operating Agreement, dated September 28, 2006, by and between
      the Company and Win-Eldrich Gold, Inc.
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      for September 28, 2006, as filed with the SEC on October 3,
      200610.33
              
              Second
      Amendment to Golden Phoenix/Schnack Agreement
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A
      for November 2, 2006, as filed with the SEC on November 8,
      200610.34
              
              Independent
      Contractor Agreement dated December 18, 2006 by and between the Company
      and Dennis P. Gauger
              
              Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      for December 18, 2006, as filed with the SEC on December 21,
      2006
  35
 10.35
                
                Share
      and Warrant Purchase Agreement dated April 23, 2007 by and between the
      Company and certain Investors
                
                Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      for April 23, 2007, as filed with the SEC on April 25,
  200710.36
                
                Registration
      Rights Agreement dated April 23, 2007 by and between the Company and
      certain Investors
                
                Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      for April 23, 2007, as filed with the SEC on April 25,
  200710.37
                
                Advance
      Sale Restructuring Agreement dated April 23, 2007 by and between the
      Company and William Schnack or Candida Schnack
                
                Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      for April 23, 2007, as filed with the SEC on April 27,
  200710.38
                
                Mutual
      Termination Agreement dated April 23, 2007 by and between the Company and
      Fusion Capital Fund II, LLC
                
                Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      for April 23, 2007, as filed with the SEC on April 27,
  200710.39
                
                2006
      Non-Employee Director Stock Option Plan
                
                Incorporated
      by reference to Exhibit 10.26 to the Company’s Registration Statement on
      Form SB-2, as filed with the SEC on May 25, 200710.40
                
                2007
      Equity Incentive Plan
                
                Incorporated
      by reference to Exhibit 10.27 to the Company’s Registration Statement on
      Form SB-2, as filed with the SEC on May 25, 200710.41
                
                Production
      Payment Purchase Agreement and Assignment, dated June 12, 2007 by and
      between the Company and Crestview Capital Master, LLC
                
                Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      for June 13, 2007, as filed with the SEC on June 19,
  200710.42
                
                Registration
      Rights Agreement, dated June 12, 2007 by and between the Company and
      Crestview Capital Master, LLC
                
                Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      for June 13, 2007, as filed with the SEC on June 19,
  200710.43
                
                Security
      Agreement, dated June 12, 2007 by and between the Company and Crestview
      Capital Master, LLC
                
                Incorporated
      by reference to the Company’s Registration Statement on Form SB-2, as
      filed with the SEC on June 29, 200710.44
                
                Notice
      of Assignment, dated June 12, 2007 by and between the Company and
      Crestview Capital Master, LLC
                
                Incorporated
      by reference to the Company’s Registration Statement on Form SB-2, as
      filed with the SEC on June 29,
2007
 10.45
              
              Settlement
      Agreement and Release dated September 14, 2007, by and among Steven D.
      Craig, Estate of Collette Crater-Craig and the Company
              
              Provided
      herewith10.46
              
              Addendum
      to Production Payment Purchase Agreement between the Company and Ashdown
      Milling Company LLC dated February 6, 2008
              
              Provided
      herewith10.47
              
              Amended
      Settlement Agreement and Release dated March 21, 2008, by and among Steven
      D. Craig, Estate of Collette Crater-Craig and the Company
              
              Provided
      herewith21
              
              Subsidiaries
      of Golden Phoenix Minerals, Inc.
              
              None
   36
  31.1
              
              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)
Golden Phoenix did not file any reports on Form 8-K during the last quarter of
its fiscal year ended December 31, 2007.  Golden Phoenix did file the
following report on Form 8-K during the first quarter of its fiscal year ended
December 31, 2008:
  On
January 7, 2008, Golden Phoenix filed a Form 8-K to announce that effective
January 1, 2008, Jeffrey Tissier resigned for personal reasons as a member of
the Board of Directors and as the Chairman of the Audit Committee of the
Company.  And that effective January 1, 2008, Joan Y. Brown has been
appointed to the Board of Directors and has been named Chairperson of the Audit
Committee of the Company.
 
 ITEM
      14.
              PRINCIPAL ACCOUNTANT FEES AND
      SERVICES
 
 The
Company’s principal independent accountants for the performance of the audits
for the years ended December 31, 2007 and 2006 were HJ & Associates,
LLC.
 
 (a) Audit Fees. For the
fiscal years ended 2007 and 2006, the aggregate fees billed for services
rendered for the audits of the annual financial statements and the review of the
financial statements included in the quarterly reports on Form 10-QSB and the
services provided in connection with the statutory and regulatory filings or
engagements for those fiscal years and registration statements filed with the
SEC was $78,750 and $80,820, respectively.
  (b) Audit-Related Fees.
For the fiscal years ended December 31, 2007 and 2006, 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 December 31, 2007 and 2006, fees billed for tax compliance
services were $6,400 and $3,515.  There was no tax-planning advice
provided in 2007 or 2006.
 
 (e) Other Fees. For the
fiscal years ended December 31, 2007 and 2006 there were no fees billed for
services other than services described above.
     
 
 
 
  37
  SIGNATURES
 
 Pursuant
to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this Annual Report on Form 10-KSB to be
signed on its behalf by the undersigned, thereto duly authorized.
 
 GOLDEN
      PHOENIX MINERALS, INC.Date:
      March 31, 2008
              By:
              /s/ David A. CaldwellName:
      David A. CaldwellTitle:
      Chief Executive Officer(Principal
      Executive Officer)Date:
      March 31, 2008
              By:
              /s/ Dennis P. GaugerName:
      Dennis P. GaugerTitle:
      Chief Financial Officer(Principal
      Accounting and 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. Caldwell
              
              Chief
      Executive Officer and Director
              
              March
      31, 2008David
      A. Caldwell/s/ Robert P. Martin
              
              President
      and Secretary
              
              March
      31, 2008Robert
      P. Martin/s/ Ronald L. Parratt
              
              Director
              
              March
      31, 2008Ronald
      L. Parratt/s/ Joan Y. Brown
              
              Director
              
              March
      31, 2008Joan
      Y. Brown/s/ Corby G. Anderson
              
              Director
              
              March
      31, 2008Corby
      G. Anderson/s/ Kent D. Aveson
              
              Director
              
              March
      31, 2008Kent
      D. Aveson
 
 
 
 
 
 
 
 
 
  38
  GOLDEN
PHOENIX MINERALS, INC.
 Index
to Consolidated Financial Statements
 
 Report
      of Independent Registered Public Accounting Firm
              F-2Consolidated
      Balance Sheet
              F-3Consolidated
      Statements of Operations
              F-4Consolidated
      Statements of Stockholders’ Deficit
              F-5Consolidated
      Statements of Cash Flows
              F-6Notes
      to Consolidated Financial Statements
              F-7
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  F-1
  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 consolidated balance sheet of Golden Phoenix Minerals,
Inc. as of December 31, 2007, and the related consolidated statements of
operations, stockholders’ deficit, and cash flows for the years ended December
31, 2007 and 2006.  These financial statements are the responsibility
of the Company’s management.  Our responsibility is to express an
opinion on these financial statements based on our audits.
 
 We
conducted our audits in accordance with auditing standards 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 consolidated financial position of Golden Phoenix
Minerals, Inc. at December 31, 2007 and the results of their operations and
their cash flows for the years ended December 31, 2007 and 2006, in conformity
with United States generally accepted accounting principles.
    The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has generated significant losses
from operations, has an accumulated deficit of $37,565,720 and has a working
capital deficit of $739,673 at December 31, 2007, 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 consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
 
 /s/ HJ
& Associates, LLC
 HJ &
Associates, LLC
 Salt Lake
City, Utah
 March 28,
2008
 
 
 
 
 
 
 
  F-2
  GOLDEN
PHOENIX MINERALS, INC.
 Consolidated Balance
Sheet
 December
31, 2007
 
 ASSETSCurrent
      assets:Cash
      and cash equivalents
              
              $
              2,173,811Receivables
              
              
              951,873Prepaid
      expenses and other current assets
              
              
              153,962Inventories
              
              
              402,483Marketable
      securities
              
              
              163,958Total
      current assets
              
              
              3,846,087Property
      and equipment, net
              
              
              1,815,654Other
      assets:Restricted
      funds – reclamation obligations
              
              
              2,246,824Prepaid
      bond insurance premiums
              
              
              277,276Deposits
              
              
              163,009Total
      other assets
              
              
              2,687,109$
              8,348,850LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable
              
              $
              891,836Accrued
      liabilities
              
              
              980,287Current
      portion of severance obligations
              
              
              132,158Current
      portion of long-term debt
              
              
              103,721Production
      payment obligation – related party
              
              
              100,026Production
      payment obligation
              
              
              1,974,456Amounts
      due to related parties
              
              
              403,276Total
      current liabilities
              
              
              4,585,760Long-term
      liabilities:Reclamation
      obligations
              
              
              3,312,562Severance
      obligations
              
              
              166,595Long-term
      debt
              
              
              123,164Total
      long-term liabilities
              
              
              3,602,321Total
      liabilities
              
              
              8,188,081Commitments
      and contingenciesMinority
      Interest
              
              
              34,034Stockholders’
      equity:Preferred
      stock, no par value, 50,000,000 shares authorized, none
    issued
              
              
              —Common
      stock; no par value, 400,000,000 shares authorized, 180,552,639 shares
      issued and outstanding
              
              
              37,690,538Other
      comprehensive income
              
              
              1,917Accumulated
      deficit
              
              
              (37,565,720
              )Total
      stockholders’ equity
              
              
              126,735$
              8,348,850
  
 See
accompanying notes to consolidated financial statements
  F-3
  GOLDEN
PHOENIX MINERALS, INC.
 Consolidated Statements of
Operations
 
 Years Ended December 31,2007
              
              
              2006Sales
              
              $
              10,398,361
              
              
              $
              176,777Operating
      costs and expenses:Costs
      of mining operations
              
              
              8,868,308
              
              
              
              1,593,607Exploration,
      development and mineral property lease expenses
              
              
              449,598
              
              
              
              2,909,404Accretion
      expense
              
              
              190,811
              
              
              
              169,584General
      and administrative expenses
              
              
              3,194,094
              
              
              
              2,431,518Depreciation
      and amortization expense
              
              
              232,747
              
              
              
              104,616Write
      off of reclamation asset
              
              
              —
              
              
              
              1,826,140Total
      operating costs and expenses
              
              
              12,935,558
              
              
              
              9,034,869Loss
      from operations
              
              
              (2,537,197
              )
              
              
              (8,858,092
              )Other
      income (expense):Interest
      income
              
              
              121,822
              
              
              
              6,463Interest
      expense
              
              
              (275,981
              )
              
              
              (1,152,607
              )Gain
      (loss) on extinguishment of debt
              
              
              537,309
              
              
              
              5,312,853Gain
      on sale of mineral properties
              
              
              —
              
              
              
              162,041Gain
      (loss) on disposal of property and equipment
              
              
              19,713
              
              
              
              (53,018
              )Other
      income (expense)
              
              
              —
              
              
              
              19,739Total
      other income (expense)
              
              
              402,863
              
              
              
              4,295,471Loss
      before minority interest and income taxes
              
              
              (2,134,334
              )
              
              
              (4,562,621
              )Minority
      interest in net (income) loss of consolidated joint
venture
              
              
              (216,101
              )
              
              
              482,067Loss
      before income taxes
              
              
              (2,350,435
              )
              
              
              (4,080,554
              )Provision
      for income taxes
              
              
              —
              
              
              
              —Net
      loss
              
              $
              (2,350,435
              )
              
              $
              (4,080,554
              )Loss
      per common share, basic and diluted
              
              $
              (0.01
              )
              
              $
              (0.03
              )Weighted
      average number of shares outstanding
              
              
              172,926,174
              
              
              
              144,698,413
   
 See
accompanying notes to consolidated financial statements
 
  F-4
  GOLDEN
PHOENIX MINERALS, INC.
 Consolidated
Statements of Stockholders’ Deficit
 Years
Ended December 31, 2007 and 2006
 
 Common
      Stock
              
              
              Common
                Stock
              
              
              Other
                Comprehensive
              
              
              AccumulatedShares
              
              
              Amount
              
              
              Subscribed
              
              
              Income
              
              
              Deficit
              
              
              TotalBalance,
      January 1, 2006
              
              
              136,380,087
              
              
              $
              23,062,607
              
              
              $
              28,686
              
              
              $
              —
              
              
              $
              (31,134,731
              )
              
              $
              (8,043,438
              )Issuance
      of common stock for cash
              
              
              11,901,992
              
              
              
              4,237,504
              
              
              
              (60,000
              )
              
              
              —
              
              
              
              —
              
              
              
              4,177,504Issuance
      of common stock for directors fees
              
              
              20,589
              
              
              
              9,038
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              9,038Issuance
      of common stock for services
              
              
              266,427
              
              
              
              123,074
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              123,074Issuance
      of common stock for production payment
                purchase
      agreement
              
              
              700,000
              
              
              
              227,100
              
              
              
              (7,900
              )
              
              
              —
              
              
              
              —
              
              
              
              219,200Issuance
      of common stock for exploration and development expenses
              
              
              735,000
              
              
              
              373,380
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              373,380Issuance
      of common stock upon exercise of options and warrants
              
              
              741,400
              
              
              
              139,610
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              139,610Issuance
      of common stock for payment of debt
              
              
              3,318,515
              
              
              
              1,408,995
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              1,408,995Warrants
      issued as inducements to enter into agreements
              
              
              —
              
              
              
              196,075
              
              
              
              (20,786
              )
              
              
              —
              
              
              
              —
              
              
              
              175,289Stock-based
      compensation
              
              
              —
              
              
              
              483,160
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              483,160(934,188
              )Comprehensive
      net income calculation:Net
      loss
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (4,080,554
              )
              
              
              (4,080,554
              )Net
      unrealized gain on marketable securities
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              43,902
              
              
              
              —
              
              
              
              43,902Net
      comprehensive income
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (4,036,652
              )Balance,
      December 31, 2006
              
              
              154,064,010
              
              
              
              30,260,543
              
              
              
              (60,000
              )
              
              
              43,902
              
              
              
              (35,215,285
              )
              
              
              (4,970,840
              )Issuance
      of common stock for cash
              
              
              23,441,066
              
              
              
              7,034,999
              
              
              
              60,000
              
              
              
              —
              
              
              
              —
              
              
              
              7,094,999Issuance
      of common stock for stock issuance costs
              
              
              150,000
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —Stock
      issuance costs
              
              
              —
              
              
              
              (350,494
              )
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (350,494
              )Issuance
      of common stock for services
              
              
              393,990
              
              
              
              144,106
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              144,106Issuance
      of common stock for payment of debt
              
              
              423,728
              
              
              
              125,000
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              125,000Issuance
      of common stock upon exercise of options and warrants
              
              
              2,079,845
              
              
              
              373,645
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              373,645Issuance
      of warrants for interest expense
              
              
              —
              
              
              
              7,308
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              7,308Stock-based
      compensation
              
              
              —
              
              
              
              95,431
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              95,4312,519,155Comprehensive
      net income calculation:Net
      loss
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (2,350,435
              )
              
              
              (2,350,435
              )Net
      unrealized loss on marketable securities
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (41,985
              )
              
              
              —
              
              
              
              (41,985
              )Net
      comprehensive income
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              —
              
              
              
              (2,392,420
              )Balance,
      December 31, 2007
              
              
              180,552,639
              
              
              $
              37,690,538
              
              
              $
              —
              
              
              $
              1,917
              
              
              $
              (37,565,720
              )
              
