AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 2005
REGISTRATION NO. 333-110099

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

POST-EFFECTIVE AMENDMENT NO. 1 ON
FORM SB-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

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CADENCE RESOURCES CORPORATION
(Name of Small Business Issuer in its Charter)

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UTAH 1311 87-0306609
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)

HOWARD CROSBY, PRESIDENT
6 EAST ROSE STREET
WALLA WALLA, WASHINGTON 99362
(509) 526-3491
(Name, Address and Telephone Number of Principal Executive Offices
and Agent for Service)

WITH A COPY TO:
HENRY I. ROTHMAN
JENKENS & GILCHRIST PARKER CHAPIN LLP
405 LEXINGTON AVENUE
NEW YORK, NEW YORK 10174
(212) 704-6000

Approximate date of commencement of proposed sale to the public: From time
to time after this post-effective amendment is declared effective.

If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: |X|

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: |_|

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: |_|

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: |_|

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box: |_|

Pursuant to Rule 429 of the Securities Act of 1933, as amended, this
registration statement also serves as Post-Effective Amendment No. 1 to the
registrant's Registration Statement on Form SB-2, File No. 333-117493 relating
to 841,000 shares of the registrant's common stock issuable upon exercise of
warrant.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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The information contained in this prospectus is not complete and may be changed.
The selling security holders may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.

SUBJECT TO COMPLETION, DATED FEBRUARY 11, 2005

CADENCE RESOURCES CORPORATION
3,919,540 SHARES OF COMMON STOCK
$.01 PAR VALUE

We are registering up to 3,919,540 shares of our common stock, 1,222,765
shares of which are issuable upon exercise of warrants, for sale by certain of
our shareholders from time to time. The selling security holders will receive
all the proceeds from the sale of the offered shares. See "Selling Shareholders"
on page 29 of this prospectus.

Our common stock is traded on the OTC Bulletin Board under the symbol
"CDNR". The last reported bid price of the common stock on February 3, 2005 was
$2.45 per share.

Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 2 to read about certain risks you should consider
before buying shares of our common stock.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Our principal executive offices are located at 6 East Rose Street, Walla
Walla, Washington 99362. Our telephone number is (509) 526-3491.

The date of this Prospectus is February ___, 2005.

TABLE OF CONTENTS

PROSPECTUS SUMMARY.............................................................1

RISK FACTORS...................................................................2

USE OF PROCEEDS................................................................8

MARKET FOR OUR COMMON STOCK AND RELATED SHAREHOLDER MATTERS....................8

FORWARD-LOOKING STATEMENTS ....................................................8

BUSINESS AND PROPERTIES........................................................9

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ..................................................9

MANAGEMENT....................................................................22

EXECUTIVE COMPENSATION........................................................24

PRINCIPAL SHAREHOLDERS........................................................27

SELLING SHAREHOLDERS..........................................................27

PLAN OF DISTRIBUTION..........................................................33

RELATED PARTY TRANSACTIONS....................................................34

DESCRIPTION OF SECURITIES.....................................................38

TRANSFER AGENT AND REGISTRAR..................................................39

EXPERTS.......................................................................40

WHERE YOU CAN FIND MORE INFORMATION...........................................40

FINANCIAL STATEMENTS

Index to Financial Statements................................................F-1

Financial Statements for the fiscal year ended September 30, 2004
Independent Auditor's Report..............................................F-2
Balance Sheets as of September 30, 2004, 2003 and 2002....................F-3
Statements of Operations and Comprehensive Loss for the years ended
September 30, 2004, 2003 and 2002......................................F-5
Statement of Stockholder's Equity.........................................F-6
Statements of Cash Flows for the years ended September 30,
2004, 2003 and 2002....................................................F-9
Notes to the Financial Statements........................................F-11

PROSPECTUS SUMMARY

This prospectus is part of a registration statement we filed with the U.S.
Securities and Exchange Commission. You should rely on the information provided
in this prospectus. Neither we nor the selling security holders listed in this
prospectus have authorized anyone to provide you with information different from
that contained in this prospectus. The selling security holders are offering to
sell, and seeking offers to buy, shares of common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or of any sale of common stock. Applicable
SEC rules may require us to update this prospectus in the future.

THE COMPANY

We are a Utah corporation, originally incorporated on April 7, 1969 to
explore and mine natural resources under the name Royal Resources, Inc. In
January 1983, we changed our name to Royal Minerals, Inc. In March 1994, we
changed our name to Consolidated Royal Mines, Inc. In September 1995, we changed
our name to Royal Silver Mines, Inc. On May 2, 2001 we changed our name to
Cadence Resources Corporation, in connection with a corporate reorganization to
focus our operations on oil and gas exploration.

We have operations in Wilbarger County, Texas, DeSoto Parish, Louisiana,
Eddy County, New Mexico and Alpena County, Michigan. We also have leased
interests in western Kansas and southern Texas. We are engaged in acquiring,
exploring, developing, and producing oil and gas properties.

During the year ended September 30, 2004, substantially all of our
revenues were derived from our interests in five producing oil wells in
Wilbarger County, TX and eleven producing natural gas wells in DeSoto Parish,
LA. We received small revenues from our interest in nine producing gas wells in
Alpena County, MI and in September 2004 received our first production revenue
from our minority interest in a producing well in Eddy County, NM.

At the completion of our 2004 fiscal year in September, we were continuing
to evaluate the performance of our natural gas wells in DeSoto Parish. Along
with our partner, Bridas Energy, we have not made plans to drill additional
wells at that location. In the first fiscal quarter of 2005, we drilled three
new wells on our West Electra Lake Unit, in Wilbarger County, TX, completed the
seismic evaluation process on the north block of our Kansas acreage,
participated for a working interest in development wells being drilled in Eddy
County, NM and participated for a working interest in an exploratory well in
Tennessee.

On November 19, 2004, we announced that we signed a letter of intent
establishing a 60 day exclusivity period in order to conduct due diligence and
negotiate terms for acquisition of all of the outstanding shares of Aurora
Energy, Ltd., a privately held company based in Traverse City, Michigan in
exchange for shares of common stock of Cadence. On January 31, 2005, Cadence,
Aurora Acquisition Corp., a wholly owned subsidiary of Cadence, and Aurora
entered into a definitive merger agreement providing for the acquisition of all
of the outstanding shares and options of Aurora by Cadence. The closing is
conditioned upon, among other things, obtaining the approval of Aurora's
shareholders and the shares of Cadence's common stock being issued to Aurora's
shareholders being registered on a Form S-4 registration statement. Upon
consummation of the merger, (i) Cadence will issue two shares of its common
stock for each share of Aurora common stock, (ii) all options and warrants to
purchase Aurora common stock shall become options or warrants to receive shares
of Cadence common stock, and (iii) Aurora will become a wholly owned subsidiary
of Cadence. It is contemplated by the parties that if this effort is
successfully consummated, Cadence will relocate its operational headquarters to
Aurora's offices in Traverse City, MI and the Board of Directors and management
of Cadence will be significantly restructured.

Our principal executive offices are located at 6 East Rose Street, Walla
Walla, Washington 99362, and our telephone number is (509) 526-3491.

THE OFFERING

Common stock offered by the selling security holders: 3,497,400

Common stock outstanding as of January 24, 2005 12,911,827 shares

Use of Proceeds: We will not receive
any of the proceeds
from the sale of the
shares owned by the
selling security
holders. We may
receive proceeds in
connection with the
exercise of
warrants, the
underlying shares of
which may be sold by
the selling security
holder under this
prospectus.

RISK FACTORS

An investment in our common stock involves a high degree of risk. You
should carefully consider the risks described below and the other information
contained in this prospectus and in the documents incorporated by reference
before deciding to invest in our common stock.

RISKS RELATED TO OUR BUSINESS

WE CONTINUE TO EXPERIENCE SIGNIFICANT OPERATING LOSSES.

We reorganized our business in July 2001 to pursue oil and gas exploration
and development opportunities, and have a limited operating history in our
current form. Since we reorganized our business, our operating costs have
exceeded our revenue in each quarter. We have incurred cumulative net losses of
approximately $8,700,000 from June 30, 2001 through September 30, 2004, and we
anticipate a net loss at least through 2005. We may not be able to obtain or
maintain any level of revenues, natural gas and crude oil reserves or
production. If we are unsuccessful in these efforts, we may never achieve
profitability.

WE HAVE NO FULL-TIME EMPLOYEES AND ARE DEPENDENT ON OUR DIRECTORS, OFFICERS AND
THIRD-PARTY CONTRACTORS.

We have no full time employees and are wholly dependent upon the personal
efforts and abilities of our officers, directors and our consulting geologist,
each of whom devotes less than all of his time and efforts to our operations.
The loss of any one of these individuals could adversely affect our business. We
do not have employment agreements with any of our officers or directors and must
rely on consultants paid on a monthly basis. There is no assurance that we will
be able to hire and retain such personnel in the future.

WE LACK EXPERIENCE IN THE OIL AND GAS INDUSTRY AND MUST RELY ON THIRD PARTIES TO
CONDUCT OUR OIL AND GAS EXPLORATION ACTIVITIES.

We have limited expertise in the area of oil and gas exploration. Our
management does not have significant technical training or experience in the oil
and gas industry and only devotes a small percentage of their time to our
business. Accordingly, we have engaged third party geologists and landmen who
have been largely responsible for the evaluation, recommendation, and
acquisition of our existing leases. We have historically retained, and plan to
continue in the future to retain, drilling contractors, technicians, landmen,
additional geologists, and engineers to direct the drilling and completion of
oil and gas wells on our leases, and to aid in the acquisition and evaluation of
other properties.

OUR DRILLING ACTIVITIES MAY BE UNSUCCESSFUL.

We cannot predict prior to drilling and testing a well whether the well
will be productive or whether we will recover all or any portion of our
investment in the well. Our drilling for oil and natural gas may involve
unprofitable efforts, not only from dry holes but from wells that are productive
but do not produce sufficient quantities to cover drilling and completion costs
thus which are not economically viable. Our efforts to identify commercially
productive reservoirs, such as studying seismic data, the geology of the area
and production history of adjoining fields, do not conclusively establish that
oil and gas is present in commercial quantities. If our drilling efforts are
unsuccessful we may never achieve profitability.

WE DO NOT OPERATE ANY OF OUR OIL AND GAS PROPERTIES

We do not operate any of the properties in which we have an interest. As a
result, we have a limited or no control over:

o the timing of drilling and recompleting of wells;

o the timing and amounts of production;

o the approval of other participants in drilling wells;

o development and operating costs; and

o negative gas balance conditions.

These and other aspects of the operation of our properties and the
success of our drilling and development activities are entirely dependent on the
expertise and financial resources of our third-party operators.

WE MAY BE UNABLE TO MAKE ACQUISITIONS OF PRODUCING PROPERTIES OR PROSPECTS OR
SUCCESSFULLY INTEGRATE THEM INTO OUR OPERATIONS.

Acquisitions of producing properties are an essential part of our
long-term growth strategy. We may not be able to identify suitable acquisitions
in the future or to finance these acquisitions on favorable terms or at all. In
addition, we compete against other companies for acquisitions, many of whom have
substantially greater managerial and financial resources than we do. The
successful acquisition of producing properties requires an assessment of
recoverable reserves, exploration potential, future oil and gas prices,
operating costs, potential environmental and other liabilities and other factors
beyond our control. These assessments are necessarily inexact and their accuracy
inherently uncertain. Such a review may not reveal all existing or potential
problems, nor will it necessarily permit us to become sufficiently familiar with
the properties to fully assess their merits and deficiencies. Significant
acquisitions can change the nature of our operations and business depending upon
the character of the acquired properties, which may be substantially different
in operating and geological characteristics or geographic location than existing
properties. Our acquisitions may not be integrated successfully into our
operations and may not achieve desired profitability objectives.

THE FAILURE TO DEVELOP RESERVES COULD ADVERSELY AFFECT OUR PRODUCTION AND CASH
FLOWS.

Our success depends upon our ability to find, develop or acquire oil and
gas reserves that are economically recoverable. We will need to conduct
successful exploration or development activities or acquire properties
containing proved reserves, or both. The business of exploring for, developing
or acquiring reserves is capital intensive. We may not be able to make the
necessary capital investment to expand our oil and natural gas reserves from
cash flows and external sources of capital may be limited or unavailable. Our
drilling activities may not result in significant reserves and we may not have
continuing success drilling productive wells. Exploratory drilling involves more
risk than development drilling because exploratory drilling is designed to test
formations for which proved reserves have not been discovered. Additionally,
while our revenues may increase if prevailing oil and gas prices increase
significantly, our finding costs for reserves also could increase and we may not
be able to finance additional exploration or development activities.

WE MAY HAVE DIFFICULTY FINANCING OUR PLANNED GROWTH.

We have experienced and expect to continue to experience substantial
capital expenditure and working capital needs, particularly as a result of our
property acquisition and development drilling activities. We will most likely
require additional financing, in addition to cash generated from our operations,
to fund our planned growth. If our cash flow from operations is not sufficient
to satisfy our capital expenditure requirements, additional financing may not be
available to us on acceptable terms or at all. In the event additional capital
resources are unavailable, we may be forced to curtail our acquisition,
development drilling and other activities or to sell some of our assets on an
untimely or unfavorable basis.

OIL AND GAS PRICES ARE VOLATILE. A SUBSTANTIAL DECREASE IN OIL AND NATURAL GAS
PRICES COULD ADVERSELY AFFECT OUR BUSINESS.

Our revenues, profitability and future growth depend in part on prevailing
natural gas and crude oil prices. Prices also affect the amount of cash flow
available for capital expenditures and our ability to borrow and raise
additional capital. Lower prices may also reduce the amount of natural gas and
crude oil that we can economically produce.

Prices for natural gas and crude oil fluctuate widely, as evidenced by the
volatility in natural gas prices in response to the war between the United
States and Iraq. The prices for oil and natural gas are subject to a variety of
factors beyond our control, including:

o the level of consumer product demand;

o weather conditions;

o domestic and foreign governmental regulations;

o the price and availability of alternative fuels;

o political conditions in oil and gas producing regions;

o the domestic and foreign supply of oil and gas;

o market uncertainty; and

o worldwide economic conditions.

WE MAY NOT HAVE GOOD AND MARKETABLE TITLE TO OUR PROPERTIES.

It is customary in the oil and gas industry that upon acquiring an
interest in a non-producing property, that only a preliminary title
investigation be done at that time and that a drilling title opinion be done
prior to the initiation of drilling, neither of which can substitute for a
complete title investigation. We have followed this custom to date and intend to
continue to follow this custom in the future. If the title to our prospects
should prove to be defective, we could lose the costs that we have incurred in
their acquisition, or incur substantial costs for curative title work.

COMPETITION IN OUR INDUSTRY IS INTENSE, AND WE ARE SMALLER AND HAVE A MORE
LIMITED OPERATING HISTORY THAN MOST OF OUR COMPETITORS.

We compete with major and independent oil and gas companies for property
acquisitions and for the equipment and labor required to operate and develop
these properties. Most of our competitors have substantially greater financial
and other resources than we do. In addition, larger competitors may be able to
absorb the burden of any changes in federal, state and local laws and
regulations more easily than we can, which would adversely affect our
competitive position. These competitors may be able to pay more for exploratory
prospects and productive natural gas and oil properties and may be able to
define, evaluate, bid for and purchase a greater number of properties and
prospects than we can. Our ability to explore for oil and gas prospects and to
acquire additional properties in the future will depend on our ability to
conduct operations, to evaluate and select suitable properties and to complete
transactions in this highly competitive environment.

OIL AND NATURAL GAS OPERATIONS INVOLVE VARIOUS RISKS.

The oil and gas business involves operating hazards such as well blowouts,
craterings, explosions, uncontrollable flows of crude oil, natural gas or well
fluids, fires, formations with abnormal pressures, pipeline ruptures or spills,
pollution, releases of toxic gas and other environmental hazards and risks, any
of which could cause us to experience substantial losses. In addition, we may be
liable for environmental damage caused by previous owners of properties
purchased or leased by us.

Federal and state regulation of oil and gas production and transportation,
tax and energy policies, changes in supply and demand and general economic
conditions all could adversely affect our ability to produce and market our
natural gas and crude oil. Production from gas wells in many geographic areas of
the United States, including Louisiana and Texas, has been curtailed or shut-in
for considerable periods of time due to a lack of market demand, and such
curtailments may continue for a considerable period of time in the future. There
may be an excess supply of gas in areas where our operations will be conducted.
In such event, it is possible that there will be no market or a very limited
market for our production.

As a result of operating hazards, regulatory risks and other uninsured
risks, we could incur substantial liabilities to third parties or governmental
entities, the payment of which could reduce or eliminate funds available for
exploration, development or acquisitions.

WE LACK INSURANCE THAT WOULD LOWER RISKS TO OUR INVESTORS.

We do not maintain any insurance against certain losses or liabilities
which may arise from operations, including some pollution and environmental
risks. We also do not have "key man" life insurance, or errors and omissions
coverage. In addition to the operational risks that this poses for us, it may
make it more difficult to recruit or maintain executive officers and directors.

WE ARE SUBJECT TO COMPLEX FEDERAL, STATE AND LOCAL LAWS AND REGULATIONS THAT
COULD ADVERSELY AFFECT OUR BUSINESS.

Oil and gas operations are subject to various federal, state and local
government laws and regulations which may be changed from time to time in
response to economic or political conditions. Matters that are typically
regulated include:

o discharge permits for drilling operations;

o drilling bonds;

o reports concerning operations; o spacing of wells;

o unitization and pooling of properties;

o environmental protection; and

o taxation.

From time to time, regulatory agencies have imposed price controls and
limitations on production by restricting the rate of flow of oil and gas wells
below allowed production capacity to conserve supplies of natural gas and crude
oil. We also are subject to changing and extensive tax laws, the effects of
which we cannot predict.

The development, production, handling, storage, transportation and
disposal of natural gas and crude oil, by-products and other substances and
materials produced or used in connection with oil and gas operations are subject
to laws and regulations primarily relating to protection of human health and the
environment. The discharge of natural gas, crude oil or pollutants into the air,
soil or water may give rise to significant liabilities on our part to the
government and third parties and may result in the assessment of civil or
criminal penalties or require us to incur substantial costs of remediation.

Legal and tax requirements frequently are changed and subject to
interpretation, and we are unable to predict the ultimate cost of compliance
with these requirements or their effect on our operations. Existing laws or
regulations, as currently interpreted or reinterpreted in the future, could harm
our business, results of operations and financial condition.

RISKS RELATED TO THE OWNERSHIP OF OUR STOCK

WE MAY EXPERIENCE VOLATILITY IN OUR STOCK PRICE, WHICH COULD NEGATIVELY AFFECT
YOUR INVESTMENT, AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT OR ABOVE THE
OFFERING PRICE.

