UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C.  20549

                                FORM 10-K/A

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

                  For the fiscal year ended March 31, 2004

                       Commission File Number 1-7375

                            COMMERCE GROUP CORP.
           (Exact name of registrant as specified in its charter)

     WISCONSIN                                              39-6050862
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                          Identification No.)

                           6001 North 91st Street
                      Milwaukee, Wisconsin 53225-1795
            (Address of principal executive offices) (Zip Code)


Registrant's telephone number, including area code: (414) 462-5310

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

                                                      Name of each exchange
Title of each class                                     on which registered
-------------------                                   ---------------------
Common Shares $0.10 par value      Over The Counter Bulletin Board (OTC BB)


Securities registered pursuant to Section 12(g) of the Act: None

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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  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/A or any
amendment to this Form 10-K/A.  [   ]

Indicate by check mark whether the Registrant is an accelerated file (as
defined in Rule 12b-2 of the Exchange Act).

Yes [ ]   No [X]

The aggregate market value of the 15,662,802 shares held by nonaffiliates
of the registrant based on the closing price of the OTC BB on September 30,
2003 was approximately $4,072,329.

At March 31, 2004, there were 22,681,591 shares of the registrant's common
stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of Form 10-K/A is incorporated herein
by reference to the registrant's definitive Proxy Statement relating to its
2004 Annual Meeting of Stockholders, which was filed with the Commission
within 120 days after the end of the registrant's fiscal year.


                            COMMERCE GROUP CORP.
                       2004 FORM 10-K/A ANNUAL REPORT
                  For the Fiscal Year Ended March 31, 2004

                             TABLE OF CONTENTS

                                                                       Page


                                   PART I

Item 1.     Business . . . . . . . . . . . . . . . . . . . . . . . . . .  3
Item 2.     Properties . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 3.     Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . 20
Item 4.     Submission of Matters to a Vote of Security Holders. . . . . 20
Item 4(a).  Executive Officers and Managers of the Company . . . . . . . 21

                                  PART II

Item 5.     Market for the Company's Common Stock and Related
            Stockholders' Matters. . . . . . . . . . . . . . . . . . . . 23
Item 6.     Selected Financial Data. . . . . . . . . . . . . . . . . . . 24
Item 7.     Management's Discussion and Analysis of Financial
            Condition and Results of Operations. . . . . . . . . . . . . 25
Item 7(a).  Quantitative and Qualitative Disclosures About
            Market Risk. . . . . . . . . . . . . . . . . . . . . . . . . 36
Item 8.     Financial Statements and Supplementary Data. . . . . . . . . 38
Item 9.     Changes in and Disagreements with Accountants
            on Accounting and Financial Disclosure . . . . . . . . . . . 66
Item 9(a).  Controls and Procedures. . . . . . . . . . . . . . . . . . . 66

                                  PART III

Item 10.    Directors and Executive Officers of the Registrant . . . . . 66
Item 11.    Executive Compensation . . . . . . . . . . . . . . . . . . . 67
Item 12.    Security Ownership of Certain Beneficial Owners
            and Management . . . . . . . . . . . . . . . . . . . . . . . 67
Item 13.    Certain Relationships and Related Transactions . . . . . . . 67
Item 14.    Principal Accounting Fees and Services . . . . . . . . . . . 67

                                  PART IV

Item 15.    Exhibits, Financial Statement Schedules and
            Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . 67


Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995.

The matters discussed in this report on Form 10-K/A, when not historical
matters, are forward-looking statements that involve a number of risks and
uncertainties that could cause actual results to differ materially from
projected results.  Such factors include, among others, the speculative
nature of mineral exploration, commodity prices, production and reserve
estimates, environmental and governmental regulations, availability of
financing, force majeure events, and other risk factors as described from
time to time in the Company's filings with the Securities and Exchange
Commission.  Many of these factors are beyond the Company's ability to
control or predict.  The Company disclaims any intent or obligation to
update its forward-looking statements, whether as a result of receiving new
information, the occurrence of future events, or otherwise.



                                   PART I

Item 1.  Business
-----------------

General
-------

Commerce Group Corp. ("Commerce," the "Company," and/or the "Registrant")
is the only precious metals company that has produced gold in the past
twenty years in the Republic of El Salvador, Central America.  Furthermore,
since 1968, Commerce has been operative in the exploration, exploitation,
development, and production of precious metals in El Salvador.  Its gold
ore reserves exceed 1.5 million ounces.  Commerce's objectives are to
obtain a sufficient amount of funds to expand its San Cristobal Mill and
Plant and to commence an open-pit, heap-leach operation to produce gold at
a profit.  Commerce simultaneously continues to seek a compatible
acquisition or merger, preferably a business in the precious metals field,
or an endeavor in which synergism will prevail.  This combination  should
enhance the value of Commerce's common shares.

Commerce has been a Wisconsin-chartered corporation since its merger from a
State of Delaware corporation on April 1, 1999, and its corporate
headquarters are based in Milwaukee, Wisconsin.  It was organized in 1962
and its common shares have been publicly traded since 1968.  The Company's
shares have been trading on the Over the Counter Bulletin Board  (OTCBB)
under the Symbol CGCO.OB since May 5, 1999.  The Company presently is in
the business of precious metals mining.

Precious Metal Mining
---------------------

Commerce continues to be engaged in the exploration, exploitation, and
development of gold and silver mines in the Republic of El Salvador,
Central America, through its Commerce/Sanseb Joint Venture ("Joint
Venture").  Commerce holds a nearly 100% interest in the Joint Venture
which is the operator of the San Sebastian Gold Mine ("SSGM").

Commerce's objective is to enhance the value of its shares by realizing
profits, cash flow, and by increasing its gold ore reserves.  This may be
achieved by its continuing  to be a low-cost gold producer, by increasing
production and by expanding its gold ore reserves.  Commerce has an
opportunity to increase its gold ore reserves since on March 3, 2003, it
received the New San Sebastian Gold Mine Exploration Concession/License
hereinafter identified as the "New SSGM."  It is currently exploring this
42-square kilometer area, which includes three formerly-operated mines and
encompasses the SSGM.

Commerce's current goal is to secure sufficient capital to increase its
production of gold to 113,000 ounces per year and to simultaneously develop
additional gold ore reserves.  The Company expects to increase production
by developing an open-pit, heap-leach operation on site at the SSGM and by
acquiring additional mill and related equipment which will increase the
capacity of the processing of its higher grade virgin ore at the San
Cristobal Mill and Plant ("SCMP").  The heap-leach operation should have
the capability of producing (through processing a higher volume of gold
ore) significantly more gold than could be produced at the SCMP, which has
a present capacity of processing  200 tons of gold ore per day.  Commerce
will also continue to explore areas contiguous to the SSGM site, and it
also is planning drill programs at its other potential mining prospects.



                                     3

OPERATIONS
----------

On December 31, 1999, the Joint Venture decided to temporarily suspend its
processing of gold ore at its SCMP until such time as it has adequate funds
to retrofit, restore, rehabilitate, and expand its mill and plant.  A major
overhauling is needed to preserve the integrity of the equipment.  The
initial resumption of producing gold was with the SCMP used equipment the
Joint Venture purchased on February 23, 1993.  Even though the Joint
Venture has maintained this mill and plant on a continuous basis, certain
basic structural components are worn out and need to be replaced,
retrofitted or overhauled.  Another concern at that time was the
substantial decline in the world market price of gold.  Concurrent with the
decision to suspend processing gold ore was the awareness to increase
efficiency by expanding the SCMP facilities from the existing 200-ton-per-
day capacity to a 500-ton-per-day operation.  From March 31, 1995 through
December 31, 1999 when production was suspended, 22,710 ounces of bullion
containing 13,305 ounces of gold and 4,667 ounces of silver were produced
at the SSGM and then sold at the respective current world market price.

There are approximately 1.5 million ounces of proven and estimated gold ore
reserves at the SSGM.   Although the financial statement periods presented
herein reflect that the SSGM is the only one of the Company's mining
properties which has generated revenues, there are strong indications of
commercial gold ore present at the other gold mine sites.

At the current stage of the exploration and development, the Company's
geologists have defined the following gold reserves:
<Table>
<Caption>
                                                                      Ounces
                                        Average               -----------------------
                               Tons       Grade    Contained    Probable        Total
                        ----------- -----------  ----------- -----------  -----------
<S>                     <C>         <C>          <C>         <C>          <C>
San Sebastian Gold Mine
(a) Virgin ore, dump
    waste material and
    tailings             14,404,096       0.081                1,166,732    1,166,732
(b) Stope fill
    (estimated)           1,000,000       0.340                  340,000      340,000
                        ----------- -----------  ----------- -----------  -----------
                         15,404,096                1,166,732     340,000    1,506,732
</Table>
The anticipated recovery for processing via the SCMP will range from 85% to
95% and for heap leaching from 65% to 70%.

As of March 31, 2004, the total investment, including interest and holding
costs, in the El Salvador mining projects by Commerce, three of Commerce's
subsidiaries, Sanseb, and the Joint Venture amounted to $88,242,656.

SSGM Joint Venture Arrangements

Commerce acquired 82 1/2% of the authorized and issued common shares of San
Sebastian Gold Mines, Inc. ("Sanseb"), a Nevada corporation formed on
September 4, 1968.  The balance of Sanseb's shares are held by
approximately 200 unrelated shareholders.  From 1969 forward, Commerce has
provided substantially all of the capital required to develop a mining
operation at the SSGM, to fund exploration, and to acquire and refurbish
the SCMP.

On September 22, 1987, Commerce and Sanseb entered into a joint venture
agreement (named the "Commerce/Sanseb Joint Venture" and sometimes referred
to herein as the "Joint Venture") to formalize the relationship between
Commerce and Sanseb with respect to the mining venture and to divide
profits.  The terms of this agreement authorize Commerce to supervise and
control all of the business affairs of the Joint Venture.  Under this
agreement 90% of the net pre-tax profits of the Joint Venture will  be
distributed  to  Commerce  and  ten  percent  to  Sanseb, and because
Commerce owns 82 1/2% of the authorized and  issued shares of Sanseb,
Commerce in effect has an over 98% interest in the activities of the Joint
Venture.  In order to maintain current accounting between Commerce and
Sanseb, the interest charges to Sanseb on advances made by Commerce are
kept separately.  Therefore, when profits are earned, the interest recorded
will be paid from the cash distributions made to Sanseb.

                                     4
The Joint Venture leases the SSGM from the Company's 52%-owned subsidiary,
Mineral San Sebastian, S.A. de C.V. ("Misanse"), an El Salvadoran
corporation.  On January 14, 2003, the Company entered into an amended and
renewed 20-year lease agreement with Mineral San Sebastian Sociedad Anomina
de Capital Variable (Misanse) pursuant to the approval of the Misanse
shareholders and Misanse directors at a meeting held on January 12, 2003.
The renewed lease is for a period of time commencing and coinciding with
the date that the Company received its Renewed San Sebastian Gold Mine
Exploitation Concession/License, hereinafter identified as the "Renewed
SSGM," from the Ministry of Economy's Director of El Salvador Department of
Hydrocarbons and Mines (DHM).  The lease is automatically extendible for
one or more equal periods.  The Company will pay to Misanse for the rental
of this real estate the sum of five percent of the net sales of the gold
and silver produced from this real estate, however, the payment will not be
less than $343.00 per month.  The Company has the right to assign this
lease without prior notice or permission from Misanse.  This lease is
pledged as collateral for loans made to related parties (Note 7).

The Joint Venture is registered as an operating entity to do business in
the State of Wisconsin, U.S.A. and in the Republic of El Salvador, Central
America.  The Joint Venture Agreement authorizes Commerce to execute
agreements on behalf of the Joint Venture.

ORGANIZATIONAL STRUCTURE AND MINING PROJECTS
--------------------------------------------

The percentage of ownership of the Joint Venture and the Company's
subsidiaries are shown below and are included in the consolidated financial
statements of the Company.  All significant intercompany balances and
transactions have been eliminated.

<Table>
<Caption>

                                                                   Charter/Joint Venture
Included in the Consolidated Statements     % Ownership       Place         Date
---------------------------------------     -----------  ----------   ----------
<S>                                         <C>          <C>          <C>
Homespan Realty Co., Inc. ("Homespan")            100.0   Wisconsin   02/12/1959
Ecomm Group Inc. ("Ecomm")                        100.0   Wisconsin   06/24/1974
San Luis Estates, Inc. ("SLE")                    100.0    Colorado   11/09/1970
San Sebastian Gold Mines, Inc. ("Sanseb")          82.5      Nevada   09/04/1968
Universal Developers, Inc.  ("UDI")               100.0   Wisconsin   09/28/1964
Commerce/Sanseb Joint Venture
("Joint Venture")                                  90.0 Wisconsin &
                                                        El Salvador   09/22/1987

Not included in the Consolidated Statements
-------------------------------------------
Mineral San Sebastian, S.A. de C.V.  ("Misanse")   52.0 El Salvador   05/08/1960

</Table>

Commerce was originally formed as a Wisconsin corporation (September 14,
1962).  It then merged into a Delaware corporation on July 26, 1971 and on
April 1, 1999 it merged back into a Wisconsin corporation.  It owns 52% of
Misanse, an El Salvadoran corporation that was formed on May 8, 1960,
reinstated on January 25, 1975 and reincorporated on October 22, 1993.
Commerce also owns 82 1/2% of the San Sebastian Gold Mines, Inc. (SSGM)
which was chartered as a Nevada corporation on September 4, 1968.  Misanse
previously had a mining concession with the government of El Salvador and
was the owner of the SSGM real estate.  At that time, Misanse had assigned
the mining concession to Commerce Group Corp. and San Sebastian Gold Mines,
Inc., the mining operator formed on September 22, 1987 and known as the
Commerce/Sanseb Joint Venture (Joint Venture).  The Joint Venture operates
the SCMP (the gold processing plant acquired on February 23, 1993) and has
conducted exploration and exploitation at the following El Salvador gold
mines: SSGM (since October 1968), San Felipe-El Potosi (from September 1993
through November 1999) and its extension Capulin (from May 1995 through
November 1999); Modesto (from August 1993 through July 1997); Hormiguero
(from September 1993 through 1998) and Montemayor (from March 1995 through
July 1997).


                                     5

Currently the Joint Venture is performing exploration on the La Lola Mine,
the Santa Lucia Mine and the Tabanco Mine, which are included in the New
SSGM.

The Government of El Salvador has issued the Modesto and San Felipe-El
Potosi mining concessions to others.  Commerce's attorneys have challenged
the legality of the issuance of these concessions.  Commerce owns
properties  believed to be  crucial  to the Modesto Mine and it holds
leases to the key property of the Montemayor Mine.  It plans to apply for
concessions on the property it owns (Modesto) and on the property that it
leases (Montemayor).  It also has a lease agreement with the owners of the
San Felipe-El Potosi Mine.  Although the sub surface rights belong to the
Government of El Salvador, access to the surface rights must be obtained
from the owner.

All of the mines mentioned were formerly in production and did produce gold
and/or silver.  In addition to the channel trenching, test pit holes, and
underground adit openings, the Joint Venture has acquired its own diamond
drilling rig and has contracted with others to explore in depth, the above-
described potential targets.  All of the mining properties have promising
geologic prospects, alterations, and historical records that bear evidence
that all have been mined and produced gold on a commercial basis in the
past.

WORLD GOLD MARKET PRICE, CUSTOMERS AND COMPETITION
--------------------------------------------------

Since the Joint Venture was in operation and produced gold on a curbed
start-up basis, its revenues, profitability and cash flow were greatly
influenced by the world market price of gold.  The gold world market price
is generally influenced by basic supply and demand fundamentals.  It is
unpredictable, volatile, can fluctuate widely and is affected by numerous
factors beyond the Company's control, including, but not limited to,
expectations for inflation, the relative strength of the United States'
dollar in relation to other major currencies, political and economic
conditions, central bank sales or purchases, inflation, production costs in
major gold-producing regions, and other factors.  The supply and demand for
gold can also greatly affect the price of gold.  The Company has not and
does not expect in the foreseeable future to engage in hedging or other
similar transactions to minimize the risk of fluctuations in gold prices or
currencies.  The Company's present and past practice has been to sell its
gold and silver at the world market spot prices.  Gold and silver can be
sold on numerous markets throughout the world, and the market price is
readily ascertainable for such precious metals.  There are many worldwide
refiners and smelters available to refine these precious metals.  Refined
gold and silver can also be sold to a large number of precious metal
dealers on a competitive basis.  The Joint Venture's SCMP operation which
produces dor, was refined by and sold to a refinery located in the United
States.

At this time the Joint Venture believes that, due to its current financial
capacity, it may not be a major gold producer based on the size of larger
existing gold mining companies.  The Company believes no single
gold-producing company could have a large impact to offset either the price
or supply of gold in the world market.  There are many mining entities in
the world producing gold.  Many of these companies have substantially
greater technical and financial resources and larger gold ore reserves than
the Company.  The Company believes that the expertise of the Joint
Venture's experienced key personnel, its ability to train its employees,
its low overhead, its gold ore resources, its accessibility to the mine,
its infrastructure, and its projected low cost of production may allow it
to compete effectively and to produce reasonable profits.


                                     6

The profitability and viability of the Joint Venture is dependent upon, not
only the price of gold in the world market (which can be unstable), but
also upon the political stability of El Salvador and the availability of
adequate funding for either the SCMP operation or the SSGM open-pit,
heap-leaching operation or for the other exploration projects.

As of this date, inflation, currency, interest rate fluctuations, and
political instability have not had a material impact on the Company or its
results of operations.

SEASONALITY
-----------

Seasonality does not have a material impact on the Company's operations,
but the rainy season in El Salvador (May through November) can curtail
production.

ENVIRONMENTAL MATTERS
---------------------

Since the Government of El Salvador (GOES) has established a new Mining Law
effective February 1996, its exploration, development, and production
programs are subject to environmental protection.  The GOES has established
the Office of the El Salvador Ministry of Environment and Natural Resources
(MARN).  In order to comply with mining law, the Company was required to
obtain environmental permits.  On October 15, 2002, an environmental permit
under MARN Resolution 474-2002 was issued for the SCMP.  On October 21,
2002, an environmental permit under MARN Resolution 493-2002 was issued
pertaining to the SSGM.

Environmental regulations add to the cost and time needed to bring new
mines into production and add to operating and closure costs for mines
already in operation.  As the Company places more mines into production,
the costs associated with regulatory compliance can be expected to
increase.  Such costs are a normal cost of doing business in the mining
industry, and may require significant capital and operating expenditures in
the future.  The Company's policy is to adhere to the El Salvador
environmental standards.  The Company cannot accurately predict or estimate
the impact of any future laws or regulations developed in El Salvador that
would affect the Company's operations.

All operations by the Company involving the exploration or the production
of minerals are subject to existing laws and regulations relating to
exploration procedures, safety precautions, employee health and safety, air
quality standards, pollution of water sources, waste materials, odor,
noise, dust and other environmental protection requirements adopted by the
El Salvador governmental authorities.  The Company was required to prepare
and present to such authorities data pertaining to the effect or impact
that any proposed exploration or production of minerals may have upon the
environment.  The requirements imposed by any such authorities may be
costly, time consuming and may delay operations.  Future legislation and
regulations designed to protect the environment, as well as future
interpretations of existing laws and regulations, may require substantial
increases in equipment and operating costs to the Company and delays,
interruptions, or a termination of operations.  The Company cannot
accurately predict or estimate the impact of any such future laws or
regulations, or future interpretations of existing laws and regulations, on
its operations.








                                     7


EL SALVADOR, CENTRAL AMERICA INFORMATION SOURCES
------------------------------------------------

The most current information about El Salvador can be obtained from the
following sources:

1.   General information can be obtained through the Internet from the
     following websites:
          http://www.usinfo.org.sv/newsite/eng/irc/svlinks.html and
          http://www.dirla.com/elsalvador2.html.

2.   The U.S. Embassy in El Salvador can also be contacted at Final
     Boulevard Santa Elena Sur, Urbanizacion Santa Elena, Antiguo
     Cuscatl n, La Libertad, El Salvador, telephone (011) 503-278-4444
     and fax (011) 503-278-6011 or at its website:
     http://elsalvador.usembassy.gov/consular2.

OPERATIONS, OTHER THAN MINING
-----------------------------

Commerce independently and through its partially and wholly-owned
subsidiaries conducted other business activities, which at present, most
are dormant.  Previous operations consisted of the following:   (1) land
acquisition and real estate development through its wholly-owned
subsidiaries, San Luis Estates, Inc. ("SLE") and Universal Developers, Inc.
("UDI"); (2) real estate sales, through its wholly-owned subsidiary,
Homespan Realty Co., Inc. ("Homespan"); and (3) advertising and various
businesses, including Internet-related businesses, through its subsidiary,
Ecomm Group Inc. ("Ecomm").

LAND ACQUISITION, DEVELOPMENT, OWNERSHIP AND REAL ESTATE SALES
--------------------------------------------------------------

During the past years, the Company has substantially diminished its
activities in the business of real estate development conducted principally
through its subsidiaries  San Luis Estates, Inc. ("SLE"), a Colorado
corporation, and Universal Developers, Inc. ("UDI"), a Wisconsin
corporation.  At present, all activities have ceased.

Misanse, the Company's majority-owned subsidiary (52%) owns the SSGM real
estate consisting of approximately 1,470 acres.  This real estate is
located approximately two and one-half miles northwest of the city of Santa
Rosa de Lima, off of the Pan American Highway (a four-lane newly
constructed highway), about 108 miles southeast of the capital city of San
Salvador, El Salvador, and is about 11 miles west from the border of the
Country of Honduras.  It is also about 26 miles from the city of La Union
which has railroad and port facilities.  The Company, on January 14, 2003,
entered into a long term lease arrangement.

The Company also leases approximately 166 acres of real estate on which it
has its SCMP and plans to process ore on this site.  These facilities are
located on the Pan American Highway, near the City of El Divisadero.

The Company owns approximately 63 acres of land on the Modesto Mine site
which is located due north of the city of Paisnal and approximately 19
miles north of San Salvador, the capital city of El Salvador.  This real
estate is pledged as collateral for funds advanced to the Company.  It also
leases approximately 175 acres of land considered to be the main part of
the Montemayor Mine in the Department of Morazan.


                                     8

The Joint Venture entered into a lease agreement with the San Felipe-El
Potosi Cooperative ("Cooperative") of the city of Potosi, El Salvador on
July 6, 1993, to lease the real estate encompassing the San Felipe-El
Potosi Mine for a period of 30 years and with an option to renew the lease
for an additional 25 years, for the purpose of mining and extracting
minerals.

Reference is made to "Item 2.  Properties," for additional information.

Homespan, the local real estate marketing subsidiary of the Company is
presently inactive.  It has no significant activity and is not material to
the Company's operation.

