SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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

                   For the Fiscal Year Ended December 31, 2004

                                       OR

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

                          Commission File No. 000-22905

                          GOLDEN PHOENIX MINERALS, INC.
             (Exact Name of Registrant as Specified in Its Charter)

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

1675 East Prater Way, Suite 102, Sparks, Nevada                    89434
-----------------------------------------------                    -----
    (Address of Principal Executive Offices)                    (Zip Code)

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

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

                      Common Stock, no par value per share
                      ------------------------------------
                                (Title of Class)

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

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

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

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

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

<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 corporate directors, officers, and managers are individuals with prior
management experience who specialize in exploration and development with large
and small mining companies. This team has in excess of 100 years of mineral
exploration, development, and gold production experience, with career tracks
beginning at entry-level, then to mid-management and executive positions.
Management believes that Golden Phoenix has created the basis for a competitive
minerals exploration/development and operational company through assembling a
unique group of individuals with experience in target generation, ore discovery,
resource evaluation, mine development and mine operations.

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

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

      There are numerous levels of government regulation associated with the
activities of exploration and mining companies. Permits, which we are
maintaining and amending include "Notice of Intent" to explore, "Plan of
Operations" to explore, "Plan of Operations" to mine, "Reclamation Permit", "Air
Quality Permit", "Water Quality Permit", "Industrial Artificial Pond Permit",
and several other health and safety permits. These permits are subject to


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<PAGE>

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

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

<TABLE>
<CAPTION>
                                                        Compliance
Name of Regulation                         Fees         Cost       Type of Compliance
------------------                         ----         ----       ------------------
<S>                                        <C>          <C>        <C>
Nevada Department of Environmental
Protection Water Pollution Control         $   900      $   4,800  Quarterly water sampling & waste rock sampling
Nevada Department of Environmental
Protection Air Quality                     $ 1,250      $   2,000  Air quality monitoring of equipment
Nevada Department of Environmental
Protection Reclamation                     $    --      $ 360,000  Reclamation
Mining Safety Health Association           $    --      $   5,667  Safety equipment and training
                                           -------      ---------
Total                                      $ 2,150      $ 372,467
                                           =======      =========
</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 for the Mineral Ridge Mine was the Reclamation Permit and
Plan of Operation and was issued May 8, 2003. This permit determines the amount
of bonding required for the project. There are three other major permits, which
have a renewal period that has coincided with Golden Phoenix's acquisition of
the mine property. These permits are: Air Quality Permit, Water Pollution
Control Permit, and Artificial Pond Permit. These permits were received by
Golden Phoenix in 2003 and are all in compliance. There are several mine safety
permits that were renewed when Golden Phoenix notified MSHA that it was
restarting the mine. These permits require inspections prior to the start of
full operations.


Competition And Gold Price

      The mining industry has historically been intensely competitive. However,
over the last ten years imposition of numerous regulatory requirements and claim
rental policies by the United States Government and the general exodus of major
gold corporations from the U.S. to pursue mineral exploration in foreign
countries has allowed large areas of very prospective mineralized ground to
become open for location and acquisition. Nonetheless, the increasing price of
gold since 2002, has led to a number of companies to begin once again to
aggressively acquire claims and properties. Gold prices in 2002 increased from
$278 to $349 and closed at $347. In 2003 gold prices ranged from $320 to the
high closing of $416. In 2004 gold prices ranged from a low of $375 to a high of
$454.


Capital Equipment

      In the next twelve months, we anticipate purchasing or leasing certain
capital equipment for the Ashdown and Mineral Ridge mines, which would be
support equipment for the underground operation and process/leach facilities.
These items include underground hauling machines and muckers, front-end loader,
forklift, and a small haul truck. Depending on whether we purchase new or used
equipment, these capital equipment items could cost between $50,000 and
$200,000. We anticipate funding these capital equipment expenditures with funds
we receive from any gold or molybdenum production revenues we may generate or
from debt financing. The pickup trucks we intend to purchase will be for our
staff professionals only. All contractors will provide their own vehicles.


Mining Properties And Projects

      The Federal government owns public lands that are administered by the
Bureau of Land Management or the United States Forest Service. Ownership of the
subsurface mineral estate can be acquired by staking a 20-acre mining claim
granted under the 1872 Mining Law. The Federal government still owns the surface
estate even though the subsurface can be owned through claim staking. Private
fee lands are lands that are controlled by fee-simple title by private


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<PAGE>

individuals or corporations. These lands can be controlled for mining and
exploration activities by either leasing or purchasing the surface and
subsurface rights from the private owner. Unpatented mining claims, which are
staked by another individual or corporation, can be controlled by either leasing
or purchasing the claims outright from the private owners that staked the claims
on public land. Patented mining claims are claims that were staked under the
1872 Mining Law, and through application and approval, the owners were granted
full private ownership of the surface and subsurface estate by the Federal
government. These lands can be acquired for exploration and mining through lease
or purchase from the private owners. Tribal lands are those lands that are under
control by sovereign Native American tribes. Areas that show promise for
exploration and mining can be leased or joint ventured with the tribe
controlling the land.

      The following describes the existing mining projects found in Nevada that
are owned or controlled by the Company. Our primary and most important mining
property asset is the operating Mineral Ridge gold project. The Ashdown
gold-molybdenum project is expected to go into production in 2005. Two other
projects, the Contact copper-silver project and the Borealis gold-silver project
were terminated or sold at the end of 2004 and early 2005, respectively.

                        Golden Phoenix Probable Reserves
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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%        $405/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 140 unpatented mining claims totaling
nearly 3,880 acres, or 6 square miles. The property is accessed on the east side
from state highway 265 and on the west side from a well-maintained gravel road.
Heavy trucks access the site by way of the west entrance by way of state highway
264, which connects to state highway 773 and U. S. highway 6.

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

      The Mineral Ridge property holds three separate economically mineable gold
deposits, the Drinkwater, Mary, and Brodie. The combined reserves, at a 0.030
troy ounces of gold per ton cut off grade, 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., an outside consultant.
Included in the reserve estimate of recoverable gold are 10,000 recoverable
ounces of gold contained in the leach pad that remain to be recovered by cyanide
leaching. The property holds further mineral potential with identified targets
potentially containing additional gold mineralization. As of December 31, 2004,
total expenditures, excluding acquisition costs, on the Mineral Ridge property
have been $8,082,464.

      In 2001 Golden Phoenix filed a $1.8 million interim reclamation bond,
which allowed the company to hold the Mineral Ridge property while other
permitting was underway. The reclamation permit, which was in place when Golden
Phoenix bought the property out of bankruptcy, was not transferable and the
company holding the surety bond refused to write a new bond for a startup
company. We were required to post a new bond, but this could not be completed
until a new reclamation plan and permit was completed. The bond was due for a
three-year review by the Bureau of Land Management and Nevada Department of
Environmental Protection. This review changed the cost of the bond from $1.64
million to $3.2 million for the same plan. The previous bonding company wanted
to be released from the bond held by the Bureau of Land Management; however,
without a replacement bond, the only method of release would have been by
reclaiming the property. To avoid loss of the property value due to destruction
of the infrastructure, Golden Phoenix needed to bring the property back into
production. We negotiated an interim bond amount to keep the project in a
status-quo status until a new plan and bond amount could be negotiated. The
source for the cash bond was from the two previous operators and one of our
shareholders. On May 8, 2003, we received the new amended operating permit and
on June 23, 2003, we filed a $2.7 million reclamation bond with the Bureau of
Land Management with respect to the Mineral Ridge mine. We utilized an
insurance-backed financial assurance program produced by IMA Environmental
Insurance of Denver, Colorado, and underwritten by AIG Environmental, to acquire


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<PAGE>

the bond. The program structure includes an insurance policy that will pay
reclamation expenses as they occur. The insurance enables us to acquire the
necessary reclamation bond at a fixed and discounted rate for a term of twelve
years. It also allows us the flexibility to increase our bond in the future as
we move into Phase II of our operations at Mineral Ridge. Operations began once
the bond was in place, and these included adding chemicals to the process
solutions, plumbing the pad with drip lines and main trunk pipes, and mining new
ore and old stockpiled ore.

      The total value of the gold sales over five-year mine life, at a $325 gold
price, is estimated to be $59 million. The total operating cost, which includes
royalty payments, refining costs, mining costs, milling costs, reclamation
costs, and operating expenses is estimated to be $36 million and capital costs
of $6 million. The net cash flow, including royalties and federal income taxes,
is estimated to be $12 million. As of December 31, 2004, the Mineral Ridge
property has sold 5,779 ounces of gold and 4,012 ounces of silver since
acquisition by the Company, for a net value to the Company of $2,132,566.

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


Land And Royalties

      The Mineral Ridge property consists of 54 patented and 140 unpatented
mining claims totaling nearly 3,880 acres or 6 square miles. We also control
three private land parcels, which are located outside the main mine area. These
are the abandoned Blair town site, the Silver Peak mill site, and deeded land
west of Mineral Ridge over some springs. These private lands total about 430
acres.

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


Recent Mine And Property Ownership And Discussion Of Past Results

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

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

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

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


                                       5
<PAGE>

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


Discussion on Golden Phoenix Minerals Operational Results

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

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

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

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


Ashdown Project, Humboldt County, Nevada

      The Ashdown gold-molybdenum project is located about 100 miles northwest
of Winnemucca in Humboldt County, Nevada. The property covers about 3.2-square
miles and is controlled by 101 unpatented mining claims. Access to the property
is gained by following a dirt road located about 10 miles west of Denio Junction
off of paved State Route 140 for about three miles to the southeast to the
property.

      Golden Phoenix has signed two agreements for the Ashdown property; the
first terminated due to another party's failure to perform. The first agreement
was signed on September 19, 2003 where Golden Phoenix Minerals entered into a


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<PAGE>

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

      The Ashdown mine previously produced approximately 50,000 ounces of gold
from underground ores averaging about 0.35 ounces per ton. This production took
place from about 1880 to 1942. More recently, four companies, including
Win-Eldrich Mines, beginning in 1979 spent about $7-8 million drilling 270 core
and rotary holes, performing numerous metallurgical tests, excavating an
1,880-foot tunnel for bulk molybdenum samples, and conducting several
feasibility studies for potential open pit and underground mining operations.
All this work identified potentially economic open-pittable gold and high-grade
underground molybdenum resources on the property. Past economic evaluations
identified mineralized material of about 1.18 million tons of gold ore at 0.125
ounces per ton and, in a separate deposit, 146,000 tons of molybdenum ore
averaging about 2.9% molybdenum. Both deposits are open for possible expansion
of the mineralized inventory and numerous step-out exploration holes have
identified strong mineralization needing follow up drilling. The property
currently consists of 101 mining claims, covering about 3.2 square miles.