The market price of our common stock may fluctuate significantly in
response to a number of factors, some of which are beyond our control,
including:

o quarterly variations in operating results;

o changes in financial estimates by securities analysts;

o changes in market valuations of other similar companies;

o announcements by us or our competitors of new products or of
significant technical innovations, contracts, acquisitions,
strategic partnerships or joint ventures;

o additions or departures of key personnel;

o any deviations in net sales or in losses from levels expected
by securities analysts; and

o future sales of common stock.

In addition, the stock market has recently experienced extreme volatility
that has often been unrelated to the performance of particular companies. These
market fluctuations may cause our stock price to fall regardless of our
performance.

BECAUSE OUR SECURITIES TRADE ON THE OTC BULLETIN BOARD, YOUR ABILITY TO SELL
YOUR SHARES IN THE SECONDARY MARKET MAY BE LIMITED.

The shares of our common stock have been listed and principally quoted on
the Nasdaq OTC Bulletin Board since May 1994. Because our securities currently
trade on the OTC Bulletin Board, they are subject to the rules promulgated under
the Securities Exchange Act of 1934, as amended, which impose additional sales
practice requirements on broker-dealers that sell securities governed by these
rules to persons other than established customers and "accredited investors"
(generally, individuals with a net worth in excess of $1,000,000 or annual
individual income exceeding $200,000 or $300,000 jointly with their spouses).
For such transactions, the broker-dealer must determine whether persons that are
not established customers or accredited investors qualify under the rule for
purchasing such securities and must receive that person's written consent to the
transaction prior to sale. Consequently, these rules may adversely effect the
ability of purchasers to sell our securities and otherwise affect the trading
market in our securities. Because our shares are deemed "penny stocks," you may
have difficulty selling them in the secondary trading market.

The Securities and Exchange Commission has adopted regulations which
generally define a "penny stock" to be any equity security that has a market
price (as defined in the regulations) less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions.
Additionally, if the equity security is not registered or authorized on a
national securities exchange or Nasdaq, the equity security also would
constitute a "penny stock." As our common stock falls within the definition of
penny stock, these regulations require the delivery, prior to any transaction
involving our common stock, of a risk disclosure schedule explaining the penny
stock market and the risks associated with it. Disclosure is also required to be
made about compensation payable to both the broker-dealer and the registered
representative and current quotations for the securities. In addition, monthly
statements are required to be sent disclosing recent price information for the
penny stocks. The ability of broker/dealers to sell our common stock and the
ability of shareholders to sell our common stock in the secondary market would
be limited. As a result, the market liquidity for our common stock would be
severely and adversely affected. We can provide no assurance that trading in our
common stock will not be subject to these or other regulations in the future,
which would negatively affect the market for our common stock.

A LARGE NUMBER OF SHARES WILL BE ELIGIBLE FOR FUTURE SALE AND MAY DEPRESS OUR
STOCK PRICE.

Our shares that are eligible for future sale may have an adverse effect on
the price of our stock. As of January 24, 2005, there were 12,911,827 shares of
our common stock outstanding. As of January 24, 2005 over five million shares of
our common stock will be freely tradeable without substantial restriction or the
requirement of future registration under the Securities Act of 1933. The
remainder of our outstanding shares, most of which are held by our officers,
directors and greater than 5% shareholders, may be sold without registration
under the exemption from registration provided by Rule 144 under the Securities
Act. In addition, as of January 24, 2005, an additional 2,457,624 shares were
subject to outstanding options or warrants or were issuable upon the conversion
of our Class A Preferred Shares.

Sales of substantial amounts of common stock, or a perception that such
sales could occur, and the existence of options or warrants to purchase shares
of common stock at prices that may be below the then current market price of the
common stock, could adversely affect the market price of our common stock and
could impair our ability to raise capital through the sale of our equity
securities.

WE DO NOT HAVE CUMULATIVE VOTING AND A SMALL NUMBER OF EXISTING SHAREHOLDERS
CONTROL OUR COMPANY, WHICH COULD LIMIT YOUR ABILITY TO INFLUENCE THE OUTCOME OF
SHAREHOLDER VOTES.

Our shareholders do not have the right to cumulative votes in the election
of our directors. Cumulative voting, in some cases, could allow a minority group
to elect at least one director to our board. Because there is no provision for
cumulative voting, a minority group will not be able to elect any directors.
Accordingly, the holders of a majority of the shares of common stock, present in
person or by proxy, will be able to elect all of the members of our board of
directors.

Our executive officers and directors, together with our two largest
shareholders, beneficially own as of January 24, 2005 approximately 53% of our
common stock. As a result, these entities and individuals will be able to
control the outcome of shareholder votes, including votes concerning the
election of directors, the adoption or amendment of provisions in our charter or
bylaws and the approval of mergers and other significant corporate transactions.

OUR ARTICLES OF INCORPORATION CONTAIN PROVISIONS THAT DISCOURAGE A CHANGE OF
CONTROL.

Our articles of incorporation contain provisions that could discourage an
acquisition or change of control without our board of directors' approval. Our
articles of incorporation authorize our board of directors to issue preferred
stock without shareholder approval. If our board of directors elects to issue
preferred stock, it could be more difficult for a third party to acquire control
of us, even if that change of control might be beneficial to shareholders.

USE OF PROCEEDS

We will not receive any of the proceeds from the sale of the shares owned
by the selling security holders. We may receive proceeds in connection with the
exercise of warrants, the underlying shares of which may in turn be sold by
selling security holder. Although the amount and timing of our receipt of any
such proceeds are uncertain, such proceeds, if received, will be used for
general corporate purposes.

MARKET FOR OUR COMMON STOCK AND RELATED SHAREHOLDER MATTERS

MARKET FOR OUR COMMON STOCK

Our common stock trades under the symbol CDNR on the Over-the-Counter
Bulletin Board Electronic Quotation System maintained by the National
Association of Securities Dealers, Inc. Approximately fifteen professional
market makers hold themselves out as willing to make a market in our common
stock. Following is information about the range of high and low bid prices for
our common stock for each fiscal quarter in the last two fiscal years and the
first two fiscal quarters of the current fiscal year. These quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not necessarily represent actual transactions.

QUARTER ENDED HIGH BID QUOTATION LOW BID QUOTATION
- ------------------------------------ ------------------ -----------------
December 31, 2002 $ 1.90 $ 1.51
March 31, 2003 $ 1.75 $ 1.40
June 30, 2003 $ 1.85 $ 1.40
September 30, 2003 $ 3.55 $ 1.75

December 31, 2003 $ 3.60 $ 2.75
March 31, 2004 $ 4.40 $ 3.00
June 30, 2004 $ 3.75 $ 1.75
September 30, 2004 $ 2.15 $ 1.70

December 31, 2004 $1.65 $0.98
March 31, 2005 (through January 24, 2005) $1.70 $1.09

HOLDERS

As of January 24, 2005, there were 429 holders of record of our common
stock, although we believe that there are additional beneficial owners of our
common stock who own their shares in "street name."

DIVIDENDS

There have been no cash dividends declared on our common stock since our
company was formed. Dividends are declared at the sole discretion of our board
of directors. It is not anticipated that any dividends will be declared for the
foreseeable future on our common stock.

FORWARD-LOOKING STATEMENTS

This prospectus, supplements to this prospectus and the documents
incorporated by reference contain certain forward-looking statements about our
financial condition, results of operations and business. These statements may be
made expressly in this document or may be "incorporated by reference" to other
documents we have filed with the Securities and Exchange Commission. You can
find many of these statements by looking for words such as "believes,"
"expects," "anticipates," "estimates" or similar expressions used in this
prospectus, supplements to this prospectus or documents incorporated by
reference.

These forward-looking statements are subject to numerous assumptions,
risks and uncertainties. Factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by us in those statements include, among
others, the following:

o the quality of our properties with regard to, among other things,
the existence of reserves in economic quantities;

o our ability to increase our production and oil and gas income
through exploration and development;

o the number of locations to be drilled and the time frame within
which they will be drilled;

o future prices of natural gas and crude oil;

o anticipated domestic demand for oil and natural gas; and

o the adequacy of our capital resources and liquidity.

Because such statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by the
forward-looking statements. You are cautioned not to place undue reliance on
such statements, which speak only as of the date of this prospectus or
supplements to this prospectus or, in the case of documents incorporated by
reference, as of the date of such document.

We do not undertake any responsibility to release publicly any revisions
to these forward-looking statements to take into account events or circumstances
that occur after the date of this prospectus or supplements to this prospectus.
Additionally, we do not undertake any responsibility to update you on the
occurrence of any unanticipated events which may cause actual results to differ
from those expressed or implied by the forward-looking statements.

BUSINESS AND PROPERTIES

THE COMPANY

OIL AND NATURAL GAS OPERATIONS

[GRAPHIC OMITTED]

DeSoto Parish, Louisiana

We leased over 4,250 acres in DeSoto Parish (approximately 40 miles south
of Shreveport, Louisiana) in the summer of 2001 and throughout 2002. Our acreage
is southwest of the Holly Field and southeast of the Bethany Longstreet Field,
both extensively drilled and developed since 1996 by Sonat (now El Paso
Corporation). In April 2003, we contributed these leases to a joint exploration
and development program with Bridas Energy, which has operations in the
Texas-Louisiana Gulf Coast area. Under this program, Bridas Energy is the
operator of the DeSoto Parish properties. Bridas Energy is a wholly-owned
subsidiary of Bridas Corporation, an Argentinean-based private, independent
energy company with headquarters in Buenos Aires.

Under the terms of our joint exploration agreement with Bridas Energy, we
assigned Bridas Energy a 55% working interest in all of the acreage constituting
the area of mutual interest of our DeSoto Parish leases in return for a cash
payment of $50,000. Bridas Energy agreed to fund all costs of drilling,
completing and bringing to production the initial test well, the Ardis-Martin
Timber #27-1, drilled during June 2003, in Section 27 of this prospect. Upon
successful completion of this test well, we conveyed an additional 20% working
interest to Bridas Energy in that well and all other leases covering acreage in
Section 27, leaving us a 25% working interest in Section 27. We retain a 45%
working interest in all other wells on the leased acreage in this prospect and a
lesser working interest in any wells drilled in the area of mutual interest
around the leased acreage, depending upon the amount of acreage leased by each
respective party in that particular section. Our ninth well, the Eva Gamble #4-1
was drilled in March 2004 in the area of mutual interest to the south of Section
27. We have a 22.5% working interest in this well.

As of December 31, 2004 we had twelve producing wells in this field, one
of which had just begun producing in mid-October 2004. During the month of
December 2004, these wells produced natural gas at an aggregate average rate per
well of 2,402 Mcf per day. The sixth, seventh, and eighth wells in this field
were drilled to the shallower Hosston sand formation to test these formations,
but we have been generally disappointed at the rate of production from these
wells. We decided to impair the carrying value of one of these wells as of June
30, 2004, and made the election to impair the carrying value of three more wells
at September 30, 2004. The twelfth well in the field, the Billingsley well, is a
Cotton Valley well which was placed on production in October of 2004. Through
January 31, 2005, this well had averaged 477 McF per day.

As of September 30, 2004, all but three of our producing wells in DeSoto
Parish were from the Cotton Valley formation.. The Cotton Valley formation lies
immediately below the Hosston, with the best sands typically extending to about
10,300 feet. Of the twelve producing wells as of December 31, 2004, we have a
25% working interest and an approximate 20% net revenue interest in three of
them and a 45% working interest and an approximate 36% net revenue interest in
nine of them.

The Seven wells in this project completed to the Cotton Valley formation
produced at an aggregate rate of approximately 2,071 Mcf/day during December
2004. The seventh well drilled to the Puluxy Formation, the JB Barr #2, produced
36,675 mcf of gas during fiscal 2004 and has produced 6,075 mcf of gas between
October 1, 2004 and January 31, 2005. The Hosston wells produced at an aggregate
rate of approximately 286 Mcf/day during December 2004.

During the second fiscal quarter of 2004, we began to focus on the
development of the Hosston sand formation. The first well completed to the
Hosston sand, the Adelle Thomas #28-1, was drilled to a total depth of
approximately 8,100 feet and, as of September 30, 2004, was not producing
commercial quantities of gas. We have elected to take an impairment charge on
this well at September 30, 2004. We have a 45% working interest and an
approximate 36% net revenue interest in this well. The second well initially
drilled solely to the Hosston sand, the Eva Gamble #4-1, has also produced only
small commercial quantities of natural gas. As of January 31, 2005, this well
was producing at a rate of 80 mcf per day, and we elected to take an impairment
charge on the carrying value of this well as of September 30, 2004. We have a
22.5% working interest and approximate 18% net revenue interest in this well.
The third well drilled to the Hosston sand, the Sampson #33-1, was completed as
of mid-May, 2004 to a depth of approximately 9300 feet and to date has produced
35,948 mcf of gas. As of January 31, 2005 this well was producing at a rate of
approximately 100 mcf per day. We have a 45% working interest and approximate
36% net revenue interest in this well.

We decided to impair the carrying value of the Leon Gamble #33-1 and the
Eugene Cowdin #27-1 effective as of June 30, 2004, and we decided to impair the
carrying value of the Adell Thomas, the JB Barr #2 and the Sampson 33-1 as of
September 30, 2004.

In May 30, 2004, we had drilled, completed and logged our eleventh well,
the Martin Timber #27-2 to the Cotton Valley formation, The well had begun
producing as of May 31, 2004 at good flush rates of production and to date,
through January 31, 2005, has produced 104,248 mcf of gas at an average daily
rate of 419 mcf . We have a 25% working interest and an approximate 20% net
revenue interest in the Martin-Timber #27-2.

The twelfth well, the Billingsley #28-1 was drilled in Section 28, to a
depth of approximately 10,300 feet. Well logs indicated commercial pay zones in
the Cotton Valley and Hosston formations. This well was placed into production
in October of 2004 at an initial flow rate of 1,451mcf per day, and through
January 31, 2005 had produced 55,691 mcf of gas at an average daily rate of 484
mcf. We have a 45% working interest and approximate 36% net revenue interest in
the Billingsley #28-1.

In May, 2004, Bridas Energy began drilling a new well in Section 28, the
Barr #28-2 well, to the shallower Paluxy and Rodessa sand formations. This well
was drilled to intersect shallower pay which was revealed in the deeper Barr
#28-1 well previously drilled in November, 2003. The well was completed in the
Paluxy formation and began producing in early July. Although the initial flow
rates for this Puluxy well were encouraging, the decline over the first three
months was very dramatic, and as of September 30, 2004 the well was not
producing economic quantities of gas.

The DeSoto Parish properties are located on a major anti-clinorium on the
southeast side of the Sabine Uplift. The Sabine Uplift is a large structure that
is related to the cretaceous and younger rocks in the established oil and gas
fields of northeast Texas and northern Louisiana. In this area, wells from these
formations produce approximately 35% to 50% of the well's reserves in the first
24 months of production, with the remainder produced over 12 to 15 years.

Our drilling and completion costs for these DeSoto Parish wells drilled to
the Cotton Valley formation, to the 8/8ths interest, are approximately $1.25
million to $1.3 million per well. Ready access points to both interstate and
intrastate gas pipelines are available. We have been generally disappointed by
the performance of these wells and will continue to evaluate the substandard
performance of our Hosston formation wells and formulate future development
plans in this field. In fact, it should be noted that we may not proceed to
develop any further wells in this area and may elect to dispose of our interest
therein or write-down the carrying cost of the project entirely.

Additionally, our technical staff is studying other completion techniques
being used successfully by other operators of Hosston wells in the area to
assess the application of these techniques to our wells. However, as of the date
of this report, no specific recommendations have been made to our management.

Wilbarger County, Texas

Our property in Texas is located on the Waggoner Ranch, a large,
privately-held ranch in Wilbarger County from which oil and gas has been
produced since 1910, approximately 50 miles northwest of Wichita Falls, Texas,
and 15 miles south of the Oklahoma border. Since October 2001, we have conducted
exploration activities on the Waggoner Ranch,. The W.T. Waggoner Estate is the
operator of all of our wells on the Waggoner Ranch and the sole purchaser of all
production from these properties. We logged our first productive well in this
field in January 2002. During the month of September 2004, we owned interests in
five wells on these properties, producing an aggregate of approximately 98 net
working interest barrels per day, to the 8/8ths interest, of 35(degree) API
sweet crude oil.

The major geologic feature in this part of north Texas is the Red River
Arch, which consists of Permian and Leonardon shales and sands. This structure
has historically produced more than 150 million barrels of oil from several
geologic features, including the Canyon limestone formation. Our primary targets
on this prospect are oil-bearing pinnacle reefs in the Canyon limestone
formation, typically located between 3,000 and 3,600 feet. In addition, numerous
"stacked" oil-bearing shallower horizons are also known to exist in this area.
These zones are also primary targets of our exploration. We are producing oil
from two areas of the Ranch: the east side of Electra Lake, referred to as the
Virgin Reef Prospect, and the west side of Electra Lake, referred to as the West
Electra Lake Prospect.

The Virgin Reef Leasehold consists of approximately 160 acres. In August
2002, we signed an exploration agreement with the Waggoner Ranch on 1,000 acres
in the West Electra Lake Prospect, with a surrounding 1/2 mile area of mutual
interest, from which our current production comes. The West Electra Lake
Leasehold currently consists of an aggregate of 532 acres under lease and a 1/2
mile area of mutual interest surrounding such acreage.

Because of the shallow nature of the wells in this area, prospect,
drilling and completion costs have ranged between approximately $160,000 and
$180,000 per well, on an 8/8ths basis. The typical production profile of wells
in the Lower Milham Sand formation is a steady decline of approximately 15% per
year. Wells producing from the Canyon formation are expected to decline at rates
approaching 25% per year.

We have two producing wells on the Virgin Reef Prospect, the #1A in which
we have a 60% working interest and a 45.6% net revenue interest and the #1B
well, in which we have 100% working interest and a 76% net revenue interest. The
#1A well was logged in January 2002 and showed four pay zones between 2,400 feet
and 3,002 feet. This well is currently producing from the Lower Milham Sand at a
depth of approximately 2,500 feet. We have already produced this well from the
deeper Canyon formation zones and re-completed the well in the Lower Milham
zone. One more zone in this well remains to be completed. This well produced an
average of approximately 50 net working interest barrels per day during
September 2004. The #1B well produced only a nominal 5.5 net working interest
barrels of oil per day during April 2004, and by September 2004 was producing
only a nominal rate of oil.

In August 2002, we began developing the West Electra Lake Prospect. We
logged our first well in the first quarter of calendar 2003. We have three
producing wells in this prospect, all of which are producing from the upper
Milham Sand at a depth of approximately 2,600 feet. The first well, the West
Electra Lake #1, in which we have a 45% working interest and a 34.2% net revenue
interest, has 10 feet of net pay. The West Electra Lake #2 and #3 wells, in
which we have a 50% working interest and a 38% net revenue interest, were both
drilled in June 2003 and encountered 10 feet and 11 feet of net pay,
respectively, in the same zone. These three wells are subject to Texas Railroad
Commission production limits and during September 2004, produced at the rate of
an aggregate of approximately 72 barrels of oil per day, which is below the
maximum allowable rate of an aggregate of 120 barrels of oil per day, with the
pumps operating for only eight hours per day. At this time we expect that rate
of production to continue for at least the next two years, subject to normal
decline. Drilling and completion costs for the wells on the West Electra Lake
Prospect have ranged from approximately $160,000 to $220,000 per well, on an
8/8th basis.

