SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

                                       OR

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

                          COMMISSION FILE NO. 000-22905

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

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

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

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

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

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

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

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ___

      The  registrant  had revenues of $118,007 for the year ended  December 31,
2002.

      The   aggregate   market  value  of  the  voting   common  stock  held  by
non-affiliates  of the  Registrant  on May 13,  2003,  was  approximately  $14.1
million, based on the average bid and asked prices on such date of $0.205.

      The  Registrant had  87,078,856  shares of common stock,  no par value per
share, outstanding on May 13, 2003.

<PAGE>

                                     PART I


ITEM 1.  BUSINESS


GENERAL DESCRIPTION OF BUSINESS

      FORWARD-LOOKING  STATEMENTS AND  ASSOCIATED  RISKS.  THIS FILING  CONTAINS
FORWARD-LOOKING  STATEMENTS.  SUCH FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS
REGARDING,  AMONG  OTHER  THINGS,  (A) OUR  ESTIMATES  OF MINERAL  RESERVES  AND
MINERALIZED MATERIAL, (B) OUR PROJECTED SALES AND PROFITABILITY,  (C) OUR GROWTH
STRATEGIES,  (D) ANTICIPATED  TRENDS IN OUR INDUSTRY,  (E) OUR FUTURE  FINANCING
PLANS,  (F)  OUR  ANTICIPATED  NEEDS  FOR  WORKING  CAPITAL,  (G)  OUR  LACK  OF
OPERATIONAL EXPERIENCE,  AND (H) THE BENEFITS RELATED TO OWNERSHIP OF OUR COMMON
STOCK.  FORWARD-LOOKING  STATEMENTS,  WHICH INVOLVE ASSUMPTIONS AND DESCRIBE OUR
FUTURE PLANS, STRATEGIES, AND EXPECTATIONS, ARE GENERALLY IDENTIFIABLE BY USE OF
THE  WORDS  "MAY,"  "WILL,"  "SHOULD,"   "EXPECT,"   "ANTICIPATE,"   "ESTIMATE,"
"BELIEVE,"  "INTEND,"  OR  "PROJECT"  OR THE  NEGATIVE  OF THESE  WORDS OR OTHER
VARIATIONS  ON THESE  WORDS OR  COMPARABLE  TERMINOLOGY.  THIS  INFORMATION  MAY
INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, AND OTHER FACTORS THAT MAY CAUSE
OUR ACTUAL RESULTS, PERFORMANCE, OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM
THE FUTURE RESULTS,  PERFORMANCE,  OR  ACHIEVEMENTS  EXPRESSED OR IMPLIED BY ANY
FORWARD-LOOKING  STATEMENTS.  THESE STATEMENTS MAY BE FOUND UNDER  "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF  OPERATIONS"  AND
"BUSINESS,"  AS WELL AS IN THIS FILING  GENERALLY.  ACTUAL EVENTS OR RESULTS MAY
DIFFER MATERIALLY FROM THOSE DISCUSSED IN FORWARD-LOOKING STATEMENTS AS A RESULT
OF VARIOUS  FACTORS,  INCLUDING,  WITHOUT  LIMITATION,  THE RISKS OUTLINED UNDER
"RISK FACTORS" AND MATTERS DESCRIBED IN THIS FILING GENERALLY. IN LIGHT OF THESE
RISKS AND  UNCERTAINTIES,  THERE CAN BE NO  ASSURANCE  THAT THE  FORWARD-LOOKING
STATEMENTS CONTAINED IN THIS FILING WILL IN FACT OCCUR AS PROJECTED.


THE COMPANY

      Golden Phoenix plans to produce  economically  valuable  minerals from the
mineral properties we currently control, and from mineral properties that we may
acquire in the future. We have specialized in acquiring and consolidating large,
advanced  exploration-stage  properties with near-term  production potential and
future growth through exploration  discoveries.  Our acquisition and development
emphasis is focused on properties  containing gold,  silver,  copper,  and other
strategic minerals located in Nevada and the Western United States.

      Our five  corporate  directors  and  officers are  individuals  with prior
management  experience who specialize in exploration and development  with large
and small  mining  companies.  This  team has in excess of 120 years of  mineral
exploration,  development,  and gold production  experience,  with career tracks
beginning at entry-level, then to mid-management and executive positions.

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

      Management  believes  that  Golden  Phoenix  has  created  the basis for a
competitive  minerals  exploration/development  and operational  company through
assembling a unique group of individuals  with experience in target  generation,
ore discovery, resource evaluation, mine development and mine operations.

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

      There are numerous  levels of government  regulation  associated  with the
activities  of  exploration  and  mining  companies.   Permits,   which  we  are
maintaining  and  amending  include  "Notice  of Intent"  to  explore,  "Plan of

                                       1
<PAGE>

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 agency will timely approve,  if at all, the necessary permits for
our current  operations or other  anticipated  operations,  currently we have no
reason to believe that necessary  permits will not be issued in due course.  The
total cost and effects on our operations of the  permitting and bonding  process
cannot be  estimated  at this  time.  The cost will vary for each  project  when
initiated and could be material.


COMPETITION AND GOLD PRICE

      The mining industry has historically been intensely competitive.  However,
over the last ten years imposition of numerous regulatory requirements and claim
rental policies by the United States  Government and the general exodus of major
gold  corporations  from the U.S.  to  pursue  mineral  exploration  in  foreign
countries  has allowed  large areas of very  prospective  mineralized  ground to
become open for location and acquisition.  Nonetheless,  the increasing price of
gold in 2002 and 2003 to date has led to a number  of  companies  to begin  once
again to  aggressively  acquire  claims  and  properties.  Gold  prices  in 2002
increased  from $278 to $349 and  closed at $347.  During  the first  quarter of
2003, the gold price reached $382 in early  February  before falling to close at
$335 at the end of March.


CAPITAL EQUIPMENT

      In the next twelve months, we anticipate purchasing some capital equipment
for the Mineral Ridge mine, which is support equipment for the process and leach
facilities including a small dozer, front-end loader, forklift, and a small haul
truck. The Company plans to conduct all mining with contractors. However, if the
Company decides to do its own mining,  then a fleet of mining equipment would be
purchased or leased. The equipment required would include a bulldozer, front-end
loader,  road grader,  haul trucks,  blast-hole  drill rigs,  and field  support
vehicles.  We also plan to purchase at least three  pickup  trucks for our staff
professionals only. All contractors will provide their own vehicles.


MINING PROPERTIES AND PROJECTS

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

<TABLE>

==========================================================================================
                        GOLDEN PHOENIX PROBABLE RESERVES
==========================================================================================
<CAPTION>
                                                                               RECOVERABLE
PROPERTY                    PROBABLE RESERVE      GRADE    RECOVERY   PRICE      METAL
------------------------------------------------------------------------------------------
<S>                         <C>               <C>           <C>    <C>        <C>

Mineral Ridge Gold Project  2,600,000 tons    0.076 opt     81%    $325/oz    172,000 oz
------------------------------------------------------------------------------------------
Borealis Gold Project        860,000 tons     0.126 opt     75%    $325/oz     81,000 oz

==========================================================================================
</TABLE>

      MINERAL RIDGE GOLD MINE, ESMERALDA COUNTY, NEVADA

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

      On November 8, 2000,  Golden Phoenix purchased the Mineral Ridge gold mine
out of bankruptcy by making a purchase  payment of $225,000 and assumed  certain
liabilities  associated with the power company serving the property.  Prior mine
operators had spent about $30 million on the property,  which includes about $18
million  in  office,  process,  and  ancillary  facilities,  about $2 million in
engineering and feasibility studies, about $6 million in drilling and assays, $2
million in past permitting  costs,  and the remainder in site  preparation.  The
property comes with an active leach pad and ore exposed in the Drinkwater pit.

      The Mineral Ridge property holds four separate  economically mineable gold
deposits,  the Drinkwater,  Mary,  Brodie, and  Solberry/Bluelite.  The combined
reserves,  at a 0.030 troy  ounces of gold per ton cut off grade,  is  2,600,000
tons  averaging  0.076  troy  ounces  of  gold  per ton for  172,000  ounces  of
recoverable  gold at an 81 percent  recovery.  The reserve was calculated  using

                                       2
<PAGE>

      Minesight(TM)  software and has been  reviewed by Behre Dolbear & Company,
Inc., an outside  consultant.  Included in the reserve  estimate of  recoverable
gold are  10,000  recoverable  ounces  of gold  contained  in the leach pad that
remain to be recovered by cyanide  leaching.  The property holds further mineral
potential  with  identified  targets  potentially   containing  additional  gold
mineralization.   As  of  December  31,  2002  total   expenditures,   excluding
acquisitions costs, on the Mineral Ridge property have been $ 3,141,376.

      The  Mineral  Ridge  mine was  purchased  in late 2000 for  $225,000.  The
company has filed a $1.8  million  interim  reclamation  bond,  which allows the
company to hold the property while other permitting is underway. The company has
been working to obtain a new amended  operating permit and reclamation plan, and
to obtain the operating  capital required to put the mine into production.  Once
these goals are achieved,  our operating plan provides for us to realize 1) gold
production from the leach pad through the addition of new cyanide to the regular
leach fluids to increase gold recovery,  2) significant new gold production from
initiating  open pit and possibly  underground  mining,  which will be processed
through a cyanide  vat leach gold  recovery  plant,  and 3)  recovery of salable
byproduct industrial minerals derived from the gold-bearing  alaskite and quartz
rocks.

      The total value of the gold sales over five-year mine life, at a $325 gold
price, is estimated to be $59 million.  The total operating cost, which includes
royalty  payments,  refining  costs,  mining costs,  milling costs,  reclamation
costs,  and operating  expenses is estimated to be $36 million and capital costs
of $6 million.  The net cash flow, including royalties and federal income taxes,
is estimated to be $12 million.  As of December 31, 2002, Mineral Ridge mine has
produced  1,974  ounces of gold and 983  ounces of silver for a net value to the
company of $462,948.

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


      LAND AND ROYALTIES

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

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


      RECENT MINE AND PROPERTY OWNERSHIP AND DISCUSSION OF PAST RESULTS

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

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

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

                                       3
<PAGE>

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

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


      CHANGES FOR FUTURE OPERATIONAL SUCCESS

      Golden  Phoenix has initiated  numerous  studies to better  understand the
reasons  for past  failures  at the mine.  The  results  of these  studies  were
revealing  in their  conclusions  and are  listed by impact  to the  mining  and
recovery operation.

      GOLD RECOVERY.  Past operators  placed ore containing about 100,000 ounces
of gold onto the leach pad. Since 1997 when leaching was  initiated,  only about
54,000 ounces of gold was recovered.  Our metallurgical  studies have discovered
that the deposit  contains a large  quantity of visible,  chunky gold along with
micron  gold.  Golden  Phoenix  initially  plans to  recover  a  portion  of the
approximate  46,700 ounces remaining on the pad by adding cyanide to the crushed
ore on the leach pad. Any  remaining  coarse gold should be recovered at a later
date.  Future  processing,  when mining is underway,  will require a mill with a
flowsheet  that  recovers  the large gold before the ore goes into a cyanide vat
leach recovery plant.  The leach pad will no longer be used other than for waste
rock storage.

      ORE  CRUSHING.  Evaluation of the crushing  plant,  which crushes rocks as
large as 3 feet in diameter  down to  1/8-inch  particles,  found that  numerous
design problems exist in the plant. The biggest problem is that the plant has an
internal 60 percent recycle load,  which means that rock that was properly sized
was not removed  from the flow  stream,  but had to be carried  along with rocks
requiring  additional crushing.  Furthermore,  the plant had no internal storage
pile capacity, so that if a piece of equipment required repair, the entire plant
had to be shut down.  Golden Phoenix plans to reconfigure  the entire crusher so
that it operates  efficiently  and cost  effectively.  Crushed  products will go
directly to a nearby mill that we  anticipate  will be  constructed  in the next
twenty-four months.

      MINING GRADE CONTROL.  Past operators used oversized equipment to mine the
ore zone,  and up to 40 percent  dilution  of the ore with waste rock  occurred.
Golden Phoenix plans to conduct  mining with properly sized  equipment that will
reduce  dilution  and  maintain  the grade of the ore that goes to the  crushing
plant and mill.


      FURTHER POTENTIAL

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

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

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

                                       4
<PAGE>

and 5) the  Brodie-Missouri  WNW  structural  zone.  We believe that by drilling
these targets, the mineable ore reserves held on the property will increase.


      BOREALIS PROJECT, MINERAL COUNTY, NEVADA

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

      The  property  is  held  under  a  lease   agreement   with  the  Borealis
Partnership,  which  consists of three separate  individuals  who combined their
separate properties to facilitate leasing the entire mineralized zone covered by
the three  properties.  Subsequent to acquiring this lease,  two of the partners
have become  shareholders  in the Company;  one is a minor  shareholder  and the
other is John Whitney who is a major  shareholder in the company.  The lease was
entered into on January 24, 1997 and control of the property is maintained  with
monthly advanced royalty payments.  Current monthly payments are $8,000, and the
company is about 5 months behind in these  payments.  The production  royalty is
calculated  by dividing  the price of gold by 100. As of December 31, 2002 total
expenditures  including  acquisition  cost on the  Borealis  property  have been
$1,919,179.

      On May 13, 2003 the Company  signed an  Agreement  in  Principle  to joint
venture its  Borealis  gold project  with  Gryphon  Gold  Corporation,  a Nevada
incorporated  company.  Under the terms of the  agreement  Gryphon  Gold has the
right to  acquire a 50%  interest  in the  property  after  incurring  qualified
expenditures  on work  programs  or making  payments  to Golden  Phoenix  in the
aggregate of five million dollars over a four-year period.  Gryphon Gold has the
right to acquire an additional 20% by delivering to Golden Phoenix a feasibility
study for mine production  based on a mineable reserve of 500,000 ounces of gold
or gold  equivalent  or by  incurring  an  additional  four  million  dollars in
expenditures.  Gryphon has paid Golden Phoenix  $25,000,  in  consideration of a
75-day due diligence period and will pay an additional $100,000 upon signing the
definitive joint venture agreement.

      Echo Bay Minerals  and their  predecessors  mined the property  from eight
pits  beginning in 1981.  The mine  processed 10.7 million tons of gold ore that
averaged  0.059 ounces of gold per ton,  which yielded  635,000  ounces of gold.
Echo Bay terminated  oxide ore mining in 1991,  even though we believe they knew
that the property still had numerous unmined oxide and sulfide deposits

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

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

      In total the  Company  identified  a probable  reserve of 860,000  tons of
oxidized  gold ore  averaging  0.126  ounces of gold per ton from  which  81,000
ounces of gold can be  recovered  at a 75  percent  recovery  rate.  An in house
mining engineer using Minesight(TM)  software,  after the drill hole information
was entered and checked into a database,  calculated the resource using industry
standard search parameters.  This probable reserve is contained in the Borealis,
Freedom Flats, East Ridge/Gold View, Polaris, and Northeast Ridge deposits.

      Mining will be by open pit and processing by cyanide  leaching.  We intend
to retain a  contract  miner to  conduct  mining,  processing,  and  reclamation
operations.  The contractor will be supervised by Golden Phoenix personnel.  The
total value of the gold sales over a six-year  mine life,  at a $325 gold price,
is estimated to be $27 million  including  silver  credits.  The total operating
cost, which includes royalty  payments,  refining costs,  mining costs,  milling
costs, reclamation costs, and operating expenses, is estimated to be $13 million
and capital  costs are estimated to be $8 million.  The net cash flow  including
federal income taxes is estimated to be $3 million.

                                       5
<PAGE>


      FURTHER POTENTIAL

We are planning to drill additional holes,  once funding is obtained,  to better
delineate  some of the  shallow  oxide  gold  deposits  that have been  defined.
Furthermore,  we also hope to drill the leach  pads to  determine  the amount of
remaining  gold left in the pads and whether  they would be economic to re-leach
for  gold.  In  addition,   we  plan  to  further  explore   identified  sulfide
mineralization  lying below known oxide  deposits and in the partially  explored
Graben deposit.

      CONTACT PROJECT, ELKO COUNTY, NEVADA

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

      On July 10,  1998,  Golden  Phoenix  entered  into a separate  exploration
license and  purchase  option  agreement  for the SF Lewis Trust  portion of the
Contact  Project.  The F. W.  Lewis  Inc.  Exploration  License  with  Option to
Purchase was acquired  for an initial  payment of $15,000 and 100,000  shares of
common  stock.  The  agreement  requires  Golden  Phoenix to make  monthly  cash
payments,  initially at $1,500 per month and then escalating to $2,500 per month
and will total $149,000 and to issue common shares with total cash value of $2.2
million  over the 4-1/2 year option  term which  ended  December  31,  2002.  On
February 19, 2003 Lewis and Golden  Phoenix  entered  into a First  Amendment to
Exploration  License  with Option to  Purchase,  which  extended the term of the
Agreement  to December  31, 2007 and  modified  the  requirements  for the stock
distributions  to  350,000  shares  on  January 1 and on July 1 of each year and
minimum  annual work  commitments  of  $100,000.  Monthly  payments  continue at
$2,500. As of May 1, 2003, $62,500 has been paid toward the monthly payments and
4,453,623  shares have been issued.  The option to purchase  price for the Lewis
property is $3 million cash and $1 million worth of Golden  Phoenix common stock
and can be executed at any time during the option period. The option was further
granted and extended under the First  Amendment  agreement.  The SF Lewis Trust,
which controls all the shares of F. W. Lewis,  Inc., will retain a five per cent
production  royalty on gold and silver and 4 percent on all other minerals.  The
SF Lewis Trust  production  royalty may be purchased  for $3 million cash and $2
million worth of common stock.  Golden Phoenix was obligated to expend  $250,000
on  exploration  during  1998 and $1.4  million  over the term of the 4-1/2 year
License  agreement,  which ended December 31, 2002. The  exploration  and option
agreement  was extended to December 31, 2007 in an amendment  signed on February
19, 2003.  This amendment  requires Golden Phoenix to make $2,500 per month cash
payments,  make stock payments of 350,000 shares to be paid July 1 and January 1
of each year during the term of the  agreement,  and to expend  $100,000 in work
commitment.

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

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

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

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

                                       6
<PAGE>

      The Contact copper  project  contains  mineralized  material from over 100
drill holes of 61,513,000 tons grading 0.77% copper at a 0.2% cutoff for a total
of 953,271,000  pounds of copper.  Internal to the Banner  mineralized  zone are
several  continuous  high-grade  zones  that range from five to forty feet wide.
Using  a 3%  cutoff  grade  on  these  zones,  Golden  Phoenix  calculated  this
mineralized  material to be 1,777,000  tons grading  7.17% copper for a possible
total of 254,789,000 pounds of copper.


      FURTHER POTENTIAL

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


      ALASKAN ROYALTIES

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

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

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


RECENT DEVELOPMENTS

      FUSION CAPITAL TRANSACTION

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


      STAFFING

      We have a staffing level of two key  professionals  and a full time CPA in
the Reno office. At the Mineral Ridge mine we have eight full time employees and
anticipate  adding other  permanent  staff at the Mineral Ridge operation in the
next  twelve  months.  We intend to employ  independent  contractors  to fulfill
short-term needs and obligations.

      The Company  plans to hire an  environmental  manager and chief  financial
officer,  who will oversee Company wide  responsibilities  in their specialties.
They will be assigned to the Reno  headquarters  office. As the Company prepares
to develop the Contact and  Borealis  copper and gold  projects,  we intended to
hire mine  managers,  geologists,  and engineers  will be hired to ensure proper
development  of the  projects.  It is not  known  when  these  projects  will be
developed.

                                       7
<PAGE>


      CERTAIN BUSINESS RISK FACTORS

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


      NATURE OF TITLE TO UNPATENTED MINING CLAIMS

      A majority of our properties consist of unpatented mining claims, which we
own or lease. These claims are located on federal land or involve mineral rights
that are subject to the claims procedures established by the General Mining Law.
We must make  certain  filings  with the  county in which the land or mineral is
situated and with the Bureau of Land Management and pay an annual holding fee of
$100  per  claim.  If we fail to make the  annual  holding  payment  or make the
required  filings,  our mining claim could be void or voidable.  Because  mining
claims are self-  initiated  and  self-maintained  rights,  they are  subject to
unique vulnerabilities not associated with other types of property interests. It
is difficult to ascertain the validity of  unpatented  mining claims from public
property records and, therefore,  it is difficult to confirm that a claimant has
followed all of the requisite  steps for the  initiation  and  maintenance  of a
claim.  The General  Mining Law requires the discovery of a valuable  mineral on
each  mining  claim  in order  for such  claim to be  valid,  and  rival  mining
claimants and the United  States may challenge  mining  claims.  Under  judicial
interpretations of the rule of discovery,  the mining claimant has the burden of
proving  that the mineral  found is of such  quality and  quantity as to justify
further development, and that the deposit is of such value that it can be mined,
removed  and  disposed  of at a profit.  The burden of  showing  that there is a
present  profitable  market  applies  not only to the time  when the  claim  was
located, but also to the time when such claim's validity is challenged. However,
only the federal  government  can make such  challenges;  they cannot be made by
other  individuals with no better title rights than those of the Company.  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.