INTERNET BUSINESS AND ADVERTISING
---------------------------------

The Company owns 100% of the outstanding common stock of Ecomm Group Inc.
("Ecomm"), a Wisconsin corporation.  The Company, in order to diversify its
business activities, on January 29, 1999, announced its plans to have its
wholly-owned subsidiary, Ecomm, enter into the web portal business.
Ecomm's strategy was to attempt to acquire or to "roll up" Internet
websites and businesses and consolidate them into a web portal.  The
Company's attempts to acquire Internet-related businesses have not been
successful, therefore, there are no activities.

EMPLOYEES
---------

As of March 31, 2004, the Company and its wholly-owned subsidiaries
employed between 35 and 45 persons, which number may adjust seasonally.
The Company also employs up to four persons, including part-time help, in
the United States.  None of the Company's employees are covered by
collective bargaining agreements.

PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS & GOVERNMENT
CONTRACTS
-------------------------------------------------------------------

Other than concessions, licenses and interests in mining properties granted
by governmental authorities and private landowners, the Company does not
own any material patents, trademarks, licenses, franchises or concessions.

SIGNIFICANT CUSTOMERS
---------------------

The Company presently has no individual significant customers in which the
loss of one or more would have an adverse effect on any segment of its
operations or from whom the Company has received more than ten percent of
its consolidated revenues, except for the sale of gold when the Joint
Venture is in production.  The gold in dor, form is refined and then sold
at the world market spot price to a  refinery located in the United States.

MISCELLANEOUS
-------------

Backlog orders at this time are not significant to either the Company's or
its majority-owned subsidiaries' areas of operations, or at this time is
any portion of their operations subject to renegotiation of profits or
termination of contracts at the election of the United States' Government.



                                     9


At this time, neither the Company nor its majority-owned subsidiaries
conduct any material research and development activities, except as
indicated in this report with respect to the Joint Venture and its mining
exploration, exploitation, and development  programs in the Republic of El
Salvador, Central America.

The Company believes that the federal, state and local provisions
regulating the discharge of materials into the environment should not have
a substantial effect on the capital expenditures, earnings or competitive
position of the Company or any of its majority-owned subsidiaries as the
Company does not have any mining activity in the United States.

Item 2.  Properties

Mining Properties

The table below provides a summary of the most significant mining
properties in which Commerce Group Corp. or the Joint Venture has an
interest.  All  of the properties are located in the Republic of El
Salvador, Central America.  More detailed information regarding each of
these properties is provided in the text that follows.

<Table>
<Caption>

                                                             Amount
                                 Date                      of Funds
                              Interest                      to Make         Date Mine
       Property       Nature       was   Cost of           Property           will be
    Description  of Interest  Acquired  Interest        Operational       Operational
    -----------  -----------  -------- ---------  -----------------  ----------------
<S>              <C>          <C>      <C>        <C>                <C>
1.San Sebastian      Mineral      1968     5% of  This is dependent         It was in
   Mine located   concession           the gross    on the scale of    operation on a
        two and   consisting            precious    production that   curbed product-
 one-half miles      of 100%               metal         management    ion basis from
   northwest of    ownership            proceeds         decides to    03/31/05 until
    the city of       of the                  or      perform.  The      December 31,
     Santa Rosa     precious              $343 a          amount of         1999 when
    de Lima and       metals               month         investment   operations were
        the Pan    extracted           whichever      could be from     suspended due
       American    from this                  is         $5 million    to the need to
       highway.        mine.             higher.   to 100$ million.         overhaul,
                                                                      repair, restore
                                                                           and expand
                                                                             the SCMP
                                                                          facilities.

2.  San Felipe-  El Salvador  07/06/93     5% of       Undetermined     Undetermined.
    El Postosi/        legal           the gross            until a
   Cauplin Mine   counsel is            precious        preliminary
   located near       in the              metals   drilling program
    the city of   process of           proceeds.      is completed;
    Postosi, 18    reviewing                         estimated cost
   miles north- alternatives                            of drilling
    west of the    to obtain                         is $2 million.
    city of San  the mineral
        Miguel.  concession.

3.   Hormiguero    Ownership     09/93       The       Undetermined     Undetermined.
   Mine located       of the             surface            until a
     five miles    tailings.              use of        preliminary
    southest of                             land   drilling program
    the City of                           (rent)      is completed;
  San Cristobal                            is to     estimated cost
 Mill and Plant                               be        of drilling
  near the city                                         negotiated.    is $2 million.
  of Comacaron.                                        Mine surface
                                                  channel trenching
                                                  and adit cleaning
                                                should be completed
                                                       to determine
                                                    drilling costs.

4  Modesto Mine  Application     09/93    On the       Undetermined     Undetermined.
   located near        is to            Company-            until a
    the city of    submitted               owned        preliminary
    Paisnal andfor a mineral             land it           drilling
 about 19 miles   concession             appears         program is
    north of El  on the real               as if         completed;
  Salvador, the estate owned           this will          estimated
  capital city.       by the               be an            cost of
                  Company to                            underground          drilling
                    own 100%               mine,              is $2
                      of the          therefore,           million.
                    precious             no cost
                      metals                 for
                   extracted           interest.
                    from the
                 real estate
                    owned by
                the Company.

5.   Montemayor  Application     07/95        It       Undetermined     Undetermined.
   Mine located     is to be             appears            until a
 about 14 milessubmitted for           that this        preliminary
      northeast    a mineral             will be           drilling
    of SCMP and   concession           an under-         program is
      about six  on the real              ground         completed;
          miles estate owned               mine,          estimated
   northwest of       by the          therefore,            cost of
          SSGM.   Company to             current           drilling
                 own 100% of              leases              is $2
                the precious           will have           million.
                      metals               to be
                   extracted                           renegotiated
                    from the                 and
                   areas the           extended.
              Company leases.

6           San      Mil and Equipment Equipment      To expand the   Curbed product-
      Cristobal  Plant owned  02/23/93 purchased   plant, including     ion commenced
       Mill and     by Joint       and       and         a crushing       March 1995;
  Plant located     Venture.    there- extensive        system to a         expansion
        off the     The real     after    retro-        capacity of        program in
   Pan American       estate     Lease   fitting       500 tons per         progress.
        Highway     is owned  11/12/93   was and  day; an estimated        Operations
    west of the by an agency           continues       sum of up to         suspended
     city of El       of the               to be     $3 million may
    Divisadero.   Government          performed.       be required,       on 12/31/99
                      of El                  The      all dependent         until the
                   Salvador.                           depreciation    whether new or  existing
                    Includes          investment     used equipment      equipment is
                    crushing             through            will be       overhauled,
                   equipment            03/31/04         purchased.         repaired,
                  located at                  is                         restored and
                     the San                            $4,333,128.                   expansion
                   Sebastian
                  Gold Mine.


7.      New San  Exploration     02/03  Undeter-       Undetermined     Undetermined.
      Sebastian   concession               mined              until
      Gold Mine     issue by                  as        exploration
    Exploration          the                           negotiations             at an
    Concession/   Government             will be          estimated
        License        of El           made with         cost of $2
     consisting     Salvador                            the surface        million is
          of 42     for 100%              rights         completed.
         square    ownership             owners.
    kilometers.       of the
                    precious
                     metals.


</Table>

                                     11

THE SAN SEBASTIAN GOLD MINE
---------------------------

GENERAL LOCATION AND ACCESSIBILITY

The SSGM  is situated on a mountainous tract of land consisting of
approximately 1,470 acres of explored and unexplored mining prospects.  The
SSGM is located approximately two and one-half miles off of the Pan
American Highway, northwest of the city of Santa Rosa de Lima in the
Department of La Union, El Salvador. The tract is typical of the numerous
volcanic mountains of the coastal range of southeastern El Salvador.  The
topography is mountainous with elevations ranging from 300 to 1,500 feet
above sea level.  The mountain slopes are steep, the gulches are well
defined, and the drainage is excellent.

There is good roadway access to the SSGM site.  Most of the reconstruction
of the Pan American Highway from two lanes to  four lanes (from the city of
San Salvador to the Honduran border) has been completed.  The city of Santa
Rosa de Lima (approximately three miles from the SSGM)  is one of the
larger cities in the Eastern Zone.    The SSGM is approximately 30 miles
from the city of San Miguel, which is El Salvador's third largest city, and
approximately 108 miles southeast of  El Salvador's capital city, San
Salvador. SSGM is also approximately 26 miles from the city of La Union
which has port and railroad facilities.  Major United States' commercial
airlines provide daily scheduled flights to the Comalapa Airport which is
located on the outskirts of the city of San Salvador.

SSGM RESERVES AND OPERATION

<Table>
<Caption>

GOLD ORE RESERVES (03/31/05)
                                                                  Contained
                                                     Average           Gold
                                         Tons          Grade     Ounces (1)
                                 ------------   ------------   ------------
<S>                              <C>            <C>            <C>
Ore - virgin                       14,404,096          0.081      1,166,732
Stope fill (estimated)              1,000,000          0.340        340,000
                                 ------------   ------------   ------------
   Totals                          15,404,096                     1,506,732

</Table>

(1)  The estimated recoverable ounces of gold by processing: SCMP, 85% to
     95%; heap leach, 65% to 70%.

The tailings, dump material, and stope fill at the SSGM are the by-products
of past mining operations.  The tailings are the residue of higher grade
ore once milled and processed to recover the then economically feasible
fraction of gold present in the material.  Most of the tailings, except the
lower grade, have been processed.  The dump material is actually gold ore
which has been mined in the search for higher grades of gold ore and piled
to the side of past excavations as it was considered at that time to be too
low of a grade of ore to process economically; however, it was reserved for
future processing until the price of gold is at a level to process it
profitably.   The stope fill that is available was in the past considered
to be too low of a grade of ore to process economically, therefore it was
primarily used to fill the voids in the underground workings to accommodate
the extraction of the higher grade of gold ore in the past SSGM mining
activities.  Virgin gold ore, as the term is used in this report, is gold
ore which is on the surface and readily available for processing; it also
includes the undeveloped underground gold ore.


                                     12

Virgin gold ore at the SSGM represents the majority of the material (14.4
million tons, including the dump waste material) in the Company's reserves.
The Company plans to use an open-pit mining method and will  truck the
lower grade gold ore to one or more heap-leaching pads developed at the
SSGM site.  The use of open-pit mining and heap-leaching techniques will
enable the Company to process a higher volume of low grade gold ore than
can be processed at the SCMP.  The Company plans to continue to operate the
SCMP after developing a leach-pad operation at the SSGM, using the facility
to process the higher grade ore it encounters in the course of mining at
the SSGM.  The milling operation at the SCMP is expected to return a higher
rate of gold recovery than can be expected from heap-leaching techniques.

Approximately 960,000 tons of dump material present at the SSGM site, with
grades ranging from 0.082 to 0.178 ounces of gold per ton, have been
combined with the virgin ore reserves.   An analysis of the underground
stope fill material was made by the Company's consulting geologist who has
confirmed that about seven percent of the stope fill had been removed and
processed during the 1973-1978 period.  The grade of the stope fill
averages 0.34 ounces of gold per ton.  It is estimated that there are about
one million tons available for SCMP treatment from the underground
operations.  It is necessary to remove the material which has caved in the
adits to reach the stope fill areas, or it eventually will be encountered
in the open-pit operations.

All residue from the contemplated operations will be stockpiled for
potential future processing dependent upon the price of gold, improvements
in technology, and the depletion of higher grade material.

MISANSE MINING LEASE

The Company (previously through the Joint Venture) leases the SSGM from
Mineral San Sebastian, S.A. de C.V. ("Misanse"), an El Salvadoran
corporation.  The Company owns 52% of the total of Misanse's issued and
outstanding shares.  The balance of the shares are owned by about 100 El
Salvador, Central American and United States' citizens.  (Reference is made
to Note 7 of the financial statements for related party interests.)

SSGM MINING LEASE

On January 14, 2003, the Company entered into an amended and renewed lease
agreement with Mineral San Sebastian Sociedad Anomina de Capital Variable
(Misanse) pursuant to the approval of the Misanse shareholders and
directors at a shareholders' meeting and thereafter at a directors' meeting
both held on January 12, 2003.  The renewed lease is for a period to
coincide with the term of its Renewed SSGM, which it received on August 29,
2003 from the DHM.  The lease is automatically extendible for one or more
equal periods.  The Company will pay to Misanse for the rental of this real
estate the sum of five percent of the net sales of the gold and silver
produced from this real estate, however, the payment will not be less than
$343.00 per month.  The Company has the right to assign this lease without
prior notice or permission from Misanse.  This lease is pledged as
collateral for loans made to related parties (Note 7).

MISANSE MINERAL CONCESSION/LICENSE-GOVERNMENT OF EL SALVADOR

In El Salvador, the rights to minerals below the sub-surface are vested
with the government.  Mineral rights are granted by the government through
concessions or licenses.


                                     13

On January 27, 1987, the Government of El Salvador granted a right to the
SSGM mining concession ("concession") to Misanse which was subject to the
performance of the El Salvador Mining Law requirements.  These rights were
simultaneously assigned to the Joint Venture.

On July 23, 1987, the Government of El Salvador delivered and granted to
Misanse, possession of the mining concession.  This is the right to extract
and export minerals for a term of 25 years (plus a 25-year renewal option)
beginning on the first day of production from the real estate which
encompasses the SSGM owned by Misanse.  Misanse assigned this concession to
the Joint Venture.

Effective February 1996, the Government of El Salvador passed a law which
required mining companies to pay to it three percent of its gross gold sale
receipts and an additional one percent is to be paid to the El Salvador
municipality which has jurisdiction of the mine site.  As of July 2001, a
series of revisions to the El Salvador Mining Law offer to make exploration
more economical.  The principal change is that the fee has been reduced to
two percent of the gross gold receipts.

RENEWED SAN SEBASTIAN GOLD MINE EXPLOITATION CONCESSION/LICENSE (RENEWED
SSGM) - APPROXIMATELY 1.2306 SQUARE KILOMETERS, DEPARTMENT OF LA UNION, EL
SALVADOR, CENTRAL AMERICA

On September 6, 2002, at a meeting held with the El Salvadoran Minister of
Economy and the DHM, it was agreed to submit an application for the Renewed
SSGM for a 30-year term and to  simultaneously cancel the concession
obtained on July 23, 1987.  On September 26, 2002, the Company filed this
application.  On February 28, 2003 (received March 3, 2003) the DHM
admitted to the receipt of the application and the Company proceeded to
file public notices as required by Article 40 of the El Salvadoran Mining
Law and its Reform (MLIR).  On April 16, 2003, the Company's El Salvadoran
legal counsel filed with the DHM notice that it believed that it complied
with the requirements of Article 40, and that there were no objections; and
requested that the DHM make its inspection as required by MLIR Article 42.
An inspection by the DHM was made.  The Company then provided a bond which
was required by the DHM to protect third parties against any damage caused
from the mining operations, and it simultaneously paid the annual surface
tax.  On August 29, 2003 the Office of the Ministry of Economy formally
presented the Company with a twenty-year Renewed SSGM which was dated
August 18, 2003.  This Renewed SSGM replaces the collateral that the same
parties held with the previous concession.

NEW SSGM EXPLORATION CONCESSION/LICENSE (NEW SSGM) - APPROXIMATELY 40.7694
SQUARE KILOMETERS

On October 20, 2002, the Company applied for the New SSGM, which covers an
area of 42 square kilometers and includes approximately 1.2306 square
kilometers of the Renewed SSGM.  The New SSGM is in the jurisdiction of the
City of Santa Rosa de Lima in the Department of La Union and in the Nueva
Esparta in the Department of Morazan, Republic of El Salvador, Central
America.  On February 24, 2003, the DHM issued the New SSGM for a period of
four years starting from the date following the notification of this
resolution which was received on March 3, 2003.  The New SSGM may be
extended for two two-year periods, or for a total of eight years.  Besides
the San Sebastian Gold Mine,  the following three other formerly operative
gold and silver mines included in the New SSGM are being explored:  the La
Lola Mine, the Santa Lucia Mine, and the Tabanco Mine.



                                     14

NUEVA ESPARTA EXPLORATION CONCESSION/LICENSE (NUEVA ESPARTA) - 45 SQUARE
KILOMETERS

On or about October 20, 2002, the Company filed an application with the DHM
for the Nueva Esparta, which consists of 45 square kilometers north and
adjacent to the New SSGM.  This rectangular area is in the Departments of
La Union (east) and Morazan (west) and in the jurisdiction of the City of
Santa Rosa de Lima, El Salvador, Central America.  Included in the Nueva
Esparta are eight other formerly operated gold and silver mines known as:
the Grande Mine, the Las Pinas Mine, the Oro Mine, the Montemayor Mine, the
Banadero Mine, the Carrizal Mine, the La Joya Mine and the Copetillo Mine.
The application was denied and presently is being appealed by the Company.

SSGM CURRENT STATUS

The Company, through its Joint Venture is conducting the following
activities:  It is in the exploration, exploitation, development and
pre-production mining stage which consists of completing its survey,
mapping, site preparation, infrastructure, construction, planning, and the
performance of the auxiliary work needed to resume gold production at the
SSGM site. Presently,  the Company is seeking funding to purchase
equipment, to purchase inventory, and to use for working capital for its
on-site proposed open-pit, heap-leaching operation.  In addition, the
Company is planning its strategies for the New SSGM in anticipation of
increasing its gold ore reserves.

The Company's main objective and plan, through the Joint Venture, is to
operate a moderate tonnage, low-grade, open-pit, heap-leaching operation to
produce gold on its SSGM site.  Dependent on the funding, the grade of ore,
and the tonnage processed, it anticipates producing more than 40,000 ounces
of gold from its open-pit, heap-leaching operation during the first twelve
full operating months and then gradually increasing the annual production
of gold to 113,000 ounces.

PROPOSED SSGM OPEN-PIT, HEAP-LEACHING OPERATION

The Joint Venture has placed the SCMP into a curbed production operation.
It now intends to obtain a sum of $9 million or more  to commence an
open-pit, heap-leaching operation at the SSGM site.  An additional $8
million or more is estimated to be required for the crushing  system,
plant, and mining equipment, if the Joint Venture were unable to lease this
equipment.  After these funds are obtained, the Joint Venture intends to
start processing gold ore from its open pit at a production level of 2,000
tons per day.  During the second year, the production level plans are to
expand production to  3,000 tons per day (the funds for this expansion
could be generated from profits).  An increase to process 4,000 tons of
gold ore per day would take place during the third year and another
expansion to process 6,000 tons per day would take place at the beginning
of the fifth year; all funds for this expansion should be available through
a combination of earned profits, borrowings, equity sales, or other
creative sources. With the anticipated production volume, there is more
than a nine-year supply of gold ore as it is believed that a substantial
amount of gold ore can be proven.


                                     15

The Company's geologists have defined a body of ore consisting of 138
million tons of gold ore at a grade of 0.025 ounces of gold per ton.  This
reflects a potential of 3.4 million ounces of gold (including the existing
1.5 million ounces) and about 400,000 ounces of silver from this planned
open-pit, heap-leaching operation.  It would take about 64 years to process
this body of gold ore at a production capacity of 6,000 tons per day.

SSGM OWNERSHIP OF THE PROPERTY

The San Sebastian Gold Mine real estate consisting of approximately 1,470
acres, is owned by Misanse, a Salvadoran corporation.  The Company owns 52%
of Misanse common shares that are issued and outstanding.

ENVIRONMENTAL MATTERS

The Company's operations are subject to environmental laws and regulations
adopted by various governmental authorities in the jurisdictions in which
the Company operates.  Accordingly, the Company has adopted policies,
practices and procedures in the areas of pollution control, product safety,
occupational health and the production, handling, storage,  use and
disposal of hazardous materials to prevent material environmental or other
damage, and to limit the financial liability which could result from such
events.  However, some risk of environmental or other damage is inherent in
the business of the Company, as it is with other companies engaged in
similar businesses.

The DHM requires environmental permits to be issued in connection with the
application of the Renewed SSGM.  The issuance of these permits is under
the jurisdiction of the El Salvador Ministry of Environment and Natural
Resources Office (MARN).  On October 15, 2002, MARN issued an environmental
permit under Resolution 474-2002 for the SCMP.  On October 20, 2002, MARN
issued an environmental permit under Resolution 493-2002 for the Renewed
SSGM Exploitation area.

Environmental regulations add to the cost and time needed to bring new
mines or mills into production and add to operating and closure costs for
mines already in operation.  As the Company places more mines into
production, the costs associated with regulatory compliance can be expected
to increase.  Such costs are a normal cost of doing business in the mining
industry, and may require significant capital and operating expenditures in
the future.  The Company cannot accurately predict or estimate the impact
of any future laws or regulations developed in El Salvador that would
affect the Company's operations.

All operations by the Company involving the exploration or the production
of minerals are subject to existing laws and regulations relating to
exploration procedures, safety precautions, employee health and safety, air
quality standards, pollution of water sources, waste materials, odor,
noise, dust and other environmental protection requirements adopted by the
El Salvador governmental authorities.  The Company is required to prepare
and present to such authorities data pertaining to the effect or impact
that any proposed exploration or production of minerals may have upon the
environment.  The requirements imposed by any such authorities may be
costly, time consuming and may delay operations.  Future legislation and
regulations designed to protect the environment, as well as future
interpretations of existing laws and regulations, may require substantial
increases in equipment and operating costs to the Company and delays,
interruptions, or a termination of operations.  The Company cannot
accurately predict or estimate the impact of any such future laws or
regulations, or future interpretations of existing laws and regulations, on
its operations.


                                     16

SAN FELIPE-EL POTOSI MINE ("POTOSI") AND ITS EXTENSION THE EL CAPULIN MINE
("EL CAPULIN")
--------------------------------------------------------------------------
POTOSI LOCATION

The Joint Venture had commenced an exploration program on the Potosi
property which is located approximately 18 miles northwest of the city of
San Miguel, the third largest city in the Republic of El Salvador, Central
America, on a paved road 15 miles to the city of Chapalteque and then west
three miles on a gravel road to the city of Potosi.  The historical records
and the exploration work performed by the Company indicate that the
potential of developing a gold mine is above average.

POTOSI LEASE AGREEMENT

The Joint Venture entered into a lease agreement with the San Felipe Potosi
Cooperative ("Cooperative") of the city of Potosi, El Salvador on July 6,
1993, to lease the real estate for a period of 30 years, with an option to
renew the lease for an additional 25 years, for the purpose of mining and
extracting minerals.  Although the Company did not receive a
concession/license from the DHM, it is preserving its rights under the
lease agreement.

HORMIGUERO MINE ("HORMIGUERO")
------------------------------

HORMIGUERO LOCATION

The Hormiguero is located approximately five miles southeast from the SCMP
off of the Pan American Highway in the Departments of San Miguel and
Morazan, Comacaran Jurisdiction, in the Republic of El Salvador, Central
America.  The Joint Venture plans to survey, map, plat, plan and develop an
exploration program.

HORMIGUERO CURRENT STATUS

The Joint Venture is planning to develop an exploration program on this
5,000 acre site.  An application for exploration had been filed on
September 6, 1993 with the DHM.  In order to comply with the El Salvadoran
Mining Law adopted during February 1996, an exploration application was
filed on April 21, 1997.  The Joint Venture has temporarily suspended all
of its activities until such time as it decides to resume them.