              $
              126,735




See
accompanying notes to consolidated financial statements
  F-5
  GOLDEN
PHOENIX MINERALS, INC.
 Consolidated Statements of Cash
Flows
 
 Years Ended December 31,2007
              
              
              2006Cash
      flows from operating activities:Net
      loss
              
              $
              (2,350,435
              )
              
              $
              (4,080,554
              )Adjustments
      to reconcile net loss to net cash used in
                operating
      activities:Depreciation
      and amortization
              
              
              232,747
              
              
              
              104,616Accretion
      expense
              
              
              190,811
              
              
              
              169,584Stock-based
      compensation
              
              
              95,431
              
              
              
              483,160(Gain)
      loss on disposal of property and equipment
              
              
              (19,713
              )
              
              
              53,018Bad
      debt expense
              
              
              116,407
              
              
              
              —Issuance
      of common stock for services
              
              
              144,106
              
              
              
              126,826Issuance
      of warrants for interest expense
              
              
              7,308
              
              
              
              31,993Gain
      on extinguishment of debt
              
              
              (537,309
              )
              
              
              (5,312,853
              )Minority
      interest in net income (loss) of joint venture
              
              
              216,101
              
              
              
              (482,067
              )Property
      and equipment expensed to supplies
              
              
              —
              
              
              
              1,572Write
      off of reclamation asset
              
              
              —
              
              
              
              1,826,140Issuance
      of common stock for exploration and development expenses
              
              
              —
              
              
              
              373,380Gain
      on sale of mineral properties
              
              
              —
              
              
              
              (162,041
              )Changes
      in operating assets and liabilities:(Increase)
      decrease in receivables
              
              
              (932,696
              )
              
              
              124,416Decrease
      in prepaid expenses and other current assets
              
              
              200,875
              
              
              
              264,747Increase
      in inventories
              
              
              (355,227
              )
              
              
              (24,957
              )Increase
      in restricted funds – reclamation obligations
              
              
              (69,329
              )
              
              
              (180,638
              )Increase
      in deposits
              
              
              (102,248
              )
              
              
              (12,381
              )Increase
      in accounts payable
              
              
              469,148
              
              
              
              378,131Increase
      in accrued and other liabilities
              
              
              283,511
              
              
              
              1,067,718Increase
      in reclamation obligations
              
              
              124,626
              
              
              
              330,448Net
      cash used in operating activities
              
              
              (2,285,886
              )
              
              
              (4,919,742
              )Cash
      flows from investing activities:Purchase
      of property and equipment
              
              
              (654,600
              )
              
              
              (193,602
              )Proceeds
      from the sale of property and equipment
              
              
              40,000
              
              
              
              86,075Minority
      interest capital contributions to joint venture
              
              
              360,000
              
              
              
              440,000Cash
      distributions from joint venture to minority interest
              
              
              (500,000
              )
              
              
              —Net
      cash provided by (used in) investing activities
              
              
              (754,600
              )
              
              
              332,473Cash
      flows from financing activities:Net
      proceeds from the sale of common stock
              
              
              6,744,505
              
              
              
              4,177,504Proceeds
      from the exercise of options and warrants
              
              
              186,045
              
              
              
              139,610Payments
      of severance obligations
              
              
              (338,469
              )
              
              
              —Payments
      of notes payable and long-term debt
              
              
              (802,275
              )
              
              
              (47,940
              )Payments
      of amounts due to related parties
              
              
              (250,000
              )
              
              
              (273,048
              )Payments
      of production payment obligation – related party
              
              
              (804,541
              )
              
              
              —Proceeds
      from notes payable
              
              
              —
              
              
              
              265,000Proceeds
      from amounts due to related parties
              
              
              —
              
              
              
              145,000Proceeds
      from production payment purchase agreement
              
              
              —
              
              
              
              650,000Net
      cash provided by financing activities
              
              
              4,735,265
              
              
              
              5,056,126Net
      increase in cash
              
              
              1,694,779
              
              
              
              468,857Cash
      and cash equivalents, beginning of year
              
              
              479,032
              
              
              
              10,175Cash
      and cash equivalents, end of year
              
              $
              2,173,811
              
              
              $
              479,032
 
   See
accompanying notes to consolidated financial statements
  F-6
  GOLDEN
PHOENIX MINERALS, INC.
 Notes to Consolidated Financial
Statements
 Years
Ended December 31, 2007 and 2006
 
 Note
1:  Description of Business and Summary of Significant Accounting
Policies
 
 Organization
and Description of Business
 
 Golden
Phoenix Minerals, Inc. (the “Company” or “Golden Phoenix”) is a mineral
exploration, development and production company formed in Minnesota on June 2,
1997.  On September 21, 2007, at the Company’s Annual Meeting of
Shareholders, the shareholders of the Company voted in favor of a Plan of Merger
to reincorporate from the State of Minnesota to the State of
Nevada.  The Company expects to reincorporate into the State of Nevada
within the next several months.  The Company’s business includes
acquiring and consolidating mineral properties that the Company believes have a
high potential for new mineral discoveries and profitability.  The
Company’s focus is on properties containing gold, silver and molybdenum that are
located in Nevada.  As of February 25, 2008, the Company had proven
reserves of molybdenum of 2,773,908 pounds with a grade of 2.91% and probable
reserves of 1,074,023 pounds with a grade of 0.78% pursuant to an independent
third party Technical Report and Feasibility Study.
 
 The
Company’s primary mining property assets are the Ashdown molybdenum project
operated by the Ashdown Project LLC (the “Ashdown LLC”) in which the Company
currently owns a 60% member interest (and has claim, though contested, to an
additional 9.5% interest), and the Mineral Ridge mine.  Both
properties are located in Nevada.  Management’s near-term goals are to
extract molybdenum deposits at Ashdown and to develop a plan for profitable
production of gold and silver at Mineral Ridge.
 
 Accounting
Method
 
 The Company’s consolidated financial
statements are prepared by management in conformity with United States generally
accepted accounting principles using the accrual method of
accounting.  The Company has elected a December 31
year-end.
 
 Principles
of Consolidation
 
 The consolidated financial statements
of the Company include the accounts of Golden Phoenix Minerals, Inc. and the
Ashdown LLC, an entity controlled by Golden Phoenix Minerals, Inc. through its
60% member interest.  The consolidated financial statements for 2006
include the operations and cash flows of the Ashdown LLC from September 28,
2006, the date of formation of the Ashdown LLC.  All significant
inter-company balances and transactions have been eliminated.
 
 Minority
Interest
 
 As of December 31, 2007, the minority
interest balance is comprised of the portion of the members’ equity in the
Ashdown LLC not owned by the Company.  The operating income of the
Ashdown LLC for the year ended December 31, 2007 was allocated 40% to
Win-Eldrich Gold, Inc., the minority member, based on its equity ownership
percentage, thereby increasing the Company’s net loss.  Similarly, the
operating loss of the Ashdown LLC for the year ended December 31, 2006 was
allocated 40% to Win-Eldrich Gold, Inc., thereby reducing the Company’s net
loss.
 
 Reclassifications
 
 Certain reclassifications have been
made to the 2006 financial statements in order for them to conform to the
classifications used for the current year presentation.
 
 Concentrations
 
 Concentration
of Credit Risk — Financial instruments, which could potentially subject the
Company to credit risk, consist primarily of cash in bank and
receivables.  The Company maintains its cash in bank deposit accounts
insured by the Federal Deposit Insurance Corporation up to
$100,000.  The Company’s account balances, at times, may exceed
federally insured limits.  The Company has not experienced material
losses in such accounts, and believes it is not exposed to any significant
credit risk with respect to its cash accounts.  As of December 31,
2007, substantially all of the Company’s receivables were comprised of amounts
due from the purchaser of the Ashdown molybdenite
concentrates.  Management does not believe significant credit risk
exists for these receivables at December 31, 2007.
 
  F-7
  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.
 
 In each
of the years ended December 31, 2007 and 2006, 100% of the Company’s sales
consisted of sales to one party of molybdenite concentrates produced by the
Ashdown LLC.
 
 Use
of Estimates
 
 The
preparation of financial statements in conformity with United States generally
accepted accounting principles 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.  Differences in these estimates and actual results
could be material to the Company’s consolidated financial position and results
of operations.
 
 Cash
and Cash Equivalents
 
 The
Company considers all investments purchased with original maturities of three or
fewer months to be cash equivalents.  The Company had cash equivalents
of $2,200,377 at December 31, 2007.  As of December 31, 2007, the
Company had $29,935 of cash that is federally insured.  All remaining
amounts of cash either exceed federally insured limits or are not covered by
federal deposit insurance.
 
 Accounts
Receivable
 
 Trade
receivables are carried at original invoice amount less an estimate made for
doubtful accounts.  The Company maintains an allowance for doubtful
accounts based upon historical collection experience and expected collectibility
of all accounts receivable.  The Company’s allowance for doubtful accounts
was $116,407 at December 31, 2007.  Trade receivables are written off
when deemed uncollectible.  Recoveries of trade receivables previously
written off are recorded as income when received.
 
 Inventories
 
 Materials
and supplies inventories are stated at the lower of cost (using the average cost
method) or market.  Market is determined on the basis of estimated
realizable values.
  Molybdenite
concentrate finished goods inventories are stated at the lower of cost (using
current period production costs) or market.  Market is determined on
the basis of current sales prices per pound of the molybdenite
concentrates.
 
 Marketable
Securities
 
 Marketable
securities consist of shares of International Enexco Ltd. common stock received
in the sale of mineral properties (Note 4).  The Company intends on
holding these shares for the foreseeable future, and accordingly, the shares are
accounted for as securities held-for-sale in accordance with Statement of
Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments
in Debt and Equity Securities.  The marketable securities are
stated at fair value based on market quotes.  Unrealized gains and
losses are recorded as other comprehensive income, a component of stockholders’
equity in the Company’s consolidated balance sheet.  The total net
unrealized loss on this investment for the year ended December 31, 2007 was
$41,985, and the total net unrealized gain on this investment for the year ended
December 31, 2006 was $43,902.
 
 Property
and Equipment
 
 Property
and equipment are stated at cost.  Depreciation and amortization are
calculated using the straight-line method over estimated useful lives as
follows:
  F-8
  
 Buildings
              5-40
      yearsMining
      and milling equipment
              3-7
      yearsVehicles
              5
      yearsComputer
      equipment
              3-5
      yearsFurniture
      and equipment
              5-7
      years
 
 Mine
development costs are capitalized after proven and probable reserves have been
identified.  Amortization of mine development costs will be calculated
using the units-of-production method over the expected life of the operation
based on the estimated proven and probable reserves.  As of December
31, 2007, the Company had no proven or probable reserves at the Ashdown property
and has temporarily idled the Mineral Ridge mine pending full reviews of
engineering and metallurgy, and optimization of a revised mine and operations
plan.  Accordingly, through December 31, 2007, mining equipment and
buildings are currently being depreciated on a straight-line basis over their
estimated economic useful life rather than on a units-of-production
method.
 
 Property
Acquisition and Deferred Mineral Property Development Costs
 
 Mineral
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 that can be produced
profitably.  On the commencement of profitable commercial production,
depletion of each mineral property acquisition and associated deferred property
development costs will be computed on the units of production basis using
estimated proven and probable reserves.
 
 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 depleted in accordance with the policies described
above.
 
 Stripping
Costs
 
 On March
30, 2005, the Financial Accounting Standards Board (FASB) ratified the consensus
of the Emerging Issues Task Force (EITF) Issue 04-06 that stripping costs
incurred during the production phase of a mine are variable costs that should be
included in the costs of the inventory produced during the period that the
stripping costs are incurred.  The Company will utilize this
accounting policy for stripping costs incurred in its mining operations where
applicable.
 
 Proven
and Probable Ore Reserves
 
 On a
periodic basis, management reviews the reserves that reflect estimates of the
quantities and grades of metals at our mineral properties which management
believes can be recovered and sold at prices in excess of the total cost
associated with mining and processing the mineralized material. 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. 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.
  As of
February 25, 2008, the Company had proven reserves of molybdenum of 2,773,908
pounds with a grade of 2.91% and probable reserves of 1,074,023 pounds with a
grade of 0.78% pursuant to an independent third party Technical Report and
Feasibility Study.
 
  F-9
  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 and 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.
  The
Company has estimated costs associated with closure, reclamation and
environmental reclamation of the Mineral Ridge and Ashdown properties which are
included in its consolidated 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 8).
 
 Property
Evaluations and Impairment of Long-Lived Assets
 
 The
Company reviews and evaluates the carrying amounts of its mining properties and
related buildings and equipment, and other long-lived assets when events or
changes in circumstances indicate that the carrying amount may not be
recoverable.  Estimated future net cash flows, on an undiscounted
basis, from a property or asset are calculated using estimated recoverable
minerals (considering current proven and probable reserves and mineralization
expected to be classified as reserves where applicable); 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, or other long-lived assets, 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 and long-lived
assets.
 
 Revenue
Recognition
 
 Revenue
from the sale of precious metals is recognized when title and risk of ownership
passes to the buyer and the collection of sales proceeds is
assured.  Molybdenite concentrates from the Ashdown LLC are currently
sold FOB mine site pursuant to the terms of a long-term agreement with a
buyer.  Title transfers upon the buyer’s acceptance of each twelve
(12) sack lot when the material is loaded onto the buyer’s
transport.
 
 Income
Taxes
 
 The
Company recognizes a liability or asset for deferred tax consequences of all
temporary differences between the tax bases of assets and liabilities and their
reported amounts in the consolidated financial statements that will result in
taxable or deductible amounts in future years when the reported amounts of the
assets and liabilities are recovered or settled.  Deferred tax items
mainly relate to net operating loss carry forwards and accrued
expenses.  These deferred tax assets or liabilities are measured using
the enacted tax rates that will be in effect when the differences are expected
to reverse.  The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.  Deferred tax assets are reviewed periodically for
recoverability, and valuation allowances are provided when it is more likely
than not that some or all of the deferred tax assets may not be
realized.  As of December 31, 2007, the Company had reduced its
deferred tax assets by recording a valuation allowance of $9,552,000. (see Note
19).
   F-10
  Stock-Based
Compensation and Equity Transactions
 
 The
Company has stock-based compensation plans, which are described more fully in
Note 16.  On January 1, 2006, the Company adopted SFAS No. 123R, Share-Based Payment, an
amendment of FASB Statements 123 and 95, which requires the Company to measure
the compensation cost of stock options and other stock-based awards to employees
and directors at fair value at the grant date and recognize compensation expense
over the requisite service period for awards expected to vest.  Prior
to January 1, 2006, as permitted under SFAS No. 123, the Company accounted for
its stock option awards to employees and directors following the recognition and
measurement principles of Accounting Principles Board (APB) No. 25, Accounting for Stock Issued to
Employees, and related interpretations.  Accordingly, no
stock-based compensation expense for employee and director stock options was
reflected in the Company’s consolidated statements of operations prior to 2006
as all options granted generally had an exercise price equal to or greater than
the market value of the underlying common stock on the date of grant and the
related number of shares granted was fixed at that time.  The Company
reported pro-forma disclosures of net loss and loss per share as if the fair
value method of valuing stock options had been applied.
  Except
for transactions with employees and directors that are within the scope of SFAS
123R or 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 established; or (2) the date at which the counter party’s
performance is complete.
 