      FORWARD-LOOKING NATURE OF RESERVE AND MINERALIZATION ESTIMATES

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

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

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

                                       8
<PAGE>

      o     FUEL PRICE VARIABILITY:  the cost of fuel can be a major variable in
            the cost of mining,  one which is not  necessarily  included  in the
            contract  mining  prices  obtained  from mining  contractors  but is
            passed  on to the  overall  cost of  operation.  Although  high fuel
            prices by historical  standards have been used in making the reserve
            estimates  included  herein,  future fuel prices and their impact on
            operating profitability cannot be predicted.

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

      o     CHANGES IN  ENVIRONMENTAL  AND MINING LAWS AND  REGULATIONS:  Golden
            Phoenix   believes   that  it  currently   complies   with  existing
            environmental   and  mining  laws  and  regulations   affecting  its
            operations.  The reserve  estimates  contain cost estimates based on
            requirements  compliance  with current laws and  regulations.  While
            there are no  currently  known  proposed  changes  in these  laws or
            regulations,  significant  changes have affected past operations and
            no  assurance  can be given that such  changes will not occur in the
            future.


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

      We have yet to establish  any history of  profitable  operations.  We have
incurred annual  operating losses of $3,675,756,  and $2,563,489,  respectively,
during the past two fiscal  years of  operation.  As a result,  at December  31,
2002, we had an accumulated  deficit of $13,999,723.  Our revenues have not been
sufficient  to sustain our  operations.  We expect that our revenues will not be
sufficient  to  sustain  our  operations  for  the   foreseeable   future.   Our
profitability will require the successful  commercialization  of our gold mines.
No assurances  can be given that we will be able to  successfully  commercialize
our gold mines or that we will ever be profitable.

      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, 2002,  December 31, 2001, and December 31, 2000 with
respect to their  substantial  doubt  about our ability to continue as a going
concern.  In the event that we do not obtain  additional  funding,  we will be
forced to curtail or cease our  operations.  Our ability to obtain  additional
funding  will  determine  our  ability to  continue  as a going  concern.  Our
financial  statements  do not include any  adjustments  that might result from
the outcome of this uncertainty.


      WE WILL  REQUIRE  ADDITIONAL  FINANCING  TO SUSTAIN OUR  OPERATIONS  AND
      WITHOUT IT WE WILL NOT BE ABLE TO CONTINUE OPERATIONS

      We do not  currently  have  sufficient  financial  resources to fund our
operations.   Therefore,   we  need   additional   funds  to  continue   these
operations.  Upon  effectiveness of the registration  statement which we filed
pursuant to the common stock purchase  agreement with Fusion Capital,  we only
have the right to receive $15,000 per trading day under such agreement  unless
our stock price  equals or exceeds  $0.40,  in which case the daily amount may
be  increased  under  certain  conditions  as the  price of our  common  stock
increases.  Fusion  Capital  does not have the  right  nor the  obligation  to
purchase  any shares of our common  stock on any trading  days that the market
price of our common stock is less than $0.10.

      The  extent to which we rely on Fusion  Capital  as a source of  funding
will depend on a number of factors  including,  the prevailing market price of
our  common  stock  and the  extent  to which we are  able to  secure  working
capital  from  other  sources,  such as  through  the  sale of debt or sale of
stock.  If sufficient  financing from Fusion Capital is not available or if we
are unable to commercialize  and sell our gold, we will need to secure another
source of funding in order to satisfy our working  capital  needs.  Even if we
are able to access the full $12.0  million  under the  common  stock  purchase
agreement with Fusion Capital,  we may still need additional  capital to fully
implement  our  business,  operating  and  development  plans.  The  amount of
additional  capital  that we  require  is not  known at this  time as  certain
operational  goals must be met first in order to better  estimate  our capital
requirements.  Should the financing we require to sustain our working  capital
needs be unavailable or  prohibitively  expensive when we require it, we would
be forced to curtail our business operations.

                                       9
<PAGE>


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

      The  report  of our  independent  accountants  on our  December  31,  2002
financial statements includes an explanatory  paragraph indicating that there is
substantial  doubt  about our  ability to  continue  as a going  concern  due to
substantial recurring losses from operations and significant accumulated deficit
and working capital deficit.  Our ability to continue as a going concern will be
determined by our ability to obtain additional funding and commence and maintain
successful  operations.  Our financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


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

      We are required to comply with numerous environmental laws and regulations
imposed by federal and state authorities. At the federal level, legislation such
as the Clean Water Act,  the Clean Air Act,  the RCRA,  CERCLA and the  National
Environmental  Policy  Act  impose  effluent  and waste  standards,  performance
standards,  air quality and emissions  standards and other design or operational
requirements for various components of mining and mineral processing,  including
gold and copper ore mining and  processing.  In January 2001, the Bureau of Land
Management amended its surface management  regulations to require bonding of all
hard rock mining and exploration  operations  involving greater than casual use.
The impact of bonding the Mineral Ridge Mine has been significant.  Many states,
including the State of Nevada (where all of our  properties  are located),  have
also adopted  regulations  that establish  design,  operation,  monitoring,  and
closing  requirements for mining  operations.  Under these  regulations,  mining
companies are required to provide a reclamation plan and financial  assurance to
insure  that the  reclamation  plan is  implemented  upon  completion  of mining
operations.  Additionally,  Nevada and other states require mining operations to
obtain and comply with  environmental  permits,  including permits regarding air
emissions and the protection of surface water and  groundwater.  Although we are
currently in compliance with applicable  federal and state  environmental  laws,
changes in those laws in 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.


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

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


      THE DEVELOPMENT AND OPERATION OF OUR MINING PROJECTS INVOLVE NUMEROUS
      UNCERTAINTIES

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

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

      o     estimation of reserves

      o     anticipated metallurgical recoveries;

      o     future gold prices; and

      o     anticipated capital and operating costs of such projects.

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

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

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

      o     unanticipated adverse geotechnical conditions;

      o     incorrect data on which engineering assumptions are made;

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

      o     availability and cost of processing and refining facilities;

      o     availability of economic sources of power;

      o     adequacy of water supply;

      o     adequate access to the site;

      o     unanticipated transportation costs;

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

      o     fluctuation in gold prices; and

      o     accidents, labor actions and FORCE MAJEURE events.

      Adverse effects on the operations or further  development of a project may
also adversely affect our business,  financial condition,  results of operations
and cash flow.

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

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

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

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

      o     the capital available for exploration and development.

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


      MINERAL EXPLORATION IS HIGHLY SPECULATIVE

      Exploration for minerals is highly  speculative and involves greater risks
than are inherent in many other  industries.  Many  exploration  programs do not
result in the discovery of mineralization, and any mineralization discovered may
not be of sufficient  quantity or quality to be profitably mined.  Also, because
of the  uncertainties in determining  metallurgical  amenability of any minerals
discovered,  the mere discovery of mineralization  may not warrant the mining of
the minerals on the basis of  available  technology.  No assurance  can be given
that any of the  exploration  targets on the properties we own, lease or acquire
contain (or will contain) commercially mineable mineral deposits.


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

      The profitability of gold and copper mining operations is directly related
to the market  prices of gold and copper.  The market  prices of gold and copper

                                       10
<PAGE>

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


      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, no
assurance  can be given that such  insurance  will  continue to be  available at
economically  feasible  rates,  or that our  insurance  is adequate to cover the
risks and potential liabilities associated with exploring,  owning and operating
our properties.


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

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


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

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


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

      The market  price of our common stock has been and is expected to continue
to be highly volatile. Factors, including regulatory matters, concerns about our
financial  condition,  operating  results,  litigation,  government  regulation,
developments  or disputes  relating to  agreements,  title to our  properties or
proprietary  rights,  may have a  significant  impact on the market price of our
stock.  The range of the high and low bid  prices of our  common  stock over the
last 3 years has been between $0.46 and $0.09. In addition,  potential  dilutive
effects of future  sales of shares of common  stock by  shareholders  and by the
company,  including  Fusion Capital and  subsequent  sale of common stock by the
holders of warrants and options could have an adverse effect on the price of our
securities,  which could hinder our ability to raise additional capital to fully
implement our business, operating and development plans.


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

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

ITEM 2.  PROPERTIES

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

      The  principal  offices  are leased  from  Longley  Business  Park in Reno
Nevada.  The lease is a renewable lease,  which the company has maintained since
July 1997.  The last renewal was signed in July 2002 and will expire on July 31,
2004.  The land under the Mineral Ridge mine office is leased from the Esmeralda
County school district. This lease will be terminated once the company moves the
office building to the mine site sometime during 2003.

      Golden  Phoenix's  business  is related to mineral  properties,  which are
described more specifically in Item 1 above.

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


ITEM 3.  LEGAL PROCEEDINGS

      On March 5,  2003,  William F.  Matlack,  a former  shareholder  of Golden
Phoenix,  filed a complaint  in the Second  Judicial  District  Court in and for
Washoe County,  Nevada against Golden Phoenix. The complaint relates to a former
subsidiary of Golden Phoenix,  Golden Phoenix Alaska,  and alleges,  among other
things,   breach  of  contract,   dealing  in  bad  faith,   fraud,   fraudulent
misrepresentation,  negligence, negligent misrepresentation, breach of fiduciary
duty and breach of covenant of dealing  fairly and in good faith.  The complaint
seeking (i) economic damages in excess of $10,000,  (ii) compensatory damages in
excess of  $10,000,  (iii)  punitive  damages  at the amount of  $500,000,  (iv)
interest on economic  damages at the rate  established by law and (v) reasonable
fees and costs related to the action.  On April 16, 2003,  Golden Phoenix served
on Mr. Matlack a motion to quash service of process. Golden Phoenix believes the
complaint is without substance and intends to vigorously defend this matter.


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

      None.

                                       12
<PAGE>

                                      PART II


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

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

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

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

            YEAR 2002                                   HIGH       LOW
           ----------------------------------------- ---------- ---------
            First quarter                              $0.25      $0.09
            Second quarter                             $0.55      $0.18
            Third quarter                              $0.46      $0.23
            Fourth quarter                             $0.31      $0.17
            YEAR 2003                                   HIGH       LOW
            First quarter                              $0.34      $0.17


      On May 13, 2003,  the closing price of our common stock as reported on the
Over-the-Counter  Bulletin Board was $0.19 per share. On May 13, 2003, we had in
excess of 500 beneficial  stockholders of our common stock and 87,078,856 shares
of our common stock were issued and outstanding.


DIVIDENDS

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


RECENT SALES OF UNREGISTERED SECURITIES

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

<TABLE>
<CAPTION>


                                                                   VALUE       SHARE PRICE
                                               SHARES ISSUED     RECEIVED       PER SHARE
                                               -------------   ------------  ---------------
<S>                                                <C>        <C>                      <C>

FIRST QUARTER 2002

Private Placement For Cash                         4,640,000  $  464,000.00            0.10
Exchange Of Stock For Part Of Interim
  Reclamation Bond                                 1,257,862     200,000.00            0.16
Lease - Borealis Paid In Stock                       328,235      27,900.00            0.09
Jeffrey Baclet Investor Relations                    100,000      18,500.00            0.19
The Eversull Group Investor Relations                200,000      25,000.00            0.13
                                               -------------   ------------  ---------------
  Total First Quarter 2002                         6,526,097  $  735,400.00            0.11
                                               =============  =============  ===============
</TABLE>

                                       13
<PAGE>

<TABLE>
<CAPTION>

                                                                   VALUE       SHARE PRICE
                                               SHARES ISSUED     RECEIVED       PER SHARE
                                               -------------   ------------  ----------------
<S>                                                <C>        <C>                        <C>

SECOND QUARTER 2002

Private Placement For Cash $0.10                   3,060,002  $  306,000.20              0.10
Private Placement For Cash $0.15                   5,692,504     851,375.45              0.15
Warrant Exercise                                     827,100      82,710.00              0.10
Directors Compensation For Board Meetings            109,448      17,948.00              0.16
Payments For BO Lease                                201,333      30,200.00              0.15
Fusion Capital Fund II LLC                           250,000      46,250.00              0.19
Jeffrey Baclet Investor Relations                    115,000      48,000.00              0.42
Taylor Hard Money Advisors Public Relations          400,000      60,000.00              0.15
The Eversull Group Investor Relations                100,000      35,000.00              0.35
Thomas Mancuso Consulting Services                    20,000       4,000.00              0.20
Whitney & Whitney Consulting Services                114,198      10,848.81              0.10
Whitney & Whitney Consulting Services                400,000      47,058.82              0.12
Whitney & Whitney Consulting Services                  4,459         700.00              0.16
Whitney & Whitney Consulting Services                112,786      18,609.69              0.17
Whitney & Whitney Consulting Services                 61,442      10,322.26              0.17
Newmex Nevada Inc.  Debt Service                     392,963      39,296.27              0.10
Richard Cavell Family Trust Debt Service              86,133      25,840.00              0.30
Craig & Diana B Drossell Debt Service                399,263      63,186.00              0.16
                                               -------------  -------------  ----------------
  Total Second Quarter 2002                       12,346,631  $1,697,345.50              0.14
                                               =============  =============  ================

THIRD QUARTER 2002

Private Placement For Cash $0.15                      83,334   $  12,500.00             0.15
Warrant Exercise                                     500,000      50,000.00             0.10
Whitney & Whitney Consulting Services                 99,141      17,647.06             0.18
Whitney & Whitney Consulting Services                 98,039      17,647.06             0.18
Whitney & Whitney Consulting Services                 60,435      17,647.06             0.29
Whitney & Whitney Consulting Services                110,582      35,294.17             0.32
Whitney & Whitney Debt Conversion                    350,000      35,000.00             0.10
Fusion Capital LLC Commitment Fee                  1,587,302     300,000.00             0.19
                                               -------------  -------------  ---------------
  Total Third Quarter 2002                         2,888,833  $  485,735.30             0.17
                                               =============  =============  ===============
FOURTH QUARTER 2002

Warrant Exercise                                     100,000   $  10,000.00             0.10
David Caldwell Director Compensation                 100,000      17,974.00             0.18
Allan Marter Director Compensation                   100,000      17,974.00             0.18
Contact Lease Payment                              2,753,623     450,000.00             0.16
Payments For BO Lease                                 78,400      11,760.00             0.15
Chuck DuCharme Finders Fee                            50,333       6,549.95             0.13
Whitney & Whitney Consulting Services                 25,570       5,030.89             0.20
Whitney & Whitney Consulting Services                 57,403      11,294.05             0.20
Whitney & Whitney Consulting Services                 52,947      14,772.21             0.28
Fusion Capital Fund Debt For Professional
  Services                                           200,000      37,000.00             0.19
Whitney & Whitney Debt Conversion                    300,000      30,000.00             0.10
Convertible Note Conversion                           44,323      13,296.90             0.30
Fusion Capital Fund Advance Against Equity Line    2,000,000     540,000.00             0.27
                                               -------------  -------------  ---------------
  Total Third Quarter 2002                         5,862,599  $1,165,652.00             0.20
                                               =============  =============  ===============
FIRST QUARTER 2003

Warrant Exercise At $0.10                          9,414,137  $  941,413.70             0.10
Warrant Exercise At $0.15                            446,668      67,000.20             0.15
Payments For BO Lease                                253,800      42,600.00             0.17
                                               -------------  -------------  ---------------
  Total First Quarter 2003                        10,114,605  $1,051,013.90             0.10
                                               =============  =============  ===============
</TABLE>

                                       14
<PAGE>

<TABLE>
<CAPTION>

                                                          EXERCISABLE
                                                            OPTIONS
                                           SHARES OWNED   OR WARRANTS   PERCENTAGE
                                           -------------  ------------- ----------------
<S>                                         <C>           <C>           <C>

FIRST QUARTER 2003
Warrant Exercise at $0.10                      9,294,137  $ 929,413.70              0.10
Warrant Exercise at $0.15                        446,668     67,000.20              0.15
Payments for BO lease                            253,800     42,600.00              0.17
                                            ------------- ------------- ----------------
  Total first quarter 2003                     9,740,805  $ 996,413.90              0.10
                                            ============  ============  ================
</TABLE>

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


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

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


OVERVIEW

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

      Golden Phoenix  purchased the Mineral Ridge mine in late 2000 for $225,000
out of bankruptcy and assumed certain liabilities associated with this property.
The  Company  has been  working  to obtain a new  amended  operating  permit and
reclamation  plan, and to obtain the operating  capital required to put the mine
into production.  Once these goals are achieved, our operating plan provides for
us to realize 1) gold  production from the leach pad through the addition of new
cyanide to the regular leach fluids to increase gold  recovery,  2)  significant
new gold production from  initiating open pit and possibly  underground  mining,
which  would be  processed  through a new  gravity  and  cyanide  vat leach gold
recovery plant, and 3) recovery of salable byproduct industrial minerals derived
from the  gold-bearing  alaskite and quartz  rocks.  The total value of the gold
sales over the six-year mine life, at a $325 gold price,  is estimated to be $59
million.  The total operating cost,  which includes royalty  payments,  refining
costs, mining costs,  milling costs,  reclamation costs, and operating expenses,
is estimated to be $36 million.  Capital cost, including reclamation bonding, is
estimated  to be $6 million.  The net income  after taxes is estimated to be $12
million.

      The Borealis  property is held under a lease  agreement  with the Borealis
Partnership,  which  consists of three separate  individuals  who combined their
separate properties to facilitate leasing the entire mineralized zone covered by
the three  properties.  Mining  will be by open pit and  processing  by  cyanide
leaching.  We intended to retain a contract miner to conduct  mining,  crushing,
and  reclamation  operations.   Golden  Phoenix  personnel  will  supervise  the
contractor. The total value of the gold sales over a 6-year mine life, at a $325
per ounce gold price, is estimated to be $27 million  including  silver credits.
The total  operating  cost,  which includes  royalty  payments,  refining costs,
mining costs,  milling costs,  reclamation  costs,  and operating  expenses,  is
estimated to be $13 million and capital costs,  including  reclamation  bonding,
are estimated at $8 million. The net cash flow including federal income taxes is
estimated to be $3 million.

      The  Contact  property  is  held  through  agreements  with  two  separate
entities,  the  International  Enexco Joint Venture and F. W. Lewis, Inc. Golden
Phoenix's  operating control over property owned by these two entities allows it

                                       15
<PAGE>

to combine deposits within the district allowing for economic mining,  which was
previously  not possible.  Mining will be by open pit and  processing by solvent
extraction-electro-wining  leaching.  We intend to  retain a  contract  miner to
conduct mining,  crushing, and reclamation operations.  Golden Phoenix personnel
will supervise the contractor. The total value of the copper sales over a 4-year
mine life, at a $0.85 copper price,  is estimated to be $100 million.  The total
operating cost, which includes royalty payments,  refining costs,  mining costs,
milling costs,  reclamation costs, and general and administrative  expenses,  is
estimated to be $65 million and capital costs, including reclamation bonding, of
an estimated $25 million.  The net cash flow  including  federal income taxes is
estimated to be $5 million.

      The Company has a history of operating losses and we expect to continue to
incur operating  losses in the near future as we initiate  mining  operations at
our three mines and  conduct  additional  exploration  in their  vicinity.  As a
development  stage company we have been funded primarily through stock sales and
loans from  officers  and  shareholders  with the  addition of revenue from gold
sales through the  production  from the Mineral Ridge mine. We intend to develop
and mine  existing  reserves  and to further  delineate  additional,  identified
mineral  deposits at our three mines. We also intend to explore for undiscovered
deposits on these three  properties  and to acquire and explore new  properties,
all with the view to enhancing the value of such  properties.  We have been open
to and will  continue to entertain  possible  joint  ventures  with other mining
company  partners.  Except for the  agreement in principal  executed May 6, 2003
with  Gryphon Gold  Corporation,  several  potential  joint  ventures  have been
explored but none has yet come to fruition.

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

      The  report  of our  independent  accountants  on our  December  31,  2002
financial statements includes an explanatory  paragraph indicating that there is
substantial  doubt  about our  ability to  continue  as a going  concern  due to
substantial recurring losses from operations and significant accumulated deficit
and working capital deficit.  Our ability to continue as a going concern will be
determined by our ability to obtain additional funding and commence and maintain
successful  operations.  Our financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


CRITICAL ACCOUNTING POLICIES

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

      Several of those critical accounting policies are as follows:

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

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

                                       16
<PAGE>

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

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

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

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

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

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

      Future  closure,  reclamation  and  environment-related  expenditures  are
difficult  to  estimate  in  many  circumstances  due to  the  early  stages  of
investigation,  uncertainties  associated with defining the nature and extent of
environmental contamination,  the uncertainties relating to specific reclamation
and remediation  methods and costs,  application  and changing of  environmental
laws, regulations and interpretations by regulatory authorities and the possible
participation of other  potentially  responsible  parties.  Reserves for closure
costs, reclamation and environmental matters totaled approximately $1,820,000 at
December 31, 2002. We anticipate  that  expenditures  relating to these reserves
will be made over the next five to ten  years.  It is  reasonably  possible  the
ultimate  cost of  remediation  could  change in the future and that  changes to
these estimates could have a material effect on future operating  results as new
information becomes known.