MODESTO MINE
------------

MODESTO MINE LOCATION

The Modesto Mine is located due north of the town of El Paisnal,
approximately 19 miles north of the capital city, San Salvador, in the
Republic of El Salvador, Central America.

                                     17


MODESTO MINE PRESENT STATUS

On or about September 2, 1993, the Joint Venture through one of its
employees, filed an application with the DHM to explore the 4,000 hectares
(9,800 acres) of property known as the Modesto Mine.  The application,
together with the consent to explore this area from the property owners
owning more than 25% of total area, has been submitted to the DHM.  Also,
the Joint Venture had submitted its original plan to this governmental
agency on January 24, 1994, outlining its exploration program.    In order
to comply with the current mining regulations adopted by the Government of
El Salvador during February 1996, the Joint Venture filed an exploration
concession application on April 21, 1997.

After completing the necessary surveying, mapping and planning, the Joint
Venture proceeded to clean and trench the surface and adit vein exposure.
Since August 1993, 3,084 metric feet of surface channel trenching (10,177
feet) and 866 meters (2,858 feet) of adit cleaning were completed.  In
addition,  four inclines have been excavated for entry.  A total of 4,027
fire assay samples were performed revealing an average grade of 0.035
ounces per ton.  The Joint Venture suspended its exploration during July
1997 as the Government of El Salvador awarded the concession of the
property to another mining company.  The Company believes that it owns the
key property, therefore permission from the Company will be required before
entry can be made by others.  The Joint Venture, upon advice of legal
counsel, intends to file an application for a concession (license) on the
property it owns.

MONTEMAYOR MINE ("MONTEMAYOR")
-----------------------------

MONTEMAYOR LOCATION/OWNERSHIP

The Joint Venture has obtained leases for more than 175 acres of the
surface rights from a number of property owners which permit the Joint
Venture to enter their property for the purpose of exploring, exploiting
and developing the property  and then, if feasible, to mine and extract
minerals from this property.  The term of this permission is for an
infinite period.  The Company believes that this real estate contains the
"heart" of the mine.  Montemayor is located about 14 miles northeast of the
SCMP, six miles northwest of the SSGM and about two and one-half miles east
of the city of San Francisco Gotera in the Department of Morazan, Republic
of El Salvador.  Historical records evidence that the potential for the
Montemayor to become an exploration and development gold-producing prospect
is good.

On April 22, 1997, a current exploration concession was filed with the El
Salvador Minister of Economy's office in order to comply with the El
Salvadoran Mining Law adopted in February 1996.  During July 1997, the
Minister of Economy awarded the concession to others.  Since the Joint
Venture has leases on the surface of key real estate, it cannot be forced
to allow others to operate a mine on this key part of the property.  The
concession/license for the Montemayor Mine is included in the Nueva Esparta
application filed on October 20, 2002.

SAN CRISTOBAL MILL AND PLANT ("SCMP") RECOVERY AND PROCESSING SYSTEM
--------------------------------------------------------------------

SCMP LOCATION

SCMP is located near the city of El Divisadero (bordering the Pan American
Highway),  and  is approximately 13 miles east of the city of San Miguel,
the third largest city in the Republic of El Salvador, Central America.


                                     18

SCMP LEASE AGREEMENT

Although the Joint Venture owns the mill, plant and related equipment, it
does not own the land and certain buildings.

On November 12, 1993, the Joint Venture entered into an agreement with
Corporacion Salvadorena de Inversiones ("Corsain"), an El Salvadoran
governmental agency, to lease for a period of ten years, approximately 166
acres of land and buildings on which its gold processing mill, plant and
related equipment (the SCMP) are located, and which is approximately 15
miles west of the SSGM site.  The basic annual lease payment was U.S.
$11,500, payable annually in advance, unless otherwise amended, and subject
to an annual increase based on the annual United States' inflation rate.
As agreed, a security deposit of U.S. $11,500 was paid on the same date and
this deposit was subject to increases based on any United States'
inflationary rate adjustments.

On April 26, 2004, a three-year lease, which includes an automatic
additional three-year extension subject to Corsain's review, was executed
by and between Corsain and the Company.  This lease is retroactive to
November 12, 2003 and the monthly lease payments are $1,418.51 plus the El
Salvadoran added value tax.  The lease is subject to an annual increase
based on the U.S. annual inflationary rate adjustments.  The SCMP is
strategically located to process ore from other mining projects.

SCMP MILL AND PLANT PROCESS DESCRIPTION

CURRENT STATUS

The SCMP (a precious metal cyanidation carbon-in-leach system) has a
capacity of processing up to 200 tons of virgin ore per day.  The following
units of operations are required:  crushing, grinding, thickening, agitated
leaching and recovery of precious metals via a carbon-in-leach (CIL)
system.

The SCMP has been designed to process up to 500 tons of virgin ore per day.
The SCMP operations were suspended as of December 31, 1999, as the plant,
equipment, and facilities have been place on a care and maintenance status
until such time as the Company has sufficient funds to complete a major
overhaul in order to place it into operating condition.

SCMP PROJECT OPERATING PLAN

CURRENT AND ANTICIPATED PRODUCTION SCHEDULE

Preproduction development, consisting primarily of expansive road and site
improvements to the mine and mill sites, mill equipment modifications and
the development and hauling of virgin ore has taken place during the past
years.  Initial production was from the SSGM tailings.  Since the SSGM's
tailings' resource is exhausted, virgin gold ore is excavated from the SSGM
surface and hauled to the SCMP site.

The other sources of gold ore from the SSGM to be used at the SCMP
operation will be obtained from the stope fill or higher grade gold ore
after obtaining access via the underground workings or from the surface of
the main ore body.  This gold ore will have to be crushed and pulverized,
which increases the cost, but is expected to yield a 90% or higher
recovery.  The income, dependent on the market price of gold  from the
higher grade and  recovery of gold ore, is expected to be substantially
more than the cost involved, providing that the world gold market price
does not decline to a level of unprofitability.



                                     19

The virgin ore and/or tailings are referred to herein as "gold ore."  The
gold ore from the  SSGM open-pit is loaded onto 20-25 ton dump trucks for
transport to the SCMP.  Trucks then haul the gold ore on the Pan American
Highway approximately 15 miles from the SSGM.  Mine employees are
responsible for the mining activities including the determination of areas
to be excavated, trucking and loading operations, head sampling and sample
analysis.

The gold ore is  received at the SCMP where it is weighed, logged, and
sampled.  Weighing is performed utilizing a conveyor belt scale and/or a
truck scale located on the SCMP site.  The excess gold ore is then unloaded
at the SCMP site and stockpiled in an area which was developed to allow
storage of more than 50,000 tons.

ENVIRONMENTAL MATTERS

Reference is made to San Sebastian Gold Mine "ENVIRONMENTAL MATTERS."  The
same information applies.  On October 15, 2002, an environmental permit
(Resolution 474-2002) was issued to the Company by the Office of the El
Salvadoran Ministry of Environment and Natural Resources.

THE JOINT VENTURE LABORATORIES (LAB)
------------------------------------

The Joint Venture has two laboratories:  one located at the SCMP facilities
and the other on real estate owned by the Company near the SSGM site.  A
total of 78,441 samples of exploration fire assays have been logged through
March 31, 2004.  This total does not include the assays that were performed
for production purposes.

CORPORATE HEADQUARTERS
----------------------

The Company leases approximately 4,032 square feet of office space for its
corporate headquarters on the second floor of the building known as the
General Building located at 6001 North 91st Street, Milwaukee, Wisconsin,
at a monthly rental charge of $2,789 on a month-to-month basis.  The lessor
is General Lumber & Supply Co., Inc. ("General Lumber"), a Wisconsin
corporation.  The Company's President, Edward L. Machulak, owns 55% of the
common stock of General Lumber.  Edward L. Machulak disclaims any interest
in the balance of General Lumber common stock which is owned by two of Mr.
Machulak's brothers, his wife, and a trust for the benefit of his children.
In addition, the Company shares proportionately any increase in real
property taxes and any increase in general fire and extended coverage
insurance on the property.  In lieu of cash payment, the Lessor has agreed
to apply the monthly rental payments owed to the secured open-ended,
on-demand promissory note(s) due to it.

ITEM 3.  LEGAL PROCEEDINGS
--------------------------

The Company is not a party to any material legal proceedings.

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

No matters were brought to a vote of security holders in the last quarter
ended March 31, 2004.










                                     21

ITEM 4(A).  EXECUTIVE OFFICERS AND MANAGERS OF THE COMPANY
----------------------------------------------------------

Listed below are the names, ages and positions of the executive officers
and managers of the Company and their business experience during the past
five or more years.  All officers are elected at the annual meeting of the
directors, which is normally held after the annual shareholders' meeting.

<Table>
<Caption>


               Age as of      Executive Offices Held           Period Served
Name           March 31, 2004 With Company (1)                 In Office (2)
-------------  -------------- -----------------------------    ------------------
<S>            <C>            <C>                              <C>
Edward L.
 Machulak      77             President, Chief Executive,
                              Operating and Financial Officer  9/14/62 to present
                              Treasurer                        06/78  to present

Edward A.
 Machulak
(Son of the
President)     52             Executive Vice President         10/16/92 to present
                              Secretary                        1/12/87 to present
                              Assistant Secretary              4/15/86 to 1/12/87

Luis A. Limay  62             Project and Mine Manager         10/86 to 1995
                              Manager of El Salvador
                              Operations                       03/95 to present

</Table>

(1)  Neither  have there been nor are there any arrangements nor
     understandings between any Executive Officer and any other person
     pursuant to which any Executive Officer was elected as an Executive
     Officer.

(2)  Executive Officers are elected by the Directors for a term expiring at
     the Directors' Annual Meeting and/or hold such positions until their
     successors have been elected and have qualified.

Family Relationships
--------------------

Edward A. Machulak, presently a Director, Member of the Directors'
Executive Committee, Director-Emeritus, Executive Vice President, and
Secretary, is the son of Edward L. Machulak, the Company's Chairman of the
Board of Directors who is also a Member of the Directors' Executive
Committee, and is the President and Treasurer of the Company.    Attorney
John E. Machulak (son of Edward L. Machulak) of the law firm of Machulak,
Robertson & Sodos, S.C. is the legal counsel for the Company.


                                     21

Officers' and Key Management's Experience
-----------------------------------------

The business experience of each of the Directors, Officers, and Key
Management is as follows:

EDWARD L. MACHULAK has been employed by the Company since September 1962.
Mr. Machulak has served as the President, Director, and Chairman of the
Board of Directors of the Company since 1962, Treasurer since 1978, and on
March 11, 1991, he was elected as a Member of the Directors' Executive
Committee.  He has been a member of the Audit Committee since February 9,
1998, the date that the Audit Committee was formed, and has been a
Director-Emeritus since December 5, 1979.

He is a Director and the President or Officer of:  Homespan Realty Co.,
Inc.; San Luis Estates, Inc.; San Sebastian Gold Mines, Inc.; and Universal
Developers, Inc.  He is the Secretary and Treasurer of Ecomm Group Inc.  He
is the authorized representative of the Commerce/Sanseb Joint Venture.  He
is a Director, was the Treasurer, and as of January 12, 2003, was elected
President of  Mineral San Sebastian S.A. de C.V.  Also he is involved in
various capacities with the following companies:  General Lumber & Supply
Co., Inc., Director; Edjo, Ltd., Director and Secretary; and Landpak, Inc.,
Director and Secretary.

EDWARD A. MACHULAK (son of Edward L. Machulak) is a Director and holds the
following Company positions:  Director as of October 28, 1985; a member of
the Directors' Executive Committee as of March 11, 1991; Director-Emeritus
since October 28, 2000; Executive Vice President as of October 16, 1992;
Secretary as of January 12, 1987; and he was the Assistant Secretary from
April 15, 1986 through January 12, 1987.

He is also a Director, Vice President and Secretary of:  Homespan Realty
Co., Inc. and San Luis Estates, Inc.; and is a Director and Secretary of
San Sebastian Gold Mines, Inc.  He has been a Director and Secretary of
Ecomm Group Inc. and was elected President on May 17, 2000.

His business experience is as follows:  Director and Corporate Secretary of
General Lumber & Supply Co., Inc., a building material wholesale and retail
distribution center from April 1, 1970 to November 1983;  Director and
President of Gamco, Inc., a marketing and advertising company, from
November 1983 to present; Director and President of Circular Marketing,
Inc., an advertising and marketing business, from March 1986 to present;
Director and President of MacPak, an Internet developer from September 26,
1996 to present; Director and President of Edjo, Ltd., a company involved
in the development, subdividing and sale of land and real estate from June
7, 1973 to present; Director and President of Landpak, Inc., a corporation
which owns, operates, manages and sells real estate from September 1985 to
present; and he was involved in other corporate real estate ventures and
business activities.

LUIS ALFONSO LIMAY was appointed to the position of Project and Mine
Manager in October 1986 and is responsible for managing the daily affairs
of the Joint Venture.  During March 1995, Mr. Limay was appointed to the
position of Manager of El Salvador operations which supersedes his position
as Project and Mine Manager.   Mr. Limay was employed by Sanseb from 1977
through March 1978 as its chief geologist. He obtained degrees in geology
and engineering from the National University of San Marlos, Lima, Peru, and
the University of Toronto.  He was employed as chief geologist by Rosario
Resources in a Honduran underground mining operation and he held the same
position with Canadian Javelin, a silver mining company that formerly
operated in El Salvador.



                                     22

                                  PART II

ITEM 5.  MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDERS'
MATTERS
-------------------------------------------------------------------------

(A)  PRINCIPAL MARKET AND COMMON STOCK PRICE
--------------------------------------------

Since May 5, 1999, the Company's common shares are being traded on the Over
the Counter Bulletin Board (OTCBB) under the symbol CGCO.OB.  Prior to this
time, the common shares were traded since 1968 on the Over the Counter,
American Stock Exchange, Boston Stock Exchange and on the Nasdaq Smallcap.

The following table reflects the range of high and low trade prices of the
common shares as reported by Nasdaq or the OTCBB for the period ended March
31, 2004 and the highest and lowest trade price during each quarter through
the period ended March 31, 2003.


<Table>
<Caption>

For the period ended                               March 31, 2004           March 31, 2003
                                         High       Low      High       Low
                                        -----     -----     -----     -----
<S>                                    <C>       <C>       <C>       <C>
First quarter ending June 30            $0.30     $0.15     $0.45     $0.08
Second quarter ending September 30      $0.37     $0.21     $0.29     $0.07
Third quarter ending December 31        $0.31     $0.22     $0.31     $0.10
Fourth quarter ending March 31          $0.30     $0.20     $0.42     $0.14
</Table>

(b)  Approximate Number of Holders of Common Shares
---------------------------------------------------

As of March 31, 2004, the common shares were held by approximately 4,000
shareholders; it is estimated that over  95% are United States' residents.

As of March 31, 2004, there were approximately 1,631 holders of record of
the Company's common shares.  The number of shareholders of the Company who
beneficially own shares in nominee or "street name" or through similar
arrangements are estimated by the Company to be approximately 2,369.

As of March 31, 2004, there were issued and outstanding: (a) 22,681,591
shares of common stock; and (b) 210,000 stock options to purchase common
stock.

(c)  Equity Compensation Plans
------------------------------

None.

(d)  Dividend History
---------------------

Subject to the rights of holders of any outstanding series of preferred
shares to receive preferential dividends, and to other applicable
restrictions and limitations, holders of shares of common shares are
entitled to receive dividends if and when declared by the Board of
Directors out of funds legally available.  No dividends were payable during
the last fiscal year ended March 31, 2004.  The declaration of future
dividends will be determined by the Board of Directors in light of the
Company's earnings, cash requirements and other relevant considerations.


                                     23

(e)  Issue of Securities
------------------------

During the fourth quarter ended March 31, 2004, the Company issued 69,629
shares to its Directors in payment for Directors' fees, 31,481 shares for
Officer's compensation; and 13,102 to a Director for services rendered.
These shares were issued pursuant to a Securities and Exchange Commission
Form S-8 Registration.

ITEM 6.  SELECTED FINANCIAL DATA
--------------------------------

The following table sets forth certain financial information with respect
to the Company and is qualified in its entirety by reference to the
historical financial statements and notes thereto of the Company included
in "Item 8.  Financial Statements and Supplementary Data."  The statement
of operations and balance sheet data included in this table for each of the
five years in the fiscal period ended March 31st, were derived from the
audited financial statements and the accompanying notes to those financial
statements.

<Table>
<Caption>
                                                Year Ended March 31
                        -------------------------------------------------------------

                             2004        2003         2002        2001         2000
                        ----------- -----------  ----------- -----------  -----------
<S>                     <C>         <C>          <C>         <C>          <C>
INCOME STATEMENT DATA

Total revenue           $         0 $         0  $        38 $   242,182  $   480,615
                        =========== ===========  =========== ===========  ===========
Income (loss) from
continuing operations   $ (237,790) $ (232,647)  $ (303,466) $ (164,679)  $ (396,232)
                        =========== ===========  =========== ===========  ===========
Income (loss) from
continuing operations
per share:

  Basic and diluted     $   (.0113) $   (.0123)  $   (.0186) $   (.0116)  $   (.0326)
                        =========== ===========  =========== ===========  ===========
Weighted average
  shares - basic/diluted 21,089,812  18,907,958   16,349,170  14,174,662   12,172,867
                        =========== ===========  =========== ===========  ===========
Cash dividends
per common share        $         0 $         0  $         0 $         0  $         0
                        =========== ===========  =========== ===========  ===========
Balance sheet data
  Working capital*1     $   504,882 $   457,538  $   199,573 $   152,906  $   420,963
                        =========== ===========  =========== ===========  ===========
  Total assets          $34,419,381 $32,500,150  $31,390,671 $30,008,216  $29,856,201
                        =========== ===========  =========== ===========  ===========
  Short-term
  obligations*1         $13,981,516 $12,329,096  $11,486,216 $ 9,998,955  $10,231,272
                        =========== ===========  =========== ===========  ===========
  Long-term
  obligations           $         0 $         0  $         0 $         0  $         0
                        =========== ===========  =========== ===========  ===========
  Shareholders' equity  $20,437,865 $20,171,054  $19,904,455 $20,009,261  $19,624,929
                        =========== ===========  =========== ===========  ===========
</Table>

*1   Although the majority of the short-term obligations are due on demand,
some of these obligations have the attributes of being long-term as most of
the debt is due to related parties who have not called for the payment
except for nominal amounts of their short-term loans during the past five
or more years.


                                     24

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

The matters discussed in this report on Form 10-K/A, when not historical
matters, are forward-looking statements that involve a number of risks and
uncertainties that could cause actual results to differ materially from
projected results.  Such factors include, among others, the speculative
nature of mineral exploration, gold and silver prices, production and
reserve estimates, litigation, environmental and government regulations,
general economic conditions, conditions in the financial markets, political
and competitive developments in domestic and foreign areas in which the
Company operates, availability of financing, force majeure events,
technological and operational difficulties encountered in connection with
the Company's mining activities, labor relations, other risk factors as
described from time to time in the Company's filings with the Securities
and Exchange Commission and other matters discussed under this reporting
category.  Many of these factors are beyond the Company's ability to
control or predict.  The Company disclaims any intent or obligation to
update its forward-looking statements, whether as a result of receiving new
information, the occurrence of future events, or otherwise.  Should one or
more of those risks or uncertainties materialize, or should any underlying
assumption prove incorrect, actual results or outcomes may vary materially
from those described herein as anticipated, believed, estimated, expected
or intended.

Management's discussion and analysis ("MD&A") of the financial condition
and results of operations of  the Company should be read in conjunction
with the audited consolidated financial statements and the notes thereto.
The Company prepares and files its consolidated financial statements and
MD&A in United States ("U.S.") dollars and in accordance with U.S.
generally accepted accounting principles ("GAAP").

The following discussion provides information on the results of operations
for each of the three years ended March 31, 2004, 2003 and 2002 and the
financial condition, liquidity and capital resources for March 31, 2004 and
2003.  The financial statements of the Company and the notes thereto
contain detailed information that should be referred to in conjunction with
this discussion.

                                     25


CRITICAL ACCOUNTING POLICIES AND ESTIMATES
------------------------------------------

The ensuing discussion and analysis of financial condition and results of
operations are based on the Company's consolidated financial statements,
prepared in accordance with accounting principles generally accepted in the
United States of America and contained within this report on S.E.C. Form
10-K/A.  Certain amounts included in or affecting the Company's financial
statements and related disclosures must be estimated, requiring that
certain assumptions be made with respect to values or conditions which
cannot be made with certainty at the time the financial statements are
prepared.  Therefore, the reported amounts of the Company's assets and
liabilities, revenues and expenses, and associated disclosures with respect
to contingent assets and obligations are necessarily affected by these
estimates.  The more significant areas requiring the use of management
estimates and assumptions relate to mineral reserves that are the basis for
future cash flow estimates and units-of-production amortization
determination; recoverability and timing of gold production from the heap-
leaching process; environmental, reclamation and closure obligations; asset
impairments (including estimates of future cash flows); useful lives and
residual values of intangible assets; fair value of financial instruments;
valuation allowances for deferred tax assets; and contingencies and
litigation.  The Company bases its estimates on historical experience and
on various other assumptions that are believed to be reasonable under the
circumstances.  Actual results may differ from these estimates under
different assumptions or conditions.

A critical accounting policy is one that is important to the portrayal of
the Company's financial condition and results, and requires the Company to
make difficult subjective and/or complex judgments.  Critical accounting
policies cover accounting matters that are inherently uncertain because the
future resolution of such matters is unknown.  The Company believes the
following accounting policies are critical policies; accounting for its
gold ore reserves, environmental liabilities, income taxes and asset
retirement obligations.

The Company believes the following significant assumptions and estimates
affect its more critical practices and accounting policies used in the
preparation of its consolidated financial statements.

The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company to make estimates and
assumptions for the reporting period and as of the financial statement
date.  These estimates and assumptions affect the reported  amounts of
assets and liabilities, the disclosure of contingent liabilities and the
reported amounts of revenues and expenses.  Actual results could differ
from those amounts.

Gold ore reserves include proved reserves that represent estimated
quantities of gold in which geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known
reserves under existing economic and operating conditions.  The gold ore
reserves are based on estimates prepared by geology consultants and are
used to calculate depreciation, depletion and amortization (DD&A) and
determine if any potential impairment exists related to the recorded value
of the Company's gold ore reserves.



                                     27


The Company reviews, on an as needed basis, its estimates of costs of
compliance with environmental laws and the cleanup of various sites,
including sites in which governmental agencies have designated the Company
as a potentially responsible party.  When it is probable that obligations
have been incurred and where a minimum cost or a reasonable estimate of the
actual costs of compliance or remediation can be determined, the applicable
amount is accrued.  Actual costs can differ from estimates due to changes
in laws and regulations, discovery and analysis of site conditions and
changes in technology.