 Earnings
Per Common Share
 
 The
computation of basic earnings (loss) per common share is based on the weighted
average number of shares outstanding during each year.
  The
computation of diluted earnings (loss) per common share is based on the weighted
average number of shares outstanding during the year plus the common stock
equivalents which would arise from the exercise of stock options and warrants
outstanding using the treasury stock method and the average market price per
share during the year.  Options and warrants to purchase 17,911,573
and 9,572,317 shares of common stock were outstanding at December 31, 2007
and 2006, respectively.  No options or warrants were included in the
2007 and 2006 computation of diluted weighted average number of shares because
the effect would have been anti-dilutive.
 
 Preferred
Stock/Common 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 (the
“Board”) 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 (10) 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 the date of this
action and as of December 31, 2007, there were no shares of preferred stock
outstanding. The Company has authorized 400,000,000 shares of no par value
common stock as of December 31, 2007.
 
 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, 2007 and 2006, respectively.
 
 Recent
Accounting Pronouncements
 
 In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities.  This statement changes the disclosure
requirements for derivative instruments and hedging
activities.  Entities are required to provide enhanced disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, and its related
interpretations, and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash
flows.  This statement is effective for financial statements issued
for fiscal years and interim periods beginning after November 15, 2008, or the
Company’s fiscal year beginning January 1, 2009, with early application
encouraged.  This statement encourages, but does not require,
comparative disclosures for earlier periods at initial adoption.  The
Company is unable to determine what impact the future application of this
pronouncement may have on its consolidated financial statements.
 
  F-11
  In December 2007, the FASB issued SFAS
No. 141 (revised 2007), Business Combinations.  This statement
replaces SFAS No. 141, Business Combinations and applies to all transactions or
other events in which an entity (the acquirer) obtains control of one or more
businesses (the acquiree), including those sometimes referred to as “true
mergers” or “mergers of equals” and combinations achieved without the transfer
of consideration.  This statement establishes principles and
requirements for how the acquirer: a) recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree; b) recognizes and measures the goodwill
acquired in the business combination or a gain from a bargain purchase; and c)
determines what information to disclose to enable users of the financials
statements to evaluate the nature and financial effects of the business
combination.  This statement will be effective for fiscal years, and
interim periods within those fiscal years, beginning on or after December 15,
2008, or the Company’s fiscal year beginning January 1, 2009.  Earlier
adoption is prohibited.  The Company currently is unable to determine
what impact the future application of this pronouncement may have on its
consolidated financial statements.
 
 In
December 2007, the FASB issued SFAS 160, Noncontrolling Interests in
Consolidated Financial Statements.  This statement applies to all
entities that prepare consolidated financial statements, except not-for-profit
organizations, and amends Accounting Research Bulletin (“ARB”) 51 to establish
accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary.  It also
amends certain of ARB 51’s consolidation procedures for consistency with the
requirements of SFAS No. 141 (revised 2007).  This statement will be
effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008, or the Company’s fiscal year beginning
January 1, 2009.  Earlier adoption is prohibited.  The
Company currently is unable to determine what impact the future application of
this pronouncement may have on its consolidated financial
statements.
  In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities – Including an Amendment of FASB Statement No.
115. This statement permits entities to choose to measure many financial
instruments and certain other items at fair value.  Most of the
provisions of SFAS No. 159 apply only to entities that elect the fair value
option.  However, the amendment to SFAS No. 115 Accounting for Certain
Investments in Debt and Equity Securities applies to all entities with
available-for-sale and trading securities. SFAS No. 159 is
effective as of the beginning of an entity’s first fiscal year that begins after
November 15, 2007.  The Company adopted SFAS No. 159 on January 1,
2008, resulting in no financial statement impact.
 
 In
September 2006, the FASB issued SFAS Statement No. 158, Employers’ Accounting
for Defined Benefit Pension and Other Postretirement Plans.  This new
standard will require employers to fully recognize the obligations associated
with single-employer defined benefit pension, retiree healthcare and other
postretirement plans in their financial statements.  The Company
adopted SFAS No. 158 on December 31, 2007, resulting in no financial statement
impact since the Company currently does not sponsor the defined benefit pension
or postretirement plans within the scope of the standard.
 
 In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No.
157 defines fair value, establishes a framework for measuring fair value, and
requires enhanced disclosures about fair value measurements.  SFAS No.
157 requires companies to disclose the fair value of their financial instruments
according to a fair value hierarchy as defined in the
standard.  Additionally, companies are required to provide enhanced
disclosure regarding financial instruments in one of the categories, including a
reconciliation of the beginning and ending balances separately for each major
category of assets and liabilities.  In February 2008, the FASB issued
FASB Staff Position (FSP) No. FAS 157-2, which delays by one year the effective
date of SFAS No. 157 for certain types of non-financial assets and non-financial
liabilities.  As a result, SFAS No. 157 will be effective for
financial statements issued for fiscal years beginning after November 15, 2007,
or the Company’s fiscal year beginning January 1, 2008, for financial assets and
liabilities carried at fair value on a recurring basis, and on January 1, 2009,
for non-recurring non-financial assets and liabilities that are recognized or
disclosed at fair value.  The Company adopted SFAS No. 157 on January
1, 2008, for financial assets and liabilities carried at fair value on a
recurring basis, with no material impact on its consolidated financial
statements.  The Company is currently unable to determine what impact
the application of SFAS No. 157 on January 1, 2009, for non-recurring
non-financial assets and liabilities that are recognized or disclosed at fair
value, will have on its consolidated financial statements.
 
 In March
2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial
Assets.  This statement amends SFAS 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, a replacement
of FASB Statement 125, or SFAS 140, regarding (1) the circumstances under
which a servicing asset or servicing liability must be recognized, (2) the
initial and subsequent measurement of recognized servicing assets and
liabilities, and (3) information required to be disclosed relating to
servicing assets and liabilities.  The Company adopted this standard
on January 1, 2007, with no impact on its consolidated financial
statements.
 
  F-12
  In
February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid
Financial Instruments, or SFAS 155.  This statement amends SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities, to
narrow the scope exception for interest-only and principal-only strips on debt
instruments to include only such strips representing rights to receive a
specified portion of the contractual interest or principal cash
flows.  SFAS 155 also amends SFAS 140 to allow qualifying
special-purpose entities to hold a passive derivative financial instrument
pertaining to beneficial interests that itself is a derivative financial
instrument. The Company adopted this standard on January 1, 2007, with no impact
on its consolidated financial statements.
 
 The FASB
has issued Financial Interpretation No. 48, Accounting for Uncertainty in Income
Taxes – An Interpretation of FASB Statement No. 109 (FIN 48).  FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with FASB Statement No. 109,
Accounting for Income Taxes.  FIN 48 also prescribes a recognition
threshold and measurement standard for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax
return.  In addition, FIN 48 provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.  The Company adopted FIN 48 on January 1,
2007, and the provisions of FIN 48 were applied to all tax positions upon
initial adoption of this standard.  There was no financial statement
impact of adopting FIN 48.
 
 EITF No.
07-3, Accounting for Nonrefundable Advance Payments for Goods or Services
Received for Use in Future Research and Development Activities, was issued in
June 2007.  The EITF reached a consensus that nonrefundable payments
for goods and services that will be used or rendered for future research and
development activities should be deferred and capitalized.  Such
amounts should be recognized as an expense as the related goods are delivered
and the related services are performed.  Entities should continue to
evaluate whether they expect the goods to be delivered or services to be
rendered.  If the entity does not expect the goods to be delivered or
services to be rendered, the capitalized advance payment should be charged to
expense.  This pronouncement is effective for financial statements
issued for fiscal years beginning after December 15, 2007 (the Company’s fiscal
year beginning January 1, 2008) and interim periods within those fiscal
years.  Earlier application is not permitted.  Entities are
required to report the effects of applying this pronouncement prospectively for
new contracts entered into on or after the effective date of this
pronouncement.  The Company currently is not a party to research and
development arrangements that include nonrefundable advance
payments.  To the extent that the Company enters into research and
development arrangements in the future that include nonrefundable advance
payments, the future application of this pronouncement may have a material
effect on its financial condition and results of operations.
 
 
 Note
2:  Going Concern
 
 The
Company’s consolidated 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.  It has not
generated revenues sufficient to cover its operating costs and has an
accumulated deficit of $37,565,720 and a working capital deficit of $739,673 at
December 31, 2007, which together raises doubt about the Company’s ability to
continue as a going concern.  The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
  The
Company has obtained working capital from debt and equity financing, the
exercise of options and warrants, and from a production payment purchase
agreement to fund the Company’s activities until sufficient revenues can be
generated from operations.  During the year ended December 31, 2007,
the Company received net proceeds from the sale of its common stock of
$6,744,505 and proceeds from the exercise of options and warrants of
$186,045.  The Ashdown LLC placed the Ashdown property into commercial
operation in December 2006, and for the year ended December 31, 2007, generated
sales of $10,398,361, which has funded a significant portion of the Company’s
operating costs and expenses.  Because commercial operations only
recently commenced at the Ashdown property and the Ashdown LLC has not sustained
a consistent level of production, the Company cannot predict the future
operating cash flows from the Ashdown LLC.  However, the Company
anticipates that operating cash flows from the Ashdown LLC, after distributions
to the minority interest member and after related production payment and debt
obligations have been satisfied, will contribute to the working capital of the
Company.  As of February 25, 2008, the Company had identified proven
reserves of molybdenum of 2,773,908 pounds with a grade of 2.91% and probable
reserves of 1,074,023 pounds with a grade of 0.78% pursuant to an independent
third party Technical Report and Feasibility Study.
 
  F-13
  There can
be no guarantee or assurance that the Company will be successful in its ability
to sustain a profitable level of operations from the Ashdown LLC or to attain
successful operations from its other properties, or to continue to raise capital
at favorable rates or at all.  The consolidated financial statements
do not include any adjustments that might result from the outcome of these
uncertainties.
 
 
 Note
3:  Ashdown Project LLC
 
 The
Ashdown molybdenum-gold project is located about 115 miles northwest of
Winnemucca in Humboldt County, Nevada.  The property covers about nine
(9) square miles and is controlled by 293 unpatented mining
claims.  The Ashdown property was secured under a Letter Agreement
with Win-Eldrich Mines (“Win-Eldrich”) executed on February 5,
2004.  The terms of the joint venture agreement gave the Company the
right to earn 60%, as manager and operator of project, from Win-Eldrich (40%) as
owner of the property.  The Company could earn an undivided, vested
60% interest in the project in either of two (2) ways: (1) by placing the
project into profitable production using a small mill, or (2) spending
$5,000,000 toward development of the project.  Upon signing the
agreement, the Company paid Win-Eldrich $50,000, and starting three (3) months
after the signing paid a monthly sum of $5,000 through December
2006.  In May 2006, the Company exceeded the $5,000,000 benchmark for
development expenditures at Ashdown and formally notified Win-Eldrich that the
Company had vested its 60% interest as provided under clause (2) of the Letter
Agreement.
 
 On
September 28, 2006, the Company entered into the Ashdown Project LLC Operating
Agreement with Win-Eldrich Gold, Inc. in order to govern the management of
Ashdown LLC and the future mineral exploration, evaluation, development and
mining operations by the Ashdown LLC on the real property contributed by the
Company and Win-Eldrich Gold, Inc. and all other real property within the area
of interest that is acquired by the Ashdown LLC.  The Company has
served as the initial Manager of the Ashdown LLC and will continue to serve as
Manager until such time that the Management Committee determines that the
Ashdown LLC should either retain the Company as the Manager for an additional
period of time, or manage the Ashdown LLC itself, with the Mine General Manager
and the other officers of the Ashdown LLC being responsible for the day-to-day
operations.  Additionally, on September 28, 2006, the Company entered
into a Contribution Agreement with the Ashdown LLC in order to recognize that
the Company had incurred actual expenditures at the Ashdown Mine of not less
than $5,000,000 and to contribute all of its right, title and interest in the
Mill, encumbered as set forth in the Settlement Agreement, dated August 26, 2005
by and between the Company, Earl Harrison, dba Western Mine Development,
Retrievers LLC, John Tingue and Kris Tingue, to the Ashdown LLC.  The
Company agreed with the Ashdown LLC that value of its contribution was
$5,000,000, which resulted in a sixty percent (60%) ownership interest in the
Ashdown LLC.  Simultaneously with the entry into the Contribution
Agreement by the Company, Win-Eldrich Gold, Inc. entered into a Contribution
Agreement with the Ashdown LLC in order to contribute all of its right, title
and interest in and to certain personal property and certain unpatented mining
claims situated in Humboldt County, Nevada in exchange for a forty percent (40%)
ownership interest in the Ashdown LLC at an agreed-upon value of the
contribution of $3,333,333.
 
 Because
the mineral property operated by the Ashdown LLC did not have proven or probable
reserves as defined by the Securities and Exchange Commission Guide 7, the
$5,000,000 in development expenditures incurred by the Company at the Ashdown
project have been expensed by the Company as incurred, with the exception of the
cost of the mill and other tangible property and equipment, along with certain
reclamation bonds and deposits contributed by the Company to Ashdown
LLC.  Therefore, the Ashdown LLC capital account of the Company, and
the Company’s investment in the Ashdown LLC, will not include the $5,000,000 of
development expenditures incurred on behalf of the Ashdown
LLC.  Similarly, the agreed-upon value of $3,333,333 of the personal
property and unpatented mining claims contributed to capital by Win-Eldrich
Gold, Inc. will not be included in its Ashdown LLC capital account due to the
uncertainty of the carryover cost basis of these assets to Win-Eldrich Gold,
Inc. as determined under United States generally accounting
principles.
  In May
2006, the Company completed permitting a mill designed to run about 100 tons per
day of mine production.  Construction on the mill and tailings
impoundment is 100% complete.  On October 30, 2006, final versions of
the Occupancy Permit and the Plan of Operations/Environmental Assessment
documents were approved by regulators.  The Ashdown LLC initiated
mining activities on the property, subject to certain stipulations, in the
fourth quarter of 2006, and completed the first sale of molybdenite concentrates
in December 2006.  The Ashdown LLC has a marketing agreement in place
that facilitates the sale of the molybdenite concentrates (FOB mine) to an
international metals broker.  The Ashdown LLC will not be required to
provide roasted material to the market, and does not have to locate third party
roasting capacity under this contract.  The Ashdown LLC plans to
assess expansion into a larger operation now that production has
commenced.
 
  F-14
  The Company also transferred to the
Ashdown LLC a mill under construction with a cost basis of $601,855, and
restricted deposits and bonds relating to the Ashdown project totaling $360,796,
the cost basis to the Company.  Because of the Company’s undivided 60%
interest in the Ashdown LLC, the financial statements of the Ashdown LLC have
been consolidated with those of the Company.  The consolidated
financial statements include the operations and cash flows of the Ashdown LLC
from September 28, 2006, the date of its formation.  All significant
inter-company balances and transactions have been eliminated.
 
