SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 AMENDMENT NO. 2
                                       TO
                                   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, par value $0.001 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 November 7, 2003, was approximately $40.3
million, based on the average bid and asked prices on such date of $0.50.

      The Registrant had 93,858,710 shares of common stock, no par value per
share, outstanding on November 7, 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 is a mineral property development company, formed in
Minnesota on June 2, 1997. Golden Phoenix plans to produce economically valuable
minerals from the mineral properties we currently control, and from mineral
properties that we may acquire in the future. Our acquisition emphasis is
focused on properties containing gold, silver, copper, and other strategic
minerals located in Nevada and the Western United States.

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

      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
Operations" to explore, "Plan of Operations" to mine, "Reclamation Permit", "Air
Quality Permit", "Water Quality Permit", "Industrial


                                       1
<PAGE>

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.

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

<TABLE>
<CAPTION>
                                                          Compliance
Name of Regulation                            Fees          Cost       Type of Compliance
------------------                            ----        ----------   ------------------
<S>                                         <C>            <C>         <C>
Nevada Department of Environmental
  Protection Water Pollution Control        $ 14,000       $  4,800    Quarterly water sampling & waste rock sampling
Nevada Department of Environmental
  Protection Air Quality                     $ 2,000       $  2,000    Air quality monitoring of equipment
Nevada Department of Environmental
  Protection Reclamation                     $ 5,000             --    Reclamation
Mining Safety Health Association                  --      $   2,000    Safety equipment and training
---------------------------------------------------------------------------------------------------------------------
Total                                       $ 21,000      $   8,800
                                            ========      =========
</TABLE>

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

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

Competition And Gold Price

      The mining industry has historically been intensely competitive. However,
over the last ten years imposition of numerous regulatory requirements and claim
rental policies by the United States Government and the general exodus of major
gold corporations from the U.S. to pursue mineral exploration in foreign
countries has allowed large areas of very prospective mineralized ground to
become open for location and acquisition. Nonetheless, the increasing price of
gold 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 certain capital
equipment for the Mineral Ridge mine, which would be support equipment for the
process and leach facilities, including a small dozer, front-end loader,
forklift, and a small haul truck, which cost could range from $50,000 to
$200,000. We anticipate funding these capital equipment expenditures with funds
we receive from our Fusion Capital financing and from any revenues we may
generate. 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 anticipate purchasing some capital equipment for the Mineral
Ridge mine, which would be support equipment for the process and leach
facilities such as a small dozer, front end loader, forklift, and a small haul
truck. The pickup trucks we intend to purchase will be for our staff
professionals only. All contractors will provide their own vehicles.


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<PAGE>

Mining Properties And Projects

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

      The following describes the existing mining 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 three key projects
are exploration/development-stage properties and are the Contact copper-silver
project, the Borealis gold-silver project and the Ashdown gold-molybdenum
project.

<TABLE>
<CAPTION>
                                Golden Phoenix Probable Reserves
-------------------------------------------------------------------------------------------------------
Property                     Probable Reserve      Grade     Recovery       Price     Recoverable Metal
--------                     ----------------      -----     --------       -----     -----------------
<S>                           <C>                <C>            <C>        <C>           <C>
Mineral Ridge Gold Project    2,600,000 tons     0.076 opt      81%        $325/oz       172,000 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.

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

      The Mineral Ridge property holds 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
Minesight(TM) software and has been reviewed by Behre Dolbear & Company, Inc., a
outside consultant. Included in the reserve estimate of recoverable gold are
10,000 recoverable ounces of gold contained in the leach pad that remain to be
recovered by cyanide leaching. The property holds further mineral potential with
identified targets potentially containing additional gold mineralization. As of
June 30, 2003, total expenditures, excluding acquisition costs, on the Mineral
Ridge property have been $3,141,376.

      Golden Phoenix has filed a $1.8 million interim reclamation bond, which
allows us to hold the Mineral Ridge property while other permitting is underway.
The reclamation permit, which was in place when Golden Phoenix bought the
property out of bankruptcy, was not transferable and the company holding the
surety bond refused to write a new bond for a startup company. We were required
to post a new bond, but this could not be completed until a new reclamation plan
and permit was completed. The bond was due for a three-year review by the Bureau
of Land Management and Nevada Department of Environmental Protection. This
review changed the cost of the bond from $1.64 million to $3.2 million for


                                       3
<PAGE>

the same plan. The previous bonding company wanted to be released from the bond
held by the Bureau of Land Management; however, without a replacement bond, the
only method of release would have been by reclaiming the property. To avoid loss
of the property value due to destruction of the infrastructure, Golden Phoenix
needed to bring the property back into production. We negotiated an interim bond
amount to keep the project in a status-quo status until a new plan and bond
amount could be negotiated. The source for the cash bond was from the two
previous operators and one of our shareholders. On May 8, 2003, Golden Phoenix
obtained a new amended operating permit and on June 23, 2003, we filed a $2.7
million reclamation bond with the Bureau of Land Management with respect to the
Mineral Ridge mine. Now that the new permit and bond are in place the company
assumes its reclamation obligation to be $2.7 million. We are working to obtain
additional 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 and (2) significant new gold production
from initiating open pit mining, which will be processed through cyanide vat
leach gold recovery plant.

      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, the Mineral Ridge
property has sold 1,974 ounces of gold and 983 ounces of silver since the
acquisition by the Company 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. This work has been delayed in the past
in part due to on-going discussions we have had with the Bureau of Land
Management and the Nevada Department of Environmental Protection with respect to
the approximate amount of the reclamation bond. An additional reason for the
delay in restarting the mine has been our lack of capital necessary to fund the
reclamation bond required to restart the leach pad. On May 8, 2003, we received
the new amended operating permit and on June 23, 2003, we filed a $2.7 million
reclamation bond with the Bureau of Land Management with respect to the Mineral
Ridge mine. We utilized an insurance-backed financial assurance program produced
by IMA Environmental Insurance of Denver, Colorado, and underwritten by AIG
Environmental, to acquire the bond. The program structure includes an insurance
policy that will pay reclamation expenses as they occur. The insurance enables
us to acquire the necessary reclamation bond at a fixed and discounted rate for
a term of twelve years. It also allows us the flexibility to increase our bond
in the future as we move into Phase II of our operations at Mineral Ridge.

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 we 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


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<PAGE>

conducted extensive exploration and development programs on the Mineral Ridge
Property. In February 1996, Behre Dolbear performed a feasibility study for
Cornucopia that was positive and stressed two main risks: (1) grade control
during mining and (2) maintaining the permeability of the heaps by agglomerating
with sufficient cement.

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

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

      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. The use of the crushing
facility is not anticipated until Phase II operations commence. Phase II of the
operation is planned for commissioning approximately 2 years after Phase I,
which is to re-leach the existing leach pad to recover between 20,000 and 24,000
ounces of gold. We are in the preliminary stages of this redesign of the plant;
therefore, at this time, we are unable to estimate the time and cost of the
reconfiguration of the crushing plant. Management will make the decision to
reconfigure the crushing plant as the design approaches completion, as well as
the decision about what parts of the plant will be used and what will be
disposed of is decided. 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.


                                       5
<PAGE>

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

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

Borealis Project, Mineral County, Nevada

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

      The property is held under a lease agreement with the Borealis
Partnership, which consists of three separate individuals who entered an
explanation partnership to facilitate leasing the entire mineralized zone owned
by the three partners. Subsequent to acquiring this lease, two of the partners
have become shareholders in the Company; one is a minor shareholder and the
other is John Whitney who, as of July 1, 2003 controlled approximately 7.8% of
Golden Phoenix's issued and outstanding common stock. The lease was entered into
on January 24, 1997 and control of the property is maintained with monthly
advanced royalty payments. Current monthly payments are $8,000; we are current
on 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 July 18, 2003 the Company signed a Joint Venture agreement for its
Borealis gold project with Gryphon Gold Corporation, a Nevada incorporated
company. Under the terms of the agreement Gryphon Gold has the right to acquire
a 50% interest in the property after incurring qualified expenditures on work
programs or making payments to Golden Phoenix in the aggregate of five million
dollars over a four-year period. Gryphon Gold has the right to acquire an
additional 20% by delivering to Golden Phoenix a feasibility study for mine
production based on a mineable reserve of 500,000 ounces of gold or gold
equivalent or by incurring an additional four million dollars in expenditures.
Gryphon has paid Golden Phoenix $25,000 in consideration of a 75-day due
diligence period and will pay an additional $100,000 upon signing the definitive
joint venture agreement. Gryphon Gold is now managing the project and making
plans for drilling, metallurgy, and other exploration activities.

      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.

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

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


                                       6
<PAGE>

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

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

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. At December 31, 2002, the total liability for monthly payments and
minimum work commitments to Enexco was $1,127,000. The President of Enexco has
deferred the current late payments for a later time. Enexco did not set a
specific due date for the payment of the current late payments. The current late
payments are due on demand by Enexco. Golden Phoenix also has the option to
acquire Enexco's remaining 40 percent in the joint venture following the 60
percent earn-in, for an additional $5 million for the first 20 percent and $10
million for the remaining 20 percent. These agreements expire if Golden Phoenix
terminates the joint venture agreement or is found in default of any term in the
agreement. A 0.25 percent net smelter return royalty burdens the Enexco property
upon production and is payable to the SF Lewis Trust.

      On July 10, 1998, Golden Phoenix entered into a separate exploration
license and purchase option agreement for the SF Lewis Trust portion of the
Contact Project. The F. W. Lewis Inc. Exploration License with Option to
Purchase was acquired for an initial payment of $15,000 and 100,000 shares of
common stock. The agreement requires Golden Phoenix to make monthly cash
payments, initially at $1,500 per month and then escalating to $2,500 per month
and will total $149,000. In addition, Golden Phoenix is to issue F.W. Lewis
common shares with total cash value of $2.2 million over the 4-1/2 year option
term which ended December 31, 2002 and expend a total of $1,650,000 of minimum
work commitment related costs. On February 19, 2003 Lewis and Golden Phoenix
entered into a First Amendment to Exploration License with Option to Purchase,
which extended the term of the Agreement to December 31, 2007 and modified the
requirements for the stock distributions to 350,000 shares on January 1 and on
July 1 of each year and minimum annual work commitments of $100,000. Monthly
payments continue at $2,500. On May 7, 2003, the parties signed a second
amendment that clarified that expenditures for work performed by Golden Phoenix
on either the Lewis property or the adjoining International Enexco, Ltd.
property shall be applied to Lewis' minimum work commitment. Additionally, the
second amendment clarified that Lewis holds a Production Royalty with respect to
the Enexco property. As of December 31, 2002, $62,500 has been paid toward the
monthly payments and 4,453,623 shares have been issued, which were valued at
$676,000. As of December 31, 2002, the total liability owed to F.W. Lewis was
$43,000 for the exploration license, $1,550,000 for the bi-annual stock
distribution and $1,117,000 for the minimum work commitment not yet performed.
The option to purchase price for the Lewis property is $3 million cash and $1
million worth of Golden Phoenix common stock and can be 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.