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

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

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

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


Borealis Project, Mineral County, Nevada

      The Borealis property is held under a lease agreement with the Borealis
Partnership, which consists of three separate individuals who combined their
separate properties to facilitate leasing the entire mineralized zone covered by
the three properties. The lease was entered into on January 24, 1997 and control
of the property is maintained with monthly advanced royalty payments. On May 13,
2003 the Company signed an Agreement in Principle to joint venture its Borealis
gold project with Gryphon Gold Corporation, a private Nevada incorporated
company. Under the terms of the agreement Gryphon Gold has the right to acquire
a 50% interest in the property after incurring qualified expenditures on work


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<PAGE>

programs or making payments to Golden Phoenix in the aggregate of five million
dollars over a four-year period. Gryphon Gold has the right to acquire an
additional 20% by delivering to Golden Phoenix a feasibility study for mine
production based on a mineable reserve of 500,000 ounces of gold or gold
equivalent or by incurring an additional four million dollars in expenditures.
Gryphon has paid Golden Phoenix $25,000, in consideration of a 75-day due
diligence period and an additional $100,000 upon signing the definitive joint
venture agreement. On January 31, 2005 the Company closed an agreement to sell
its 30% interest in the Borealis Gold Project to Borealis Mining Company/Gryphon
Gold Corporation for a series of cash payments totaling $1,400,000. The terms of
payment are as follows: $400,000 was paid on January 18, 2005, followed by four
payments of $250,000, paid in 90-day increments. In accordance with the terms of
the joint venture agreement to date, the parties agree that Borealis/Gryphon has
earned 70% of the overall joint venture. With the purchase of Golden Phoenix
Mineral's 30% interest, Borealis/Gryphon will own 100% of the project. In
return, Gryphon Gold will guarantee Borealis Mining Company's payment obligation
to Golden Phoenix Minerals by depositing as security 15% of Borealis Mining
Company shares into escrow.


Contact Project, Elko County, Nevada

      The Contact copper project is located about 50 miles north of Wells in
Elko County, Nevada. The property covers about five-square miles and is
controlled by both 152 patented and 8 unpatented mining claims. Golden Phoenix
had two agreements in place on the Contact property; the first is the
International Enexco Joint Venture and the second is with F. W. Lewis, Inc. On
January 28, 1998, we acquired the right to earn a 60 percent interest in the
International Enexco Limited ("Enexco") patented mining claims through a
combination of annual work commitments totaling $2,600,000 on the Enexco
property and $4,000 per month payments to Enexco totaling $313,000 over seven
years. At December 31, 2004 the total liability for the minimum work commitments
to Enexco was $2,175,200 and $4,000 for the monthly lease payments. The
agreement was terminated on December 23, 2004.

      On July 10, 1998 Golden Phoenix entered into a separate exploration
license and purchase option agreement for the SF Lewis Trust portion of the
Contact Project. On February 19, 2003 Lewis and Golden Phoenix entered into a
First Amendment to Exploration License with Option to Purchase, which extended
the term of the Agreement to December 31, 2007 and made other modifications to
the original agreement. On May 7, 2003, the parties signed a second amendment
that clarified that expenditures for work performed by Golden Phoenix on either
the Lewis property or the adjoining International Enexco, Ltd. property shall be
applied to Lewis' minimum work commitment. As of December 31, 2004, $115,000 had
been paid toward the monthly payments and 4,453,623 shares had been issued,
which were valued at $676,000. As of December 31, 2004, the total liability owed
to F.W. Lewis was $17,000 for the exploration license, $1,989,250 for the
bi-annual stock distribution and $1,243,200 for the minimum work commitment not
yet performed On December 23, 2004 the Company terminated the Exploration
License and Purchase Option Agreement with F. W. Lewis, Inc.

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


Alaskan Royalties

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

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

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


Fusion Capital Transaction

      On November 12, 2002, we entered into a common stock purchase agreement
with Fusion Capital Fund II, LLC, for the issuance and purchase of our common
stock. Under the common stock purchase agreement, Fusion Capital committed to
purchase up to $12.0 million of our common stock over a forty-month period that
commenced when the registration statement was filed as part of this transaction.
Once the registration statement became effective, and subject to certain
conditions, Fusion Capital is to purchase $15,000 of our common stock on each
trading day during the term of the agreement, subject to our right to increase,


                                       8
<PAGE>

decrease or suspend purchases by Fusion Capital. The purchase price of the
shares of common stock will be equal to a price based upon the future market
price of the common stock without any fixed discount to the market price.
However, Fusion Capital does not have the right and is not obligated to purchase
our stock in the event that the purchase price is below $0.10. We intend to use
the proceeds from the sale of our common stock to Fusion Capital, if any, for
working capital and general corporate purposes, if market conditions are
favorable. The number of shares ultimately offered for sale by Fusion Capital is
dependent upon the number of shares purchased by Fusion Capital under the common
stock purchase agreement.

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


Staffing

      Corporate Office

      We have a staffing level of one key professional, a CFO, Operations
Manager, and an accounting assistant in the Sparks office. The Company plans to
hire a receptionist, purchasing agent and a senior mining engineer to assist the
Company as it grows. We intend to employ independent contractors to fulfill
short-term needs and obligations.

      Mineral Ridge Mine

      At the Mineral ridge mine we have 10 full time employees and these are in
the plant operations. It is anticipated that more employees will be added at the
Mineral Ridge operation in the next twelve months as the operations at the mine
are started back up.

      Ashdown Project

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


Certain Business Risk Factors

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


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

      We have yet to establish any history of profitable operations. We have
incurred annual operating losses of $6,470,008 and $2,966,060 respectively,
during the years ended December 31, 2004 and 2003, respectively. As a result, at
December 31, 2004, we had an accumulated deficit of $25,192,268. Our revenues
have not been sufficient to sustain our operations. We expect that our revenues
will not be sufficient to sustain our operations for the foreseeable future. Our
profitability will require the successful commercialization of our gold mines.
We may not be able to successfully commercialize our gold mines or ever become
profitable.


There Is Doubt About Our Ability To Continue As A Going Concern Due To Recurring
Losses From Operations, Accumulated Deficit And Working Capital Deficit All Of
Which Means That We May Not Be Able To Continue Operations

      Our independent auditors have added an explanatory paragraph to their
audit opinion issued in connection with the financial statements for the years
ended December 31, 2004 and 2003 with respect to their doubt about our ability
to continue as a going concern. As discussed in Note 2 to our financial
statements for the fiscal year ended December 31, 2004, we have generated losses
from operations, had an accumulated deficit of $25,192,268 and had a working
capital deficit of $7,610,574 at December 31, 2004, which together raises doubt
about our ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 2 to our financial statements for
the fiscal year ended December 31, 2004.


                                       9
<PAGE>

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

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


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

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

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

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

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


                                       10
<PAGE>

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

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


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

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

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


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

      During the past several years, the United States Congress considered a
number of proposed amendments to the General Mining Law of 1872, as amended,
which governs mining claims and related activities on federal lands. In 1992, a
holding fee of $100 per claim was imposed upon unpatented mining claims located
on federal lands. Beginning in October 1994, a moratorium on processing of new
patent applications was approved. In addition, a variety of legislation over the
years has been proposed by the sitting United States Congress to further amend
the General Mining Law. If any of this legislation is enacted, the proposed
legislation would, among other things, change the current patenting procedures,
limit the rights obtained in a patent, impose royalties on unpatented claims,
and enact new reclamation, environmental controls and restoration requirements.


                                       11
<PAGE>

The royalty proposal ranges from a two percent royalty on "net profits" from
mining claims to an eight percent royalty on modified gross income/net smelter
returns. The extent of any such changes that may be enacted is not presently
known, and the potential impact on us as a result of future congressional action
is difficult to predict. If enacted, the proposed legislation could adversely
affect the economics of developing and operating our mines because many of our
properties consist of unpatented mining claims on federal lands. Our financial
performance could therefore be materially and adversely affected by passage of
all or pertinent parts of the proposed legislation, which could force us to
curtail or cease our business operations.


The Development And Operation Of Our Mining Projects Involve Numerous
Uncertainties

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

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

      o     estimation of reserves;

      o     anticipated metallurgical recoveries;

      o     future gold prices; and

      o     anticipated capital and operating costs of such projects.

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

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

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

      o     unanticipated adverse geotechnical conditions;

      o     incorrect data on which engineering assumptions are made;

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

      o     availability and cost of processing and refining facilities;

      o     availability of economic sources of power;

      o     adequacy of water supply;

      o     adequate access to the site;

      o     unanticipated transportation costs;

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

      o     fluctuations in gold prices; and

      o     accidents, labor actions and force majeure events.


                                       12
<PAGE>

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


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

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

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

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

      o     the capital available for exploration and development.

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


Mineral Exploration Is Highly Speculative

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


The Price Of Gold, Copper and Molybdenum are Highly Volatile And A Decrease In
The Price Of Gold, Copper or Molybdenum Can Have A Material Adverse Effect On
Our Business

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


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

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


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

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


                                       13
<PAGE>

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

Fatal Accident

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


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

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


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

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


ITEM 2. PROPERTIES

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

      The principal offices are leased from WDCI, Inc in Sparks Nevada. The
lease has a 7 year term and is renewable. We consider our existing facilities to
be adequate for our foreseeable needs.


ITEM 3. LEGAL PROCEEDINGS

      On March 5, 2003, William F. Matlack, a former shareholder of Golden
Phoenix, filed a complaint in the Second Judicial District Court in and for
Washoe County, Nevada against Golden Phoenix. The complaint relates to a former
subsidiary of Golden Phoenix, Golden Phoenix Alaska, and alleges, among other
things, breach of contract, dealing in bad faith, fraud, fraudulent


                                       14
<PAGE>

misrepresentation, negligence, negligent misrepresentation, breach of fiduciary
duty and breach of covenant of dealing fairly and in good faith. The complaint
seeking (i) economic damages in excess of $10,000, (ii) compensatory damages in
excess of $10,000, (iii) punitive damages at the amount of $500,000, (iv)
interest on economic damages at the rate established by law and (v) reasonable
fees and costs related to the action. On July 2, 2003, Golden Phoenix filed its
response with respect to this complaint. On April 6, 2004 Golden Phoenix
Minerals, Inc. and Mr. Matlack verbally agreed to a settlement in which each
side agreed to pay its own legal fees and dismiss the suit.


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

      None.


                                       15
<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 2003                         High             Low
                 ---------                         ----             ---

                 First Quarter                     $0.34           $0.17
                 Second Quarter                    $0.33           $0.15
                 Third Quarter                     $0.44           $0.25
                 Fourth Quarter                    $0.54           $0.38

                 Year 2004                         High             Low
                 ---------                         ----             ---

                 First Quarter                     $0.40           $0.36
                 Second Quarter                    $0.32           $0.28
                 Third Quarter                     $0.29           $0.26
                 Fourth Quarter                    $0.25           $0.22

      On December 31, 2004, the closing price of our common stock as reported on
the Over-the-Counter Bulletin Board was $0.17 per share. On December 31, 2004,
we had in excess of 5000 holders of common stock and 132,155,654 shares of our
common stock were issued and outstanding. Many of our shares are held in
brokers' accounts, so we are unable to give an accurate statement of the number
of shareholders.