 Pursuant to the terms of a Letter
Agreement dated September 28, 2006 (the “Letter Agreement”) entered into as part
of the organization of the Ashdown LLC, on November 1, 2006, the Company
believes that Win-Eldrich Gold, Inc. was required to pay the Company the
aggregate amount of $309,391 related to the joint venture.  On
December 4, 2006, the Company informed Win-Eldrich Gold, Inc. that it was in
default under the Letter Agreement, that the 30-day cure period had expired and
that the matter had been referred to the Company’s Board of Directors for
further consideration.  On December 20, 2006, the Company notified
Win-Eldrich Gold, Inc. of its intention, pursuant to the remedial provisions of
the Letter Agreement, to invoke the remedy of dilution under subsection 7.5.2(a)
of the Ashdown Project LLC Operating Agreement (the “Operating Agreement”) to
decrease Win-Eldrich Gold, Inc.’s Ownership Interest from 40% to 30.5% and
increase the Company’s Ownership Interest from 60% to
69.5%.  Win-Eldrich Gold, Inc. disagrees that it is in default under
the Letter Agreement and the Company anticipates that this disagreement will be
resolved by an amicable agreement or under the dispute resolution provisions of
the Operating Agreement providing for mediation and binding
arbitration.  While the Company is confident that its interpretation
of the Letter Agreement and the remedial provisions of the Operating Agreement
are correct, until the disagreement is resolved pursuant to the dispute
resolution provisions of the Operating Agreement, or by the ongoing settlement
discussions between the parties, it is uncertain whether the Company’s Ownership
Interest in the Ashdown LLC will remain at 60% or increase to 69.5%. The Company
does not anticipate that this disagreement will have a material adverse effect
on the Ashdown LLC’s operations or on the Company’s consolidated financial
condition or results of operations.  Through December 31, 2007 the
consolidated financial statements reflect the Company’s Ownership Interest in
the Ashdown LLC at 60%.
 
 As more
fully described in Notes 11 and 12, the Company’s share of production
distributions from the LLC are encumbered by certain financing
agreements.
 
 As of
February 25, 2008, the Company had identified at Ashdown proven reserves of
molybdenum of 2,773,908 pounds with a grade of 2.91% and probable reserves of
1,074,023 pounds with a grade of 0.78%.
 
 Note
4:  Mineral Properties
 
 The
Company’s two primary mining property assets are the Ashdown molybdenum project
operated by the Ashdown LLC (Note 3) and the Mineral Ridge gold
mine.  Management’s near-term goal is to extract the known molybdenum
deposits at Ashdown and develop a plan for profitable production of gold and
silver at Mineral Ridge.
 
 As
further discussed below, the Company completed a purchase agreement with four
individuals for the Northern Champion molybdenum property located in Ontario,
Canada, and plans to take bulk samples for metallurgical and market testing, and
to actively explore and delineate molybdenum mineralization on the
property.
 
 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 (“Mineral
Ridge”).  The mine was acquired out of bankruptcy and the trustee was
conducting only minimum maintenance activities at the time.  The
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 at
the time of the purchase.  Since then, the Company has obtained new
permits based upon a revised Plan of Operations/Environmental Assessment (“POA”)
and posted an updated reclamation surety bond of approximately
$2,700,000.  The Mineral Ridge mine was placed in full operation in
the spring of 2004.
 
  F-15
  The Mineral Ridge property holds three
separate potentially economic mineable gold deposits, the Drinkwater, Mary, and
Brodie, as outlined in an independent third party engineering and feasibility
study completed in May 2003 by Behre Dolbear & Company, Inc., an outside
consultant (“Behre Dolbear”).  The feasibilility study identified
156,504 ounces of gold that could be recovered using a cyanide heap leaching
process, including 10,000 recoverable ounces estimated to be on the leach pad.
Silver values were not economically significant in the mineralized material at
Mineral Ridge and were not included in these reserve
calculations.  The property holds further mineral potential with
identified targets potentially containing additional gold
mineralization.
 
 Operations
began in 2003 once the bond was in place, including adding chemicals to the
process solutions, plumbing the pad with drip lines and main trunk pipes, and
mining both new and old stockpiled materials.  Operations have yielded
certain amounts of precious metal product that has been sold resulting in total
revenues of approximately $2.3 million in 2005 and
2004.  Under-performance of the leach pads and associated high
production costs resulted from the Company’s failure to meet the designed
processing specifications as outlined under the Behre Dolbear feasibility
study.  On January 12, 2005, the Company announced its decision to
temporarily idle the mine pending full reviews of engineering and metallurgy,
and optimization of a revised mine and operations plan. The Company intends to
commence further exploration of numerous targets and development of identified
economic mineralization at Mineral Ridge in 2008.  It is expected that
this work, which is being contracted with a third party, will identify and
delineate additional reserves for both open pit and underground deposits and
ultimately extend the life of the mine.
 
 Northern
Champion Property
 
 The
Northern Champion Property is approximately 880 acres in Griffith and Broughham
Townships in the Province of Ontario, Canada (“Northern Champion
Property”).  On April 18, 2006, the Company executed a Purchase
Agreement with Robert R. Robitaille, Douglas Lalonde, Sheldon Davis and Ronald
E. Dockweiler (collectively, the “Vendors”) to purchase five (5) registered
claims totaling 22 units on the Northern Champion Property together with a NI
43-101 Technical Report and Feasibility Study describing a molybdenite deposit
within the area of the claims.
 
 Pursuant
to the terms of the agreement, the Company was obligated to pay $125,000 in four
(4) equal quarterly installments of $31,250 commencing on August 15,
2006.  Each payment was to be distributed as follows, $9,991.50 to Mr.
Lalonde, $9,247.45 to each of Messrs. Robitaille and Davis, and $2,763.61 to Mr.
Dockweiler.  In addition, the agreement provided that the Company
would issue 735,000 shares of the Company’s common stock to the
Vendors.  Mr. Lalonde received 235,000 shares, each of Messrs.
Robitaille and Davis received 217,500 shares and Mr. Dockweiler received 65,000
shares.  The agreement also provides that the Vendors will retain a
3.3% Net Smelter Return (“NSR”) on the sales of minerals taken from the Northern
Champion Property.  Each of Messrs. Lalonde, Robitaille and Davis will
be entitled to receive 1% of the Net Smelter Return and Mr. Dockweiler will be
entitled to receive 0.3% of the Net Smelter Return.  Additionally, the
Company will have the right of first refusal to purchase 1.65% of said Net
Smelter Return from the Vendors for $1,650,000.  The Company will have
the ability to purchase 0.5% of said Net Smelter Return from each of Messrs.
Lalonde, Robitaille and Davis and 0.15% of said Net Smelter Return from Mr.
Dockweiler.
 
 On
February 12, 2007, the parties agreed to convert the remaining cash payments to
an equivalent number of restricted shares valued at the market close of $0.295
on that date.  On February 16, 2007, 423,729 restricted shares were
issued to the Vendors and the purchase was completed.  The Company now
owns 100% of the Northern Champion Property subject to the NSR reserved by the
Vendors.
 
 All costs
incurred by the Company in connection with the Northern Champion Property,
including acquisition costs, have been expensed to exploration and development
costs.
 
 Gain
on Sale of Mineral Properties
 
 On June
27, 2006, the Company executed a Quitclaim Deed conveying its interest in and to
the six unpatented mining claims at the Contact Property known as the “Red
Metal” Claims to International Enexco Ltd. (“Enexco”) in exchange for 100,000
shares of Enexco.  The stock certificate was received by the Company
on July 21, 2006 and the Company valued the Enexco Shares as of that date at CDN
$1.85 per share or USD $1.62 per share, resulting in a gain on sale of mineral
properties of USD $162,041 reported for the year ended December 31,
2006.  The Company intends on holding the Enexco shares for the
foreseeable future.  Accordingly, the Enexco shares are accounted for
as securities-held-for sale in accordance with FAS 115.
 
  F-16
  Note
5:  Inventories
 
 Inventories
consist of the following at December 31, 2007:
 
 Materials
      and supplies
              
              $
              185,752Finished
      goods
              
              
              216,731$
              402,483
 
 
 Note 6:  Property and
Equipment
 
 Property and equipment consist of the
following at December 31, 2007:
 
 Land
              
              $
              57,599Buildings
              
              
              242,122Mining
      and milling equipment
              
              
              1,736,337Vehicles
              
              
              79,930Computer
      equipment
              
              
              156,265Support
      equipment
              
              
              183,852Office
      furniture and equipment
              
              
              46,464Construction
      in progress
              
              
              124,2032,626,772Less
      accumulated depreciation and amortization
              
              
              (811,118
              )$
              1,815,654
 
 For the
years ended December 31, 2007 and 2006, the Company recorded depreciation and
amortization expense of $232,747 and $104,616, respectively, related to property
and equipment.
 
 The Company had no material amounts of
property and equipment under capital lease at December 31, 2007.
 
 Note
7:  Restricted Funds – Reclamation Obligations
 
 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
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, 2007.  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 included in the balance of the Restricted Funds - Reclamation
Obligations asset in the accompanying consolidated balance sheet as of December
31, 2007.
 
 The
prepaid bond insurance premiums of $526,505 are being amortized over the twelve
(12) year term of the policy.  The annual insurance premium of $11,311
is amortized over a twelve (12) month period.  At December 31, 2007,
the total current portion of the prepaid insurance premiums related to this
policy totaled $43,212 and is included in prepaid expenses and other current
assets in the accompanying consolidated balance sheet.  The long-term
portion of the prepaid insurance premiums totaled $277,276 and is included in
other assets in the accompanying consolidated balance sheet as of December 31,
2007.  This program allows the Company flexibility to increase its
bond in the future to an aggregate limit of $4,000,000.
 
  F-17
  Restricted funds totaling $408,200 for
a bond and other regulatory deposit requirements for the Ashdown property and a
deposit of $41,972 for the Mineral Ridge property are also included in the
balance of the Restricted Funds – Reclamation Obligations in the accompanying
consolidated balance sheet as of December 31, 2007.
 
 Note
8:  Reclamation Asset and Obligations
 
 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.  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
(reclamation asset included in other assets) and as an asset retirement
liability (reclamation obligation included in long-term liabilities). The
amortization of the additional property cost (using the units of production
method) is included in depreciation expense and the accretion of the discounted
liability is being recorded as a separate operating expense in the Company’s
consolidated statement of operations with a corresponding increase in the
reclamation liability.
  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 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 of $17,558 was
recognized for the year ended December 31, 2005, using the units-of-production
method.  Subsequent to the Company’s idling of the Mineral Ridge
property in 2005, no depreciation of the reclamation asset has been recorded
pursuant to SFAS No. 143.
  Because
the Company was unable to operate the Mineral Ridge mine profitably in
accordance with the feasibility study completed in 2003 and has idled the
project, the Company wrote off the reclamation asset, net of accumulated
depreciation, recorded pursuant to the requirements of SFAS No. 143, resulting
in an expense of $1,826,140 in the year ended December 31, 2006.
  During
the years ended December 31, 2007 and 2006, the Company increased its
reclamation obligation by $124,626 and $330,448, respectively, for the estimated
reclamation costs of the Ashdown project.
  Accretion
expense related to the reclamation obligations for the years ended December 31,
2007 and 2006 was $190,811 and $169,584, respectively.
  The
following is a summary of the changes to the Company’s reclamation
obligations:
 
 Balance,
      December 31, 2005
              
              $
              2,497,093Ashdown
      reclamation obligations
              
              
              330,448Accretion
      expense
              
              
              169,584Balance,
      December 31, 2006
              
              
              2,997,125Ashdown
      reclamation obligations
              
              
              124,626Accretion
      expense
              
              
              190,811Balance,
      December 31, 2007
              
              $
              3,312,562
 
 Note
9:  Accrued Liabilities
 
 Accrued
liabilities consisted of the following as of December 31, 2007:
 
 Officers
      deferred compensation
              
              $
              427,807Accrued
      payroll and related
              
              
              306,471Other
              
              
              246,009$
              980,287
 
  F-18
  The
officers deferred compensation is payable to the following officers or former
officers of the Company:
 
 Steven
      Craig (former officer)
              
              $
              129,587David
      Caldwell
              
              
              166,670Robert
      Martin
              
              
              131,550$
              427,807
 
 Note
10:  Severance Obligations
 
 At a
meeting of the Board on February 18, 2005, the directors unanimously approved a
separation agreement for Michael Fitzsimonds, a former Chief Executive Officer
of the Company.  The terms of separation were that Mr. Fitzsimonds
would be paid his full salary for one year including medical benefits, followed
by 180 hours of vacation.  The Company then would pay him $394,000 in
59 equal monthly payments.  He would be allowed to use a company
vehicle for one year at which time he exercised his option to purchase
it.  Mr. Fitzsimonds loaned $100,000 to the Company in 1998 on which
the Company pays $1,350 a month for interest (see Note 13).  The
principal was to be repaid on or before February 18, 2008, but was still
outstanding as of the date of this Report.    The current
portion of the severance obligation to Mr. Fitzsimonds of $80,136 is included in
current liabilities and the long-term portion of the severance obligation of
$166,595 is included in long-term liabilities in the accompanying consolidated
balance sheet as of December 31, 2007.
  On
January 31, 2007, the Company entered into an Employment Separation Agreement
(the “Separation Agreement”) with Kenneth S. Ripley whereby Mr. Ripley resigned
as the Chief Executive Officer of the Company and all other positions he held
with the Company and on behalf of the Company, effective as of January 31, 2007
(the “Effective Date”).  The Separation Agreement terminates the
Employment Agreement dated as of March 8, 2006 between the Company and Mr.
Ripley whereby Mr. Ripley assumed the role of Chief Executive Officer of the
Company effective March 13, 2006 (the “Employment Agreement”).
  Under the
terms of the Separation Agreement: (i) subject to a “Cash Call Delay”, the
Company agreed to pay Mr. Ripley his deferred salary of $115,000 (balance of
$98,750 as of December 31, 2006) in twelve (12) equal monthly installments
starting in March 2007 as severance pay; (ii) subject to a Cash Call Delay, the
Company agreed to pay Mr. Ripley a performance bonus in the amount of $195,000
in twelve (12) equal monthly installments starting in March 2007 as bonus pay,
with the unpaid portion of the bonus pay accruing simple interest at the rate of
18% per annum; (iii) subject to a Cash Call Delay, the Company agreed to pay the
outstanding balance of Mr. Ripley’s note payable and related accrued interest
totaling $157,979, consisting of $89,897 in principal and $68,082 in accrued
interest, in twelve (12) equal monthly installments starting in March 2007 as
promissory note payments; (iv) the Company agreed to immediately vest the
unvested portion of the Mr. Ripley’s stock options to purchase an aggregate
amount of 30,000 shares of common stock granted pursuant to the Company’s Year
2002 Supplemental Employee/Consultant Stock Compensation Plan as of January 31,
2007 (the “Termination Date”); (v) Mr. Ripley agreed to a non-solicitation
clause for a term of eighteen (18) months following the Termination Date; and
(vi) Mr. Ripley provided the Company with a general release of liability and
claims.  Under the Separation Agreement, a “Cash Call Delay” is
defined as a cash call or any cash payment required of the Company in connection
with the Ashdown Project LLC.
  In
addition, pursuant to the Separation Agreement, the Company and Mr. Ripley
further agreed that all payments to Mr. Ripley that are subject to a Cash Call
Delay are to be suspended for such month and such monthly payments are to be
deferred until the next month with the payment terms to be extended by such
number of cash call delay months, provided however, such repayment term will not
exceed April 30, 2008.  The Company guaranteed that Mr. Ripley will
receive at least one monthly installment of the payments due on or before April
1, 2007.  The total severance obligation to Mr. Ripley as of December
31, 2007 of $52,022, including accrued interest payable of $16,606, is included
in current liabilities in the accompanying consolidated balance sheet as of
December 31, 2007.  Through December 31, 2007, no Cash Call Delays
have occurred.
 