                                       7
<PAGE>

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

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

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

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

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

Further Potential

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

Ashdown Project, Humboldt County, Nevada

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

      Prior to signing of the PRS agreement with Golden Phoenix, PRS Enterprise
Inc. (PRS), a Nevada LLC, and Win-Eldrich Mines, Ltd. (W-E) signed a Memorandum
of Understanding relating to the Ashdown mine, controlled by W-E. This
Memorandum of Understanding granted PRS the rights to explore and develop the
property known as the Ashdown Mine in Humboldt County, Nevada, provided PRS
meets certain investment requirements by December 15, 2003. On September 19,
2003, Golden Phoenix Minerals entered a Memorandum of Understanding with PRS
Enterprise, Inc. to become its project operator for the Ashdown project. The
agreement required that PRS raise the funding necessary to develop and operate
the Ashdown Property. To the extent the necessary funds become available, Golden
Phoenix will perform the required work to acquire the proper permits, and to
explore and develop the Ashdown property. All work will be conducted in a
professional manner, and in compliance with appropriate state and federal
regulations. To accomplish the tasks set forth, a management committee will be
set up, consisting of PRS, W-E, and Golden Phoenix. Further, the parties agreed
to a share of the profits, if any, from the mining operation including an
investor payback plan.

      Approximately $8 million in exploration and development drilling has been
conducted on the property since about 1985. This money was applied to drilling
about 270 reverse circulation and core holes, driving 1800 feet of tunnel to get
bulk samples of the molybdenite mineralization, and conducting several
feasibility studies for open pit and underground mining operations.


                                       8
<PAGE>

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

Certain Business Risk Factors

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

We Have A Limited Operating History With Significant Losses And Expect Losses To
Continue For The Foreseeable Future

      We have yet to establish any history of profitable operations. We have
incurred annual operating losses of $3,944,312, and $2,979,873 respectively,
during the years ended December 31, 2002 and 2001, respectively. As a result, at
December 31, 2002, we had an accumulated deficit of $15,756,200. Our revenues
have not been sufficient to sustain our operations. We expect that our revenues
will not be sufficient to sustain our


                                       9
<PAGE>

operations for the foreseeable future. Our profitability will require the
successful commercialization of our gold mines. We may not be able to
successfully commercialize our gold mines or ever become profitable.

The Sale Of Our Common Stock To Fusion Capital Will Cause Dilution And The Sale
Of The Shares Of Common Stock Acquired By Fusion Capital Could Cause The Price
Of Our Common Stock To Decline

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

There Is 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

      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 and 2001 with respect to their substantial doubt about
our ability to continue as a going concern. As discussed in Note 2 to our
financial statements for the fiscal year ended December 31, 2002, we have
generated significant losses from operations, had an accumulated deficit of
$15,756,200 and had a working capital deficit of $4,212,556 at December 31,
2002, which together raises substantial doubt about our ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 2 to our financial statements for the fiscal year ended December 31,
2002.

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. As of December 31, 2002, we had a working capital deficit of
$44,212,556. Therefore, we need additional funds to continue these operations.
Upon effectiveness of the registration statement which we are filing 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.

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

The Validity Of Our Unpatented Mining Claims Could Be Challenged, Which Could
Force Us To Curtail Or Cease Our Business Operations

      A majority of our properties consist of unpatented mining claims, which we
own or lease. These claims are located on federal land or involve mineral rights
that are subject to the claims procedures established by the General Mining Law.
We must make certain filings with the county in which the land or mineral is
situated and with the Bureau of Land Management and pay an annual holding fee of
$100 per claim. If we fail to make the annual holding payment or make the


                                       10
<PAGE>

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

Estimates Of Mineral Reserves And Of Mineralized Material Are Inherently
Forward-Looking Statements, Subject To Error, Which Could Force Us To Curtail Or
Cease Our Business Operations

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

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

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

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

      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


                                       11
<PAGE>

            ensure planned requirements are met. Nevertheless, unforeseen
            difficulties may occur in planned operations, which would force us
            to curtail or cease our business operations.

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

Environmental Controls Could Curtail Or Delay The Exploration And Development Of
Our Mines And Impose Significant Costs On Us

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

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

Proposed Legislation Affecting The Mining Industry Could Have An Adverse Effect
On Us

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


                                       12
<PAGE>

The Development And Operation Of Our Mining Projects Involve Numerous
Uncertainties

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

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

      o     estimation of reserves;

      o     anticipated metallurgical recoveries;

      o     future gold prices; and

      o     anticipated capital and operating costs of such projects.

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

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

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

      o     unanticipated adverse geotechnical conditions;

      o     incorrect data on which engineering assumptions are made;

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

      o     availability and cost of processing and refining facilities;

      o     availability of economic sources of power;

      o     adequacy of water supply;

      o     adequate access to the site;

      o     unanticipated transportation costs;

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

      o     fluctuations in gold prices; and

      o     accidents, labor actions and force majeure events.

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

Gold Exploration Is Highly Speculative, Involves Substantial Expenditures, And
Is Frequently Non-Productive

      Gold exploration involves a high degree of risk and exploration projects
are frequently unsuccessful. Few prospects that are explored end up being
ultimately developed into producing mines. To the extent that we continue to be
involved in


                                       13
<PAGE>

gold exploration, the long-term success of our operations will be related to the
cost and success of our exploration programs. We cannot assure you that our gold
exploration efforts will be successful. The risks associated with gold
exploration include:

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

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

      o     the capital available for exploration and development.

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

Mineral Exploration Is Highly Speculative

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

The Price Of Gold 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
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. Adverse fluctuations of the
market prices of gold and copper, respectively, may force us to curtail or cease
our business operations.

Mining Risks And Insurance Could Have An Adverse Effect On Our Profitability

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

We Are Currently Not Compliant With The Terms Of Our International Enexco Joint
Venture And Our F.W. Lewis Exploration License

      On January 28, 1998, we acquired the right to earn a 60% interest in the
International Enexco Limited patented mining claims with respect to the Contact
Project in Elko County, Nevada, through a combination of annual work commitments
totaling $2.6 million on the Enexco property and $4,000 per month payments to
Enexco totaling $313,000 over seven years. At December 31, 2002, our total
past-due liability for monthly payments and minimum work commitments to Enexco
was $1,127,000. Enexco has deferred the current late payments for a future
unspecified date. The current late payments are due on demand by Enexco. In the
event we are unable to pay Enexco the amounts due when demanded, we could lose
our investment in the Contact Project. In addition, if we are found in default
of any term of the agreement with Enexco, our earn-in right will expire.


                                       14
<PAGE>

      On July 10, 1998, Golden Phoenix entered into a separate exploration
license and purchase option agreement for the SF Lewis Trust portion of the
Contact Project. The F. W. Lewis Inc. Exploration License with Option to
Purchase was acquired for an initial payment of $15,000 and 100,000 shares of
common stock. The agreement requires Golden Phoenix to make monthly cash
payments, initially at $1,500 per month and then escalating to $2,500 per month
and will total $149,000. In addition, Golden Phoenix is to issue F.W. Lewis
common shares with total cash value of $2.2 million over the 4-1/2 year option
term which ended December 31, 2002 and expend a total of $1,650,000 of minimum
work commitment related costs. On February 19, 2003 Lewis and Golden Phoenix
entered into a First Amendment to Exploration License with Option to Purchase,
which extended the term of the Agreement to December 31, 2007 and modified the
requirements for the stock distributions to 350,000 shares on January 1 and on
July 1 of each year and minimum annual work commitments of $100,000. Monthly
payments continue at $2,500. On May 7, 2003, the parties signed a second
amendment that clarified that expenditures for work performed by Golden Phoenix
on either the Lewis property or the adjoining International Enexco Ltd. property
shall be applied to Lewis' minimum work commitment. Additionally, the second
amendment clarified that Lewis holds a Production Royalty with respect to the
Enexco property. As of December 31, 2002, $62,500 has been paid toward the
monthly payments and 4,453,623 shares have been issued, which were valued at
$676,000. As of December 31, 2002, the total liability owed to F.W. Lewis was
$43,000 for the exploration license, $1,550,000 for the bi-annual stock
distribution and $1,117,000 for the minimum work commitment. In the event we are
unable to pay F.W. Lewis the amounts owed, we could lose our investment in the
SF Lewis Trust portion of the Contact Property.

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

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

The Market Price Of Our Common Stock Is Highly Volatile, Which Could Hinder Our
Ability To Raise Additional Capital

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

Penny Stock Regulations Affect Our Stock Price, Which May Make It More Difficult
For Investors To Sell Their Stock

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


                                       15
<PAGE>

      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 July 2, 2003, Golden Phoenix filed its
response with respect to this complaint. Golden Phoenix believes that this
complaint is without substance and intends to vigorously defend this matter.

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

      None.


                                       16
<PAGE>

                                     PART II

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

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

Year 2000                                                 High             Low
---------                                                 ----             ---
First quarter                                             $0.40           $0.20
Second quarter                                            $0.24           $0.15
Third quarter                                             $0.19           $0.14
Fourth quarter                                            $0.17           $0.11

Year 2001                                                 High             Low
---------                                                 ----             ---
First quarter                                             $0.15           $0.09
Second quarter                                            $0.21           $0.10
Third quarter                                             $0.16           $0.10
Fourth quarter                                            $0.13           $0.09

Year 2002                                                 High             Low
---------                                                 ----             ---
First quarter                                             $0.25           $0.09
Second quarter                                            $0.55           $0.18
Third quarter                                             $0.46           $0.23
Fourth quarter                                            $0.31           $0.17

Year 2003                                                 High             Low
---------                                                 ----             ---
First Quarter                                             $0.34           $0.17
Second Quarter                                            $0.33           $0.15
Third Quarter                                             $0.44           $0.25
Fourth Quarter (October 1 - October 31)                   $0.53           $0.37

      On October 31, 2003, the closing price of our common stock as reported on
the Over-the-Counter Bulletin Board was $0.53 per share. On October 31, 2003, we
had in excess of 500 holders of common stock and 93,858,710 shares of our common
stock were issued and outstanding. Many of our shares are held in brokers'
accounts, so we are unable to give an accurate statement of the number of
shareholders.