The Company makes certain estimates, which may include various tax planning
strategies, in determining taxable income, the timing of deductions and the
utilization of tax attributes, which can differ from estimates due to
changes in laws and regulations, discovery and analysis of site conditions
and changes in technology.

Management is required to make judgments based on historical experience and
future expectations on the future abandonment cost, net of salvage value,
of its mining properties and equipment.  The Company reviews its estimate
of the future obligation periodically and will accrue the estimated
obligation based on the SFAS No. 143 "Account for Asset Retirement
Obligations."

From time to time, the Company estimates its ore reserves when it is in
production.  There are a number of uncertainties inherent in estimating
quantities of reserves, including many factors beyond the control of the
Company.  Ore reserve estimates are based upon engineering evaluations of
assay values derived from samplings of drill holes and other openings.
Additionally, declines in the market price of gold may render certain
reserves containing relatively lower grades of mineralization uneconomic to
mine.  Further, availability of permits, changes in operating and capital
costs, and other factors could materially and adversely affect ore
reserves.  The Company uses its ore reserve estimates in determining the
unit basis for mine depreciation and closure rates, as well as in
evaluating mine asset impairments.  Changes in ore reserve estimates could
significantly affect these items.

The Company will assess its producing properties and undeveloped mineral
claims and leases for impairment when events or changes in circumstances
warrant and at least annually.  For producing properties and equipment, an
impairment is recognized when the estimated future cash flows (undiscounted
and without interest) expected to result in the use of the asset are less
than the carrying amount of that asset.  Measurement of the impairment loss
is based on discounted cash flows.  Undeveloped mineral claims and leases
are measured on a fair value basis.  Fair value with respect to such
mineral interest, pursuant to Statement of Financial Accounting Standards
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
effective January 1, 2002, would generally be assessed with reference to
comparable property sales transactions in the market place.

The Company adopted Statement of Financial Accounting Standards No. 128
(SFAS128), Earnings per Share in prior years.  SFAS128's objective is to
simplify the computation of earnings per share (EPS) and to make the U.S.
standard more compatible with that of other countries and the International
Accounting Standards Committee.  SFAS128 supersedes APB Opinion 15,
replacing the presentation of "primary" and "fully diluted" EPS with
"basic" and "diluted" EPS.  Basic EPS is computed by dividing income
available to common shareholders (net income less any dividends declared on
preferred stock and any dividends accumulated on cumulative preferred
stock) by the weighted average number of common shares outstanding.
Diluted EPS requires an adjustment to the denominator to include the number
of additional common shares that would have been outstanding if dilutive
potential common shares had been issued.  The numerator is adjusted to add
back any convertible preferred dividends and the after-tax amount of
interest recognized with any convertible debt.



                                     27


The financial statements for the fiscal years ended March 31, 2004, 2003
and prior years reflect and include Commerce Group Corp.'s subsidiaries and
the Commerce Group Corp./Sanseb Joint Venture (Joint Venture) on a
consolidated basis.  Previously, the Company reported the investment in the
Joint Venture as advances to the Joint Venture and the Company's advances
included the interest earned on these advances in anticipation of the
interest being reimbursed.  Now these advances are restated and combined
with the Company's Consolidated Financial Statements.  Although the
elimination of interest income reduces the retained earnings, it does not
eliminate the interest charged by and earned by the Company which is due
and payable to it and which is maintained additionally with a separate
accounting.  At such time when the profits from the gold mining operation
are distributed, the interest earned on these advances will be paid first
to the Company pursuant to an agreement entered into by the joint venture
parties.

For the fiscal year ended March 31, 2004, the Company was able to segregate
the disbursements to the Joint Venture to identify the category to be
charged.  Reference is made to Note 2 in the financial statements for
additional details.

GOLD ORE RESERVES (03/31/04)

The Company's geologists have defined the following San Sebastian Gold Mine
gold ore reserves:


<Table>
<Caption>
                               Tons       Average Grade              Ounces
                        -----------       -------------       -------------
<S>                     <C>               <C>                 <C>
Virgin ore               14,404,096               0.081           1,166,732
Stope fill estimated      1,000,000               0.340             340,000
                        -----------       -------------       -------------
  Totals                 15,404,096                               1,506,732
</Table>

The estimated recoverable ounces by processing through the San Cristobal
Mill and Plant ranges from 85% to 95%; the recovery of gold from the heap-
leaching operations should range from 60% to 70%.

PRECIOUS METAL MINING STRATEGY

The Joint Venture has produced gold from March 31, 1995 through December
31, 1999.  Its San Cristobal Mill and Plant (SCMP) consisted primarily of
used equipment that had been installed at its leased site by a previous
mining company.  The used processing equipment was acquired by the Joint
Venture on February 23, 1993, and the SCMP operations were officially
suspended as of March 31, 2000.  During this period, the price of gold
suffered a severe decline.

Although while in operation the Company has on a continuous basis
retrofitted, modified, and restored the equipment, it presently lacks
sufficient funds to perform a major overhaul and to expand the SCMP
facilities.


                                     28

The Company's management has temporarily suspended its gold processing
until such time as it has adequate funds for the retrofitting,
rehabilitation, restoration, overhauling, and most importantly for the
expansion of the SCMP facilities.  During the last two fiscal periods, the
price of gold has increased to a level to place the SCMP into a viable
position.

The Company has a number of non-exclusive independent consulting agreements
for the purpose of raising the sum of up to U.S. $20 million.  The funds
are to be used to purchase and install equipment, perform site development,
working capital for the SSGM open-pit, heap-leaching operation, and for the
expansion of the Joint Venture's SCMP.

Through December  1999, the Joint Venture produced gold on a curbed basis
primarily from processing the tailings and from the virgin ore it was
excavating from its SSGM open pit.  The gold was processed at its SCMP
facility which is located approximately 15 miles from the SSGM site.  It is
contemplating the installation  of a pilot open-pit, heap-leaching gold-
processing system on the SSGM site.  The cone crushing system is being
erected at this site.  It also is continuing its SSGM site preparation, the
expansion of its exploration and exploitation targets, and the enlargement
and development of its gold ore reserves.  The Montemayor Mine and the
Modesto Mine have been placed on a standby basis pending the advice from
its legal counsel relative to the filing of applications for concessions
(licenses) on the properties it owns or on which it holds leases. All of
the mining properties are located in the Republic of El Salvador, Central
America.

The Joint Venture will continue its attempts to commence its production of
gold.  Its objectives are to have an expanded complementary operation while
continuing its endeavor to obtain sufficient funds for the SSGM open-pit,
heap-leach operation. The Company's main objective and plan, through the
Joint Venture, is to operate at the SSGM site, a moderate tonnage,
low-grade, open-pit, heap-leaching, gold-producing mine.  It intends to
commence this gold-mining operation as soon as adequate funding is in place
and the gold price stabilizes at the current level.  Dependent on the grade
of gold ore processed and the funds it is able to obtain, it then
anticipates producing annually approximately 10,000 ounces of gold from the
SCMP operation and eventually up to 113,000 ounces of gold from its SSGM
open-pit, heap-leaching operation.  The Joint Venture continues on a
limited basis to conduct an exploration program to develop additional gold
ore reserves at the SSGM.  Since it has the New SSGM, it is exploring the
Tabanco Mine and the Santa Lucia Mine, and plans to commence production of
gold and silver after funds are available.

The Joint Venture produced gold from March 1995 through December 1999 at
the SCMP through a start-up or preliminary operation, which was a
forerunner of its greater goals.  The Company's revenues, profitability and
cash flow are greatly influenced by the price of gold.  Gold prices
fluctuate widely and are affected by numerous factors which will be beyond
the Company's control, such as, expectations for inflation, the strength of
the U.S. dollar, overproduction of gold, global and regional demand, acts
of terrorism, or political and economic conditions, or for that matter,
many other reasons.  The combined effect of these and other factors is
difficult; perhaps impossible to predict.  Should the market price of gold
fall below the Company's production costs and remain at such level for any
sustained period, the Company could experience losses.


                                     29

The Company believes that neither it, nor any other competitor, has a
material effect on the precious metal markets and that the price it will
receive for its production is dependent upon world market conditions over
which it has no control.

RESULTS OF OPERATION FOR THE FISCAL YEAR ENDED MARCH  31, 2004 COMPARED TO
MARCH 31, 2003
--------------------------------------------------------------------------

There are no revenues as the Company has suspended its gold production
until it is able to procure the funds it requires to rehabilitate,
retrofit, overhaul, and expand its SCMP and/or when it has funds to
commence an open-pit, heap-leach operation at the SSGM site.  The price of
gold has stabilized at a price level that could assure a profitable
operation.  The Company recorded a net loss of $237,790 or $.0113 cents per
share.  This compares to a net loss of $232,647 or $.0123 cents per share
for the fiscal year ended March 31, 2003.

There was no current or deferred provision for income taxes during the
fiscal period ended March 31, 2004 or 2003.  Additionally, even though the
Company has an operating tax loss carryforward, the Company has previously
recorded a net deferred tax asset due to an assessment of the "more likely
than not" realization criteria required by the Statement of Financial
Accounting Standards No. 109, Accounting for Taxes.

Inflation did not have a material impact on operations in the fiscal years
ended March 31, 2004 or 2003.  The Company does not anticipate that
inflation will have a material impact on continuing operations during the
next fiscal year.

Interest expense in the sum of $1,433,298 was recorded by the Joint Venture
during this fiscal period compared to $1,212,976 for the same period in
2003, and it was eliminated with the interest income earned from the Joint
Venture.

Almost all of the costs and expenses incurred by the Company are allocated
and charged to the Joint Venture. The Joint Venture capitalizes these costs
and expenses and will continue to do so until such time when it is in full
production.  At the time production commences, these capitalized costs will
be charged as an expense based on a per unit basis.  If the prospect of
gold production becomes unlikely, all of these costs will be written off in
the year that this occurs.

RESULTS OF OPERATION FOR THE FISCAL YEAR ENDED MARCH  31, 2003 COMPARED TO
MARCH 31, 2002
--------------------------------------------------------------------------

There are no revenues as the Company has suspended its gold production
until it is able to procure the funds it requires to rehabilitate,
retrofit, overhaul, and expand its SCMP, when it has funds to commence an
open-pit, heap-leach operation at the SSGM site, and when the price of gold
stabilizes at a price level to assure a profitable operation.  The Company
recorded a net loss of $232,647 or $.0123 cents per share.  This compares
to a net loss of $303,465 or a loss of  $.0186 cents per share for the
fiscal year ended March 31, 2002.

There was no current or deferred provision for income taxes during the
fiscal period ended March 31, 2003 or 2002.  Additionally, even though the
Company has an operating tax loss carryforward, the Company has previously
recorded a net deferred tax asset due to an assessment of the "more likely
than not" realization criteria required by the Statement of Financial
Accounting Standards No. 109, Accounting for Taxes.



                                     30

Inflation did not have a material impact on operations in the fiscal years
ended March 31, 2003 or 2002.  The Company does not anticipate that
inflation will have a material impact on continuing operations during the
next fiscal year.

Interest expense in the sum of $1,212,976 was recorded by the Joint Venture
during this fiscal period compared to $1,026,940 for the same period in
2002, and it was eliminated with the interest income earned from the Joint
Venture.

Almost all of the costs and expenses incurred by the Company are allocated
and charged to the Joint Venture. The Joint Venture capitalizes these costs
and expenses and will continue to do so until such time when it is in full
production.  At the time production commences, these capitalized costs will
be charged as an expense based on a per unit basis.  If the prospect of
gold production becomes unlikely, all of these costs will be written off in
the year that this occurs.

FINANCING ACTIVITIES, LIQUIDITY AND CAPITAL RESOURCES
-----------------------------------------------------

As of December 31, 1999, the Joint Venture suspended its SCMP operations
until such time as it has adequate funding to repair, retrofit, overhaul
and expand the mill to process its gold ore, and at such time that the
price of gold will stabilize at a higher price.  After almost five years of
24-hour-per-day operation with used equipment, the plant requires a major
overhaul.  At that time the low price of gold did not provide an adequate
cash reserve for these needs. Additional equipment has to be purchased,
delivered and installed.

The Company will endeavor to commence an open-pit, heap-leaching operation
at the SSGM as there is a substantial amount of gold ore that grades less
than 0.04 ounces per ton.  The Company's engineers had determined that a
2,000 ton-per-day open-pit, heap-leach, start-up operation may produce
1,280 ounces of gold per month. It is necessary to raise adequate funds
from outside sources for this operation; the amount required is dependent
on the targeted daily volume of production.

The Company  estimates that it will need up to U.S. $17 million to start a
2,000 ton-per-day open-pit, heap-leaching operation.  Eventually the
production capacity would be increased in stages to 6,000 tons per day so
that annual production could be 113,000 ounces of gold at the SSGM.  The
use of the $17,000,000 proceeds is as follows: $8,250,000 for mining
equipment and the completion of erecting a crushing system; $3,783,548 for
the processing equipment and site and infrastructure costs; and a sum of
$4,966,452 is to be used for working capital.  The once depressed price of
gold has substantially increased during the last two years.  The Company's
incredibly low common share market price is a  major deterrent in raising
cash for the Company's programs.

The Company continues to be cognizant of its cash liquidity until it is
able to produce adequate profits from its SSGM gold production.   It will
attempt to obtain sufficient funds to assist the Joint Venture in placing
the SSGM into production as the anticipated profits from the existing SCMP
operation (unless accumulated over a period of time) appear insufficient to
meet the SSGM capital  and the other mining exploration requirements.  In
order to continue obtaining funds to conduct the Joint Venture's
exploration, exploitation, development, expansion programs, and the
production of gold from the SSGM  open-pit, heap-leaching operation, it is
necessary for the Company to obtain funds from other sources.  The Company
may have to borrow funds by issuing open-ended, secured, on-demand or
unsecured promissory notes, by selling its shares to its directors,
officers and other interested accredited investors, or by entering into a
joint venture, merging, or developing an acceptable form of a business
combination with other companies.



                                     31

During the past,  the Joint Venture was engaged in  exploration,
exploitation and development programs designed to increase its gold ore
reserves.  The prospects of expanding the gold reserves are positive.  The
Company believes that the past invested funds significantly contributed to
the value of the SSGM and  to the value of its other mining prospects as
the results of the exploratory efforts evidence the potential for a
substantial increase of gold ore reserves.  The Company was unable to
obtain sufficient funds during this fiscal year to complete the
modification and expansion of the SCMP or for its open-pit, heap-leach
operation.  However, the Company did invest funds during this fiscal
period, which were used to progress the erection of the cone crushing
system and to maintain the SCMP.

The Company continues to rely on its directors, officers, related parties
and others for its funding needs.  The Company believes that it may be able
to obtain such short-term and/or equity funds as are required from similar
sources as it has in the past.   It further believes that the funding
needed to proceed with the continued exploration of the other exploration
targets for the purpose of increasing its gold ore reserves will be greatly
enhanced if the price of gold continues to increase.  These exploration
programs will involve airborne geophysics, stream chemistry, geological
mapping, trenching, drilling, etc.  The Joint Venture believes that it may
be able to joint venture or enter into other business arrangements to share
these exploration costs with other entities.

From September 1987 through March 31, 2004, the Company has advanced the
sum of $44,295,125 to the Joint Venture (which includes interest charges
payable to the Company), and three of the Company's subsidiaries have
advanced the sum of $590,265, for a total of $44,885,390.  This investment
includes the charge of $27,200,167 for interest expense during this period
of time.  The funds invested in  the Joint Venture were used primarily for
the exploration, exploitation, and development of the SSGM, for the
construction of the Joint Venture laboratory facilities on real estate
owned by the Company near the SSGM site, for the operation of the
laboratory, for the purchase of a 200-ton per day used SCMP precious
metals' cyanide leaching mill and plant,  for the initial retrofitting,
repair, modernization and expansion of its SCMP facilities, for consumable
inventory, for working capital, for exploration and holding costs of the
San Felipe-El Potosi Mine, the Modesto Mine, the Hormiguero Mine, and the
Montemayor Mine, for SSGM infrastructure, including rewiring, repairing and
installation of about two miles of the Company's electric power lines to
provide electrical service, for the purchase of equipment, laboratory
chemicals, and supplies, for parts and supply inventory, for the
maintenance of the Company-owned dam and reservoir, for extensive road
extension and preservation,  for its participation in the construction of a
community bridge, for community telephone building and facilities, for a
community place of worship, for the purchase of the real estate on the
Modesto Mine, for leasing the Montemayor real estate, for the purchase and
erection of a cone crushing system, for diamond drilling at the SSGM, for
the purchase of a rod mill and a carbon regeneration system, for holding
costs, and all other related needs.

RECENTLY ISSUED ACCOUNTING STANDARDS
------------------------------------

The Company adopted Interpretation No. 45, GUARANTOR'S ACCOUNTING AND
DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING INDIRECT GUARANTEES OF
INDEBTEDNESS OF OTHERS (FIN NO. 45).  FIN No. 45 broadens the disclosures
to be made by the guarantor about its obligations under certain guarantees.
FIN No. 45 also requires a guarantor to recognize a liability for the fair
value of the obligation undertaken in issuing the guarantee at the
inception of a guarantee.  Adoption of FIN No. 45 did not have an impact on
the Company's financial position, results of operations, or cash flows as
of  March 31, 2004.




                                     32

In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, CONSOLIDATION OF VARIABLE INTEREST ENTITIES, (FIN
No. 46) which provides guidance on the identification and reporting for
entities over which control is achieved through means other than voting
rights.  FIN No. 46 defines such entities as variable interest entities
(VIEs).  A FASB Staff Position issued in October 2003 deferred the
effective date of FIN No. 46 to the first interim or annual period ending
after December 15, 2003 for entities created before February 1, 2003 if
certain criteria are met.  Subsequently, during December 2003, the FASB
issued a revision to FIN No. 46 (FIN No. 46R) which replaces the original
interpretation.  Application of this revised interpretation is required in
financial statements for companies that have interests in VIEs or potential
VIEs commonly referred to as special-purpose entities created after
December 15, 2003.  Application for entities created before January 1, 2004
is required in financial statements for periods ending after March 15,
2004.  The Company believes it has no such variable interest entities and
as a result FIN No. 46 did not have an impact on the Company's financial
position, results of operations, or cash flows for the year then ended
March 31, 2004.

In April 2003, the FASB issued SFAS No. 149, AMENDMENT OF STATEMENT 133 ON
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES to amend and clarify
financial accounting and reporting for derivative instruments, including
certain derivative instruments embedded in other contracts and for hedging
activities.  The changes in this statement improve financial reporting by
requiring that contracts with comparable characteristics be accounted for
similarly to achieve more consistent reporting of contracts as either
derivative or hybrid instruments.  SFAS No. 149 is effective for contracts
entered into or modified after June 30, 2003.  SFAS No. 149 did not have
any impact on the Company's financial position, results of operations, or
cash flows for the year then ended March 31, 2004.

In May 2003, the FASB issued SFAS No. 150, ACCOUNTING FOR CERTAIN FINANCIAL
INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY providing
guidance regarding classification of freestanding financial instruments as
liabilities (or assets in some circumstances).  SFAS No. 150 was originally
effective for financial instruments entered into or modified after May 31,
2003, and otherwise at the beginning of the first interim period beginning
after June 15, 2003, and was to be applied prospectively.  However, on
October 29, 2003, the FASB decided to defer the provisions of paragraphs
nine and ten of SFAS No. 150 as they apply to mandatorily redeemable non-
controlling interests.  These provisions required that mandatorily
redeemable minority interests within the scope of SFAS No. 150 be
classified as a liability on the parent company's financial statements in
certain situations, including when a finite-lived entity is consolidated.
The deferral of those provisions is expected to remain in effect while
these interests are addressed in either Phase II of the FASB's Liabilities
and Equity Project or Phase II of the FASB's Business Combinations Project.
The FASB also decided to (i) preclude any "early" adoption of the
provisions of paragraphs nine and ten for these non-controlling interests
during the deferral period; and (ii) require the restatement of any
financial statements that have been issued where those provisions were
applied to mandatorily redeemable non-controlling interests.  SFAS No. 150
did not have any impact on the Company' financial position, results of
operations or cash flows, for the year then ended March 31, 2004.



                                     33


In July 2001, the Financial Accounting Standard Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and
Other Intangible Assets," which supersedes the Accounting Principles Board
(APB) Opinion No. 17, "Intangible Assets."  This Statement addresses the
accounting and reporting of goodwill and other intangible assets subsequent
to their acquisition.  The Statement also provides specific guidance on
testing goodwill and intangible assets for impairment.  SFAS No. 142
provides that (i) goodwill and indefinite-lived intangible assets will no
longer be amortized, (ii) impairment will be measured using various
valuation techniques based on discounted cash flows, (iii) goodwill will be
tested for impairment at least annually at the reporting unit level, (iv)
intangible assets deemed to have an indefinite life will be tested for
impairment at least annually and (v) intangible assets with finite lives
will be amortized over their useful lives.  At this time the Company
believes that the impact of this standard should not have any material
impact on the financial statements taken as a whole.

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," which addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs.  This Statement 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.  The associated asset retirement costs are
capitalized as part of the carrying amount of the long-lived asset.  All
provisions of this Statement will be effective when the occurrence arises.
At this time, the Company believes that the adoption of SFAS No. 143 should
not have a material impact on the Company's results of operations or
financial position.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets."  This Statement supersedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" and amends APB No. 30, "Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions."  This Statement
requires that long-lived assets that are to be disposed of by sale be
measured at the lower of book value or fair value less costs to sell.  SFAS
No. 144 retains the fundamental provision of SFAS 121 for (a) recognition
and measurement of the impairment of long-lived assets to be held and used
and (b) measurement of long-lived assets to be disposed of by sale.  This
statement also retains APB No. 30's requirement that companies report
discontinued operations separately from continuing operations.  All
provisions of this Statement are effective in the first quarter of 2003.
At this time, the Company believes that the impact of this standard should
have no material impact on the financial statements taken as a whole.

In June 2002, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 146, Accounting for Costs Associated with Exit or
Disposal Activities (SFAS No. 146).  SFAS No. 146 is effective for exit or
disposal activities that are initiated after March 31, 2003.  This
Statement addresses financial accounting and reporting for costs associated
with exit or disposal activities and nullifies Emerging Issues Task Force
(EITF) Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)."  At this time, the Company believes
that SFAS No. 146 should not have a material impact on its results of
operations or financial position.

In November 2002, the Financial Accounting Standards Board issued
Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others
(FIN No. 45).  FIN No. 45 elaborates on the disclosures to be made by the
guarantor about is obligations under certain guarantees.  FIN No. 45 also
clarifies that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee.  As required by FIN No. 45, the Company has adopted
the disclosure requirements effective March 31, 2003.  The Company believes
that the initial recognition and measurement provisions of FIN No. 45 on a
prospective basis for guarantees issued or modified after March 31, 2003
should not have any material impact on its results of operations or
financial position.