In December 2004 we commenced a program to drill three more wells on the
West Electra Lake unit. The first well was logged on December 7th, and indicated
the expected Milham pay interval, as well as an unexpected 12 feet of pay in the
Saddle Creek formation at about 1700 feet. The second new well was logged on
December 18, 2004 and encountered some ten feet of net pay in the Upper Milham
formation. Both of these wells have been completed as of January 31, 2005. Two
new wells are scheduled for drilling in March, 2005.

We have drilled three non-commercial wells on the Virgin Reef and West
Electra Leases. In May, 2002 we drilled the #2A well which targeted the lower
Milham Sand formation. This well was only marginally productive, so we converted
it to a saltwater disposal well. In December, 2002 we drilled the #2B well which
targeted a reef prospect in the Canyon limestone formation. The #2B well was a
dry hole. In July, 2004 we drilled the 1D and encountered only a sub economic
pay in the Dyson sand. The well was therefore plugged and abandoned.

Alpena County, Michigan

In December 2002, we began participating in a natural gas drilling program
in Alpena County, Michigan with Aurora Energy, Ltd. As of September 30, 2004, we
had a 22.5% working interest (before payout, 20% after payout), 18% net revenue
interest (before payout, 16% after payout), in ten producing wells in Alpena
County. Production commenced from this field in June 2003 and our ten producing
wells produced at an average aggregate rate of approximately 80 Mcf/day during
September 2004 and received an average price of $4.51per Mcf. Aurora is the
operator of all our properties in Alpena County.

The target of this prospect is the well-known Antrim shale formation that
has yielded natural gas production from more than 7,500 wells along a 30 mile
thick trend stretching from Lake Michigan to Lake Huron. Antrim shale wells
typically cost approximately $180,000 to $200,000 per well to drill and complete
and typically pay out in approximately three to four years. Production typically
peaks at approximately six to 18 months and then follows a slow decline curve of
approximately 30 to 40 years. Our participation agreement with Aurora Energy,
Ltd., originally gave us participation rights in up to 200 wells to be drilled
by Aurora into the Antrim shale to depths of approximately 800 to 1,000 feet,
but effective as of May 15, 2004, we waived our rights to participate in future
wells in this prospect in order to focus on our Louisiana, Texas and Kansas
projects.

New Mexico

In June 2004, we participated for a 20% working interest, 15% net revenue
interest, in the Santa Nina Prospect in Eddy County, NM. This prospect was
developed by and is operated by SDX Resources of Midland, TX, an experienced
operator with over 20 years of operational experience in the Permian Basin. The
well was completed in July 2004, with an initial flow rate in excess of 50
barrels of oil per day, plus natural gas. The well was produced for some 40
days, and then shut in to allow a gas pipeline to be attached. This work is in
process. We received our first production check for this well in October 2004.

Earlier in the year, we announced that it had signed an agreement with SDX
Resources for an option to participate for up to a 25% working interest, 20% net
revenue interest, in up to 17 development wells in a project called the
Sparkplug Unit. These wells will be offsetting existing production in the San
Andreas and Yeso formations to a maximum depth of about 5,000 feet. Drilling on
the initial development well, in which we elected to take a 20% working
interest, commenced on December 16, 2004. Initial results indicate multiple pay
horizons in the San Andreas formation and, as of January 31, 2005, the well is
in the process of being completed.

Tennessee

In August, 2004 we acquired a 25% equity ownership in TN Oil Company,
which owns leases covering some 1500 acres prospective for oil in central and
north central Tennessee. Subsequent to the end of the fiscal year, we elected to
participate for 100% of the working interest in a well being drilled by TN Oil,
as operator, to a depth of some 1700 feet. This well targeted oil production
from the Murfreesboro and Knox formations. The well was spudded on December 17,
2004. Based upon the well logs, our geologists determined that this well was
non-commercial and elected to plug the well.

Western Kansas

Our newest oil exploration project is in the Anadarko Basin in Lane and
Ness Counties, Kansas. In June 2004, we completed our first leasing program in
the area, consisting of approximately 26,000 acres. We have a 100% working
interest and an approximate 83% net revenue interest in these leases. During
September and October 2004, we completed a three dimensional seismic shooting
program on the 13,000 acres which constitute the Cadence North Block. We will
acquire 3-D seismic data on the remainder of the acreage prior to making a
decision to drill any test wells. We plan to use a local third-party operator to
develop these prospects and we currently expect to begin drilling on the
acquired acreage during the 2005 fiscal year. As the project moves into the
exploratory drilling and operational phases, we expect to contract out drilling
and operations to experienced local operators in the State of Kansas.

Southern Texas

We have completed leasing of 58 acres in Matagorda County, Texas, on a
salt dome prospect. We have identified one drilling target on this lease and
expect to begin drilling the first test well sometime in the second fiscal
quarter of 2005 (somewhat later than we first anticipated due to the complexity
of obtaining a drill site title opinion for this lease). We expect the drilling
and completion costs on this well to range from approximately $200,000 to
$215,000. Operations will be contracted for with third parties experienced in
this part of Texas.

OIL RESERVES

The following table presents information regarding proved reserves of oil
attributable to our interests in producing properties in Wilbarger County,
Texas, and De Soto Parish, LA as of September 30, 2004. The information
regarding reserves is based on proved reserves reports prepared by Ralph E.
Davis Associates, Inc., Houston, Texas, independent petroleum engineers. The
report (and table) do not include information on our interests in gas wells
located in Alpena County, MI as no engineering study has been undertaken of
these wells as of the date of this report. Ralph E. Davis's audit was based upon
review of production histories and other geological, economic, ownership and
engineering data provided by us. All of the reserves presented in the following
table are proved, developed reserves.

The SEC requires that estimates of future net revenues from our proved
reserves, discounted to present value using an annual discount rate of 10% (the
PV-10 Value), be made using oil and gas prices in effect as of the dates of such
estimates, held constant throughout of the life of the properties. Proved
reserves as of September 30, 2004 were estimated based upon the spot price on
September 30, 2004, our fiscal year-end, of West Texas intermediate crude oil at
Cushing, Oklahoma which was $49.51 per barrel. The unit gas price used of $5.44
per MMBTU was the spot price on September 30, 2004 at the Henry Hub in
Louisiana.

The table contains estimates of future net revenues presented on the basis
of unescalated prices and costs and their PV-10 Value, as required by the SEC.
We deducted operating costs, development costs and certain production-related
taxes to arrive at the estimated future net revenues. We calculated future net
revenues based on an estimated 4.5 year life of these reserves. We made no
provision for income taxes. The estimates of future net revenues and their
present value differ in this respect from the standardized measure of discounted
future net cash flows contained in the supplemental information to this report
which is calculated after provision for future income taxes.

FUTURE NET INCOME
ESTIMATED NET RESERVES WEIGHTED AVERAGE -----------------------
PROVED RESERVES (MBBLS/MMCF) PRICE ($BBL/MCF) UNDISCOUNTED PV-10
- --------------- ---------------------- ---------------- ------------ -----

Producing Oil 29.9 $49.51
Producing Gas 585.7 $5.44
Producing Oil & Gas $3,346,900 $2,803,100

PRODUCTION INFORMATION

The following tables summarizes sales volumes, sales prices, and production cost
information for our net oil and gas production for the two-year period ended
September 30, 2004. "Net" production is production that is owned by us directly
or indirectly and is produced to our interest after deducting royalty, and other
similar interests. This table includes information from production from our oil
wells in Wilbarger County, Texas, and from our gas wells in De Soto Parish,
Louisiana and from Alpena County, Michigan.

Oil Production Year Ended September 30,
------------------------------
2004 2003
------------ -----------
Total Net Revenues $ 837,305 $ 337,355
Net Sales Volume (Bbls.) 25,887 11,447
Average Sales Price (per Bbl.) $ 36.11 $ 29.47
Average Production Cost (per Bbl.) $ 2.61 $ 8.26

Gas Production Year Ended September 30,
------------------------------
2004 2003
------------ -----------
Total Net Revenues $ 1,704,142 $ 0
Net Sales Volume (mcf) 37,571 0
Average Sales Price (per mcf.) $ 5.69 $ 0
Average Production Cost (per mcf.) $ 1.12 $ 0

OIL AND GAS WELLS

Oil Wells Gas Wells Total Wells
----------- ----------- -----------
September 30, 2004
Gross(1) 6.00 10.00 24.00
Net(2) 3.70 2.30 9.15
September 30, 2003
Gross(1) 5.00 0 5.00
Net(2) 3.50 0 3.50

- ---------------
(1) Gross wells are the total wells in which a working interest is owned.

(2) Net wells are the sum of fractional working interests owned in gross
wells.

OIL AND GAS ACREAGE

The following table sets forth our acreage position as of September 30, 2004.

Developed(1) Undeveloped(2)
-------------------------- --------------------------
Gross Net Gross Net
--------- --------- --------- ---------
Louisiana 1280 320 2970 1336
Texas 625 392 1000 500
Michigan 640 144 0 0
Kansas 0 0 2270 2270
Tennessee 0 0 0 0
New Mexico 80 16 1200 300
--------- --------- --------- ---------
Total 2545 856 6240 4106
========= ========= ========= =========

(1) The number of acres which are allocated or assignable to producing wells
or wells capable of production.

(2) Lease acreage on which wells have not been participated in or completed to
a point that would permit the production of commercial quantities of oil
and natural gas regardless of whether such acreage contains proved
reserves.

DRILLING ACTIVITIES

The following table sets forth our drilling results for the years ended
September 30, 2004, and 2003:

Fiscal Gross Wells Net Wells
Year Type of Well Total Productive(2) Dry(3) Abandoned(4) Total Productive Dry Abandoned
- ---------- ---------------- ----------------------------------------------- ------------------------------------------------

2004 Exploratory(1) 2 1 1 0 1.2 2 1.0 0
Development(1) 11 7 2 2 4.525 2.5 0.9 0.9
2003 Exploratory(1) 2 1 1 0 1 .5 .5 0
Development(1) 13 12 1 0 3.8 3.8 .5 0

- ---------------

(1) An exploratory well is a well drilled either in search of a new, as yet
undiscovered oil or gas reservoir or to greatly extend the known limits of
a previously discovered reservoir. A development well is a well drilled
within the presently proved productive area of an oil or gas reservoir, as
indicated by reasonable interpretation of available data, with the
objective of completing in that reservoir.

(2) A productive well is an exploratory or development well found to be
capable of producing either oil or gas in sufficient quantities to justify
completion as an oil or gas well.

(3) A dry well is an exploratory or development well that is not a producing
well.

(4) An abandoned well is a well that has either been plugged or has been
converted to another use. We have converted this Texas well to a salt
water disposal well. Two of the DeSoto Parish wells produced limited
quantities of gas for a time, but are no longer producing any gas and are
considered abandoned for the purposes of this table.

COMPETITION AND MARKETS

We face competition from other oil and natural gas companies in all
aspects of our business, including acquisition of producing properties and oil
and gas leases, marketing of oil and gas, and obtaining goods, services and
labor. Many of our competitors have substantially larger financial and other
resources. Factors that affect our ability to acquire producing properties
include available funds, available information about prospective properties and
our limited number of employees. Gathering systems are the only practical method
for the intermediate transportation of natural gas. Therefore, competition for
natural gas delivery is presented by other pipelines and gas gathering systems.
Competition is also presented by alternative fuel sources, including heating oil
and other fossil fuels.

The availability of a ready market for and the price of any hydrocarbons
produced will depend on many factors beyond our control, including but not
limited to the amount of domestic production and imports of foreign oil and
liquefied natural gas, the marketing of competitive fuels, the proximity and
capacity of natural gas pipelines, the availability of transportation and other
market facilities, the demand for hydrocarbons, the effect of federal and state
regulation of allowable rates of production, taxation, the conduct of drilling
operations and federal regulation of natural gas. In addition, the restructuring
of the natural gas pipeline industry virtually eliminated the gas purchasing
activity of traditional interstate gas transmission pipeline buyers. Producers
of natural gas have therefore been required to develop new markets among gas
marketing companies, end users of natural gas and local distribution companies.
All of these factors, together with economic factors in the marketing arena,
generally may affect the supply of and/or demand for oil and gas and thus the
prices available for sales of oil and gas.

Proposals and proceedings that might affect the oil and gas industry are
pending before Congress, the Federal Energy Regulatory Commission, or "FERC",
the Minerals Management Service, or "MMS", state legislatures and commissions
and the courts. We cannot predict when or whether any such proposals may become
effective. In the past, the natural gas industry has been heavily regulated.
There is no assurance that the regulatory approach currently pursued by various
agencies will continue indefinitely. Notwithstanding the foregoing, we currently
do not anticipate that compliance with existing federal, state and local laws,
rules and regulations will have a material or significantly adverse effect upon
our capital expenditures, earnings or competitive position. No material portion
of our business is subject to re-negotiation of profits or termination of
contracts or subcontracts at the election of the federal government.

The following discussion contains summaries of certain laws and
regulations and is qualified in its entirety by the foregoing.

REGULATION OF NATURAL GAS AND OIL EXPLORATION AND PRODUCTION

Our operations are subject to various types of regulation at the federal,
state and local levels. Such regulation includes requiring permits for drilling
wells, maintaining bonding requirements in order to drill or operate wells and
regulating the location of wells, the method of drilling and casing wells, the
surface use and restoration of properties upon which wells are drilled, the
plugging and abandoning of wells and the disposal of fluids used or generated in
connection with operations. Our operations are also subject to various
conservation laws and regulations. These include the regulation of the size of
drilling and spacing units or proration units and the density of wells which may
be drilled and the unitization or pooling of oil and gas properties. In
addition, state conservation laws establish maximum rates of production from oil
and gas wells, generally prohibit the venting or flaring of gas and impose
certain requirements regarding the ratability of production. The effect of these
regulations may limit the amount of oil and gas we can produce from our wells in
a given state and may limit the number of wells or the locations at which we can
drill.

FEDERAL REGULATION OF SALES PRICES AND TRANSPORTATION

Currently, there are no federal, state or local laws that regulate the
price for our sales of natural gas, NGLs, crude oil or condensate. However, the
rates charged and terms and conditions for the movement of gas in interstate
commerce through certain intrastate pipelines and production area hubs are
subject to regulation under the Natural Gas Policy Act of 1978 ("NGPA").
Pipeline and hub construction activities are, to a limited extent, also subject
to regulations under the Natural Gas Act of 1938 ("NGA"). While these controls
do not apply directly to us, their effect on natural gas markets can be
significant in terms of competition and cost of transportation services, which
in turn can have a substantial impact on our profitability and costs of doing
business. Additional proposals and proceedings that might affect the natural gas
industry are considered from time to time by Congress, FERC, state regulatory
bodies and the courts. We cannot predict when or if any such proposals might
become effective and their effect, if any, on our operations. We do not believe
that we will be affected by any action taken in any materially different respect
from other natural gas producers, gatherers and marketers with whom we compete.

GATHERING REGULATIONS

State regulation of gathering facilities generally includes various
safety, environmental and, in some circumstances, nondiscriminatory take
requirements. Such regulation has not generally been applied against gatherers
of natural gas, although natural gas gathering may receive greater regulatory
scrutiny in the future.

ENVIRONMENTAL REGULATIONS

Public interest in the protection of the environment has increased
dramatically in recent years. Our oil and natural gas production and saltwater
disposal operations and our processing, handling and disposal of hazardous
materials, such as hydrocarbons and naturally occurring radioactive materials
are subject to stringent regulation. We could incur significant costs, including
cleanup costs resulting from a release of hazardous material, third-party claims
for property damage and personal injuries fines and sanctions, as a result of
any violations or liabilities under environmental or other laws. Changes in or
more stringent enforcement of environmental laws could also result in additional
operating costs and capital expenditures.

Various federal, state and local laws regulating the discharge of
materials into the environment, or otherwise relating to the protection of the
environment, directly impact oil and gas exploration, development and production
operations, and consequently may impact our operations and costs. These
regulations include, among others, (i) regulations by the EPA and various state
agencies regarding approved methods of disposal for certain hazardous and
non-hazardous wastes; (ii) the Comprehensive Environmental Response,
Compensation, and Liability Act, Federal Resource Conservation and Recovery Act
and analogous state laws which regulate the removal or remediation of previously
disposed wastes (including wastes disposed of or released by prior owners or
operators), property contamination (including groundwater contamination), and
remedial plugging operations to prevent future contamination; (iii) the Clean
Air Act and comparable state and local requirements which may result in the
gradual imposition of certain pollution control requirements with respect to air
emissions from the operations of Cadence; (iv) the Oil Pollution Act of 1990
which contains numerous requirements relating to the prevention of and response
to oil spills into waters of the United States; (v) the Resource Conservation
and Recovery Act which is the principal federal statute governing the treatment,
storage and disposal of hazardous wastes; and (vi) state regulations and
statutes governing the handling, treatment, storage and disposal of naturally
occurring radioactive material ("NORM").

In the course of our routine oil and natural gas operations, surface
spills and leaks, including casing leaks, of oil or other materials occur, and
we incur costs for waste handling and environmental compliance. It is also
possible that our oil and natural gas operations may require us to manage NORM.
NORM is present in varying concentrations in sub-surface formations, including
hydrocarbon reservoirs, and may become concentrated in scale, film and sludge in
equipment that comes in contact with crude oil and natural gas production and
processing streams. Some states, including Texas, have enacted regulations
governing the handling, treatment, storage and disposal of NORM. Moreover, we
are able to control directly the operations of only those wells for which we act
as the operator. Despite our lack of control over wells owned by us but operated
by others, the failure of the operator to comply with the applicable
environmental regulations may, in certain circumstances, be attributed to us
under applicable state, federal or local laws or regulations.

Management believes that we are in substantial compliance with all
currently applicable environmental laws and regulations. To date, compliance
with such laws and regulations has not required the expenditure of any material
amounts, and management does not currently anticipate that future compliance
will have a materially adverse effect on our consolidated financial position or
results of operations. Since these laws and regulations are periodically
amended, we are unable to predict the ultimate cost of compliance. To our
knowledge, there are currently no material adverse environmental conditions that
exist on any of our properties and there are no current or threatened actions or
claims by any local, state or federal agency or by any private landowner against
us pertaining to such a condition. Further, we are not aware of any currently
existing condition or circumstance that may give rise to such actions or claims
in the future.

We maintain insurance against some, but not all, potential risks and
losses associated with our industry and operations. We do not carry business
interruption insurance. For some risks, we may not obtain insurance if we
believe the cost of available insurance is excessive relative to the risks
presented. In addition, pollution and environmental risks generally are not
fully insurable. If a significant accident or other event occurs and is not
fully covered by insurance, it could adversely affect us.