NEW ACCOUNTING PRONOUNCEMENTS

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

      SFAS NO. 143 -- In August 2001,  the FASB issued SFAS No. 143,  ACCOUNTING
FOR ASSET RETIREMENT  OBLIGATIONS,  which established a uniform  methodology for
accounting for estimated  reclamation and abandoned costs. The statement will be
adopted  January 1, 2003,  when the Company  will record the  estimated  present
value of reclamation liabilities and increase the carrying amount of the related
asset. Subsequently, the reclamation costs will be allocated to expense over the
life of the related  assets and will be adjusted for changes  resulting from the
passage of time and  revisions  to either  the timing or amount of the  original
present value estimate.  The Company is in the process of quantifying the effect
of adoption.

      SFAS NO. 145 -- On April 30, 2002,  the FASB issued FASB Statement No. 145
(SFAS 145),  "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement  No. 13,  and  Technical  Corrections."  SFAS 145  rescinds  both FASB
Statement No. 4 (SFAS 4),  "Reporting  Gains and Losses from  Extinguishment  of
Debt,"  and  the  amendment  to  SFAS  4,  FASB  Statement  No.  64  (SFAS  64),
"Extinguishments  of Debt Made to Satisfy  Sinking-Fund  Requirements."  Through
this  rescission,  SFAS 145 eliminates the  requirement (in both SFAS 4 and SFAS

                                       17
<PAGE>

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

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

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

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


RESULTS OF OPERATIONS


      RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002 COMPARED
      TO FISCAL YEAR ENDED DECEMBER 31, 2001

      We  generated  $118,007 in  operational  revenue for the fiscal year ended
December  31, 2002,  as compared to $343,038 for the fiscal year ended  December
31,  2001,  a decrease  of $225,031 or 65.6%.  Our  revenues  for the year ended
December  31, 2002 were  derived  from the  production  of gold from the Mineral
Ridge  mine.  The  reduction  in  revenues  in 2002  are  due to  lack of  final
reclamation  permit  that  would have  allowed  the  addition  of cyanide to the
processing  circuit  and  additional  gold  leach from the  existing  heap leach
material at the mine.

      Development   costs  have  been  incurred  in  connection  with  just  the
properties in Nevada.  These costs have been incurred for the location of mining

                                       18
<PAGE>

claims, and field examinations to determine the potential occurrence of economic
mineralization on the different properties.  Other costs include the compilation
of historic data on the properties to assist in the evaluation of the properties
and the planning of further development and exploration.

      The Following  table  describes  the results of operations  for the fiscal
year ended December 31, 2002 compared to fiscal year ended December 31, 2001.

DESCRIPTION                      2002             2001           DIFFERENCE
-------------------------------- ----------     ---------     ------------------

Finance Charges (1)              $253,231       $189,392      $     63,839
Plant Operations (2)              308,637        293,577            15,000
Bad Debt (3)                       52,203              0            52,203
Consultants (4)                   108,518         25,735            82,783
Directors Fees (5)                 43,779              0            43,779
Investor Relations (6)            429,092         50,453           378,639
Lease payments (7)                930,620        728,000           202,620
License & Permits (8)              68,901         27,502            41,399
Payroll (9)                       311,270        249,513            61,757
Professional Fees (10)            194,239        259,611           (65,372)


(1)   The change in the finance charge is primarily due to the change in accrual
      of interest on unpaid salaries for Michael Fitzsimonds,  Steven Craig, and
      our CPA. This interest was not accrued in previous years. We also have the
      finance  charge  for  the  letter  of  credit  that  secures  the  Interim
      Reclamation Bond for Mineral Ridge.

(2)   The modest  change in the plant  operation  cost is due to  adjustment  of
      hourly  rates for some of our  employees at the mine and the addition of a
      mining engineer for the project. We had savings in some of the operational
      areas that allowed for the modest  increase in total cost.

(3)   During 2002 it was  decided to write off an  investment  in an  industrial
      mineral  company  that  continues to have  problems  with  permitting  and
      raising  sufficient  capital to sustain its self.  We have not given up on
      the company  but are not  planning  to put any  further  capital  into the
      venture.  If we do  see  a  return  then  we  will  treat  the  income  by
      appropriate accounting methods to reverse the write off. We also wrote off
      two small debts from ex-employees that are to small to pursue collections.

(4)   During the year we have undertaken several engineering studies for Mineral
      Ridge Mine.  Approximately  $65,720 of the increase can be  attributed  to
      Whitney & Whitney who has an ongoing consulting  contract with the company
      for  assistance  with  engineering  studies.  These include  evaluation of
      changing the recovery process at the mine from a heap leach operation to a
      full  gravity/cyanide  vat leach mill. This will be an on going evaluation
      during  the next  two  years  that  will  include  a plant  design  if the
      evaluation is positive. We also had some additional  metallurgical testing
      completed for the current Reclamation Permit submitted to the Nevada State
      Department of Environmental Protection.

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

(6)   The increase in public  relations is primarily due to increased  costs for
      investor  relations  activities  during 2002.  These include fees for some
      outside groups in connection  with the Company's  private  placements that
      allowed the company to operate the Mineral Ridge mine and post the interim
      reclamation  bond. There were also fees paid in connection with the equity
      financing from Fusion Capital and other debt financings that have not been
      completed  at this  time.

(7)   The increase in lease payments can be attributed to a payment  $450,000 in
      common stock during the fourth quarter for the Contact property.  This was
      a scheduled  payment  that we were asked to hold by the owner since it was
      in common stock. The payments are calculated for the time period that they
      were due but not distributed  until requested by the owner.  There will be
      further  payments  in the future for this  project.

(8)   The  increase in license and permits can be  attributed  to  increases  in
      permit fees for Mineral  Ridge.

(9)   The  increase  in  payroll  is due to an  accounting  change on accrual of
      deferred  salaries for Michael  Fitzsimonds and Steven Craig that have not
      shown as an accrual in the past.  This  accounting  change  increased  the
      payroll that is being  accrued by  approximately  $320,000.  This deferred
      payroll has been noted in our filings  since the  beginning  but was never
      accrued  until 2002.  The other  change for the year is the addition of an
      executive  assistant to the Reno office.

(10)  The change in  professional  fees for the year is due to lower  legal fees
      associated with Mineral Ridge mine.

      Operating expenses totaled $3,675,756 for 2002, compared to $2,563,489 for
2001. The increase is  primarily  attributable  to  increased   professional and
consulting fees of  approximately  $480,000,  mineral property lease and minimum
work commitment expenses on the Contact property of approximately $326,000,  and
bad debt expense of approximately $52,000.


LIQUIDITY AND CAPITAL RESOURCES

      Since Golden  Phoenix's  incorporation  in June 1997,  our  expenses  have
exceeded  sales  resulting  in an  accumulated  deficit of  approximately   $9.9
million at December  31, 2001 and  approximately  $14.0  million at December 31,
2002.

                                       19
<PAGE>

      As of December 31, 2002,  we had $15,940 in cash plus $12,674 of available
interest from the restricted  reclamation  cash funds. A significant  portion of
the working  capital is allocated to the Mineral Ridge mine,  the Contact copper
property and the Borealis gold property.  We anticipate  total  expenditures for
year 2003 for general and administrative  expenses to be approximately  $250,000
and for exploration and property holding costs to be  approximately  $1,000,000.
Exploration,  development  and holding  expenditures  include  $300,000  for the
Mineral Ridge gold mine,  $200,000 for the Lewis Contact Property,  $350,000 for
the  International  Enexco  Contact  joint  venture,  $200,000  for the Borealis
project, $50,000 for future Nevada land holding costs and $40,000 for generative
exploration. These amounts could increase or decrease significantly, at any time
during the fiscal year, based on  exploration/development  results and decisions
about releasing or acquiring  additional  properties,  among other factors.  The
Borealis  property lease  payments are $8,000 per month.  Payments to the end of
December  2002 total  $76,720.  The total  Contact  payment is $6,500 per month,
which is  divided  as $2,500  for F. W.  Lewis  Inc.  lease and  $4,000  for the
International  Enexco  joint  venture.  The total  payments  through  the end of
December 2002 are $7,500. The payments are payable in cash.

      During 2002, our liquidity needs were met from: (i) a private placement of
restricted  shares of  $1,833,875,  (ii) the  issuance  of stock to vendors  and
employees  for  services  valued  at  $992,969,  and  (iii)  the  conversion  of
outstanding  debt and  related  interest  to  common  stock of  $651,983.  As of
December 31, 2002 the Company had 76,881,842 shares of common stock outstanding,
which the Company has  recognized as  $12,340,490  of paid in capital  including
cash and services.  As of December 31, 2002,  the Company had current  assets of
$71,048  compared to current  liabilities  of $4,263,730  resulting in a working
capital deficit of $4,192,682. Total current liabilities decreased approximately
$11,402.

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

      During the twelve months ended December 31, 2002, we raised  approximately
$1.83 million from the sale of restricted shares of common stock. The funds were
used to reduce outstanding debt and continue improvements and repairs at Mineral
Ridge.

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

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

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

      Subsequent to December 31, 2002,  the Company  entered into two additional
amendments to the  Exploration  License with Option to Purchase  Agreement  with
F.W. Lewis, Inc. that extended the term of the exploration license and clarified
certain  minimum work  commitments of the Company.  See Note 10 to our financial
statements for the year ended December 31, 2002 for additional details.


ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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


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

         a)    Previous Independent Accountants

                                       20
<PAGE>

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

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

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

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

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

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

      b)    New Independent Accountants

      On February 25, 2003,  Golden Phoenix engaged HJ & Associates,  LLC ("HJ &
Associates")  as its  principal  accountant  to audit  the  Company's  financial
statements.  Golden  Phoenix did not consult with HJ & Associates on any matters
described in paragraphs  (a)(2)(i) and  (a)(2)(ii) of Regulation  S-B during the
Company's two most recent fiscal years or any subsequent interim period prior to
engaging HJ & Associates.

                                       21
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                              FINANCIAL STATEMENTS
                                DECEMBER 31, 2002






                                       F-1

<PAGE>

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

Independent Auditors' Reports.............................................. F-3

Balance Sheet.............................................................. F-5

Statements of Operations and Other Comprehensive Income (Loss)............. F-7

Statements of Stockholders' Equity (Deficit)............................... F-9

Statements of Cash Flows................................................... F-27

Notes to the Financial Statements.......................................... F-29


                                       F-2
<PAGE>

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

To the Board of Directors and Stockholders
Golden Phoenix Minerals, Inc.
(A Development Stage Company)
Reno, Nevada

We have audited the accompanying balance sheet of Golden Phoenix Minerals,  Inc.
(a  development  stage  company)  as of  December  31,  2002,  and  the  related
statements of operations and other  comprehensive  income (loss),  stockholders'
equity  (deficit),  and cash flows for the year ended December 31, 2002 and from
inception on June 2, 1997 through December 31, 2002. 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 audit. The related
statements of operations and other  comprehensive  income (loss),  stockholders'
equity (deficit),  and cash flows of Golden Phoenix Minerals, Inc (a development
stage  company)  from  inception on June 2, 1997 through  December 31, 2001 were
audited by other auditors whose report, dated April 13, 2002, on those financial
statements  included an explanatory  paragraph that expressed  substantial doubt
about the Company's  ability to continue as a going concern.  Our opinion on the
statements of operations and other  comprehensive  income (loss),  stockholders'
equity  (deficit) and cash flows from inception on June 2, 1997 through December
31, 2001,  insofar as it relates to amounts for prior periods  through  December
31, 2001, is based solely on the report of other audits.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit 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  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Golden Phoenix Minerals, Inc (a
development  stage  Company).  at December 31, 2002 and from inception  (June 2,
1997)  to  December  31,  2002  and the  results  of its  operations  and  other
comprehensive  income (loss) and its cash flows for the year ended  December 31,
2002, in conformity with accounting  principles generally accepted in the United
Stated of America.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue  as a going  concern.  As  discussed  in Note 2 to the  financial
statements, the Company has generated significant losses from operations, has an
accumulated  deficit  of  $13,999,723  and  has a  working  capital  deficit  of
$4,192,682 at December 31, 2002, which together raises  substantial  doubt about
the  Company's  ability to continue as a going  concern.  Management's  plans in
regard to these matters are also  described in Note 2. The financial  statements
do not  include  any  adjustments  that might  result  from the  outcome of this
uncertainty.


HJ & Associates, LLC
Salt Lake City, Utah
May 12, 2003

                                       F-3
<PAGE>
                 Report of Independent Certified Public Accountants


To the Board of Directors and Stockholders
Golden Phoenix Minerals, Inc.
(A Development Stage Company)
Reno, Nevada

We  have  audited  the   accompanying   statements  of   operations   and  other
comprehensive  income (loss),  stockholders'  equity (deficit) and cash flows of
Golden Phoenix  Minerals,  Inc. (a development  stage  company)as of and for the
year ended  December  31, 2001 and from  inception of the  development  stage on
June 2, 1997  through  December 31, 2001.  These  financial  statements are  the
responsibility of Golden Phoenix Minerals, Inc.'s management. Our responsibility
is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit 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 audit  provides a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  results  of Golden  Phoenix  Minerals,  Inc.'s (a
development  stage company)  operations and other  comprehensive  income (loss),
changes in stockholders'  equity (deficit) and its cash flows for the year ended
December 31, 2001 and from  inception of the  development  stage on June 2, 1997
through  December 31, 2001, in conformity with accounting  principles  generally
accepted in the United States.

The accompanying  financial  statements have been prepared  assuming the Company
will continue as a going concern.  As discussed in Note 2, the Company's ability
to  generate  sufficient  cash flows to meet its  obligations  and  sustain  its
operations,  either  through future  revenues and /or additional  debt or equity
financing,  cannot  be  determined  at  this  time.  These  uncertainties  raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's  plans in regard to these matters are also described in Note 2. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.

As more fully described in Note 15,  subsequent to the issuance of the company's
December 31, 2001,  financial  statements and our report thereon dated April 13,
2002, we became aware that those  financial  statements did not reflect  certain
lease liabilities,  common stock transactions, and deferred compensation,  among
other items,. In our original report, we expressed an unqualified opinion on the
December  31,  2001,  financial  statements  and  our  opinion  on  the  revised
statements, as expressed herein, remains unqualified.


Albright, Persing & Associates, Ltd.
Reno, Nevada
April 13, 2002, except as to the fifth paragraph above and Note 15, which are as
of May 19, 2003

                                       F-4
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                                  Balance Sheet

                                     ASSETS
                                     ------

                                                                  December 31,
                                                                      2002
                                                                  ------------

CURRENT ASSETS

  Cash and cash equivalents                                       $     28,614
  Prepaid expenses                                                      42,434
                                                                  ------------

   Total Current Assets                                                 71,048
                                                                  ------------

PROPERTY AND EQUIPMENT (Note 1)

  Land                                                                  57,600
  Buildings                                                            100,000
  Vehicles                                                             142,521
  Computer equipment                                                    91,975
  Office furniture and equipment                                        16,516
  Mining equipment                                                     605,067
  Accumulated depreciation                                            (316,395)
                                                                  ------------

   Total Property and Equipment, Net                                   697,284
                                                                  ------------

OTHER ASSETS

  Restricted cash - reclamation obligation (Note 3)                  1,821,817
  Mineral properties and claims (Note 3)                             1,650,000
  Deferred mineral property development costs (Note 3)                  98,878
  Deposits                                                              15,611
                                                                  ------------

   Total Other Assets                                                3,586,306
                                                                  ------------

   TOTAL ASSETS                                                   $  4,354,638
                                                                  ============

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

                                       F-5
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                            Balance Sheet (Continued)

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                 ----------------------------------------------
                                                                  December 31,
                                                                      2002
                                                                  ------------
CURRENT LIABILITIES

  Accounts payable                                                $    385,138
  Accrued liabilities (Note 6)                                       3,404,854
  Current portion of long term debt (Note 8)                           101,945
  Capital lease obligations-current portion (Note 7)                    40,102
  Amounts due to related parties (Note 5)                              331,691
                                                                  ------------

   Total Current Liabilities                                         4,263,730
                                                                  ------------

LONG-TERM LIABILITIES

  Accrued reclamation obligation (Note 3)                            1,819,874
  Convertible notes payable and related accrued interest (Note 9)      621,430
  Capital lease obligations (Note 7)                                    83,131
  Long-term debt (Note 8)                                               16,163
                                                                  ------------

   Total Long-Term Liabilities                                       2,540,598
                                                                  ------------

   Total Liabilities                                                 6,804,328
                                                                  ------------

COMMITMENTS AND CONTINGENCIES (NOTE 10)

STOCKHOLDERS' EQUITY (DEFICIT)

  Preferred stock, no par value, 50,000,000 shares
   authorized, no shares issued and outstanding                              -
  Common stock, no par value, 150,000,000 shares
   authorized, 76,881,842 issued and outstanding                    12,340,490
  Stock subscription receivable                                       (490,457)
  Deferred costs                                                      (300,000)
  Deficit accumulated during the development stage                 (13,999,723)
                                                                  ------------

   Total Stockholders' Equity (Deficit)                             (2,449,690)
                                                                  ------------

   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)           $  4,354,638
                                                                  ============

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

                                       F-6
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
         Statements of Operations and Other Comprehensive Income (Loss)


                                                                      From
                                                                    Inception
                                            For the Years Ended    On June 2,
                                               DECEMBER 31,       1997 through
                                         ------------------------ December 31,
                                             2002         2001        2002
                                         -----------  ----------- ------------
                                                       (Restated)

REVENUES

  Metal sales                            $   118,007  $   309,796 $    462,948
  Other revenue                                    -       33,242      130,453
                                         -----------  ----------- ------------

   Total Revenues                            118,007      343,038      593,401
                                         -----------  ----------- ------------

COST OF SALES                                282,149      286,601      595,800
                                         ------------ ----------- ------------

GROSS MARGIN (DEFICIT)                      (164,142)      56,437       (2,399)
                                         -----------  ----------- ------------

EXPENSES

   Exploration, mineral property leases,
    and minimum work commitment expenses   1,762,553    1,175,923    6,677,520
  General and administrative                 847,902      686,792    3,087,629
  Investor relations and professional fees   662,110      309,833    1,852,591
  Salaries and wages                         273,477      269,876    1,294,286
  Depreciation                               129,714      121,065      329,265
                                         -----------  ----------- ------------

   Total Expenses                          3,675,756    2,563,489   13,241,291
                                         -----------  ----------- ------------

LOSS FROM OPERATIONS                      (3,839,898)  (2,507,052) (13,243,690)
                                         -----------  ----------- ------------

OTHER INCOME (EXPENSE)

  Interest income                             40,092       19,277       61,235
  Interest expense                          (253,231)    (232,142)    (830,166)
  Gain on sale of stock in affiliate               -            -       10,016
  Gain on sale of fixed assets                     -            -        2,551
  Gain on settlement of debt                       -            -       22,331
  Realized gain on available-for-sale securities 523            -          523
  Loss on impairment of investments          (10,742)           -      (10,742)
  Other expense                               (1,803)        (102)     (11,781)
                                         -----------  ----------- ------------

   Total Other Income (Expense)             (225,161)    (212,967)    (756,033)
                                         -----------  ----------- ------------

LOSS BEFORE INCOME TAXES                 $(4,065,059) $(2,720,019)$(13,999,723)
                                         -----------  ----------- ------------

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

                                       F-7
<PAGE>
                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
   Statements of Operations and Other Comprehensive Income (Loss) (Continued)


                                                                      From
                                                                    Inception
                                            For the Years Ended    On June 2,
                                               DECEMBER 31,       1997 through
                                         -------------------------December 31,
                                             2002         2001        2002
                                         -----------  ----------- ------------
                                                       (Restated)

LOSS BEFORE INCOME TAXES                $(4,065,059) $(2,720,019) $(13,999,723)

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

NET LOSS                                 (4,065,059)  (2,720,019)  (13,999,723)
                                         ----------  -----------  ------------

OTHER COMPREHENSIVE INCOME (LOSS)

  Unrealized gain (loss) on
   available-for-sale securities             (1,437)       1,437             -
   (Note 4)                               ---------  ------------ -------------

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


 COMPREHENSIVE LOSS                     $(4,066,496) $(2,718,582) $ (13,999,723)
                                         ==========  ===========  =============

BASIC LOSS PER SHARE

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

WEIGHTED AVERAGE NUMBER
 OF SHARES OUTSTANDING                    61,842,556   40,497,175
                                          ==========  ===========