                                     34

EMPLOYEES
---------

As of March 31, 2004, the Joint Venture employed between 35 and 45 full-
time persons in El Salvador to perform its limited exploration,
exploitation, and development programs; to erect the cone crushing system,
to provide 24-hour seven-day-a-week security at three different sites; to
provide engineering, geology, drafting, and computer-related services;  and
to handle the administration of its activities. None of these employees are
covered by any collective bargaining agreements.  It has developed a
harmonious relationship with its employees, and it believes that in the
past, it was one of the largest single non-agricultural employers in the El
Salvador Eastern Zone.   Also, the Company employs up to four persons,
including part-time help, in the United States.   Since the Joint Venture
has laid off most of its employees, the Joint Venture had to pay the
severance pay and other benefits to its employees and therefore it had to
sell and continues to sell the Company's common shares which were issued to
the Commerce Group Corp. Employee Benefit Account.  El Salvador employees
are entitled to receive severance pay, which is based on one month's pay
for each year of employment.

RELATED PARTY LOANS, OBLIGATIONS AND TRANSACTIONS
-------------------------------------------------

The related party transactions are included in detail in the Notes to the
Consolidated Financial Statements.

COMPANY ADVANCES TO THE JOINT VENTURE
-------------------------------------

Since September 1987 through March 31, 2004, the Company, and three of its
subsidiaries, have advanced to the Joint Venture $44,885,390.  Included in
the total advances is the interest charged to the Joint Venture by the
Company which amounts to $27,200,167 through March 31, 2004.  The Company
furnishes all of the funds required by the Joint Venture.  This interest
charge has been eliminated from these financial statements.

EFFORTS TO OBTAIN CAPITAL
-------------------------

Since the concession was granted, and through the present time, substantial
effort is exercised by the Directors and Officers in attempting to secure
funding through various sources, all with the purpose to expand the
operations of the SCMP, to construct an open-pit heap-leach operation at
the SSGM site, and to continue the exploration of its other mining
prospects.

The Company, Sanseb, and the Joint Venture consider the past political
situation in the Republic of El Salvador to have been unstable, and believe
that the final peace declaration on December 16, 1992, has put an end to
the conflict.  Even though many years have passed, the stigma of the past
unfavorable political status in the Republic of El Salvador exists and
therefore certain investors continue to be apprehensive to invest the funds
required.  However, as explained in this report, the Company was able to
obtain a sum of funds to invest in the expansion and retrofitting of its
SCMP and for the exploration of its other mining prospects.  The decline in
the Company's stock market price places the Company in a situation of
substantially diluting its common shares in order to raise equity capital.
The Company believes that it will be able to obtain adequate financing to
conduct its operations from the same sources as in the past.  There are no
assurances that funds will be available, except at this time, there is a
greater world-wide interest in the ownership of gold.  The price of gold
has increased substantially during this past fiscal year which encourages
investors to invest in gold mining companies.



                                     35

ENVIRONMENTAL REGULATIONS
-------------------------

The Company's operations are subject to environmental laws and regulations
adopted by various governmental authorities in the jurisdictions in which
the Company operates.  Accordingly, the Company has adopted policies,
practices and procedures in the areas of pollution control, product safety,
occupational health and the production, handling, storage,  use and
disposal of hazardous materials to prevent material environmental or other
damage, and to limit the financial liability which could result from such
events.  However, some risk of environmental or other damage is inherent in
the business of the Company, as it is with other companies engaged in
similar businesses.

The DHM requires environmental permits to be issued in connection with the
application of the Renewed SSGM.  The issuance of these permits are under
the jurisdiction of the El Salvador Ministry of Environment and Natural
Resources Office (MARN).  On October 15, 2002, MARN issued an environmental
permit under Resolution 474-2002 for the SCMP.  On October 20, 2002, MARN
issued an environmental permit under Resolution 493-2002 for the Renewed
SSGM Exploitation area.

DIVIDENDS
---------

For the foreseeable future, it is anticipated that the Company will use all
of its earnings to finance its growth and expansion, therefore, dividends
will not be paid to shareholders.

IMPACT OF INFLATION
-------------------

The impact of inflation on the Company has not been significant in recent
years because of the relatively low rates of inflation and deflation
experienced in the United States.


ITEM 7(A).  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------------------

COMMODITY PRICES
----------------

When in production, the Company's earnings and cash flow will be
significantly impacted by changes in the market price of gold.  Gold prices
can fluctuate widely and are affected by numerous factors, such as demand,
production levels, economic policies of central banks, producer hedging,
and the strength of the U.S. dollar relative to other currencies.  During
the last five years, the average annual market price of gold has fluctuated
between $270 per ounce and $375 per ounce.  The Company has not been
engaged in any hedging contracts whatsoever.

FOREIGN CURRENCY
----------------

The Company conducts the majority of its operations in the Republic of El
Salvador, Central America.  Currently, El Salvador is on the U.S. dollar
system, and therefore all receipts and expenditures since January 1, 2001
are in U.S. dollars.



                                     36

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
-------------------------------------------------------------------------

Some of the statements contained in this report are forward-looking
statements, such as estimates and statements that describe the Company's
future plans, objectives or goals, including words to the effect that the
Company or management expects a stated condition or result to occur.  Since
forward-looking statements address future events and conditions, by their
very nature, they involve inherent risks and uncertainties.  Actual results
in each case could differ materially from those currently anticipated in
such statements by reason of factors such as production at the Company's
mines, changes in operating costs, changes in general economic conditions
and conditions in the financial markets, changes in demand and prices for
the products the Company produces, litigation, legislative, environmental
and other judicial, regulatory, political and competitive developments in
areas in which the Company operates and technological and operational
difficulties encountered in connection with mining.  Many of these factors
are beyond the Company's ability to control or predict.  The Company
disclaims any intent or obligation to update its forward-looking
statements, whether as a result of receiving new information, the
occurrence of future events, or otherwise.














                                     37

Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------
                 Index to Consolidated Financial Statements
                      And Supplementary Financial Data

                                                                       Page
                                                                       ----

Report of Independent Registered Public Accounting Firm. . . . . . . . . 39

Financial Statements:

Consolidated Balance Sheets, Years Ended March 31, 2004 and 2003 . . . . 40
Consolidated Statements of Operations, Years Ended March 31,
  2004, 2003 and 2002. . . . . . . . . . . . . . . . . . . . . . . . . . 41
Consolidated Statements of Changes in Shareholders' Equity
  Years Ended March 31, 2004, 2003 and 2002. . . . . . . . . . . . . . . 42
Consolidated Statements of Cash Flows, Years Ended March 31,
  2004, 2003 and 2002. . . . . . . . . . . . . . . . . . . . . . . . . . 43
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . 46

Supplementary Financial Data:

Report of Independent Registered Public Accounting Firm on the
Financial Statement Schedules. . . . . . . . . . . . . . . . . . . . . . 39

Schedules of financial statements other than those listed herein have been
omitted since they are either not required, are not applicable, or the
required information is included in the financial statements and related
notes.





          REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Shareholders
Commerce Group Corp.
Milwaukee, Wisconsin

We have audited the accompanying consolidated balance sheets of Commerce
Group Corp. (a Wisconsin corporation) as of March 31, 2004 and 2003, and
the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for the years ended March 31, 2004, 2003 and 2002.
These consolidated financial statements are the responsibility of the
Company's management.  Our responsibility is to express and opinion on
these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States).  Those standards
require that we plan and perform the audits to obtain reasonable assurance
about whether the consolidated financial statements are free of material
misstatement.  The Company is not required to have, nor were we engaged to
perform, audits of its internal control over financial reporting.  Our
audits included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting.
Accordingly, we express no such opinion.  An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement
presentation.  We believe that our audits provides a reasonable basis for
our opinion.

In our opinion, the consolidated statements referred to above present
fairly, in all material respects, the consolidated financial position of
Commerce Group Corp. as of March 31, 2004 and 2003, and the consolidated
results of their operations and their cash flows for the years ended March
31, 2004, 2003 and 2002 in conformity with accounting principles generally
accepted in the United States of America.



Chisholm, Bierwolf & Nilson, LLC
Certified Public Accountants


Bountiful, Utah
July 5, 2005



                                     39

       COMMERCE GROUP CORP., ITS SUBSIDIARIES, AND THE JOINT VENTURE
                   Consolidated Balance Sheets--March 31
<Table>
<Caption>

                                                     2004          2003
                                                 ------------  ------------
<S>                                              <C>           <C>
                                   ASSETS
                                  -------
Current assets
  Cash                                           $     30,348  $     28,004
  Other current assets                                219,098       194,578
  Accounts receivable, related                        584,011       582,608
  Accounts receivable, other                           24,658        25,604
  Mining supplies                                      39,562        39,562
  Prepaid items and deposits                           95,794        41,901
                                                 ------------  ------------
     Total current assets                             993,471       912,257

Real estate                                                 -        23,336
Property, plant and equipment, net                  4,333,128     4,280,912
Mining resources investment                        29,092,782    27,283,645
                                                 ------------  ------------
     Total assets                                $ 34,419,381  $ 32,500,150
                                                 ============  ============

                                LIABILITIES
                                -----------

Current liabilities
  Accounts payable                               $    262,704  $    233,635
  Accounts payable, related                           225,885       221,084
  Notes and accrued interest payable to
   related parties                                  9,400,682     8,027,380
  Notes and accrued interest payable to others        247,579       225,922
  Accrued salaries                                  2,871,128     2,672,415
  Accrued legal fees                                  327,015       326,941
  Other accrued expenses                              646,523       621,719
                                                 ------------  ------------
     Total liabilities                             13,981,516    12,329,096

Commitments and contingencies
(Notes 2, 4, 5, 6, 7, 8, 10 & 12)

                            SHAREHOLDERS' EQUITY
                           ---------------------
Preferred Stock
  Preferred stock, $0.10 par value:
   Authorized 250,000 shares;
   Issued and outstanding
   2004-none; 2003-none                          $          0  $          0
  Common stock, $0.10 par value:
   Authorized 50,000,000 shares;
   Issued and outstanding:
   2004-22,681,591                                  2,268,159
   2003-20,407,429                                                2,040,743
  Capital in excess of par value                   19,274,597    18,997,412
  Retained earnings (deficit)                     (1,104,891)     (867,101)
                                                 ------------  ------------
     Total shareholders' equity                    20,437,865    20,171,054
                                                 ------------  ------------
     Total liabilities and shareholders' equity  $ 34,419,381  $ 32,500,150
                                                 ============  ============


</Table>

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

                                     40

       COMMERCE GROUP CORP., ITS SUBSIDIARIES, AND THE JOINT VENTURE
                   Consolidated Statements of Operations
                        For the Years Ended March 31

<Table>
<Caption>

                                                 2004          2003          2002
                                             ------------  ------------  ------------
<S>                                          <C>           <C>           <C>
Revenues:                                    $          0  $          0  $          0

Expenses:
  General and administrative                      237,790       232,647       303,466
                                             ------------  ------------  ------------

  Net profit (loss)                          $  (237,790)  $  (232,647)  $  (303,466)
  Credit (charges) for income taxes                     0             0             0
                                             ------------  ------------  ------------
  Net income (loss) after income tax
   credit (charge)                           $  (237,790)  $  (232,647)  $  (303,466)
                                             ============  ============  ============

  Net income (loss) per share basic          $      (.01)  $      (.01)  $      (.02)
                                             ============  ============  ============


   Weighted av. common shares outstanding      21,089,812    18,907,958    16,349,170
                                             ============  ============  ============

</Table>

Reference is made to "(2) Significant Accounting Policies, Earnings (Loss)
Per Common Share," for an explanation of the anti-dilutive effect due to
losses.







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

                                     41


       COMMERCE GROUP CORP., ITS SUBSIDIARIES, AND THE JOINT VENTURE
         Consolidated Statements of Changes in Shareholders' Equity
             For the Years Ended March 31, 2004, 2003 and 2002

<Table>
<Caption>
                                                            Common Shares
                                                          ------------------------------------
                                                             Capital in      Retained
                                      Number of               Excess of      Earnings
                                         Shares  Par Value    Par Value     (Deficit)
                                   ------------ ----------  -----------  ------------
<S>                                <C>          <C>         <C>          <C>
Balances March 31, 2001              15,794,008 $1,579,401  $18,760,849  $  (330,988)

Net loss for FY March 31, 2002                -          -            -     (303,466)

Common stock issued for:
 Dir./off./employee/services comp.    1,154,000    115,400        5,260             -
 Payment of debt                        250,000     25,000       12,500             -
 Cash                                   270,000     27,000       13,500             -
                                   ------------ ----------  -----------  ------------
Balances March 31, 2002              17,468,008  1,746,801   18,792,109     (634,454)

Net loss for FY March 31, 2003                -          -            -     (232,647)

Common stock issued for:
 Dir./off./employee/services comp.      693,221     69,322       85,848             -
 Payment of debt                      1,435,200    143,520       85,805             -
 Cash                                   811,000     81,100       33,650             -
                                   ------------ ----------  -----------  ------------
Balances March 31, 2003              20,407,429  2,040,743   18,997,412     (867,101)

Net loss for FY March 31, 2004                -          -            -     (237,790)

Common stock issued for:
 Dir./off./employee/services comp.      630,862     63,086       92,014             -
 Payment of debt                        928,300     92,830      138,657             -
 Stock options exercised for cash       230,000     23,000        6,500             -
 Cash                                   485,000     48,500       63,350             -
 Capital distribution                         -          -     (23,336)             -
                                   ------------ ----------  -----------  ------------
Balances March 31, 2004              22,681,591 $2,268,159  $19,274,597  $(1,104,891)
                                   ============ ==========  ===========  ============



</Table>

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



                                     42

       COMMERCE GROUP CORP., ITS SUBSIDIARIES, AND THE JOINT VENTURE
                   Consolidated Statements of Cash Flows
                        For the Years Ended March 31
<Table>
<Caption>
                                                 2004          2003          2002
                                             ------------  ------------  ------------
<S>                                          <C>           <C>           <C>
Operating activities:
  Net loss                                     $(237,790)    $(232,647)    $(303,466)
  Adjustments to reconcile net loss to net
  cash provided by (used in) operating
  activities:
   Common stock issued for services rendered      155,100       155,170       120,660
  Changes in assets and liabilities:
   Decrease (increase) in accounts receivable
     and other current assets                    (24,977)      (85,108)         1,680
   Decrease (increase) in prepaid items and
     deposits                                    (53,893)      (16,856)         8,935
   Increase (decrease) in accounts payable
     and other accrued expenses                    58,674        58,915      (54,183)
   Increase (decrease) in accrued salaries       (94,101)       196,650       454,330
   Increase (decrease) in accrued legal fees           74        12,138         6,518
                                             ------------  ------------  ------------
     Net cash provided by (used in)
     operating activities                       (196,913)        88,262       234,474

Investing activities:
  Investment in mining resources and
   property, plant and equipment                (135,241)     (214,089)     (260,294)
                                             ------------  ------------  ------------
     Net cash used by investing activities      (135,241)     (214,089)     (260,294)

Financing activities:
  Cash received on related party notes
   payable                                        193,148             -             -
  Common stock issued for cash                    141,350       114,750        40,500
                                             ------------  ------------  ------------
     Net cash provided by financing
     activities                                   334,498       114,750        40,500

Net increase (decrease) in cash and
cash equivalents                                    2,344      (11,077)        14,680
Cash - beg. of year                                28,004        39,081        24,401
                                             ------------  ------------  ------------
Cash - end of year                           $     30,348  $     28,004  $     39,081
                                             ============  ============  ============

</Table>


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

                                     43

       COMMERCE GROUP CORP., ITS SUBSIDIARIES, AND THE JOINT VENTURE
              Consolidated Statements of Cash Flows, continued

<Table>
<Caption>
Supplemental disclosures of cash information:                    Year Ended
                                                             March 31, 2004           March 31, 2003
                                                             --------------          ---------------
<S>                                                          <C>                     <C>
A.  Cash information                                     $ Amount            $ Amount
                                                       ----------          ----------
    1.  Accrued interest capitalized                   $1,433,298          $1,212,976
    2.  Interest expense paid in cash                           -                   -
    3.  Income taxes paid                                       -                   -

B.  Non cash investing and financing
    Common stock issued for:
    1.  Director fees, officer compensation,
        employee benefits and services          630,862  $155,100   693,221  $155,170
    2.  Related party notes payable             928,300  $231,487 1,435,200  $229,325
</Table>

C.   Other supplemental disclosures

1.   Other current assets consist of securities held by Commerce for the
     Commerce Group Corp. Employee Benefit Account, which are stated at
     cost of $86,650 at March 31, 2004.  The funds are to be used to pay
     the El Salvadoran employee medical benefits of $567 and pension
     benefits of $40,628 as required by the El Salvadoran Government.

     The vacation and Christmas bonus payments are due when earned while
     the severance pay is due and payable at such time when the employee
     has been discharged, retired, permanently laid off, death or when
     incapable of working due to permanent health/work related conditions.
     This amounts to a sum of $36,850 at March 31, 2004.  The Company has
     sole control and jurisdiction over this account and to the best of the
     Company's knowledge, there is absolutely no condition, right, or
     requirement by the El Salvadoran authorities to have such funds in any
     form of a reserve.

     Also included in other current assets are certain precious stones and
     jewelry stated at cost of $132,448 at March 31, 2004.

2.   The accounts receivable, related consist of advances to Mineral San
     Sebastian S.A. (Misanse), which is 52% owned by the Company.  These
     advances are an offset for the past and future Misanse rental charges
     that are included in the accounts payable.  An accounting is as
     follows:

<Table>
<Caption>
                                                Misanse    Others     Total
                                               --------  --------  --------
<S>                                            <C>       <C>       <C>
Accounts receivable                            $584,011  $ 24,658  $608,669
Accounts payable                               $225,885  $262,704  $488,589

</Table>

On January 14, 2003, at a Misanse shareholders' meeting held at the
Company's City of San Miguel, El Salvador office, the shareholders and the
Directors approved, confirmed and ratified that Misanse owed the Company
the sum of $582,608 for advances the Company incurred on behalf of Misanse.
It was also confirmed that the Company owed Misanse a sum of $221,084
primarily for leasing the property.  An accounting is as follows:


                                     44

<Table>
<Caption>
                                                     Accounts      Accounts
                                                   Receivable       Payable
                                                 ------------  ------------
<S>                                              <C>           <C>
January 14, 2003 balance                         $    582,608  $    221,084
3/31/03 cash advances/charges                             946           686
3/31/04 cash advances/charges                             457         4,115
                                                 ------------  ------------
Total                                            $    584,011  $    225,885

</Table>

     The Company is of the opinion that it is appropriate to record the
     fact that Misanse owes the Company $584,011 and that the Company owes
     Misanse $225,885 as Misanse is not consolidated with the Company's
     financial records.  When gold production commences, the 5% royalty
     payable to Misanse for rent of the San Sebastian Gold Mine property
     based on the gross proceeds from the sale of gold and the accounts
     payable offset will reduce this receivable until it is paid in full.

3.   Mining supplies consist of consumable items used in processing gold
     ore, which are stated at the average cost.





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











                                     45

        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004

(1)  The Company and Basis of Presentation of Financial Statements
------------------------------------------------------------------

(a)  Commerce Group Corp. ("Commerce," the "Company" and/or "Registrant")
     and its 82 1/2%-owned subsidiary, San Sebastian Gold Mines, Inc.
     ("Sanseb")  both United States corporations, have formed the
     Commerce/Sanseb Joint Venture ("Joint Venture") for the purpose of
     performing gold mining, the sale of gold, and related activities,
     including, but not limited to, exploration, exploitation, development,
     extraction and processing of precious metals in the Republic of El
     Salvador, Central America.   Gold bullion, currently the Joint
     Venture's principal product, was produced (but not on a full
     production basis) in El Salvador and refined and sold in the United
     States.  Expansion of exploration is a goal at the San Sebastian Gold
     Mine ("SSGM") which is located near the city of Santa Rosa de Lima.
     Expanded exploration is being curtailed at other mining projects until
     adequate funding is obtained under acceptable terms and conditions.
     All of the mining projects are located in the Republic of El Salvador,
     Central America.

     On March 3, 2003, the Company received an exploration license from the
     Government of El Salvador (GOES) dated February 24, 2003, for the
     exploration of minerals in an area encompassing the SSGM, consisting
     of 42 square kilometers, which is hereafter referred to as the "New
     SSGM Exploration Concession/License" or the "New SSGM."  This expanded
     area provides the Company with an opportunity to increase its gold and
     silver ore reserves.  Included in this area are three formerly-
     operated gold and silver mines:  the La Lola Mine, the Santa Lucia
     Mine and the Tabanco Mine.

     As of March 31, 2000, the Joint Venture had temporarily suspended the
     San Cristobal Mill and Plant  ("SCMP") operations (operations ceased
     on December 31, 1999) until such time as it has adequate funds to
     retrofit, rehabilitate, restore and expand these facilities and until
     there is certainty that the price of gold will be stabilized at the
     current or a higher selling price.

     The Company continues to be cognizant of its cash needs until such
     time as it is able to produce adequate profits from its SSGM gold
     production.  It will continue to attempt to obtain sufficient funds to
     assist the Joint Venture in placing the SSGM into production as the
     anticipated profits from the existing SCMP operation (unless
     accumulated over a period of time) appear insufficient to meet the
     SSGM capital and the other mining exploration requirements.  In order
     to continue to follow its goal to conduct the Joint Venture's
     exploration, exploitation, development expansion programs, and the
     production of gold from the SSGM open-pit, heap-leaching operation, it
     is necessary for the Company to obtain funds from other sources.  The
     Company may have to borrow funds by issuing open-ended, secured, on-
     demand or unsecured promissory notes, by selling its shares to its
     directors, officers and other interested accredited investors, or by
     entering into a joint venture, merging, or developing an acceptable
     form of a business combination with other companies.

     The Company's directors and officers, with the aid of investment
     bankers and finders, are aggressively seeking a compatible financial
     or business arrangement.  The verbal and written proposals or
     arrangements received were not acceptable by the Company due to the
     terms and conditions.




                                     46



        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004


     The Joint Venture plans to begin its open-pit, heap-leaching process
     on the SSGM site when adequate funding becomes available, and if the
     price of gold maintains the current price level.  It also plans to
     continue its SSGM site preparation, the expansion of its exploration
     and exploitation targets, and the enlargement and development of its
     gold ore reserves.  Furthermore, it plans to explore the potential of
     other gold mine exploration prospects in El Salvador.  Concurrently,
     it is in the process of obtaining necessary funding for each of these
     separate programs while its Joint Venture is performing minor retrofit
     and rehabilitation work at the SCMP.  It commenced an exploration
     program on the New SSGM.

(b)  Basis of presentation:

     Management estimates and assumptions:

     Certain amounts included in or affecting the Company's financial
     statements and related disclosures must be estimated, requiring that
     certain assumptions be made with respect to values or conditions which
     cannot be made with certainty at the time the financial statements are
     prepared.  Therefore, the reported amounts of the Company's assets and
     liabilities, revenues and expenses, and associated disclosures with
     respect to contingent assets and obligations are necessarily affected
     by these estimates.  The Company evaluates these estimates on an
     ongoing basis, utilizing historical experience, consultation with
     experts, and other methods considered reasonable in the particular
     circumstances.  Nevertheless, actual results may differ significantly
     from the Company's estimates.