Dividends

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


Recent Sales Of Unregistered Securities

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

<TABLE>
<CAPTION>
                                              Nature                                                        Share Price
                                       of Services Performed         Shares Issued      Value Received       Per Share
                                       ---------------------         -------------      --------------       ---------
<S>                                <C>                               <C>                <C>                  <C>
First Quarter 2004
Warrant Exercise at $0.10                                                  2,550,000         $  255,000         $   0.100
Warrant Exercise at $0.15                                                    100,000             15,000             0.150
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                                7,652              3,443             0.450
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                                6,264              2,819             0.450
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                                7,016              3,157             0.450
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                                6,718              3,023             0.450
                                                                           ---------        -----------        ----------
  Total First Quarter 2004                                                 2,677,653         $  282,442         $   0.105
                                                                           =========        ===========        ==========
</TABLE>


                                       16
<PAGE>

<TABLE>
<CAPTION>
                                              Nature                                                        Share Price
                                       of Services Performed         Shares Issued      Value Received       Per Share
                                       ---------------------         -------------      --------------       ---------
<S>                                <C>                               <C>                <C>                  <C>
Second Quarter 2004
Warrant Exercise at $0.10                                                  1,352,900         $  135,290         $   0.100
Warrant Exercise at $0.15                                                  1,716,662            257,500             0.150
Directors Compensation For Board
  Meetings                                                                     7,815              2,190             0.280
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                                6,266              2,130             0.340
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                                8,552              2,737             0.320
                                                                           ---------        -----------        ----------
  Total Second Quarter 2004                                                3,092,200        $   399,847         $   0.129
                                                                           =========        ===========        ==========
</TABLE>

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

<TABLE>
<CAPTION>
                                              Nature                                                        Share Price
                                       of Services Performed         Shares Issued      Value Received       Per Share
                                       ---------------------         -------------      --------------       ---------
<S>                                <C>                               <C>                <C>                  <C>
Fourth Quarter 2004
Warrant Exercise at $0.10                                                    317,647         $   31,765         $   0.100
Warrant Exercise @ $0.15                                                     100,000             15,000             0.150
Whitney & Whitney Consulting       Business and Financial
  Services                           Consulting                                9,466              2,272             0.240
                                                                           ---------        -----------        ----------
  Total Fourth Quarter 2004                                                  427,113         $   49,037         $   0.115
                                                                           =========        ===========        ==========
</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."


                                       17
<PAGE>

Overview

      Golden Phoenix Minerals, Inc. is a mineral-property development company,
formed in Minnesota on June 2, 1997, specializing in acquiring and consolidating
mineral properties with production potential and future growth through
exploration discoveries. Acquisition emphasis is focused on properties
containing gold, silver, copper, and other strategic minerals that are located
in Nevada. Presently our primary mining property asset is the operating Mineral
Ridge gold mine and the Ashdown gold-molybdenum project. The Company terminated
its joint venture with International Enexco, Ltd. and its exploration license
and option to purchase with F. W. Lewis, Inc. on December 23, 2004 at its
Contact project. On January 31, 2005 the Company closed the sale of its Borealis
project to Gryphon Gold Inc. for $1.4 million.

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

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

      The Borealis property was held under a lease agreement with the Borealis
Partnership, which consists of three separate individuals who entered an
exploration partnership to facilitate leasing the entire mineralized zone owned
by the three partners. On July 18, 2003 the Company signed a Joint Venture
agreement for its Borealis gold project with Gryphon Gold Corporation, a Nevada
incorporated company. Under the terms of the agreement Gryphon Gold has the
right to acquire a 50% interest in the property after incurring qualified
expenditures on work programs or making payments to Golden Phoenix in the
aggregate of five million dollars over a four-year period. Gryphon Gold has the


                                       18
<PAGE>

right to acquire an additional 20% by delivering to Golden Phoenix a feasibility
study for mine production based on a mineable reserve of 500,000 ounces of gold
or gold equivalent or by incurring an additional four million dollars in
expenditures. Gryphon paid Golden Phoenix $25,000 in consideration of a 75-day
due diligence period and also paid an additional $100,000 upon signing the
definitive joint venture agreement. On January 31, 2005 the Company closed an
agreement to sell its 30% interest in the Borealis Gold Project to Borealis
Mining Company/Gryphon Gold Corporation for a series of cash payments totaling
$1,400,000. The terms of payment are as follows: $400,000 paid on January 18,
2005, followed by four payments of $250,000, paid in 90-day increments. In
accordance with the terms of the joint venture agreement to date, the parties
agree that Borealis/Gryphon has earned 70% of the overall joint venture. With
the purchase of Golden Phoenix Mineral's 30% interest, Borealis/Gryphon will own
100% of the project. In return, Gryphon Gold will guarantee Borealis Mining
Company's payment obligation to Golden Phoenix Minerals by depositing as
security 15% of Borealis Mining Company shares into escrow.

      The Contact property was held through agreements with two separate
entities, the International Enexco Joint Venture and F. W. Lewis, Inc. Golden
Phoenix's operating control over property owned by these two entities allowed it
to combine deposits within the district allowing for economic mining, which was
previously not possible. On December 23, 2004, Golden Phoenix Minerals
terminated the Joint Venture Agreement dated January 28, 1998, by and between
the Company and International Enexco Ltd. and the Exploration License and Option
to Purchase Agreement dated July 10, 1998, by and between the Company and F.W.
Lewis, Inc.

      The Ashdown property was originally held through a Letter Agreement with
PRS Enterprises with Golden Phoenix managing the project. PRS also had a Letter
Agreement with Win-Eldridge Mines, Ltd., which grants the Ashdown property to
the three-company venture. This agreement expired on about December 15, 2003 due
to the inability of PRS to fulfill their contractual obligations. Negotiations
with Win-Eldrich Mines continued, which resulted in a joint venture agreement
being signed on February 5, 2004. The terms of the agreement gives 60% to Golden
Phoenix, as manager/operator of project, and 40% to Win-Eldrich Mines, as owner
of the property. Golden Phoenix will earn an undivided vested 60% interest in
the project in either of two ways: by placing the project into profitable
production using a small pilot mill, or spending $5 million toward development
of the project. The Company has four years to complete vesting into the project.
Upon signing the agreement, Golden Phoenix paid Win-Eldrich $50,000, and
beginning in three months after the signing, it will pay $5,000 per month until
a cash distribution through profitable production is achieved. By the end of the
2004, permit applications were being reviewed by the agencies and include the
Water Pollution Control Permit, Reclamation Plan, and Right of Way Permit. The
Air Quality Permit is ready to be submitted, and the Storm Water Permit has been
received. Permitting efforts for the larger mill and open pit mine includes
writing the Plan of Operations and gathering base line information for the
Environmental Assessment. Other permit applications will be prepared and
submitted once the Plan of Operations is submitted to the Bureau of Land
Management.

      The Company has a history of operating losses, and we expect to continue
to incur operating losses in the near future as we initiate mining operations at
our four mines and conduct additional exploration in their vicinity. As a
development stage company we have been funded primarily through stock sales and
loans from officers and shareholders with the addition of revenue from gold
sales through the production from the Mineral Ridge mine and the common stock
purchase agreement with Fusion Capital. We intend to develop and mine existing
reserves and to further delineate additional, identified mineral deposits at our
three mines. We also intend to explore for undiscovered deposits on these four
properties and to acquire and explore new properties, all with the view to
enhancing the value of such properties. We have been open to and will continue
to entertain possible joint ventures with other mining company partners. We
currently have a Letter Agreement to Joint Venture Agreement February 5, 2004
with Win-Eldrich Mines for the Ashdown project. No other joint ventures have
been entered into.

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


Going Concern

      The report of our independent accountants on our December 31, 2004
financial statements includes an explanatory paragraph indicating that there is
doubt about our ability to continue as a going concern due to recurring losses
from operations and accumulated deficit and working capital deficit. Our ability
to continue as a going concern will be determined by our ability to commence and
maintain successful operations. Our financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


Critical Accounting Policies

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make a wide variety of estimates and assumptions that affect (i)
the reported amounts of assets and liabilities and disclosure of contingent


                                       19
<PAGE>

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

      Several of those critical accounting policies are as follows:

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

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

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

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

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

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

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

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


                                       20
<PAGE>

losses from environmental remediation obligations generally are recognized no
later than completion of the remedial feasibility study for the mineral
property. Accruals are expensed when the closure of operations and environmental
matters are acknowledged. We periodically review our accrued liabilities for
such remediation costs as evidence becomes available indicating that our
remediation liability has potentially changed. Such costs are based on
management's current estimate of amounts that are expected to be incurred when
the remediation work is performed within current laws and regulations.

         Future closure, reclamation and environment-related expenditures are
difficult to estimate in many circumstances due to the early stages of
investigation, uncertainties associated with defining the nature and extent of
environmental contamination, the uncertainties relating to specific reclamation
and remediation methods and costs, application and changing of environmental
laws, regulations and interpretations by regulatory authorities and the possible
participation of other potentially responsible parties. Reserves for closure
costs, reclamation and environmental matters totaled approximately $1,820,000 at
December 31, 2002. On May 8, 2003, we received the new amended operating permit
and on June 23, 2003, we filed a $2.7 million reclamation bond with the Bureau
of Land Management with respect to the Mineral Ridge mine. We utilized an
insurance-backed financial assurance program produced by IMA Environmental
Insurance of Denver, Colorado, and underwritten by AIG Environmental, to acquire
the bond. The program structure includes an insurance policy that will pay
reclamation expenses as they occur. The insurance enables us to acquire the
necessary reclamation bond at a fixed and discounted rate for a term of twelve
years. Now that the new permit and bond are in place the company assumes its
reclamation obligation to be $2.7 million. We anticipate that expenditures
relating to these reserves will be made over the next five to ten years. It is
reasonably possible the ultimate cost of remediation could change in the future
and that changes to these estimates could have a material effect on future
operating results as new information becomes known.


New Accounting Pronouncements

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

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

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

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

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


                                       21
<PAGE>

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

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


Results Of Operations


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

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

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

      The following table describes the results of operations for the fiscal
year ended December 31, 2004 compared to fiscal year ended December 31, 2003.

Description                  2004           2003         Difference
-----------                  ----           ----         ----------

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

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

(2)   The change in the plant operation cost is due to adjustment of hourly
      rates and increased equipment costs, plus eleven months of full or near
      full mining operations that included substantial drilling, blasting and
      fuel costs.

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

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

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

(6)   The decrease in public relations is primarily due to lower costs for
      investor relations activities during 2004. These lower fees were the
      result of the elimination of outside groups.

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

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

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

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


                                       22
<PAGE>

Liquidity And Capital Resources

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

      As of December 31, 2004, we had $(41,600) in cash and cash equivalents and
a working capital deficit of $7,610,574. A significant portion of the cash is
allocated to be used for the Mineral Ridge mine. We anticipate expenditures for
year 2005 for general and administrative expenses to be approximately $370,000
and approximately $1,000,000 for exploration and property holding costs.
Exploration and holding expenditures are expected to include $100,000 for the
Mineral Ridge gold mine, $50,000 for future Nevada land holding costs and
$20,000 for generative exploration. These amounts could increase or decrease
significantly, at any time during the fiscal year, based on exploration results
and decisions about releasing or acquiring additional properties, among other
factors. As of December 31, 2004, the total liability for monthly payments and
work commitments to Enexco was $2,175,200 and $4,000 for the monthly lease
payment. As of December 31, 2004, the total liability owed to F.W. Lewis was
$17,000 for the exploration license, $1,989,250 for the bi-annual stock
distribution and $1,243,000 for the minimum work commitment. Qualifying Enexco
work commitment expenditures can be applied to the F.W. Lewis work commitment.
As of December 23, 2004 both the Enexco and Lewis agreements were terminated.
Please see the additional description contained under the section entitled
"Business - Mining Property and Projects."

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

      In the next twelve months, we anticipate purchasing or leasing certain
capital equipment for the Ashdown and Mineral Ridge mines, which would be
support equipment for the underground operation and process/leach facilities.
These items include underground hauling machines and muckers, front-end loader,
forklift, and a small haul truck. Depending on whether we purchase new or used
equipment, these capital equipment items could cost between $50,000 and
$200,000. We anticipate funding these capital equipment expenditures with funds
we receive from any gold or molybdenum production revenues we may generate or
from debt financing.