Dividends

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


                                       17
<PAGE>

Recent Sales Of Unregistered Securities

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

<TABLE>
<CAPTION>
                                              Nature                                                            Share Price
                                       of Services Performed             Shares Issued    Value Received         Per Share
                                       ---------------------             -------------    --------------         ---------
<S>                                <C>                                    <C>                <C>                <C>
First Quarter 2002
Private Placement For Cash                                                 4,640,000         $  464,000         $   0.100
Exchange Of Stock For Part Of
  Interim Reclamation Bond                                                 1,257,862            200,000             0.160
Lease - Borealis Paid In Stock                                               328,235             27,900             0.090
Jeffrey Baclet Investor Relations  Investor Relations                        100,000             18,500             0.185
The Eversull Group Investor
  Relations                        Investor Relations                        100,000             17,000             0.170
                                                                          ----------        -----------         ---------
  Total First Quarter 2002                                                 6,426,097         $  727,400         $   0.113
                                                                          ==========        ===========         =========

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


                                       18
<PAGE>

<TABLE>
<CAPTION>
                                              Nature                                                            Share Price
                                       of Services Performed             Shares Issued    Value Received         Per Share
                                       ---------------------             -------------    --------------         ---------
<S>                                <C>                                    <C>                <C>                <C>
Third Quarter 2002
Private Placement For Cash $0.15                                              83,334         $   12,500         $   0.150
Warrant Exercise                                                             500,000             50,000             0.100
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                               99,141             34,699             0.350
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                               98,039             17,647             0.180
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                               60,435             23,570             0.390
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                              110,582             36,492             0.330
Whitney & Whitney Debt Conversion                                            350,000             35,000             0.100
Fusion Capital LLC Commitment Fee                                          1,587,302            300,000             0.189
                                                                          ----------        -----------         ---------
  Total Third Quarter 2002                                                 2,888,833         $  509,908         $   0.177
                                                                          ==========        ===========         =========

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

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


                                       19
<PAGE>

<TABLE>
<CAPTION>
                                              Nature                                                            Share Price
                                       of Services Performed             Shares Issued    Value Received         Per Share
                                       ---------------------             -------------    --------------         ---------
<S>                                <C>                                    <C>                <C>                <C>
Second Quarter 2003
Warrant Exercise at $0.10                                                  1,370,000         $  137,000         $   0.100
Warrant Exercise at $0.15                                                    248,500             37,275             0.150
Directors' Compensation for
  Board Meetings                                                              33,210             10,295             0.310
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                               15,605              2,573             0.170
                                                                          ----------        -----------         ---------
  Total Second Quarter 2003                                                1,667,315         $  187,143         $   0.112
                                                                          ==========        ===========         =========
</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 emphasis is focused on properties
containing gold, silver, copper, and other strategic minerals that are located
in Nevada. Presently our primary mining property asset is the operating Mineral
Ridge gold mine. The other three key properties are the Borealis gold-silver
project, Contact copper-silver project, and the Ashdown gold-molybdenum project.

      Golden Phoenix purchased the Mineral Ridge mine in late 2000 out of
bankruptcy for $225,000 cash and the assumption of a $382,000 liability to
Sierra Pacific Power Co. for a facility charge for the installation of a grid
power line. Additional commitments were also assumed, including obligations to
pay advanced royalty payments of $60,000 per year and the annual permit cost for
the Nevada Department of Environmental Protection of approximately $20,000
during the time the permits were being transferred to Golden Phoenix from the
previous operator. Golden Phoenix filed a $1.8 million interim reclamation bond,
which allowed us to hold the Mineral Ridge property while other permitting was
underway. The reclamation permit, which was in place when Golden Phoenix bought
the property out of bankruptcy, was not transferable and the company holding the
surety bond refused to write a new bond for a startup company. We were required
to post a new bond, but this could not be completed until a new reclamation plan
and permit was completed. The bond was due for a three-year review by the Bureau
of Land Management and Nevada Department of Environmental Protection. This
review changed the cost of the bond from $1.64 million to $3.2 million for the
same plan. The previous bonding company wanted to be released from the bond held
by the Bureau of Land Management; however, without a replacement bond, the only
method of release would have been by reclaiming the property. To avoid loss of
the property value due to destruction of the infrastructure, Golden Phoenix
needed to bring the property back into production. We negotiated an interim bond
amount to keep the project in a status-quo status until a new plan and bond
amount could be negotiated. The source for the cash bond was from the two
previous operators and one of our shareholders. On May 8, 2003, Golden Phoenix
obtained a new amended operating permit and on June 23, 2003, we filed a $2.7
million reclamation bond with the Bureau of Land Management with respect to the
Mineral Ridge mine. Now that the new permit and bond are in place the company
assumes its reclamation obligation to be $2.7 million. We are working to obtain
additional 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


                                       20
<PAGE>

leach pad through the addition of new cyanide to the regular leach fluids to
increase gold recovery and (2) significant new gold production from initiating
open pit mining, which will be processed through cyanide vat leach gold recovery
plant. Pursuant to our internally generated feasibility study for Mineral Ridge,
which was evaluated and reported by Behre Dolbear & Company, Inc. an independent
mineral auditing consultant, the total value of the gold sales over the six-year
mine life, at a $325 gold price, is estimated to be $59 million. The total
operating cost, which includes royalty payments, refining costs, mining costs,
milling costs, reclamation costs, and operating expenses, is estimated to be $36
million. Capital cost, including reclamation bonding, is estimated to be $6
million. The net income after taxes is estimated to be $12 million.

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

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

      The Ashdown property is held through a Letter Agreement with PRS
Enterprises with Golden Phoenix managing the project. PRS also has a Letter
Agreement with Win-Eldridge Mines, Ltd., which grants the Ashdown property to
the three-company venture.

      The Company has a history of operating losses, and we expect to continue
to incur operating losses in the near future as we initiate mining operations at
our four mines and conduct additional exploration in their vicinity. As a
development stage company we have been funded primarily through stock sales and
loans from officers and shareholders with the addition of revenue from gold
sales through the production from the Mineral Ridge mine. 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. We currently have one Joint Venture Agreement executed July
19, 2003 with Gryphon Gold Corporation and a Letter Agreement to Joint Venture
executed September 19, 2003 with PRS Enterprises. No other joint ventures have
been entered into.

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

Going Concern

      The report of our independent accountants on our December 31, 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 accounting
principles generally accepted in the United States of America requires
management to make a wide variety of estimates and assumptions that affect (i)
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities as of the date of the financial statements, and (ii) the
reported amounts of revenues and expenses during the reporting periods covered
by the financial statements. Our management routinely makes judgments and
estimates about the effect of matters that are inherently uncertain. As the


                                       21
<PAGE>

number of variables and assumptions affecting the future resolution of the
uncertainties increases, these judgments become even more subjective and
complex. We have identified certain accounting policies that are most important
to the portrayal of our current financial condition and results of operations.
Our significant accounting policies are disclosed in Note 1 of the Notes to the
Financial Statements.

      Several of those critical accounting policies are as follows:

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

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

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

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

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

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

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

      Environment Matters. When it is probable that such costs will be incurred
and they are reasonably estimable, we accrue costs associated with environmental
remediation obligations at the most likely estimate. Accruals for estimated
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


                                       22
<PAGE>

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. On May 8, 2003, we received the new amended operating permit
and on June 23, 2003, we filed a $2.7 million reclamation bond with the Bureau
of Land Management with respect to the Mineral Ridge mine. We utilized an
insurance-backed financial assurance program produced by IMA Environmental
Insurance of Denver, Colorado, and underwritten by AIG Environmental, to acquire
the bond. The program structure includes an insurance policy that will pay
reclamation expenses as they occur. The insurance enables us to acquire the
necessary reclamation bond at a fixed and discounted rate for a term of twelve
years. Now that the new permit and bond are in place the company assumes its
reclamation obligation to be $2.7 million. We anticipate that expenditures
relating to these reserves will be made over the next five to ten years. It is
reasonably possible the ultimate cost of remediation could change in the future
and that changes to these estimates could have a material effect on future
operating results as new information becomes known.

New Accounting Pronouncements

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

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

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

      SFAS No. 146 - In June 2002, the FASB issued SFAS No. 146, "Accounting for
Exit or Disposal Activities" (SFAS 146). SFAS 146 addresses significant issues
regarding the recognition, measurement, and reporting of costs that are
associated with exit and disposal activities, including restructuring activities
that are currently accounted for under EITF No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." The scope of SFAS 146
also includes costs related to


                                       23
<PAGE>

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.

      SFAS No. 150 - In May 2003, the FASB issued Statement of Financial
Accounting Standards No. 150 ("SFAS 150"), Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." This Statement
establishes standards for how a company classifies and measures certain
financial instruments with characteristics of both liabilities and equity. This
statement is effective for financial instruments entered into or modified after
May 31, 2003 and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. The statement will be implemented by
reporting the cumulative effect of a change in accounting principle for
financial instruments created before the issuance date of the statement and
still existing at the beginning of the period of adoption. The Company does not
expect that the adoption of SFAS 150 will have a material effect on the
Company's financial statements.

Results Of Operations

Results Of Operations For The Fiscal Year Ended December 31, 2002 Compared To
Fiscal Year Ended December 31, 2001

      We generated no revenue for the fiscal year ended December 31, 2002, as
compared to no revenue for the fiscal year ended December 31, 2001.

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


                                       24
<PAGE>

      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          15,060
Bad Debt (3)                              52,203             --          52,203
Consultants (4)                          108,518         25,735          82,783
Directors Fees (5)                        43,779             --          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.

      For the year ended December 31, 2003, we had precious metal by-product
income net of related costs of $(164,142) as compared to $56,437 for the year
ended December 31, 2001.

Liquidity And Capital Resources

      Since Golden Phoenix's incorporation in June 1997, our expenses have
exceeded sales resulting in an accumulated deficit of approximately $15.7
million at December 31, 2002 and approximately $9.9 million at December 31,
2001.


                                       25
<PAGE>

      As of December 31, 2002, we had $28,614 in cash and a working capital
deficit of $4,212,556. A significant portion of the cash is allocated to be used
for the Mineral Ridge mine, the Contact copper property and the Borealis gold
property. We anticipate expenditures for year 2003 for general and
administrative expenses to be approximately $250,000 and approximately
$1,000,000 for exploration and property holding costs. Exploration and holding
expenditures are expected to include $300,000 for the Mineral Ridge gold mine,
$300,000 for the Contact Property, $150,000 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 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 totaled $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. In addition,
we have minimum work commitments to Enexco and F.W. Lewis. As of December 31,
2002, the total liability for monthly payments and work commitments to Enexco
was $1,127,000. The President of Enexco has deferred the current late payments
for a later time. Enexco did not set a specific due date for the payment of the
current late payments. No payments have been made for the year 2003 through the
end of June. The payments are payable in cash. As of December 31, 2002, the
total liability owed to F.W. Lewis was $43,000 for the exploration license,
$1,550,000 for the bi-annual stock distribution and $1,117,000 for the minimum
work commitment. Qualifying Enexco work commitment expenditures can be applied
to the F.W. Lewis work commitment. Please see the additional description
contained under the section entitled "Business - Mining Property and Projects."