(2)  Significant Accounting Policies
------------------------------------

CONSOLIDATED STATEMENTS

The Joint Venture and the following subsidiaries are all majority-owned by
the Company and are included in the consolidated financial statements of
the Company.  All significant intercompany balances and transactions have
been eliminated.  The Company does not have corporate control of Misanse as
the majority of Misanse's elected directors are to be El Salvadoran
shareholders.

<Table>
<Caption>
                                                                  Charter/Joint Venture
                                                                  ---------------------

Included in the Consolidated Statements  % Ownership         Place          Date
---------------------------------------  -----------  ------------  ------------
<S>                                     <C>           <C>           <C>
Homespan Realty Co., Inc. ("Homespan")         100.0     Wisconsin    02/12/1959
Ecomm Group Inc. ("Ecomm")                     100.0     Wisconsin    06/24/1974
San Luis Estates, Inc. ("SLE")                 100.0      Colorado    11/09/1970
San Sebastian Gold Mines, Inc. ("Sanseb")       82.5        Nevada    09/04/1968
Universal Developers, Inc.  ("UDI")            100.0     Wisconsin    09/28/1964
Commerce/Sanseb Joint Venture
  ("Joint Venture")                             90.0   Wisconsin &
                                                       El Salvador     9/22/1987

Not included in the Consolidated Statements
-------------------------------------------
Mineral San Sebastian, S.A. de C.V.
("Misanse")                                     52.0   El Salvador    05/08/1960


</Table>

                                     47


        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004

OTHER CURRENT ASSETS

Other current assets consist of securities held as nominee for the Commerce
Group Corp. Employee Benefit Account, and are stated at cost.  Other
current assets also include certain precious stones also stated at cost.

ACCOUNTS RECEIVABLE

The accounts receivable primarily consists of the advances to Misanse, a
52%-owned subsidiary, which will be offset for the Misanse rental charges
included in the accounts payable.

INTERCOMPANY BALANCES

All intercompany balances and transactions have been eliminated in the
consolidated financial statements.

MINING SUPPLIES

Mining supplies consist of consumable supplies used in connection with
processing ore and are stated at cost, which is lower than the market
value.

DEFERRED MINING COSTS

The Company, in order to avoid expense and revenue unbalance, capitalizes
all costs directly associated with acquisition, exploration and development
of specific properties, until these properties are put into operation, sold
or are abandoned.  Gains or losses resulting from the sale or abandonment
of mining properties will be included in operations.  The Joint Venture
capitalizes its costs and expenses and will write off these cumulative
costs on a units of production method at such time as it begins producing
gold derived from the gold ore on a full production basis.  If the prospect
of gold production, due to different conditions and circumstances becomes
unlikely, all of these costs may be written off in the year that this
occurs.

The Company regularly evaluates its carrying value of exploration
properties in light of their potential for economic mineralization and the
likelihood of continued work by either the Company or a joint venture
partner.  The Company may, from time to time, reduce its carrying value to
an amount that approximates fair market value based upon an assessment of
such criteria.

REVENUE RECOGNITION

Revenue from the sale of gold will be recognized when delivery has
occurred, title and risk of loss passes to the buyer, and collectability is
reasonably assured.  Gold sales will be made in accordance with sales
contracts where the price is fixed or determinable.

PROPERTY, PLANT AND EQUIPMENT

Property, plant, and equipment is stated at the lower of cost or estimated
net realizable value.  Mining properties, development costs and  plant and
equipment will be depreciated when full production takes place using the
units of production method based upon proven and probable reserves.  Until
the Company suspended its mining operations, the assets were depreciated
using the straight-line method over estimated useful lives ranging from
three to ten years.  Depreciation and amortization expenses include the
amortization of assets acquired, if any, under capital leases.
Replacements  and major improvements are capitalized.  When in operation,
maintenance and repairs will be charged to expense based on average
estimated equipment usage.  Interest costs incurred in the construction or
acquisition of property, plant, and equipment are capitalized and amortized
over the useful lives of the related assets.  Since the Company suspended
its gold processing operations effective as of March 31, 2000, it also
ceased to depreciate its fixed assets.


                                     48

        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004


MINERAL EXPLORATION AND DEVELOPMENT COSTS

Significant property acquisition payments for active exploration properties
are capitalized.  If no minable ore body is discovered, previously
capitalized costs are expensed in the period the property is abandoned.
Expenditures for the development of new mines, to define further
mineralization at and adjacent to existing ore bodies, and to expand the
capacity of operating mines, are capitalized and amortized on the units of
production basis over proven and probable reserves.

IMPAIRMENTS

The Company evaluates the carrying value of its properties and equipment
when events or changes in circumstances indicate that the properties or
equipment may be impaired and then at that time it plans to apply the
provisions of Statement of Financial Accounting Standards No. 121 (SFAS
121), Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of.  Estimated future net cash flows, on an
undiscounted basis, from each property are calculated using estimated
recoverable ounces of gold (considering current proven and probable
reserves and mineral resources expected to be converted into mineral
reserves.  The inclusion of mineral resources is based on various
circumstances, including but not limited to, the existence and nature of
known mineralization, location of the property, results of drilling; and
analysis to demonstrate the ore is commercially recoverable), estimated
future gold price realization (considering historical and current prices,
price trends and related factors); and operating, capital and site
restoration costs.  Reduction in the carrying value of property, plant and
equipment, with a corresponding charge to income, are recorded to the
extent that the estimated future net cash flows are less than the carrying
value.

RECENTLY ISSUED ACCOUNTING STANDARDS

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," which addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs.  This Statement 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.  The associated asset retirement costs are
capitalized as part of the carrying amount of the long-lived asset.  All
provisions of this Statement will be effective when the occurrence arises.
At this time, the Company believes that the adoption of SFAS No. 143 should
not have a material impact on the Company's results of operations or
financial position.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets."  This Statement supersedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" and amends APB No. 30, "Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions."  This Statement
requires that long-lived assets that are to be disposed of by sale be
measured at the lower of book value or fair value less costs to sell.  SFAS
No. 144 retains the fundamental provision of SFAS 121 for (a) recognition
and measurement of the impairment of long-lived assets to be held and used
and (b) measurement of long-lived assets to be disposed of by sale.  This
statement also retains APB No. 30's requirement that companies report
discontinued operations separately from continuing operations.  All
provisions of this statement are effective in the first quarter of 2003.
At this time, the Company believes that the impact of this standard should
have no material impact on the financial statements taken as a whole.


                                     49

        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004

In December 2002, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 148, Accounting for Stock-Based Compensation -
Transition and Disclosure (SFAS No. 148).  SFAS No. 148, amends SFAS No.
123, Accounting for Stock-Based Compensation (SFAS No. 123), to provide
alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation.  In
addition, SFAS No. 148 amends the disclosure requirement of SFAS No. 123 to
require prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results.  The
amendments to SFAS No. 123 are effective for financial statements for
fiscal years ending after December 15, 2002.  The Company will account for
stock-based employee compensation using the intrinsic value method in
accordance with APB No. 25, Accounting for Stock Issued to Employees when
such plan will be implemented by the Company.  At that time, the Company
will disclose the requirements of SFAS No. 148.  No stock-based employee
compensation has been provided as of this date.

Management's estimates of gold and other metal prices, recoverable proven
and probable reserves, operating, capital, and reclamation costs are
subject to certain risks and uncertainties which may affect the
recoverability of the Company's investment in property, plant, and
equipment.  Although management has made its best estimate of these factors
based on current conditions, it is reasonably possible that changes could
occur in the near-term which could adversely affect management's estimate
of the net cash flows expected to be generated from its mining properties.

Estimates of future cash flows are subject to risks and uncertainties.  It
is possible that changes could occur which may affect the recoverability of
property, plant and equipment.

INTEREST CAPITALIZATION

Interest costs are capitalized as part of the historical cost of facilities
and equipment, if material.

INCOME TAXES

The Company files a consolidated federal income tax return with its
subsidiaries (See Note 9).  The Joint Venture files a U.S. partnership
return.


                                     50

        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004

EARNINGS (LOSS) PER COMMON SHARE

The Company has in the past years reported its "Earnings per Share" (EPS)
which presently complies with the provisions of Statement of Financial
Accounting Standards No. 128 (SFAS N. 128).  As required by this standard,
the Company, if applicable, could report two earnings per share amounts,
basic net income and diluted net income per share.  Basic net income per
share is computed by dividing income or loss reportable to common
shareholders (the numerator) by the weighted average number of common
shares outstanding (the denominator).  The computation of diluted net
income or loss per share is similar to the computation of basic net income
per share except that the denominator is increased to include the dilutive
effect of the additional common shares that would have been outstanding if
all convertible securities, stock options, rights, share loans etc. had
been converted to common shares.

However, the computation of diluted EPS shall not assume conversion,
exercise, or contingent issuance of securities that would have an
antidilutive effect on earnings per share.  Shares issued on actual
conversion, exercise, or satisfaction of certain conditions for which the
underlying potential common shares were antidilutive shall be included in
the computation as outstanding common shares from the date of conversion,
exercise, or satisfaction of those conditions, respectively.  Therefore,
there is no difference in the earnings or the number of basic or diluted
shares.

FOREIGN CURRENCY

The Company conducts the majority of its operations in the Republic of El
Salvador, Central America. Currently, El Salvador is on the U.S. dollar
system and therefore all receipts and expenditures since January 1, 2001
are in U.S. dollars.

(3) INVESTMENT IN PROPERTY, PLANT, EQUIPMENT  AND MINING RESOURCES
------------------------------------------------------------------

The following is a summary of the investment in property, plant, equipment,
mining resources and development costs:

<Table>
<Caption>

                                               March 31, 2004                         March 31, 2003
                                    ----------------------------------               -----------------------------------
                         Accumulated                         Accumulated
                            Depre-                              Depre-
                 Cost      ciation       Net         Cost      ciation        Net
               ---------- ---------- -----------  ----------- ----------  -----------
<S>            <C>        <C>        <C>          <C>         <C>         <C>
Mineral
Properties
and
Deferred
Development   $29,092,782            $29,092,782  $27,283,645             $27,283,645

Property,
Plant and
Equipment       6,585,271  2,252,143   4,333,128    6,533,055  2,252,143    4,280,912
               ---------- ---------- -----------  ----------- ----------  -----------
              $35,678,053 $2,252,143 $33,425,910  $33,816,700 $2,252,143  $31,564,557
              =========== ========== ===========  =========== ==========  ===========

</Table>

Vehicles, office, mining and laboratory equipment, buildings, etc. are
stated at cost and are depreciated using the straight-line method over
estimated useful lives of three to ten years.  Maintenance and repairs are
charged to expense as incurred.  Since the Joint Venture suspended
operations in view of the weak price of gold and the need to expand the
SCMP facilities, no depreciation has been recorded during this fiscal year.

                                     51

        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004

(4) COMMERCE/SANSEB JOINT VENTURE ("JOINT VENTURE")
---------------------------------------------------

The Company is in a joint venture with and owns 82 1/2% of the total common
stock (2,002,037 shares) of Sanseb, a U.S. State of Nevada chartered (1968)
corporation.  The balance of Sanseb's stock is held by approximately 180
non-related shareholders, including the President of the Company who owns
2,073 common shares.  Sanseb was formed in 1968 to explore, exploit,
research, and develop adequate gold reserves.  Sanseb produced gold from
the SSGM from 1972 through February 1978.

On September 22, 1987, the Company and Sanseb entered into a joint venture
agreement to formalize their relationship with respect to the mining
venture and to account for the Company's substantial investment in  Sanseb.
Under the terms of the agreement, the Company is authorized to supervise
and control all of the business affairs of the Joint Venture and has the
authority to do all that is necessary to resume mining operations at the
SSGM on behalf of the Joint Venture.  The net pre-tax profits of the Joint
Venture will be distributed as follows:  Company 90%; and Sanseb 10%.
Since the Company owns 82 1/2% of the authorized and issued common shares
of Sanseb, the Company in effect has over a 98% interest in the Joint
Venture activities.

The joint venture agreement further provides that the Company has the right
to be compensated for its general and administrative expenses in connection
with managing the Joint Venture.

Under the joint venture agreement, agreements signed by the Company for the
benefit of the Joint Venture create obligations binding upon the Joint
Venture.

The Joint Venture is registered to do business in the State of Wisconsin
and in the Republic of El Salvador, Central America.

INVESTMENTS IN JOINT VENTURE

As of March 31, 2004, the Company's investments, including charges for
interest expense to the Joint Venture, were $44,295,125 and three of the
Company's subsidiaries' advances were $590,265 for a total of $44,885,390.

















                                     52

        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004

INVESTMENT IN EL SALVADOR MINING PROJECTS

During the fiscal year, the Company has advanced funds, performed services,
and allocated its general and administrative costs to the Joint Venture.

As of March 31, 2004 and 2003, the Company, Sanseb and three of the
Company's subsidiaries have invested (including carrying costs) the
following in its Joint Venture:

<Table>
<Caption>
                                                          2004          2003
                                                      ------------  ------------
<S>                                                   <C>           <C>
The Company's advances (net of gold sale
proceeds) since 09/22/87                              $ 44,295,125  $ 40,181,015
The Company's initial investment in the Joint
Venture                                                  3,508,180     3,508,180
Sanseb's investment in the Joint Venture                 3,508,180     3,508,180

Sanseb's investment in the mining projects and
amount due to the Company                               36,340,906    34,160,023
                                                      ------------  ------------
Total:                                                  87,652,391    81,357,398

Advances by the Company's three subsidiaries               590,265       590,265
                                                      ------------  ------------
Combined total investment                             $ 88,242,656  $ 81,947,663
                                                      ============  ============
</Table>

SSGM ACTIVITY

The Company had no significant activity at the SSGM site from February 1978
through January 1987 due to the civil unrest in El Salvador.  The present
status is that, the Company, since January 1987, and thereafter, the Joint
Venture, since September 1987, have completed certain of the required
mining pre-production preliminary stages in the minable and  proven gold
ore reserve area, and the Company is active in attempting to obtain
adequate financing for the proposed open-pit, heap-leaching operations at
the SSGM.  The Joint Venture plans to resume its exploration and expansion
program to develop additional gold ore reserves in the area surrounding the
minable gold ore reserves.  Presently, it is completing the erection of its
cone crushing system and performing minor rehabilitation repairs to its San
Cristobal Mill and Plant.  On February 24,  2003, the Ministry of Economy's
Director of El Salvador Department of Hydrocarbons and Mines (DHM) granted
an exploration concession referred to as the "New SSGM" which area includes
and encompasses the existing SSGM.  Presently the Company is in the process
of exploring three of the formerly operated gold mines.  On May 24, 2004,
the Government of El Salvador (GOES) granted another exploration concession
which is referred to as the "Nueva Esparta" and included eight formerly
operated gold and silver mines.  Exploration has commenced on the
Montemayor Mine.

MINERAL SAN SEBASTIAN S.A. DE C.V. ("MISANSE")

(A)  MISANSE CORPORATE STRUCTURE

The SSGM real estate is owned by and leased to the Joint Venture by
Misanse, a Salvadoran-chartered corporation.  The Company owns 52% of the
total of  Misanse's issued and outstanding common shares.  The balance is
owned by approximately 100 El Salvador, Central American, and United
States' citizens.

                                     53

        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004

(B)  SSGM MINING LEASE

On January 14, 2003, the Company entered into an amended and renewed 30-
year lease agreement with Mineral San Sebastian Sociedad Anomina de Capital
Variable (Misanse) pursuant to the approval of the Misanse shareholders and
Misanse directors at a meeting held on January 12, 2003.  The renewed lease
is for a period of thirty (30) years commencing on the date that the
Company received its Renewed San Sebastian Gold Mine Exploitation
Concession/License, hereinafter identified as the "Renewed SSGM," from the
DHM.  The lease is automatically extendible for one or more equal periods.
The Company will pay to Misanse for the rental of this real estate the sum
of five percent of the net sales of the gold and silver produced from this
real estate, however, the payment will not be less than $343.00 per month.
The Company has the right to assign this lease without prior notice or
permission from Misanse.  This lease is pledged as collateral for loans
made to related parties (Note 7).

(C)  MINERAL CONCESSIONS/LICENSES

RENEWED SAN SEBASTIAN GOLD MINE EXPLOITATION CONCESSION/LICENSE (RENEWED
SSGM) - APPROXIMATELY 1.2306 SQUARE KILOMETERS, DEPARTMENT OF LA UNION, EL
SALVADOR, CENTRAL AMERICA

On September 6, 2002, at a meeting held with the El Salvadoran Minister of
Economy and the DHM, it was agreed to submit an application for the Renewed
SSGM for a 30-year term and to  simultaneously cancel the concession
obtained on July 23, 1987.  On September 26, 2002, the Company filed this
application.  On February 28, 2003 (received March 3, 2003) the DHM
admitted to the receipt of the application and the Company proceeded to
file public notices as required by Article 40 of the El Salvadoran Mining
Law and its Reform (MLIR).  On April 16, 2003, the Company's El Salvadoran
legal counsel filed with the DHM notice that it believed that it complied
with the requirements of Article 40, and that there were no objections; and
requested that the DHM make its inspection as required by MLIR Article 42.
The Company then provided a bond which was required by the DHM to protect
third parties against any damage caused from the mining operations, and it
simultaneously paid the annual surface tax.  On August 29, 2003 the Office
of the Ministry of Economy formally presented the Company with a twenty-
year Renewed SSGM which was dated August 18, 2003.  This Renewed SSGM
replaces the collateral that the same parties held with the previous
concession.

NEW SSGM EXPLORATION CONCESSION/LICENSE (NEW SSGM) - APPROXIMATELY 40.7694
SQUARE KILOMETERS

On October 20, 2002, the Company applied for the New SSGM, which covers an
area of 42 square kilometers and includes approximately 1.2306 square
kilometers of the Renewed SSGM.  The New SSGM is in the jurisdiction of the
City of Santa Rosa de Lima in the Department of La Union and in the Nueva
Esparta in the Department of Morazan, Republic of El Salvador, Central
America.  On February 24, 2003, the DHM issued the New SSGM for a period of
four years starting from the date following the notification of this
resolution which was received on March 3, 2003.  The New SSGM may be
extended for two two-year periods, or for a total of eight years.  Besides
the San Sebastian Gold Mine,  three other formerly operative gold and
silver mines known as the La Lola Mine, the Santa Lucia Mine, and the
Tabanco Mine are included in the New SSGM and are being explored.  The
Company has complied as required by filing its annual activity report and
it paid the annual surface tax.




                                     54

        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004

NUEVA ESPARTA EXPLORATION CONCESSION/LICENSE (NUEVA ESPARTA) - 45 SQUARE
KILOMETERS

On or about October 20, 2002, the Company filed an application with the DHM
for the Nueva Esparta, which consists of 45 square kilometers north and
adjacent to the New SSGM.  This rectangular area is in the Departments of
La Union (east) and Morazan (west) and in the jurisdiction of the City of
Santa Rosa de Lima, El Salvador, Central America.  Included in the Nueva
Esparta are eight other formerly operated gold and silver mines known as:
the Grande Mine, the Las Pinas Mine, the Oro Mine, the Montemayor Mine, the
Banadero Mine, the Carrizal Mine, the La Joya Mine and the Copetillo Mine.
The application was denied and presently is being appealed by the Company.

EL SALVADOR MINERAL PRODUCTION FEES

As of July 2001, a series of revisions to the El Salvador Mining Law offer
to make exploitation more attractive.  The principal change is that the fee
has been reduced to two percent of the gross gold and silver receipts.  The
Company believes that it is in compliance with the new law, and plans to
file applications for all of the mining concessions in which it has an
interest.

SCMP LAND AND BUILDING LEASE

On November 12, 1993, the Joint Venture entered into an agreement with
Corporacion Salvadorena de Inversiones ("Corsain"), an El Salvadoran
governmental agency, to lease for a period of ten years, approximately 166
acres of land and buildings on which its gold processing mill, plant and
related equipment (the SCMP) are located, and which is approximately 15
miles west of the SSGM site.  The basic annual lease payment was U.S.
$11,500, payable annually in advance, unless otherwise amended, and subject
to an annual increase based on the annual United States' inflation rate.
As agreed, a security deposit of U.S. $11,500 was paid on the same date and
this deposit was subject to increases based on any United States'
inflationary rate adjustments.

On April 26, 2004, a three-year lease, which includes an automatic
additional three-year extension subject to Corsain's review, was executed
by and between Corsain and the Company.  This lease is retroactive to
November 12, 2003 and the monthly lease payments are $1,418.51 plus the El
Salvadoran added value tax.  The lease is subject to an annual increase
based on the U.S. annual inflationary rate adjustments.  The SCMP is
strategically located to process ore from other mining projects.

MODESTO MINE

REAL ESTATE

The Company owns 63 acres of land which are a key part of the Modesto Mine
that is located near the city of El Paisnal, El Salvador.  This real estate
is subject to a mortgage and promissory note and is pledged as collateral
to certain parties described in Note 7.





                                     55


        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004

SAN FELIPE-EL POTOSI MINE ("POTOSI")

REAL ESTATE LEASE AGREEMENT

The Joint Venture entered into a lease agreement with the San Felipe-El
Potosi Cooperative ("Cooperative") of the city of Potosi, El Salvador on
July 6, 1993, to lease the real estate encompassing the San Felipe-El
Potosi Mine for a period of 30 years and with an option to renew the lease
for an additional 25 years, for the purpose of mining and extracting
minerals.

MONTEMAYOR MINE

The Joint Venture has leased approximately 175 acres of land that it
considers to be the key mining property.  The terms of the various leases
are one year with automatic renewal rights.  This property is located 14
miles northwest of the SCMP, six miles northwest of the SSGM, and about two
miles east of the city of San Francisco Gotera in the Department of
Morazan, El Salvador.

(5)  SYNOPSIS OF REAL ESTATE OWNERSHIP AND LEASES
-------------------------------------------------

The Company's 52%-owned subsidiary, Misanse, owns the 1,470 acre SSGM site
located near the city of Santa Rosa de Lima in the Department of La Union,
El Salvador.  Other real estate ownership or leases in El Salvador are as
follows:   the Company owns approximately 63 acres at the Modesto Mine; and
the Joint Venture leases the SCMP land and buildings on which its mill,
plant and equipment are located.  In addition, the Joint Venture has
entered into a lease agreement to lease approximately 675 acres based on
the production of gold payable in the form of royalties with a mining
prospect in the Department of San Miguel and it previously leased
approximately 175 acres in the Department of Morazan in the Republic of El
Salvador.  The Company also leases on a month-to-month basis approximately
4,032 square feet of office space in Milwaukee, Wisconsin.