      During 2004, our liquidity needs were met from: (i) the issuance of stock
to vendors and employees for services valued at $45,682 (ii) the conversion of
warrants to common stock of $1,195,805 and (iii) the sale of common stock under
the Fusion Capital common stock agreement with net proceeds of $2,410,341. As of
March 15, 2005 the Company had 132,155,654 shares of common stock outstanding,
which the Company has recognized as $21,870,270 of paid in capital including
cash and services. As of December 31, 2004, the Company had current assets of
$248,277 compared to current liabilities of $7,858,851 resulting in a working
capital deficit of $7,610,574. Due to the sale of shares of our common stock, we
were able to generate cash that was used to partially meet our working capital
needs. As a result of the additional issuances of our shares of common stock,
any net income per share would be lower in future periods. We anticipate funding
our working capital needs through funding we receive from loans and any future
revenue we may generate, as well as other possible sales of our common stock. In
the event we fund our working capital needs through the issuance of equity, our
existing and future shareholders will be diluted and any net income per share
would be lower in future periods. [BILL/STEVE: THESE NUMBERS DO NOT TIC TO THE
FLS]

      During the years ended December 31, 2004 and 2003 and the period from
inception through December 31, 2004, we made precious metal sales of $1,560,419,
$98,097 and $248,695, respectively to Itronics Metallurgical, Inc. (Itronics),
Sierra Coin and Johnson Matthey Inc. Itronics acted as a intermediary for the
sale of our precious metals with an outside refinery acquiring the metals based
on their quoted price. Itronics is a company owned by Dr. John W. Whitney, who
is a significant shareholder of Golden Phoenix. Sierra Coin and Johnson Matthey
are independent of the Company.

      Before joint venturing the Borealis Property with Gryphon Gold, we leased
the property from the Borealis Partnership, which consists of three separate
individuals who combined their separate properties to facilitate leasing the
entire mineralized zone covered by the three properties. Dr. Whitney is an
underlying owner of the Borealis project. During the years ended December 31,
2004 and 2003 and the period from inception through December 31, 2004, we have
made payments of $0, and $30,290, respectively to Dr. Whitney for a portion of
its lease obligation on the Borealis property.


                                       23
<PAGE>

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

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

      On November 12, 2002, we entered into a common stock purchase agreement
with Fusion Capital Fund II, LLC, for the issuance and purchase of our common
stock. Under the common stock purchase agreement, Fusion Capital committed to
purchase up to $12.0 million of our common stock over a forty-month period that
commences upon the effectiveness of the registration statement required to be
filed pursuant to the common stock purchase agreement. Upon effectiveness of
such registration statement and subject to certain conditions, Fusion Capital is
to purchase $15,000 of our common stock on each trading day during the term of
the agreement, subject to our right to increase, decrease or suspend purchases
by Fusion Capital. The purchase price of the shares of common stock will be
equal to a price based upon the future market price of the common stock without
any fixed discount to the market price. However, Fusion Capital does not have
the right and is not obligated to purchase our stock in the event that the
purchase price is below $0.10. We used the proceeds from the sale of our common
stock to Fusion Capital for working capital and general corporate purposes. The
terms of the agreement were fulfilled on January 3, 2005.

      During the twelve months ended December 31, 2004, we raised approximately
$45 thousand from the sale of restricted shares of common stock. The funds were
used to reduce outstanding debt and continue improvements, repairs at Mineral
Ridge.

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

      On July 18, 2003, the Company signed a Joint Venture Agreement for its
Borealis gold project with Gryphon Gold Corporation, a Nevada corporation.
Gryphon is not an affiliate of the Company. Under the terms of the agreement
Gryphon Gold has the right to acquire a 50% interest in the property after
incurring qualified expenditures on work programs or making payments to Golden
Phoenix in the aggregate of five million dollars over a four-year period.
Gryphon Gold has the right to acquire an additional 20% by delivering to Golden
Phoenix a feasibility study for mine production based on a mineable reserve of
500,000 ounces of gold or gold equivalent or by incurring an additional four
million dollars in expenditures. Gryphon has paid Golden Phoenix $25,000 in
consideration of a 75-day due diligence period and an additional $100,000 upon
signing the definitive joint venture agreement. On January 31, 2005 the company
closed an agreement to sell its 30% interest in the Borealis Gold Project to
Borealis Mining Company/Gryphon Gold Corporation for a series of cash payments
totaling $1,400,000. The terms of payment are as follows: $400,000 payable on
January 18, 2005, followed by four payments of $250,000, paid in 90-day
increments. In accordance with the terms of the joint venture agreement to date,
the parties agree that Borealis/Gryphon has earned 70% of the overall joint
venture. With the purchase of Golden Phoenix Mineral's 30% interest,
Borealis/Gryphon will own 100% of the project. In return, Gryphon Gold will
guarantee Borealis Mining Company's payment obligation to Golden Phoenix
Minerals by depositing as security 15% of Borealis Mining Company shares into
escrow.

      We are also investigating other potential financing sources and we are in
discussions with potential joint venture partners, including a potential joint
venture in Mineral Ridge.


ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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


ITEM 8. CONTROLS AND PROCEDURES

      Annual Evaluation Of The Company's Disclosure Controls And Internal
Controls. Within the 90 days prior to the date of this Annual Report on Form
10-QSB, the Company evaluated the effectiveness of the design and operation of
its "disclosure controls and procedures" (Disclosure Controls), and its
"internal controls and procedures for financial reporting" (Internal Controls).


                                       24
<PAGE>

This evaluation was done under the supervision and with the participation of
management, including our Chief Executive Officer (CEO)/Chief Financial Officer
(CFO). Rules adopted by the SEC require that in this section of the Annual
Report we present the conclusions of the CEO/CFO about the effectiveness of our
Disclosure Controls and Internal Controls based on and as of the date of the
Controls Evaluation.

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

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

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

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

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


                                       25
<PAGE>

                                    PART III


ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The following are the directors and executive officers of Golden Phoenix
as of April 1, 2005:

    Name                  Age   Position
    ----                  ---   --------

    William Thomas        59    Chief Financial Officer
    Steven D. Craig       57    Chairman, Vice President, Secretary and Director
    David A. Caldwell     44    Director
    Ronald L. Parratt     55    Director

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

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

      Steven D. Craig. Mr. Craig is Chairman of the Board, taking this position
in January 2005 and Vice President, Corporate Secretary and a Director and has
served in this capacity since 1998. He is an experienced economic geologist
specializing in the discovery of ore deposits and building exploration teams to
facilitate discoveries. Mr. Craig has more than 30 years of diversified
exploration experience including, 7 years with Golden Phoenix and the prior 23
years with Kennecott Exploration Company, and its affiliates, as manager of a
gold exploration team headquartered in Reno, Nevada. His international
experience includes gold exploration in New Guinea, South America and Mexico.
Mr. Craig earned his M.S. in Economic Geology from Colorado State University.
His responsibilities at Golden Phoenix include directing of the Company's
exploration program and assisting in administrative functions.

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

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


Directors

      Our Board of Directors consists of five seats. Directors serve for a term
of one year and stand for election at our annual meeting of stockholders.


                                       26
<PAGE>

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


Committees

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

<TABLE>
<CAPTION>
Committee                Chairperson                      Members
---------                -----------                      -------
<S>                      <C>                              <C>
Audit Committee          Steven D. Craig, for the Board   Ronald Parratt, David Caldwell
Compensation Committee   David Caldwell                   Ronald Parratt, David Caldwell
Governance Committee     Ronald Parratt                   Ronald Parratt, David Caldwell
</TABLE>


Compensation Of Directors

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

      Share-based Compensation. The Board of Directors is compensated $500 per
regularly scheduled meeting and $250 for specially called meetings that is paid
in restricted stock valued at the average price for the month that the meeting
occurs. The Board of Directors is also allocated stock options on a yearly basis
that have a five-year expiration limit.


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

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

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


Code of Ethics

      Golden Phoenix has adopted a formal code of ethics that applies to our
principal executive officer and principal accounting officer that was filed as
an exhibit to the Company's Annual Report for the year ended December 31, 2003.


ITEM 10.  EXECUTIVE COMPENSATION

      The following table sets forth information as to the compensation of the
Chief Executive Officer whose compensation for the year ended December 31, 2004
did not exceeded $100,000:

<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         ($)          ($)            (4)            Awards(s)         (#)           ($)        Compensation
---------------- ---------- --------------- ----------     -----------      -----------     ----------    ----------     ---------
       (a)           (b)          (c)          (d)             (e)              (f)            (g)           (h)            (i)
---------------- ---------- --------------- ----------     -----------      -----------     ----------    ----------     ---------
<S>              <C>        <C>             <C>            <C>              <C>             <C>           <C>           <C>
Michael                2004 $     95,000(1)        --             --            500             --             --             --
Fitzsimonds, CEO       2003 $     95,000(2)        --             --             --             --             --             --
</TABLE>

(1)   Of the $95,000 in 2004 annual compensation, $35,000 was accrued at
      December 31, 2003 and remains unpaid.

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


                                       27
<PAGE>

      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>


<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values


Options Exercised:

                                                                            Shares Acquired
Name                                                                        On Exercise(#)           Value Realized
----                                                                        --------------           --------------
<S>                                                                         <C>                      <C>
Michael R. Fitzsimonds                                                      None                     --
</TABLE>


Options Unexercised:

<TABLE>
<CAPTION>
                                                                                             Value of Unexercised
                                               Number of Securities Underlying               In-the-Money Options
                                               Unexercised Options at 12/31/03                    At 12/31/03
                                               -------------------------------                    -----------

Name                                           Exercisable          Unexercised        Exercisable         Unexercised
----                                           -----------          -----------        -----------         -----------
<S>                                              <C>                <C>                 <C>                   <C>
Michael R. Fitzsimonds                           2,818,940          2,818,940           $539,741              $539,741
</TABLE>


Stock Option Plan

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


Employment Agreements

      Effective May 15, 1998, Golden Phoenix entered into an Employment
Agreement with Michael Fitzsimonds. Pursuant to the Employment Agreement, Mr.
Fitzsimonds served as President of Golden Phoenix. The initial term of the
Employment Agreement was for one (1) year and automatically renewed for an
additional one (1) year term on each successive annual anniversary of the
Employment Agreement, unless terminated pursuant to the terms of the Employment
Agreement. Mr. Fitzsimonds' Employment Agreement provides for $95,000 in total
annual salary, of which $60,000 was to be paid in bi-monthly installments, with
the remaining $35,000 deferred. On February 18, 2005, Mr. Michael Fitzsimonds
resigned his positions as Chairman of the Board and as Company President. The
Board of Directors agreed on terms of separation salary and benefits for one
year. At the conclusion of the termination agreement, the Company will begin
payments of deferred salary from prior years activities and on a loan furnished
to the Company during 1997 and 1998.

      Effective May 15, 1998, Golden Phoenix entered into an Employment
Agreement with Steven Craig. Pursuant to the Employment Agreement, Mr. Craig
serves as Vice-President of Corporate Development of Golden Phoenix. The initial
term of the Employment Agreement was for one (1) year and automatically renews


                                       28
<PAGE>

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


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


Principal Shareholders

      The following table presents certain information regarding the beneficial
ownership of all shares of common stock at March 15, 2005 for each executive
officer and director of our Company and for each person known to us who owns
beneficially more than 5% of the outstanding shares of our common stock. The
percentage ownership shown in such table is based upon the 132,155,654 common
shares issued and outstanding at March 15, 2005 and ownership by these persons
of options or warrants exercisable within 60 days of such date. Also included is
beneficial ownership on a fully diluted basis showing all authorized, but
unissued, shares of our common stock at March 15, 2005 as issued and
outstanding. Unless otherwise indicated, each person has sole voting and
investment power over such shares.