      In May 2003, we entered into an insurance-backed financial assurance
program for a surety bond, to secure the $2.7 million reclamation bond for the
Mineral Ridge property. The program structure includes an insurance policy that
will pay reclamation expenses as they occur. During June 2003, we transferred
approximately $1,800,000 of the reclamation cash deposits that had been
presented as restricted cash for the reclamation of the Mineral Ridge property
to the insurance company and removed the accrued reclamation obligation due to
the insurance policy entered into that will pay the future reclamation costs
during the term of the policy. We paid an additional $200,000 of premiums on the
reclamation bond policy in June 2003 with an obligation to pay an additional
$167,000 within six months of the inception of the policy and an additional
$170,000 within nine months of the inception of the policy. We are obligated to
pay an additional $11,311 annually thereafter.

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

      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 $1,246,492, 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 $13,248,089 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 $4,283,604 resulting in a working
capital deficit of $4,212,556. Due to the sale of shares of our common stock, we
were able to generate cash that was used to partially meet our working capital
needs. As a result of the additional issuances of our shares of common stock,
any net income per share would be lower in future periods. We anticipate funding
our working capital needs through funding we receive from our Fusion Capital
financing and any future revenue we may generate, as well as other sales of our
common stock. In the event we fund our working capital needs through the
issuance of equity, our existing and future shareholders will be diluted and any
net income per share would be lower in future periods.

      During the years ended December 31, 2002 and 2001 and the period from
inception through December 31, 2002, we made precious metal sales of $-0-,
$115,453, and $150,598, respectively to Itronics Metallurgical, Inc. (Itronics).
Itronics acted as a intermediary for the sale of our precious metals with an
outside refinery acquiring the metals based on their quoted price. Itronics is a
company owned by Dr. John W. Whitney, who is a significant shareholder of Golden
Phoenix.

      We lease mineral property known as the Borealis Property from the Borealis
Partnership, which consists of three separate individuals who combined their
separate properties to facilitate leasing the entire mineralized zone covered by
the three properties. Dr. Whitney is an underlying owner of the Borealis
project. During the years ended December 31, 2002 and 2001 and the period from
inception through December 31, 2002, we have made payments of $18,620, $30,290,
and $133,485, respectively to Dr. Whitney for a portion of its lease obligation
on the Borealis property.


                                       26
<PAGE>

      We sub-leased part of our office space to Whitney & Whitney, Inc. The
sublease expired in July 2000. We have a consulting agreement with Whitney &
Whitney which has a term of three years beginning March 1, 1999 and may be
extended for an additional three years. The consulting agreement calls for
Whitney & Whitney to provide metallurgical, geological and plant design services
related to our projects along with assistance related to general business and
financial matters. The agreement also calls for payments by Golden Phoenix of a
minimum of $2,500 per month in restricted shares of common stock. The agreement
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 Golden Phoenix. At December 31, 2002, he owned directly or
beneficially approximately 6% of Golden Phoenix `s outstanding common stock.

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

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

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

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

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

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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


                                       27
<PAGE>

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

      a) Previous Independent Accountants

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

                  (ii) Albright Persing's report on Golden Phoenix's financial
statements for the 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.

ITEM 8A. CONTROLS AND PROCEDURES

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

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

      Disclosure Controls And Internal Controls. Disclosure Controls are
procedures that are designed with the objective of ensuring that information
required to be disclosed in our reports filed under the Securities Exchange Act
of 1934 (Exchange Act), such as this Annual Report, is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's (SEC) rules and forms. Disclosure Controls are also
designed with


                                       28
<PAGE>

the objective of ensuring that such information is accumulated and communicated
to our management, including the CEO/CFO, as appropriate to allow timely
decisions regarding required disclosure. Internal Controls are procedures which
are designed with the objective of providing reasonable assurance that (1) our
transactions are properly authorized; (2) our assets are safeguarded against
unauthorized or improper use; and (3) our transactions are properly recorded and
reported, all to permit the preparation of our financial statements in
conformity with generally accepted accounting principles.

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

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

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


                                       29
<PAGE>

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

                          RESTATED 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 before they were restated for the matters discussed in Note 15 to the
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 $15,756,200 and has a working capital deficit of
$4,212,556 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.

As discussed in Note 16 to the financial statements, the 2002 financial
statements have been restated as a result of a change in the determination of
the status of one of the Company's mineral properties and corrections made for
the valuation of common stock issued for services rendered and the
extinguishments of debt.

HJ & Associates, LLC
Salt Lake City, Utah
May 12, 2003, except for Notes 1, 2, 3, 12, 15 and 16, which are November 11,
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 November 10, 2003.


                                      F-4
<PAGE>

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

                                     ASSETS

                                                                    December 31,
                                                                        2002
                                                                    ------------
                                                                     (Restated)

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
  Deposits                                                               15,611
                                                                    -----------
    Total Other Assets                                                1,837,428
                                                                    -----------
    TOTAL ASSETS                                                    $ 2,605,760
                                                                    ===========

   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)

<TABLE>
<CAPTION>
                                                                                                   December 31,
                                                                                                       2002
                                                                                                   ------------
                                                                                                    (Restated)
<S>                                                                                                <C>
CURRENT LIABILITIES
  Accounts payable                                                                                 $    385,138
  Accrued liabilities (Note 6)                                                                        3,424,728
  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                                                                         4,283,604
                                                                                                   ------------

LONG-TERM LIABILITIES
  Reclamation obligation (Note 3)                                                                       900,000
  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                                                                       1,620,724
                                                                                                   ------------

    Total Liabilities                                                                                 5,904,328
                                                                                                   ------------

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       13,248,089
  Stock subscription receivable                                                                        (490,457)
  Deferred costs                                                                                       (300,000)
  Deficit accumulated during the development stage                                                  (15,756,200)
                                                                                                   ------------
    Total Stockholders' Equity (Deficit)                                                             (3,298,568)
                                                                                                   ------------

    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                           $  2,605,760
                                                                                                   ============
</TABLE>

   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)

<TABLE>
<CAPTION>
                                                                                                      From Inception
                                                                                                        On June 2,
                                                                          For the Years Ended             1997
                                                                               December 31,              through
                                                                       ---------------------------     December 31,
                                                                          2002            2001             2002
                                                                       (Restated)      (Restated)       (Restated)
                                                                       -----------     -----------     ------------
<S>                                                                    <C>             <C>             <C>
REVENUES                                                               $        --     $        --     $         --

EXPENSES
  Exploration, mineral property leases, and minimum work commitment
    expenses                                                             2,028,893       1,652,970        8,781,508
  General and administrative                                               850,118         626,129        3,195,231
  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                                                       3,944,312       2,979,873       15,452,881
                                                                       -----------     -----------     ------------

LOSS FROM OPERATIONS                                                    (3,944,312)     (2,979,873)     (15,452,881)
                                                                       -----------     -----------     ------------

OTHER INCOME (EXPENSE)
  Interest income                                                           40,092          19,277           61,235
  Interest expense                                                        (253,231)       (232,142)        (830,166)
  Contributions to reclamation deposits                                         --              --          740,000
  Gain on sale of fixed assets                                                  --              --            2,551
  Loss on extinguishment of debt                                          (275,333)           (600)        (278,140)
  Realized gain on available-for-sale securities                               523              --              523
  Loss on impairment of investments                                        (10,742)             --          (10,742)
  Precious metal by-product income net of related costs                   (164,142)         56,437          (36,799)
  Other income (expense), net                                               (1,803)           (102)          48,219
                                                                       -----------     -----------     ------------
    Total Other Income (Expense)                                          (664,636)       (157,130)        (303,319)
                                                                       -----------     -----------     ------------

LOSS BEFORE INCOME TAXES                                               $(4,608,948)    $(3,137,003)    $(15,756,200)
                                                                       ===========     ===========     ============
</TABLE>


   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)

<TABLE>
<CAPTION>
                                                                                                       From Inception
                                                                           For the Years Ended         on June 2, 1997
                                                                               December 31,               through
                                                                       ---------------------------      December 31,
                                                                          2002             2001             2002
                                                                      ------------     ------------     ------------
                                                                       (Restated)       (Restated)       (Restated)
<S>                                                                   <C>              <C>              <C>
LOSS BEFORE INCOME TAXES                                              $ (4,608,948)    $ (3,137,003)    $(15,756,200)

INCOME TAXES                                                                    --               --               --

NET LOSS                                                                (4,608,948)      (3,137,003)     (15,756,200)
                                                                      ------------     ------------     ------------

OTHER COMPREHENSIVE INCOME (LOSS)

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

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

COMPREHENSIVE LOSS                                                    $ (4,610,385)    $ (3,135,566)    $(15,756,200)
                                                                      ============     ============     ============

BASIC LOSS PER SHARE

  Basic loss per share                                                $      (0.07)    $      (0.08)
                                                                      ============     ============

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING                           61,842,556       40,497,175
                                                                      ============     ============
</TABLE>

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


                                      F-8
<PAGE>

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

<TABLE>
<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 $2.50 per share,
  July 23, 1997                           --          --        370,000       925,000          --          --          --

Issuance of common stock for
  joint venture  option purchase
  at $2.50 per share,  August
  14, 1997                                --          --         50,000       125,000          --          --          --

Issuance of common stock for
  extinguishment of debt at
  $4.25 per share, October 16,
  1997                                    --          --         54,480       231,540          --          --          --

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    $2,509,209    $     --    $     --    $     --
                                    --------     -------     ----------    ----------    --------    --------    --------
</TABLE>

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


                                      F-9
<PAGE>

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

<TABLE>
<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    $ 2,509,209     $     --     $    --    $        --

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

Net loss for the period from
  June 2, 1997 through December
  31, 1997                               --      --            --             --           --          --     (2,457,428)
                                    -------    ----    ----------    -----------     --------     -------    -----------
Balance, December 31, 1997          225,000     900    12,939,480      2,429,209           --          --     (2,457,428)

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
  exploration and property costs
  at $1.31 per share, January
  12, 1998                               --      --        80,000        105,000           --          --             --

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
  exploration and property costs
  at $0.69  and $1.09 per share,
  February 10 to April 15, 1998          --      --       184,140        144,876           --          --             --

Issuance of common stock for
  exploration and property costs
  at $1.09 per share, February
  10, 1998                               --      --        25,000         27,342           --          --             --
                                    -------    ----    ----------    -----------     --------     -------    -----------

Balance Forward                     225,000    $900    14,330,120    $ 3,235,427     $(60,000)    $    --    $(2,457,428)
                                    -------    ----    ----------    -----------     --------     -------    -----------

</TABLE>
   The accompanying notes are an integral part of these financial statements.