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

                                       F-8
<PAGE>
<TABLE>
                                                    GOLDEN PHOENIX MINERALS, INC.
                                                    (A Development Stage Company)
                                            Statements of Stockholders' Equity (Deficit)
<CAPTION>
                                                                                                                           Deficit
                                                                                                                         Accumulated
                                          Preferred Stock              Common Shares           Stock                     During the
                                         ----------------------  ----------------------    Subscription      Deferred   Development
                                           Shares       Amount       Shares      Amount     Receivable        Costs        Stage
                                         -------------- ----------- -----------  --------- -----------   -------------  ------------
<S>                                             <C>       <C>         <C>         <C>        <C>            <C>        <C>
Balance at inception, June 2, 1997                    -   $       -           -   $      -   $        -  $          -  $          -

Issuance of common stock for services
 at $0.001 per share, June 18, 1997                   -           -   2,000,000      2,000            -             -             -

Issuance of preferred stock for services
 at $0.004 per share, June 18, 1997             500,000       2,000           -          -            -             -             -

Issuance of common stock for cash at $0.005
 per share, June 18, 1997                             -           -  10,000,000     50,000            -             -             -

Issuance of common stock for services
 at $2.00 per share, July 23, 1997                    -           -     370,000    740,000            -             -             -

Issuance of common stock for joint venture
 option purchase at $2.00 per share,
 August 14, 1997                                      -           -      50,000    100,000            -             -             -

Issuance of common stock for conversion of
 debt at $4.35 per share, October 16, 1997            -           -      54,480    236,988            -             -             -

Issuance of common stock for cash at $3.00
 per share, October 16 to 22, 1997                    -           -     165,000    495,000            -             -             -

Issuance of common stock for cash at $2.10
 per share, November 25, 1997                         -           -     300,000    680,669            -             -             -

Cancellation of preferred shares at $0.004,
 December 8, 1997                              (275,000)     (1,100)          -          -            -             -             -
                                             ----------  ----------  ----------  ---------  -----------  ------------   -----------

Balance Forward                                 225,000  $      900  12,939,480 $2,304,657   $        -  $          -   $         -
                                             ----------  ----------  ---------- ----------   ----------  ------------   -----------

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

</TABLE>

                                                                 F-9
<PAGE>

<TABLE>
                                                    GOLDEN PHOENIX MINERALS, INC.
                                                    (A Development Stage Company)
                                      Statements of Stockholders' Equity (Deficit) (Continued)
<CAPTION>
                                                                                                                          Deficit
                                                                                                                       Accumulated
                                          Preferred Stock            Common Shares         Stock                         During the
                                         ----------------------  ---------------------- Subscription      Deferred      Development
                                           Shares      Amount      Shares      Amount    Receivable        Costs           Stage
                                         ----------  ----------  ----------  ---------  -----------     -------------  ------------
<S>                                         <C>      <C>         <C>         <C>        <C>             <C>            <C>
Balance Forward                             225,000  $      900  12,939,480  $2,304,657 $        -      $          -   $          -

Stock offering costs                              -           -           -     (80,000)         -                 -              -

Net loss for the period from June 2, 1997
 through December 31, 1997                        -           -           -           -          -                 -     (1,602,876)
                                            -------  ----------  ----------  ---------- ----------     -------------    -----------

Balance, December 31, 1997                  225,000         900  12,939,480   2,224,657          -                 -     (1,602,876)

Issuance of common stock for cash at $2.00
 per share, January 8 to February 2, 1998         -           -     171,500     343,000          -                 -              -

Issuance of common stock for joint venture
 agreement at $1.19 per share,
 January 12, 1998                                 -           -      80,000      95,000          -                 -              -

Issuance of common stock for stock options
 and warrants exercised at $0.20 per share,
 February 6 to September 29, 1998                 -           -     930,000     186,000    (60,000)                -              -

Issuance of common stock for joint venture
 agreement at $0.75 per share, February 10 to
 April 15, 1998                                   -           -     184,140     133,750          -                 -              -

Issuance of common stock for joint venture
 agreement at $0.74 per share,
 February 10, 1998                                -           -      25,000      20,133          -                 -              -
                                            -------  ----------  ----------  ---------- ----------      ------------   ------------

Balance Forward                             225,000  $      900  14,330,120  $3,002,540 $  (60,000)     $          -   $ (1,602,876)
                                            -------  ----------  ----------  ---------- ----------      ------------   ------------

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

</TABLE>

                                                                F-10
<PAGE>
<TABLE>
                                                    GOLDEN PHOENIX MINERALS, INC.
                                                    (A Development Stage Company)
                                      Statements of Stockholders' Equity (Deficit) (Continued)
<CAPTION>
                                                                                                                          Deficit
                                                                                                                       Accumulated
                                          Preferred Stock            Common Shares         Stock                         During the
                                         ----------------------  ---------------------- Subscription      Deferred      Development
                                           Shares      Amount      Shares      Amount    Receivable        Costs           Stage
                                         ----------  ----------  ----------  ---------- -----------     -------------  ------------
<S>                                         <C>      <C>         <C>         <C>         <C>            <C>            <C>
Balance Forward                             225,000  $      900  14,330,120  $3,002,540  $ (60,000)     $         -    $ (1,602,876)

Issuance of common stock for joint venture
 agreement at $2.00 per share,
 February 10, 1998                                -           -      23,890      47,780          -                -               -

Issuance of common stock for stock options
 and warrants exercised at $2.00 per share,
 February 26, 1998                                -           -      75,000     150,000          -                -               -

Issuance of common stock for joint venture
 agreement at $0.78 per share,
 March 10, 1998                                   -           -     123,456      96,450          -                -               -

Issuance of common stock for conversion of
 debt at $0.56 per share, March 23, 1998          -           -     346,667     195,000          -                -               -

Issuance of common stock for services
 at $0.10 per share, March 23 to
 September 14, 1998                               -           -     325,000      50,000          -                -               -

Issuance of common stock for services
 at $0.50 per share, April 30 to
 May 22, 1998                                     -           -     136,000      68,000          -                -               -
                                            -------  ----------  ----------  ---------- ----------      -----------    ------------

Balance Forward                             225,000  $      900  15,360,133  $3,609,770 $  (60,000)     $         -    $ (1,602,876)
                                            -------  ----------  ----------  ---------- ----------      -----------    ------------

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



                                                                F-11

</TABLE>
<PAGE>

<TABLE>

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

                                                                                                                          Deficit
                                                                                                                       Accumulated
                                          Preferred Stock            Common Shares         Stock                         During the
                                         ----------------------  ---------------------- Subscription      Deferred      Development
                                           Shares      Amount      Shares      Amount    Receivable        Costs           Stage
                                         ----------  ----------  ----------  ---------- -----------     -------------  ------------
<S>                                         <C>      <C>         <C>         <C>         <C>            <C>            <C>


Balance Forward                             225,000  $      900  15,360,133  $3,609,770  $ (60,000)     $          -   $ (1,602,876)

Issuance of common stock for stock options
 and warrants exercised at $0.25 per share,
 May 21, 1998                                     -           -     200,000      50,000          -                 -              -

Issuance of common stock for stock options
 and warrants exercised at $0.20 per share,
 May 21 to June 22, 1998                          -           -     230,000      53,315          -                 -              -

Issuance of common stock for joint venture
 agreement at $0.26 per share, June 15, 1998      -           -     100,000      26,000          -                 -              -

Issuance of common stock for stock options
 and warrants exercised at $0.17 per share,
 June 26, 1998                                    -           -      60,606      10,000          -                 -              -

Issuance of common stock for stock options
 and warrants exercised at $0.14 per share,
 June 29, 1998                                    -           -     500,000      71,000          -                 -              -

Issuance of common stock for stock options
 and warrants exercised at $0.16 per share,
 July 13, 1998                                    -           -     125,679      20,000          -                 -              -
                                            -------  ----------  ----------  ---------- ----------      ------------    -----------

Balance Forward                             225,000  $      900  16,576,418  $3,840,085  $ (60,000)     $          -   $ (1,602,876)
                                            -------  ----------  ----------  ----------  ---------      ------------    -----------


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


                                                                F-12

</TABLE>

<PAGE>

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

                                                                                                                          Deficit
                                                                                                                       Accumulated
                                          Preferred Stock            Common Shares         Stock                         During the
                                         ----------------------  ---------------------- Subscription      Deferred      Development
                                           Shares      Amount      Shares      Amount    Receivable        Costs           Stage
                                         ----------  ----------  ----------  ---------  -----------     -------------  ------------
<S>                                           <C>      <C>       <C>         <C>          <C>            <C>           <C>




Balance Forward                               225,000  $    900  16,576,418  $3,840,085   $ (60,000)     $        -    $ (1,602,876)

Issuance of common stock for stock options
 and warrants exercised at $0.27 per share,
 October 5, 1998                                    -         -      44,036      11,890           -               -               -

Issuance of common stock for services at
 $0.27 per share, November 10, 1998                 -         -      50,000      13,500           -               -               -

Cancellation of stock subscription receivable,
 December 31, 1998                                  -         -    (300,000)    (60,000)     60,000               -               -

Net loss for the year ended December 31, 1998       -         -           -           -           -               -      (1,863,167)

                                              -------  --------  ----------  ----------  ----------     -----------    ------------
Balance, December 31, 1998                    225,000       900  16,370,454   3,805,475           -               -      (3,466,043)

Issuance of common stock for joint venture
 agreement at $0.13 per share,
 January 1 to 28, 1999                              -         -   1,784,615     224,000           -               -               -

Issuance of common stock for services
 at $0.27 per share,
 January 22, 1999                                   -         -     200,000      25,016           -               -               -
                                             --------  --------  ----------  ----------  ----------      ----------    ------------

Balance Forward                               225,000  $    900  18,355,069  $4,054,491  $        -      $        -    $ (3,466,043)
                                             -------  ---------  ----------  ----------- ----------     ------------   ------------


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


                                                                F-13
</TABLE>
<PAGE>

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

                                                                                                                          Deficit
                                                                                                                       Accumulated
                                          Preferred Stock            Common Shares         Stock                         During the
                                         ----------------------  ---------------------- Subscription      Deferred      Development
                                           Shares      Amount      Shares      Amount    Receivable        Costs           Stage
                                         ----------  ----------  ----------  ---------  -----------     -------------  ------------
<S>                                         <C>      <C>         <C>         <C>         <C>            <C>            <C>


Balance Forward                             225,000  $      900  18,355,069  $4,054,491  $        -     $         -    $ (3,466,043)

Issuance of common stock for conversion of
 debt at $0.10 per share March 3 to
 December 15, 1999                                -           -   2,271,960     220,384           -               -               -

Issuance of common stock for conversion of
 debt at $0.09 per share, March 5, 1999           -           -      25,000       2,204           -               -               -

Issuance of common stock for services
 at $0.09 per share March 10 to
 December 1, 1999                                 -           -     320,792      28,581           -               -               -

Issuance of common stock for joint venture
 agreement for $0.09 per share, March 19 to
 November 21, 1999                                -           -     419,260      37,750           -               -               -

Issuance of common stock for cash at $0.10
 per share, March 5 to December 30, 1999          -           -   2,425,000     242,500           -               -               -

Issuance of common stock for services
 at $0.11 per share, May 27 to
 October 15, 1999                                 -           -     326,069      35,584           -               -               -
                                            -------  ----------  ----------  ---------- -----------     -----------  --------------

Balance Forward                             225,000  $      900  24,143,150  $4,621,494 $         -     $         -  $   (3,466,043)
                                            -------  ----------  ----------  ---------- -----------     -----------  --------------

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



                                                                F-14
</TABLE>
<PAGE>

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

<CAPTION>

                                                                                                                          Deficit
                                                                                                                       Accumulated
                                          Preferred Stock            Common Shares         Stock                         During the
                                         ----------------------  ---------------------- Subscription      Deferred      Development
                                           Shares      Amount      Shares      Amount    Receivable        Costs           Stage
                                         ----------  ----------  ----------  ---------  -----------     -------------  ------------
<S>                                         <C>       <C>         <C>         <C>        <C>            <C>            <C>


Balance Forward                              225,000  $      900  24,143,150  $4,621,494 $        -     $           -  $ (3,466,043)

Issuance of common stock for services
 at $0.08 per share, October 29 to
 December 30, 1999                                 -           -     284,885      23,136          -                 -             -

Net loss for the year ended December 31, 1999      -           -           -           -          -                 -    (1,323,437)
                                             -------  ----------  ----------  ---------- ----------     -------------   -----------

Balance, December 31, 1999                   225,000         900  24,428,035   4,644,630          -                 -    (4,789,480)

Issuance of common stock for cash at $0.10
 per share, January 7 to December 11, 2000         -               2,900,000     290,000          -                 -             -

Beneficial conversion feature on convertible
 notes, January 11 to April 19, 2000               -           -           -      92,666          -                 -             -

Issuance of common stock for services
 at $0.19 per share, January 31, 2000              -           -      10,886       2,052          -                 -             -

Issuance of common stock for services
 at $0.15 per share, January 31 to
 October 27, 2000                                  -           -     326,008      48,880          -                 -             -

Issuance of common stock for services
 at $0.17 per share, January 31 to
 November 10, 2000                                -            -     371,830      63,380          -                 -             -
                                            -------   ----------  ----------  ---------- ----------     -------------  ------------

Balance Forward                             225,000  $      900  28,036,759   $5,141,608 $        -     $           -  $ (4,789,480)
                                            -------  ----------  ----------   ---------- ----------     -------------  ------------

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

                                                                F-15
</TABLE>

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

<CAPTION>

                                                                                                                          Deficit
                                                                                                                       Accumulated
                                          Preferred Stock              Common Shares         Stock                       During the
                                         ----------------------    ---------------------- Subscription      Deferred    Development
                                           Shares        Amount      Shares      Amount    Receivable        Costs         Stage
                                         -------------  ---------  ----------  ---------  -----------     -----------  ------------
<S>                                            <C>      <C>         <C>         <C>        <C>            <C>          <C>


Balance Forward                                225,000  $      900  28,036,759  $5,141,608 $        -     $         -  $ (4,789,480)

Issuance of common stock for services
 at $0.23 per share, February 29, 2000               -           -     138,285      31,695          -               -             -

Issuance of common stock for conversion of
 debt at $0.25 per share, March 1, 2000              -           -      33,207       8,302          -               -             -

Issuance of common stock for services
 at $0.27 per share, March 31, 2000                  -           -      87,268      23,212          -               -             -

Preferred stock converted to common shares at
 $0.10 per share, April 5 to December 2, 2000  (58,300)       (233)    583,000      58,533          -               -             -

Issuance of common stock for services
 at $0.20 per share, April 30, 2000                  -           -      46,638       9,694          -               -             -

Issuance of common stock for services
 at $0.18 per share, May 31, 2000                    -           -      59,856      10,766          -               -             -

Issuance of common stock for services
 at $0.16 per share, June 30 to
 November 10, 2000                                   -           -   1,163,223     185,854          -               -             -

Issuance of common stock for stock options
 and warrants exercised at $0.10 per share,
 June 30, 2000                                       -           -      55,000       5,500          -               -             -
                                               -------  ----------  ----------  ---------- ----------     -----------  ------------

Balance Forward                                166,700  $      667  30,203,236  $5,475,164 $        -     $         -  $ (4,789,480)
                                               -------  ----------  ----------  ---------- ----------     -----------  ------------

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


                                                                F-16
</TABLE>

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

<CAPTION>

                                                                                                                          Deficit
                                                                                                                       Accumulated
                                          Preferred Stock            Common Shares         Stock                         During the
                                         ----------------------  ---------------------- Subscription      Deferred      Development
                                           Shares      Amount      Shares      Amount    Receivable        Costs           Stage
                                         ----------  ----------  ----------  ---------  -----------     -------------  ------------
<S>                                           <C>       <C>         <C>         <C>        <C>          <C>            <C>


Balance Forward                               166,700   $      667  30,203,236  $5,475,164 $      -     $           -  $ (4,789,480)

Issuance of common stock for services
 at $0.13 per share, July 31 to
 August 31, 2000                                    -            -     136,967      17,467        -                 -             -

Issuance of common stock for services
 at $0.12 per share, September 30 to
 October 31, 2000                                   -            -     167,463      20,705        -                 -             -

Issuance of common stock for purchase of
 mining properties and claims at $0.20 per
 share, October 17, 2000                            -            -   3,000,000     600,000        -                 -             -

Issuance of common stock for cash at $0.20
 per share, October 17, 2000                        -           -   3,000,000     600,000         -                 -             -

Issuance of common stock for services
 at $0.11 per share, November 30, 2000              -           -     146,550      16,413         -                 -             -

Issuance of common stock for services
 at $0.10 per share, November 30 to
 December 11, 2000                                  -           -     358,299      34,992         -                 -             -

Stock offering costs                                -           -           -     (77,800)        -                 -             -

Net loss for the year ended December 31, 2000       -           -           -           -         -                 -    (2,425,165)

Balance, December 31, 2000                    166,700  $      667  37,012,515  $6,686,941  $      -     $           -  $ (7,214,645)
                                              -------  ----------  ----------  ----------  ----------   -------------  ------------

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


                                                                F-17
</TABLE>

<PAGE>

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

<CAPTION>
                                                                                                                          Deficit
                                                                                                                       Accumulated
                                          Preferred Stock            Common Shares         Stock                         During the
                                         ----------------------  ---------------------- Subscription      Deferred      Development
                                           Shares      Amount      Shares      Amount    Receivable        Costs           Stage
                                         ------------- ---------  ----------  ---------  -----------     ------------- -------------
<S>                                            <C>      <C>         <C>         <C>        <C>            <C>          <C>


Balance, December 31, 2000                     166,700  $      667  37,012,515  $6,686,941 $        -     $         -  $ (7,214,645)

Issuance of common stock for services
 at $0.17 per share, January 11 to
 May 10, 2001                                        -           -     175,000      29,750          -               -             -

Issuance of common stock for services
 at $0.16 per share, January 11 to
 December 4, 2001                                    -           -     800,000     128,000          -               -             -

Issuance of common stock for services
 at $0.15 per share, January 26 to
 July 27, 2001                                       -           -     300,000      45,000          -               -             -

Issuance of common stock for services
 at $0.10 per share, February 28 to
 December 4, 2001                                    -           -     531,637      52,251          -               -             -

Issuance of common stock for services
 at $0.09 per share, March 31 to
 November 30, 2001                                   -           -     543,186      47,914          -               -             -

Preferred stock converted to common shares
 at $0.10 per share, March 31 to June 30, 2001 (15,400)        (62)    154,000      15,462          -               -             -
                                               -------  ----------    --------   ---------

Balance Forward                                151,300  $      605  39,516,338  $7,005,318 $        -     $         -  $ (7,214,645)
                                               -------- ----------- ----------  ---------- ----------     -----------  ------------

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


                                                                F-18
</TABLE>

<PAGE>

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

                                                                                                                          Deficit
                                                                                                                       Accumulated
                                          Preferred Stock            Common Shares         Stock                         During the
                                         ----------------------  ---------------------- Subscription      Deferred      Development
                                           Shares      Amount      Shares      Amount    Receivable        Costs           Stage
                                         ------------- ---------  ----------  ---------  -----------     ------------- -------------
<S>                                         <C>      <C>         <C>         <C>        <C>              <C>           <C>


Balance Forward                             151,300  $      605  39,516,338  $7,005,318 $        -       $        -    $ (7,214,645)

Issuance of common stock for services
 at $0.14 per share, April 5 to
 June 30, 2001                                    -           -     169,110      23,222          -                -               -

Issuance of common stock for cash at $0.10
 per share, April 10 to December 14, 2001         -           -   4,200,000     420,000          -                -               -

Issuance of common stock for purchase of
 mining properties and claims at $0.10 per
 share, June 12, 2001                             -           -     434,747      41,710          -                -               -

Issuance of common stock for services
 at $0.13 per share, July 31, 2001                -           -     111,690      15,000          -                -               -

Fair value of warrants issued as additional
 consideration for promissory note,
 August 28, 2001                                  -           -           -       2,750          -                -               -

Issuance of common stock for conversion of
 debt at $0.10 per share, August 29, 2001         -           -      50,000       5,000          -                -               -

Issuance of common stock for services
 at $0.11 per share, August 31, 2001              -           -     131,962      14,245          -                -               -
                                           --------  ----------  ----------  ---------- ----------       ----------      ----------

Balance Forward                             151,300  $      605  44,613,847  $7,527,245 $        -       $        -    $ (7,214,645)
                                           --------  ----------  ----------  ---------- ----------       ----------      ----------

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


                                                                F-19

 </TABLE>

<PAGE>

<TABLE>

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

<CAPTION>
                                                                                                                          Deficit
                                                                                                                       Accumulated
                                          Preferred Stock            Common Shares         Stock                         During the
                                         ----------------------  ---------------------- Subscription      Deferred      Development
                                           Shares      Amount      Shares      Amount    Receivable        Costs           Stage
                                         ------------- ---------  ----------  ---------- -----------     ------------  -------------
<S>                                           <C>      <C>         <C>         <C>        <C>            <C>           <C>


Balance Forward                               151,300  $     605  44,613,847   $7,527,245 $       -      $       -     $ (7,214,645)

Issuance of common stock for stock
 subscription receivable at $0.09 per share,
 December 28, 2001                                  -          -     500,000       44,500   (44,500)             -                -