EMPLOYEES

As of January 24, 2004, we have three part-time employees, all of whom are
officers of Cadence, and no one works for Cadence on a full time basis. Because
our officers perform consulting services for other companies, for tax purposes
we have treated these officers as consultants.

PROPERTIES

Cadence's oil and gas leasehold properties, as well as its mineral
properties are described above in Item 1. In addition to the properties
described above, our principal executive offices are located in leased office
space at 6 East Rose Street, Walla Walla, WA 99362. This lease provides for a
monthly rental rate of $400 and expired in June, 2004. We have continued to
lease space in this office on a month-to-month basis since then, and expect to
continue to be able to do so for the foreseeable future. We also have mineral
rights in a number of properties, although we do not presently consider them to
be material to our business on a going forward basis.

LEGAL PROCEEDINGS

There are no currently threatened or pending claims against Cadence.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with our financial
statements, together with the notes to those statements, included elsewhere in
this prospectus. The following discussion contains forward-looking statements
that involve risks, uncertainties, and assumptions such as statements of our
plans, objectives, expectations, and intentions. Our actual results may differ
materially from those discussed in these forward-looking statements because of
the risks and uncertainties inherent in future events, particularly those
identified in "Risk Factors."

OVERVIEW

We were formed in 1969 as Royal Resources, Inc. to acquire and develop
mineral properties and we pursued mining operations under several different
names until mid-2001 when we changed our name to Cadence Resources Corporation,
split our stock on a 1-for-20 reverse basis, and changed our business to
acquiring, exploring and developing oil and gas properties. The current
management of Cadence, Mr. Crosby and Mr. Ryan, assumed control of Cadence in
1996, in connection with the acquisition of Cadence by an entity they
controlled. Although the management of Cadence has been reduced in size since
1996, our key executives, Mr. Crosby and Mr. Ryan, have remained with Cadence.

Following a corporate reorganization in May 2001 to shift our focus to oil
and gas exploration, we began to lease oil and gas properties in Louisiana in
the fall of 2001, and in both Texas and Louisiana in fiscal 2002, but did not
produce commercial quantities of oil and gas until the fourth quarter of the
fiscal year ended September 30, 2002, when production began from our properties
in Texas. During the fourth quarter of 2003, we began to produce gas from our
properties in Louisiana that we are exploring together with Bridas Energy USA,
Inc.

As a result of our change from a mineral exploration company to an oil and
gas exploration company, in 2001 our Board determined to write-off and dispose
of our inventory of mineral properties to the greatest extent possible. Because
mineral properties at the exploration stage have limited marketability, and
because the management of Cadence does not have the extensive time it would take
to attempt to reach the limited number of buyers for our properties, we have not
been successful at disposing of our properties in outright arms' length sales,
but have chosen to write-down the carrying value of a substantial majority of
our properties to zero, or to sell the properties to other entities controlled
by the management of Cadence in non-arms' length transactions.

RECENT DEVELOPMENTS

On November 19, 2004, Cadence issued a press release announcing that
Cadence signed a letter of intent establishing a 60 day exclusivity period in
order to conduct due diligence and negotiate terms for acquisition of all of the
outstanding shares of Aurora Energy, Ltd., a privately held company based in
Traverse City, Michigan in exchange for shares of common stock of Cadence. On
January 31, 2005, Cadence, Aurora Acquisition Corp., a wholly owned subsidiary
of Cadence, and Aurora entered into a definitive merger agreement providing for
the acquisition of all of the outstanding shares and options of Aurora by
Cadence. The closing is conditioned upon, among other things, obtaining the
approval of Aurora's shareholders and the shares of Cadence's common stock being
issued to Aurora's shareholders being registered on a Form S-4 registration
statement. Upon consummation of the merger, (i) Cadence will issue two shares of
its common stock for each share of Aurora common stock, (ii) all options and
warrants to purchase Aurora common stock shall become options or warrants to
receive shares of Cadence common stock, and (iii) Aurora will become a wholly
owned subsidiary of Cadence.

On January 31, 2005, Cadence entered into a purchase agreement with twenty
two accredited investors pursuant to which the investors purchased 7,810,000
shares of common stock and warrants to purchase 14,050,000 shares of common
stock at an exercise price of $1.75 per share for $9,762,500.

On January 31, 2005, Cadence entered into an agreement with the seven
investors from its April 2004 private placement pursuant to which Cadence was
permitted to repay the $6,000,000 in notes held by such investors without any
prepayment penalties in exchange for the exercise price of the warrants to
purchase 765,000 shares of common stock issued in the April 2004 private
placement being reduced from $4.00 per share to $1.25 per share. $5,000,000 of
the notes were repaid in cash and $1,000,000 of the notes were converted into
common stock and warrants of Cadence pursuant to the purchase agreement
described in the immediately preceding paragraph.

CAPITAL RESOURCES AND LIQUIDITY

From our reorganization in mid-2001 until the date of this report, we have
funded our operations principally through the private sale of equity securities,
borrowings from officers, directors and shareholders, and borrowings from third
party individuals and we expect this to continue to be the case for at least the
remainder of 2005. In February 2004, we borrowed $410,000 in short term notes
from three directors of Cadence and a company of which two of Cadence's officers
and directors are also affiliated. These notes bore interest at the rate of 12%
per annum, and were repaid in full in April, 2004. On April 2, 2004, we issued
$6,000,000 of senior secured notes to seven individual investors. These notes
are secured by substantially all of our assets are due and payable on March 31,
2006 and bear interest at the rate of 10% per annum, payable quarterly.
Pre-payments of 10% of the principal are required on September 30, 2005 and
December 31, 2005 if the weighted average price of our common stock is less than
$5 per share. Each $50,000 principal amount of the notes was accompanied by
warrants to purchase 6,375 shares of our common stock, or an aggregate of
765,000 shares, at a price of $4.00 per share. The warrants expire on April 2,
2007.

We realized net proceeds of $941,900 from the sale of our common stock and
warrants during fiscal year 2002, net proceeds of approximately $4,830,000 from
the sale of our common stock, preferred stock and warrants during the year ended
September 30, 2003. Additionally, we received net proceeds of $288,500 from the
sale of common stock and exercise of warrants during the year ended September
30, 2004.

In our fiscal years ended September 30, 2002, 2003 and 2004, we received
approximately $86,000, $16,000 and $14,000 respectively from the sale of
investments in various public companies. The sales of these investments were
made to fund our working capital needs. Prior to our refocus upon the
exploration and development of oil and gas properties, we would from time to
time make investments in public companies. These investments were passive in
nature and were generally relatively small. Given our focus on oil and gas,
future investments of this nature are likely to be limited to opportunities that
are of some strategic value to our core oil and gas business and are likely to
be less passive in nature.

In our 2001 fiscal year, we borrowed $125,000 from Howard Crosby, (an
officer and shareholder of Cadence) and $10,000 from Dotson Exploration, a
related party which is 48% owned by Messrs. Crosby and Ryan. These amounts were
repaid in fiscal 2002 for cash of $45,000, and 300,000 shares of our common
stock. In fiscal 2002, we had no net borrowings, and in the year ended September
30, 2003, we had total borrowings of $600,000, of which $140,000 was repaid in
cash. As of September 30, 2003, $50,000 was owed to Nathan Low Family Trust, a
shareholder of Cadence, $85,000 was owed to Mr. Crosby, $25,000 was owed to
Kevin Stulp and $300,000 was owed to CGT Management Ltd. All of such amounts
were repaid by in October 2003. During the year ended September 30, 2004, we
borrowed $410,000 in short-term notes from officers, directors, and other
insiders of Cadence, as well as $1,000,000 of non-interest bearing short-term
notes received in late March 2004. These liabilities were repaid in full in
April 2004.

We spent $144,000 in fiscal 2002, $321,000 in fiscal 2003 and $530,167 in
fiscal 2004 for oil and gas lease expenses and lease operating expenses. In the
same periods we spent $134,000, $145,000, and $308,000, respectively, for oil
and gas drilling, production and operating expenses. Furthermore, given our
capital constraints, we have been unable to employ full time technical and
professional people. Consequently, we have obtained services largely on a
consulting basis. We spent approximately $934,000 in fiscal 2002, $591,000 in
fiscal 2003 and $424,873 in fiscal 2004, for consulting services in various
disciplines.

During fiscal 2002, 2003 and 2004, we purchased fixed assets in the
amounts of $172,000, $183,000 and $980,000, respectively. These expenditures
were primarily related to the purchase of well equipment, including pipelines,
tanks, casings and pumping units.

As of January 24, 2004, we had cash and cash equivalents of approximately
$488,145.27. We anticipate funding most of our near-term operating and
administrative overhead out of revenues from the sale of our Texas oil
production and our recently added Louisiana gas production.

RESULTS OF OPERATIONS

Years ended September 30, 2004 and 2003

Revenues

During the year ended September 30, 2004, revenues from the sale of oil
and gas totaled approximately $2,541,447, primarily from production from our
wells in Texas, Louisiana and Michigan. This revenue came from the sale of
25,887 net barrels of oil at an average price of $36.11 per barrel from our
wells in Texas and 37,517 mcf of natural gas at an average price of $5.83 per
mcf from our wells in Louisiana and Michigan. Revenues from oil and gas
exploration of $337,355 were received in the comparable period of fiscal 2003.
This revenue came from the sale of 11,447 net barrels of oil at an average price
of $29.47 per barrel. There was no production from our wells in Louisiana or
Michigan in fiscal 2003. We also realized a cash receipt of $50,000 in April
2003 from Bridas Energy upon transfer of drilling and production rights in our
leasehold acreage in DeSoto Parish, Louisiana that we are currently exploring
with them on a joint basis.

Expenses

Our expenses during fiscal 2003 and 2004 break into two general
categories: corporate and administrative overhead and expenses from oil and gas
operations. Our overall general and administrative expenses include officer
compensation, rent, travel, audits and legal fees associated with SEC filings,
directors fees, investor relations and related consulting fees, stock transfer
fees and other items associated with the costs of being a public entity.
Expenses from oil and gas operations include consulting fees for technical and
professional services related to oil and gas activities, leases, drilling
expenses, exploration expenses, depletion, depreciation and amortization of oil
and gas properties and related equipment, and other expenses related to the
procurement and development of oil and gas properties.

The following table is a comparison of Cadence's two general categories of
expenses for the years ended September 30 2004 and 2003, and the percentages
each of these categories comprise of total expenses:

YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------
% of 2004 % of 2003
Total Total
2004 Expenses 2003 Expenses
------------- ------------- ------------- -------------

Corporate and Administrative Overhead $ 2,551,269 41.2% $ 1,446,756 71.3%
Expenses from Oil and Gas Operations $ 3,643,666 58.8% 583,393 28.7%
------------- ------------- ------------- -------------
Total Expenses $ 6,194,935 100% $ 2,030,149 100.0%
============= ============= ============= =============

Cadence's general and administrative expenses increased from fiscal 2003
to fiscal 2004 by approximately $1,104,000, principally because of increased
legal costs paid to outside counsel in connection with the filing of two
separate SB-2 registration statements during the course of the fiscal year.
These registration statements also substantially increased the amounts paid to
outside accountants as well.

The comparable year to year increases in oil and gas related expenditures
are summarized in the following table, which reflects the major expense
categories for expenses from oil and gas operations for fiscal 2004 and 2003
These expenses increased over six-fold from the prior year, primarily as a
result of the decision to impair the carrying value of five wells drilled in
Desoto Parish during the fiscal year.

YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------
2004 2003
------------------------------- ------------------------------
% of Total % of Total
2004 Expenses 2003 Expenses
------------- ------------- ------------- -------------

Exploration and drilling $ 134,452 3.7% $ 109,968 18.8%
Depreciation, depletion and amortization 2,663,695 73.1% 57,310 9.8%
Oil and gas lease expenses 565,148 15.5% 302,204 51.8%
Oil and gas production costs 174,836 4.8% 34,577 6.0%
Oil and gas lease operating expenses 0 0.0% 19,334 3.3%
Oil and gas consulting 105,535 2.9% 60,000 10.3%
------------- ------------- ------------- -------------
Total Expenses from oil and gas operations $ 3,643,666 100% $ 583,393 100.0%
============= ============= ============= =============

Although exploration and drilling expenses and oil and gas lease expenses
increased by some $24,000 from the 2003 fiscal year, by far the largest increase
in oil and gas related expenses came in the category of depreciation, depletion
and amortization, which increased by over $2,600,000 from the prior year, and as
a percentage increased from 9.8% to 73.1% of the total. This was due primarily
to the decision by Cadence to impair the carrying value of two De Soto Parish
gas wells at June 30th, and to impair the value of three more De Soto Parish gas
wells as of September 30, as well as a downward adjustment in the total gas
reserves as determined by Ralph E Davis and Associates, the independent
petroleum engineers.

RECENT ACCOUNTING PRONOUNCEMENTS

There have been no recently issued accounting pronouncements which we
expect to have a material effect on our consolidated financial position or
results of operations.

MANAGEMENT

The following table sets forth the name, age and position of each of our
officers and directors:

NAME AGE POSITION
-------------------- --- --------------------------------------
Howard M. Crosby 52 President, Treasurer and Director
John P. Ryan 42 Vice President, Secretary and Director
Douglas Newby 46 Vice President
Kevin Stulp 48 Director
Glenn DeHekker 48 Director
Jeffrey M. Christian 49 Director

Under our Bylaws, the authorized number of directors of our company is set
at no fewer than three and no more than ten directors. We currently have a board
of directors with five members. Each director serves for a term of one year that
expires at the following annual shareholders meeting. Each officer serves at the
pleasure of the board of directors and until a successor has been qualified and
appointed. There are no family relationships, or other arrangements or
understandings between or among any of the directors, executive officers or
other person pursuant to which such person was selected to serve as a director
or officer. Set forth below is certain biographical information regarding each
of our directors and executive officers:

Mr. Crosby has served as our President and a director since February 1994.
He has served as our treasurer since January 1998. Since 1989, Mr. Crosby has
been president of Crosby Enterprises, Inc., a family-owned business advisory and
public relations firm. Mr. Crosby received a B.A. degree from the University of
Idaho. Mr. Crosby is also an officer and director of White Mountain Titanium
Corporation., a publicly traded mining exploration company, High Plains Uranium,
Inc., Sundance Diamonds Corporation, Dotson Exploration Company and
Nevada-Comstock Mining Company (formerly Caledonia Silver-Lead Mines Company),
all of the latter being privately held companies.

Mr. Ryan has served as our Vice President of Corporate Development since
September 1996, as Secretary since October 1998 and as a member of our board of
directors since April 1997. Mr. Ryan is a degreed mining engineer. From August,
2000 to the present, he has served as a Director and the Chief Financial Officer
of Trend Mining Company, a publicly traded mineral exploration and development
company and since February 2004 he has served as an officer and director of
White Mountain Titanium Corporation, a publicly traded mining exploration
company. Other companies with which Mr. Ryan holds an officer and/or director
position include Bio-Quant, Inc., Nevada-Comstock Mining Company, High Plains
Uranium, Inc., GreatWall Gold Corporation, Sundance Diamonds Corporation, TN Oil
Co., and Dotson Exploration Company. Many of these companies have only minimal
activity and require only a small amount of Mr. Ryan's time. Mr. Ryan is a
former U.S. Naval Officer and obtained a B.S. in Mining Engineering from the
University of Idaho and a Juris Doctor from Boston College Law School.

Mr. Newby has served as a Vice President since January 2004. Mr. Newby has
been President of Proteus Capital Corp., a corporate advisory firm that
specializes in the natural resource industries, since July 2001. Mr. Newby
served as Managing Director of Proteus Consultants Ltd. from January 1991 to
July 2001 and Managing Partner of Moyes Newby & Co., Inc. from April 1994 to
December 1998, both of which provided corporate advisory services primarily to
the international energy and mining industries. Since January 2004, Mr. Newby
has served as Director of Western Goldfields, Inc., a gold mining and
exploration company which owns and operates the Mesquite Mine in Southern
California. Before forming Proteus Consultants Ltd., Mr. Newby held senior
positions with the investment banking firms of S.G. Warburg & Co., Inc., Morgan
Grenfell & Co., and James Capel & Co.

Mr. Stulp has served as a director since March 1997. Since August 1995,
Mr. Stulp has variously worked as consultant with Forte Group, on the board of
the Bible League, and active with various other non-profit organizations. From
December 1983 to July 1995, Mr. Stulp held various positions with Compaq
Computer Corporation, including industrial engineer, new products planner,
manufacturing manager, director of manufacturing and director of manufacturing
reengineering. Mr. Stulp holds an M.B.A. and B.S. in Mechanical Engineering,
both from the University of Michigan, and a B.S. from Calvin College, Grand
Rapids, Michigan.

Mr. DeHekker has served as a director since January 2004. Mr. Dehekker is
a professional engineer with 25 years experience in the oil and gas industry
throughout the United States, Canada, and overseas. He has a B.Sc. in Mechanical
Engineering from the University of Missouri and a M.Sc. in Petroleum Engineering
from Stanford University. From 1996 to 2001, Mr. DeHekker held several senior
management positions, firstly as Development Manager for Marathon's
multi-billion dollar project on Sakhalin Island in eastern Russia, based out of
Houston and Moscow, and secondly as Engineering, Geoscience, and Operations
Manager for Marathon's Canadian Operations, based out of Calgary. Since 2001,
Mr. DeHekker has been providing project management and consulting services in
oil and gas management, operations, and engineering.

Mr. Christian has served as a director since January 2004. Mr. Christian
is the Managing Director of CPM Group, which he and several associates created
in June 1986, in a leveraged buyout of the Goldman Sachs Commodities Research
Group which they comprised. As Managing Director, Mr. Christian is responsible
for the total operation of CPM Group, supervising a respected group of analysts,
investment bankers, and dealers dedicated to precious metals and commodities
market research, consulting, and investment banking. He is actively engaged in
the research products of CPM Group, taking primary responsibility for the long
term (10 year) projections for the precious metals and copper markets. Mr.
Christian has a Bachelors of Journalism from the University of Missouri and has
engaged in post-graduate non-degree studies in econometrics, international
economics and finance, and international political science. Mr. Christian is
Chairman of Electronic Precious Metals, LLC, a director of Trend Mining Company
and Chief Financial Officer and director of North American Emerald Mines, Inc.

Set forth below is certain biographical information about our primary
geological consultant. While not an employee of ours, he is under contract to
provide us with consulting services on a 75% of full-time basis.

Mr. Lucius C. Geer has served as our chief consulting geologist since July
2001 and has been an independent geological consultant since 1971. Prior to that
he held positions as Chief of Exploration for Texas Crude, Inc., a private
Houston based oil and gas company. From 1966-1969 he was the Division
Exploration Manager for Signal Oil & Gas based in Los Angeles. From 1957-1966 he
was the Division Geophysicist for Union Oil of California (UNOCAL). Mr. Geer has
an M.S. in Geology from the University of Houston and a B.S. in Geology from
Mississippi State University.