<TABLE>
<CAPTION>
                                                                          Exercisable
                                                                           Options/
                                                      Shares owned          Warrants            Percentage
                                                      ------------          --------            ----------
<S>                                                   <C>                 <C>                   <C>

Frank Diegman                                           11,083,333                    0                  8%
1986 E Football Blvd
Pasadena, CA 91107


John W. Whitney                                          1,597,700              379,400                1.5%
P.O. Box 10725
Reno, Nevada

Michael Fitzsimonds                                      2,105,478            2,497,940                3.4%
1675 E. Prater Way
Suite 102
Sparks, NV  89434

Steven D. Craig                                             44,928            2,270,300                1.7%
1675 E. Prater Way
Suite 102
Sparks, NV  89434

David Caldwell                                             143,291              340,000                   *
1675 E. Prater Way
Suite 102
Sparks, NV  89434

Ronald L. Parratt                                           17,566              200,000                   *
1675 E. Prater Way
Suite 102
Sparks, NV  89434
</TABLE>


                                       29
<PAGE>

<TABLE>
<CAPTION>
                                                                          Exercisable
                                                                           Options/
                                                      Shares owned          Warrants            Percentage
                                                      ------------          --------            ----------
<S>                                                   <C>                 <C>                   <C>

William L. Thomas                                           13,333              253,000                   *
1675 E. Prater Way
Suite 102
Sparks, NV  89434

All directors and officers as a group (5 persons)          219,118            3,063,300                2.4%
</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.

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

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

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


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED PARTIES

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

                              Number Of Shares            Value 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
                                ============                  ==========


                                       30
<PAGE>

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

                                                        Total Of Above
                            Number Of Shares      Related Party Transactions
                Year        Of Common Stock            For Mr. Whitney
                ----        ---------------            ---------------

                2001            1,978,795                     $196,066
                2002            2,894,500                     $350,999
                2003               29,400                     $  5,880
                              -----------                   ----------
                Total           4,902,695                     $552,935
                              ===========                   ==========

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

                                 Number Of Shares
                Year              Of Common Stock        Amounts Invested
                ----              ---------------        ----------------
                2001                  3,250,000                $  275,000
                2002                  4,583,333                $  625,000
                2003                  3,000,000                $  300,000
                Total                10,333,333                $1,200,000

ITEM 13.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

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

(a) Audit Fees. For the fiscal years ended 2004 and 2003, the aggregate fees
billed of services rendered for the audits of the annual financial statements
and the review of the financial statements included in the quarterly reports on
Form 10-QSB and the services provided in connection with the statutory and
regulatory filings or engagements for those fiscal years and registration
statements filed with the United States Securities and Exchange Commission was
$172,000.

(b) Audit-Related Fees. For the fiscal years ended December 31, 2004 and 2003,
there were no fees billed for the audit or review of the financial statements
that are not reported above under Audit Fees.

(c) Tax Fees. For the fiscal years ended 2004 and 2003, there were no fees
billed for the compliance services and there was no tax-planning advice
provided.

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


                                       31
<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>

                                       32
<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 November 24, 2004 Golden Phoenix filed a Form 8-K with respect to Item
9 - Appointment of William Thomas as Registrant's Chief Financial Officer

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

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

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


                                       33
<PAGE>

                                   SIGNATURES

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

Date:    April ___, 2005                         GOLDEN PHOENIX MINERALS, INC.

                                                 By:___________________________
                                                       Steven D. Craig
                                                       Chairman of the Board

                                                 By:___________________________
                                                       William Thomas
                                                       Chief Financial Officer

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

<TABLE>
<CAPTION>
SIGNATURE                TITLE                                                   DATE
<S>                      <C>                                                     <C>

-----------------------
William Thomas           Chief Financial Officer                                 April ___, 2005


-----------------------
Steven D. Craig          Chairman, Director, Vice President and Secretary        April ___, 2005


-----------------------
David A. Caldwell        Director                                                April ___, 2005


-----------------------
Ronald L. Parratt        Director                                                April ___, 2005
</TABLE>


                                       34

<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.

                              FINANCIAL STATEMENTS

                                DECEMBER 31, 2004

<PAGE>

                                 C O N T E N T S


Report of Independent Registered Public Accounting Firm              3

Balance Sheet                                                        4

Statements of Operations                                             6

Statements of Stockholders' Equity (Deficit)                         8

Statements of Cash Flows                                            11

Notes to the Financial Statements                                   13


                                       ii
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


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

We have audited the accompanying balance sheet of Golden Phoenix Minerals, Inc.
as of December 31, 2004, and the related statements of operations, stockholders'
equity (deficit), and cash flows for the years ended December 31, 2004 and 2003.
These financial statements are the responsibility of the Company's management.

We conducted our audits in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Golden Phoenix Minerals, Inc.
at December 31, 2004 and the results of its operations and its cash flows for
the years ended December 31, 2004 and 2003, in conformity with United States
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has generated significant losses from operations, has an
accumulated deficit of $25,192,268 and has a working capital deficit of
$7,610,574 at December 31, 2004, which together raises doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.



HJ & Associates, LLC
Salt Lake City, Utah
March 29, 2005


                                       1
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                                  Balance Sheet

                                                         December 31,
                            ASSETS                           2004
                                                        ------------
CURRENT ASSETS
  Prepaid expenses and other current assets             $    117,045
  Precious metals inventory                                  114,803
  Materials and supplies inventory                            16,429
                                                        ------------
    Total Current Assets                                     248,277
                                                        ------------

PROPERTY AND EQUIPMENT (Note 1)
  Land                                                        57,599
  Buildings                                                  116,020
  Vehicles                                                   266,464
  Computer equipment                                         107,104
  Office furniture and equipment                              18,221
  Mining and milling equipment and rolling stock           1,380,427
  Accumulated depreciation                                  (521,828)
                                                        ------------

    Total Property and Equipment, Net                      1,424,007
                                                        ------------

OTHER ASSETS
  Restricted funds - reclamation obligations (Note 4)      1,848,823
  Reclamation asset, net (Note 4)                          1,843,698
  Prepaid bond insurance premiums                            406,912
  Deposits                                                    15,464
                                                        ------------

    Total Other Assets                                     4,114,897
                                                        ------------

    TOTAL ASSETS                                        $  5,787,181
                                                        ============

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


                                       2
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                            Balance Sheet (Continued)

<TABLE>
<CAPTION>
                                                                     December 31,
                                                                         2004
                                                                     ------------
<S>                                                                  <C>
                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
  Bank overdraft                                                     $     41,601
  Accounts payable                                                      1,757,459
  Accrued liabilities (Note 7)                                          4,787,546
  Current portion of long term debt (Note 9)                               89,575
  Capital lease obligations-current portion (Note 8)                       33,929
  Convertible notes payable and related accrued interest (Note 10)        779,521
  Amounts due to related parties (Note 6)                                 369,220
                                                                     ------------
    Total Current Liabilities                                           7,858,851
                                                                     ------------

LONG-TERM LIABILITIES
  Reclamation obligation (Note 4)                                       2,352,235
  Long-term debt (Note 9)                                                  77,029
  Capital lease obligations (Note 8)                                        7,004
                                                                     ------------
    Total Long-Term Liabilities                                         2,436,268
                                                                     ------------

    Total Liabilities                                                  10,295,119
                                                                     ------------

COMMITMENTS AND CONTINGENCIES (NOTE 11)

STOCKHOLDERS' EQUITY (DEFICIT)
  Preferred stock, no par value, 50,000,000 shares authorized, no
    shares issued and outstanding                                              --
  Common stock, no par value, 150,000,000 shares authorized,
    119,721,984 issued and outstanding                                 20,684,330
  Accumulated deficit                                                 (25,192,268)
                                                                     ------------
    Total Stockholders' Equity (Deficit)                               (4,507,938)
                                                                     ------------

    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)             $  5,787,181
                                                                     ============

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


                                       3
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                            Statements of Operations

<TABLE>
<CAPTION>
                                                                                  For the Years Ended
                                                                                     December 31,
                                                                               --------------------------
                                                                                  2004            2003
                                                                               -----------    -----------
REVENUES
<S>                                                                            <C>            <C>
  Sale of precious metals                                                      $ 1,560,419    $    98,097
                                                                               -----------    -----------

EXPENSES
  Cost of mining operations                                                      3,289,569        296,725
  Exploration, mineral property leases, and minimum work commitment expenses     1,483,255        917,363
  Accretion expense                                                                133,507        118,532
  General and administrative                                                     1,862,699      1,099,717
  Investor relations and professional fees                                         228,415        533,218
  Salaries and wages                                                               752,356        357,377
  Depreciation and depletion                                                       170,547         85,517
                                                                               -----------    -----------
    Total Expenses                                                               7,920,348      3,408,449
                                                                               -----------    -----------

LOSS FROM OPERATIONS                                                            (6,359,929)    (3,310,352)
                                                                               -----------    -----------

OTHER INCOME (EXPENSE)
  Interest income                                                                      428         20,955
  Interest expense                                                                (121,451)      (141,969)
    Loss on extinguishment of debt                                                      --             --
    Realized gain on available-for-sale securities                                      --          1,290
    Loss on impairment of investments                                                   --             --
    Sale of interest in mineral property                                                --        125,000
    Precious metal by-product sales net of related costs                                --       (369,266)
    Other income, net                                                               10,944         14,454
                                                                               -----------    -----------
      Total Other Income (Expense)                                                (110,079)      (349,536)
                                                                               -----------    -----------

      LOSS BEFORE INCOME TAXES                                                 $(6,470,008)   $(3,659,888)
                                                                               ===========    ===========
</TABLE>

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


                                       4
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                      Statements of Operations (Continued)

<TABLE>
<CAPTION>
                                                                                      For the Years Ended
                                                                                           December 31,
                                                                                 ------------------------------
                                                                                      2004             2003
                                                                                 -------------    -------------
<S>                                                                              <C>              <C>
LOSS BEFORE INCOME TAXES                                                         $  (6,470,008)   $  (3,659,888)

INCOME TAXES                                                                                --               --
                                                                                 -------------    -------------
LOSS BEFORE CUMULATIVE CHANGE IN ACCOUNTING PRINCIPLE                               (6,470,008)      (3,659,888)

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

NET LOSS                                                                         $  (6,470,008)   $  (2,966,060)
                                                                                 =============    =============

BASIC LOSS PER SHARE

  Basic loss per share                                                           $       (0.06)   $       (0.03)
                                                                                 =============    =============

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING                                      108,928,872       89,435,621
                                                                                 =============    =============
</TABLE>