  F-19
  Note
11:  Production Purchase Agreement and Assignment
 
 Schnack Agreements -On May
10, 2005, the Company entered into a financing agreement with William D. and
Candida Schnack (“Schnack”) (the “Prior Schnack Agreement”) wherein Schnack
could advance to the Company up to $1,000,000 secured by production and sale of
molybdenum concentrates from the Ashdown property.  The advances were
restricted to funding activities associated with the Ashdown mineral
property.  Advances were to be disbursed in accordance with the
achievement by the Company of pre-approved milestones as set forth in the
Agreement.  In consideration of the advances, Schnack will receive the
repayment of the advances, a premium of $2,000,000 and 1,000,000 two-year
warrants to purchase common stock of the Company at an exercise price equal to
$0.14 per share.  In addition, the Company agreed that, during the
period that is two (2) years from the date of the Prior Schnack Agreement, in
the event there is any dilution of the stock of the Company, the number of
warrants to Schnack shall be increased to reflect this
dilution.  Pursuant to this agreement, the Company received $735,000
in 2005 and $265,000 in 2006, and recognized $1,470,000 of the premium as
interest expense in 2005 and $530,000 interest expense in 2006.
 
 In
conjunction with the anti-dilution provisions of the Prior Schnack Agreement, an
additional 156,602 warrants were issued in 2006 and 2005, and the final 36,576
warrants valued at $7,308 were issued in May 2007.
 
 On
April 23, 2007, the Company entered into an Advance Sales Restructuring
Agreement with Schnack (the “Restructuring Agreement”), which supersedes the
Prior Schnack Agreement.  Terms of the Restructuring Agreement
include: that it be effective upon the closing of private placement equity
financing; to provide for an early payment of $1 million; the restructuring
of the remaining amounts owed under the Prior Schnack Agreement into a Net
Smelter Returns payment from the Company’s distributions from the Ashdown LLC;
the exercise of Schnack’s warrants to purchase the Company’s common stock issued
to Schnack pursuant to the Prior Schnack Agreement (the “Schnack Warrants”); and
that the Company use its reasonable best efforts to include the shares purchased
by Schnack upon the exercise of the Warrants on a registration statement to be
filed with the SEC (which was done with a registration statement that went
effective with the SEC in 2007).
 
 Further
terms include: that the remaining amounts owed to Schnack under the Prior
Schnack Agreement shall be paid from a production payment in the amount of two
million dollars ($2,000,000) paid exclusively from the Company’s share of
production of base and precious minerals produced from the Ashdown Mine
allocated to the Company pursuant to the Ashdown LLC.  The rate of
payment shall be equal to a fifteen percent (15%) Net Smelter (Refinery) Return
on the entire production of precious and base minerals produced from the Ashdown
Mine.
 
 Further
terms include that the Company, or its assignee, has the option to purchase the
production payment provided for in the Restructuring Agreement for the following
amounts during the time periods set forth below:
 
 1.           On
or prior to August 31, 2007.  The Company, or its assignee, has the
option to purchase the production payment for one million three hundred thousand
dollars ($1,300,000), less any amounts already paid pursuant to the
Restructuring Agreement.
 
 2.           Between
September 1, 2007 and December 31, 2007.  The Company, or its
assignee, has the option to purchase the production payment for one million five
hundred thousand dollars ($1,500,000), less any amounts already paid pursuant to
the Restructuring Agreement.
 
 3.           After
December 31, 2007.  The Company, or its assignee, has the option to
purchase the production payment for two million dollars ($2,000,000), less any
amounts already paid pursuant to the Restructuring Agreement.
 
 4.           Assignment
of Option and Adjustment to Production Payment.  If, and only if, the
Company assigns its option to purchase the production payment provided for
herein, then the following modifications to the production payment shall be made
automatically immediately prior to the exercise of the option by the assignee,
as follows.  The aggregate amount of the production payment shall be
equal to one hundred ten percent (110%) of the amount of the exercise price of
the option, but in no case shall it exceed two million dollars ($2,000,000) less
any amounts already paid.  The production payment shall be paid in an
amount equal to a five percent (5%) Net Smelter (Refinery) Returns instead of
the fifteen percent (15%) Net Smelter (Refinery) Returns provided for above and
paid solely from the Company’s share of production distributed to the Company
pursuant to the Ashdown Project LLC.
 On May 4, 2007, Schnack exercised
1,193,178 warrants, with total proceeds to the Company of $167,045, and the
Company repaid $250,000 of the $1,000,000 advance.
  F-20
 
 Crestview Agreement -On June
13, 2007, the Company entered into a Production Payment Purchase Agreement and
Assignment (the “Purchase Agreement”) by and between the Company and Crestview
Capital Master, LLC (“Crestview”).  Pursuant to the terms of the
Purchase Agreement, Crestview acquired from the Company the assignment of the
Company’s purchase rights under the Restructuring Agreement in consideration of
Crestview paying the seven hundred fifty thousand dollar ($750,000) payment due
Schnack and Crestview immediately exercising the Company’s purchase rights to
acquire the production payment, along with certain amendments to the
Restructuring Agreement, for a combined purchase amount paid by Crestview to
Schnack equal to one million seven hundred ninety-four thousand nine hundred
sixty dollars ($1,794,960).
 
 Further
terms of the Purchase Agreement include: (i) that the aggregate amount of the
production payment will be equal to one million nine hundred seventy four
thousand four hundred fifty six dollars ($1,974,456), representing 110% of the
actual cash paid by Crestview to satisfy the Company’s obligations to Schnack;
(ii) that the production payment will be paid in an amount equal to a five
percent (5%) Net Smelter (Refinery) Returns (“NSR”) paid solely from the
Company’s share of production distributed to the Company pursuant to the Ashdown
Project LLC Operating Agreement; and (iii) that so long as the production
payment remains outstanding, the production payment shall be convertible, in
whole or in part, into shares of the Company’s Common Stock at the option of
Crestview or its assignee.
 
 As a
result of the Purchase Agreement and related agreements, the liabilities of the
Company have been reduced by five hundred twenty thousand five hundred four
dollars ($520,504), which has been recorded as a gain on extinguishment of debt
in the accompanying consolidated statement of operations for the year ended
December 31, 2007.
  The
production payment obligation to Crestview of $1,974,456 has been recorded as a
current liability in the accompanying consolidated balance sheet at December 31,
2007.  So long as the production payment obligation remains
outstanding, it may be converted in whole or in part into shares of the
Company’s common stock at the option of Crestview.  The number of
shares of the Company’s common stock to be issued upon conversion of the
production payment shall be calculated by dividing the remaining amount of the
production payment by the number derived by multiplying the average of the
volume weighted average price of the Company’s common stock for a period of ten
(10) trading days prior to exercise of this conversion right by 0.80, but in no
case less than $0.36 per share nor more than $0.46 per
share.  Provided that the shares of common stock underlying the
conversion right remain registered with the U.S. Securities and Exchange
Commission (which was initially done with a registration statement that went
effective with the SEC in 2007), the production payment shall automatically
convert into shares of the Company’s common stock if the closing price of the
Company’s common stock on the OTC Bulletin Board or other public trading market
is greater than or equal to $0.65 per share for ten consecutive trading
days.
  The
Company has determined, that in the event the market value per share of the
Company’s common stock is greater than the $0.36 per share minimum conversion
price per share, there is a beneficial conversion feature equal to the intrinsic
value of the production payment obligation.  The Company will
calculate the beneficial conversion feature at the end of each quarterly
reporting period, and record changes to the intrinsic value of the beneficial
conversion to common stock and interest expense.  At December 31,
2007, there was no beneficial conversion feature since the market price of the
Company’s common stock was less that the $0.36 per share minimum conversion
price.
 
 Note
12:  Ashdown Milling Production Payment Purchase
Agreement
 
 On
September 26, 2005, the Company entered into a Production Payment Purchase
Agreement with Ashdown Milling Co LLC (“Ashdown Milling”).  Under the
terms of the agreement, Ashdown Milling agreed to purchase a production payment
to be paid from the Company’s share of production from the Ashdown mine for a
minimum of $800,000.  In addition, Ashdown Milling is to receive one
share of the Company’s common stock and one warrant to purchase one share of the
Company’s common stock at $0.20 per share for each dollar paid to the
Company.  In addition, the Production Payment Purchase Agreement
provides that, upon the request of the Company for additional funds, Ashdown
Milling has the right, but not the obligation, to increase its investment in the
production payment up to an additional $700,000 for a maximum purchase price of
$1,500,000.  The amount of the production payment to be paid to
Ashdown Milling is equal to a 12% net smelter returns royalty on the minerals
produced from the mine until an amount equal to 240% of the total purchase price
has been paid.  Robert P. Martin, President of the Company, and
Kenneth S. Ripley, a former Chief Executive Officer of the Company, are
co-managers and two of the five members of Ashdown Milling.  The
Company’s Board approved the transaction.
 
  F-21
  Because
production payments from the Ashdown mine were not assured at the time of the
agreement with Ashdown Milling, the transaction was originally accounted for as
the sale of an interest in mineral properties with the related gain to be
deferred until the Company began making payments according the terms of the
agreement.  Through December 31, 2006, there had been $1,500,000
advanced to the Company pursuant to this agreement, $650,000 received in 2006,
with the proceeds allocated as follows.
 
 Common
      stock
              
              $
              370,100Warrants
              
              
              225,333Deferred
      revenue
              
              
              904,567$
              1,500,000
 
 The
allocation of the proceeds to common stock was based on the quoted market price
of the Company’s common stock on the date the shares were issued to the Ashdown
Milling members.  The allocation of the proceeds to warrants, also
recorded to common stock, was based on the estimated value of the warrants
calculated using the Black-Scholes valuation model.
  With the
commencement of mining operations at the Ashdown mine, the Company has
reclassified the deferred revenue in 2007 to a production payment obligation –
related party, a current liability, to be repaid from the Company’s share of
production distributions received from the Ashdown LLC.  The Company
made payments totaling $804,541 during 2007, reducing the obligation to a
balance of $100,026 at December 31, 2007.  The Company subsequently
bought out the member interests of two members of Ashdown Milling, thereby
reducing its production payment obligation.  See Note 23.
 
 
 Note
13:  Amounts Due to Related Parties
 
 Amounts
due to related parties, included in current liabilities, consist of the
following at December 31, 2007:
 
 Principal
              
              
              Interest
              
              
              TotalNote
      payable to Kenneth Ripley, a former Chief Executive Officer of the
      Company, with interest at an annual rate of 18%, plus a 5% origination
      fee
              
              $
              14,897
              
              
              $
              27,675
              
              
              $
              42,572Note
      payable to Michael Fitzsimonds, a former Chief Executive Officer of the
      Company, with interest payments of $1,350 per month, due on or before
      February 18, 2008 (see Note 10)
              
              
              100,000
              
              
              
              —
              
              
              
              100,000Note
      payable to the former manager of the Ashdown mine for the purchase of a
      mill, equipment rental and other, with interest at 12%
              
              
              212,908
              
              
              
              47,796
              
              
              
              260,704$
              327,805
              
              
              $
              75,471
              
              
              $
              403,276
 
 In
January 2007, the principal balance of the note payable to Mr. Ripley was
reduced by $160,228 in connection with the exercise by Mr. Ripley of employee
stock options.
 
 Under the
terms of an Employment Separation Agreement (see Note 10), the Company agreed to
pay the then outstanding balance of the Mr. Ripley’s note payable and related
accrued interest totaling $157,979, consisting of $89,897 in principal and
$68,082 in accrued interest, in twelve (12) equal monthly installments starting
in March 2007.
 
 
 
  F-22
 
 Note
14:  Long-Term Debt
 
 Long-term
debt consists of the following at December 31, 2007:
 
 
 Note
      payable to GMAC, payable at $538 per month with no interest through May
      2009, secured by vehicle
              
              $
              9,138Note
      payable to CitiFinancial, with final payment of $215 made in January 2008,
      secured by vehicle
              
              
              215Note
      payable to Komatsu Equipment Company, with principal payments of $240,000
      on July 6, 2007, $58,486 on June 30, 2008, $58,486 on June 30, 2009, and
      $58,485 on June 30, 2010, with interest at 8%, includes $7,018 accrued
      interest, unsecured
              
              
              182,475Capital
      lease payable to GE Capital, payable at $1,272 per month through March
      2009, secured by equipment
              
              
              17,957Capital
      lease payable to Thiessen Equipment Ltd., payable at $1,368 per
      month   through December 2008, secured by
      equipment
              
              
              17,100Total
              
              
              226,885Less
      current portion
              
              
              103,721Long-term
      portion
              
              $
              123,164
 
 Future maturities of long-term debt are
as follows:
 
 Years
      Ending December 31:2008
              
              $
              103,7212009
              
              
              64,6792010
              
              
              58,485$
              226,885
 
 Note
15:  Gain on Extinguishment of Debt
 
 During
the years ended December 31, 2007 and 2006, the Company has continued its
efforts to settle and extinguish certain obligations related to its mineral
properties, notes payable and amounts payable to related parties.
  As
discussed in Note 11, during the year ended December 31, 2007, the Company
realized a net gain on extinguishment of debt of $520,504 resulting from the
elimination of amounts payable pursuant to the Schnack financing agreement, and
subsequent conversion of certain amounts to a production payment obligation to
Crestview.  The Company also realized a net gain on extinguishment of
debt of $16,805 in 2007 from agreements reached to extinguish certain accounts
payable.
  The
Company reached agreement with various parties during the year ended December
31, 2006 pursuant to which a total of $6,143,692 of debt was
extinguished.  Net of a loss on extinguishment of amounts due to
related parties of $830,839 from the issuance of common shares where the market
value of the common stock exceeded the recorded amount of the debt paid on the
date the shares were issued, the Company recognized a gain on extinguishment of
debt of $5,312,853 for the year ended December 31, 2006.  The
extinguishment of debt has significantly improved the working capital position
of the Company.
 
 Contact
Property Obligations
  The
Contact Property was held through agreements with two (2) separate entities,
International Enexco, Ltd. (“Enexco”) and F.W. Lewis, Inc.
(“Lewis”).  On January 28, 1998, pursuant to the terms of the Letter
Agreement, the Company acquired the right to earn a 60% interest in the Enexco
patented mining claims through a combination of annual work commitments totaling
$2,600,000 on the portion of the property owned by Enexco and $4,000 per month
payments to Enexco totaling $313,000 over seven (7) years.  The Letter
Agreement was terminated on December 23, 2004.  On June 27, 2006, the
Company entered into a Termination Agreement with Enexco affirming that: (1) the
Letter Agreement was terminated with an effective date of January 22, 2005; (2)
the Company releases any claim of further right, title or interest in the
Contact Property; and (3) Enexco releases the Company from any and all claims,
demands, or liabilities arising from its activities at the Contact
Property.  Upon signing the Termination Agreement, the accrued unpaid
liabilities relating to the Letter Agreement were extinguished, resulting in a
gain on extinguishment of debt in the amount of $2,420,643.
 