                                      F-10
<PAGE>

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

<TABLE>
<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    $3,235,427    $(60,000)    $    --    $(2,457,428)

Issuance of common stock for
  exploration and property costs
  at $0.84 and $1.09 per share,
  February 10, 1998 and March 7,
  1998                                   --      --        23,890        24,878          --          --             --

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
  exploration and property costs
  at $0.81 per share, March 10,
  1998                                   --      --       123,456       100,308          --          --             --

Issuance of common stock for
  extinguishments of debt to a
  related party at $0.66 per
  share, March 23, 1998                  --      --       346,667       227,483          --          --             --

Issuance of common stock for
  services at $0.34 and $0.66
  per share, March 23 to
  September 14, 1998                     --      --       325,000       157,930          --          --             --

Issuance of common stock for
  services at $0.41 and $0.53
  per share, April 30 to May 27,
  1998                                   --      --       136,000        71,493          --          --             --
                                    -------    ----    ----------    ----------    --------     -------    -----------

Balance Forward                     225,000    $900    15,360,133    $3,967,519    $(60,000)    $    --    $(2,457,428)
                                    -------    ----    ----------    ----------    --------     -------    -----------
</TABLE>

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


                                      F-11
<PAGE>

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

<TABLE>
<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    $3,967,519    $(60,000)    $    --    $(2,457,428)

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
  exploration and property costs
  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    $4,197,834    $(60,000)    $    --    $(2,457,428)
                                    -------    ----    ----------    ----------    --------     -------    -----------
</TABLE>

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


                                      F-12
<PAGE>

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

<TABLE>
<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    $ 4,197,834   $(60,000)    $    --    $(2,457,428)

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 $0.30 per share,
  November 11, 1998                      --      --        50,000         15,000         --          --             --

Contributed capital from sale of
  investment in affiliate                --      --            --         10,016         --          --             --

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

Net loss for the year ended
  December 31, 1998                      --      --            --             --         --          --     (2,427,881)

Balance, December 31, 1998          225,000     900    16,370,454      4,174,740         --          --     (4,885,309)

Issuance of common stock for
  exploration and property costs
  at $0.13 per share, January 1
  to 28, 1999                            --      --     1,784,615        215,077         --          --             --

Issuance of common stock for
  services at $0.12 per share,
  January 22, 1999                       --      --       200,000         24,000         --          --             --
                                    -------    ----    ----------    -----------   --------     -------    -----------

Balance Forward                     225,000    $900    18,355,069    $ 4,413,817   $     --     $    --    $(4,885,309)
                                    -------    ----    ----------    -----------   --------     -------    -----------
</TABLE>

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


                                      F-13
<PAGE>

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

<TABLE>
<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    $4,413,817    $    --      $    --    $(4,885,309)

Issuance of common stock for
  extinguishment of debt at $0.09
  to $0.10 per share March 3 to
  December 15, 1999                       --      --     2,271,960       216,595         --           --             --

Issuance of common stock for
  extinguishment of debt at $0.10
  per share, March 5, 1999                --      --        25,000         2,500         --           --             --

Issuance of common stock for
  services at $0.10 to $0.14 per
  share March 10 to December 1,
  1999                                    --      --       320,792        34,191         --           --             --

Issuance of common stock for
  exploration and property costs
  for $0.09 to $0.14 per share,
  March 19 to November 21, 1999           --      --       419,260        49,910         --           --             --

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 $0.09 to $0.14 per
  share, May 19 to October 15, 1999       --      --       326,069        38,788         --           --             --
                                     -------    ----    ----------    ----------    -------      -------    -----------

Balance Forward                      225,000    $900    24,143,150    $4,998,301    $    --      $    --    $(4,885,309)
                                     -------    ----    ----------    ----------    -------      -------    -----------
</TABLE>

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


                                      F-14
<PAGE>

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

<TABLE>
<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    $4,998,301    $    --      $    --    $(4,885,309)

Issuance of common stock for
  services at $0.09 to $0.23 per
  share, October 29 to December
  30, 1999                                --      --       284,885        36,335         --           --             --

Net loss for the year ended
  December 31, 1999                       --      --            --            --         --           --     (1,353,584)
                                     -------    ----    ----------    ----------    -------      -------    -----------
Balance, December 31, 1999           225,000     900    24,428,035     5,034,636         --           --     (6,238,893)

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 $0.22 per share,
  January 31, 2000                        --      --        10,886         2,395         --           --             --

Issuance of common stock for
  services at $0.15 to $0.27 per
  share, January 31 to October
  27, 2000                                --      --       326,008        61,336         --           --             --

Issuance of common stock for
  services at $0.14 to $0.22 per
  share, January 31 to November
  10, 2000                                --      --       371,830        66,803         --           --             --
                                     -------    ----    ----------    ----------    -------      -------    -----------
Balance Forward                      225,000    $900    28,036,759    $5,547,836    $    --      $    --    $(6,238,893)
                                     -------    ----    ----------    ----------    -------      -------    -----------
</TABLE>

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


                                      F-15
<PAGE>

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

<TABLE>
<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    $5,547,836    $    --     $    --    $(6,238,893)

Issuance of common stock for
  services at $0.27 per share,
  February 29, 2000                       --        --        138,285        37,337         --          --             --

Issuance of common stock for
  extinguishments of debt at
  $0.28 per share, March 1, 2000          --        --         33,207         9,298         --          --             --

Issuance of common stock for
  services at $0.20 per share,
  March 31, 2000                          --        --         87,268        17,454         --          --             --

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 $0.21 per share,
  April 30, 2000                          --        --         46,638         9,794         --          --             --

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 $0.14 to $0.16 per
  share, June 30 to November 10,
  2000                                    --        --      1,163,223       178,231         --          --             --

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    $5,874,749    $    --     $    --    $(6,238,893)
                                     -------     -----     ----------    ----------    -------     -------    -----------
</TABLE>

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


                                      F-16
<PAGE>

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

<TABLE>
<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    $ 5,874,749   $    --     $    --    $(6,238,893)

Issuance of common stock for
  services at $0.15 per share,
  July 31 to August 31, 2000               --      --       136,967         20,612        --          --             --

Issuance of common stock for
  services at $0.15 per share,
  September 30 to October 31, 2000         --      --       167,463         25,120        --          --             --

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 $0.12 per share,
  November 30, 2000                        --      --       146,550         17,586        --          --             --

Issuance of common stock for
  services at $0.12 per share,
  November 30 to December 11, 2000         --      --       358,299         41,204        --          --             --

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

Net loss for the year ended
  December 31, 2000                        --      --            --             --        --          --     (1,771,356)
                                      -------    ----    ----------    -----------   -------     -------    -----------

Balance, December 31, 2000            166,700    $667    37,012,515    $ 7,101,471   $    --     $    --    $(8,010,249)
                                      -------    ----    ----------    -----------   -------     -------    -----------
</TABLE>

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


                                      F-17
<PAGE>

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

<TABLE>
<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    $7,101,471    $    --      $    --    $(8,010,249)

Issuance of common stock for
  services at $0.13 to $0.14 per
  share, January 11 to May 10,
                              2001          --        --      175,000        23,188         --           --             --

Issuance of common stock for
  services at $0.10 to $0.13 per
  share, January 11 to December
  4, 2001                                   --        --      800,000        85,499         --           --             --

Issuance of common stock for
  services at $0.10 to $0.13 per
  share, January 26 to April 27,
                              2001          --        --      300,000        33,000         --           --             --

Issuance of common stock for
  services at $0.10 to $0.12 per
  share, February 28 to December
  4, 2001                                   --        --      531,637        55,988         --           --             --

Issuance of common stock for
  services at $0.11 to $0.16 per
  share, March 31 to November 30,
                              2001          --        --      543,186        68,189         --           --             --

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    $7,382,797    $    --      $    --    $(8,010,249)
                                       -------     -----   ----------    ----------    -------      -------    -----------
</TABLE>

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


                                      F-18
<PAGE>

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

<TABLE>
<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    39,516,338    $7,382,797    $    --     $    --    $(8,010,249)

Issuance of common stock for
  services at $0.11 to $0.16 per
  share, April 5 to June 30, 2001          --      --       169,110        23,545         --          --             --

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 $0.12 per share,
  July 31, 2001                            --      --       111,690        13,403         --          --             --

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

Issuance of common stock for
  extinguishments of debt at
  $0.11 per share, August 29, 2001         --      --        50,000         5,600         --          --             --

Issuance of common stock for
  services at $0.11 per share,
  August 31, 2001                          --      --       131,962        14,516         --          --             --
                                      -------    ----    ----------    ----------    -------     -------    -----------

Balance Forward                       151,300    $605    44,613,847    $7,904,321    $    --     $    --    $(8,010,249)
                                      -------    ----    ----------    ----------    -------     -------    -----------
</TABLE>

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


                                      F-19
<PAGE>

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

<TABLE>
<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   $ 7,904,321   $     --     $    --    $ (8,010,249)

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 $0.11 per share,
  December 31, 2001                      --        --        71,209         7,477         --          --              --

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

Net loss for the year ended
  December 31, 2001                      --        --            --            --         --          --      (3,137,003)
                                    -------      ----    ----------   -----------   --------     -------    ------------

Balance, December 31, 2001          151,300       605    45,185,056     7,932,398    (44,500)         --     (11,147,252)

Issuance of common stock for
  services at $0.11 to $0.27 per
  share, January 1 to August 23,
  2002                                   --        --       553,600        79,017         --          --              --

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 4, 2002             --        --     7,495,002       739,500         --          --              --

Issuance of common stock for
  services at $0.18 to $0.22 per
  share, February 1 to October
  30, 2002                               --        --       655,000       120,350         --          --              --
                                    -------      ----    ----------   -----------   --------     -------    ------------

Balance Forward                     151,300      $605    53,888,658   $ 8,871,265   $     --     $    --    $(11,147,252)
                                    -------      ----    ----------   -----------   --------     -------    ------------
</TABLE>

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


                                      F-20
<PAGE>

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

<TABLE>
<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    $8,871,265    $    --     $    --    $(11,147,252)