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


                                       5
<PAGE>

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

<TABLE>
<CAPTION>
                                 Preferred Stock                Common Shares
                            ---------------------------   ---------------------------      Stock
                                                                                        Subscription     Deferred       Accumulated
                               Shares         Amount         Shares         Amount       Receivable        Costs          Deficit
                            ------------   ------------   ------------   ------------   ------------    ------------   ------------
<S>                         <C>            <C>            <C>            <C>            <C>             <C>            <C>
Balance, December 31,
   2002                               --   $         --     76,881,842   $ 13,248,089   $   (490,457)   $   (300,000)  $(15,756,200)
Issuance of common stock
  for services                        --             --        743,674        269,073             --              --             --
Issuance of common stock
  for cash                            --             --      4,911,305      1,760,000             --              --             --
Issuance of common stock
  for exploration and
  property costs                      --             --        253,800         58,827             --              --             --
Issuance of common stock
  for warrants exercised              --             --     14,940,839      1,563,413        (60,000)             --             --
Issuance of common stock
  pursuant to a
  consulting agreement                --             --      1,500,000        525,000             --        (525,000)            --
Issuance of common stock
  for directors fees                  --             --         46,830         16,560             --              --             --
Issuance for common
  stock for software
  maintenance and
  extinguishments of debt             --             --         55,180         22,072             --              --             --
Cash received on stock
  subscription receivable             --             --             --             --        376,430              --             --
                            ------------   ------------   ------------   ------------   ------------    ------------   ------------
Balance Forward                       --   $         --     99,333,470   $ 17,463,034   $   (174,027)   $   (825,000)  $(15,756,200)
                            ------------   ------------   ------------   ------------   ------------    ------------   ------------
</TABLE>

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


                                       6
<PAGE>

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

<TABLE>
<CAPTION>
                                  Preferred Stock             Common Shares
                            --------------------------  --------------------------
                                                                                       Stock
                                                                                     Subscription     Deferred     Accumulated
                               Shares        Amount        Shares        Amount       Receivable       Costs         Deficit
                            ------------  ------------  ------------  ------------   ------------   ------------   ------------
<S>                         <C>           <C>           <C>           <C>            <C>            <C>            <C>
Balance Forward                       --  $         --    99,333,470  $ 17,463,034   $   (174,027)  $   (825,000)  $(15,756,200)
Cash received on stock
  subscriptions receivable            --            --            --            --        174,027             --             --
Amortization of deferred
  costs                               --            --            --            --             --        233,750             --
Stock offering costs                  --            --            --      (175,825)            --             --             --
Net loss for the year
  ended, December 31, 2003            --            --            --            --             --             --     (2,966,060)
                            ------------  ------------  ------------  ------------   ------------   ------------   ------------
Balance, December 31, 2003            --  $         --    99,333,470  $ 17,287,209   $         --   $   (591,250)  $(18,722,260)
                            ------------  ------------  ------------  ------------   ------------   ------------   ------------
</TABLE>

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


                                       7
<PAGE>

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

<TABLE>
<CAPTION>
                              Preferred Stock              Common Shares
                        --------------------------  --------------------------
                                                                                    Stock
                                                                                 Subscription     Deferred     Accumulated
                            Shares       Amount        Shares         Amount      Receivable       Costs         Deficit
                        ------------  ------------  ------------  ------------   ------------  ------------   ------------
<S>                     <C>           <C>           <C>           <C>            <C>           <C>            <C>
Balance December 31,
  2003                            --  $         --    99,333,470  $ 17,287,209   $         --  $   (591,250)  $(18,722,260)
Issuance of common
  stock for warrants
  exercised                       --            --     9,728,884     1,230,805             --            --             --
Issuance of common
  stock for cash                  --            --    10,528,587     2,410,341             --            --             --
Issuance of common
  stock for directors
  fees                            --            --         7,815         2,190             --            --             --
Issuance for common
  stock for services -            --       123,228        38,785            --             --             --
Amortization of
  deferred costs                  --            --            --            --             --       306,250             --
Stock offering costs              --            --            --      (285,000)            --       285,000             --
Net loss for the year
  ended, December 31,
  2004                            --            --            --            --             --            --     (6,470,008)
                        ------------  ------------  ------------  ------------   ------------  ------------   ------------
Balance, December 31,
  2004                            --  $         --   119,721,984  $ 20,684,330   $         --  $         --   $(25,192,268)
                        ============  ============  ============  ============   ============  ============   ============
</TABLE>

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


                                       8
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                            Statements of Cash Flows

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

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property and equipment                                               (582,041)      (100,583)
                                                                               ------------   ------------
  Net Cash Used by Investing Activities                                        $   (582,041)  $   (100,583)
                                                                               ------------   ------------
</TABLE>

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


                                       9
<PAGE>

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

<TABLE>
<CAPTION>
                                                                           For the Years Ended
                                                                                December 31,
                                                                        ---------------------------
                                                                            2004           2003
                                                                        ------------   ------------
<S>                                                                     <C>            <C>
CASH FLOWS FROM FINANCING ACTIVITIES
  Bank Overdraft                                                        $     41,601   $         --
  Principal payments on capital lease obligations                            (36,912)       (45,388)
  Payments on notes payable and long-term debt                               (93,784)       (31,394)
  Proceeds from notes payable and long-term debt                              33,296             --
  Cash receipts on stock subscription receivable                                  --        410,457
  Proceeds from exercise of options and warrants                           1,195,805      1,496,412
  Proceeds from the conversion of preferred stock                                 --             --
  Stock offering costs                                                            --        (20,825)
    Net proceeds from sale of common stock                                 2,410,341      1,760,000
                                                                        ------------   ------------

    Net Cash Provided by Financing Activities                              3,550,347      3,569,262
                                                                        ------------   ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                        (442,262)       413,648

CASH AND CASH EQIVALENTS AT BEGINNING OF YEAR                                442,262         28,614
                                                                        ------------   ------------

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

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash Paid for Interest                                                $      7,848   $     14,948
  Cash Paid for Income Taxes                                            $         --   $         --

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
  Common stock issued for services                                      $     40,975   $    285,634
  Common stock issued for exploration and property costs                $         --   $     80,899
  Debt applied for the exercise of stock options and warrants           $         --   $      7,000
                                                                        $         --   $         --
</TABLE>

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


                                       10
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

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

Organization

Golden Phoenix Minerals, Inc. (the Company) was incorporated under the laws and
of the state of Minnesota on June 2, 1997. The Company is engaged in the
operation, exploration and development of mineral properties in Nevada and other
parts of the western United States. The Company controls its mineral property
interests through ownership, leases, and mining claims. The Company is planning
exploration and development of selected properties with the intent of conducting
precious and base mining and production operations. The Company is continually
investigating new mineral properties for potential exploration, development and
operation. The Company intends to attempt to provide joint venture opportunities
to other large mining companies to work with the Company in these activities. In
mid-2003, the Company began formal operation of its Mineral Ridge property. As
of December 31, 2004, the operations of the Mineral Ridge Mine has been
winter-idled.

Accounting Method

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

Cash and Cash Equivalents

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

Concentrations

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

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

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


                                       11
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

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

Use of Estimates

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

Basic Loss Per Share

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

<TABLE>
<CAPTION>
                                                              For the Years Ended
                                                                  December 31,
                                                         -----------------------------
                                                             2004            2003
                                                         -------------   -------------
<S>                                                      <C>             <C>
      Net loss per share from operations:

      Numerator - net loss                               $  (6,470,008)  $  (2,966,060)

      Denominator - weighted average shares outstanding    108,923,872      89,435,621
                                                         -------------   -------------

      Basic loss per share                               $       (0.06)  $       (0.03)
                                                         =============   =============
</TABLE>

The Company's outstanding common stock options and warrants have been excluded
from the basic loss per share calculation as they are anti-dilative. The Company
has excluded 7,531,153 common stock equivalents at December 31, 2004.

Provision for Taxes

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


                                       12
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

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

Provision for Taxes (Continued)

Net deferred tax assets consist of the following components as of December 31,
2004 and 2003:

                                     2004           2003
                                 ------------   ------------
      Deferred tax assets:
        NOL Carryover            $  7,644,580   $  5,071,800
        Accrued Expenses              233,615        233,700
        Depreciation                  282,095
      Deferred tax liabilities:
        Depreciation                       --        (48,900)
      Valuation allowance          (8,160,290)    (5,256,600)
                                 ------------   ------------
        Net deferred tax asset   $         --   $         --
                                 =============  ============

The income tax provision differs from the amount of income tax determined by
applying the U.S. federal income tax rate of 39% to pretax income from
continuing operations for the years ended December 31, 2004 and 2003 due to the
following:

                                              2004           2003
                                          ------------   ------------

      Book loss                           $ (2,523,300)  $ (1,151,240)
      Accrued compensation                          --         (1,255)
      Depreciation                                  --        (27,520)
      Other                                      1,385          1,120
      Stock for services/options expense        18,775        142,950
      Valuation allowance                    2,503,140      1,035,945
                                          ------------   ------------

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

At December 31, 2004, the Company had net operating loss carry-forwards of
approximately $19,000,000 that may be offset against future taxable income from
the year 2004 through 2024. No tax benefit has been reported in the December 31,
2004 financial statements since the potential tax benefit is offset by a
valuation allowance of the same amount.

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


                                       13
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

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

Inventories

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

Revenue Recognition

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

Property and Equipment

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

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

For the years ended December 31, 2004 and 2003, the Company recorded
depreciation expense of $134,391 and $71,347, respectively related to property
and equipment.

Valuation and Measurement of Equity Instruments

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


                                       14
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

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

Stock Options

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

Property Acquisition and Deferred Mineral Property Development Costs

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

Proven and Probable Ore Reserves

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

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


                                       15
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

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

Proven and Probable Ore Reserves (Continued)

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

Properties Under Development

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

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

Exploration Properties

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


                                       16
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

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

Closure, Reclamation and Remediation Costs

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

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

Property Evaluations

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

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


                                       17
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

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

Impairment of Long-Lived Assets

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

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

New Accounting Pronouncements

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

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


                                       18
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

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

New Accounting Pronouncements (Continued)

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

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

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

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


                                       19
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

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

Preferred Stock

The Company has authorized 50,000,000 shares of no par value non-voting
convertible preferred stock. In 1997, the Company's board of directors
authorized the designation of a class of preferred stock convertible into ten
shares of common stock for each share of preferred stock at a conversion rate of
$0.10 per common share for a period of ten years from June 12, 1997. The Company
did not determine any dividend rights, dividend rates, liquidation preferences,
redemption provisions, and other rights, preferences, privileges and
restrictions. At December 31, 2004, the Company had no shares of preferred stock
issued and outstanding.

Advertising Expense

The Company expenses advertising expenses as incurred in accordance with SOP
93-7. The Company had no advertising expense for the years ended December 31,
2004 and 2003.

NOTE 2 -          GOING CONCERN

The Company's financial statements are prepared using accounting principles
generally accepted in the United States of America applicable to a going concern
which contemplates the realization of assets and liquidation of liabilities in
the normal course of business. However, the Company has experienced losses since
its inception in 1997, and it has not generated revenues sufficient to cover its
operating costs, has an accumulated deficit of $25,192,268 and a working capital
deficit of $7,610,574 at December 31, 2004, which raises doubt about its ability
to continue as a going concern. The accompanying financial statements do not
include any adjustments that might result from the outcome of this uncertainty.