Issuance of common stock for services
 at $0.08 per share, December 31, 2001              -          -      71,209        5,811         -              -                -

Stock offering costs                                -          -           -      (23,900)        -              -                -

Net loss for the year ended December 31, 2001       -          -           -            -         -              -       (2,720,019)
                                              -------  ---------   ---------   ---------- ----------     ----------    ------------

Balance, December 31, 2001(Restated)          151,300        605  45,185,056    7,553,656   (44,500)             -       (9,934,664)

Issuance of common stock for services
 at $0.15 per share, January 1 to
 June 4, 2002                                       -          -     553,600       82,614         -              -                -

Cash received on stock subscription receivable,
 January 8 to 25, 2002                              -          -           -            -    44,500              -                -

Issuance of common stock for cash at $0.10
 per share, January 18 to June 14, 2002             -          -   7,495,002      739,500         -              -                -

Issuance of common stock for services
 at $0.19 per share, February 1 to
 October 30, 2002                                   -          -     655,000      121,200         -              -                -
                                              -------  ---------   ---------   ---------  ----------     ----------    ------------

Balance Forward                               151,300  $     605  53,888,658   $8,496,970 $       -      $       -    $  (9,934,664)
                                              -------  ---------   ---------   ---------- ----------     ----------    ------------

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


                                                                F-20
</TABLE>

<PAGE>

<TABLE>

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

                                                                                                                          Deficit
                                                                                                                       Accumulated
                                          Preferred Stock            Common Shares         Stock                         During the
                                         ----------------------  ---------------------- Subscription      Deferred      Development
                                           Shares      Amount      Shares      Amount    Receivable        Costs           Stage
                                         ------------- ---------- ----------- ---------  -----------     ------------- -------------
<S>                                         <C>        <C>         <C>         <C>        <C>            <C>           <C>

Balance Forward                             151,300    $      605  53,888,658  $8,496,970 $        -     $          -  $ (9,934,664)

Issuance of common stock for services
 at $0.16 per share, February 4 to
 October 28, 2002                                 -             -   1,414,006     224,871          -                -             -

Issuance of common stock for joint venture
 agreement at $0.09 per share, February 7, 2002   -             -     328,235      27,900          -                -             -

Issuance of common stock for cash at $0.12 per
 share, February 21, 2002                         -             -     160,000      19,170          -                -             -

Issuance of common stock for services
 at $0.17 per share, February 28 to
 March 31, 2002                                   -             -     174,228      28,932          -                -             -

Issuance of common stock for services
 at $0.10 per share, March 1 to
 August 29, 2002                                  -             -     230,198      22,449          -                -             -

Issuance of common stock for services
 at $0.12 per share, March 5 to
 April 19, 2002                                   -             -     407,625      47,974          -                -             -

Issuance of common stock for stock options
 and warrants exercised at $0.15 per share,
 March 11 to September 3, 2002                    -             -     983,833     147,575     (5,625)               -             -
                                            -------    ----------  ----------  ---------- ----------     ------------  ------------

Balance Forward                             151,300    $      605  57,586,783  $9,015,841 $   (5,625)    $          -  $ (9,934,664)
                                         ----------    ----------  ----------  ---------- ----------     ------------  ------------

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

                                                                F-21
</TABLE>

<PAGE>

<TABLE>

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

<CAPTION>
                                                                                                                           Deficit
                                                                                                                        Accumulated
                                          Preferred Stock            Common Shares          Stock                         During the
                                         ----------------------  ----------------------  Subscription      Deferred      Development
                                           Shares      Amount      Shares      Amount     Receivable        Costs           Stage
                                         ------------- ---------  ----------  ----------- -----------    ------------- -------------
<S>                                         <C>        <C>        <C>         <C>         <C>             <C>          <C>

Balance Forward                                151,300 $     605  57,586,783  $ 9,015,841 $   (5,625)     $          - $ (9,934,664)

Issuance of common stock for cash at $0.15
 per share, March 22 to October 18, 2002             -         -   5,126,669      768,500          -                 -            -

Issuance of common stock for services
 at $0.20 per share, April 3 to
 December 23, 2002                                   -         -     117,973       23,325          -                 -            -

Issuance of common stock for stock options
 and warrants exercised at $0.10 per share,
 April 29 to November 26, 2002                       -         -   2,925,063      292,506          -                 -            -

Preferred stock converted to common shares
 at $0.10 per share, May 13 to
 December 18, 2002                            (151,300)     (605)  1,513,000      151,905          -                 -            -

Issuance of common stock for services
 at $0.35 per share, May 31, 2002                    -         -     100,000       35,000          -                 -            -

Issuance of common stock for conversion of
 debt at $0.15 per share, June 3 to 4, 2002          -         -     733,333      110,000          -                 -            -

Issuance of common stock for services
 at $0.13 per share, June 4, 2002                    -         -      50,333        6,550          -                 -            -
                                            ---------- ---------  ----------  ----------- ----------      ------------- -----------

Balance Forward                                      - $       -  68,153,154  $10,403,627 $   (5,625)     $          - $ (9,934,664)
                                            ---------- ---------  ----------  ----------- ----------      ------------ ------------

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


                                                                F-22
</TABLE>

<PAGE>

<TABLE>

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

<CAPTION>
                                                                                                                          Deficit
                                                                                                                       Accumulated
                                          Preferred Stock            Common Shares           Stock                       During the
                                         ----------------------  ----------------------   Subscription    Deferred      Development
                                           Shares      Amount      Shares      Amount      Receivable      Costs           Stage
                                         ----------    ---------- ----------- -----------  ----------    ------------- -------------
<S>                                         <C>        <C>         <C>        <C>          <C>           <C>           <C>


Balance Forward                                   -    $        -  68,153,154 $10,403,627  $(5,625)      $        -    $ (9,934,664)

Issuance of common stock for services
 at $0.40 per share, June 6 to
 September 6, 2002                                -             -     139,448      55,713        -                -               -

Issuance of common stock for services
 at $0.45 per share, June 7, 2002                 -             -     300,000     135,000        -                -               -

Issuance of common stock for conversion of
 debt at $0.30 per share, June 12, 2002           -             -      86,133      25,840        -                -               -

Issuance of common stock for conversion of
 debt at $0.20 per share, June 20, 2002           -             -      65,930     13,186         -                -               -

Issuance of common stock for cash at $0.20
 per share, June 23, 2002                         -             -     100,002      20,000        -                -               -

Issuance of common stock for services
 at $0.29 per share, June 30 to
 November 22, 2002                                -             -      65,435      19,072        -                -               -

Cash received on stock subscription
 receivable, July 9, 2002                         -             -           -           -    5,625                -               -

Issuance of common stock for deferred
 stock offering costs at $0.19 per share,         -             -   1,587,302           -        -                -               -
 July 12, 2002                             --------    ----------  ---------- -----------  -------       ----------    ------------

Balance Forward                                   -    $        -  70,497,404 $10,972,438  $             $ (300,000)   $ (9,934,664)
                                           --------    ----------  ---------- -----------  -------       ----------    ------------

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


                                                                F-23
</TABLE>

<PAGE>

<TABLE>

                                                    GOLDEN PHOENIX MINERALS, INC.
                                                    (A Development Stage Company)
                                      Statements of Stockholders' Equity (Deficit) (Continued)
<CAPTION>
                                                                                                                          Deficit
                                                                                                                       Accumulated
                                          Preferred Stock            Common Shares          Stock                        During the
                                         ----------------------  ----------------------   Subscription     Deferred      Development
                                           Shares      Amount      Shares      Amount      Receivable       Costs           Stage
                                         ------------- --------- -----------  ---------- -----------     ------------- -------------
<S>                                               <C>  <C>       <C>          <C>         <C>            <C>           <C>


Balance Forward                                   -    $       - 70,497,404   $10,972,438 $        -     $   (300,000) $ (9,934,664)
Issuance of common stock for stock subscription
 receivable at $0.25 per share, July 12, 2002     -            -     50,000        12,500    (12,500)               -             -

Issuance of common stock for cash at $0.30 per
 share, August 29, 2002                           -            -    180,000        53,261          -                -             -

Issuance of common stock for stock subscription
 receivable at $0.28 per share, August 29, 2002   -            -     50,000        14,000    (14,000)               -             -

Issuance of common stock for stock options and
 warrants exercised at $0.26 per share,
 September 3 to 10, 2002                          -            -     50,000        13,000          -                -             -

Issuance of common stock for services
 at $0.18 per share, September 6 to
 October 18, 2002                                 -            -    397,180        71,242          -                -             -

Issuance of common stock for services
 at $0.32 per share, September 20, 2002           -            -    110,582        35,294          -                -             -

Issuance of common stock for services
 at $0.33 per share, September 23, 2002           -            -      5,000         1,650          -                -             -
                                         ----------   ---------- ----------  ------------ ----------     ------------  ------------

Balance Forward                                   -  $        -  71,340,166  $ 11,173,385 $  (26,500)    $   (300,000) $ (9,934,664)
                                         ----------   ---------  ----------   ----------  ----------     ------------  ------------

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


                                                                F-24
</TABLE>

<PAGE>

<TABLE>

                                                    GOLDEN PHOENIX MINERALS, INC.
                                                    (A Development Stage Company)
                                      Statements of Stockholders' Equity (Deficit) (Continued)
<CAPTION>
                                                                                                                          Deficit
                                                                                                                       Accumulated
                                          Preferred Stock            Common Shares         Stock                         During the
                                         ----------------------  ---------------------- Subscription      Deferred      Development
                                           Shares      Amount      Shares      Amount    Receivable        Costs           Stage
                                         ------------- ---------  ----------  ---------  -----------     ------------- -------------
<S>                                                <C> <C>        <C>         <C>         <C>            <C>           <C>


Balance Forward                                    -   $       -  71,340,166  $11,173,385 $(26,500)      $(300,000)    $ (9,934,664)

Vehicle received as payment for stock
 subscription receivable, September 20, 2002       -           -           -            -    5,865               -                -

Issuance of common stock for conversion of
 debt at $0.30 per share, October 3, 2002          -           -      44,323       13,297        -               -                -

Issuance of common stock for services
 at $0.22 per share, October 3, 2002              -           -        5,000        1,100        -               -                -

Issuance of common stock for services
 at $0.26 per share, October 3, 2002              -           -      28,651         7,550        -               -                -

Issuance of common stock for services
 at $0.28 per share, October 3 to 30, 2002        -           -      81,679        22,788        -               -                -

Issuance of common stock for joint venture
 agreement at $0.16 per share,
 October 18, 2002                                 -           -   2,753,623       450,000        -               -                -

Issuance of common stock for cash and stock
 subscription receivable at $0.19 per share,
 October 21 to November 6, 2002                   -           -     250,000        48,500  (23,000)              -                -
                                         ----------  ----------  ----------   ----------- --------       ---------      -----------

Balance Forward                                   -  $        -  74,503,442   $11,716,620 $(43,635)      $(300,000)    $ (9,934,664)
                                         ----------  ----------  ----------   ----------- --------       ---------      -----------

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


                                                                F-25
</TABLE>

<PAGE>

<TABLE>
                                                    GOLDEN PHOENIX MINERALS, INC.
                                                    (A Development Stage Company)
                                      Statements of Stockholders' Equity (Deficit) (Continued)
<CAPTION>
                                                                                                                          Deficit
                                                                                           Stock                       Accumulated
                                          Preferred Stock            Common Shares      Subscription                     During the
                                         ----------------------  ----------------------  Receivable       Deferred      Development
                                           Shares      Amount      Shares      Amount    Receivable        Costs           Stage
                                         ------------- ---------  ----------  ---------  -----------     ------------- -------------
<S>                                               <C>  <C>       <C>          <C>         <C>            <C>           <C>


Balance Forward                                   -    $      -  74,503,442   $11,716,620 $ (43,635)     $(300,000)    $ (9,934,664)

Issuance of common stock for services
 at $0.25 per share, December 3, 2002             -           -     200,000        49,000         -              -                -

Issuance of common stock for cash and stock
 subscription receivable at $0.18 per share,
 December 4, 2002                                 -           -     100,000        17,722    (6,822)             -                -

Issuance of common stock for stock subscription
 receivable at $0.27 per share,
 December 17, 2002                                -           -   2,000,000       540,000  (540,000)             -                -

Cash received on stock subscription receivable,
 December 20, 2002                                -           -           -             -   100,000              -                -

Issuance of common stock for joint venture
 agreement at $0.15 per share,
 December 23, 2002                                -           -      78,400        11,760         -              -                -

Fair value of options granted for services,
 March 11 to December 4, 2002                     -           -           -        44,168         -              -                -

Stock offering costs                              -           -           -       (38,780)        -              -                -

Net loss for the year ended December 31, 2002     -           -           -             -         -              -     $ (4,065,059)
                                              -----  ----------  ---------- -------------   --------     -----------   ------------
Balance, December 31, 2002                        -  $        -  76,881,842   $12,340,490 $(490,457)     $(300,000)    $(13,999,723)
                                              =====  ==========  ==========   =========== =========      =========     ============

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


                                                                F-26
</TABLE>

<PAGE>

<TABLE>
                                GOLDEN PHOENIX MINERALS, INC.
                                (A Development Stage Company)
                                  Statements of Cash Flows
<CAPTION>
                                                                                    From
                                                                                  Inception
                                                   For the Years Ended           On June 2,
                                                      DECEMBER 31,              1997 through
                                                ------------------------        December 31,
                                                    2002         2001              2002
                                                -----------  -----------     ---------------
                                                              (Restated)
<S>                                              <C>          <C>            <C>

CASH FLOWS FROM OPERATING ACTIVITIES

Net Loss                                        $(4,065,059)  $(2,720,019)   $(13,999,723)
Adjustments to reconcile net loss to net
 cash used in operating activities:
 Depreciation and amortization                      129,714       121,065         329,265
 Bad debt expense                                    52,203             -          52,203
 Realized gain on available-for-sale securities        (523)            -            (523)
 Loss gain on sale of fixed assets                        -             -          (2,551)
 Gain on extinguishment of debt                           -             -          22,331
 Fixed assets exchanged for goods
  and services                                            -             -          55,982
 Common stock issued for goods
   and services                                     992,969       381,635       2,947,472
 Preferred stock issued for goods
  and services                                            -             -           2,000
 Beneficial conversion feature                            -             -          92,666
 Fair value of options and warrants granted          44,168         2,750          46,918
Changes in operating assets and liabilities:
 (Increase) in restricted cash                       (1,177)            -          (1,177)
 (Increase) in accounts and other
  receivables                                        (6,492)      (56,956)        (83,127)
 (Increase) decrease in prepaid expenses             (6,558)        8,377         (42,435)
 (Increase) in employee advances                          -        (3,526)         (2,371)
 (Increase) in deposits                             (10,000)      393,623         (16,377)
 (Increase) in deferred exploration and
  development costs                                 (15,033)      (12,772)        (98,880)
 Increase in accounts payable                       113,141       180,744         590,385
 Increase in accrued liabilities                  1,219,369     1,177,975       4,057,218
                                                -----------   -----------    ------------

   Net Cash Used by Operating Activities         (1,553,278)     (527,104)     (6,050,724)
                                                -----------   -----------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES

 Purchase of property and equipment                 (54,482)      (65,201)       (719,646)
 Proceeds from fixed asset sales                          -             -          34,965
 Proceeds from sale of investments                    2,223             -           2,223
 Purchase of mining properties and claims                 -             -         (51,700)
 Purchase of joint venture                                -             -        (550,000)
                                                -----------   -----------    ------------

   Net Cash Used by Investing Activities        $   (52,259)   $  (65,201)   $ (1,284,158)
                                                -----------   -----------    ------------


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


                                                                F-27
</TABLE>
<PAGE>

<TABLE>
                               GOLDEN PHOENIX MINERALS, INC.
                               (A Development Stage Company)
                            Statements of Cash Flows (Continued)
<CAPTION>
                                                                                        From
                                                                                      Inception
                                                      For the Years Ended            On June 2,
                                                       DECEMBER 31,                 1997 through
                                                   ----------------------------    December 31,
                                                    2002          2001                  2002
                                                   ----------  ----------------   ----------------
                                                                (Restated)
<S>                                                  <C>       <C>            <C>

CASH FLOWS FROM FINANCING ACTIVITIES

  Proceeds from convertible notes payable            $      -  $          -   $   $485,000
  Principal payments on capital lease obligations     (32,702)       (7,229)       (48,688)
  Proceeds from notes payable - stockholders                -       105,500        728,900
  Payments on notes payable - stockholders                  -       (10,000)       (16,300)
  Payments on notes payable and long-term debt       (456,281)     (384,859)      (958,027)
  Proceeds from notes payable and long-term debt       12,000       220,100        744,756
  Cash receipts on stock subscription receivable      150,125             -        150,125
  Proceeds from exercise of options and warrants      318,585             -        876,290
  Proceeds from the conversion of preferred stock      51,300        15,400        125,000
  Stock offering costs                                (38,780)      (23,900)      (220,480)
  Net proceeds from sale of common stock            1,629,561       639,000      5,496,920
                                                   ----------  ------------   ------------

   Net Cash Provided by Financing Activities        1,633,808       554,012      7,363,496
                                                   ----------  ------------   ------------


NET INCREASE (DECREASE) IN CASH                        28,271       (38,293)        28,614

CASH AT BEGINNING OF YEAR                                 343        38,636              -
                                                   ----------  ------------   ------------

CASH AT END OF YEAR                                  $ 28,614  $       343    $     28,614
                                                   ==========  ===========    ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

  Cash Paid for Interest                             $239,681  $   219,480    $    532,293
  Cash Paid for Income Taxes                         $      -  $         -    $          -

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

  Reduction in debt due to renegotiation of joint
   venture contract                                  $      -  $         -    $    200,000
  Common stock issued for debt payment and related
   interest                                          $651,983  $    10,000    $  1,053,398
  Common stock issued for amounts due to related
   parties                                           $      -  $         -    $    195,000
  Common stock issued for joint venture purchase     $-        $         -    $    100,000
  Common stock issued for mining property
   purchase                                          $      -  $         -    $    600,000
  Property plant and equipment purchased
   through debt assumed                              $      -  $         -    $    382,400
  Common stock issued for services                   $992,969  $   381,635    $  2,947,472
  Common stock issued for deferred costs             $300,000  $         -    $    300,000
  Debt applied for the exercise of stock options and
   warrants                                          $134,496  $         -    $    134,496
  Debt applied to the conversion of preferred stock
   into common stock                                 $100,000  $         - $       100,000
  Conversion of preferred stock into common stock    $    605  $        62 $           900
  Common stock issued for stock subscription
   receivable                                        $601,947  $    44,500 $       646,447
  Asset received and applied to stock subscription
   receivable                                        $  5,865  $         - $         5,865

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



                                                                F-28
</TABLE>

<PAGE>
                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001
                                      30

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

         ORGANIZATION
         ------------

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

         The  Company  is in the  development  stage  since  it has  generated
         little   revenue  and  has  not  commenced   its  principal   revenue
         generating  operations.  With respect to the Extractive Industry, the
         Company is also  considered to be in the  development  stage with two
         of the  Company's  three  mineral  properties  containing  proven and
         probable  mineral  reserves.  The Company  has been funded  primarily
         through equity funding,  debt offerings,  and loans from officers and
         shareholders.  The  Company's  prospects  are  subject  to the risks,
         expenses  and  uncertainties  frequently  encountered  in the  mining
         industry.  These risks include the  volatility of mineral  prices and
         the ability to explore and develop profitable mining properties.

         PRESENTATION
         ------------

         Certain 2001 balances have been  reclassified  to conform to the 2002
         presentation.

         ACCOUNTING METHOD
         -----------------

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

         CASH AND CASH EQUIVALENTS
         -------------------------

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


                                      F-29
<PAGE>



                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


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

         CONCENTRATIONS
         --------------

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

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

         During 2002, 94% (36% in 2001) of revenues consisted of gold sales to
         one party.

         USE OF ESTIMATES
         ----------------

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

         BASIC LOSS PER SHARE
         --------------------

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

         Net loss per share from operations:
                                                       For the Years Ended
                                                          DECEMBER 31,
                                                   ---------------------------
                                                       2002          2001
                                                   ------------  -------------
                                                                  (Restated)

         Numerator - loss                          $ (4,065,059) $  (2,720,019)

         Denominator -
           weighted average shares outstanding       61,842,556     40,497,175
                                                   ------------  -------------

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

         The  Company's  outstanding  common stock  options and warrants  have
         been excluded from the basic loss per share  calculation  as they are
         anti-dilutive.  The Company has excluded  24,034,750  of common stock
         equivalents at December 31, 2002.


                                      F-30
<PAGE>


                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


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

         MARKETABLE SECURITIES
         ---------------------

         The  Company  follows the  provisions  of SFAS  regarding  marketable
         securities.  The Company `s  securities  investments  that are bought
         and held  principally  for the purpose  of  selling  them in the near
         term are  classified as trading  securities.  Trading  securities are
         recorded at fair value on the balance sheet in current  assets,  with
         the change in fair value during the period included in earnings.