Issuance of common stock for
  services at $0.13 to $0.20 per
  share, February 4 to October
  28, 2002                               --        --     1,414,006       211,877         --          --              --

Issuance of common stock for
  exploration and property costs
  at $0.18 per share, February
  7, 2002                                --        --       328,235        59,083         --          --              --

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 $0.19 to $0.20 per
  share, February 28 to March
  31, 2002                               --        --       174,228        33,360         --          --              --

Issuance of common stock for
  services at $0.17 to $0.29 per
  share, March 1 to August 29,
  2002                                   --        --       230,198        40,403         --          --              --

Issuance of common stock for
  services at $0.18 to $0.19 per
  share, March 5 to April 19,
  2002                                   --        --       407,625        75,373         --          --              --

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    $9,458,106    $(5,625)    $    --    $(11,147,252)
                                    -------      ----    ----------    ----------    -------     -------    ------------
</TABLE>

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


                                      F-21
<PAGE>

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

<TABLE>
<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   $ 9,458,106    $(5,625)    $    --    $(11,147,252)

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 $0.21 to $0.45 per
  share, April 3 to December 23,
  2002                                    --        --      117,973        28,875         --          --              --

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
  extinguishment of debt at
  $0.51 to $0.55 per share, June
  3 to 4, 2002                            --        --      733,333       385,333         --          --              --

Issuance of common stock for
  services at $0.55 per share,
  June 4, 2002                            --        --       50,333        27,683         --          --              --
                                    --------     -----   ----------   -----------    -------     -------    ------------

Balance Forward                           --     $  --   68,153,154   $11,147,908    $(5,625)    $    --    $(11,147,252)
                                    --------     -----   ----------   -----------    -------     -------    ------------

</TABLE>
   The accompanying notes are an integral part of these financial statements.


                                      F-22
<PAGE>

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

<TABLE>
<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   $11,147,908    $(5,625)    $      --  $(11,147,252)

Issuance of common stock for
  services at $0.29 to $0.40 per
  share, June 6 to September 6,
  2002                                   --         --      139,448        53,329         --            --            --

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 convertible debt
  at $0.30 per share, June 12,
  2002                                   --         --       86,133        25,840         --            --            --

Issuance of common stock for
  conversion of convertible 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 $0.20 to $0.39 per
  share, June 30 to November 22,
  2002                                   --         --       65,435        24,545         --            --            --

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, July 12,
  2002                                   --         --    1,587,302       300,000         --      (300,000)           --
                                     ------    -------   ----------   -----------    -------     ---------  ------------

Balance Forward                          --    $    --   70,497,404   $11,719,808    $    --     $(300,000) $(11,147,252)
                                     ------    -------   ----------   -----------    -------     ---------  ------------
</TABLE>

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


                                      F-23
<PAGE>

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

<TABLE>
<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   $11,719,808    $     --     $(300,000)    $(11,147,252)

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 to $0.35 per
  share, April 30  to October
  18, 2002                               --         --      397,180        96,346          --            --               --

Issuance of common stock for
  services at $0.33 per share,
  September 20, 2002                     --         --      110,582        36,492          --            --               --

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

Balance Forward                          --    $    --   71,340,166   $11,947,057    $(26,500)    $(300,000)    $(11,147,252)
                                     ------    -------   ----------   -----------    --------     ---------     ------------
</TABLE>

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


                                      F-24
<PAGE>

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

<TABLE>
<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    11,947,057    $(26,500)    $(300,000)    $(11,147,252)

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

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

Issuance of common stock for
  services at $0.28 per share,
  October 3, 2002                       --          --        5,000         1,400          --            --               --

Issuance of common stock for
  services at $0.28 per share,
  October 3, 2002                       --          --       28,651         8,022          --            --               --

Issuance of common stock for
  services at $0.18 to $0.28 per
  share, October 3 to 30, 2002          --          --       81,679        17,575          --            --               --

Issuance of common stock for
  exploration and property costs
  at $0.22 per share, October
  18, 2002                              --          --    2,753,623       605,797          --            --               --

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   $12,641,648    $(43,635)    $(300,000)    $(11,147,252)
                                      ----      ------   ----------   -----------    --------     ---------     ------------
</TABLE>

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


                                      F-25
<PAGE>

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

<TABLE>
<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                          --    $    --   74,503,442   $ 12,641,648   $ (43,635)    $(300,000)    $(11,147,252)

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
  exploration and property costs
  at $0.21 per share, December
  23, 2002                               --         --       78,400         16,464          --            --               --

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

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

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

Balance, December 31, 2002               --    $    --   76,881,842   $ 13,248,089   $(490,457)    $(300,000)    $(15,756,200)
                                      =====    =======   ==========   ============   =========     =========     ============
</TABLE>

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


                                      F-26
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                     From Inception
                                                                          For the Years Ended        On June 2, 1997
                                                                              December 31,               through
                                                                      ---------------------------      December 31,
                                                                          2002            2001             2002
                                                                      -----------     -----------     ------------
                                                                       (Restated)      (Restated)      (Restated)
<S>                                                                   <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net Loss                                                            $(4,608,948)    $(3,137,003)    $(15,756,200)
  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)
    Gain on sale of fixed assets                                               --              --           (2,551)
    Loss on extinguishment of debt                                        275,333             600          278,140
    Fixed assets exchanged for goods and services                              --              --           55,982
    Common stock issued for goods and services                            804,161         155,755        1,459,339
    Common stock issued for exploration and property costs                952,478         169,051        3,233,871
    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 accounts and other receivables                           (6,492)        (56,956)         (83,127)
    (Increase) decrease in prepaid expenses                                (6,558)          8,377          (42,434)
    (Increase) in employee advances                                            --          (3,526)              --
    (Increase) in restricted cash                                          (1,177)       (160,000)        (901,177)
    (Increase) in deposits                                                (10,000)        393,623          (15,611)
    Increase in accounts payable                                          113,141         180,743          600,401
    Increase in accrued liabilities                                       709,222       1,798,417        2,950,116
    Increase in reclamation obligation                                         --              --          900,000
                                                                      -----------     -----------     ------------
      Net Cash Used by Operating Activities                            (1,553,278)       (527,104)      (6,800,722)
                                                                      -----------     -----------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property and equipment                                      (54,482)        (65,201)        (519,648)
  Proceeds from fixed asset sales                                              --              --           34,965
  Proceeds from sale of investments                                         2,223              --            2,223
  Purchase of mining properties and claims                                     --              --          (51,700)
                                                                      -----------     -----------     ------------
      Net Cash Used by Investing Activities                           $   (52,259)    $   (65,201)    $   (534,160)
                                                                      -----------     -----------     ------------
</TABLE>

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


                                      F-27
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                          (A Development Stage Company)
                      Statements of Cash Flows (Continued)

<TABLE>
<CAPTION>
                                                                                                        From Inception
                                                                             For the Years Ended        On June 2, 1997
                                                                                 December 31,               through
                                                                         ---------------------------      December 31,
                                                                             2002            2001            2002
                                                                         -----------     -----------     ------------
                                                                          (Restated)      (Restated)      (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            --         816,290
  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       5,556,920
                                                                          -----------     ---------     -----------

    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:
  Common stock issued for amounts due to related parties                  $        --     $      --     $   195,000
  Property plant and equipment purchased through debt assumed             $        --     $      --     $   382,400
  Common stock issued for services                                        $   804,161     $ 155,755     $ 1,459,339
  Common stock issued for deferred costs                                  $   952,478     $ 169,051     $ 3,233,871
  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
  Contributed capital from sale of stock in affiliate                     $        --     $      --     $    10,016
</TABLE>

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


                                      F-28
<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

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)      (Restated)

Numerator - loss                                   $ (4,608,948)   $ (3,137,003)
Denominator - weighted average shares outstanding    61,842,556      40,497,175
                                                   ------------    ------------
Basic loss per share                               $      (0.07)   $      (0.08)
                                                   ============    ============

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 115 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                                 $ 3,739,400         $ 2,591,800

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

Valuation allowance                              (3,721,300)         (2,539,400)
                                                -----------         -----------

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                                         $(1,797,490)      $(1,223,430)
Accrued compensation                                   29,660            43,480
Depreciation                                           21,497           (37,020)
Other                                                   5,200               900
Stock for services/options expense                    593,512           368,880
Valuation allowance                                 1,147,621           847,190
                                                  -----------       -----------

Net Deferred Tax                                  $        --       $        --
                                                  ===========       ===========

At December 31, 2002, the Company had net operating loss carryforwards of
approximately $9,588,000 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

As previously discussed, the Company has not begun its principal revenue
generating business operations of conducting mining extraction and production.
Minimal income is recognized from the sale of gold by-product as a result of
maintenance activities associated with the Mineral Ridge mineral property as
discussed in Note 3. Income from those activities is recognized at the time of
delivery of the precious metals. The Company receives immediate payment. The
cost of these maintenance activities presently includes personnel, utilities,
maintenance parts and supplies. These costs have been offset against the income
from precious metal by-product sales with the net results reflected as part of
other income and expense in the accompanying financial statements.

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

Valuation and Measurement of Equity Instruments

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

Stock Options

As permitted by FASB Statement 123 "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 and will be capitalized once determination has been made that a
mineral property has proven or probable reserves. On the commencement of
commercial production, depletion of each mineral property and associated
accumulated costs will be provided on the units of production basis using
estimated proven and probable reserves as the depletion basis.


                                      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

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

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

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

Properties Under Development

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

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

Exploration Properties

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


                                      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 $900,000 (as
restated) at December 31, 2002. We anticipate that expenditures relating to
these reserves will be made over the next six to eight 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 was adopted January
1, 2003, at which time the Company recorded the estimated present value of
reclamation liabilities totaling $1,269,472, including accretion of the
discounted liability from the date the property was acquired, and recognized the
carrying amount of the related retirement asset in the amount of $1,063,300, all
related to the Mineral Ridge property. Subsequently, the reclamation costs will
be allocated to expense over the life of the related assets on a units of
production basis and will be adjusted for changes resulting from the passage of
time and revisions to either the timing or amount of the original present value
estimate. The cumulative effect of this change in accounting principle as a
result of the adoption of SFAS No. 143 was $693,828.


                                      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 $15,756,200 and a working capital
deficit of $4,212,556 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 Company also received rights to $900,000 of cash restricted
for use in reclaiming the Mineral Ridge property. With this acquisition, the
Company also assumed the liability to reclaim the property in its current
condition. The net present value of those estimated reclamation costs was
approximately $900,000 on the date of the acquisition. In allocating the
purchase price of the Mineral Ridge Property, a total of $57,600 was assigned to
land as tangible property associated with the patented mining claims acquired by
the Company in the transaction which contain all of the currently determined
proven and probable mineral reserves associated with the property. Accordingly,
no value has been assigned to the unpatented mining claims to which the Company
has rights but no determined value at this time.