                                       20
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 2 -          GOING CONCERN (Continued)

Management has obtained debt and equity financing to fund the Company's
activities until sufficient revenues can be generated from operations. The
Company has a common stock purchase agreement for a commitment to purchase up to
$12 million of common stock by Fusion Capital, with a related registration
statement filed with the Securities Exchange Commission declared effective in
November 2003. The Company also plans to obtain funds through the exercise of
outstanding stock warrants which would provide additional working capital to
cover the costs of its mineral property and other corporate expenses. The
Company is in the process of attempting to sell additional debt and equity
financing from other sources. The Company intends to continue to seek joint
ventures for its properties with third parties in order to alleviate some of the
costs associated with it's current and future exploration, development and
mining operation activities. Finally during 2003, the Company received the final
permits from the state of Nevada and the Bureau of Land Management for its
Mineral Ridge Mine and the Company posted the required reclamation bond which
allowed the Company to begin operation and recovery of gold at that property. As
of December 31, 2004, the operations at the Mineral Ridge Mine had been winter
idled. The Company expects to place the Ashdown Property into operation during
2005 and anticipate generating revenues from those operations.

NOTE 3 -          MINERAL PROPERTIES

Ashdown Project, Humboldt County, Nevada

The Ashdown gold-molybdenum project is located about 100 miles northwest of
Winnemucca in Humboldt County, Nevada. The property covers about 6-square miles
and is controlled by 101 unpatented mining claims.

The Company has signed two agreements for the Ashdown property; the first
terminated due to the other party's failure to perform. These funds were not
obtained and the agreement terminated. The second agreement is a joint venture
signed directly with Win-Eldrich Mines on February 5, 2004. The terms of the
agreement gives 60% to Golden Phoenix, as manager/operator of project, and 40%
to Win-Eldrich Mines, as owner of the property. Golden Phoenix will earn an
undivided vested 60% interest in the project in either of two ways: by placing
the project into profitable production using a small pilot mill, or spending $5
million toward development of the project. The Company has four years to
complete vesting into the project. Upon signing the agreement, Golden Phoenix
paid Win-Eldrich $50,000, and beginning in three months after the signing, began
paying $5,000 per month until a cash distribution through profitable production
is achieved.


                                       21
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 3 -          MINERAL PROPERTIES (Continued)

Ashdown Project, Humboldt County, Nevada (Continued)

Golden Phoenix has begun an economic evaluation and has started the permitting
process for a pilot mill, designed to run about 100 to 200 tons per day of
high-grade molybdenum ore. The mill equipment and building has been transported
to a site a short distance from the proposed milling site. Molybdenum ore is
currently stockpiled at the mine site and was previously mined for a large
metallurgical test conducted more than twenty years ago. It is estimated that
considerable metal values lie in this stockpile. Golden Phoenix also plans to
expand into a larger operation once production is underway.

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

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

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

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

Mineral Ridge Property

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

Previously existing permits associated with the Mineral Ridge mining operations
had either expired or were under review by the State of Nevada and the Bureau of
Land Management (BLM) with the obtaining of new permits dependent upon the
Company's proposed plan of mining operations. Accordingly, the Mineral Ridge
mine was placed in operation during the spring of 2004. The mine was acquired
with minimum maintenance activities being conducted. Operations have yielded
certain amounts of precious metal product that has been sold resulting in
revenues of $1,560,419 in 2004 and $98,097 in 2003. Costs associated with these
activities totaled $3,289,569 in 2004 and $296,725 in 2003. The proceeds from
the sale of the precious metal have been reflected net of the associated
property maintenance costs as part of other income and expense in the
accompanying financial statement.


                                       22
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 3 - MINERAL PROPERTIES (Continued)

Mineral Ridge Property (Continued)

Based on the Company's proposed mine operating plan, the Company had been in the
process of obtaining new mine operation permits, including a current reclamation
permit. In May 2003, the new operating and reclamation permits were granted,
specifying an increase in the amount of the dedicated reclamation funds to
approximately $2,693,000. Accordingly, the Company obtained a reclamation surety
bond for a corresponding amount (See Note 5). The Company began formal operation
of the Mineral Ridge property in September 2003 and concluded full operations
during the spring of 2004. During December 2004, the company suspended
operations of the Mineral Ridge Mine, and is currently processing the heap leach
pads. Gold and silver continue to be recovered.

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

The Company has determined, with the assistance of independent and qualified
consultants, that the Mineral Ridge mine and related mineral property has
economically feasible proven and probable ore reserves of 2,400,000 tons
averaging 0.076 troy ounces of gold per ton for 181,400 ounces of recoverable
gold at an 81 percent recovery. There were an additional 10,000 ounces estimated
to be on the leach pad. As of December 31, 2004, the operations at the Mineral
Ridge Mine had been winter idled.

Borealis Property

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

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

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


                                       23
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 3 -          MINERAL PROPERTIES (Continued)

Borealis Property (Continued)

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

Contact Copper Property

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

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

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

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

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


                                       24
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 4 - RECLAMATION ASSET AND OBLIGATION

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

In connection with the new reclamation permit obtained in May 2003, the Company
increased its estimated reclamation costs based on the new operating plan for
the Mineral Ridge property. Accordingly, on June 1, 2003, the Company increased
the Mineral Ridge property reclamation asset by $830,724 to $1,894,024 based on
the revised estimate using a credit adjusted risk free interest rate of 8.5%
with a corresponding increase in the related reclamation obligation.
Depreciation of the reclamation asset was recognized for the year ended December
31, 2003 in the amount of $14,170 and $36,156 for the year ended December 31,
2004, using the units-of-production method.

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


                                       25
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 4 -          RECLAMATION ASSET AND OBLIGATION (Continued)

The following is a description of the changes to the Company's asset retirement
obligation from January 1 through December 31, 2004:

      Reclamation obligation (asset retirement obligation) as
        reported at December 31, 2003                          $2,218,728
      Impact of adopting SFAS No. 143                                  --
      Accretion expense:
        Revision in reclamation cost estimates                         --
        Accretion expense - January 1, 2004 through
          December 31, 2004                                       133,507
                                                               ----------

      Reclamation obligation at December 31, 2004              $2,352,235
                                                               ==========

NOTE 5 - RECLAMATION SURETY BOND

During May 2003, The Company entered into an insurance backed financial
assurance program for a surety bond, to secure the $2,693,000 reclamation bond
for the Mineral Ridge property. The program structure includes an insurance
policy that will pay reclamation expenses as they occur. During June 2003, the
Company transferred to the insurance company approximately $1,800,000 of the
reclamation cash deposits that had been presented in previous periods as
restricted cash for the reclamation of the Mineral Ridge property. The Company
has paid an additional $526,505 of premiums on the reclamation bond policy
through December 31, 2004. The Company is obligated to pay $11,311 annually
thereafter which amount will be expensed during the year incurred.

Of the total initial premium of $2,326,505, $1,796,652 represents a Reclamation
Experience Account which funds are directly available to the Company to use for
closure, reclamation and remediation activities once they commence based on the
existing known condition of the Mineral Ridge property. This amount has been
reflected as part of the Restricted Funds-Reclamation Obligations asset in the
accompanying financial statements. The remaining amount consists of an $11,311
annual insurance premium, which is being amortized over a 12-month period and
$518,542, which represents the portion of the premium to be amortized over the
12-year term of the policy. At December 31, 2004, the total current portion of
the prepaid insurance premiums related to this policy totaled $47,925 and the
long-term portion totaling $406,912.

The insurance enabled the Company to acquire the necessary reclamation bond at a
fixed and discounted rate for a term of twelve years. It also allowed the
Company the flexibility to increase its bond in the future to an aggregate limit
of $4 million, should it move into Phase 2 of its operations at Mineral Ridge.
With the filing of the reclamation bond, the Company has begun Phase 1 of its
operating plan to produce gold from the mine. This included the restart of the
leaching of gold from the existing leach pad which has already commenced. As of
December 31, 2004, the operations at the Mineral Ridge Mine had been winter
idled.


                                       26
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 6 - AMOUNTS DUE TO RELATED PARTIES

At various times officers and shareholders of the Company have advanced funds to
pay operating, general and administration costs with the Company making partial
repayments periodically. As of December 31, 2004, a total of $208,962 was
payable to these related parties. Interest has been imputed at a rate of 8% on
amounts outstanding in excess of twelve months. As of December 31, 2004, total
accrued interest of $76,710 has been recognized. These advances along with the
imputed accrued interest are unsecured and due on demand.

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

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

NOTE 7 - ACCRUED LIABILITIES

<TABLE>
<CAPTION>
      <S>                                                             <C>
      Accrued liabilities consisted of the following at
        December 31, 2004:
          Contact Property lease payable (Note 11)                    $  1,764,807
          Contact Property minimum work commitment payable (Note 11)     2,420,643
          Officers accrued salaries and deferred compensation              506,144
          Accrued payroll and related expenses                              92,872
          Accrued interest                                                   3,080
                                                                      ------------

                                                                      $  4,787,546
                                                                      ============
</TABLE>

NOTE 8 - CAPITAL LEASES

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


                                       27
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 8 - CAPITAL LEASES (Continued)

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

<TABLE>
<CAPTION>
<S>                                                                                                              <C>
Capital lease payable to Hewlett Packard Financial Service Co., dated  August 1, 2001, payable at $1,596
per month, including taxes  and fees and interest imputed at 17.18% per annum, maturity August 1, 2005,
secured partially by certain computer equipment                                                                  $   11,361

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                                                                                                   10,455

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                                                                                                            19,117
                                                                                                                 ----------
  Total                                                                                                              40,933
                                                                                                                 ----------

  Less: Current Portion                                                                                              33,929

  Long-term portion                                                                                              $    7,004
                                                                                                                 ==========
</TABLE>

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

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

      2005                                            $36,528
      2006                                              7,173
      2007                                                 --
      2008                                                 --
      2009 and thereafter                                  --
                                                      -------

      Total future minimum lease payments              43,701

      Less: Amount representing interest                2,768
                                                      -------

      Present value of future minimum lease payments  $40,933
                                                      =======

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


                                       28
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 9 - LONG TERM DEBT

<TABLE>
<CAPTION>
<S>                                                                                                              <C>
Long term debt consisted of the following at December 31, 2004:
Note payable to GMAC, dated November 17, 2000, payable at  $672 per month including interest at 3.9% per
annum through  December, 2004, secured by a 2001 GMC Sierra truck.                                               $    2,999

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.                                                    2,999

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.                                                     2,677

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.                                                     2,671

Note payable to Arcadia Financial Ltd., dated August 12, 2003, payable at $468 per month including
interest at 12% per annum through February 2008, secured by a 1999 Chevrolet truck                                   14,702

Note payable to Komatsu Financial, dated December 10, 2003, payable at $1,798 per month through December
2006 with no interest, secured by a Komatsu crawler dozer                                                            44,946

Note payable to an individual, dated August 28, 2001, payable upon demand, including interest at 15% per
annum, unsecured.                                                                                                    37,540

Note payable to GMAC, dated May 11, 2004, payable at $558 per month with no interest, through May 2009,
secured by a 2004 GMC Sierra truck.                                                                                  29,580

Note payable to GMAC, dated May 11, 2004, payable at $538 per month with no interest, through May 2009,
secured by a 2004 GMC Sierra truck.                                                                                  28,490
                                                                                                                 ----------
  Total                                                                                                             166,604

  Less: Current portion of long term debt                                                                            89,575
                                                                                                                 ----------
  Total Long-term debt                                                                                           $   77,029
                                                                                                                 ==========
</TABLE>


                                       29
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 9 - LONG TERM DEBT

Maturities on long term debt are as follows:

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

      2005                   $ 89,575
      2006                     39,309
      2007                     18,316
      2008                     13,926
      2009 and thereafter       5,478
                             --------

      Total                  $166,604
                             ========

NOTE 10 -         CONVERTIBLE NOTES PAYABLE

At December 31, 2004, the Company had twelve convertible notes payable totaling
$455,000. These notes originated in April 2000 and accrue interest at 12% per
annum. Principal and interest are due in April, 2005, five years from the date
of issue. The principal and interest on the notes are convertible into common
stock of the Company at $0.20 to $0.30 per share. As of December 31, 2004,
accrued interest on these convertible notes totaled $324,521.