INDEMNIFICATION

Our bylaws provide that our directors and officers will be indemnified to
the fullest extent permitted by the Utah Corporation Code. However, such
indemnification does not apply to acts of intentional misconduct, a knowing
violation of law, or any transaction where an officer or director personally
received a benefit in money, property, or services to which the director was not
legally entitled.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933, or the Securities Act, may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.

EXECUTIVE COMPENSATION

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following sets forth the annual and long-term compensation for
services in all capacities to Cadence for the fiscal years ended September 30,
2004, 2003 and 2002 paid to the Cadence's Chief Executive Officer ("CEO") and
other two executive officers who were serving as executive officers at the end
of the last completed fiscal year.

SUMMARY COMPENSATION TABLE

LONG TERM COMPENSATION
----------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------- --------------------------- ---------------------
Other Restricted
Annual Stock Securities LTIP All Other
Name And Principal Year Salary(1) Bonus Compensation Award(s) Under-Lying Payouts Compensation
Position ($) ($) ($) ($) Options/SARs(#) ($) ($)
- ------------------ ---- --------- ----- ------------ ---------- --------------- ------- ------------

Howard M. Crosby 2004 $ 61,500 (2) -- -- $ -- -- -- --
Chief Executive 2003 $178,000 (2) -- -- $ -- -- -- --
Officer 2002 $ 93,000 (2) -- -- $ -- -- -- --

John P. Ryan 2004 $ 70,336 (3) -- -- $ -- -- -- --
Vice President and 2003 $222,500 (3) -- -- $ -- -- -- --
Secretary 2002 $144,255 (3) -- -- $ -- -- -- --

Douglas Newby 2004 $ 50,000 (4) -- -- $ -- $225,000 -- --
Vice President

- ---------------
(1) Salary was structured to be paid part in cash and part in stock for all
three fiscal years shown. The stock portion, 20,000 shares per quarter for
the last two quarters of fiscal 2001 and for all four quarters of fiscal
2002 and 2003, was accrued quarterly and valued as of the final quotation
on the last day of each quarter. Of the shares awarded, 5,000 shares per
quarter were for executive compensation, and 15,000 shares per quarter
were for services as a director. The amounts reflect the total of cash
plus the value of all shares received for services as an officer and
director. In fiscal year 2004 both Mr. Crosby and Mr. Ryan waived the
stock portion of their compensation as officers of Cadence, waived half of
their director compensation, and deferred the other half of their director
compensation until Fiscal 2005. Thus, they each received 10,000 shares of
stock for service in fiscal year 2004, but these shares were not received
until January, 2005. Therefore, the value of these shares is not included
in the above calculations. These shares were issued pursuant to Cadence's
share award plan.

(2) Mr. Crosby received 134,255 in cash in fiscal year 2004 which included
prior year accrued compensation of $72,755. The cash portion of Mr.
Crosby's salary for fiscal 2003 was $62,500, of which he received $18,000
in fiscal 2003, payment of the remaining $44,500 having been deferred
until after the end of fiscal 2003. In addition, he received 80,000 shares
of our common stock, 20,000 per quarter. These were valued at the closing
price at the end of the quarter for which the shares were awarded: $34,000
for the first quarter, $29,000 for the second quarter, $33,000 for the
third quarter and $65,000 for the fourth quarter, for a total of $161,000
in stock compensation and $212,255 in total compensation. The cash portion
of Mr. Crosby's salary for fiscal 2002 was set at $51,255, which he
elected to defer until Cadence had adequate production revenues to cover
this salary. Accordingly, he received this payment after the end of fiscal
2003. In addition, he received 80,000 shares of our common stock, 20,000
per quarter. These were valued at the closing price at the end of the
quarter for which the shares were awarded: $15,000 for the first quarter,
$19,000 for the second quarter, $24,000 for the third quarter and $30,000
for the fourth quarter, for a total of $88,400 in stock compensation and
$139,655 total compensation. The cash portion of Mr. Crosby's salary for
fiscal 2001 was set at $25,000. However, he received 83,500 shares of our
common stock in lieu thereof, which had a fair market value, when issued
in January 2002, of $25,000. In addition, he received 40,000 shares of our
common stock, 20,000 per quarter for each of the last two quarters of the
fiscal year. These were valued at the closing price at the end of the
quarter for which the shares were awarded: $11,000 for the third quarter
and $15,000 for the fourth quarter, for a total of $26,000 in stock
compensation and $51,000 in total compensation.

(3) Mr. Ryan received $75,000 in cash in fiscal year 2004 which included prior
year accrued compensation of $4,664. The cash portion of Mr. Ryan's salary
for fiscal 2003 was $62,500. In addition, he received 80,000 shares of our
common stock, 20,000 per quarter. These were valued at the closing price
at the end of the quarter for which the shares were awarded: $34,000 for
the first quarter, $29,000 for the second quarter, $33,000 for the third
quarter and $65,000 for the fourth quarter, for a total of $161,000 in
stock compensation and $212,255 in total compensation. The cash portion of
Mr. Ryan's salary for fiscal 2002 was $51,255, of which $6,255 was paid
after the end of fiscal 2003. In addition, he received 80,000 shares of
our common stock, 20,000 per quarter. These were valued at the closing
price at the end of the quarter for which the shares were awarded: $15,000
for the first quarter, $19,000 for the second quarter, $24,000 for the
third quarter and $30,000 for the fourth quarter, for a total of $88,400
in stock compensation and $139,655 total compensation. The cash portion of
Mr. Ryan's salary for fiscal 2001 was set at $25,000. However, this was
later paid through the issuance of 30,000 shares of our common stock
valued at $9,000 and the transfer of shares Cadence owned in Trend Mining
Company valued at $16,000. In addition, he received 40,000 shares of our
common stock, 20,000 per quarter for each of the last two quarters of the
fiscal year. These were valued at the closing price at the end of the
quarter for which the shares were awarded: $11,000 for the third quarter
and $15,000 for the fourth quarter, for a total of $26,000 in stock
compensation and $51,000 in total compensation.

(4) Mr. Newby served as an executive officer for the last three quarters of
fiscal year 2004 (January through September 30, 2004). During this period
he received $50,000 of cash compensation. He also received 15,000 shares
of restricted shares (5,000 per quarter of service) and stock options
valued at $225,000. These shares and options were issued pursuant to
Cadence's share award plan.

OPTION GRANTS IN LAST FISCAL YEAR

NUMBER OF % OF TOTAL OPTIONS GRANTED
SECURITIES UNDERLYING TO EMPLOYEES IN THE EXERCISE EXPIRATION
NAME OPTIONS GRANTED(1) FISCAL YEAR PRICE DATE
- ---------------- --------------------- -------------------------- -------- ----------

Howard M. Crosby 0 0 -- --
John P. Ryan 0 0 -- --
Douglas Newby 250,000 100% 3.53 March 1, 2007

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

The following table contains information concerning the number of shares
acquired and value realized from the exercise of options by the named executive
officers during fiscal 2004 and the number of unexercised options held by the
named executive officers at September 30, 2004.

NUMBER OF SHARES OF VALUE OF UNEXERCISED
COMMON STOCK UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT YEAR END (SEPTEMBER 30 2004)(1)
AT YEAR END (SEPTEMBER 30) 2004 ($)
--------------------------------- -----------------------------------
SHARES
ACQUIRED
ON VALUE REALIZED
NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ------------- --------------- --------------- ----------------- ---------------- ------------------

Howard M. Crosby 0 $ 0 -- -- -- --

John P. Ryan 0 $ 0 -- -- -- --

Douglas Newby 0 0 250,000 -- $ 225,000 --

- ---------------
(1) Options are "in-the-money" if the market price of a share of common stock
exceeds the exercise price of the option.

Cadence has no retirement, pension or profit sharing program for the
benefit of its directors, officers or other employees, but the Board of
Directors may recommend one or more such programs for adoption in the future.

OPTION/SAR GRANTS

In February, 2004 the Board adopted the 2004 Stock Option and Stock Award Plan
which was approved by the Shareholders in May, 2004 and under which up to
1,000,000 shares of our common stock could be awarded as share awards or options
and based upon merit of work performed as well as a retention tool. As of
September 30, 2004, 440,000 shares or options have been awarded under this plan,
all of which are currently outstanding and exercisable.

Prior to the 2004 Stock Option and Stock Award Plan, our Board of Directors
chose to make option or warrant awards to select officers, directors,
consultants, or shareholder/investors in order to induce them to assist us in
implementing our business plan and to provide long term additional incentive.
These options or warrants, as awarded, were not awarded pursuant to a plan but
were specific individual awards with varying terms and conditions. In some
instances, the Board of Directors reserved the right to cancel these awards for
non-performance or other reasons, or established a vesting schedule pursuant to
which the award is earned.

DIRECTOR COMPENSATION

Cadence compensates its directors in cash and in shares of our common stock. The
Directors elected not to receive compensation for the first quarter of Fiscal
Year 2004 pending a revision of the director compensation plan. Beginning the
second quarter of the fiscal year, Cadence granted each director (employee and
non-employee) 5,000 shares of common stock per quarter of completed service.
Each non-employee director also receives (1) $5,000 per quarter of completed
service (2) 2,500 restricted shares of common stock for each year of service on
any committee of the Board of Directors (3) $2,500 for any committee of which
they chair and (4) each Director (employee or non employee) receives an option
to purchase 50,000 shares of Cadence's common stock on the anniversary of their
appointment to the Board. Board members may be granted additional stock options
pursuant to Board recommendation and approval. Cadence also pays its
non-employee directors $1,600 for each board meeting they attend in person and
$750 for each telephonic meeting and Cadence's employee directors $600 for each
board meeting they attend in person. Messrs. DeHekker and Christian each
received an option to purchase 75,000 shares of Cadence's common stock upon
joining the Board.

During fiscal 2004, 75,000 shares of common stock were awarded to our directors
as compensation. There are no contractual arrangements with any member of the
Board of Directors.

PRINCIPAL SHAREHOLDERS

The following table sets forth, as of January 24, 2005, certain
information regarding the ownership of voting securities of Cadence by each
stockholder known to our management to be (i) the beneficial owner of more than
5% of our outstanding Common Stock, (ii) our directors, (iii) our current
executive officers named in the Summary Compensation Table and (iv) all
executive officers and directors as a group. We believe that, except as
otherwise indicated, the beneficial owners of the Common Stock listed below,
based on information furnished by such owners, have sole investment and voting
power with respect to such shares.

NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2) OUTSTANDING SHARES (3)
------------------------------------------ -------------------------------- --------------------------

Howard Crosby ........................... 877,500 (4) 6.97%

John Ryan ............................... 753,809 (5) 5.99%

Douglas Newby............................ 317,000 (6) 2.52%

Kevin Stulp.............................. 417,550 (7) 3.32%

Jeffrey M. Christian..................... 90,000 (8) *

Glenn DeHekker........................... 90,000 (9) *

Nathan A. Low Roth IRA and affiliates.... 2,427,742 (10) 18.88%
641 Lexington Avenue
New York, New York

Thomas Kaplan............................ 2,410,992 (11) 18.98%
154 West 18th Street
New York, New York

All executive officers and directors .... 2,545,859 (12) 20.15%
as a group (5 persons)

- ---------------

* Less than 1%

(1) Under the rules of the SEC, addresses are only given for holders of more
than 5% of the outstanding common stock of Cadence. Unless otherwise
indicated, the address for each 5% holder of our common stock is c/o
Cadence Resources Corporation, 6 East Rose Street, Walla Walla, Washington
beneficial 99362.

(2) Under the rules of the SEC, a person is deemed to be the beneficial owner
of a security if such person has or shares the power to vote or direct the
voting of such security or the power to dispose or direct the disposition
of such security. A person is also deemed to be a beneficial owner of any
securities if that person has the right to acquire beneficial ownership
within 60 days of the date hereof. Except as otherwise indicated the named
entities or individuals have sole voting and investment power with respect
to the shares of common stock beneficially owned.

(3) Represents the number of shares of common stock beneficially owned as of
January 24, 2005 by each named person or group, expressed as a percentage
of the sum of all of (i) the shares of such class outstanding as of such
date, and (ii) the number of shares not outstanding, but beneficially
owned by such named person or group as of such date.

(4) Includes 204,168 shares of common stock held by Crosby Enterprises, Inc.
and 29,000 shares of common stock owned by Dotson Exploration Company.

(5) Includes 172,875 shares of common stock owned by Nancy Martin-Ryan; 45,000
shares of common stock owned by John Ryan as custodian for Karen Ryan;
45,000 shares of common stock owned by John Ryan as custodian for Patrick
Ryan; 150,000 shares owned by J.P. Ryan Company, Inc.; 29,000 shares of
common stock owned by Dotson Exploration Company; and 87,500 shares of
common stock owned by Andover Capital Corporation.

(6) Includes options exercisable for 250,000 shares of common stock and
options exercisable for 50,000 shares owned by Proteus Capital Corp.

(7) Includes options currently exercisable for 100,000 shares of common stock,
2,750 shares of common stock owned by Mr. Stulp's IRA, and 1,750 shares of
common stock owned by a charitable remainder trust.

(8) Includes options currently exercisable for 75,000 shares of common stock.

(9) Based upon information included in amendment number 4 to a Schedule 13D
filed with the SEC on May 12, 2004. Nathan A. Low has the sole power to
vote or direct the vote of, and the sole power to direct the disposition
of, the shares held by the Nathan A. Low Roth IRA and the shares held by
him individually, which total 2,230,367 shares of common stock, which
includes 76, 500 shares of common stock issuable upon exercise of
warrants. Although Nathan A. Low has no direct voting or dispositive power
over the 40,000 shares of common stock held by the Nathan A. Low Family
Trust, he may be deemed to beneficially own those shares because his wife
is the trustee of the Trust. Similarly, Nathan A. Low may be deemed to
beneficially own those shares of common stock underlying options and
warrants (a total of 157,375 shares of common stock) held for the benefit
of his minor children because his wife has sole voting and dispositive
power over such shares. Therefore, Nathan A. Low reports shared voting and
dispositive power over 197,375 shares of common stock, which includes
including 100,000 shares of common stock underlying options to purchase
common stock and 57,375 shares of common stock underlying warrants to
purchase common stock.

(10) Consists of 480,811 shares of common stock owned by LCM Holdings LDC,
480,811 shares of common stock owned by Electrum Resources, LLC, 1,329,370
shares of common stock owned by Electrum Capital, LLC and 120,000 shares
of common stock owned by CGT Management Ltd.

(11) Includes options currently exercisable for 450,000 shares of common stock;
204,168 shares of common stock held by Crosby Enterprises, Inc.; 29,000
shares of common stock owned by Dotson Exploration Company; 172,875 shares
of common stock owned by Nancy Martin-Ryan; 45,000 shares of common stock
owned by John Ryan as custodian for Karen Ryan; 45,000 shares of common
stock owned by John Ryan as custodian for Patrick Ryan; 150,000 shares
owned by J.P. Ryan Company, Inc.; and 87,500 shares of common stock owned
by Andover Capital Corporation.

SELLING SHAREHOLDERS

We issued to the selling shareholders the common stock and the options and
warrants to purchase common stock that are covered by this prospectus pursuant
to private placements in (i) October 2002, (ii) April through June 2003, (iii)
September 2003, (iv) October 2003 and (v) April 2, 2004 (the "April Private
Placement").

This prospectus relates to the resale from time to time of up to a total
of 3,919,540 shares of our common stock by the selling shareholders identified
in this prospectus. We filed a registration statement, of which this prospectus
constitutes a part, in order to permit the selling shareholders to resell to the
public the shares of our common stock in connection with this transaction.

The options being registered on behalf of American Friends of Ohr
Somayach, American Friends of Yeshiva D'Mir, American Friends of Shalva,
American Friends of Yad Ezra, Marcia Kucher, Lisa Low as custodian for Daniel
Low, Michael Low, Gabriel Low and Chantal Low and Jason Lyons are exercisable at
a price of $2.50 per share and expire in September 2008. These options may be
exercised on a cashless basis at any time. The options being registered on
behalf of Proteus Capital Corp. are exercisable at a price of $1.75 per share
and expire on June 18, 2007.

The warrants being registered on behalf of Ellen Aguiar, Robert Denison,
Scott Mager and Scott and Shari Notowitz are exercisable at $1.35 per share and
expire on October 17, 2005. The warrants may be exercised in whole or in part,
subject to the limitations provided in the warrants. Any warrant holders who do
not exercise their warrants prior to the conclusion of the exercise period will
forfeit the right to purchase the shares of common stock underlying the warrants
and any outstanding warrants will become void and be of no further force or
effect.

In the April Private Placement, Cadence sold 120 units at the price of
$50,000 per unit to seven accredited investors for an aggregate sales price of
$6,000,000. Each unit consisted of a senior secured note in the principal amount
of $50,000 and a warrant to purchase 6,375 shares of our common stock,
exercisable at $4.00 per share. On January 31, 2005, we entered into an
agreement with the investors in the April Private Placement pursuant to which we
paid off the notes in full and reduced the exercise price of the warrants to
$1.25.

The following table sets forth the names of the selling shareholders, the
number of shares of common stock beneficially owned by the selling shareholders
as of January 24, 2005, the number of shares of common stock being offered by
the selling shareholders, the number of shares of common stock each selling
shareholder will beneficially own if the shareholder sells all of the shares
being registered and the selling shareholder's percentage ownership of Cadence
common stock if all the shares in the offering are sold. The calculation of the
shares beneficially owned does not take into account the limitation on more than
4.99% beneficial ownership contained in the terms of the warrants of the April
Private Placement (as discussed in note 1 to the table). The shares being
offered hereby are being registered to permit public secondary trading, and the
selling shareholders may offer all or part of the shares for resale from time to
time. However, the selling shareholders are under no obligation to sell all or
any portion of such shares nor are the selling shareholders obligated to sell
any shares immediately under this prospectus. To prevent dilution to the selling
security holders, the following numbers may change because of adjustments to
reflect stock splits, stock dividends or similar events involving our common
stock.

None of the selling shareholders have, nor within the past three years
have had, any position, office or other material relationship with us or any of
our predecessors or affiliates, except that that (i) Guma Aguiar was an officer
and director of Cadence, and Ellen Aguiar is Guma Aguiar's mother (ii) Thomas
Kaplan, a 5% shareholder of Cadence, is a principal of LCM Holdings, LDC, (iii)
Nathan A. Low, a 5% shareholder of Cadence, is the husband of Lisa Low, the
father of Daniel Low, Michael Low, Gabriel Low and Chantal Low, and the son of
Ruth Low, formed the Nathan Low Family Trust for the benefit of his family and
is the beneficiary of the Nathan A Low Roth IRA, and (iv) Derek Caldwell is an
employee of Sunrise Securities Corporation, which is controlled by Nathan A.
Low, and has performed institutional investor relations services for Cadence.
Mr. Low also acted as a finder for Cadence in the April Private Placement
described above and has done so in prior placements, for which he was
compensated by Cadence.