  F-23
  On July 10, 1998, the Company entered
into the Lewis Agreement for the Lewis Property.  On February 19,
2003, the parties amended the Lewis Agreement to extend the term to December 31,
2007 and made other modifications to the original agreement.  On May
7, 2003, the parties signed a second amendment to clarify that expenditures for
work performed by the Company on either the Lewis Property or the adjoining
property owned by Enexco would be applied to the minimum work commitment due
under the Lewis Agreement.  On December 23, 2004, the Company
terminated the Lewis Agreement. On December 12, 2005, the Company was notified
that 50% of the accrued and unpaid obligations due Lewis had been assigned to
Sharon F. Lewis Trust dated January 22, 2004 and the remaining 50% to the Frank
Lewis Revocable Living Trust dated March 15, 2004.  On July 3, 2006,
the Company was served with a Summons and Complaint filed on June 29, 2006 by
Frank Lewis Revocable Living Trust dated March 15, 2004 in the Second Judicial
District Court of the State of Nevada in Washoe County. On August 7, 2006, the
Company filed an Answer to the Summons and Complaint.
  Concurrently
with the filing of the Answer on August 7, 2006, the Company filed a Third Party
Complaint in the Second Judicial District of the State of Nevada naming F.W.
Lewis, Inc., the Sharon F. Lewis Trust dated January 22, 2004 and Roes 1 through
10, inclusive, as third party defendants to the action brought by the Frank
Lewis Revocable Living Trust dated March 15, 2004, as described
above.
  In
January 2007, the Company finalized a Settlement Agreement and Mutual Release
with F.W. Lewis, Inc., The Frank Lewis Revocable Living Trust, and The Sharon F.
Lewis Trust, resulting in the dismissal of all complaints and the release of all
claims.  The effective date of the settlement agreement was December
1, 2006.  With resolution of the legal issues, accrued liabilities
related to the Contact Mine were extinguished, resulting in a gain of
$3,255,796.
 
 Other
Debt Extinguished
 
 In 2007,
the Company also reached a settlement agreement with American Asphalt and
Grading, Inc. relating to payment for goods and services provided the Company at
the Mineral Ridge property.  The parties agreed to the dismissal of
all complaints and the release of all claims.  With resolution of the
legal issues, the Company has stated the related accounts payable and accrued
liabilities as of December 31, 2006 at the agreed-upon settlement
amounts.  Accounts payable and accrued liabilities totaling $226,638
was extinguished, resulting in a gain on extinguishment of debt for the same
amount recorded in December 2006.
 
 In
addition, during the fourth quarter of 2006, the Company recorded a gain on
extinguishment of debt of $236,615 with the extinguishment of obligations to
shareholders, including notes payable of $142,000 and related accrued interest
of $94,615.
 
 Note
16:  Stock Options and Stock-Based Compensation
 
 In April 1998, the Board approved the
Golden Phoenix Minerals, Inc. Stock Option Incentive Plan (the “1997 Stock
Option Incentive Plan”), under which employees and directors of the Company are
eligible to receive grants of stock options. The Company has reserved a total of
1,000,000 shares of common stock under the 1997 Stock Option Incentive Plan.
Subsequent to this, the Employee Stock Incentive Plan of 2002 amended the 1997
Stock Option Incentive Plan and allows for up to 4,000,000 options to be granted
(the “2002 Stock Option Incentive Plan”). In addition to these qualified plans,
the Company created a class of non-registered, non-qualifying options in 2000 to
compensate its three principal employees for deferred salaries. The Company’s
executive management administers the plan. Subject to the provisions of the 2002
Stock Option Incentive Plan, the Board 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.
 
 On
October 23, 2006, the Board approved the 2006 Non-Employee Director Stock Option
Plan providing for 2,000,000 shares of the Company’s common stock to be reserved
for issuance of awards of non-qualified stock options to non-employee directors
of the Company pursuant to the terms and conditions set forth in the
plan.
 
  F-24
  On
September 21, 2007, the shareholders of the Company approved the 2007 Equity
Incentive Plan (the “2007 Plan”) providing nine percent (9%) of the total number
of outstanding shares of common stock of the Company to be reserved and
available for grant and issuance at the effective date of the 2007 Plan, with an
increase at the beginning of each year if additional shares of common stock were
issued in the preceding year so that the total number of shares reserved and
available for grant and issuance, not including shares that are subject to
outstanding awards, will be nine percent (9%) of the total number of outstanding
shares of common stock of the Company on that date.  No more than two
million (2,000,000) shares of common stock shall be granted in the form of
Incentive Stock Options.  Under the 2007 Plan, grants may be made to
any director, officer or employee of the Company or other person who, in the
opinion of the Board, is rendering valuable services to the Company, including
without limitation, an independent contractor, outside consultant, or advisor to
the Company.
 
 The
Company has also issued stock options on a stand-alone basis under no specific
plan, which have been approved by the Board.
 
 The
Company accounts for stock-based compensation in accordance with Statement of
Financial Accounting Standards (“SFAS”) No. 123(R), Share Based
Payments.  Under the fair value recognition provisions of this
statement, stock-based compensation cost is measured at the grant date based on
the value of the award granted, using the Black-Scholes option pricing model,
and recognized over the period in which the award vests.  The
stock-based compensation expense for the years ended December 31, 2007 and 2006
of $95,431 and $483,160, respectively, has been included in general and
administrative expense, and had no material impact on the basic and diluted loss
per share reported by the Company for the years ended December 31, 2007 and
2006.  There was no stock compensation expense capitalized during the
years ended December 31, 2007 and 2006.
 
 During
the year ended December 31, 2007, options to purchase 180,000 shares of the
Company’s common stock were issued to a consultant with an exercise price of
$0.29 per share.  The Company estimated the grant-date fair value of
these options using the Black-Scholes option pricing model using the following
assumptions:
 
 Expected
      dividend yield
              
              0.00%Expected
      stock price volatility
              
              75.09%Risk-free
      interest rate
              
              4.16%Expected
      life of options
              
              5
      years
 
 The
following table summarizes the stock option activity during 2007:
 
 Options
              
              
              Weighted
      Average Exercise Price
              
              
              Weighted
      Average Remaining Contract Term
              
              
              Aggregate
      Intrinsic ValueOutstanding
      at December 31, 2006
              
              
              6,915,715
              
              
              $
              0.22Granted
              
              
              180,000
              
              
              $
              0.29Exercised
              
              
              (886,667
              )
              
              $
              0.23Expired
      or cancelled
              
              
              (397,475
              )
              
              $
              0.19Outstanding
      at December 31, 2007
              
              
              5,811,573
              
              
              $
              0.22
              
              
              
              2.29
              
              
              $
              524,386Options
      vested and exercisable at December 31, 2007
              
              
              5,562,673
              
              
              $
              0.22
              
              
              
              2.16
              
              
              $
              523,036
 
 The aggregate intrinsic value provided for supplemental information in the
preceding table represents the total pretax intrinsic value, based on the
Company’s closing stock price of $0.30 as of December 31, 2007, which would have
been received by the holders of in-the-money options had the option holders
exercised their options as of that date.
 
 As of
December 31, 2007, the total future compensation cost related to non-vested
stock-based awards not yet recognized in the consolidated statements of
operations was $40,343.
 
  F-25
  Note
17:  Stock Warrants
 
 A summary
of the status of the Company’s stock warrants as of December 31, 2007 and
changes during the year then ended is presented below:
 
 WeightedAverageShares
              
              
              Exercise
      PriceOutstanding,
      December 31, 2006
              
              
              2,656,602
              
              
              $
              0.17Granted
              
              
              10,636,576
              
              
              $
              0.40Canceled
      / Expired
              
              
              -
              
              
              
              -Exercised
              
              
              (1,193,178
              )
              
              $
              0.14Outstanding,
      December 31, 2007
              
              
              12,100,000
              
              
              $
              0.38
 
 The
following summarizes the exercise price per share and expiration date of the
Company's outstanding warrants to purchase common stock at December 31,
2007:
 
 Expiration
      Date
              
              Price
              
              Number2008
              
              $  0.20
              
              800,0002009
              
              $  0.20
              
              700,0002009
              
              $  0.40
              
              10,600,00012,100,000
 
 Note
18:  Stockholders’ Equity
 
 On
April 24, 2007, the Company completed its private offering of 20,000,000
units of its common stock and warrants to purchase common stock (the “Private
Offering”) to certain institutional and accredited investors.  Each
unit consists of one share of common stock, no par value per share, and one-half
(1/2) of one two year warrant to purchase common stock, with each whole warrant
entitling the holder to purchase one share of common stock at an exercise price
of $0.40 per share. The units were sold at a per unit price of $0.30. The
Company raised an aggregate amount of $6,000,000 from this Private Offering,
less a placement fee of $210,000 and other offering expenses of
$140,494.
 
 Further,
in connection with the Private Offering, the Company issued to its placement
agent 150,000 shares of common stock and two-year warrants to purchase 600,000
shares of common stock at an exercise price of $0.40 per share.
 
 On July 13, 2005, the Company entered
into a Common Stock Purchase Agreement (the “Original Purchase Agreement”) with
Fusion Capital Fund II, LLC (“Fusion Capital”), pursuant to which Fusion Capital
had agreed, under certain conditions, to purchase on each trading day $12,500 of
the Company’s common stock up to an aggregate of $6 million over a twenty-four
(24) month period.  On January 19, 2006, the Company and Fusion
Capital entered into a Termination Agreement whereby the parties terminated the
Original Purchase Agreement.  On January 20, 2006, the Company entered
into a new Common Stock Purchase Agreement (“Purchase Agreement”) with Fusion
Capital.  Under the Purchase Agreement, Fusion Capital committed to
purchase up to $6 million of the Company’s common stock over a twenty-four (24)
month period that commences when a registration statement filed with the SEC
becomes effective.  The SEC declared the registration statement
effective on February 13, 2006.  Pursuant to the Purchase Agreement,
Fusion Capital was to purchase $12,500 of the Company’s common stock on each
trading day during the term of the Purchase 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 was 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 did not have the right and was not obligated to purchase the Company’s
stock in the event that the purchase price per share of common stock was below
$0.10.  The Company has used this financing vehicle on an as needed
basis for working capital and general corporate purposes.  On March
13, 2006, the Company initiated the sale of commencement shares under the
Purchase Agreement.
 
  F-26
  During the year ended December 31,
2007, 3,441,066 shares of the Company’s common stock were purchased by Fusion
Capital with proceeds to the Company of $1,034,999, or an average of $0.301 per
share.
  On April
23, 2007, the Company terminated the agreement with Fusion Capital.
  In
addition to the 23,441,066 common shares issued for cash to Fusion Capital and
in the Private Offering, the Company issued 3,047,563 shares of its common stock
during the year ended December 31, 2007 for the following
consideration:  393,990 shares for services valued at $144,106;
423,728 shares issued for reduction of accounts payable of $125,000; 150,000
shares for stock issuance costs; and 2,079,845 shares issued for the exercise of
options and warrants, $186,045 for cash, $27,373 reduction in accounts payable
and $160,227 reduction in amounts due related parties.  The prices per
share recorded in non-cash equity transactions approximated the quoted market
price of the Company’s common stock on the date the shares were
issued.  In those instances where the market price of the Company’s
common stock on the date the shares are issued to repay debt or other
obligations differs from the market price originally used to determine the
number of shares to be issued, a gain or loss on extinguishment of debt is
recorded.  Depending on the delay in issuing these shares, the gain or
loss may be material.  For the year ended December 31, 2007, no gain
or loss on extinguishment of debt repaid through the issuance of the Company’s
common stock was recorded.
 
 During
the year ended December 31, 2006, 11,901,992 shares of the Company’s common
stock were purchased by Fusion Capital with proceeds to the Company of
$4,237,504 (including a stock subscription receivable of $60,000 at December 31,
2006), or an average of $0.356 per share.
  In
addition to the 11,901,992 common shares issued for cash, the Company issued
5,781,931 shares of its common stock during the year ended December 31, 2006 for
the following consideration:  266,427 shares for services valued at
$123,074; 20,589 shares issued for directors’ fees; 3,318,515 shares issued in
payment of debt of $1,408,995; 735,000 shares issued for exploration and
development expenses (Note 4); 700,000 shares valued at $227,100 issued in
connection with the Production Purchase Payment Agreement (Note 12); and 741,400
shares issued for the exercise of options and warrants totaling
$139,610.  For the year ended December 31, 2006, the loss on
extinguishment of debt repaid through the issuance of the Company’s common stock
was $830,840.
 
 Note
19:  Income Taxes
 
 The
benefit (provision) for income taxes is different than amounts which would be
provided by applying the statutory federal income tax rate to (loss) income
before income taxes for the following reasons:
 
 Years
      Ended December 31,2007
              
              
              2006Income
      tax benefit at statutory rate
              
              $
              727,575
              
              
              $
              1,591,416Adjustments
      to net operating loss carry forward
              
              
              567,184
              
              
              
              (675,871
              )Change
      in rate
              
              
              (1,216,255
              )
              
              
              -Other
              
              
              (12,924
              )
              
              
              (5,134
              )Depreciation
      and amortization
              
              
              -
              
              
              
              (66,137
              )Write
      off of reclamation asset
              
              
              -
              
              
              
              (712,195
              )Stock
      for services/options expense
              
              
              -
              
              
              
              (606,626
              )Change
      in valuation allowance
              
              
              (65,580
              )
              
              
              474,547$
              -
              
              
              $
              -
 
 
  F-27
 
 Deferred tax assets (liabilities) are
comprised of the following:
 
 2007
              
              
              2006Deferred
      tax assets:Net
      operating loss carry forwards
              
              $
              7,999,868
              
              
              $
              8,975,209Reclamation
      obligation
              
              
              1,059,936
              
              
              
              -Accrued
      expenses
              
              
              294,062
              
              
              
              408,095Mineral
      properties
              
              
              170,947
              
              
              
              145,618Allowance
      for doubtful accounts
              
              
              39,578
              
              
              
              -Stock-based
      compensation
              
              
              32,447
              
              
              
              -9,596,838
              
              
              
              9,528,922Less
      valuation allowance
              
              
              (9,552,365
              )
              
              
              (9,486,785
              )Net
      deferred tax assets
              
              
              44,473
              
              
              
              42,137Deferred
      tax liabilities:Depreciation
              
              
              (43,821
              )
              
              
              (42,137
              )Unrealized
      gain on investments
              
              
              (652
              )
              
              
              -Net
      deferred tax liabilities
              
              
              (44,473
              )
              
              
              (42,137
              )Net
      deferred taxes
              
              $
              -
              
              
              $
              -
 
 At December 31, 2007 the Company has a
net operating loss carry forward available to offset future taxable income of
approximately $23,000,000, which will begin to expire in 2008.  If
substantial changes in the Company’s ownership should occur, there would also be
an annual limitation of the amount of the net operating loss carry forward which
could be utilized.
 
 The FASB
has issued Financial Interpretation No. 48, Accounting for Uncertainty in Income
Taxes – An Interpretation of FASB Statement No. 109 (FIN 48).  FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with FASB Statement No. 109,
Accounting for Income Taxes.  Fin 48 requires a company to determine
whether it is more likely than not that a tax position will be sustained upon
examination based upon the technical merits of the position.  If the
more-likely-than-non threshold is met, a company must measure the tax position
to determine the amount to recognize in the financial statements.  As
a result of the implementation of FIN 48, the Company performed a review of its
material tax positions in accordance with recognition and measurement standards
established by FIN 48.
 
 At the
adoption date of January 1, 2007, the Company had no unrecognized tax benefit
which would affect the effective tax rate if recognized.  There has
been no significant change in the unrecognized tax benefit during the year ended
December 31, 2007.
 
 The
Company classifies interest and penalties arising from the underpayment of
income taxes in the consolidated statements of operations under general and
administrative expenses.  As of December 31, 2007, the Company had no
accrued interest or penalties related to uncertain tax positions.
 
 The
Company files income tax returns in the U.S. federal jurisdiction, but in no
state or local jurisdictions since all operations are currently conducted in the
State of Nevada, which does not have a corporate income tax.  The
Company also has immaterial operations in Canada.  All U.S. federal
net operating loss carry forwards through the year ended December 31, 2007 are
subject to examination.
 