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. Costs associated with
these maintenance activities totaled $27,050 in 2000, $286,601 in 2001 and
$282,149 in 2002. The proceeds from the sale of the precious metal has been
reflected net of the associated property maintenance costs as other income and
expense in the accompanying financial statements.


                                      F-40
<PAGE>

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

NOTE 3 - MINERAL PROPERTIES (Continued)

Mineral Ridge Property (Continued)

Subsequent to the acquisition of the Mineral Ridge property, the Company
received rights to $740,000 of additional restricted cash from two previous
operators of the property. The Company contributed an additional $160,000 to
meet the requirements of the temporary reclamation permit. 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 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 in 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 mineralized material without
sufficient proven or probable reserves. Accordingly, the Borealis Mineral
Property is considered to be in the exploration stage with all related costs and
expenditures expenses as incurred.

Contact Copper Property

On January 28, 1998 the Company entered into a joint venture agreement with
International Enexco Ltd. ("Enexco"). The Company has the option to purchase 60%
of the rights to Enexco's interest in the Contact Copper Property for a total of
$2,600,000 in Work Requirements and $313,000 in lease payments over a six-year
period. During 1999, the Company incurred $387,820 in work requirements and
$24,000 in cash and issued 24,000 shares of stock for mining lease payments.
During 2000, the Company incurred $177,349 in work requirements and $48,000 in
mining lease payments. During 2001, the Company incurred $50,006 in work
requirements and $32,000 in mining lease payments.

On July 10, 1998, the Company entered into an Exploration License Agreement (the
Agreement) with F.W. Lewis, Inc. granting the Company the exclusive right and
license to explore the Contact Copper Property terminating December 31, 2002.
The agreement requires stock distributions of $2,200,000 of Golden Phoenix, Inc.
common stock and minimum work requirements totaling $750,000. During 1999, the
Company distributed $200,000 in Golden Phoenix, Inc. common stock and incurred
$358,374 in work requirements. The Company incurred $177,349 in work
requirements during 2000. F.W. Lewis has suspended the required stock
distributions for the current time.

The Contact Copper Property currently does not have proven probable ore
reserves. Accordingly, this property is considered to be in the exploration
stage with all related costs and expenditures 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 officers and shareholders of the Company have advanced 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                                                 83,678
                                                                      ----------

                                                                      $3,424,728
                                                                      ==========


                                      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:

<TABLE>
<S>                                                                                                        <C>
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
                                                                                                           =========
</TABLE>


                                      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:

<TABLE>
<S>                                                                                                         <C>
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
                                                                                                            -------
</TABLE>


                                      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)

<TABLE>
<S>                                                                                                          <C>
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
                                                                                                             =========
</TABLE>

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. As discussed in Note 11, Dr.
John W. Whitney a shareholder of the Company, is one of the individual lessors
of the Borealis Property.


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

At December 31, 2002, the Company had a total liability of $2,710,000 on the
lease which consists of $1,550,000 of property lease 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 lease 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

The Company also leases mineral property in Elko County, Nevada, known as the
Contact Property as part of a joint venture agreement with International Enexco
(See Note 3). The lease includes monthly payments of $4,000 and minimum work in
qualifying expenses ranging from $550,000-$650,000 for exploration, development,
or mining. At December 31, 2002, the Company had a total liability of $1,127,000
on the lease which includes $78,000 in monthly payments and $1,049,000 in
minimum work commitment liability. The lease is cancelable within thirty days.
Future lease 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.

                                                                       Royalty
                                                                      Percentage
Price of Gold per Troy Ounce                                             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.

During 1998 and in connection with the dissolution of Golden Phoenix Alaska,
Inc., the Company issued a total of 500,000 shares of common stock per the
related separation arrangement to an individual and two former officers and
directors of the Company. Golden Phoenix Alaska, Inc. is a former subsidiary of
the Company. The cash portion of the transaction was done at $0.10 per share.
Accordingly, in accounting for the satisfaction of the accounts payable at the
same price per share, a resulting gain of $10,016 on the forgiveness of the
obligation, which was recognized as contributed capital.

During the years ended December 31, 2002 and 2001 and the period from inception
through December 31, 2002, the Company made precious metal sales of $-0-,
$115,453, and $150,598, respectively to Itronics Metallurgical, Inc. (Itronics).
Itronics acted as a intermediary for the sale of the Company's precious metals
with an outside refinery acquiring the metals based on their quoted price.
Itronics is a company owned by Dr. John W. Whitney, who is a significant
shareholder of the Company.

The Company leases mineral property known as the Borealis Property from the
Borealis Partnership, which consists of three separate individuals who combined
their separate properties to facilitate leasing the entire mineralized zone
covered by the three properties. Dr. Whitney is an underlying owner of the
Borealis project. During the years ended December 31, 2002 and 2001 and the
period from inception through December 31, 2002, the Company has made payments
of $18,620, $30,290, and $133,485, respectively to Dr. Whitney for a portion of
its lease obligation on the Borealis property. (See Note 10).


                                      F-52
<PAGE>

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

NOTE 11 - RELATED PARTY TRANSACTIONS (Continued)

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.

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.


                                      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)

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                                      $(4,608,948)     $(3,137,003)
  Pro forma                                        $(4,804,249)     $(3,137,003)

Basic income (loss) per share:
  As reported                                      $     (0.07)     $     (0.08)
  Pro forma                                        $     (0.07)     $     (0.08)

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


                                      F-54
<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)

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.

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                                         14,784,172         0.12
  Canceled / Expired                                (450,000)        0.10
  Exercised                                       (2,810,063)        0.10
                                                  ----------        -----

Outstanding, December 31, 2002                    25,883,856        $0.12
                                                  ==========        =====

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               10,357,037
2003                                   0.150                  175,000
2004                                   0.085                  117,647
2004                                   0.100                8,380,000
2004                                   0.150                6,652,839
2005                                   0.150                  201,333
                                                           ----------
                                                           25,883,856
                                                           ==========


                                      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

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.

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.


                                      F-56
<PAGE>

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

NOTE 14 - SUBSEQUENT EVENTS (Continued)

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).

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, reclamation obligation, 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.


                                      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)

December 31, 2001-

<TABLE>
<CAPTION>
                                   Originally
                                    Reported        As 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                 --          (210,591)  (4)
                                                                        (1,650,000)  (5)
Deferred development costs            462,709                 --          (354,309)  (6)
                                                                           (83,845)  (5)
                                                                           (24,555)  (7)
Accrued liabilities                   207,341          2,646,291          (240,000)  (8)
                                                                        (2,090,500)  (9)
                                                                           (30,000) (10)
                                                                           (78,450) (11)
Accrued interest                      296,207            317,648           (21,441) (12)
                                                                           (19,824) (13)
Capital lease obligations             118,228            158,228           (40,000) (14)
Reclamation liabilities             1,819,824            900,000           900,000  (15)
                                                                            19,824  (13)
Preferred stock                         1,708                605             1,103  (16)
Common stock                        7,281,637          7,932,395            78,450  (11)
                                                                            (1,103) (16)
                                                                           (73,700) (17)
                                                                            43,250  (18)
                                                                          (283,500) (19)
                                                                            60,000  (19)
                                                                            (2,750) (20)
                                                                           (92,666) (21)
                                                                           (10,016) (22)
                                                                           (25,138) (23)
                                                                          (343,589) (24)
Additional paid in capital            123,700                 --            50,000   (4)
                                                                            73,700  (15)
Accumulated deficit                (6,700,367)       (11,147,252)        2,972,644  (25)
                                                                         1,474,241  (26)
Net loss                           (1,662,762)        (3,137,003)        1,474,241  (26)
Loss per share                     $    (0.04)      $      (0.08)      $     (0.04) (27)
</TABLE>


                                      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)

(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 mining properties and claims and deferred development costs
      related to the Borealis of Property which had been previously capitalized
      as a result of the conclusion that the property does not have sufficient
      proven or probable mineral reserves.
(6)   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.
(7)   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.
(8)   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.
(9)   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.
(10)  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.
(11)  Recognize unrecorded liability for finders fees and account for as stock
      offering costs and charged as a reduction in common stock.
(12)  Recognize additional accrued interest on debt obligations calculated
      incorrectly resulting in an increase in accumulated deficit of $21,441.
(13)  Reclassify certain accrued liabilities.
(14)  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.
(15)  Correct the reclamation obligation to the $900,000 fair value of the
      liability at the date of acquisition in October 2000 that had previously
      been recorded at $1,800,000.
(16)  Recognize book value of shares of convertible preferred stock converted to
      common stock prior to December 31, 2000.
(17)  Reclassify amount incorrectly charged to additional paid in capital for no
      par common stock with a corresponding change to the value of common stock.
(18)  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.
(19)  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.
(20)  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.
(21)  Recognize charges related to the beneficial conversion feature of
      convertible debt issued in 2000 with a corresponding charge to accumulated
      deficit.
(22)  Contributed capital from gain on sale of stock in affiliate.
(23)  Additional expense recognized for common stock issued for extinguishment
      of debt valued at the market price of the shares issued.
(24)  Additional expense recognized for common stock issued for services
      rendered valued at the market price of the shares issued.
(25)  Cumulative affect of Items (1) through (24) on accumulated deficit.
(26)  Cumulative affect of Items (1) through (24) on net loss for the year ended
      December 31, 2001.
(27)  Loss per share increased by $0.04 per share.


                                      F-59
<PAGE>

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

NOTE 16 - CORRECTION OF ERRORS

Subsequent to the original issuance of the December 31, 2002 financial
statements, a revised determination was made that the Borealis Mineral Property
has mineralized material without sufficient proven or probable reserves.
Accordingly, the Borealis Mineral Property is considered to be in the
exploration stage with all related costs and expenditures to be expensed as
incurred. As a result, acquisition costs totaling $1,650,000 and deferred
development costs of $83,845 incurred prior to December 31, 2001, have been
reflected as being expensed in prior periods as reflected in Note 15. An
additional $15,033 of Borealis deferred development costs incurred in 2002 and
previous capitalized have been expensed and included in the net loss for the
year ended December 31, 2002.

Also subsequent to the original issuance of the December 31, 2002 financial
statements it was determined that common stock issued to extinguish debt
obligations of the Company had not been accounted for properly. The financial
statements have been restated to reflect the fair market value of the common
stock issued based on quoted market price rather than the amount of the debt
obligation resulting in a loss on extinguishment of debt totaling $275,333 for
the year ended December 31, 2002 and an additional net loss on extinguishment of
debt amounting to $25,138 for prior periods as reflected in Note 15.