Percent of
Shares of Common Class Owned
Stock Beneficial After
Beneficially Shares of Ownership After Offering if
Owned Prior to Common Stock Offering if All All Shares
Selling Shareholders Offering to be Sold Shares are Sold are Sold
- ------------------------------------------------- ---------------- ------------ --------------- -----------

Moshe Azouley 227,500(1) 227,500(1) 0 0
Lisa Low as Custodian For Gabriel S. Low UNYGMA 2,427,742(2) 57,375(3) 1,990,992 14.0%
Nathan A Low 2,427,742(4) 207,500(4) 1,990,992 14.0%
Bear Stearns as Custodian For Nathan A. Low Roth
IRA (5) 2,022,867 31,875(3) 1,990,992 14.0%
Ruth Low 58,250(6) 58,250(6) 0 0
Omicron Capital (7) 127,500(3) 127,500(3) 0 0
Portside Growth and Opportunity Fund (8) 195,300(8) 195,300(8) 0 0
Smithfield Fiduciary LLC (9) 655,000(9) 655,000(9) 0 0
Ellen Aguiar (10) 461,283 300,000 161,283 1.1%
American Friends of Ohr Somayach (11) 11,860 11,860 0 0
American Friends of Shalva (12) 10,280 10,280 0 0
American Friends of Yad Ezra (13) 20,000 20,000 0 0
American Friends of Yeshiva D'Mir(14) 20,000 20,000 0 0
B* Capital(15) 10,000 10,000 0 0
Balestra Capital Partners, L.P.(16) 25,900 25,900 0 0
Michael S. Berlin 40,000 40,000 0 0
Merlin Bingham 5,180 5,000 180 *
Derek Caldwell 60,000 34,000 26,000 *
Concorde Bank Limited (17) 15,000 15,000 0 0
Robert Darbee 10,000 10,000 0 0
David A. Dayton and Carol Dayton 7,000 7,000 0 0
Robert Denison 55,000(18) 50,000(18) 5,000 *
Buzz Fairchild 10,000 10,000 0 0
Carol Gatewood IRA (19) 25,000 25,000 0 0
Floyd E. Hambleton 91,250 20,000 71,250 *
Stephen M. Harris 25,000 25,000 0 0
Joy A. Henshel 5,000 5,000 0 0
James H. Harris, MD PSP Trust (20) 10,000 10,000 0 0
Joseph Klein III 10% Charitable Remainder Unitrust 12,000 12,000 0 0
Marcia Kucher 500(21) 500(21) 0 0
LCM Holdings, LDC (22) 480,811 160,000 320,811 2.3%
Nathan Leight 13,200 13,200 0 0
John S. Lemak 100,000 100,000 0 *
Lisa Low, as custodian for Daniel Low 2,427,742(23) 5,000(23) 1,990,992 14.0%
Lisa Low, as custodian for Michael Low 2,427,742(24) 70,000(24) 1,990,992 14.0%
Lisa Low, as custodian for Gabriel Low 2,427,742(25) 10,000(25) 1,990,992 14.0%
Lisa Low, as custodian for Chantal Low 2,427,742(26) 15,000(26) 1,990,992 14.0%
Nathan Low Family Trust, DTD 4/12/96 2,427,742(27) 40,000(27) 1,990,992 14.0%
Jason Lyons 500(28) 500(28) 0 0
Scott Mager 100,000(29) 100,000(29) 0 0
James E. McDowell and Janet L. McDowell 10,000 10,000 0 0
Scott Notowitz and Shari Notowitz 25,000(30) 25,000(30) 0 0

Paul Papi 20,000 20,000 0 0
Michael Pisani 20,000 20,000 0 0
Proteus Capital Corp. (31) 317,000 50,000 267,000 1.8%
Michael Ritger 5,000 5,000 0 0
William J. Ritger 258,334 250,000 8,334 *
Elaine Roberts Investment Trust (32) 25,000 25,000 0 0
Seaside Partners, L.P.(33) 40,000 40,000 0 0
Sherleigh Associates Inc. PSP (34) 80,000 80,000 0 0
Joyce Stump 10,000 10,000 0 0
Joseph A. Tedesco 10,000 10,000 0 0
Charles Wafer 50,000 50,000 0 0
Michael H. Weiss 180,000 180,000 0 0
Wallis W. Wood 3,000 3,000 0 0
Winton Capital Holdings Ltd. (35) 6,000 6,000 0 0
York Global Value Partners, L.P. (36) 63,854 63,854 0 0
York Select L.P. (37) 203,566 203,566 0 0
York Select Unit Trust (38) 127,580 127,580 0 0

Totals ----------- --------------- ----------------- -------------
6,770,390 3,919,540 2,850,850 19.7%

- ---------------

* Less than 1%.

(1) Shares of common stock beneficially and to be sold includes warrants to
purchase 127,500 shares of our common stock as to which footnote 3, below,
applies.

(2) Includes 2,370,367 shares of common stock beneficially owned by Nathan A.
Low, as described in footnote 4, below.

(3) Consists of warrants to purchase our common stock. The terms of the
warrants provide that no selling shareholder may exercise warrants for
common stock if such exercise would result in such selling shareholder
beneficially owning more than 4.99% of our outstanding common stock.
Accordingly, while all shares that are issuable to a selling shareholder
upon exercise of the warrants are included in the number of shares being
offered in the table, shares which a selling shareholder is prevented from
acquiring as a result of these provisions are not shown as beneficially
owned. Unless otherwise indicated, each selling shareholder has sole
voting and investment power with respect to its shares of common stock.
The inclusion of any shares in this table does not constitute an admission
of beneficial ownership for the selling shareholder.

(4) Based upon information included in amendment number 4 to a Schedule 13D
filed with the SEC on May 12, 2004. Nathan A. Low has the sole power to
vote or direct the vote of, and the sole power to direct the disposition
of, the shares held by the Nathan A. Low Roth IRA and the shares held by
him individually, which total 2,230,367 shares of common stock, which
includes 76,500 shares of common stock underlying warrants. Shares of
common stock beneficially owned and to be sold includes 76,500 shares of
common stock underlying warrants as to which footnote 3, above, applies.
Although Nathan A. Low has no direct voting or dispositive power over the
40,000 shares of common stock held by the Nathan A. Low Family Trust, he
may be deemed to beneficially own those shares because his wife is the
trustee of the Trust. Similarly, Nathan A. Low may be deemed to
beneficially own those shares of common stock underlying options and
warrants (a total of 157,375 shares of common stock) held for the benefit
of his minor children because his wife has sole voting and dispositive
power over such shares. Therefore, Nathan A. Low reports shared voting and
dispositive power over 197,375 shares of common stock, which includes
including 100,000 shares of common stock underlying options to purchase
common stock and 57,375 shares of common stock underlying warrants to
purchase common stock.

(5) Based upon information included in amendment number 4 to a Schedule 13D
filed with the SEC on May 12, 2004. We have been advised by the selling
shareholder that its controlling person is Nathan A. Low.

(6) Includes warrants to purchase 38,250 shares of our common stock as to
which footnote 3, above, applies.

(7) Bruce Bernstein is the controlling person of Omicron Capital.

(8) Ramius Capital Group, LLC ("Ramius Capital") is the investment adviser of
Portside Growth & Opportunity Fund ("Portside") and consequently has
voting control and investment discretion over securities held by Portside.
Ramius Capital disclaims beneficial ownership of the shares held by
Portside. Peter A. Cohen, Morgan B. Stark, Thomas W. Strauss and Jeffrey
M. Solomon are the sole managing members of C4S& Co., LLC, the sole
managing member of Ramius Capital. As a result, Messrs. Cohen, Stark,
Strauss and Solomon may be considered beneficial owners of any shares
deemed to be beneficially owned by Ramius Capital. Messrs. Cohen, Stark,
Strauss and Solomon disclaim beneficial ownership of these shares. Shares
of common stock beneficially owned and to be sold includes warrants to
purchase 127,500 shares of our common stock as to which footnote 3, above,
applies.

(9) Highbridge Capital Management, LLC is the trading manager of Smithfield
Fiduciary LLC and consequently has voting control and investment
discretion over securities held by Smithfield Fiduciary LLC. Glenn Dubin
and Henry Swieca control Highbridge Capital Management, LLC. Each of
Highbridge Capital Management, LLC, Glenn Dubin and Henry Swieca disclaims
beneficial ownership of the securities held by Smithfield Fiduciary LLC.
Includes warrants to purchase 255,000 shares of our common stock as to
which footnote 3, above, applies.

(10) Shares of common stock beneficially owned and to be sold includes 150,000
shares of common stock issuable upon exercise of warrants.

(11) Shares of common stock beneficially owned and to be sold consists of
11,860 shares of common stock issuable upon exercise of options. We have
been advised by the selling shareholder that its controlling person is
Nota Schieller.

(12) Shares of common stock beneficially owned and to be sold consists of
10,280 shares of common stock issuable upon exercise of options. We have
been advised by the selling shareholder that its controlling person is Leo
Klein.

(13) Shares of common stock beneficially owned and to be sold consists of
20,000 shares of common stock issuable upon exercise of options. We have
been advised by the selling shareholder that its controlling person is Zvi
Waldman.

(14) Shares of common stock beneficially owned and to be sold consists of
20,000 shares of common stock issuable upon exercise of options. We have
been advised by the selling shareholder that its controlling person is
Mordechai Grunwald.

(15) We have been advised by the selling shareholder that its controlling
person is Geannine Charriere.

(16) We have been advised by the selling shareholder that its controlling
person is James Melcher.

(17) We have been advised by the selling shareholder that its controlling
person is Remy Chapentier.

(18) Includes 25,000 shares of common stock issuable upon exercise of warrants.

(19) We have been advised by the selling shareholder that its controlling
person is Carol Gatewood.

(20) We have been advised by the selling shareholder that its controlling
person is James H. Harris.

(21) Consists of 500 shares of common stock issuable upon exercise of options.

(22) We have been advised by the selling shareholder that its controlling
person is Thomas Kaplan.

(23) Includes 2,422,742 shares of common stock beneficially owned by Nathan A.
Low Roth IRA, the Nathan Low Family Trust, Nathan A. Low, and Lisa Low as
custodian for Michael Low, Gabriel Low and Chantal Low. Number of shares
to be sold consists of common stock issuable upon exercise of options.

(24) Includes 2,357,742 shares of common stock beneficially owned by Nathan A.
Low Roth IRA, the Nathan Low Family Trust, Nathan A. Low, and Lisa Low as
custodian for Daniel Low, Gabriel Low and Chantal Low. Number of shares to
be sold consists of common stock issuable upon exercise of options.

(25) Includes 2,417,742 shares of common stock beneficially owned by Nathan A.
Low Roth IRA, the Nathan Low Family Trust, Nathan A. Low, and Lisa Low as
custodian for Michael Low, Daniel Low and Chantal Low. Number of shares to
be sold consists of common stock issuable upon exercise of options.

(26) Includes 2,412,742 shares of common stock beneficially owned by Nathan A.
Low Roth IRA, the Nathan Low Family Trust, Nathan A. Low, and Lisa Low as
custodian for Michael Low, Gabriel Low and Daniel Low. Number of shares to
be sold consists of common stock issuable upon exercise of options.

(27) Includes 2,387,742 shares of common stock beneficially owned by Nathan A.
Low Roth IRA, Nathan A. Low, and Lisa Low as custodian for Daniel Low,
Michael Low, Gabriel Low and Chantal Low. We have been advised by the
selling shareholder that its controlling person is Nathan A. Low.

(28) Consists of 500 shares of common stock issuable upon exercise of options.

(29) Includes 50,000 shares of common stock issuable upon exercise of warrants.

(30) Includes 12,500 shares of common stock issuable upon exercise of warrants.

(31) We have been advised by the selling shareholder that its controlling
person is Douglas Newby. Shares of common stock beneficially owned
includes an options to purchase 50,000 shares of common stock and an
option to purchase 250,000 shares of common stock which is owned by
Douglas Newby individually. Number of shares to be sold consists of common
stock issuable upon the exercise of an option.

(32) We have been advised by the selling shareholder that its controlling
person is Elaine Roberts.

(33) We have been advised by the selling shareholder that its controlling
person is Bill Ritger.

(34) We have been advised by the selling shareholder that its controlling
person is Jack Silver.

(35) We have been advised by the selling shareholder that its controlling
person is Marc Belzberg.

(36) We have been advised by the selling shareholder that its controlling
person is James G. Dinan.

(37) We have been advised by the selling shareholder that its controlling
person is James G. Dinan.

(38) We have been advised by the selling shareholder that its controlling
person is James G. Dinan.

PLAN OF DISTRIBUTION

The selling shareholders may, from time to time, sell any or all of their
shares of common stock issued upon exercise of the warrants issued pursuant to
the April 2004 private placement on any stock exchange, market or trading
facility on which the shares are traded or in private transactions. These sales
may be at fixed or negotiated prices. The selling shareholders may use any one
or more of the following methods when selling shares:

o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;

o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;

o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;

o an exchange distribution in accordance with the rules of the
applicable exchange;

o privately negotiated transactions;

o short sales;

o broker-dealers may agree with the selling shareholders to sell a
specified number of such shares at a stipulated price per share;

o a combination of any such methods of sale; and

o any other method permitted pursuant to applicable law.

The selling shareholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.

The selling shareholders may also engage in short sales against the box,
puts and calls and other transactions in our securities or derivatives of our
securities and may sell or deliver shares in connection with these trades.

Broker-dealers engaged by the selling shareholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling shareholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. Any profits on the resale of shares of common stock by a
broker-dealer acting as principal might be deemed to be underwriting discounts
or commissions under the Securities Act. Discounts, concessions, commissions and
similar selling expenses, if any, attributable to the sale of shares will be
borne by a selling shareholder. The selling shareholders may agree to indemnify
any agent, dealer or broker-dealer that participates in transactions involving
sales of the shares if liabilities are imposed on that person under the
Securities Act.

The selling shareholders may from time to time pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock from time to time under
this prospectus after we have filed an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933 amending
the list of selling shareholders to include the pledgee, transferee or other
successors in interest as selling shareholders under this prospectus.

The selling shareholders also may transfer the shares of common stock in
other circumstances, in which case the transferees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this
prospectus and may sell the shares of common stock from time to time under this
prospectus after we have filed an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933 amending
the list of selling shareholders to include the pledgee, transferee or other
successors in interest as selling shareholders under this prospectus.

The selling shareholders and any broker-dealers or agents that are
involved in selling the shares of common stock may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales. In such event, any commissions received by such broker-dealers or agents
and any profit on the resale of the shares of common stock purchased by them may
be deemed to be underwriting commissions or discounts under the Securities Act.
The selling shareholders have advised us that they have acquired their
securities in the ordinary course of business and they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares of common stock, nor is there
an underwriter or coordinating broker acting in connection with a proposed sale
of shares of common stock by any selling shareholder. If we are notified by any
selling shareholder that any material arrangement has been entered into with a
broker-dealer for the sale of shares of common stock, if required, we will file
a supplement to this prospectus. If the selling shareholders use this prospectus
for any sale of the shares of common stock, they will be subject to the
prospectus delivery requirements of the Securities Act.

In connection with the April Private Placement, we paid a finder's fee
consisting of $300,000 and warrants to purchase 76,500 shares of our common
stock, exercisable at $4.00 per share, to Nathan A. Low. We agreed to indemnify
the selling shareholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.

In connection with the September and October 2003 private placements we
paid finder's fees of (i) $376,565, and options to purchase 167,140 shares of
common stock at $2.50 per share, expiring on September 30, 2008, to Sunrise
Securities Corporation, (ii) 11,000 shares of common stock to Nathan A. Low,
(iii) $6,250 to Grosvenor Capital, Ltd. of London, England, and (iv) $5,000 to
David Nahmias. We agreed to indemnify the selling shareholders against certain
losses, claims, damages and liabilities, including liabilities under the
Securities Act.

We are required to pay all fees and expenses incident to the registration
of the shares of common stock. We have agreed to indemnify the selling
shareholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.

The anti-manipulation rules of Regulation M under the Securities Exchange
Act of 1934 may apply to sales of our common stock and activities of the selling
shareholders.

RELATED PARTY TRANSACTIONS

Nevada-Comstock Mining Company, formerly Caledonia Silver-Lead Mines,
Inc., is owned approximately 1.2% by Howard Crosby, chief executive officer and
director, 1.2% by John Ryan, vice president and director, and 35% by Cadence.
Cadence had unpatented mineral claims named the Kil Group and West Mullan Group,
which it sold during the fiscal year ended September 30, 2002, to Caledonia in
exchange for 3,501,980 shares of Caledonia's common stock, par value $.10 per
share. The Board of Directors valued the Caledonia shares at $350,198. The board
of directors deemed the value of the Kil Group and West Mullan Group to be de
minimus, recording all but $20,000 of the amount received as gain.

Messrs. Crosby and Ryan collectively own in excess of 40% of the stock of
Dotson Exploration Company and they are the sole officers and directors of
Dotson. Dotson owns 109,000 shares of Cadence's shares of common stock. During
fiscal year 2002 and the first quarter of fiscal year 2003, Cadence repaid
Dotson a loan in the amount of $10,000 and Cadence made two loans to Dotson, one
for $35,000 and one for $20,000, each at an interest rate of 10% per annum.
Dotson transferred to Cadence marketable securities of the common stock of two
unaffiliated companies, Enerphaze Corporation and The Williams Companies, valued
by the Board of Directors at $33,380 as partial payment of the amount loaned.
During the nine months ended June 30, 2003, Dotson repaid the $20,000 loan in
cash. Of the total amount of principal and interest Dotson owed Cadence,
$57,100, the amount of $3,720 remained outstanding at September 30, 2004, which
amount is payable on demand and bears interest at 10% per annum.

In September 2000, Cadence, through its wholly owned subsidiary,
Celebration Mining Company, entered into a 5-year, $6,000 per year lease
agreement with Oxford Metallurgical, Inc., a company of which Messrs. Crosby and
Ryan collectively own a majority, on Cadence's Palisades Group property
consisting of eight unpatented mineral claims. The lease permitted payment in
cash or 10,000 Oxford shares per $3,000 of lease payments. Cadence terminated
the lease in fiscal 2002.

In October 2001, Cadence issued 200,000 shares of its common stock to Mr.
Crosby for cash in the amount of $60,000. On January 15, 2002, Cadence issued
100,000 shares of its common stock to Mr. Crosby in payment of a loan made to
Cadence in the principal amount of $30,000 in the November 2001. On January 22,
2002, Mr. Crosby made an additional loan of $30,000 bearing interest at 8% for
which Cadence issued him 15,000 shares valued at $4,500 as an inducement to
making the loan.

On January 22, 2002, Cadence transferred 41,667 shares of the common stock
it owned in Trend Mining Company, of which Mr. Ryan is a director, to Mr. Ryan
in payment of past due salary of $16,000. Further, in October 2001, Mr. Ryan
transferred marketable securities of Enerphaze Corporation valued at $90,000 to
Cadence in exchange for 300,000 shares of Cadence, which shares are held by J.P.
Ryan Company, Inc. held 100% by John Ryan, Andover Capital Corporation held 100%
by John Ryan, and Dotson Exploration Company.