 
 Note
20:  Commitments and Contingencies
 
 Operating
Leases
 
 The
Company leases its office facilities under a non-cancelable operating lease that
expires July 31, 2011. The monthly rent is based on an escalating scale based on
an average increase of three cents ($0.03) per square foot on each anniversary
date.  In addition, the Company leases equipment and property at the
Ashdown mine. In addition, the Company entered into a lease agreement for mining
equipment at the Ashdown Property. The lease agreement provides for
month-to-month rental payments totaling $28,700 through December 31,
2008.
 
  F-28
  On August 26, 2005, the Company also
entered into a lease for the Kingston Mill as part of a settlement regarding a
dispute with Retrievers LLC, John Tingue and Kris Tingue (collectively, the
“Retrievers”) over the transport and storage of portions of its mill facilities
on their property.  To date, the Company has paid the Retrievers
$60,000 in consideration for the lease. In addition, this lease agreement
obligates the Company to use Retrievers for all of its excavation, road
maintenance, transportation of material between the mine and the mill and
reclamation work on the property for the next five years. Retrievers granted to
Golden Phoenix the exclusive right and option to purchase the Kingston Mill for
$250,000. This option expires on August 26, 2010. The purchase price will be
reduced by $50,000 upon each annual anniversary of the lease agreement. The
pricing for labor and equipment in connection with the work to be completed by
Retrievers will be negotiated between the parties and will reflect current area
and industry rates. Retrievers retain a lien on the mill as security for the
contract.
 
 The
following is a schedule, by years, of the future minimum lease payments under
operating leases, as of December 31, 2007.
 
 2008
              
              $
              533,6512009
              
              
              183,0702010
              
              
              183,7002011
              
              
              145,4092012
              
              
              56,400Thereafter
              
              
              695,600Total
              
              $
              1,797,830
 
 Rental expense for all operating leases
was $783,720 and $612,892 for the years ended December 31, 2007 and 2006,
respectively.
 
 Employment
Agreements
 
 David A.
Caldwell
 
 On
February 22, 2006, the Company entered into an Employment Agreement with David
A. Caldwell to render full-time employment to the Company as President and Chief
Operating Officer effective as of February 15, 2006.  Mr. Caldwell’s
duties are to assist the Company’s executive management in the areas of
corporate development and compliance, mergers and acquisitions, investment
banking and fund raising, strategic relationships and public relations, in the
United States and such other locations as deemed appropriate by the
Board.
  On
January 31, 2007, the Company entered into an Addendum to the Employment
Agreement with Mr. Caldwell whereby Mr. Caldwell became the full time Chief
Executive Officer of the Company and resigned from his position of President and
Chief Operating Officer of the Company.  Other than the change in
title and position, the remaining terms of the February 22, 2006 Employment
Agreement continue in full force and effect.
  Until
such a time that the Company achieved an initial cash flow through sales of
molybdenite concentrates at the Ashdown mine, the Company accrued and deferred
the payment of Mr. Caldwell’s salary for the services to be rendered by him at
the rate of One Hundred Forty Five Thousand and No/100 Dollars ($145,000)
annually (prorated for any portion of a year), subject to increases, if any, as
the Board may determine in its sole discretion after periodic review of the
performance of his duties not less frequently than
annually.  Thereafter, fifty percent (50%) of Mr. Caldwell’s base
salary will be deferred and accrued as an obligation of the Company until the
Company has fully satisfied its financial obligations to Crestview (see Note 11)
and Ashdown Milling (see Note 12) finance programs relating to the Ashdown
mine.
  Mr.
Caldwell’s salary was adjusted in June 2006 to One Hundred Sixty Five Thousand
and No/100 Dollars ($165,000) annually, subject to increases, if any, as the
Board may determine in its sole discretion after periodic review his duties not
less frequently than annually.  All of Mr. Caldwell’s salary was
deferred during 2006 and 50% of Mr. Caldwell’s salary was deferred during
2007.
  On
February 13, 2006, Mr. Caldwell was granted 600,000 options under the 2002 Stock
Option Incentive Plan with an exercise price of $0.24 per share.  One
fourth of the options vest each ninety (90) day period from the date of the
grant date resulting in one hundred percent (100%) vesting on February 13,
2007.  The options have a term of five (5) years and are subject to
other standard terms and conditions under the applicable stock option plan of
the Company.  Mr. Caldwell has also agreed to a non-competition clause
while employed by the Company and a non-solicitation clause for a term of
twenty-four (24) months following termination of his employment.
 
  F-29
  Robert P.
Martin
 
 On March
8, 2006, the Company entered into an Employment Agreement with Robert P. Martin
to render employment to the Company as Executive Vice President and Corporate
Secretary effective as of January 1, 2006.  On January 31, 2007, the
Company entered into an Addendum to the Employment Agreement with Mr. Martin
whereby Mr. Caldwell became the full time President of the Company and resigned
from his positions of Executive Vice President and Corporate Secretary of the
Company.  Other than the change in title and position, the remaining
terms of the March 8, 2006 Employment Agreement continue in full force and
effect.
 
 Until
such a time that the Company achieved an initial cash flow through sales of
molybdenite concentrates at the Ashdown mine, the Company accrued and deferred
the payment of Mr. Martin’s salary for the services to be rendered by him at the
rate of One Hundred Thirty Five Thousand and No/100 Dollars ($135,000) annually
(prorated for any portion of a year), subject to increases, if any, as the Board
may determine in its sole discretion after periodic review of the performance of
his duties not less frequently than annually. Thereafter, fifty percent (50%) of
Mr. Martin’s base salary will be deferred and accrued as an obligation of the
Company until the Company has fully satisfied its financial obligations to the
Crestview and Ashdown Milling finance programs relating to the Ashdown
mine.
  Once the
Company achieves initial cash flow through sales of molybdenite concentrates at
the Ashdown Mine and the Company has fully satisfied its financial obligations
to the Crestview and Ashdown Milling finance programs relating to the Ashdown
mine, Mr. Martin’s salary will be adjusted to One Hundred Fifty Five Thousand
and No/100 Dollars ($155,000) annually (prorated for any portion of a year),
subject to increases, if any, as the Board may determine in its sole discretion
after periodic review his duties not less frequently than
annually.  All of Mr. Martin’s salary, at the rate of $135,000 was
deferred during 2006 and 50% of Mr. Martin’s salary was deferred during
2007.
  On
February 13, 2006, Mr. Martin was granted 200,000 options under the 2002 Stock
Option Incentive Plan with an exercise price of $0.24 per share.  One
fourth of the options vest each ninety (90) day period from the date of the
grant date, resulting in one hundred percent (100%) vesting on February 13,
2007.  The options have a term of five (5) years and are subject to
other standard terms and conditions under the applicable stock option plan of
the Company.  Mr. Martin has also agreed to a non-competition clause
while employed by the Company and a non-solicitation clause for a term of
twenty-four (24) months following termination of his employment.
 
 Donald
R. Prahl
 
 On August
14, 2006, the Company entered into an Employment Agreement with Donald R. Prahl
to render full-time employment to the Company as the Vice President of
Operations.  On January 31, 2007, the Company entered into an Addendum
to the Employment Agreement with Mr. Prahl whereby Mr. Prahl became the full
time Chief Operating Officer of the Company and resigned from his position of
Vice President of Operations of the Company.  Other than the change in
title and position, the remaining terms of the August 14, 2006 Employment
Agreement continue in full force and effect.
 
 The
Company will pay Mr. Prahl salary for the services to be rendered by him at the
rate of $100,000 annually (prorated for any portion of a year) (“Annual Base
Salary”), subject to increases, if any, as the Board may determine in its sole
discretion after periodic review of Mr. Prahl's performance of his duties
hereunder not less frequently than annually.  In the event that the
Ashdown mine achieves three (3) shipments of 12 superstacks, each carrying in
excess of 3900 pounds of MoS2, within a consecutive four (4) week period, the
Company shall adjust the Annual Base Salary to the rate of $125,000 annually
(prorated for any portion of a year).  In the event that Executive
achieves six (6) shipments of 12 superstacks, each carrying in excess of 3,900
pounds MoS2, within a consecutive four (4) week period, the Company shall adjust
the Annual Base Salary to the rate of $150,000 annually (prorated for any
portion of a year).
 
 The
Company has granted to Mr. Prahl the right, privilege and option to receive an
aggregate of 200,000 shares of the Company’s restricted common stock (the
“Shares”).  For each pay period, until an aggregate of 200,000 shares
has been issued, the Company shall distribute to Mr. Prahl a number of shares
equal to $4,000 as valued in US funds set at the closing share price as of the
last trading price prior to each distribution. The Company has agreed that it
will use its best efforts to register the Shares issued in connection with the
Employment Agreement pursuant to a registration statement on Form S-8 under the
Securities Act of 1933, as amended.
 
  F-30
  On August
7, 2006, Mr. Prahl was granted 300,000 options with an exercise price of $0.325
per share.  One third of the options shall vest immediately, the
second one third of the options shall vest on August 7, 2007 and the final one
third of the options shall vest on August 7, 2008 resulting in 100% vesting on
August 7, 2008.  The options have a term of five (5) years and are
subject to other standard terms and conditions under the stock option
agreement.  Mr. Prahl has also agreed to a non-competition clause
while employed by the Company and a non-solicitation clause for a term of
twenty-four (24) months following termination of his employment.
 
 Dennis
P. Gauger
 
 On
December 18, 2006, the Company entered into an Independent Contractor Agreement
with Dennis P. Gauger to render part-time services to the Company for an initial
term of one (1) year.  Mr. Gauger shall serve as the Company’s Chief
Financial Officer and Principal Accounting Officer under the direction of the
President, Chief Executive Officer, Board of Directors and the Audit
Committee.  The Agreement automatically renews for an additional one
(1) year period at the end of each then existing term, unless one party gives to
the other thirty (30) days prior written notice to terminate.
  Mr.
Gauger was compensated $1,000 for services rendered in the month of December
2006, $4,000 for services rendered in the month of January 2007, $4,500 for
services rendered in the month of February 2007 and $6,000 for services rendered
in the month of March 2007 and each month thereafter.
  On
December 18, 2006, Mr. Gauger was granted 100,000 options with an exercise price
of $0.395 per share.  One fourth of the options shall vest on each of
March 18, 2007, June 18, 2007, September 18, 2007 and December 18, 2007,
resulting in 100% vesting on the December 18, 2007.  The options have
a term of five (5) years and are subject to other standard terms and conditions
under the stock option agreement.
 
 Kenneth
S. Ripley
 
 On
January 31, 2007, the Company entered into an Employment Separation Agreement
with Kenneth Ripley whereby Mr. Ripley resigned as the Chief Executive Officer
of the Company and all other positions he held with the Company and on behalf of
the Company, effective as of January 31, 2007.  The Separation
Agreement terminates the Employment Agreement dated as of March 8, 2006 between
the Company and Mr. Ripley whereby Mr. Ripley assumed the role of Chief
Executive Officer of the Company effective March 13, 2006.  See Note
10 for a discussion of the payment terms of amounts due to Mr. Ripley pursuant
to the Employment Separation Agreement.
 
 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 8). The Company prepared a reclamation plan for $2,693,000 that was approved
by the Nevada Department of Environmental Protection and the Bureau of Land
Management in May 2003.
  The
Company prepared a reclamation plan for the Ashdown Project, LLC for a total of
$487,757, that was approved by the Nevada Department of Environmental Protection
and the Bureau of Land Management in January and
February  2008.  The Company has obtained a reclamation
surety bond in connection with theses obligations (See Note 8).
  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 8).
 
 Litigation
 
 Steven D.
Craig — On August 30, 2006, Steven D. Craig filed a Complaint against Golden
Phoenix Minerals, Inc. in the Second Judicial District for the State of Nevada
in the County of Washoe.  The Complaint alleges Breach of Contract
regarding the failure to permit the exercise of stock options, failure to repay
non-reimbursed business expenses, and failure to pay and account for the accrual
of interest of deferred compensation. Steven D. Craig was seeking stock
options from Golden Phoenix Minerals, Inc. with regard to back salaries
allegedly owed in the following amounts: 984,300 shares at 15 cents per share;
340,000 shares at 37 cents per share; and 250,000 shares at 15 cents per
share.  Steven D. Craig was also seeking $5,500 for non-reimbursed
expenses and $243,625 in deferred salaries with interest for both
amounts.  Payments of deferred salaries totaling approximately
$130,000 were made to Mr. Craig through December 31, 2007, resulting in a
balance payable to Mr. Craig included in the consolidated balance sheet as of
December 31, 2007 of approximately $130,000.
 
  F-31
  On
September 20, 2006, the Company. filed an Answer to the Summons and
Complaint.  On September 29, 2006, Golden Phoenix Minerals, Inc. filed
a Third-Party Complaint naming Collette Crater-Craig as an interested party with
regard to community property issues due to the recent termination of marriage
between her and Steven D. Craig. The Third-Party Complaint sought declaratory
relief to ascertain the respective parties’ rights and obligations with regard
to the damages sought by the subject Complaint.  Collette Carter-Craig
since became deceased on December 3, 2006.
 
 On
September 14, 2007 the parties reached a tentative settlement, and on March 21,
2008 reached a final settlement wherein the Company issued stock options for
984,300 shares of our Common Stock, with the underlying shares to be registered
with the SEC. 492,150 stock options were issued to Mr. Craig and 492,150 stock
options were issued to the Estate of Collette Carter-Craig.  The
Company expects that a dismissal of this matter with prejudice will be filed
within the next several months.
 
 Win-Eldrich
Gold, Inc. — On April 4, 2007, Golden Phoenix participated in mediation
proceedings with Win-Eldrich Gold, Inc. (“WEG”). The dispute arises from Golden
Phoenix’s November 2, 2006 formal notice of default to WEG that it failed to
timely fund its share of the Program and Budget for the Ashdown mine, due on
October 15, 2006.  Payment was due pursuant to the Ashdown Project LLC
Operating Agreement between WEG and Golden Phoenix dated September 28, 2006 and
a related letter agreement of the same date.  The amount claimed to be
owed by Golden Phoenix under the agreement is $115,755. Additionally, by the
same notice of default, Golden Phoenix reminded WEG that it did not timely pay
to Golden Phoenix its share of revenues received by WEG for ore from stockpiles
as required by the above-mentioned letter agreement.  Golden Phoenix’s
share of these monies was $193,391.  The total amount in default
totals $309,146. Pursuant to the agreements, interest accrues on these amounts
at a rate equal to two percentage points over the Prime Rate to the maximum
allowed by law.  The agreement permits a defaulting party to cure if
they pay the defaulted amount, plus interest at a rate of Prime plus
7%.  WEG did not cure it's default. Consequently, Golden Phoenix
elected, as permitted under the agreement, to dilute WEG’s membership interest
in the Ashdown LLC by notice dated December 20, 2006.  Pursuant to a
calculation formula contained in the agreement, Golden Phoenix contends WEG’s
membership interest has been reduced from 40% to 30.5%.  WEG is
currently contesting this dilution of its interest in the Ashdown
LLC.  WEG has disputed and continues to dispute the amount and timing
of certain expenditures incurred by Golden Phoenix on the Ashdown property. As
of the date of this Annual Report, the mediation has not resolved the dispute
and the parties plan to proceed to arbitration pursuant to the terms of the
Operating Agreement.  Golden Phoenix expects this arbitration to be
conducted in 2008.  In addition, WEG has notified Golden Phoenix of
certain provisions in the Operating Agreement that it contends Golden Phoenix
has breached and has requested a meeting to discuss these provisions in
accordance with the dispute resolution provisions of the Operating
Agreement.  As of the date of this Annual Report, Golden Phoenix does
not believe any of WEG’s allegations are material.  The outcome of
these matters cannot currently be determined. The consolidated financial
statements of Golden Phoenix reflect Golden Phoenix’s ownership in the Ashdown
LLC at 60% and do not reflect the potential impact of any ultimate resolution or
arbitration.
 