         Securities  investments  that the Company has the positive intent and
         ability  to hold  to  maturity  are  classified  as  held-to-maturity
         securities and recorded at amortized  cost in  investments  and other
         assets.    Securities    investments   not   classified   as   either
         held-to-maturity    or   trading   securities   are   classifies   as
         available-for-sale  securities.   Available-for-sale  securities  are
         recorded  at fair  value  in  investments  and  other  assets  on the
         balance  sheet,  with the  change in fair  value  during  the  period
         excluded  from  earnings  and  recorded  net  of  tax  as a  separate
         component of equity.  All marketable  securities  held by the Company
         have been classified as available-for-sale securities.

         PROVISION FOR TAXES
         -------------------

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

         Net deferred tax assets  consist of the  following  components  as of
         December 31, 2002 and 2001:
                                                        2002          2001
                                                    ------------  ------------

         Deferred tax assets:
           NOL Carryover                            $  3,660,100  $  2,521,900

         Deferred tax liabilities:                             -             -
           Depreciation                                  (18,100)      (52,400)

         Valuation allowance                          (3,642,000)   (2,469,500)
                                                    ------------  ------------

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



                                      F-31
<PAGE>


                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


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

         PROVISION FOR TAXES (CONTINUED)

         The  income  tax  provision  differs  from the  amount of income  tax
         determined  by applying  the U.S.  federal  income tax rate of 39% to
         pretax  income  from  continuing   operations  for  the  years  ended
         December 31, 2002 and 2001 due to the following:

                                                        2002          2001
                                                    ------------  ------------

         Book loss                                  $ (1,585,370) $ (1,060,800)
         Accrued compensation                             29,660        43,480
         Depreciation                                     21,497       (37,020)
         Other                                             5,200         1,000
         Stock for services/options expense              387,260       148,830
         Valuation allowance                           1,141,753       904,510
                                                    ------------  ------------

                                                    $          -  $          -
                                                    ============  ============

         At  December  31,   2002,   the  Company  had  net   operating   loss
         carryforwards of approximately  $8,609,000 that may be offset against
         future  taxable  income  from  the year  2002  through  2022.  No tax
         benefit  has  been  reported  in  the  December  31,  2002  financial
         statements  since the  potential tax benefit is offset by a valuation
         allowance of the same amount.

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

         PROPERTY AND EQUIPMENT
         ----------------------

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

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

         For the years ended December 31, 2002 and 2001, the Company  recorded
         depreciation expense of $129,714 and $121,065, respectively.

                                      F-32
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


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

         REVENUE RECOGNITION AND COST OF SALES
         -------------------------------------

         As  previously  discussed,  the Company  has not begun its  principal
         revenue   generating   business   operations  of  conducting   mining
         extraction  and  production.  Revenue that is realized is as a result
         of maintenance  activities  associated with the Mineral Ridge mineral
         property as discussed in Note 3.  Revenue  from those  activities  is
         recognized  at the  time of  delivery  of the  precious  metals.  The
         Company receives immediate payment.  Cost of sales presently includes
         all  costs  associated  with the  maintenance  of the  Mineral  Ridge
         mineral   property   consisting   principally  of  personnel   costs,
         utilities, maintenance parts and supplies.

         At the time the Company  establishes  formal  mining  extraction  and
         production,  a formal and comprehensive  revenue  recognition  policy
         will be adopted.

         STOCK OPTIONS
         -------------

         As  permitted  by FASB  Statement  123  "Accounting  for Stock  Based
         Compensation"  (SFAS No. 123), the Company has elected to measure and
         record  compensation  cost relative to employee stock option costs in
         accordance  with  Accounting  Principles  Board  ("APB")  Opinion 25,
         "Accounting   for   Stock   Issued   to   Employees,"   and   related
         interpretations  and make  proforma  disclosures  of net  income  and
         earnings  per  share as if the fair  value  method of  valuing  stock
         options had been  applied.  Under APB Opinion 25,  compensation  cost
         is recognized for stock options  granted to employees when the option
         price is less that the market  price of the  underlying  common stock
         on the date of grant.

         PROPERTY ACQUISITION AND DEFERRED MINERAL PROPERTY DEVELOPMENT COSTS
         --------------------------------------------------------------------

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

         PROVEN AND PROBABLE ORE RESERVES
         --------------------------------

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

                                      F-33
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


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

         PROVEN AND PROBABLE ORE RESERVES (CONTINUED)
         --------------------------------------------

         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.

         PROPERTIES UNDER DEVELOPMENT
         ----------------------------

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

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

         EXPLORATION PROPERTIES
         ----------------------

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

                                      F-34
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


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

         RECLAMATION AND REMEDIATION COSTS
         ---------------------------------

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

         Future closure, reclamation and environment-related  expenditures are
         difficult to estimate in many  circumstances  due to the early stages
         of investigation,  uncertainties  associated with defining the nature
         and  extent  of  environmental   contamination,   the   uncertainties
         relating to specific  reclamation and remediation  methods and costs,
         application  and  changing of  environmental  laws,  regulations  and
         interpretations   by   regulatory   authorities   and  the   possible
         participation  of other  potentially  responsible  parties.  Reserves
         for closure costs,  reclamation  and  environmental  matters  totaled
         approximately  $1,820,000 at December 31, 2002.  We  anticipate  that
         expenditures  relating to these  reserves  will be made over the next
         five to ten years.  It is  reasonably  possible the ultimate  cost of
         remediation  could  change in the  future  and that  changes to these
         estimates  could have a material effect on future  operating  results
         as new information becomes known.

         In August 2001,  the FASB issued SFAS No. 143,  ACCOUNTING  FOR ASSET
         RETIREMENT  OBLIGATIONS,  which established a uniform methodology for
         accounting  for estimated  reclamation  and  abandonment  costs.  The
         statement  will be adopted  January 1, 2003,  when the  Company  will
         record the estimated  present value of  reclamation  liabilities  and
         increase  the  carrying  amount of the related  asset.  Subsequently,
         the  reclamation  costs will be allocated to expense over the life of
         the related  assets and will be adjusted for changes  resulting  from
         the passage of time and  revisions  to either the timing or amount of
         the original  present value  estimate.  The Company is in the process
         of quantifying the effect of adoption.

                                      F-35
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


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

         PROPERTY EVALUATIONS
         --------------------

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

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

         IMPAIRMENT OF LONG-LIVED ASSETS
         -------------------------------

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

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

                                      F-36
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


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

         NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS
         --------------------------------------

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

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

                                      F-37
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


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

         NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
         --------------------------------------------------

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

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

                                      F-38
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


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

         NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
         --------------------------------------------------

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

         PREFERRED STOCK
         ---------------

         The  Company  has  authorized  50,000,000  shares  of  no  par  value
         non-voting  convertible  preferred  stock.  In  1997,  the  Company's
         board  of  directors   authorized  the  designation  of  a  class  of
         preferred stock  convertible into ten shares of common stock for each
         share of  preferred  stock at a  conversion  rate of $0.10 per common
         share for a period of ten years from June 12,  1997.  The Company did
         not  determine  any  dividend  rights,  dividend  rates,  liquidation
         preferences,  redemption provisions,  and other rights,  preferences,
         privileges  and  restrictions.  At December 31, 2002, the Company had
         no shares of preferred stock issued and outstanding.

         ADVERTISING EXPENSE
         -------------------

         The Company expenses  advertising  expenses as incurred in accordance
         with SOP 93-7. The Company had no  advertising  expense for the years
         ended December 31, 2002 and 2001.

NOTE 2 -  GOING CONCERN

          The Company's  financial  statements are prepared  using  accounting
          principles  generally  accepted  in the  United  States  of  America
          applicable to a going concern which  contemplates the realization of
          assets  and  liquidation  of  liabilities  in the  normal  course of
          business.  However,  the Company has  experienced  losses  since its
          inception in 1997, and it has not generated  revenues  sufficient to
          cover  its  operating   costs,   has  an   accumulated   deficit  of
          $13,999,723  and a working capital deficit of $4,192,682 at December
          31,  2002,  which  raises  substantial  doubt  about its  ability to
          continue as a going concern.  The accompanying  financial statements
          do not include any  adjustments  that might  result from the outcome
          of this uncertainty.

                                      F-39
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 2 -  GOING CONCERN (Continued)

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

          The Company will continue to seek joint  ventures for its properties
          with  third  parties  in  order  to  alleviate  some  of  the  costs
          associated  with it's  current and future  exploration,  development
          and mining  operation  activities.  Finally,  the Company expects to
          receive  the final  permits  from the state of Nevada and the Bureau
          of Land  Management  for its  Mineral  Ridge  Mine  after  which the
          Company plans to post the required  reclamation bond which will then
          allow the Company to begin  operation  and  recovery of gold at that
          property.  However,  management  cannot provide any assurances  that
          the Company will be successful in accomplishing any of its plans.

NOTE 3 - MINERAL PROPERTIES

         MINERAL RIDGE PROPERTY
         ----------------------

         On  November  7, 2000 the Company  purchased  the Mineral  Ridge gold
         mine and related  land,  property and  equipment  located near Silver
         Peak,  Nevada.  The Company  purchased  the  property for $225,000 in
         cash, assumed debt of approximately  $382,400 and incurred $67,444 of
         additional costs associated with the acquisition.

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

         Existing permits  associated with the Mineral Ridge mining operations
         had either  expired  or were under  review by the State of Nevada and
         the  Bureau  of Land  Management  (BLM)  with  the  obtaining  of new
         permits  dependent  upon  the  Company's   proposed  plan  of  mining
         operations.  Accordingly,  the  Mineral  Ridge  mine  has not been in
         operation since it was acquired with minimum  maintenance  activities
         being  conducted  subsequently.  Those  maintenance  operations  have
         yielded  certain amounts of precious metal product that has been sold
         resulting  in  revenues  of  $35,145  in 2000,  $309,796  in 2001 and
         $118,007 in 2002.


                                      F-40
<PAGE>

NOTE 3 - MINERAL PROPERTIES (Continued)

         MINERAL RIDGE PROPERTY (CONTINUED)
         ----------------------------------

         In connection with this acquisition,  the Company assumed reclamation
         cash deposits of $900,000 and $19,874 for future  reclamation and has
         made  additional cash deposits of $900,000 for a total of $1,821,000,
         including $1,750 of accrued  interest on the $19,874  deposit.  These
         funds are  restricted to be used only for  reclamation of the Mineral
         Ridge mine as specified by the existing  permits  associated with the
         mine.  These  funds have been  reflected  as  restricted  cash in the
         accompanying   financial  statements  and  are  not  expected  to  be
         utilized in the current period.  A  corresponding  liability has been
         included in the  accompanying  financial  statements  reflecting this
         obligation.

         Based on the Company's  proposed mine operating plan, the Company has
         been  in  the  process  of  obtaining  new  mine  operation  permits,
         including a current  reclamation  permit.  Subsequent to December 31,
         2002,  the  new  reclamation  permit  was  granted,  subject  to  BLM
         approval,  specifying  an  increase  in the  amount of the  dedicated
         reclamation  funds to  $2,692,932  (see Note  14).  The  Company  has
         received  verbal approval from the BLM and is awaiting formal written
         notice.

         The Company has  determined,  with the assistance of independent  and
         qualified  consultants,  that the  Mineral  Ridge  mine  and  related
         mineral  property has  economically  feasible proven and probable ore
         reserves of 2,600,000  tons  averaging  0.076 troy ounces of gold per
         ton  for  172,000  ounces  of  recoverable  gold  at  an  81  percent
         recovery.

         BOREALIS PROPERTY
         -----------------

         The Company  entered  into an agreement on August 21, 1997 with J. D.
         Welsh &  Associates  to purchase  an interest in a mineral  property,
         situated in Mineral County,  Nevada,  known as the Borealis  Property
         ("Borealis  Property").  The Welsh interest in the Borealis  Property
         was  in  a  joint   venture  with  Cambior   Exploration   USA,  Inc.
         ("Cambior").  Cambior has elected to terminate  the joint venture due
         to  budgetary  constraints  on  their  US  exploration  program.  The
         Company  had the  option  to  purchase  all of  Welsh's  interest  in
         Borealis  over three  years for a total of  $1,250,000  in  payments.
         The  purchase  price  for 65%  ownership  in the  joint  venture  was
         reduced to  $1,050,000  in  December of 1998 and the balance has been
         paid in full.

         The Company,  along with J. D. Welsh and  Associates,  Inc.  signed a
         simple  joint  operating  agreement  on December  31, 1999 which also
         increased  the  Company's  interest to 68%. On October 25, 2000 J. D.
         Welsh assigned it's 32% interest in Borealis to Newmex  Nevada,  Inc.
         In October 2000 Golden Phoenix  Minerals,  Inc.  acquired from Newmex
         Nevada Inc. it's 32% interest in the Borealis  project for $60,000 by
         issuing  3,000,000  shares of Golden  Phoenix  Minerals  Inc.  common
         stock,  and 3,000,000 of two year warrants to purchase one additional
         share at a strike price of $0.13 per share.

                                      F-41
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 3 - MINERAL PROPERTIES (Continued)

         BOREALIS PROPERTY (CONTINUED)
         -----------------------------

         As  part  of  the  agreement   Newmex  has  purchased  an  additional
         3,000,000  common shares and  3,000,000  two year $0.13  warrants for
         $600,000.  The  agreement  requires that the $600,000 be used for the
         purchase  and  operation  of the  Mineral  Ridge Mine.  $600,000  was
         deposited  into  an  escrow  account which  the  Company subsequently
         received prior to December 31, 2001.

         The Company has determined  with the  assistance of  independent  and
         qualified  consultants,   that  the  Borealis  Mineral  Property  has
         economically   feasible   probable   ore  reserves  of  860,000  tons
         averaging  0.126  troy  ounces of gold per ton for  81,000  ounces of
         recoverable gold at a 75 percent recovery.

         Accordingly,  the Borealis  Mineral  Property is  considered to be in
         the  development  stage.  Acquisition  costs totaling  $1,650,000 and
         deferred mineral  development  costs of $98,878 have been capitalized
         in the accompanying financial statements.

         CONTACT PROPERTY
         ----------------

         During 1998,  the Company entered into  two separate  agreements with
         International  Enexco Ltd.  ("Enexco") and F.W. Lewis, Inc. ("Lewis")
         related  to mineral properties  located in Elko  County, Nevada.  The
         properties are adjacent to each other  and are  collectively referred
         to as the Contact Property.

         On  January  28,  1998  the  Company  entered  into a  joint  venture
         agreement with Enexco.  The Company has the option to purchase 60% of
         the rights to Enexco's  interest in the Contact  Property for a total
         of $2,600,000  in Work  Requirements  and $313,000 in lease  payments
         over a  six-year  period  (see Note 10).

         On July 10, 1998,  the Company  entered into an  Exploration  License
         Agreement  (the  Agreement)  with  Lewis  granting  the  Company  the
         exclusive  right and  license to explore the  Contact  Property.  The
         agreement  requires  stock  distributions  of  $2,200,000  of  Golden
         Phoenix,  Inc.  common stock and minimum work  requirements  totaling
         $750,000.

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

                                      F-42
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 4 - MARKETABLE SECURITIES

         At December 31, 2001, the Company had marketable  securities having a
         fair market  value of $3,138 which had an  unrealized  gain of $1,437
         recorded as other  comprehensive  income for the year ended  December
         31,  2001.  During the year ended  December  31,  2002,  the  Company
         liquidated  the marketable  securities  realizing a gain of $523 with
         the $1,437  previously  recognized  unrealized  gain  offset as other
         comprehensive  loss. Since the cumulative  effect of these events has
         no net impact on the Company's  financial  statements at December 31,
         2002, and the Company has no other  marketable  securities,  no other
         comprehensive  gain or loss  account  has been  reflected  as part of
         stockholders' equity in the accompanying  financial  statements.  The
         Company follows the provisions of SFAS No. 115 (See Note 1).

NOTE 5 - AMOUNTS DUE TO RELATED PARTIES

         At various  times of officers  and  shareholders  of the Company have
         advances funds to pay operating,  general and  administration  costs.
         As of December  31,  2002,  a total of $282,329  was payable to these
         related  parties.  Interest  has  been  imputed  at a  rate  of 8% on
         amounts  outstanding in excess of twelve  months.  As of December 31,
         2002, total accrued  interest of $49,362 has been  recognized.  These
         advances  along with the imputed  accrued  interest are unsecured and
         due on demand.

         The Company  incurred  related party interest  expense of $32,351 and
         $28,140   for  the  years   ended   December   31,   2002  and  2001,
         respectively.

NOTE 6 - ACCRUED LIABILITIES

         Accrued liabilities consisted of the following at December 31, 2002 :

         Officers accrued salaries and deferred compensation          $445,000
         Accrued payroll and related expenses                          108,050
         Contact Property lease payable (Note 10)                    1,628,000
         Contact Property exploration license payable (Note 10)         43,000
         Contact Property minimum work commitment payable (Note 10)  1,117,000
         Other accrued liabilities                                      63,804
                                                                    ----------

                                                                    $ 3,404,854
                                                                    ===========

                                      F-43
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 7 - CAPITAL LEASES

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

         Obligations  under capital  leases at December 31, 2002  consisted of
         the following:

         Capital lease payable to IKON Capital Resources, dated
         October 15, 1997 payable at $250 per month, including
         interest imputed at 15.2% per annum, maturity November,
         2002, secured by certain computer equipment, personally
         guaranteed by a shareholder.                              $        397

         Capital lease payable to Compaq Financial Services, dated
         August 1, 2001, payable at $1,596 per month, including taxes
         and fees and interest imputed at 17.18% per annum, maturity
         August 1, 2005, secured partially by certain computer equipment
         40,504

         Capital lease payable to CIT Financial Services, dated
         August 21, 2001, payable at $1,409 per month, including
         interest imputed at 20.48% per annum, maturity August 5,
         2005, secured partially by certain computer equipment           35,332

         Capital lease payable to Heller Financial Leasing, dated
         July 5, 2001, payable at $1,195 per month, including
         interest imputed at 18.9% per annum, maturity July 5,
         2006, secured by certain computer equipment                     47,000
                                                                   ------------

                     Total                                              123,233

                     Less: Current Portion                              (40,102)
                                                                   ------------

                     Long-term portion                             $     83,131
                                                                   ============

                                      F-44
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 7 - CAPITAL LEASES (Continued)

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

                   Year Ended
                  DECEMBER 31,

                      2003                                        $     57,832
                      2004                                              49,413
                      2005                                              37,724
                      2006                                               8,368
                  2007 and thereafter                                        -
                                                                  ------------

                  Total future minimum lease payments                  153,337

                  Less: Amount representing interest                   (30,104)
                                                                  ------------

                  Present value of future minimum lease payments  $    123,233
                                                                  ============

         The Company recorded  depreciation  expense $8,039 and $4,549 for the
         years ended  December 31, 2002 and 2001 for  equipment  under capital
         leases.

NOTE 8 - LONG TERM DEBT

         Long term debt consisted of the following at December 31, 2002:


         Note payable to GMAC, dated November 17, 2000, payable at
         $672 per month including interest at 3.9% per annum
         through December, 2004, secured by a 2001 GMC Sierra
         truck.                                                    $     17,690

         Note payable to GMAC, dated November 17, 2000, payable at
         $672 per month including interest at 3.9% per annum
         through December, 2004, secured by a 2001 GMC Sierra
         truck.                                                          17,690

         Note payable to GMAC, dated November 17, 2000, payable at
         $599 per month including interest at 3.9% per annum through
         December, 2004, secured by a 2001 GMC Sierra truck.             15,628

         Note payable to GMAC, dated November 17, 2000, payable at
         $598 per month including interest at 3.9% per annum through
         December, 2004, secured by a 2000 GMC Sierra truck.             15,587
                                                                   ------------

         Balance Forward                                           $     66,595
                                                                   ------------

                                      F-45
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 8 - LONG TERM DEBT (Continued)

         Balance Forward                                          $      66,595

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

         Note payable to an individual, dated November 15, 2002, payable
         upon demand, including interest at 4.5% per annum, unsecured
         4,513

         Note payable to an individual, dated September 30, 2002,
         payable upon demand, including interest at 10% per annum,
         unsecured.                                                       7,000
                                                                   ------------

            Total                                                       118,108

            Less: Current portion of long term debt                    (101,945)
                                                                   ------------

            Total Long-term debt                                   $     16,163
                                                                   ============

         Maturities on long term debt are as follows:

            Year Ended
            DECEMBER 31,
            ------------

              2003                                                 $    101,945
              2004                                                       16,163
              2005                                                            -
              2006                                                            -
2007 and thereafter                                                           -
                                                                   ------------

                Total                                              $    118,108
                                                                   ============

NOTE 9 - CONVERTIBLE NOTES PAYABLE

         At  December  31,  2002,  the Company  had twelve  convertible  notes
         payable totaling  $455,000.  These notes originated in April 2000 and
         accrue  interest at 12% per annum.  Principle and interest are due in
         2005,  five years from the date of issue.  The principal and interest
         on the notes are  convertible  into  common  stock of the  Company at
         $0.20 to $0.30 per share. As of December 31, 2002,  accrued  interest
         on these convertible notes totaled $166,430.