In April 2002, Mr. Crosby purchased 83,334 Cadence investment units and
Mr. Ryan purchased 43,334 Cadence investment units at $0.30 per unit, each unit
consisting of one share of common stock and one warrant exercisable at $0.30
(see also below description of additional purchases of units by significant
shareholders). The warrants contained a provision which allowed cashless
exercise when and if Cadence common stock traded at or above $1.50 per share.
Also, in April 2002, Cadence issued to Mr. Ryan 6,800 shares of its common stock
in repayment of 6,800 Cadence shares owned by Mr. Ryan that he had transferred
to third parties to pay Cadence invoices.

During fiscal 2003, Mr. Crosby made two loans to Cadence. One loan in
December 2002 was in the principal amount of $70,000, bearing interest at 5% and
the other loan made in February 2003 was in the principal amount of $50,000
bearing interest at a rate of 8%. Cadence issued 14,000 shares of its common
stock valued at $10,920, as an inducement to making the $70,000 loan and 20,000
shares valued at $15,600, as an inducement to making the $50,000 loan. The
$50,000 loan was one of three bridge loans, one for $50,000 from Kevin Stulp
(see below) and one for $100,000 from the Nathan A. Low Family Trust (see
below). Cadence repaid $60,000 in cash subsequent to the end of the fiscal year.
In addition, Cadence issued 4,000 shares of its common stock in repayment of the
remaining $10,000 principal amount outstanding on the $70,000 loan. Cadence
repaid $25,000 of the $50,000 loan in cash during fiscal 2003 and repaid the
remaining $25,000 principal amount outstanding subsequent to the end of the
fiscal year. Mr. Crosby waived the interest on both loans, which Cadence has
recorded as income.

In February 2003, Kevin Stulp, director, made a bridge loan to Cadence in
the principal amount of $50,000, bearing interest of 8% per annum. Cadence
issued 20,000 shares of its stock valued at $15,600, to Mr. Stulp as an
inducement to making the loan. In April 2003, Cadence repaid $25,000 of the
$50,000 loan in cash and in July 2003, Cadence agreed to issue 25,000 shares of
its common stock to repay the remaining $25,000 principal amount outstanding.
Mr. Stulp waived interest on this loan which Cadence has recorded as income. In
July 2003, Mr. Stulp exercised a warrant to purchase 100,000 shares of common
stock at $.75 per share.

In April 2002, the Nathan A. Low Roth IRA purchased 1,083,334 of the
investment units described above for $0.30 per unit, for a total of $325,000.
The Nathan A. Low Roth IRA gave Cadence a non-interest bearing note for $150,000
for the partial payment of the units. The due date was June 15, 2002 and the
note was paid in full and on time.

In April 2002, entities controlled by Thomas Kaplan purchased 1,083,334 of
the investment units described above for $0.30 per unit, for a total of
$325,000. These entities gave Cadence two non-interest bearing notes for
$150,000 for the partial payment of the units. The due date for the notes was
June 15, 2002 and they were paid in full and on time.

In October 2002, the Nathan A. Low Roth IRA and various entities
controlled by Thomas Kaplan exercised warrants acquired as part of the unit
offering referred to above. The exercise was done in separate cashless
transactions whereby each party surrendered a total of 175,676 shares of common
stock valued at $325,000 to exercise warrants for 1,083,334 shares of stock,
netting 907,658 shares.

In 2002, Nathan Low, a Cadence Resources major shareholder, and Cadence
decided to form a limited partnership to acquire and develop oil and natural gas
properties. Low planned to seek investors to invest as limited partners in the
partnership. On August 8, 2002, Cadence formed Cadence Resources Limited
Partnership, with Cadence as the sole general partner. Low had not brought any
investors to the partnership by the time the partnership was ready to acquire
oil and gas interests. Therefore, Low elected to provide the initial funding,
$250,000, for the first prospect, in the form of the purchase of a limited
partnership interest in the partnership. Cadence paid Sunrise Securities
Corporation, an entity controlled by Low, a finders' fee on this funding. Also,
on August 1, 2002, Sunrise Securities Corporation, together with Low and his
assigns, the limited partnership and Cadence entered into the Side Letter
Agreement of Certain Terms of Limited Partnership Drawdown Facility, a $20
million funding agreement. This was intended to provide further equity
investments in the partnership. It was structured so that the Low parties had
the option, but not the obligation, to provide capital contributions to the
partnership. In partial consideration for entering into the drawdown facility,
the Low parties were given a right of first refusal to provide funding for any
drilling project contemplated by the partnership.

Cadence and Low have agreed in principal as to the termination of the
drawdown facility, the repurchase of Low's limited partnership interest for
$250,000, dissolution of the partnership and related matters and in October
2003, Low received $250,000 from Cadence for the repurchase. The following
description of the transactions with regard to the partnership should be read in
light of the foregoing disclosure.

In the formation of the partnership, Cadence contributed $12,500 to the
partnership and Low, the limited partner, contributed $250,000 in cash. A
portion of the $250,000 was used to advance the drilling on the West Electra
Lake #1 well. For example, $24,552 was spent on seismic acquisition and
processing which covered the Virginia Reef #2B well and also the West Electra
Lake #1 well acreage. Also $26,105 of the limited partnership funds was spent on
the leasing of the West Electra Lake Prospect as well as $16,077 on preparatory
costs for the West Electra Lake #1 well. Prior to the limited partner's request
for repayment of the limited partner's contribution (see below), Cadence had
granted the limited partner a 5% working interest in the #1 West Electra Lake
well. However, the limited partner has agreed to convey his working interest in
the West Electra Lake #1 well to Cadence as part of the buyout of his limited
partnership interest by Cadence.

Low also advanced $300,000 to the partnership to explore natural gas
interests in Michigan in the Black Bean Unit. As an inducement for this advance,
Cadence issued Low 120,000 shares of common stock valued at $210,000. As an
additional inducement to making the $300,000 advance, Low was granted a 2.25%
working interest in each well in the Black Bean Unit in Michigan that was
drilled using the $300,000 until "unitized well payout," the point at which the
partnership receives 100% of its contribution back in the form of revenues from
the well unit. After unitized well payout, Low's working interest in these wells
will be reduced to a 2.00% working interest. Cadence has repaid the $300,000
loan.

In February 2003, Cadence gave a $100,000 note, as part of the $200,000
bridge loans referenced above, to the Nathan A. Low Family Trust at an interest
rate of 8%. Cadence issued 40,000 shares valued at $31,200 as an inducement to
making the loan. The principal on this note was repaid in full in October 2003.

Cadence issued approximately 1,721,400 shares of its common stock in
September and October 2003 in a brokered private placement. It paid sales
commissions of $376,565 in cash and options to purchase 162,140 shares for $2.50
per share to a broker, Sunrise Securities Corporation, a company owned by Nathan
Low. It also issued 11,000 shares of Cadence common stock valued at $2.90 per
share to Nathan Low in connection with the private placement.

CGT Management, Ltd., in which members of the Thomas Kaplan family have an
indirect interest, loaned Cadence $300,000 in 2003 at 10% interest. As an
inducement for making the loan, Cadence, in fiscal 2003, issued 120,000 shares
valued at $168,000 to CGT Management. Mr. Kaplan disclaims beneficial ownership
of the shares under the Exchange Act. The $300,000 loan and interest were repaid
in full in October 2003.

In the ordinary course of Cadence's business, Cadence acquires interests
in exploratory and developmental oil and gas prospects and sells interests in
such prospects to unaffiliated third parties. In fiscal 2002, Cadence made
available for sale to its executive officers, directors and consultants a
portion of working interests in the #1A well in Wilbarger County, Texas on terms
no less favorable to Cadence than those at which interests would otherwise have
been sold to third party investors in that well. Messrs. Crosby and Ryan each
acquired from Cadence a 6% working interest in the #1A well in Wilbarger County,
Texas for $40,800 in fiscal year 2002. Expenses are deducted from the production
checks and to date, production has been sufficient to cover expenses. Cadence
sold these working interests to raise the capital to drill the well.

Lucius C. Geer, a consultant to Cadence who manages its acquisition,
exploration and production operations, has entered several agreements with
Cadence. In October 2001, Geer entered into an agreement with Cadence under
which Cadence purchased from Geer and an associate of Geer's, geological
information for $30,000 cash and a 2% overriding royalty interest each to Geer
and his associate, in the Virgin Reef Prospect in Wilbarger County, Texas.
Effective December 31, 2001, Cadence assigned Geer a 2% overriding royalty
interest in the oil, gas and mineral lease from the W. T. Waggoner Estate in
Wilbarger County, Texas. In April 2003, Cadence assigned Geer and an associate
each a 1% overriding royalty interest in oil and gas leases in Desoto Parish,
Louisiana. Effective August 1, 2003, Cadence and Geer amended their February 1,
2002 Letter Agreement with respect to the creation and funding of a geological
and operations office to be staffed by Geer and paid for by Cadence. Under the
agreement, Geer agreed to evaluate the geological feasibility and land
availability of agreed upon areas in order to locate prospects that meet certain
criteria. The agreement provides that Geer will devote 75% of his time to his
work for Cadence for $7,500 per month. On each lease that Cadence acquires under
the agreement, Cadence must assign Geer an overriding royalty interest of 2% of
the sales price received for all oil, gas and minerals from such lease, which
amount is to be reduced proportionately if the lease covers less than the full
fee mineral estate.

On March 31, 2004, Cadence borrowed $250,000 from Howard Crosby, $70,000
from Glenn DeHekker, $50,000 from Dotson Exploration Company and $20,000 from
Kevin Stulp at an interest rate of 12%. Such amounts were repaid by Cadence in
April 2004.

On April 2, 2004, Cadence sold 120 units consisting of a note in the
principal amount of $50,000 and a warrant to purchase 6,375 shares of Common
Stock, exercisable at $4.00 per share and expiring on April 2, 2007, for an
aggregate sales price of $6,000,000. As compensation for his services in
connection with this private placement, Cadence paid Nathan A. Low, a 5%
beneficial owner of Cadence's common stock, $300,000 and issued him a warrant to
purchase 76,500 shares of Common Stock, exercisable at $4.00 per share, and
expiring on April 2, 2007. In addition, Lisa Low, as custodian for Gabriel S.
Low, purchased nine units in the offering and Bear Stearns as Custodian for
Nathan A. Low Roth IRA purchased five units in the offering. Lisa Low is Mr.
Low's spouse, Gabriel S. Low is Mr. Low's child, and Mr. Low is the controlling
person of the Nathan A. Low Roth IRA.

In August, 2004 Cadence purchased 500,000 shares of the common stock of TN
Oil Co., a Delaware corporation for $50,000. Mr. Ryan is an officer and director
of TN Oil Co. TN Oil Co. has obtained oil and gas leases in the State of
Tennessee, one of which was assigned to Cadence in November, 2004 in exchange
for a commitment to drill a test well on the subject leased property. The test
well was drilled in December, 2004 and was unsuccessful.

On January 31, 2005, Cadence entered into a purchase agreement (the
"Purchase Agreement") with twenty two accredited investors pursuant to which the
investors purchased 7,810,000 shares of common stock and warrants to purchase
14,050,000 shares of common stock at an exercise price of $1.75 per share for
$9,762,500. The Nathan A. Low Family Trust dated 4/12/96 and Bear Stearns as
Custodian for Nathan A. Low Roth IRA, both of which are controlled by Nathan
Low, a greater than 10% holder of Cadence's common stock, invested in Cadence
pursuant to the Purchase Agreement. Sunrise Securities Corporation, an affiliate
of Nathan Low, will receive a commission equal to $976,250 and a warrant to
purchase 2,186,000 shares of Cadence's common stock for services rendered as the
placement agent in the transaction.

On January 31, 2005, Cadence entered into an agreement with the seven
accredited investors in its April 2004 private placement pursuant to which the
Company was permitted to repay the $6,000,000 in notes held by such investors
without any prepayment penalties in exchange for the exercise price of the
warrants to purchase 765,000 shares of common stock issued in the April 2004
private placement being reduced from $4.00 per share to $1.25 per share.
$5,000,000 of the notes were repaid in cash and $1,000,000 of the notes were
converted into common stock and warrants of Cadence pursuant to the Purchase
Agreement. Nathan Low, a greater than 10% holder of Cadence's common stock, and
Lisa Low, Nathan Low's wife, as Custodian for Gabriel S. Low UNYGMA were two of
the eight accredited investors involved in this transaction. In connection with
this transaction, the exercise price of the warrants to purchase 76,500 shares
of common stock held by Nathan A. Low, who acted as a finder in the April 2004
private placement, were also reduced to $1.25 per share.

DESCRIPTION OF SECURITIES

Our authorized capital stock consists of 100,000,000 shares of common
stock, par value $.01 per share, and 20,000,000 shares of preferred stock, par
value $.01 per share. As of January 24, 2005, we had 12,911,827 shares of common
stock issued and outstanding. Only one class of preferred stock is issued and
outstanding. Included below is a summary description of only those warrants held
by selling shareholders and we have not described any of our other outstanding
warrants.

COMMON STOCK

The holders of the common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of shareholders. Accordingly,
holders of a majority of the shares of common stock entitled to vote in any
election of directors may elect all of the directors standing for election.
Holders of common stock are entitled to receive ratably such dividends as may be
declared by the Board out of funds legally available therefor. In the event of
our liquidation, dissolution or winding up, holders of common stock are entitled
to share ratably in the assets remaining after payment of liabilities. Holders
of common stock have no preemptive, conversion or redemption rights. All of the
outstanding shares of common stock are fully-paid and nonassessable.

PREFERRED STOCK

Our Board of Directors may, without shareholder approval, establish and
issue shares of one or more classes or series of preferred stock having the
designations, number of shares, dividend rates, liquidation preferences,
redemption provisions, sinking fund provisions, conversion rights, voting rights
and other rights, preferences and limitations that our Board may determine. The
Board may authorize the issuance of preferred stock with voting, conversion and
economic rights senior to the common stock so that the issuance of preferred
stock could adversely affect the market value of the common stock. The creation
of one or more series of preferred stock may adversely affect the voting power
or other rights of the holders of common stock. The issuance of preferred stock,
while providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things and under some circumstances, have
the effect of delaying, deferring or preventing a change in control without any
action by shareholders.

Cadence's Board of Directors has authorized the issuance of 2,500,000
shares of Class A Preferred Shares. As of January 24, 2005, there were 34,950
shares of Class A Preferred Shares outstanding. The Class A Preferred Shares are
entitled to a 15% annual dividend, paid quarterly, the right to convert each
share of Class A Preferred Stock into one share of Cadence's common stock at a
price of $1.50 per share, provided that certain conditions are met. The Class A
Preferred Shares mature seven years from the date of issuance. At maturity, the
Class Preferred Shares will be redeemed for cash or common stock at Cadence's
option in an amount equal to the amount paid by the investors for the shares
plus any accrued and unpaid dividends. If shares of common stock are to be
issued at maturity, the conversion price shall be determined by the average
closing bid price for the 20 trading days prior to the maturity date

No other classes of preferred stock are outstanding.

WARRANTS

The warrants being registered on behalf of Moshe Azouley, Lisa Low as
Custodian For Gabriel S. Low UNYGMA, Nathan A Low, Bear Stearns as Custodian For
Nathan A. Low Roth IRA, Ruth Low, Omicron Capital, Portside Growth and
Opportunity Fund and Smithfield Fiduciary LLC are exercisable at $1.25 per share
and expire on April 2, 2007. The warrants may be exercised in whole or in part,
subject to the limitations provided in the warrants. Any warrant holders who do
not exercise their warrants prior to the conclusion of the exercise period will
forfeit the right to purchase the shares of common stock underlying the warrants
and any outstanding warrants will become void and be of no further force or
effect. If at any time while any of the warrants are outstanding, Cadence issues
common stock, or securities convertible into common stock to any person at a
price per share of common stock less than the exercise price of the warrants,
the exercise price of the warrants will be reduced pursuant to a formula as
provided in the warrant. In addition, in the event of a merger, consolidation,
or sale of all or substantially all the assets of Cadence, the holder of the
warrant has the right to receive a warrant substantially similar to the warrant
or, at the option of the holder of the warrant, an amount in cash equal to the
value of the warrant. If a dividend is declared on the common stock of Cadence,
the exercise price of the warrant will be reduced in accordance with the terms
of the warrant and the number of shares of common stock the warrant is
exercisable for will be proportionately increased. If Cadence were to offer any
securities to its holders of common stock as a class, the holder of the warrant
would be entitled purchase such number of securities as if the warrant holder
were a holder of common stock.

Holders of the warrants have no voting rights of a shareholder, no
liquidation preference and no dividends will be declared on the warrants.

OPTIONS

The options may be exercised in whole or in part, subject to the
limitations provided in the options. Any option holders who do not exercise
their options prior to the conclusion of the exercise period will forfeit the
right to purchase the shares of common stock underlying the options and any
outstanding options will become void and be of no further force or effect.
Holders of the options have no voting, preemptive, liquidation or other rights
of a shareholder, and no dividends will be declared on the options.

ELECTION AND REMOVAL OF DIRECTORS

Each of our directors serves for a term of one year or until his successor
is elected and qualified if there is no annual meeting. At each annual meeting
of shareholders, the successors to the then current directors whose terms are
expiring are elected to serve for one-year terms. Directors may be removed at
any special meeting of our shareholders upon a vote of two-thirds of the
outstanding shares of stock entitled to vote for directors. Holders of our
common stock and preferred stock vote together for directors, with each share of
preferred stock having a number of votes equal to the number of shares of common
stock into which it could then be converted.

SHAREHOLDER MEETINGS

Our bylaws provide that special meetings of shareholders may be called by
our board of directors. In addition, upon the request of shareholders holding
one-fifth of the voting power of all shareholders, the Secretary of our company
is required to call a meeting of the shareholders. Finally, if no annual meeting
of shareholders has taken place for a period of more than eighteen months, any
shareholder may call a meeting of the shareholders of our company.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is OTC Stock
Transfer, 231 E. 2100 South, Suite #3, Salt Lake City, Utah 84115. Its telephone
number is (801) 485-5555 and facsimile is (801) 486-0562.

LEGAL MATTERS

The validity of the shares of common stock offered in this prospectus has
been passed upon for us by Jenkens & Gilchrist Parker Chapin LLP, The Chrysler
Building, 405 Lexington Avenue, New York, New York 10174.

EXPERTS

Our financial statements appearing in this prospectus have been examined
by the accounting firm of Williams & Webster, P.S., Certified Public
Accountants, 601 West Riverside, Suite 1970, Spokane, Washington 99201. These
financial statements are included in this Prospectus in reliance upon the said
report, given upon such firm's authority as an expert in auditing and
accounting.