(6)  NOTES PAYABLE AND ACCRUED INTEREST
---------------------------------------
<Table>
<Caption>
                                                             03/31/04      03/31/03
                                                           ------------  ------------
<S>                                                        <C>           <C>
Related Parties

Mortgage and promissory notes to related parties,
interest ranging from one percent to four percent
over prime rate, but not less than 16%, payable
monthly, due on demand, using the Misanse lease,
real estate and all other assets owned by the Company,
its subsidiaries and the Joint Venture as collateral.
(Note 7)                                                     $9,400,682    $8,027,380

Other

Short-term notes and accrued interest (March 31, 2004,
$112,578 and March 31, 2003, $90,922) issued to other
non related parties, interest rates of varying  amounts,
in lieu of actual cash payments and includes a mortgage
on a certain parcel of land pledged as collateral located
in El Salvador.                                                 247,579       225,922
                                                           ------------  ------------
Total:                                                     $  9,648,261  $  8,253,302
                                                           ============  ============
</Table>

                                     56

        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004

(7)  RELATED PARTY TRANSACTIONS
-------------------------------

The Company, in an attempt to preserve cash, had prevailed on its President
to accrue his salary for the past 23 years, including vacation pay, for a
total of $2,815,265 and $2,636,515 at March 31, 2004 and 2003,
respectively.

In addition, with the consent and approval of the Directors, the President
of the Company, as an individual and not as a Director or Officer of the
Company, entered into the following financial transactions with the
Company, the status of which is reflected as of March 31, 2004 and 2003:

The amount of cash funds which the Company has borrowed from its President
from time to time, together with accrued interest, amounts to $6,565,817
and $5,521,516 at March 31, 2004 and 2003, respectively.  To evidence this
debt, the Company has issued to its President a series of open-ended,
secured, on-demand promissory notes, with interest payable monthly at the
prime rate plus two percent, but not less than 16% per annum.

The Company has borrowed an aggregate of $915,066 and $824,866 at March 31,
2004 and 2003, respectively, including accrued interest, from the Company's
President's Rollover Individual Retirement Account (ELM RIRA).  These loans
are evidenced by the Company's open-ended, secured, on-demand promissory
note, with interest payable monthly at the prime rate plus four percent per
annum, but not less than 16% per annum.

On December 17, 2003, in order to reduce the Company's debt and to provide
liquidity to the ELM RIRA, the Company sold to the ELM RIRA, 200,000 of its
restricted common shares at a price of $.25 each for a total of $50,000.
The sale price of the common shares was no less favorable than the sales
price negotiated with unrelated third parties.

In order to satisfy the Company's cash requirements from time to time, the
Company's President has sold or pledged as collateral for loans, shares of
the Company's common stock owned by him.  In order to compensate its
President for selling or pledging his shares on behalf of the Company, the
Company has made a practice of issuing him the number of restricted shares
of common stock equivalent to the number of shares sold or pledged, plus an
additional number of shares equivalent to the amount of accrued interest
calculated at the prime rate plus three percent per annum and payable
monthly.  The Company receives all of the net cash proceeds from the sale
or from the pledge of these shares.  The Company did not borrow any common
shares during this fiscal year.  The share loans, if any, are all in
accordance with the terms and conditions of Director-approved, open-ended
loan agreements dated June 20, 1988, October 14, 1988, May 17, 1989, and
April 1, 1990.

On February 16, 1987, the Company granted its President, by unanimous
consent of the Board of Directors, compensation in the form of a bonus in
the amount of two percent of the pre-tax profits realized by the Company
from its gold mining operations in El Salvador, payable annually over a
period of twenty years commencing on the first day of the month following
the month in which gold production commences.

The President, as an individual, and not as a Director or Officer of the
Company, presently owns a total of 467 Misanse common shares.  There are a
total of 2,600 Misanse common shares issued and outstanding.




                                     57

        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004

Also with the consent and approval of the Directors, a company in which the
President has a 55% ownership, General Lumber & Supply Co., Inc. (GLSCO),
entered into the following agreements, and the status is reflected as of
March 31, 2004:

The Company leased approximately 4,032 square feet on a month-to-month
basis for its corporate headquarters' office; the monthly rental charge was
$2,789.  The same related company provides administrative services, use of
its vehicles, and other property, as required by the Company.

In lieu of cash payments for the office space rental and for the
consulting, administrative services, etc., these amounts due are added each
month to this related company's open-ended, secured, on-demand promissory
note issued by the Company.

In addition, this related company does from time to time use its credit
facilities to purchase items needed for itself or for the Joint Venture's
mining needs.

This related company has been issued an open-ended, secured, on-demand
promissory note which amounts to $1,262,390 and $1,120,442 at March 31,
2004 and 2003, respectively; the annual interest rate is four percent plus
the prime rate, but not less than 16%, and it is payable monthly.

On June 30, 2001, GLSCO purchased 250,000 restricted common shares at a
price of $.15 per share and it received options to purchase 250,000 common
shares on or before July 2, 2003, at a price of $.25 per share.  On June
24, 2003, GLSCO exercised its option right to purchase 230,000 shares.  The
terms of this transaction are no less favorable than those obtained from
unrelated third parties.

On December 17, 2003, in order to reduce debt, and in consideration for
cancellation of $115,900 of debt owed to GLSCO, the Company sold to GLSCO
436,600 of its restricted common shares, $.10 par value, at a price of $.25
a share.

The Company's Directors have consented and approved the following
transactions of which the status of each are reflected as of March 31, 2004
and 2003:

The President's wife's Rollover Individual Retirement Account (SM RIRA) has
the Company's open-ended, secured, on-demand  promissory note in the sum
of $503,581 and $429,391 at March 31, 2004 and 2003, respectively which
bears interest at an annual rate of prime plus three percent, but not less
than 16% and the interest is payable monthly.

The Directors also have acknowledged that the wife of the President is to
be compensated for her consulting fees due to her from October, 1, 1994
through September 30, 2000 or 72 months at $2,800 a month, and thereafter
at $3,000 per month.  The Company owes her as an individual and as a
consultant, the sum of $327,600 and $291,600 at March 31, 2004 and 2003,
respectively, for services rendered from October 1994.

The Law Firm which represents the Company in which a son of the President
is a principal is owed the sum of $327,015 for 1,767.65 hours of  legal
services rendered from July 1980 through March 31, 2004.  By agreement on
the date of payment, these fees are to be adjusted to commensurate with the
current hourly fees charged by the Law Firm.


                                     58

        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004

The son of the President and his son's wife have the Company's open-ended,
on-demand promissory note in the sum of $153,828 and $131,165 at March 31,
2004 and 2003, respectively, which bears interest at an annual rate of 16%
payable monthly.

The Directors, by their agreement, have deferred cash payment of their
Director fees beginning on January 1, 1981, until such time as the
Company's operations are profitable.   Effective from October 1, 1996, the
Director fees are $1,200 for each quarterly meeting and $400 for attendance
at any other Directors' meeting.  The Executive Committee Director fees are
$400 for each meeting.  The Directors and Officers have an option to
receive cash at such time as the Company has profits and an adequate cash
flow, or to at any time exchange the amount due to them for the Company's
common shares.  The Directors and Officers of the Company exercised their
option to receive a total of 101,110 common shares valued at $.27 a share
in lieu of any cash compensation for all amounts due to them as of March
31, 2004.  In addition, during this period one Director received 39,752 of
the Company's common shares for consulting services valued at $10,200.  The
Chairman/President does not receive any Director fees.

The Company advances funds, allocates and charges its expenses to the Joint
Venture.  The Joint Venture in turn capitalizes all of these advances,
costs and expenses.  When full production commences, these capitalized
costs will be charged as an expense based on a per unit production basis.
The Company also charges interest for its advances to the Joint Venture
which interest rate is established to be the prime rate quoted on the first
day of each month plus four percent and said interest is payable monthly.
This interest is eliminated from the consolidated statement of operations.
However, a separate accounting is maintained for the purpose of recording
the amount that is due to the Company from the Joint Venture.

COMPANY NET ADVANCES TO THE JOINT VENTURE
-----------------------------------------
<Table>
<Caption>
                                        2004                     2003
                                       -----------------------               -----------------------
                                Total     Interest       Total     Interest
                             Advances      Charges    Advances      Charges
                          -----------  ----------- -----------  -----------
<S>                       <C>          <C>         <C>          <C>
Beginning balances        $40,181,015  $23,751,735 $36,729,923  $20,448,289

March 31, 2004 advances     4,114,110    3,448,432   3,451,092    3,303,446

Total Company advances     44,295,125   27,200,167  40,181,015   23,751,735

Advances by three of the
Company's subsidiaries        590,265            0     590,265            0
                          -----------  ----------- -----------  -----------
Total net advances
March 31, 2004            $44,885,390  $27,200,167 $40,771,280  $23,751,735
                          ===========  =========== ===========  ===========
</Table>

(8)  Commitments
----------------

Reference is made to Notes 2, 4, 5, 6, 7, 10 and 12.

(9)  Income Taxes
-----------------

At March 31, 2004, the Company and its subsidiaries, excluding the Joint
Venture, have estimated net operating losses remaining in a sum of
approximately $5,063,150 which may be carried forward to offset future
taxable income; the net operating losses expire at various times to the
year of 2018.

                                     59

        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004

Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes.  Deferred taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporary differences and
operating loss, tax credit carry-forwards, and deferred tax liabilities are
recognized for taxable temporary differences.  Temporary differences are
the difference 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 than not that some
portion or all of the deferred tax will not be recognized.  Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.

<Table>
<Caption>
                                                             March 31,
                                                             --------------------------
                                                     2004          2003
                                                 ------------  ------------
<S>                                              <C>           <C>
  Deferred Tax Assets:
   Net Operating Loss Carryfowards                 $2,097,000           $ ?
   Valuation Allowance for Deferred Tax Assets    (2,097,000)             ?
                                                 ------------  ------------
   Net Deferred Tax Assets                       $          -  $          -
                                                 ============  ============
</Table>

(10)  DESCRIPTION OF SECURITIES
-------------------------------

A.  COMMON STOCK

The Company's Wisconsin Certificate of Incorporation effective as of April
1, 1999 authorizes the issuance of 50,000,000 shares of common stock, $0.10
par value per share of which 22,681,591 shares were issued and outstanding
as of March 31, 2004.  Holders of shares of common stock are entitled to
one vote for each share on all matters to be voted on by the shareholders.
Holders of common stock have no cumulative voting rights.  Holders of
shares of common stock are entitled to share ratably in dividends, if any,
as may be declared, from time to time by the Board of Directors in its
discretion, from funds legally available therefore.  In the event of a
liquidation, dissolution or winding up of the Company, the holders of
shares of common stock are entitled to share pro rata all assets remaining
after payment in full of all liabilities.  Holders of common stock have no
preemptive rights to purchase the Company's common stock.  There are no
conversion rights or redemption or sinking fund provisions with respect to
the common stock.  All of the issued and outstanding shares of common stock
are validly issued, fully paid and non-assessable.

B.  PREFERRED STOCK

There were no preferred shares issued and outstanding for the periods
ending March 31, 2004 or 2003.

The Company's Wisconsin Certificate of Incorporation authorizes the
issuance of 250,000 shares of preferred stock, $0.10 par value.

The preferred shares are issuable in one or more series.  If issued, the
Board of Directors is authorized to fix or alter the dividend rate,
conversion rights (if any), voting rights, rights and terms of redemption
(including any sinking fund provisions), redemption price or prices,
liquidation preferences and number of shares constituting any wholly
unissued series of preferred shares.


                                     60

        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004

C.  STOCK OPTION ACTIVITY:

<Table>
<Caption>

                                  03/31/04             03/31/03              03/31/02

                                  Weighted             Weighted              Weighted
                          Option   Average     Option   Average      Option   Average
                          Shares     Price     Shares     Price      Shares     Price
                       --------- ---------  --------- ---------   --------- ---------
<S>                    <C>       <C>        <C>       <C>         <C>       <C>
Outstanding,
 beg. yr.                960,000 $    0.21    670,000 $    0.22     920,000 $    1.27

Granted                                       290,000 $    0.19     520,000 $    0.25

Exercised              (500,000)       N/A          0       N/A           0       N/A

Forfeited               (60,000)       N/A          0       N/A   (500,000)       N/A

Expired                (190,000)       N/A                    0         N/A (270,000)  N/A
                       --------- ---------  --------- ---------   --------- ---------
Outstanding,
 end of yr.              210,000 $    0.23    960,000 $    0.21     670,000 $    0.22
                       ========= =========  ========= =========   ========= =========

</Table>

A summary of the outstanding stock options as of March 31, 2004, follows:

<Table>
<Caption>
                                                Weighted
                                                 Average
                Range of                        Remaining         Range of
                Exercise         Amount        Contractual        Exercise
                 Prices       Outstanding         Life              Price
             -------------   -------------    ------------       ----------
             <S>             <C>              <C>                <C>
             Up  to  $2.99         210,000     .3589 years            $0.23

</Table>

There were no options issued to any Director, Officer, or employee.

D.  STOCK RIGHTS - TO THE PRESIDENT

Reference is made to Note 7, Related Party Transactions, of the Company's
financial statements which disclose the terms and conditions of the share
loans to the Company by the President and the interest which is payable to
him by the Company's issuance of its restricted common shares.

Any share interest payable to the President is for shares loaned to the
Company and/or for such shares loaned or pledged for collateral purposes,
or for unpaid interest, from time to time, all in accordance with the terms
and conditions of Director-approved, open-ended loan agreements dated June
20, 1988, October 14, 1988, May 17, 1989 and April 1, 1990.

E.  SHARE LOANS - OTHERS

A series of borrowings of the Company's common shares were made from time
to time under the provision that the owners would sell said shares as the
Company's designee, with the proceeds payable to the Company.  In exchange,
the Company agreed to pay these shares loaned within 31 days or less by
issuing its restricted common shares, together with interest payable in
restricted common shares payable at a negotiated rate of interest normally
payable in advance for a period of one year.  As of March 31, 2004, there
were no shares due to other parties for shares borrowed or for interest
payment.

                                     61

        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004

F.  S.E.C. FORM S-8 REGISTRATION

On May 25, 2001, the Company filed its fourth Securities and Exchange
Commission Form S-8 Registration Statement No. 333-61650 under the
Securities Act of 1933, and it registered 1,500,000 of the Company's $0.10
par value common shares for the purpose of distributing shares pursuant to
the plan contained in such registration.  All of the 1,500,000 shares were
issued as of March 31, 2003.

On June 10, 2002, the Company filed its fifth Securities and Exchange
Commission Form S-8 Registration Statement No. 333-90122 under the
Securities Act of 1933, and it registered 1,500,000 of the Company's $0.10
par value common shares for the purpose of distributing shares pursuant to
the plan contained in such registration.  From the 1,500,000 shares
registered, 682,459 shares were issued, and 817,541 shares remain to be
issued as of March 31, 2004.

G.  COMMERCE GROUP CORP. EMPLOYEE BENEFIT ACCOUNT (CGCEBA)

This account was established for the purpose of compensating the Company's
employees for benefits such as retirement, severance pay, and all other
related compensation that is mandatory under El Salvadoran labor
regulations, and/or as determined by the Officers of the Corporation.  The
Directors provide the Officers of the Company with the authority to issue
its common shares to the CGCEBA on an as needed basis.  Under this plan,
payment can be made to any employee of the Company or the Company's
subsidiaries.  The CGCEBA has sold some of the shares issued to this
account from time to time to meet its obligations to its El Salvadoran
employees.  As of April 1, 2003, 321,000 shares remained in the account.
An additional 350,000 shares were issued and 286,000 shares were sold,
leaving a balance of 385,000 shares as of March 31, 2004.

(11)  LITIGATION
----------------

There is no known pending litigation.

(12)  CERTAIN CONCENTRATIONS AND CONCENTRATIONS OF CREDIT RISK
--------------------------------------------------------------

The Company is subject to concentrations of credit risk in connection with
maintaining its cash primarily in two financial institutions for the
amounts in excess of levels.  One is insured by the Federal Deposit
Insurance Corporation.  The other is an El Salvadoran banking institution
which the Company uses to pay its El Salvadoran obligations.  The Company
considers the U.S. institution to be financially strong and does not
consider the underlying risk at this time with its El Salvadoran bank to be
significant.  To date, these concentrations of credit risk have not had a
significant effect on the Company's financial position or results of
operations.

The Company is not subject to credit risk in connection with any hedging
activities as it has not hedged any of its gold production.  If the Company
changes its policies, then it will only use highly-rated credit worthy
counterparties, therefore it should not anticipate non-performance.

(13) COMMITMENTS AND CONTINGENCIES
----------------------------------

ENVIRONMENTAL COMPLIANCE

Based upon current knowledge, the Company believes that it is in compliance
with the U.S. and El Salvadoran environmental laws and regulations as
currently promulgated.  However, the exact nature of environmental control
problems, if any, which the Company may encounter in the future cannot be
predicted, primarily because of the increasing number, complexity and
changing character of environmental requirements that may be enacted or of
the standards being promulgated by governmental authorities.


                                     62

        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004

ENVIRONMENTAL GUARANTEES

In connection with the issuance of environmental permits, the Company has
provided the Government of El Salvador with the following guarantees on
September 27, 2002:  three-year guarantees were issued by the Banco
Agricola, S.C. on behalf of the Company to the Ministry of Environment and
Natural Resources; Guarantee No. 1901-0000059-8 was issued for the San
Cristobal Mill and Plant in the sum of $771.49; and Guarantee no. 1901-
0000058-7 was issued for the Renewed SSGM Exploitation Concession/License
in the sum of $14,428.68.

In connection with the Renewed SSGM Exploitation Concession/License, on
July 15, 2003 a one-year, third-party liability guarantee (bond) in the sum
of $42,857.14 was issued by Compania Anglo Salvadorena de Seguros, S.A.
(Anglosal) on behalf of the Company to the  Ministry of Economy's Office of
the Department of Hydrocarbons and Mines.  The Company pledged its SSGM
laboratory real estate as collateral to Anglosal for the issuance of the
bond.  On August 24, 2004 the bond was renewed and will expire on July 15,
2005, unless it is renewed.

The El Salvadoran Environmental Law, Decree No. 233, 1998 and the General
Regulation of the Environmental Law specify the following:

     -    An environmental permit from the Ministry of Environment and
          Natural Resources (MARN) based on the approval of an
          Environmental Impact Assessment, is required for exploration,
          exploitation and industrial processing of minerals and fossil
          fuels;
     -    The environmental permit requires the company to implement
          prevention, minimization or compensation measures established in
          the environmental management program, which is a component of the
          Environmental Impact Assessment;
     -    A financial security (bond) is required that covers the total
          cost of the facilities or investment required to comply with the
          environmental management plans included in the Environmental
          Impact Assessment.

Numeric standards for ambient air quality; emissions from fixed sources;
maximum environmental noise levels; water quality and effluent limits are
specified in various norms and regulation, including the Special Regulation
of Technical Norms for Environmental Quality Decree No. 40, and the Special
Regulations of Wastewater Decree No. 39.

The El Salvadoran Department of Hydrocarbons and Mines (DHM) requires
environmental permits to be issued in connection with the application of
the Renewed SSGM.  The issuance of these permits is under the jurisdiction
of the El Salvador Ministry of Environment and Natural Resources Office
(MARN).  On October 15, 2002, MARN issued an environmental permit under
Resolution 474-2002 for the SCMP.  On October 20, 2002, MARN issued an
environmental permit under Resolution 493-2002 for the Renewed SSGM
Exploitation area.

LEASE COMMITMENTS

The month-to-month lease of its offices is described in note (7) Related
Party Transactions of the Notes to the Consolidated Financial Statements.
The lease of the SCMP and other mining leases are described in note (4)
Commerce/Sanseb Joint Venture ("Joint Venture") and in note (5) Synopsis of
Real Estate Ownership and Leases of the Notes to the Consolidated Financial
Statements.


                                     63

        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004

(14) BUSINESS SEGMENTS
----------------------

The Statement of Financial Accounting Standards No. 131 (SFAS 131),
Disclosures about Segments of an Enterprise and Related Information became
effective for fiscal years beginning after December 15, 1997.  SFAS 131
establishes standards for the way that public business enterprises
determine operating segments and report information about those segments in
annual financial statements.  SFAS 131 also requires those enterprises to
report selected information about operating segments in interim financial
reports issued to shareholders.  SFAS 131 further establishes standards for
related disclosure about products and services, geographic areas, and major
customers.

The Company presently has two reportable segments:  mining and other.  The
mining segment was engaged in the exploration of precious metals.  The
mining operations are temporarily suspended.  The other segments are those
activities that are combined for reporting purposes.  There were no
reportable activities in the Internet business; no income and no expenses
were recorded.

<Table>
<Caption>
                                 Mining *1 El Salvador,           Corporate
                                        Central America        Headquarters
                                     ------------------  ------------------
<S>                                  <C>                 <C>
Year ended March 31, 2004
  Sales and revenues                 $                0  $                0
  Depreciation & amortization                         0                   0
  Operating income (loss)                             0           (237,790)
  Total assets                               34,169,935             249,446
  Capital expenditures                        1,861,353                   0

Year ended March 31, 2003
  Sales and revenues                 $                0  $                0
  Depreciation & amortization                         0                   0
  Operating income (loss)                             0           (232,647)
  Total assets                               32,277,568             222,582
  Capital expenditures                          806,764                   0

Year ended March 31, 2002
  Sales and revenues                 $                0  $                0
  Depreciation & amortization                         0                   0
  Operating income (loss)                             0           (303,466)
  Total assets                               31,121,523             269,149
  Capital expenditures                        1,378,388                   0

</Table>

*1   Its major customer for the refining and purchase of gold is a refinery
     located in the United States.  The price of gold is dependent on the
     world market price over which the Company, the refinery or any other
     single competitor do not have control.



                                     64

        COMMERCE GROUP CORP., ITS SUBSIDIARIES AND THE JOINT VENTURE
               Notes to the Consolidated Financial Statements
                               March 31, 2004

(15) QUARTERLY FINANCIAL DATA (UNAUDITED)
-----------------------------------------

The following is a tabulation of unaudited quarterly operating results for
2004 and 2003:

<Table>
<Caption>

                                                            Per Share Basic
                               Operating             Net        Diluted Net
Fiscal year ended 3/31/04       Revenues          (Loss)      Income/(Loss)
-------------------------     ----------    ------------    ---------------
<S>                           <C>           <C>             <C>
First quarter 6/30/03         $        0    $   (57,070)    $       (.0027)
Second quarter 9/30/03        $        0        (54,691)            (.0026)
Third quarter 12/31/03        $        0        (59,448)            (.0028)
Fourth quarter 3/31/04        $        0        (66,581)            (.0032)
                              ----------    ------------    ---------------
                              $        0    $  (237,790)    $       (.0113)
                              ==========    ============    ===============
First quarter 6/30/02         $        0    $   (68,630)    $       (.0036)
Second quarter 9/30/02        $        0        (60,023)            (.0032)
Third quarter 12/31/02        $        0        (61,884)            (.0033)
Fourth quarter 3/31/03        $        0        (42,110)            (.0022)
                              ----------    ------------    ---------------
                              $        0    $  (232,647)    $       (.0123)
                              ==========    ============    ===============
</Table>

(16) Uncertainties

     The Company has experienced recurring operating losses since the gold
     extraction operations have been placed on a hold status.  The Company
     has had no revenues during this phase and is therefore dependent upon
     raising capital to continue operations.  During the past 5 years, the
     Company and its shareholders and officers have been unable to provide
     the capital necessary to continue the operations of the Company and
     the maintenance of the mine and related equipment.  However, there is
     no guarantee that the Company can continue to provide required capital
     to keep the Company's assets maintained.  If the Company was unable to
     raise sufficient funds, the Company would be unable to pay the
     employees maintaining its mining equipment in El Salvador, which could
     result in loss of assets or impairment thereof.  The financial
     statements do not include any adjustments that might result from the
     outcome of this uncertainty.