 Royalties
 
 The
Company is obligated to honor two (2) prior royalty agreements with respect to
the Mineral Ridge project.  The first is to Mary Mining Company, which
includes annual advance minimum royalty payments of $60,000, and a sliding-scale
production royalty based on gold price divided by 100 in $50 increments with a
cap at 8.5% (i.e. above a $850 per ounce gold price).  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.
 
 Consulting
Agreements
 
 The
Company is obligated to pay W.G. Cook Ltd. (“Cook”) for services rendered for
marketing and sales of molybdenum from the Ashdown mine as follows:
 
 ·
              $3,500
      per month payable the 15th
      of the following month.
 
  F-32
  ·
              A
      bonus paid on the percentage of the quarterly production in any one
      calendar year and payable within 30 days of the close of that quarter in
      the amount of one tenth of one percent (0.1%) of the net invoice value
      received from the buyer.
 
 The total
compensation paid to Cook shall not be less than $50,000 nor exceed $100,000 for
any single calendar year.
  The
Company is obligated to pay Seacoast Publishing $2,000 per month for a period
from September 2007 through August 2008 for media relations
services.
 
 Note
21:  Related Party Transactions
 
 As more
fully discussed in Note 12, on September 26, 2005, the Company entered into a
Production Payment Purchase Agreement with Ashdown Milling.  Robert
Martin, President of the Company, and Kenneth Ripley, a former Chief Executive
Officer of the Company, are members, managers, and lead investors in Ashdown
Milling.  A total of $1,500,000 was advanced to the Company pursuant
to this agreement, $650,000 received in 2006 and $850,000 received in 2005, of
which $904,567 has been recorded as a production payment obligation – related
parties.  The Company made payments totaling $804,541 during 2007,
reducing the obligation to a balance of $100,026 at December 31,
2007.  Including the $904,567 obligation, the total amount of the
production payment to be paid to Ashdown Milling is equal to a 12% net smelter
returns royalty on the minerals produced from the mine until an amount equal to
240% of the total purchase price has been paid.  The Company
subsequently bought out the member interests of two members of Ashdown Milling,
thereby reducing its production payment obligation. See Note 23.
  As more
fully discussed in Note 13, former officers of the Company have advanced funds
to the Company in the form of interest-bearing promissory notes.  The
Company has made payments of principal and interest on these obligations
resulting in a current liability totaling $142,572 as of December 31, 2007, of
which $27,675 represents accrued interest payable on one of the promissory
notes.  The notes payable and accrued interest are payable in various
amounts through February 2008.
  The mill
in operation at the Ashdown project was acquired from a former employee and the
former manager of the Ashdown mine.  At December 31, 2007 a note
payable to this related party resulting from this transaction and for rental
payments and other amounts owed was $212,908, with accrued interest payable of
$47,796.
  As
detailed in Note 9, the Company also has deferred compensation payable to
officers or former officers totaling $427,807 at December 31, 2007.
 
 Note
22:  Supplemental Statement of Cash Flows Information
 
 During the years ended December 31,
2007 and 2006, the Company made no cash payments for income taxes.
 
 During the years ended December 3, 2007
and 2006, the Company made cash payments for interest of $98,650 and $48,796,
respectively.
 
 During 2007, the Company had the
following non-cash financing and investing activities:
 
 ·
              Decreased
      marketable securities and other comprehensive income for unrealized loss
      on marketable securities of
$41,985.
 
 ·
              Common
      stock was issued to pay accounts payable of
  $125,000.
 
 ·
              Amounts
      due related parties were reduced by $160,227 through the exercise of stock
      options and resultant increase in common
stock.
 
 ·
              Accounts
      payable was reduced by $27,373 through the exercise of stock options and
      resultant increase in common stock.
 
  F-33
  ·
              Accounts
      payable was reduced and long-term debt increased by
    $512,262.
 
 ·
              Property
      and equipment was purchased through the issuance of debt of
      $48,049.
 
 ·
              Notes
      payable and related accrued interest was reduced and production payment
      obligation was increased by
$1,974,456.
 
 ·
              The
      Company reclassified deferred revenue – related party of $904,567 to
      production payment obligation – related
party.
 
 ·
              Property
      and equipment was purchased through increase in accounts payable of
      $70,903.
 
 ·
              Accounts
      payable was reduced and accrued liabilities increased by
      $63,083.
 
 During 2006, the Company had the
following non-cash financing and investing activities:
 
 ·
              Increased
      marketable securities and other comprehensive income for unrealized gain
      on marketable securities of
$43,902.
 
 ·
              Common
      stock was issued to retire debt of
$583,441.
 
 ·
              Accounts
      payable of $387,908 was converted into a note payable to a related
      party.
 
 ·
              A
      note payable of $100,000 was reclassified to amounts due related
      parties.
 
 
 Note
23:  Subsequent Events
 
 In
January 2008, the Company issued 40,000 shares of its common stock pursuant to
the exercise of stock options, which were exercised at $0.19 per share for total
proceeds of $7,600.
  In
January 2008, the Company granted options to a director to purchase 100,000
shares of the Company’s common stock at an exercise price of $0.21 per
share.
  On
February 6, 2008 the Company bought out the membership interests of two members
of Ashdown Milling, Charles D. Murphy and Acco Investment Inc. in exchange for
1,866,667 shares of its common stock and $139,091.91 cash paid to each of
them.  As a result their membership interests in Ashdown Milling were
extinguished and the Company’s production payment to be paid to Ashdown Milling
was reduced from a 12% net smelter returns royalty on the minerals produced to
7.2%.
    In March
2008, the Company issued 100,000 shares of its common stock to a
consultant.
 
 
 
 
 
 
 
 
 
 
 
 
  F-34
 
 Exhibit
Index
 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.
                
                Incorporated
      by reference to Exhibit 10.2 to the 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 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, 199810.10
                
                Form
      of General Executive Compensation Contract
                
                Incorporated
      by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-KSB
      for the year ended December 31, 1998, as filed with the SEC on October 27,
      1999
   39
  10.11
                
                Mineral
      Ridge Mine Sale Agreement, dated October 9, 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 November 12, 2002, by and between Golden
      Phoenix Minerals, Inc. and Fusion Capital Fund II, LLC
                
                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, 200310.14
                
                Common
      Stock Purchase Agreement, dated January 20, 2006, by and between Golden
      Phoenix Minerals, Inc. and Fusion Capital Fund II, LLC
                
                Incorporated
      by reference to Exhibit 10.4 to the Company’s Registration Statement on
      Form SB-2, as filed with the SEC on January 23, 200610.15
                
                Registration
      Rights Agreement, dated January 20, 2006, by and between Golden Phoenix
      Minerals, Inc. and Fusion Capital Fund II, LLC
                
                Incorporated
      by reference to Exhibit 10.5 to the Company’s Registration Statement on
      Form SB-2, as filed with the SEC on January 23, 200610.16
                
                Termination
      Agreement, dated January 19, 2006, by and between Golden Phoenix Minerals,
      Inc. and Fusion Capital Fund II, LLC
                
                Incorporated
      by reference to Exhibit 10.6 to the Company’s Registration Statement on
      Form SB-2, as filed with the SEC on January 23, 200610.17
                
                Long
      Term Agreement, dated August 18, 2004, by and between Golden Phoenix
      Minerals, Inc. and Derek Raphael & Company Limited
                
                Incorporated
      by reference to Exhibit 10.17 to the Company’s Annual Report on Form
      10-KSB for the year ended December 31, 2005, as filed with the SEC on
      April 17, 200610.18
                
                Settlement
      Agreement, dated August 26, 2005 by and between Golden Phoenix Minerals,
      Inc., Earl Harrison, dba Western Mine Development, Retrievers LLC, John
      Tingue and Kris Tingue
                
                Incorporated
      by reference to Exhibit 10.18 to the Company’s Annual Report on Form
      10-KSB for the year ended December 31, 2005, as filed with the SEC on
      April 17, 200610.19
                
                Payment
      Production Purchase Agreement, September 26, 2005, by and between Golden
      Phoenix Minerals, Inc. and Ashdown Milling Company, LLC
                
                Incorporated
      by reference to Exhibit 10.19 to the Company’s Annual Report on Form
      10-KSB for the year ended December 31, 2005, as filed with the SEC on
      April 17, 200610.20
                
                Second
      Addendum to Long Term Agreement, October 25, 2005, by and between Golden
      Phoenix Minerals, Inc. and Derek Raphael & Company
    Limited
                
                Incorporated
      by reference to Exhibit 10.20 to the Company’s Annual Report on Form
      10-KSB for the year ended December 31, 2005, as filed with the SEC on
      April 17, 200610.21
                
                Employment
      Agreement, dated February 22, 2006, by and between Golden Phoenix
      Minerals, Inc. and David A. Caldwell
                
                Incorporated
      by reference to Exhibit 10.21 to the Company’s Annual Report on Form
      10-KSB for the year ended December 31, 2005, as filed with the SEC on
      April 17, 200610.22
                
                Employment
      Agreement, dated March 8, 2006, by and between Golden Phoenix Minerals,
      Inc. and Robert P. Martin
                
                Incorporated
      by reference to Exhibit 10.22 to the Company’s Annual Report on Form
      10-KSB for the year ended December 31, 2005, as filed with the SEC on
      April 17, 200610.23
                
                Employment
      Agreement, dated March 13, 2006, by and between Golden Phoenix Minerals,
      Inc. and Kenneth S. Ripley
                
                Incorporated
      by reference to Exhibit 10.23 to the Company’s Annual Report on Form
      10-KSB for the year ended December 31, 2005, as filed with the SEC on
      April 17, 2006
  40
  10.24
                
                Employment
      Agreement, dated March 22, 2006, by and between Golden Phoenix Minerals,
      Inc. and Larry A. Kitchen
                
                Incorporated
      by reference to Exhibit 10.24 to the Company’s Annual Report on Form
      10-KSB for the year ended December 31, 2005, as filed with the SEC on
      April 17, 200610.25
                
                Golden
      Phoenix/Schnack Agreement, dated May 10, 2005, by and between the Company
      and William D. and Candida Schnack
                
                Incorporated
      by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K
      for May 10, 2005, as filed with the SEC on May 18, 200510.26
                
                Letter
      of Extension, dated November 4, 2005, by and between the Company and
      William D. and Candida Schnack
                
                Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      for November 4, 2005, as filed with the SEC on November 15,
      200510.27
                
                Purchase
      Agreement, dated April 18, 2006, by and between the Company, Robert R.
      Robitaille, Douglas Lalonde, Sheldon Davis and Ronald E.
      Dockweiler
                
                Incorporated
      by reference to Exhibit 10.27 to the Company’s Quarterly Report on Form
      10-QSB for the quarter ended March 31, 2006, as filed with the SEC on May
      19, 200610.28
                
                Termination
      Agreement, dated June 27, 2006, by and between the Company and
      International Enexco Ltd.
                
                Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      for June 27, 2006, as filed with the SEC on July 7,
200610.29
                
                Quitclaim
      Deed, dated June 27, 2006, granted by the Company in favor of
      International Enexco Ltd.
                
                Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      for June 27, 2006, as filed with the SEC on July 7,
200610.30
                
                Employment
      Agreement, dated August 14, 2006, by and between the Company and Donald R.
      Prahl
                
                Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      for August 14, 2006, as filed with the SEC on August 17,
    200610.31
                
                Letter
      Agreement, dated September 29, 2006, by and between the Company and
      Win-Eldrich Gold, Inc.
                
                Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      for August 29, 2006, as filed with the SEC on August 30,
    200610.32
                
                Ashdown
      Project LLC Operating Agreement, dated September 28, 2006, by and between
      the Company and Win-Eldrich Gold, Inc.
                
                Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      for September 28, 2006, as filed with the SEC on October 3,
      200610.33
                
                Second
      Amendment to Golden Phoenix/Schnack Agreement
                
                Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A
      for November 2, 2006, as filed with the SEC on November 8,
      200610.34
                
                Independent
      Contractor Agreement dated December 18, 2006 by and between the Company
      and Dennis P. Gauger
                
                Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      for December 18, 2006, as filed with the SEC on December 21,
      2006
  41
  10.35
                  
                  Share
      and Warrant Purchase Agreement dated April 23, 2007 by and between the
      Company and certain Investors
                  
                  Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      for April 23, 2007, as filed with the SEC on April 25,
  200710.36
                  
                  Registration
      Rights Agreement dated April 23, 2007 by and between the Company and
      certain Investors
                  
                  Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      for April 23, 2007, as filed with the SEC on April 25,
  200710.37
                  
                  Advance
      Sale Restructuring Agreement dated April 23, 2007 by and between the
      Company and William Schnack or Candida Schnack
                  
                  Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      for April 23, 2007, as filed with the SEC on April 27,
  200710.38
                  
                  Mutual
      Termination Agreement dated April 23, 2007 by and between the Company and
      Fusion Capital Fund II, LLC
                  
                  Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      for April 23, 2007, as filed with the SEC on April 27,
  200710.39
                  
                  2006
      Non-Employee Director Stock Option Plan
                  
                  Incorporated
      by reference to Exhibit 10.26 to the Company’s Registration Statement on
      Form SB-2, as filed with the SEC on May 25, 200710.40
                  
                  2007
      Equity Incentive Plan
                  
                  Incorporated
      by reference to Exhibit 10.27 to the Company’s Registration Statement on
      Form SB-2, as filed with the SEC on May 25, 200710.41
                  
                  Production
      Payment Purchase Agreement and Assignment, dated June 12, 2007 by and
      between the Company and Crestview Capital Master, LLC
                  
                  Incorporated
      by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
      for June 13, 2007, as filed with the SEC on June 19,
  200710.42
                  
                  Registration
      Rights Agreement, dated June 12, 2007 by and between the Company and
      Crestview Capital Master, LLC
                  
                  Incorporated
      by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      for June 13, 2007, as filed with the SEC on June 19,
  200710.43
                  
                  Security
      Agreement, dated June 12, 2007 by and between the Company and Crestview
      Capital Master, LLC
                  
                  Incorporated
      by reference to the Company’s Registration Statement on Form SB-2, as
      filed with the SEC on June 29, 200710.44
                  
                  Notice
      of Assignment, dated June 12, 2007 by and between the Company and
      Crestview Capital Master, LLC
                  
                  Incorporated
      by reference to the Company’s Registration Statement on Form SB-2, as
      filed with the SEC on June 29,
2007
  42
  10.45
                
                Settlement
      Agreement and Release dated September 14, 2007, by and among Steven D.
      Craig, Estate of Collette Crater-Craig and the Company
                
                Provided
      herewith10.46
                
                Addendum
      to Production Payment Purchase Agreement between the Company and Ashdown
      Milling Company LLC dated February 6, 2008
                
                Provided
      herewith
 10.47
                
                Amended
      Settlement Agreement and Release dated March 21, 2008, by and among Steven
      D. Craig, Estate of Collette Crater-Craig and the Company
                
                Provided
      herewith21
                
                Subsidiaries
      of Golden Phoenix Minerals, Inc.
                
                None31.1
                
                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




43