The Company recognized a beneficial conversion feature expense of $92,666 during
the year ended December 31, 2000 because the notes were convertible immediately.
The beneficial conversion feature expense was calculated by subtracting the
conversion price from the closing market price on the note date multiplied by
the convertible number of shares. If the principal and interest on the notes
were converted as of December 31, 2004, the Company would have been required to
issue 2,993,200 shares of common stock to the holders of the convertible notes.


                                       30
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 11 - COMMITMENTS AND CONTINGENCIES

Leases

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

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

      2005     $ 79,170
      2006       82,110
      2007       84,210
      2008       86,730
      2009       89,250
      2010       91,770
      2011       54,360
               --------

      Total    $567,600
               ========

In addition, during 2004, the Company entered into various operating lease
agreements to rent heavy equipment to be used at the Mineral Ridge Mineral
Property. The equipment operating lease agreements provide for month to month
rental payments totaling $34,192 and provide for the Company to acquire the
equipment on unspecified terms.

Rental expense for all operating leases was $107,445 and $87,915 for the years
ended December 31, 2004 and 2003, respectively.


                                       31
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

Employment Agreements

Effective May 15, 1998, the Company entered into an Employment Agreement with
Michael Fitzsimonds. Pursuant to the Employment Agreement, Mr. Fitzsimonds
served as President of the Company. The initial term of the Employment Agreement
was for one (1) year and automatically renewed for an additional one (1) year
term on each successive annual anniversary of the Employment Agreement, unless
terminated pursuant to the terms of the Employment Agreement. Mr. Fitzsimonds'
Employment Agreement provided for $95,000 in total annual salary, of which
$60,000 is to be paid in bi-monthly installments, with the remaining $35,000
deferred. Mr Fitzsimonds resigned during February of 2005 and the above
agreement is in effect. On February 18, 2005 Mr. Michael Fitzsimonds resigned
his positions as Chairman of the Board and as Company President. The Board of
Directors agreed on terms of separation salary and benefits for one year. At the
conclusion of the termination agreement, the Company will begin payments of
deferred salary from prior years activities and on a loan furnished to the
company during 1997 and 1998.

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


                                       32
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

Mineral Property Lease - F.W. Lewis Contact Property

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

At December 31, 2004, the Company had a total liability of $3,249,450 on the
lease which consists of $1,989,250 of property lease payments, $1,243,200 of
minimum work commitment expenditures and $17,000 in monthly exploration license
payments. Since the minimum work commitment liability associated with the
International Enexco, Ltd. lease exceeds the minimum work commitment liability
pursuant to this the F.W. Lewis agreement and the required expenditures for the
adjoining International Enexco, Ltd property may be applied to Lewis' minimum
work commitment, the F.W. Lewis minimum work commitment liability has not been
recognized as an additional liablility. The lease is cancelable within thirty
days. The lease was cancelled on December 23, 2004.

Mineral Property Lease - International Enexco Limited - Contact Property

The Company also leased mineral property in Elko County, Nevada, known as the
Contact Property as part of a joint venture agreement with International Enexco
(See Note 3). The lease includes monthly payments of $4,000 and minimum work in
qualifying expenses ranging from $550,000-$650,000 for exploration, development,
or mining. At December 31, 2004, the Company has accrued $4,000 of the monthly
lease payments and had a liability totaling $2,175,200 in unsatisfied minimum
work commitments. The lease is cancelable within thirty days and has been
cancelled at year end of 2004. The lease was cancelled on December 23, 2004.

Royalty Agreement - Mary Mining Company, Inc.

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


                                       33
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

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

                                                               Royalty
     Price of Gold per Troy Ounce                          Percentage Rate
     ----------------------------                          ---------------

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

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

Environmental Obligations

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

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


                                       34
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)

Common Stock Purchase Agreement

On November 12, 2002, the Company entered into a common stock purchase agreement
with Fusion Capital Fund II, LLC. Under the common stock purchase agreement,
Fusion Capital committed to purchase up to $12.0 million of our common stock
over a forty-month period that commences when a registration statement filed
with the U.S. Securities and Exchange Commission becomes effective. Pursuant to
the agreement, Fusion Capital is to purchase $15,000 of the Company's common
stock on each trading day during the term of the agreement, subject to the
Company's right to increase, decrease or suspend purchases by Fusion Capital.
The purchase price for each purchase of shares of common stock will be equal to
a price based upon the future market price of the common stock without any fixed
discount to the market price. However, Fusion Capital does not have the right
and is not obligated to purchase the Company's stock in the event that the
purchase price per share of common stock is below $0.10. The Company intends to
use the proceeds from the sale of the common stock to Fusion Capital for working
capital and general corporate purposes. In connection with the common stock
purchase agreement, the Company issued 1,587,302 non-restricted shares of common
stock valued at $300,000 to Fusion Capital as a commitment fee and 250,000
restricted shares of stock valued at $46,250 as reimbursement for certain
expenses incurred by Fusion Capital. Additionally, Fusion Capital paid cash of
$37,000 for 200,000 restricted shares of stock in November 2002. The
registration statement was declared effective in November 2003 and through
December 31, 2004, the Company has issued 17,232,442 shares of common stock for
cash proceeds of $4,563,000 pursuant to the Fusion Capital agreement. As of
January 3, 2005, Fusion Capital had completed buying all of the common stock
available under the common stock purchase agreement.

Litigation

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


                                       35
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 12- RELATED PARTY TRANSACTIONS

The Company leases mineral property known as the Borealis Property from the
Borealis Partnership, which consists of three separate individuals who combined
their separate properties to facilitate leasing the entire mineralized zone
covered by the three properties. Dr. Whitney is an underlying owner of the
Borealis project. During the years ended December 31, 2004 and 2003, it was the
responsibility of Gryphon Gold, as managing partner of the Borealis Joint
Venture, to make all payments (See Note 11).

The Company has a consulting agreement with Whitney & Whitney which has a term
of three years beginning March 1, 1999 and has continued on a month-to-month
basis upon expiration of the initial term. The consulting agreement calls for
Whitney & Whitney to provide metallurgical, geological and plant design services
related to the Company's projects along with assistance related to general
business and financial matters. The agreement also calls for payments the
Company of a minimum of $2,500 per month in restricted shares of common stock.
The agreement may be terminated by either party upon 90 days written notice. The
President of Whitney & Whitney, Inc., Dr. Whitney, is no longer a significant
shareholder of the Company, with less than one percent (-1%) ownership. Under
the terms of the Whitney & Whitney agreement, the Company gave to Whitney a
written 90 notice of termination. The termination is effective March 30, 2005.

NOTE 13 -OUTSTANDING STOCK OPTIONS

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

FASB Statement 123 as amended by FASB Statement 148, "Accounting for Stock-Based
Compensation", requires the Company to provide proforma information regarding
net income and net income per share as if compensation costs for the Company's
stock option plans and other stock awards had been determined in accordance with
the fair value based method prescribed. The Company estimates the fair value of
each stock award at the grant date by using the Black-Scholes option pricing
model with the following weighted average assumptions used for grants during
2004: dividend yield of zero percent; expected volatility of 101% risk-free
interest rate of 3.5 percent and expected life of 5 years.


                                       36
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 13 -OUTSTANDING STOCK OPTIONS (Continued)

Had compensation cost for the Company's stock options granted to officers,
directors, and employees been determined based on the fair value at the grant
date under the accounting provisions of SFAS No. 123 and SFAS 148 the Company
would not have recorded an additional expense. Also under these same provisions,
the Company's net loss would not have been changed by the pro forma amounts
indicated below:

                                                December 31,
                                      -----------------------------
                                          2004             2003
                                      -------------   -------------
      Net loss:
        As reported                   $  (6,470,008)  $  (2,966,060)
        Pro forma                     $  (6,470,008)  $  (3,548,427)

      Basic income (loss) per share:
        As reported                   $       (0.06)  $       (0.03)
        Pro forma                     $       (0.06)  $       (0.04)


<TABLE>
<CAPTION>
                                       Outstanding                               Exercisable
                  ---------------------------------------------------- -----------------------------------
                       Number       Weighted Average
                   Outstanding at       Remaining     Weighted Average Number Exercisable Weighted Average
Exercises Prices      12/31/04      Contractual Life   Exercise Price      at 12/31/04     Exercise price
                  ----------------  ----------------  ----------------  ----------------  ----------------
<S>               <C>               <C>               <C>               <C>               <C>
             0.4            38,267              2.50              0.44            38,267  $           0.44
             0.1         2,465,715               (a)  $           0.15         2,465,715  $           0.15
             0.2         1,701,000              0.25              0.20         1,701,000              0.20
             0.3         2,064,000              2.50              0.37         2,064,000              0.37
                  ----------------  ----------------  ----------------  ----------------  ----------------
$           0.15         6,268,982              2.40  $           0.24         6,268,982  $           0.24
                  ================  ================  ================  ================  ================
</TABLE>

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

During the year ended December 31, 2004, the Company granted 38,267 stock
options to various employees. These options were issued with exercise prices of
$0.44 per share. All of these options vest immediately and have maturity date of
three and one half years.


                                       37
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 14 -         OUTSTANDING STOCK WARRANTS

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

                                                 Weighted
                                                  Average
                                                  Exercise
                                   Shares          Price
                                ------------   ------------
Outstanding, December 31, 2003    12,618,236   $       0.13

  Granted
  Canceled / Expired                (990,333)          0.12
  Exercised                      (10,352,551)          0.13
                                ------------   ------------

Outstanding, December 31, 2004     1,275,352   $       0.24
                                ============   ============

The following summarizes the exercise price per share and expiration date of the
Company's outstanding warrants to purchase common stock at December 31, 2004:

Expiration Date         Price     Number
---------------         -----     ------

           2006          0.20    350,000
           2006          0.25    925,352
                               ---------

                               1,275,352
                               =========

NOTE 15 - SUBSEQUENT EVENTS

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


                                       38
<PAGE>

                          GOLDEN PHOENIX MINERALS, INC.
                        Notes to the Financial Statements
                           December 31, 2004 and 2003

NOTE 15 - SUBSEQUENT EVENTS (Continued)

The Company has entered into two agreements regarding the Ashdown
gold-molybdenum project. That mineral property is located in Humboldt County,
Nevada and consists of 196 unpatented mining claims. The first agreement was
signed on September 19, 2003 and was subsequently terminated prior to December
31, 2004 as the funding terms were not met by the other party to the agreement.
Subsequently, on February 5, 2004, the Company entered into a joint venture
agreement with the owner of the property wherein the Company has the ability to
acquire an undivided vested 60% interest in the project in either of two ways:
by placing the project into profitable production using a small pilot mill, or
spending $5 million toward development of the project. The Company has four
years to complete vesting into the project. Upon signing the agreement Letter,
the Company paid $50,000 to the property owner, and beginning in three months
after the signing, the Company is obligated to pay $5,000 per month until a cash
distribution through profitable production is achieved. A formal contract for
the joint venture had not been signed by the end of 2004 and continues to be
negotiated.

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

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






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