     Management believes it has sufficient reserves through loans from its
     principal officer through interested accredited investors to continue
     operations for the coming year.  Management is also entertaining joint
     venture opportunities, and other financing in order to generate
     sufficient capital to begin the open pit heap leaching operation at
     the San Sebastian Gold Mine.




                                     65

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
------------------------------------------------------------------------

There has been no change in the Company's certified public accountants
during the past two years.  There has been no report on Form 8-K of a
disagreement between the Company and its accountants on any matter of
accounting principles or practices or financial statement disclosure.

ITEM 9(A).  CONTROLS AND PROCEDURES
-----------------------------------

Evaluation of Disclosure Controls and Procedures

The Company maintains a system of disclosure controls and procedures.  The
term "disclosure controls and procedures," as defined by regulations of the
Securities and Exchange Commission ("SEC"), means controls and other
procedures that are designed to ensure that information required to be
disclosed in the reports that the Company files or submits to the SEC under
the Securities Exchange Act of 1934, as amended (the "Act"), is recorded,
processed, summarized and reported, within the time periods specified in
the SEC's rules and forms.  Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in the reports that it
files or submits to the SEC under the Act is accumulated and communicated
to the Company's management, including its principal executive officer and
its principal financial officer, as appropriate to allow timely decisions
to be made regarding required disclosure.  The Company's Chief Executive
Officer and Chief Financial Officer have evaluated the Company's disclosure
controls and procedures as of the end of the period covered by the Annual
Report on Form 10-K/A and have concluded that the Company's disclosure
controls and procedures are effective as of the date of such evaluation.

Changes in Internal Control Over Financial Reporting

The Company also maintains a system of internal controls.  The term
"internal controls," as defined by the American Institute of Certified
Public Accountants' Codification of Statement on Auditing Standards, AU
Section 319, means controls and other procedures designed to provide
reasonable assurance regarding the achievement of objectives in the
reliability of the Company's financial reporting, the effectiveness and
efficiency of the Company's operations and the Company's compliance with
applicable laws and regulations.  There have been no changes in the
Company's internal controls or in other factors during the fourth fiscal
quarter that could significantly affect the Company's internal control over
financial reporting.

                                  PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------

The information required by this item appears under the captions "Officers
and Directors," "Section 16(a) Beneficial Ownership Reporting Compliance"
and "Code of Ethics" included in the Company's definitive proxy statement
for the 2004 Annual Meeting filed pursuant to Regulation 14A within 120
days after the end of the fiscal year and is incorporated by reference in
the Annual Report on Form 10-K/A.  Information regarding executive officers
and managers is contained in Part I of this report under "Item 4(a).
Executive Officers and Managers of the Company."



                                     66

ITEM 11.  EXECUTIVE COMPENSATION
--------------------------------

The information called for by Item 11 is incorporated by reference from
information under the caption "Executive Compensation" in the Company's
definitive proxy statement filed pursuant to Regulation 14A no later than
120 days after the close of its fiscal year.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------

The information called for by  Item 12 is incorporated by reference from
information under the captions "Security Ownership of Directors and
Management" and "Principal Shareholders" in the Company's definitive proxy
statement filed pursuant to Regulation 14A no later than 120 days after the
close of its fiscal year.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

The information called for by Item 13 is incorporated by reference from
information under the caption "Certain Relationships and Related
Transactions" in the Company's definitive proxy statement filed pursuant to
Regulation 14A no later than 120 days after the close of its fiscal year.

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES
------------------------------------------------

The information called for by Item 14 is incorporated by reference from the
information under the caption "Fees to Independent Accountants" to be
included in the Company's definitive proxy statement filed pursuant to
Regulation 14A no later than 120 days after the close of its fiscal year.

                                  PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------

(A)  FINANCIAL STATEMENTS AND SCHEDULES
---------------------------------------

See Index to Consolidated Financial Statements and Supplementary Financial
Data in Item 8 of this report.

Report of Independent Registered Public Accounting Firm
on the Financial Statement Schedules . . . . . . . . . . . . . . . . . . 71

Schedule IV (1) Indebtedness of Related Parties. . . . . . . . . . . . . 72

Schedule IV (2) Indebtedness to Related Parties. . . . . . . . . . . . . 73

(B)  REPORTS ON FORM 8-K
-------------------------

There were no Form 8-K reports filed during the three months ended March
31, 2004.



                                     67

(C)  EXHIBITS
-------------

All of the exhibits are incorporated by reference into this Annual Report
on Form 10-K/A. The exhibit numbers noted by an asterisk (*) indicate
exhibits actually filed with the Annual Report on Form 10-K on May 27,
2004, with the exception of Exhibit 23.1, which is filed herein.



Exhibit No. Description of Exhibit
----------- --------------------------------------------------------------
   3.1      Articles of Incorporation of the Company.   (Incorporated by
            reference to Exhibit 3.(i) of the Company's S.E.C. Form 8-K
            filed on April 13, 1999.)

   3.2      By-laws of the Company.  (Incorporated by reference to Exhibit
            3.(ii) of the  Company's S.E.C. Form 8-K filed on April 13,
            1999.)

   3.3      The Articles of Amendment of the Wisconsin corporation
            increasing the authorized shares to 50,000,000 common shares.
            (Incorporated by reference to Exhibit 3.(iii) of the Company's
            S.E.C. Form 8-K filed on April 13, 1999.)

   3.4      The Articles of Merger from a Delaware corporation to a
            Wisconsin corporation effective April 1, 1999 at 12:01 a.m.
            (Central Time).  (Incorporated by reference to Exhibit 2.(i)
            of the Company's S.E.C. Form 8-K filed on April 13, 1999.)

   3.5      A Certificate of Merger filed with the Office of the Secretary
            of State of Delaware merging into a Wisconsin corporation.
            (Incorporated by reference to Exhibit 2.(ii) of the Company's
            S.E.C. Form 8-K filed on April 13, 1999.)


                                     68



Exhibit No. Description of Exhibit
----------- --------------------------------------------------------------
   4        Instruments defining the rights of security holders, including
            indentures.

   4.1      Two-Year Stock Option Agreement dated April 30, 2002, and
            expiring on April 30, 2004, to purchase 40,000 common shares
            at $.25 per share. (Incorporated by reference to Exhibit 4.9
            of the Company's Form 10-K for the year ended March 31, 2002.)

   4.2      Two-Year Stock Option Agreement dated August 21, 2002, and
            expiring on August 21, 2004, to purchase 40,000 common shares
            at $.22 per share. (Incorporated by reference to Exhibit 4.10
            of the Company's Form 10-K for the year ended March 31, 2003.)

   4.3      Two-Year Stock Option Agreement dated September 20, 2002, and
            expiring on September 20, 2004, to purchase 65,000 common
            shares at $.22 per share. (Incorporated by reference to
            Exhibit 4.11 of the Company's Form 10-K for the year ended
            March 31, 2003.)

   4.4      Two-Year Stock Option Agreement dated September 25, 2002, and
            expiring on September 25, 2004, to purchase 65,000 common
            shares at $.22 per share. (Incorporated by reference to
            Exhibit 4.12 of the Company's Form 10-K for the year ended
            March 31, 2003.)

   9        Voting Trust Agreement--not applicable.

   10       Material contracts.

   10.1     Bonus compensation, Edward L. Machulak, February 16, 1987.
            (Incorporated by reference to Exhibit 7 of the Company's Form
            10-K for the year ended March 31, 1987.)

   10.2     Loan Agreement and Promissory Note, Edward L. Machulak, June
            20, 1988. (Incorporated by reference to Exhibit 10.2 of the
            Company's Form 10-K for the year ended March 31, 1993.)

   10.3     Loan Agreement and Promissory Note, Edward L. Machulak,
            October 14, 1988. (Incorporated by reference to Exhibit 10.3
            of the Company's Form 10-K for the year ended March 31, 1993.)

   10.4     Loan Agreement and Promissory Note, Edward L. Machulak, May
            17, 1989. (Incorporated by reference to Exhibit 10.4 of the
            Company's Form 10-K for the year ended March 31, 1993.)

   10.5     Loan Agreement and Promissory Note, Edward L. Machulak, April
            1, 1990. (Incorporated by reference to Exhibit 10.5 of the
            Company's Form 10-K for the year ended March 31, 1993.)


                                     69



Exhibit No. Description of Exhibit
----------- --------------------------------------------------------------
   10.6     Letter Agreement, Edward L. Machulak, October 10, 1989.
            (Incorporated by reference to Exhibit 10.6 of the Company's
            Form 10-K for the year ended March 31, 1993.)

   10.7     Loan Agreement and Promissory Note dated January 19, 1994.
            (Incorporated by reference to Exhibit 10.10 of the Company's
            Form 10-K for the year ended March 31, 1995.)

   10.8     John E. Machulak and Susan R. Robertson, Loan Agreement and
            Promissory Note dated June 3, 1994.  (Incorporated by
            reference to Exhibit 10.14 of the Company's Form 10-K for the
            year ended March 31, 1995.)

   10.9     Lillian M. Skeen, Loan Agreement and Open Ended On Demand
            Promissory Note dated June 26, 1997. (Incorporated by
            reference to Exhibit 10.9 of the Company's Form 10-K for the
            year ended March 31, 1998.)

   10.10    Robert C. Skeen, Loan Agreement and Open Ended On Demand
            Promissory Note dated June 26, 1997. (Incorporated by
            reference to Exhibit 10.10 of the Company's Form 10-K for the
            year ended March 31, 1998.)

   10.11    Robert C. Skeen, Loan Agreement and Open Ended On Demand
            Promissory Note dated January 20, 1998. (Incorporated by
            reference to Exhibit 10.11 of the Company's Form 10-K for the
            year ended March 31, 1998.)

   10.12    John E. Machulak and Susan R. Robertson, Loan Agreement and
            Open Ended On Demand Promissory Note dated March 6, 1998.
            (Incorporated by reference to Exhibit 10.12 of the Company's
            Form 10-K for the year ended March 31, 1998.)

   10.13    Lillian M. Skeen, Loan Agreement and Open Ended On Demand
            Promissory Note dated May 21, 1998. (Incorporated by reference
            to Exhibit 10.13 of the Company's Form 10-K for the year ended
            March 31, 1998.)

   10.14    Edward A. Machulak, Loan Agreement and Open Ended On Demand
            Promissory Note dated March 6, 1998. (Incorporated by
            reference to Exhibit 10.14 of the Company's Form 10-K for the
            year ended March 31, 1999.)

   10.15*   Three-year lease agreement by and between the Company and
            Corporacion Salvadorena de Inversiones ("Corsain"), an El
            Salvadoran governmental agency, covering the real estate known
            as the San Cristobal Mill and Plant (SCMP) executed on April
            26, 2004, retroactive to November 13, 2003.

   11*      Schedule of Computation of Net Income Per Share

   21*      Subsidiaries and Joint Venture of the Company


                                     70



Exhibit No. Description of Exhibit
----------- --------------------------------------------------------------

   23.1*    Consent of Independent Certified Public Accountant

   31.1*    Certification of Chief Executive Officer and Chief Financial
            Officer pursuant to Rule 13(a)-14(a)/15d-14(a), as adopted
            pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

   31.2*    Certification of Executive Vice President and Secretary
            pursuant to Rule 13(a)-14(a)/15d-14(a), as adopted pursuant to
            Section 302 of the Sarbanes-Oxley Act of 2002.

   32.1*    Certification of Chief Executive Officer and Chief Financial
            Officer pursuant to U.S.C. Section 1350, as adopted pursuant
            to Section 906 of the Sarbanes-Oxley Act of 2002.

   32.2*    Certification of Executive Vice President and Secretary
            pursuant to U.S.C. Section 1350, as adopted pursuant to
            Section 906 of the Sarbanes-Oxley Act of 2002.

   99.0     Additional Exhibits

   99.1*    Confirmation agreement, General Lumber & Supply Co., Inc., May
            10, 2004.

   99.2*    Confirmation Agreement, Edward L. Machulak, May 10, 2004.

   99.3*    Confirmation Agreement, Edward L. Machulak Rollover Individual
            Retirement Account, May 10, 2004.

   99.4*    Confirmation Agreement, Sylvia Machulak as an individual and
            for her Rollover Individual Retirement Account, May 10, 2004.

   99.5     Concession Agreement Assignment to the Company by Misanse
            (Incorporated by reference to Exhibit 1 of the Company's Form
            10-K for the year ended March 31, 1988.)

   99.6     S.E.C. Form S-8 Registration Statement No. 333-90122 filed
            under the Securities Act of 1933, as amended and declared
            effective June 10, 2002, registering one and one-half million
            of its common shares, ten cents par value.  (Incorporated by
            reference as this S.E.C. Form S-8 Registration Statement had
            been filed on June 10, 2002.)  817,541 shares remain to be
            issued as of March 31, 2004.

   99.6(a)* Consent of Independent Certified Public Accountant to
            incorporate by reference in the S.E.C. Form S-8 Registration
            Statement No. 333-90122 filed under the Securities Act of 1933
            as amended and declared effective June 10, 2002 the Certified
            Public Accountant's report dated May 10, 2004 relating to the
            financial statements of the Company for the years ended March
            31, 2004 and 2003.


                                     71

Exhibit No. Description of Exhibit
----------- --------------------------------------------------------------

   99.7     Individual financial statements of majority-owned companies
            have been omitted because these companies do not constitute a
            significant or material contribution to the Company.



                                     72

                            COMMERCE GROUP CORP.
                        FORM 10-K/A - MARCH 31, 2004

                                  PART IV

                                 SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized on July 5,
2005.


                         COMMERCE GROUP CORP.

                         (Company)

                         By: /s/ Edward L. Machulak
                         ---------------------------------------
                         Edward L. Machulak
                         Chairman of the Board of Directors,
                         Member of Executive Committee,
                         Member of Audit Committee
                         Director-Emeritus, President, Treasurer,
                         Chief Executive, Operating and Financial Officer


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


Name                     Office                             Date
/s/ Edward L. Machulak
Edward L. Machulak       Chairman of the Board of Directors,
                         Member of Executive Committee,
                         Member of Audit Committee,
                         Director-Emeritus, President,
                         Treasurer, Chief Executive,
                         Operating and Financial Officer    July 5, 2005

/s/ Edward A. Machulak
Edward A. Machulak       Director, Member of Executive
                         Committee, Director-Emeritus,
                         Executive Vice President and
                         Secretary                          July 5, 2005

/s/ Sidney Sodos
Sidney Sodos             Director                           July 5, 2005

/s/ John H. Curry
John H. Curry            Director and Member of Audit
                         Committee                          July 5, 2005







                                     73

             COMMERCE GROUP CORP. AND CONSOLIDATED SUBSIDIARIES

                              SCHEDULE IV (1)
               INDEBTEDNESS OF RELATED PARTIES - NON CURRENT
                 YEARS ENDED MARCH 31, 2004, 2003, AND 2002

Commerce/Sanseb Joint Venture (Joint Venture)
---------------------------------------------

<Table>
<Caption>
                          Beginning of     Additions to Deletions to   Balance at End
Name of Person (1)          Period (3)  Indebtedness(2) Indebtedness    of Period (3)
-----------------         ------------  --------------- ------------   --------------
<S>                       <C>           <C>             <C>            <C>
Year ended March 31, 2004
Joint Venture              $40,771,280       $4,114,110           $0      $44,885,390

Year ended March 31, 2003
Joint Venture              $37,320,188       $3,451,092           $0      $40,771,280

Year ended March 31, 2002
Joint Venture              $33,109,401       $4,210,787           $0      $37,320,188

</Table>

(1)  Commerce Group Corp. (90% ownership) and San Sebastian Gold Mines,
     Inc. (10% ownership), Joint Venture ("Joint Venture"); includes the
     advances from three of the Company's subsidiaries.

(2)  The purpose of the advances is to continue the exploration,
     exploitation and development of the SSGM and the other mining
     prospects and activities managed by the Joint Venture which are
     located in the Republic of El Salvador, Central America.  Also, funds
     were used to retrofit, rehabilitate, repair and to renovate the San
     Cristobal Mill and Plant acquired by the Joint Venture for the purpose
     of producing gold.  The standby maintenance and holding costs are also
     included.  The addition to indebtedness is netted to include any
     adjustments for payments or credits.

(3)  Beginning with September 30, 1987, the total indebtedness includes the
     advances of $590,265 from three of the Company's subsidiaries.

San Sebastian Gold Mines, Inc. (SSGM)
-------------------------------------
<Table>
<Caption>
                          Beginning of     Additions to Deletions to   Balance at End
Name of Person (1)          Period (3)  Indebtedness(2) Indebtedness    of Period (3)
-----------------         ------------  --------------- ------------   --------------
<S>                       <C>           <C>             <C>            <C>
Year ended March 31, 2004
  SSGM                     $34,160,023       $2,180,883           $0      $36,340,906
Year ended March 31, 2003
  SSGM                     $31,989,058       $2,170,965           $0      $34,160,023
Year ended March 31, 2002
  SSGM                     $29,505,884       $2,483,174           $0      $31,989,058

</Table>
(1)  San Sebastian Gold Mines, Inc. (SSGM) in which Commerce Group Corp.
     owns 82 1/2% of its issued and outstanding common shares.

(2)  The advances to SSGM primarily consist of the interest due to the
     Company on SSGM's outstanding indebtedness.



                                     74

            COMMERCE GROUP CORP.  AND CONSOLIDATED SUBSIDIARIES

                               SCHEDULE IV(2)
                      INDEBTEDNESS TO RELATED PARTIES
             CURRENT YEARS ENDED MARCH 31, 2004, 2003, AND 2002

<Table>
<Caption>

                                        Balance at       Net Additions
                                      Beginning of      (Deletions) to     Balance at
                                            Period    Indebtedness (1)  End of Period
                                     -------------    ----------------  -------------
<S>                                  <C>              <C>               <C>
Year ended March 31, 2004
-------------------------
President of the Company             $   5,521,516    $   1,044,301(a)  $   6,565,817
President's RIRA                           824,866           90,200(b)        915,066
President's Affiliated Company           1,120,442          141,948(c)      1,262,390
President's Wife's RIRA                    429,391           74,190(d)        503,581
President's Son/Daughter-in-Law            131,165           22,663(d)        153,828
                                     -------------    ----------------  -------------
  Total, notes payable               $   8,027,380    $      1,373,302  $   9,400,682
                                     =============    ================  =============
President's Accrued Salary           $   2,636,515    $     178,750(e)  $   2,815,265
                                     =============    ================  =============
President's Wife's Consulting Fees   $     291,600    $      36,000(f)  $     327,600
                                     =============    ================  =============
Legal fees
  (President's son is a principal)   $     326,941    $          74(g)  $     327,015
                                     =============    ================  =============

Year ended March 31, 2003
-------------------------
President of the Company             $   4,643,856    $     877,660(a)  $   5,521,516
President's RIRA                           703,647          121,219(b)        824,866
President's Affiliated Company           1,098,193           22,249(c)      1,120,442
President's Wife's RIRA                    366,289           63,102(d)        429,391
Others                                     111,889           19,276(d)        131,165
                                     -------------    ----------------  -------------
  Total, notes payable               $   6,923,874    $      1,103,506  $   8,027,380
                                     =============    ================  =============
President's Accrued Salary           $   2,457,765    $     178,750(e)  $   2,636,515
                                     =============    ================  =============
President's Wife's Consulting Fees   $     255,600    $      36,000(f)  $     291,600
                                     =============    ================  =============
Legal fees
(President's son is a principal)     $     314,804    $      12,137(g)  $     326,941
                                     =============    ================  =============

Year ended March 31, 2002
-------------------------
President of the Company             $   3,676,503    $     967,353(a)  $   4,643,856
President's RIRA                           599,768          103,879(b)        703,647
President's Affiliated Company             926,205          171,988(c)      1,098,193
President's Wife's RIRA                    312,459           53,830(d)        366,289
Others                                      95,445           16,444(d)        111,889
                                     -------------    ----------------  -------------
 Total, notes payable                $   5,610,380    $   1,313,494     $   6,923,874
                                     =============    ================  =============

President's Accrued Salary           $   2,279,015    $     178,750(e)  $   2,457,765
                                     =============    ================  =============
President's Wife's Consulting Fees   $     219,600    $      36,000(f)  $     255,600
                                     =============    ================  =============
Legal fees
  (President's son is a principal)   $     308,286    $       6,518(g)  $     314,804
                                     =============    ================  =============

</Table>

                                     75

(1)(a)(b) The net additions to the open-ended, secured, on-demand
          promissory notes issued to the President of the Company, as an
          individual, and not as a Director or Officer of the Company, and
          his RIRA are from net cash advances and/or accrued interest.

(1)(c)    The President owns 55% of an Affiliated Company's common shares.
          The additions to the open-ended, secured, on-demand promissory
          note issued to an Affiliated Company result from cash advances,
          accrued interest, accrued office rent, vehicle rental, computer
          use and other expenses incurred on behalf of the Company.

          The President's Affiliated Company had been issued the following
          stock options:

          The President's Affiliated Company has purchased the following
          shares which payment was offset by the reduction of the notes
          payable to the Affiliated Company:  on January 3, 2003, 575,000
          of the Company's restricted common shares, $.10 par value, were
          sold at a price of $.175 per share for a total of $100,625; and
          on March 26, 2003, 175,000 of the Company's restricted common
          shares, $.10 par value, were sold at a price of $.27 per share,
          for a total of $47,250.

          During the fiscal year ended March 31, 2004, the Affiliated
          Company on June 24, 2003, purchased 250,000 of the Company's
          restricted common shares at a price of $.25 each for a total of
          $37,500 and on December 17, 2003, it purchased 463,600 restricted
          common shares at a price of $.25 each for a total of $115,900.
          The total purchase price of the shares of $153,400 was paid by
          reducing the amount owed to the Affiliated Company.

(1)(d)    The additions resulted from accrued interest earned during the
          fiscal year.

(1)(e)    The President's salary of $165,000 was accrued for the entire
          fiscal year.  In addition, the Directors, pursuant to a
          resolution, compensated the President in the sum of  $13,750 for
          one month's vacation pay.

(1)(f)    Twelve months of consulting fees at $3,000 per month for a total
          of $36,000.

(1)(g)    The addition of the amounts due to the Law Firm results for legal
          services rendered.







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