Finally, determined was made subsequent to the original issuance of the December
31, 2002 financial statements that common stock issued for general and
administrative and exploration and related services should have been valued at
the fair market value of the Company's common stock issued based on the quoted
market price and not the invoices amount. This correction resulted in an
increase in expenses of $253,523 and the related net loss for the year ended
December 31, 2002 with an increase in expenses and related accumulated deficit
for prior periods amounting to $366,376.

The net effect on these corrections increased the net loss for the year ended
December 31, 2002 by $543,889 from $4,065,059 to $4,608,948, and had no material
effect on net loss per share.

                                      F-60
<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 October 15, 2003:

Name                     Age    Position
----                     ---    --------
Michael R. Fitzsimonds   46     President and Director
Steven D. Craig          56     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 experience evaluating
complex gold deposits. From 1987 to 1997, Mr. Fitzsimonds served as Project
Services Manager and Senior Geologist for Santa Fe Pacific Gold, Inc., and was
responsible for the company's initial resource evaluations and due diligence of
all mine operation projects and acquisitions worldwide. Mr. Fitzsimonds has
experience in many aspects of the minerals industry, ranging from grass roots
exploration and project development to mine start-up. Mr. Fitzsimonds was a
member of the startup team for the Alligator Ridge Mine in White Pine County,
Nevada, his primary responsibilities included development of new reserves for
the mine, grade control, reserve analysis, managed the mine assay laboratory,
and worked with engineering on the mine development. As part of his duties while
working with Santa Fe Pacific Gold for eleven years, Mr. Fitzsimonds did all of
the preliminary reserve estimates for all of the projects that Santa Fe Pacific
Gold made into mines in Nevada. As part of the project services group for Santa
Fe Pacific Gold, Mr. Fitzsimonds worked as the liaison between mine development
and exploration to assist in the development of these projects. Mr. Fitzsimonds
earned his B. Sc. in Geological Engineering, Mining and Exploration from the
University of Arizona.

      Steven D. Craig. Mr. Craig is Vice President, Corporate Secretary and a
Director and has served in his capacity since 1998. He is an experienced
economic geologist specializing in the discovery of ore deposits and building
exploration teams to facilitate discoveries. Mr. Craig has more than 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. 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.

      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


                                       29
<PAGE>

management role, and has had roles in project management and development at
Santa Fe Pacific Gold Corporation and the Gold Fields Mining Company.

      Ronald L. Parratt. Mr. Parratt is a Director of Golden Phoenix and has
served in his capacity since 2001. Mr. Parratt has more than 29 years experience
as a geologist, exploration manager and developer of gold deposits in North
America. Mr. Parratt is currently President of AuEx, LLC, a non-affiliated
private mineral exploration company. For the past five years, Mr. Parratt has
served as Exploration Manager for the Homestead Mining Company. Until 1997, Mr.
Parratt served as Vice President of Exploration for the Santa Fe Pacific Gold
Corporation, where he was responsible for intensive exploration activities in
the U.S., Brazil and Central Asia. During this tenure, Mr. Parratt oversaw the
exploration and development of 15 million ounces of gold reserves. Mr. Parratt
earned his M.S. degree in Economic Geology from Purdue University. Mr. Parratt
is currently serving on Nevada's Commission on Mineral Resources.

Directors

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

Committees

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

Committee                   Chairperson         Members
---------                   -----------         -------
Audit Committee             Allan Marter        Ronald Parratt, David Caldwell
Compensation Committee      Allan Marter        Ronald Parratt, David Caldwell
Governance Committee        Ronald Parratt      Allan Marter, David Caldwell

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

Compensation Of Directors

      Cash Compensation. At the present time the Board of Directors is not
compensated in cash.

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

Compliance With Section 16(a) Of The Securities Act Of 1934

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

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

Code of Ethics

      Golden Phoenix has not currently adopted a formal code of ethics that
applies to our principal executive officer or principal accounting officer. We
are in the process of establishing such written standards for these officers.


                                       30
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

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

<TABLE>
<CAPTION>
                                Annual Compensation                           Long Term Compensation
                              -----------------------    -----------------------------------------------------------------
                                                                  Awards                           Payouts
                                                         -------------------------  -------------------------------------
                                                                                    Securities
                                                                                    Underlying
Name and                                                 Other Annual   Restricted   Options/     LTIP
Principal                      Salary         Bonus      Compensation     Stock        SARs      Payouts      All Other
Position              Year       ($)           ($)           ($)         Award(s)      (#)         ($)      Compensation
----------------     ------   ----------      -----      ------------   ----------  ----------   -------    ------------
      (a)             (b)        (c)           (d)           (e)           (f)         (g)         (h)           (i)
----------------     ------   ----------      -----      ------------   ----------  ----------   -------    ------------
<S>                   <C>     <C>               <C>          <C>           <C>      <C>             <C>           <C>
Michael               2002    $95,000(1)        --           --            --           --          --            --
Fitzsimonds, CEO      2001    $95,000(2)        --           --            --           --          --            --
                      2000    $95,000(3)        --           --            --       1,395,000(4)    --            --
</TABLE>

----------
(1)   Of the $95,000 in 2002 annual compensation, $35,000 was accrued at
      December 31, 2002 and remains unpaid.
(2)   Of the $95,000 in 2001 annual compensation, $35,000 was accrued at
      December 31, 2001 and remains unpaid.
(3)   Of the $95,000 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 for common shares
      at $0.22. He was also granted 250,000 in new options at $0.22 in 2000.

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

Option Grants In Last Fiscal Year

<TABLE>
<CAPTION>
                              Number of        % of Total
                              Securities       Granted to
                              Underlying      Employees in      Exercise or
Name                       Options Granted     Fiscal Year       Base Price     Expiration Date
-------------------        ---------------    ------------      -----------     ---------------
<S>                               <C>               <C>              <C>              <C>
Michael Fitzsimonds               None              0%               --               --
</TABLE>

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:

<TABLE>
<CAPTION>
                                                                          Value of Unexercised
                            Number of Securities Underlying               In-the-Money Options
                            Unexercised Options at 12/31/02                    At 12/31/01
                            --------------------------------        -------------------------------
Name                        Exercisable          Unexercised        Exercisable         Unexercised
----                        -----------          -----------        -----------         -----------
<S>                           <C>                <C>                 <C>                   <C>
Michael R. Fitzsimonds        2,818,940          2,818,940           $539,741              $539,741
</TABLE>


                                       31
<PAGE>

Stock Option Plan

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

Employment Agreements

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

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


                                       32
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Principal Shareholders

      The following table presents certain information regarding the beneficial
ownership of all shares of common stock at October 31, 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 93,858,710 common
shares issued and outstanding at October 31, 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 October 31, 2003 as issued and
outstanding. Unless otherwise indicated, each person has sole voting and
investment power over such shares.

<TABLE>
<CAPTION>
                                                                      Exercisable
                                                                        Options/
                                                     Shares owned       Warrants       Percentage
                                                     ------------     -----------      ----------
<S>                                                    <C>             <C>               <C>
John W. Whitney                                         3,361,197      1,865,280          5.5%
P.O. Box 10725
Reno, Nevada

Frank Diegman                                          10,833,333      5,833,333         16.7%
1986 E Football Blvd
Pasadena, Ca 91107

Michael R. Fitzsimonds                                  2,074,414      2,818,940(2)       5.1%
3595 Airway Drive
Suite 405
Reno, Nevada

Steven D. Craig                                            27,362      2,265,349(3)       2.4%
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 (5 persons)       2,356,500      5,614,289          8.0%
</TABLE>

----------
*     Represents less than 1%.
(1)   Included in Mr. Whitney's shares are 1,263,752 restricted common shares
      owned by Whitney & Whitney, Inc. Mr. Whitney is President of Whitney &
      Whitney, Inc. and a greater than 10% shareholder of its parent company,
      Itronics Inc. Mr. Whitney's options and warrants are exercisable at $0.10
      per share.
(2)   Mr. Fitzsimonds has conversion rights on options for 1,670,000 common
      shares exercisable at $0.22, and options for 1,148,940 common shares
      exercisable at $0.147.


                                       33
<PAGE>

(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.

(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.

                               Number Of Shares           Value Of Compensation
Year                           Of Common Stock           Including Cash Payments
----                           ---------------           -----------------------
2001                             1,208,248                       $120,776
2002                             1,847,002                       $239,268
2003                                     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.

                                   Number Of Shares            Amounts Paid
Year                               Of Common Stock       On Exercise 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
                                 Number Of Shares     Related Party Transactions
 Year                            Of Common Stock           For Mr. Whitney
 ----                            ---------------           ---------------
 2001                                1,978,795                $196,066
 2002                                2,894,500                $350,999
 2003                                   29,400                $  5,880
                                     ---------                --------
 Total                               4,902,695                $552,935
                                     =========                ========

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


                                       34
<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.


                                       35
<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.

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

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

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

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

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

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

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

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

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

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


                                       36
<PAGE>

<TABLE>
<CAPTION>
Exhibit No.   Description                                          Location
-----------   -----------                                          --------
<S>           <C>                                                  <C>
10.10         Form of General Executive Compensation Contract      Incorporated by reference to Exhibit 14.1 to the
                                                                   Company's Annual Report on Form 10-KSB for the
                                                                   year ended December 31, 1998, as filed with the
                                                                   SEC on October 27, 1999

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

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

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

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

31.1          Certification Pursuant to Section 302                Provided herewith

31.2          Certification Pursuant to Section 302                Provided herewith

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

32.2          Certification Pursuant to 18 U.S.C. Section 1350     Provided herewith
</TABLE>

      (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.


                                       37
<PAGE>

                                   SIGNATURES

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

Date: November 14, 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.

<TABLE>
<CAPTION>
SIGNATURE                   TITLE                                             DATE
---------                   -----                                             ----
<S>                         <C>                                               <C>
/s/ Michael R. Fitzsimonds
--------------------------
Michael R. Fitzsimonds      Director, President and Chief Financial Officer   November 14, 2003

/s/ Steven D. Craig
--------------------------
Steven D. Craig             Director, Vice President and Secretary            November 14, 2003

/s/ Allan J. Marter
--------------------------
Allan J. Marter             Director                                          November 14, 2003

/s/ David A. Caldwell
--------------------------
David A. Caldwell           Director                                          November 14, 2003

/s/ Ronald L. Parratt
--------------------------
Ronald L. Parratt           Director                                          November 14, 2003
</TABLE>


                                       38