         The Company  recognized a beneficial  conversion  feature  expense of
         $92,666  during the year ended  December  31, 2000  because the notes
         were  convertible  immediately.  The  beneficial  conversion  feature
         expense was calculated by subtracting  the conversion  price from the
         closing market price on the note date  multiplied by the  convertible
         number of shares.  If the  principal  and  interest on the notes were
         converted  as of  December  31,  2002,  the  Company  would have been
         required to issue 2,993,200  shares of common stock to the holders of
         the convertible notes.

                                      F-46
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 10 - COMMITMENTS AND CONTINGENCIES

         LEASES
         ------

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

                    Year Ended
                   DECEMBER 31,
                  --------------

                       2003                                       $     28,662
                       2004                                             16,720
                                                                  ------------

                         Total                                    $     45,382
                                                                  ============

         Rental  expense for all operating  leases was $31,967 and $26,274 for
         the years ended December 31, 2002 and 2001, respectively.

         EMPLOYMENT AGREEMENTS
         ---------------------

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


                                      F-47
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 10- COMMITMENTS AND CONTINGENCIES (Continued)

         EMPLOYMENT AGREEMENTS (CONTINUED)
         ---------------------------------

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

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

         MINERAL PROPERTY LEASE - BOREALIS PROPERTY
         ------------------------------------------

         The Company leases mineral property in Mineral County,  Nevada, known
         as the Borealis  Property.  The lease is  cancelable  within 90 days.
         Future  lease  payments  are at a  rate  of  $8,000  per  month  with
         adjustments  based upon the consumer price index,  with no expiration
         of the lease specified.

                                      F-48
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 10- COMMITMENTS AND CONTINGENCIES (Continued)

         MINERAL PROPERTY LEASE - F.W. LEWIS CONTACT PROPERTY
         ----------------------------------------------------

         The  Company has an  interest  in mineral  property  in Elko  County,
         Nevada,  known  as the  Contact  Property,  as part of a  exploration
         license  agreement  entered  into in July 1998.  (See Note 3).  Among
         other  things this  agreement  provides  for annual  lease  payments,
         semi-annual  issuance of the Company's  common stock and a commitment
         to perform  minimum annual  qualifying  work on the property  through
         December 31, 2002. At December 31, 2002,  the Company was not current
         in the payment of these obligations.  Accordingly,  the Company is in
         default on the  agreement.  However,  the  Company  has not  received
         notice of default on the  agreement  and has verbal  indication  from
         F.W. Lewis that he does not intend to exercise the default provisions
         afforded by the  agreement at this time and has agreed to suspend the
         semi-annual  common stock  issuance  requirement  for the time being.
         During February 2003, the parties signed a first amendment  extending
         the term of the exploration license to December 31, 2007. The Company
         is to  continue  making  exploration  license  payments of $2,500 per
         month, stock  distributions of 350,000 shares of the Company's common
         stock on  January 1 and July 1 of each year and yearly  minimum  work
         commitment expenditures of $100,000. In addition, the first amendment
         reaffirms  that the Company  remains  obligated to satisfy the unpaid
         lease payments,  annual work commitment and issuances of common stock
         stipulated  in the original  agreement.  On May 7, 2003,  the parties
         signed a second  amendment that clarified that  expenditures for work
         performed  by  the  Company  on  either  the  Lewis  property  or the
         adjoining  International  Enexco,  Ltd.  property shall be applied to
         Lewis' minimum work  commitment.  Additionally,  the second amendment
         clarified  that Lewis holds a Production  Royalty with respect to the
         Enexco Property.

         At December 31, 2002,  the Company had a total  liability  related to
         this   agreement  of  $2,710,000  on  the  lease  which  consists  of
         $1,550,000  of  semi-annual  common  stock   distribution   payments,
         $1,117,000  of minimum work  commitment  expenditures  and $43,000 in
         monthly  exploration  license  payments.  The minimum work commitment
         liability  includes  $1,049,000  of  required  expenditures  for  the
         adjoining  International  Enexco, Ltd. property and may be applied to
         Lewis' minimum work commitment. The exploration license is cancelable
         within thirty days.

         Future minimum lease payments are as follows:

                   Year Ended
                  DECEMBER 31,
                 --------------
                      2003                                        $    130,000
                      2004                                             130,000
                      2005                                             130,000
                      2006                                             130,000
                  2007 and thereafter                                  130,000
                                                                  ------------

                      Total                                       $    650,000
                                                                  ============

                                      F-49
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 10- COMMITMENTS AND CONTINGENCIES (Continued)

         MINERAL  PROPERTY  LEASE -  INTERNATIONAL  ENEXCO  LIMITED - CONTACT
         PROPERTY
         --------------------------------------------------------------------

         In January 1998, the Company  entered into a seven year joint venture
         agreement with International Enexco relating to mineral property also
         located in Elko  County,  Nevada that is  adjacent to the F.W.  Lewis
         property previously discussed.  The mineral properties subject to the
         F.W.  Lewis  agreement  and the  International  Enexco  agreement are
         collectively  referred to as the Contact  Property or Contact Project
         (see Note 3). The joint venture  agreement calls for monthly payments
         of  $4,000  and  minimum  work  in  qualifying   expenses   totalling
         $2,600,000  over  the  term of the  agreement  in  annual  escalating
         installments  from $100,000 to $650,000 for exploration,  development
         and/or mining  activities.  At December 31, 2002, the Company was not
         current in the payment of these obligations. Accordingly, the Company
         is in default on this joint venture agreement.  However,  the Company
         has not  received  notice of default and has verbal  indication  from
         International  Enexco that they do not intend to exercise the default
         provisions  afforded by the  agreement at this time.  At December 31,
         2002,  the  Company  had a  total  liability  of  $1,127,000  on  the
         agreement which includes  $78,000 in monthly  payments and $1,049,000
         in minimum work  commitment  liability.  The  agreement is cancelable
         within thirty days.  Future  payments as of December 31, 2002 were as
         follows:

                  Years Ended
                  DECEMBER 31,
                 --------------
                    2003                                          $    598,000
                    2004                                               698,000
                                                                  ------------

                   Total                                          $  1,296,000
                                                                  ============

         ROYALTY AGREEMENT - MARY MINING COMPANY, INC.
         ---------------------------------------------

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

         PRICE OF GOLD PER TROY OUNCE                    ROYALTY PERCENTAGE RATE
         ----------------------------                    -----------------------

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

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

         The minimum advance  royalty for 2002/2003 is currently  outstanding,
         of which  $30,000 was accrued and an  additional  $8,500 in penalties
         and interest as of December 31, 2002.


                                      F-50
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 10- COMMITMENTS AND CONTINGENCIES (Continued)

         ENVIRONMENTAL OBLIGATIONS
         -------------------------

         As part  of the  purchase  of the  Mineral  Ridge  Mine  and  related
         assets,  the Company is responsible for future reclamation costs (See
         Note  3).  The  Company  has  prepared  a  reclamation  plan for $1.8
         million  dollars  which was  approved  by the  Nevada  Department  of
         Environmental  Protection and the Bureau of Land  Management in March
         of 2001. The estimated  future  reclamation and remediation  cost are
         accrued and will be charged over the expected  operating  life of the
         mine using the unit-of-production method.

         In April  2002,  the  Company  obtained a new  letter of credit  with
         Sunwest Bank for $1.8 million which is fully  collateralized  by cash
         (See Note 3).  This  letter of credit  is  security  against  the new
         bond obtained from the  Department of the  Interior's  Bureau of Land
         Management.  The bond  relates  to the  reclamation  and  remediation
         costs.

         COMMON STOCK PURCHASE AGREEMENT
         -------------------------------

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

                                      F-51
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 10- COMMITMENTS AND CONTINGENCIES (Continued)

         LITIGATION
         ----------

         As discussed further in Note 14, On March 5, 2003, William F. Matlack
         filed a complaint in the Second  Judicial  District  Court in and for
         Washoe County,  Nevada against Golden Phoenix. The complaint alleges,
         among other things, breach of contract,  dealing in bad faith, fraud,
         fraudulent       misrepresentation,       negligence,       negligent
         misrepresentation, breach of fiduciary duty and breach of covenant of
         dealing fairly and in good faith. The complaint  seeking (i) economic
         damages in excess of $10,000,  (ii) compensatory damages in excess of
         $10,000,  (iii)  punitive  damages  at the amount of  $500,000,  (iv)
         interest on economic  damages at the rate  established by law and (v)
         reasonable  fees and costs related to the action.  On April 16, 2003,
         Golden  Phoenix  served on Mr.  Matlack a motion to quash  service of
         process. Golden Phoenix intends to vigorously defend this matter. The
         likelihood of an  unfavorable  outcome or the extent of any potential
         loss is not presently determinable.

NOTE 11- RELATED PARTY TRANSACTIONS

         During 1998, various employees and shareholders  exercised  1,095,642
         of options for $118,405.  Notes payable to  stockholders  at December
         31, 2002,  consisted of unsecured  short-term notes at 8% interest in
         the amount of $282,329.

         The  Company  sub-leased  part  of its  office  space  to  Whitney  &
         Whitney,  Inc. The sublease  expired in July,  2000.  The Company has
         a consulting  agreement  with  Whitney & Whitney  which has a term of
         three  years  beginning  March  1,  1999 and may be  extended  for an
         additional  three years.  The consulting  agreement calls for Whitney
         & Whitney  to  provide  metallurgical,  geological  and plant  design
         services  related to the  Company's  projects  along with  assistance
         related to general  business and  financial  matters.  The  agreement
         also calls for  payments the Company of a minimum of $2,500 per month
         in  restricted   shares  of  common  stock.   The  agreement  may  be
         terminated  by either party upon 90 days written  notice.  The amount
         of services  provided by Whitney & Whitney were $239,268 for 2002 and
         $120,776 for 2001.

         The  President  of  Whitney  &  Whitney,  Inc.,  Dr.  Whitney,  is  a
         significant  shareholder  of the Company.  At December  31, 2002,  he
         owned  directly or  beneficially  approximately  6% of the  Company's
         outstanding common stock.


                                      F-52
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 12 -      OUTSTANDING STOCK OPTIONS

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

         FASB Statement 123, "Accounting for Stock-Based  Compensation" ("SFAS
         No.  123"),  requires  the  Company to provide  proforma  information
         regarding  net income  and net  income  per share as if  compensation
         costs for the  Company's  stock  option  plans and other stock awards
         had been  determined in  accordance  with the fair value based method
         prescribed  in SFAS No. 123. The Company  estimates the fair value of
         each stock award at the grant date by using the Black-Scholes  option
         pricing model with the following  weighted  average  assumptions used
         for grants during 2002, respectively;  dividend yield of zero percent
         for all years; expected volatility of 76.58% thru 237.34%;  risk-free
         interest rates of 1.15 percent thru 4.31 percent;  and expected lives
         of 0.019 thru 3.0 years.  As a result of applying  SFAS No. 123,  the
         Company  incurred  an  additional  expense  of $44,168  for  services
         rendered by  non-employees,  which is included in investor  relations
         and  professional  fees on the  income  statement  for the year ended
         December 31, 2002.

         Had  compensation  cost for the Company's  stock  options  granted to
         employees been  determined  based on the fair value at the grant date
         under the  accounting  provisions  of SFAS No. 123, the Company would
         have  recorded an  additional  expense of $195,301.  Also under these
         same  provisions,  the  Company's net loss would have been changed by
         the pro forma amounts indicated below:


                                                               DECEMBER 31,
                                                            2002       2001
                                                   --------------  -------------
         Net loss:
           As reported                             $ (4,065,059) $ (2,720,019)
           Pro forma                               $ (4,260,360) $ (2,720,019)

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


                                      F-53
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 12 -      OUTSTANDING STOCK OPTIONS (Continued)

         A summary of the status of the  Company's  stock  option  plans as of
         December 31, 2002 and changes during the year is presented below:

                                                                   Weighted
                                                                    Average
                                                          SHARES  EXERCISE PRICE
                                                    ------------- --------------
         Outstanding, December 31, 2001                4,395,764  $      0.18

            Granted                                    2,469,000         0.20
            Canceled                                           -            -
            Exercised                                   (668,000)        0.16
                                                    ------------  -----------

         Outstanding, December 31, 2002                6,196,764  $      0.19
                                                    ============  ===========

         Exercisable, December 31, 2002                6,196,764  $      0.19
                                                    ============  ===========

<TABLE>
<CAPTION>

                                           OUTSTANDING           EXERCISABLE
                           ------------------------------------- ---------------
                                         Weighted
                                          Average    Weighted                  Weighted
                               Number    Remaining    Average   Number         Average
                            Outstanding  Contractual Exercise  Exercisable    Exercise
         Exercise Prices    at 12/31/02     Life       Price   at 12/31/02      Price
         ---------------    -----------  ----------- --------  -----------  ------------
<S>      <C>                <C>           <C>        <C>       <C>         <C>

         $     0.15         2,465,715           (a)  $  0.15   2,465,715   $       0.15
               0.22         3,731,049         1.26      0.22   3,731,049           0.22
         ---------------    -----------   --------   --------  ---------   ------------

         $ 0.15 - 0.22      6,196,764         1.26   $  0.19   6,196,764   $       0.19
                            =========  ===========   ========  =========   =============
</TABLE>


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

         During the year ended December 31, 2002, the Company  granted 668,000
         stock options to various outside  consultants for services  rendered.
         These options were issued with exercise  prices  ranging from $0.15 -
         $0.26 per  share.  All of these  options  vest  immediately  and were
         exercised within two months of the grant date.

         On March 30, 2002,  the Company  granted  1,701,000  stock options to
         officers  and  directors of the  Company.  These  options were issued
         with an  exercise  price of $0.22  per  share.  All of these  options
         vest  immediately  and have a maturity  of three years from the grant
         date.

         On September 14, 2002, the Company  granted  100,000 stock options to
         a  director  of the  Company.  These  options  were  issued  with  an
         exercise  price  of  $0.22  per  share.  All of  these  options  vest
         immediately and expire on June 9, 2003.

                                      F-54
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 13 -      OUTSTANDING STOCK WARRANTS

         A  summary  of the  status  of the  Company's  stock  warrants  as of
         December 31, 2002 and changes during the year is presented below:

                                                                    Weighted
                                                                     Average
                                                        Shares    Exercise Price
                                                    ------------- --------------

         Outstanding, December 31, 2001               14,359,747  $      0.10

            Granted                                   14,634,172         0.12
            Canceled / Expired                        (1,250,000)        0.10
            Exercised                                 (3,700,933)        0.11
                                                    ------------  -----------

         Outstanding, December 31, 2002               24,042,986  $      0.11
                                                    ============  ===========

         The following  summarizes the exercise price per share and expiration
         date of the Company's  outstanding  warrants to purchase common stock
         at December 31, 2002:

           EXPIRATION DATE                   PRICE           NUMBER
           --------------------     -----------------     -----------

                    2003                      $0.100        9,950,000
                    2003                       0.150          175,000
                    2004                       0.085          117,647
                    2004                       0.100        7,670,000
                    2004                       0.150        6,130,339
                                                          -----------

                                                           24,042,986
                                                          ===========

NOTE 14 - SUBSEQUENT EVENTS

         STOCKHOLDERS' EQUITY
         --------------------

         Subsequent  to December 31, 2002  through May 10,  2003,  the Company
         issued  9,740,805  shares of  common  stock  for  stock  options  and
         warrants  exercised for $996,414,  462,379 shares of common stock for
         services  rendered  valued at $99,153,  and 253,800  shares of common
         stock for joint venture agreement valued at $42,600.

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

                                      F-55
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 14 - SUBSEQUENT EVENTS (Continued)

         LITIGATION
         ----------

         On March 5, 2003,  William F. Matlack filed a complaint in the Second
         Judicial  District  Court in and for Washoe  County,  Nevada  against
         Golden Phoenix. The complaint alleges,  among other things, breach of
         contract, dealing in bad faith, fraud, fraudulent  misrepresentation,
         negligence, negligent misrepresentation, breach of fiduciary duty and
         breach of covenant of dealing fairly and in good faith. The complaint
         seeking (i) economic damages in excess of $10,000,  (ii) compensatory
         damages in excess of $10,000, (iii) punitive damages at the amount of
         $500,000,  (iv) interest on economic  damages at the rate established
         by law and (v)  reasonable  fees and costs related to the action.  On
         April 16,  2003,  Golden  Phoenix  served on Mr.  Matlack a motion to
         quash service of process. Golden Phoenix intends to vigorously defend
         this matter.  The likelihood of an unfavorable  outcome or the extent
         of any potential loss is not presently determinable.

         AGREEMENT IN PRINCIPLE
         ----------------------

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

         MINERAL PROPERTY LEASE - F.W. LEWIS CONTACT PROPERTY
         ----------------------------------------------------

         Subsequent  to  December  31,  2002,  the  Company  entered  into two
         additional  amendments  to the  Exploration  License  with  Option to
         Purchase  Agreement with F.W.  Lewis,  Inc. that extended the term of
         the   exploration   license  and  clarified   certain   minimum  work
         commitments of the Company.  See Note 10 for additional details.

         NEW RECLAMATION PERMIT
         ----------------------

         Subsequent to December 31, 2002,  the Company  received a reclamation
         permit from the State of Nevada.  The permit  authorizes  the company
         to reclaim the Mineral Ridge mine  consistent  with the conditions of
         the permit and the  reclamation  plans as filed.  The permit  becomes
         effective  upon receipt or  verification  that  acceptable  funds and
         surety have been posted for the reclamation costs (See Note 3).

                                      F-56
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 15 - PRIOR PERIOD ADJUSTMENTS

         Subsequent  to  the  original  issuance  of  the  December  31,  2001
         financial   statements,   the   Company   determined   that   accrued
         liabilities,   depreciation  expense  and  common  stock  issued  for
         services were not properly  recorded for the years ended December 31,
         1997 thru December 31, 2001. The Company also  determined  that there
         was  an  incorrect   recording  of   organization   costs,   deferred
         development  costs,  mining properties and claims and additional paid
         in  capital  along  with  a  cancellation   of  preferred  stock  not
         previously  recorded.  Correction  of these errors had the  following
         effect on the previously reported Assets, Liabilities,  Stockholders'
         Equity  and Net  Loss of the  Company  as of and for the  year  ended
         December  31,  2001 and has an equal  overstatement  of the  retained
         deficit  as  of  December  31,  2001.  These  corrections  have  been
         reflected in the  accompanying  statements  of  operations  and other
         comprehensive loss for the year ended December 31, 2001.

<TABLE>
<CAPTION>

                                      Originally        As
                                       REPORTED       RESTATED         DIFFERENCE
                                    -------------   -----------     ----------------
<S>                                <C>              <C>           <C>

         Organizational costs, net $         115    $       -     $         (115)(1)
         Options                          25,000            -            (25,000)(2)
         Fixed assets, net               738,771      766,651             27,880 (3)
         Mining properties and claims  1,860,591    1,650,000           (210,591)(4)
         Deferred development costs      462,709       83,845           (354,309)(5)
                                                                        (24,555) (6)
         Accrued liabilities             207,341    2,646,291          (240,000) (7)
                                                                     (2,090,500) (8)
                                                                        (30,000) (9)
                                                                        (78,450) (10)
         Accrued interest                296,207      317,648           (21,441) (11)
         Capital lease obligations       118,228      158,228           (40,000) (12)
         Preferred stock                   1,708          605             1,103  (13)
         Common stock                  7,281,637    7,553,656            78,450  (10)
                                                                         (1,103) (13)
                                                                        (73,700) (14)
                                                                         43,250  (15)
                                                                       (283,500) (16)
                                                                         60,000  (16)
                                                                         (2,750) (17)
                                                                        (92,666) (18)
         Additional paid in capital      123,700            -            50,000  (4)
                                                                         73,700  (14)
         Accumulated deficit          (6,700,367)  (9,934,664)        2,177,040  (19)
                                                                      1,057,257  (20)
         Net loss                     (1,662,762)  (2,720,019)        1,057,257  (20)
         Loss per share            $       (0.04)  $    (0.07)    $       (0.03) (21)
</TABLE>


                                      F-57
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 15 - PRIOR PERIOD ADJUSTMENTS (Continued)

      (1)   To expense organization costs in the period incurred which was prior
            to  December  31,  2000.  Results  in a  net  increase  of  $346  in
            accumulated  deficit  and  decrease of $231 in net loss for the year
            ended December 31, 2001.
      (2)   To expense a mineral  property  acquisition  option payment that was
            applied to the  purchase  price  prior to  December  31, 2000 with a
            corresponding increase in accumulated deficit at December 31, 2000.
      (3)   To recognize errors in calculation of depreciation expense resulting
            in a decrease in accumulated deficit of $3,283 and a decrease in net
            loss of $24,597 for the year ended December 31, 2001.
      (4)   To expense  capitalized value of the Cirque Alaska project abandoned
            in 2000 with a  corresponding  increase  in  accumulated  deficit of
            $160,591  and  a  reduction  of  $50,000   incorrectly   charged  to
            additional paid in capital.
      (5)   Expense costs  incorrectly  capitalized  associated with the Contact
            mineral  property that is in the  exploration  stage resulting in an
            increase in  accumulated  deficit of $304,304 and an increase in net
            loss of $50,005 for the year ended December 31, 2001.
      (6)   Expense  costs  associated  with the Borealis  mineral  property not
            qualifying   for   capitalization   resulting   in  an  increase  in
            accumulated  deficit  of  $11,225  and an  increase  in net  loss of
            $13,330 for the year ended December 31, 2001.
      (7)   Recognized deferred  compensation  obligation to two officers of the
            Company not previously  recorded resulting in a $180,000 increase in
            accumulated  deficit and a $60,000 increase in net loss for the year
            ended December 31, 2001.
      (8)   Recognize lease, exploration and minimum work commitment obligations
            to FW Lewis related to the Contact  mineral  property not previously
            recorded resulting in a $1,170,500  increase in accumulated  deficit
            and a $920,000  increase in net loss for the year ended December 31,
            2001.
      (9)   Recognize  unrecorded  lease  obligations  to  International  Enexco
            related  to the  Contact  mineral  property  resulting  in a $18,000
            increase in accumulated  deficit and a $12,000  increase in net loss
            for the year ended December 31, 2001.
      (10)  Recognize  unrecorded  liability for finders fees and account for as
            stock offering costs and charged as a reduction in common stock.
      (11)  Recognize additional accrued interest on debt obligations calculated
            incorrectly  resulting  in an  increase  in  accumulated  deficit of
            $21,441.
      (12)  Recognize an error in recording the Heller capital lease  obligation
            resulting  in an  increase  of  $40,000 in the net loss for the year
            ended December 31, 2001.
      (13)  Recognize  book  value of  shares  of  convertible  preferred  stock
            converted to common stock prior to December 31, 2000.
      (14)  Reclassify amount incorrectly  charged to additional paid in capital
            for no par common stock with a corresponding  change to the value of
            common stock.
      (15)  Recognize  finders fees and stock  offering  costs as a reduction of
            common stock that were incorrectly  expensed.  Results in a decrease
            of $43,250 in accumulated deficit.

                                      F-58
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                           December 31, 2002 and 2001


NOTE 15 - PRIOR PERIOD ADJUSTMENTS (Continued)

      (16)  To correct  valuation of common stock issued for services  resulting
            in an increase of $60,000 in stock  offering  costs  recognized as a
            reduction  in common  stock along with an  increase  in  accumulated
            deficit of $239,500  and a reduction  of $16,000 of the net loss for
            the year ended December 31, 2001.
      (17)  Recognize the fair value of warrants  issued with a debt  instrument
            with a  corresponding  increase  in net  loss  for  the  year  ended
            December 31, 2001.
      (18)  Recognize  charges related to the beneficial  conversion  feature of
            convertible  debt  issued  in 2000  with a  corresponding  charge to
            accumulated  deficit.
      (19)  Cumulative effect of Items (1) through (18) on accumulated  deficit.
      (20)  Cumulative effect of Items (1) through (18) on net loss for the year
            ended December 31, 2001.  (21) Loss per share increased by $0.03 per
            share.


                                      F-59
<PAGE>

                                    PART III


ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The  following  are the  directors  and  executive  officers  of Golden
Phoenix as of May 13, 2003:

          NAME                    AGE     POSITION
          ----------------------  ------- --------------------------------------
          Michael R. Fitzsimonds  46      President and Director
          Steven D. Craig         55      Vice President, Corporate
                                          Secretary and Director
          Allan J. Marter         55      Director
          David A. Caldwell       43      Director
          Ronald L. Parratt       54      Director


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

      MICHAEL R. FITZSIMONDS.  Mr. Fitzsimonds is President, CEO and Chairman of
the Board of Directors of Golden  Phoenix  Minerals,  Inc. and has served in his
capacity since 1997. Mr.  Fitzsimonds is responsible for all  administrative and
corporate finance activities at Golden Phoenix. Mr. Fitzsimonds also directs the
company's  Mineral Ridge  operations and  development  work  including  resource
evaluations  and  permitting  requirements.  He has more than 24 years of mining
industry experience as a geological  engineer,  including  extensive  experience
evaluating  complex gold deposits.  From 1987 to 1997, Mr. Fitzsimonds served as
Project  Services  Manager and Senior Geologist for Santa Fe Pacific Gold, Inc.,
and was  responsible  for the company's  initial  resource  evaluations  and due
diligence  of all  mine  operation  projects  and  acquisitions  worldwide.  Mr.
Fitzsimonds has significant  experience in key aspects of the minerals industry,
ranging from grass roots  exploration and project  development to mine start-up.
Mr.  Fitzsimonds  earned  his B.  Sc.  in  Geological  Engineering,  Mining  and
Exploration from the University of Arizona.

      STEVEN D. CRAIG.  Mr. Craig is Vice President,  Corporate  Secretary and a
Director  and has  served  in his  capacity  since  1998.  He is an  experienced
economic  geologist  specializing  in the discovery of ore deposits and building
successful exploration teams to facilitate discoveries.  Mr. Craig has more than
28 years of diversified  exploration  experience including,  5 years with Golden
Phoenix  and the prior 23 years  with  Kennecott  Exploration  Company,  and its
affiliates, as manager of a gold exploration team headquartered in Reno, Nevada.
His  international  experience  includes gold  exploration in New Guinea,  South
America and Mexico. Mr. Craig earned his M. S. in Economic Geology from Colorado
State University.  His  responsibilities  at Golden Phoenix include directing of
the company's exploration program and assisting in administrative functions.

      ALLAN J. MARTER. Mr. Marter is a Director of Golden Phoenix and has served
in his capacity  since 1998.  He is Senior Vice  President  and Chief  Financial
Officer of Golden Star Resources Ltd., Denver, Colorado, where he has served for
the past  three  years.  Prior to that,  Mr.  Marter  was  President  of  Waiata
Resources,  Inc.  Mr.  Marter  has more than 23 years  experience  of  financial
management in the mining industry including as CFO and a Director of a number of
small to mid-sized  mining and  exploration  companies,  including in Denver and
Vancouver,  Canada.  Mr.  Marter also has  significant  experience in investment
banking.

      DAVID A.  CALDWELL.  Mr.  Caldwell is a Director of Golden Phoenix and has
served  in his  capacity  since  1997.  Mr.  Caldwell  has  more  than 16  years
experience  as a  geologist  and  geophysicist  specializing  in the  discovery,
delineation and economic evaluation in gold exploration,  base metal and sulfur.
Mr.  Caldwell is Senior  Geologist for Nevada  Pacific Gold  Corporation,  Elko,
Nevada, which he co-founded in 1997. Prior to that, Mr. Caldwell has also served
in a senior management role, and has had significant roles in project management
and development at Santa Fe Pacific Gold  Corporation and the Gold Fields Mining
Company.

      RONALD L.  PARRATT.  Mr.  Parratt is a Director of Golden  Phoenix and has
served in his capacity since 2001. Mr. Parratt has more than 29 years successful

                                       22
<PAGE>

experience as a geologist, exploration manager and developer of gold deposits in
North America.  Mr. Parratt is currently a consultant.  For the past five years,
Mr. Parratt has served as Exploration  Manager for the Homestead Mining Company.
Until 1997, Mr. Parratt served as Vice President of Exploration for the Santa Fe
Pacific Gold  Corporation,  where he was responsible  for intensive  exploration
activities in the U.S., Brazil and Central Asia. During this tenure, Mr. Parratt
oversaw the  exploration  and development of 15 million ounces of gold reserves.
Mr. Parratt earned his M. S. degree in Economic Geology from Purdue  University.
Mr.  Parratt  is  currently  serving  on the  Governor's  Commission  on Mineral
Resources.


DIRECTORS

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


COMMITTEES

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

COMMITTEE                    CHAIRPERSON          MEMBERS
--------------------------   ------------------   ------------------------------
Audit Committee              Allan Marter         Ronald Parratt, David Caldwell
Compensation Committee       Allan Marter         Ronald Parratt, David Caldwell
Governance Committee         Ronald Parratt       Allan Marter, David Caldwell

COMPENSATION OF DIRECTORS


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

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


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

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

      Based on available  information,  we believe that all filings with respect
to Section 16(a) are now current.  Form 5's for Mr.  Fitzsimonds,  Mr. Craig and
Mr.  Caldwell were not timely filed.  Form 3's and 5's for Mr.  Whitney were not
timely filed. A total of 11 Form 4's,  representing  29  transactions,  were not
timely filed for Mr. Whitney.

                                       23
<PAGE>

ITEM 10.  EXECUTIVE COMPENSATION

      The following table sets forth  information as to the  compensation of the
Chief Executive Officer whose  compensation for the year ended December 31, 2002
did not exceeded $100,000:

<TABLE>

                      ANNUAL COMPENSATION              LONG TERM COMPENSATION
                   -------------------------  -----------------------------------------------------------------
                                                AWARDS              PAYOUTS
                                              -------------  --------------------------------------------------
<CAPTION>

                                             OTHER                    SECURITIES
NAME AND                                    ANNUAL       RESTRICTED  UNDERLYING
PRINCIPAL                        BONUS    COMPENSATION     STOCK      OPTIONS/       LTIP           ALL OTHER
POSITION       YEAR   SALARY ($) BONUS ($)    ($)         AWARD(S)      SARS (#)    PAYOUTS ($)    COMPENSATION
    (A)        (B)       (C)       (D)        (E)          (F)            (G)          (H)             (I)
-----------   ------  ---------- --------- -----------   ----------  -----------  -------------    ------------
<S>            <C>    <C>        <C>       <C>           <C>         <C>          <C>              <C>

Michael        2002   $60,000(1)           $35,000
Fitzsimonds,   2001   $60,000(2)           $35,000
CEO
               2000   $60,000(3)           $35,000                  1,395,000(3)
               1999   $60,000(4)           $35,000                  1,148,940(5)
</TABLE>


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

      (1) Of the  $60,000 in 2002  annual  compensation,  $35,000 was accrued at
December  31,  2001  and  remains  unpaid.  (2) Of the  $60,000  in 2001  annual
compensation,  $35,000 was accrued at December 31, 2001 and remains unpaid.  (3)
Of the $60,000 in 2000 annual compensation,  $35,000 was accrued at December 31,
2000 and remains  unpaid.  (4) In 2000,  Mr.  Fitzsimonds  was  granted  options
1,145,000  common shares at $0.22. He was also granted 250,000 in new options at
$0.22 in 2000. In addition to these options, Mr. Fitzsimonds owns 100,000 shares
of convertible  preferred  stock,  which are convertible at ten shares of common
stock for each share of preferred,  at a price of $0.10 per common share. (5) Of
the $60,000 in 1999  annual  compensation,  $35,000 was accrued at December  31,
1999 and remains unpaid.  (6) In addition to the options replaced and granted in
note 1 Mr. Fitzsimonds was granted the right to convert his unpaid salary during
1998 and 1999 into options for 1,148,940 common shares at $0.147.

OPTION GRANTS IN LAST FISCAL YEAR


                             NUMBER OF
                            SECURITIES    %OF TOTAL
                            UNDERLYING    GRANTED TO
                              OPTIONS    EMPLOYEES IN  EXERCISE OR   EXPIRATION
NAME                          GRANTED    FISCAL YEAR   BASE PRICE      DATE
--------------------------------------  ------------- ------------- ------------


Michael Fitzsimonds             none         0%               --          --




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


      OPTIONS EXERCISED:

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


      OPTIONS UNEXERCISED:

                                                            VALUE OF UNEXERCISED
                           NUMBER OF SECURITIES UNDERLYING  IN-THE-MONEY OPTIONS
                           UNEXERCISED OPTIONS AT 12/31/01       AT 12/31/01
                          ------------------------------------------------------
NAME                        EXERCISABLE   UNEXERCISED  EXERCISABLE   UNEXERCISED
------------------------- --------------- ------------ ------------ ------------
Michael R. Fitzsimonds        2,543,940      375,000     $476,254       $257,813


                                       24
<PAGE>

STOCK OPTION PLAN

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


EMPLOYMENT AGREEMENTS

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

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

                                       25
<PAGE>


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


PRINCIPAL SHAREHOLDERS

      The following table presents certain information  regarding the beneficial
ownership  of all  shares of  common  stock at May 13,  2003 for each  executive
officer and  director  of our  Company and for each person  known to us who owns
beneficially  more than 5% of the  outstanding  shares of our common stock.  The
percentage  ownership  shown in such table is based upon the  87,078,856  common
shares issued and  outstanding at May 13, 2003 and ownership by these persons of
options or warrants  exercisable  within 60 days of such date.  Also included is
beneficial  ownership  on a fully  diluted  basis  showing all  authorized,  but
unissued,  shares of our common stock at May 13, 2003 as issued and outstanding.
Unless  otherwise  indicated,  each person has sole voting and investment  power
over such shares.

                                                  EXERCISABLE
                                   SHARES OWNED     OPTIONS     PERCENTAGE
                                  --------------  ------------  ------------

John W. Whitney                     5,049,009(1)     1,865,280          7.8%
P.O. Box 10725
Reno, Nevada

Frank Diegman                         10,833,333     5,833,333         17.9%
1986 E Football Blvd
Pasadena, Ca 91107

Michael R. Fitzsimonds                 2,074,414  2,818,940(2)          5.4%
3595 Airway Drive
Suite 405
Reno, Nevada

Steven D. Craig                           27,362  2,265,349(3)          2.6%
3595 Airway Drive
Reno, Nevada

David Caldwell(4)                        127,362    240,000(4)             *
3595 Airway Drive
Suite 405
Reno, Nevada

Allan Marter(5)                          127,362    190,000(5)             *
3595 Airway Drive
Suite 405
Reno, Nevada

Ronald L. Parratt                              -     100,000(6)             *
3595 Airway Drive
Suite 405
Reno, Nevada

All directors and officers as a group  2,356,500    5,614,289           8.6%
(5 persons)

---------------
*     Represents less than 1%.

(1)   Included in Mr.  Whitney's shares are 2,789,244  restricted  common shares
      owned by Whitney & Whitney,  Inc.  Mr.  Whitney is  President of Whitney &
      Whitney,  Inc. and a greater than 10%  shareholder of its parent  company,
      Itronics Inc. Mr. Whitney's  options and warrants are exercisable at $0.10
      per share.

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

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

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

                                       26
<PAGE>

(5)   Mr. Marter holds options for 190,000  common shares  exercisable  at $0.22
      per share.

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


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED PARTIES

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

                                                            VALUE OF
                                                          COMPENSATION
                                   NUMBER OF SHARES      INCLUDING CASH
            YEAR                   OF COMMON STOCK          PAYMENTS
            -------------------- --------------------   -----------------
            2001                      1,208,248              $120,776
            2002                      1,847,002              $239,268
            2003                              0                     0
            Total                     3,055,250              $360,044

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


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


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

                                                           AMOUNTS PAID
                                 NUMBER OF SHARES          ON EXERCISE
           YEAR                   OF COMMON STOCK          OF WARRANTS
           --------------------- --------------------   -----------------
           2001                       550,000                  $55,000
           2002                       800,000                  $80,000
           2003                             0                    $   0
           Total                    1,350,000                 $135,000

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

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

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

                                       27
<PAGE>


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


      Mr.  Fitzsimonds,  the Company's Chief  Executive  Officer and a Director,
converted  100,000  preferred  shares to 1,000,000 common shares of stock during
the fourth quarter of 2002 in exchange for canceling  $100,000 worth of debt the
company owed him.

                                       28
<PAGE>


ITEM 14.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

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

      (A)(3)        EXHIBITS.

EXHIBIT NO.  DESCRIPTION                         LOCATION
-----------  ----------------------------        -------------------------------

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

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

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

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

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

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

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

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

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

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

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

                                       29
<PAGE>

EXHIBIT NO.  DESCRIPTION                         LOCATION
-----------  ----------------------------        -------------------------------
10.10        Form of General Executive           Incorporated by reference to
             Compensation Contract               Exhibit 14.1 to the Company's
                                                 Annual Report on Form 10-KSB
                                                 for the year ended December 31
                                                 1998 as filed with the SEC on
                                                 October 27, 1999

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

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


      (B)   REPORTS ON FORM 8-K.

      On February 28, 2003, Golden Phoenix filed a Form 8-K with respect to Item
4 - Change in Registrant's Certifying Accountant.

      On March 17, 2003, Golden Phoenix filed an Amendment to Form 8-K with
respect to Item 4 - Change in Registrant's Certifying Accountant.

                                       30
<PAGE>

                                   SIGNATURES

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

Date: May 19, 2003                 GOLDEN PHOENIX MINERALS, INC.

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



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

SIGNATURE                      TITLE                               DATE



/s/ Michael R. Fitzsimonds    Director, President and Chief
--------------------------    Financial Officer                   May 19, 2003
Michael R. Fitzsimonds



/s/ Steven D. Craig           Director, Vice President and
--------------------------    Secretary                           May 19, 2003
Steven D. Craig


/s/ Allan J. Marter
--------------------------
Allan J. Marter                Director                            May 19, 2003


/s/ David A. Caldwell
--------------------------
David A. Caldwell              Director                            May 19, 2003


/s/ Ronald L. Parratt
--------------------------
Ronald L. Parratt              Director                            May 19, 2003

                                       31
<PAGE>

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


      In  connection  with  the  Annual  of Gold  Phoenix  Minerals,  Inc.  (the
"Company") on Form 10-KSB for the year ended December 31, 2002 as filed with the
Securities and Exchange  Commission on the date hereof (the  "Report"),  each of
the  undersigned,  in the capacities and on the dates  indicated  below,  hereby
certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that to his knowledge:

      1. The Report fully  complies  with the  requirements  of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

      2.  The  information  contained  in the  Report  fairly  presents,  in all
material  respects,  the  financial  condition  and results of  operation of the
Company.



/s/ Michael R. Fitzsimonds
--------------------------------------------------------------
Michael R. Fitzsimonds
President, Chief Executive Officer and Chief Financial Officer

                                      A-1

<PAGE>


                                  CERTIFICATION
                             PURSUANT TO SECTION 302

      I, Michael R. Fitzsimonds, certify that:

      1. I have  reviewed  this Annual  Report on Form 10-KSB of Golden  Phoenix
Minerals, Inc.;

      2. Based on my  knowledge,  this annual report does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

      3. Based on my knowledge,  the financial  statements,  and other financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

      4. The registrant's  other  certifying  officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

            a)    designed  such  disclosure  controls and  procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this quarterly report is being prepared;

            b)    evaluated the  effectiveness  of the  registrant's  disclosure
controls and  procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and

            c)    presented  in this  annual  report our  conclusions  about the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

      5.    The  registrant's  other  certifying  officers and I have disclosed,
based on our most recent evaluation,  to the registrant's auditors and the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

            a)    all  significant  deficiencies  in the design or  operation of
internal  controls  which could  adversely  affect the  registrant's  ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

            b)    any fraud,  whether or not material,  that involves management
or other  employees who have a  significant  role in the  registrant's  internal
controls; and

      6.    The registrant's  other certifying  officers and I have indicated in
this annual  report  whether or not there were  significant  changes in internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 19, 2003                         By:   /S/ MICHAEL R. FITZSIMONDS
                                                 --------------------------
                                                 Michael R. Fitzsimonds
                                                 President

                                      B-1

<PAGE>

                                  CERTIFICATION
                             PURSUANT TO SECTION 302

      I, Michael R. Fitzsimonds, certify that:

      1.    I have reviewed this Annual Report on Form 10-KSB of Golden  Phoenix
Minerals, Inc.

      2.    Based on my  Knowledge,  this  annual  report  does not  contain any
untrue  statement of a material fact or omit to state a material fact  necessary
to make the  statements  made,  in light of the  circumstances  under which such
statements  were made, not misleading with respect to the period covered by this
annual report;

      3.    Based on my knowledge, the financial statements, and other financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

      4.    The registrant's other certifying officers and I are responsible for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

            a)    designed  such  disclosure  controls and  procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this quarterly report is being prepared;

            b)    evaluated the  effectiveness  of the  registrant's  disclosure
controls and  procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and

            c)    presented  in this  annual  report our  conclusions  about the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the Evaluation Date;

      5.    The  registrant's  other  certifying  officers and I have disclosed,
based on our most recent evaluation,  to the registrant's auditors and the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent function):

            a)    all  significant  deficiencies  in the design or  operation of
internal  controls  which could  adversely  affect the  registrant's  ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

            b)    any fraud,  whether or not material,  that involves management
or other  employees who have a  significant  role in the  registrant's  internal
controls; and

      6.    The registrant's  other certifying  officers and I have indicated in
this annual  report  whether or not there were  significant  changes in internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 19, 2003                         By:   /S/ MICHAEL R. FITZSIMONDS
                                                 --------------------------
                                                 Michael R. Fitzsimonds
                                                 Chief Financial Officer

                                      C-1