The reference to the report of Ralph E. Davis Associates, Inc. Consultants
- - Petroleum and Natural Gas, located in Houston, Texas, contained herein with
respect to the proved reserves of our oil wells in Texas, the estimated net
revenue from such proved reserves, and the discounted present values of such
estimated future net revenue, is made in reliance upon the authority of such
firms as experts with the respect to such matters.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form SB-2 with the SEC. This
prospectus, which forms a part of that registration statement, does not contain
all of the information included in the registration statement and the exhibits
and schedules thereto as permitted by the rules and regulations of the SEC. For
further information with respect to Cadence Resources Corporation and the shares
of common stock offered hereby, please refer to the registration statement,
including its exhibits and schedules. Statements contained in this prospectus as
to the contents of any contract or other document referred to herein are not
necessarily complete and, where the contract or other document is an exhibit to
the registration statement, each such statement is qualified in all respects by
the provisions of such exhibit, to which reference is hereby made. You may
review a copy of the registration statement at the SEC's public reference room
at 450 Fifth Street, N.W., Washington, D.C. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. The registration statement can also be reviewed by accessing the SEC's
Internet site at http://www.sec.gov. We are subject to the information and
reporting requirements of the Securities Exchange Act of 1934 and, in accordance
therewith, file periodic reports, proxy statements or information statements,
and other information with the SEC. These reports can also be reviewed by
accessing the SEC's Internet site.

You should rely only on the information provided in this prospectus, any
prospectus supplement or as part of the registration statement Filed on Form
SB-2 of which this prospective is a part, as such registration statement is
amended and in effect with the SEC. We have not authorized anyone else to
provide you with different information. We are not making an offer of these
securities in any state where the offer is not permitted. You should not assume
that the information in this prospectus, any prospectus supplement or any
document incorporated by reference is accurate as of any date other than the
date of those documents.

INDEX TO FINANCIAL STATEMENTS

Financial Statements for the fiscal year ended September 30, 2004

Independent Auditor's Report..............................................F-2
Balance Sheets as of September 30, 2004, 2003 and 2002....................F-3
Statements of Operations and Comprehensive Loss for
the years ended September 30, 2004, 2003 and 2002.......................F-5
Statement of Stockholder's Equity.........................................F-6
Statements of Cash Flows for the years ended
September 30, 2004, 2003 and 2002.......................................F-9
Notes to the Financial Statements........................................F-11

F-1

The Board of Directors
Cadence Resources Corporation
Walla Walla, Washington

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have audited the accompanying balance sheets of Cadence Resources Corporation
as of September 30, 2004, 2003 and 2002, and the related statements of
operations, stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cadence Resources Corporation
as of September 30, 2004, 2003 and 2002, and the results of its operations,
stockholders equity and its cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.

Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
January 4, 2005

F-2

CADENCE RESOURCES CORPORATION
BALANCE SHEETS

September 30,
-----------------------------------------
2004 2003 2002
----------- ----------- -----------

ASSETS

CURRENT ASSETS
Cash $ 1,922,993 $ 3,619,345 $ 40,011
Oil & gas revenue receivable 335,407 84,575 26,123
Receivable from working interest owners -- 12,873 16,037
Notes receivable 8,720 3,720 13,078
Prepaid expenses 39,410 5,925 27,500
Other current assets 425 425 431
----------- ----------- -----------
TOTAL CURRENT ASSETS 2,306,955 3,726,863 123,180
----------- ----------- -----------

OIL AND GAS PROPERTIES, USING
SUCCESSFUL EFFORTS ACCOUNTING
Proved properties 5,731,108 590,747 48,694
Unproved properties 505,501 833,836 78,997
Wells and related equipment and facilities 855,562 202,886 67,374
Support equipment and facilities 506,427 151,963 105,108
Prepaid oil and gas leases 456,219 395,973 177,177
Less accumulated depreciation, depletion,
amortization and impairment (3,911,939) (61,611) (4,312)
----------- ----------- -----------
TOTAL OIL AND GAS PROPERTIES 4,142,878 2,113,794 473,038
----------- ----------- -----------

PROPERTY AND EQUIPMENT
Furniture and equipment 4,785 1,660 1,440
Less accumulated depreciation (1,949) (1,451) (1,440)
----------- ----------- -----------
TOTAL PROPERTY AND EQUIPMENT 2,836 209 --
----------- ----------- -----------

OTHER ASSETS
Investments 238,088 394,454 448,793
Mineral properties available for sale 197,406 246,757 246,757
----------- ----------- -----------
TOTAL OTHER ASSETS 435,494 641,211 695,550
----------- ----------- -----------

TOTAL ASSETS $ 6,888,163 $ 6,482,077 $ 1,291,768
=========== =========== ===========

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

F-3

CADENCE RESOURCES CORPORATION
BALANCE SHEETS

September 30,
--------------------------------------------
2004 2003 2002
------------ ------------ ------------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable $ 358,588 $ 584,866 $ 119,923
Revenue distribution payable 32,387 68,929 14,835
Payable to related party 300,000 550,000 2,500
Deferred working interest -- -- 22,184
Accrued compensation -- 94,920 66,261
Accrued interest - related party 3,548 15,752 --
Interest payable - secured notes 1,233 -- --
Notes payable - related party -- 460,000 --
------------ ------------ ------------
TOTAL CURRENT LIABILITIES 695,756 1,774,467 225,703
------------ ------------ ------------

LONG-TERM DEBT
Secured notes, net of discount 5,071,147 -- --
------------ ------------ ------------

COMMITMENTS AND CONTINGENCIES -- -- --
------------ ------------ ------------

REDEEMABLE PREFERRED STOCK 59,925 59,925 --
------------ ------------ ------------

STOCKHOLDERS' EQUITY
Common stock, $0.01 par value; 100,000,000 shares authorized,
12,892,327, 12,512,827, and 6,866,210 shares issued and
outstanding,
respectively 128,923 125,128 68,662
Additional paid-in capital 18,995,458 18,343,422 13,291,965
Stock options 1,642,614 1,210,704 626,790
Stock warrants 794,512 51,375 233,334
Accumulated deficit (20,035,605) (14,863,687) (12,906,132)
Accumulated other comprehensive loss (464,567) (219,257) (248,554)
------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY 1,061,335 4,647,685 1,066,065
------------ ------------ ------------

TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 6,888,163 $ 6,482,077 $ 1,291,768
============ ============ ============

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

F-4

CADENCE RESOURCES CORPORATION
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Years Ended September 30,
--------------------------------------------
2004 2003 2002
------------ ------------ ------------

REVENUES
Oil and gas sales $ 2,541,447 $ 337,355 $ 56,608
Sale of drilling and production rights -- 50,000 --
------------ ------------ ------------
Total Revenues 2,541,447 387,355 56,608
------------ ------------ ------------

OPERATING AND ADMINISTRATIVE EXPENSES
Depreciation, depletion and amortization 2,663,695 57,310 4,312
Officers' and directors' compensation 725,485 528,727 152,510
Consulting 319,338 531,137 934,254
Oil and gas lease expenses 565,148 302,204 131,812
Oil and gas consulting 105,535 60,000 --
Exploration and drilling 134,452 109,968 128,974
Oil and gas production costs 174,836 34,577 5,305
Lease operating expenses -- 19,334 12,279
Other general and administrative 1,506,446 386,892 144,192
------------ ------------ ------------
Total Expenses 6,194,935 2,030,149 1,513,638
------------ ------------ ------------

LOSS FROM OPERATIONS (3,653,488) (1,642,794) (1,457,030)
------------ ------------ ------------

OTHER INCOME (EXPENSE)
Interest income 18,874 136 1,034
Interest expense and loan fees (302,955) (227,978) (5,872)
Partnership income (loss) -- (15,200) 10,000
Gain (loss) on debt forgiveness -- (4,699) 6,109
Other income 11,172 -- --
Loss on sale of investment (9,156) -- --
Loss on disposition and impairment of assets (1,236,365) (67,020) (29,890)
------------ ------------ ------------
Total Other Income (Expense) (1,518,430) (314,761) (18,619)
------------ ------------ ------------

LOSS BEFORE TAXES (5,171,918) (1,957,555) (1,475,649)

INCOME TAXES BENEFIT -- -- 66,040
------------ ------------ ------------

LOSS FROM CONTINUING OPERATIONS (5,171,918) (1,957,555) (1,409,609)

GAIN (LOSS) FROM DISCONTINUED OPERATIONS
Gain (loss) from mining operations (net of
income taxes) -- -- 264,158
------------ ------------ ------------

NET LOSS (5,171,918) (1,957,555) (1,145,451)

OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gain (loss) in market value of
investments (245,311) 29,297 (98,392)
------------ ------------ ------------

COMPREHENSIVE LOSS $ (5,417,228) $ (1,928,258) $ (1,243,843)
============ ============ ============

LOSS PER COMMON SHARE BASIC AND DILUTED:
Net loss from continuing operations $ (0.41) $ (0.21) $ (0.28)
Net gain (loss) from discontinued operations -- -- 0.05
------------ ------------ ------------
NET LOSS PER COMMON SHARE $ (0.41) $ (0.21) $ (0.23)
============ ============ ============

WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING,
BASIC AND DILUTED 12,715,619 9,348,374 4,965,179
============ ============ ============

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

F-5

CADENCE RESOURCES CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY

Common Stock
---------------------------- Additional
Number Paid-in Stock Stock
of Shares Amount Capital Options Warrants
------------ ------------ ------------ ------------ ----------

Balance,
September 30, 2001 2,453,890 $ 24,539 $ 12,198,855 $ -- $ --

Shares issued for cash at $0.24
to $0.50 per share 783,000 7,830 234,070 -- --

Shares issued to officer for debt
at $0.30 per share 300,000 3,000 87,000 -- --

Shares issued to officers, consultants
and others for services, accrued
compensation and prepaid
expenses at $0.30 to $0.38
per share 589,184 5,892 205,775 -- --

Shares issued for cash with warrants
attached at $0.30 per share 2,333,336 23,333 443,333 -- 233,334

Shares issued to officer for
reimbursement of expenses
paid for Company at $1.03
per share 6,800 68 6,932 -- --

Shares issued for investment at
$0.30 per share 400,000 4,000 116,000 -- --

Options issued to directors and
consultants for services -- -- -- 626,790 --

Net loss for the year ended
September 30, 2002 -- -- -- -- --

Unrealized loss on market value
of investments -- -- -- -- --
------------ ------------ ------------ ------------ ----------

Balance
September 30, 2002 6,866,210 $ 68,662 $ 13,291,965 $ 626,790 $ 233,334

Accumulated
Other Total
Accumulated Comprehensive Stockholders'
Deficit Loss Equity
------------ ------------- -------------

Balance,
September 30, 2001 $(11,760,681) $ (150,162) $ 312,551

Shares issued for cash at $0.24
to $0.50 per share -- -- 241,900

Shares issued to officer for debt
at $0.30 per share -- -- 90,000

Shares issued to officers, consultants
and others for services, accrued
compensation and prepaid
expenses at $0.30 to $0.38
per share -- -- 211,667

Shares issued for cash with warrants
attached at $0.30 per share -- -- 700,000

Shares issued to officer for
reimbursement of expenses
paid for Company at $1.03
per share -- -- 7,000

Shares issued for investment at
$0.30 per share -- -- 120,000

Options issued to directors and
consultants for services -- -- 626,790

Net loss for the year ended
September 30, 2002 (1,145,451) -- (1,145,451)

Unrealized loss on market value
of investments -- (98,392) (98,392)
------------ -------------- -----------

Balance
September 30, 2002 $(12,906,132) $ (248,554) $ 1,066,065

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

F-6

CADENCE RESOURCES CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY

Common Stock
------------------------ Additional
Number Paid-in Stock Stock
of Shares Amount Capital Options Warrants
---------- --------- ------------ ------------ ------------

Balance
September 30, 2002 6,866,210 $ 68,662 $ 13,291,965 $ 626,790 $ 233,334

Shares issued for cash with warrants
attached at an average of $0.52
per unit 212,500 2,125 56,500 -- 51,375

Shares issued to officers, directors
and others for services at $0.78
to $1.80 496,500 4,965 535,710 -- --

Shares issued for loan consideration
at $1.08 per share 220,000 2,200 204,800 -- --

Shares issued for exercise of options
at $0.75 per share 100,000 1,000 142,100 (68,100) --

Shares issued from exercise of
warrants 1,956,984 19,569 213,765 -- (233,334)

Shares issued for cash at $0.80 to
$2.50 per share, net of financing
fee of $347,850 2,525,183 25,252 4,216,347 -- --

Options issued for financing -- -- (429,671) 429,671 --

Shares issued for related party loan
fee at $1.00 per share 120,000 1,200 118,800 -- --

Conversion of shares of Celebration
for shares of Cadence common stock 14,250 143 (143) -- --

Options issued to consultants for
services -- -- -- 222,343 --

Miscellaneous adjustment 1,200 12 (12) -- --

Dividends paid on preferred stock -- -- (6,739) -- --

Net loss for the year ended
September 30, 2003 -- -- -- -- --

Unrealized gain on market value of
investments (unaudited) -- -- -- -- --
---------- --------- ------------ ------------ ------------

Balance, September 30, 2003 12,512,827 $ 125,128 $ 18,343,422 $ 1,210,704 $ 51,375
========== ========= ============ ============ ============

Accumulated
Other Total
Accumulated Comprehensive Stockholders'
Deficit Loss Equity
------------ ------------- -------------

Balance
September 30, 2002 $(12,906,132) $ (248,554) $ 1,066,065

Shares issued for cash with warrants
attached at an average of $0.52
per unit -- -- 110,000

Shares issued to officers, directors
and others for services at $0.78
to $1.80 -- -- 540,675

Shares issued for loan consideration
at $1.08 per share -- -- 207,000

Shares issued for exercise of options
at $0.75 per share -- -- 75,000

Shares issued from exercise of
warrants -- -- --

Shares issued for cash at $0.80 to
$2.50 per share, net of financing
fee of $347,850 -- -- 4,241,599

Options issued for financing -- -- --

Shares issued for related party loan
fee at $1.00 per share -- -- 120,000

Conversion of shares of Celebration
for shares of Cadence common stock -- -- --

Options issued to consultants for
services -- -- 222,343

Miscellaneous adjustment -- -- --

Dividends paid on preferred stock -- -- (6,739)

Net loss for the year ended
September 30, 2003 (1,957,555) -- (1,957,555)

Unrealized gain on market value of
investments (unaudited) -- 29,297 29,297
------------ ------------ ------------
Balance, September 30, 2003 $(14,863,687) $ (219,257) $ 4,647,685
============ ============ ============

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

F-7

CADENCE RESOURCES CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY

Common Stock
---------------------------- Additional
Number Paid-in Stock Stock
of Shares Amount Capital Options Warrants
------------ ------------ ------------ ------------ ------------

Balance
September 30, 2003 12,512,827 $ 125,128 $ 18,343,422 $ 1,210,704 $ 51,375

Issuance of common stock for cash
at $2.50 per share 110,000 1,100 273,900 -- --

Shares issued for services at
$0.88 to $2.50 per share 99,500 995 143,960 -- --

Shares issued for officer and
director fees at $0.76 to $2.23
per share 120,000 1,200 183,200 -- --

Share issued for exercise of
warrants @ $1.35 per share 10,000 100 15,500 -- (2,100)

Shares issued for financing expense
at $0.76 per share 15,000 150 11,475 -- --

Shares issued for repayment of
related party loan at $1.00 per
share 25,000 250 24,750 -- --

Options issued for financing fees -- -- -- 71,910 --

Options issued to officers and
directors for services -- -- -- 360,000 --

Dividends paid -- -- (749) -- --

Deferred financing cost -- -- -- -- 745,237

Net loss for the year ended
September 30, 2004 -- -- -- -- --

Unrealized loss on market value
of investments -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance September 30, 2004 12,892,327 $ 128,923 $ 18,995,458 $ 1,642,614 $ 794,512
============ ============ ============ ============ ============

Accumulated
Other Total
Accumulated Comprehensive Stockholders'
Deficit Loss Equity
------------ ------------ -------------
Balance

September 30, 2003 $(14,863,687) $ (219,257) $ 4,647,685

Issuance of common stock for cash
at $2.50 per share -- -- 275,000

Shares issued for services at
$0.88 to $2.50 per share -- -- 144,955

Shares issued for officer and
director fees at $0.76 to $2.23
per share -- -- 184,400

Share issued for exercise of
warrants @ $1.35 per share -- -- 13,500

Shares issued for financing expense
at $0.76 per share -- -- 11,625

Shares issued for repayment of
related party loan at $1.00 per
share -- -- 25,000

Options issued for financing fees -- -- 71,910

Options issued to officers and
directors for services -- -- 360,000

Dividends paid -- -- (749)

Deferred financing cost -- -- 745,237

Net loss for the year ended
September 30, 2004 (5,171,918) -- (5,171,918)

Unrealized loss on market value
of investments -- (245,310) (245,310)
------------ ------------ ------------
Balance September 30, 2004 $(20,035,605) $ (464,567) $ 1,061,335
============ ============ ============

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

F-8

CADENCE RESOURCES CORPORATION
STATEMENTS OF CASH FLOWS

Year Ended
September 30,
-----------------------------------------
2004 2003 2002
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss $(5,171,918) $(1,957,555) $(1,145,451)
Adjustments to reconcile net loss to net cash
used by operating activities:
Loss (gain) on sale of investments 9,156 67,020 (29,890)
Impairment of long-lived assets 1,236,365 -- --
Partnership loss -- 15,200 --
Loss (gain) from mining operations -- -- (330,198)
Gain (loss) on debt forgiveness -- 4,699 --
Depreciation, depletion and amortization 2,663,695 57,310 4,312
Issuance of common stock for services 144,955 540,675 211,667
Issuance of common stock for
expenses 196,025 -- 7,000
Amortization of deferred financing fees 279,919 -- --
Issuance of common stock for loan
repayment 25,000 -- --
Issuance of common stock for loan
consideration -- 327,000 --
Issuance of stock options for
services 360,000 222,343 626,790
Issuance of stock options for
financing fees 71,910 -- --
Investment given for services -- 14,700 --
Changes in assets and liabilities:
Oil & gas revenue receivable (250,832) (58,452) (26,123)
Receivable from working interest owners 12,873 3,164 (16,037)
Notes receivable (5,000) 6,058 (30,000)
Prepaid expenses (33,485) 21,575 (26,225)
Deposit -- 6 (6)
Prepaid mineral leases -- (218,796) (95,022)
Accounts payable (226,278) 1,082 (38,934)
Revenue distribution payable (36,542) 54,094 14,835
Deferred working interest (22,184) 22,184
Accrued expenses (94,920) 28,659 50,261
Interest payable (12,204) 15,752 --
Interest payable-secured notes 1,233 -- --
Payable to related parties (550,000) (2,500) --
----------- ----------- -----------
Net cash provided (used) by operating activities (1,380,048) (880,150) (800,837)
----------- ----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments (112,360) (32,795) (33,889)
Purchase and development of proved and
unproved properties (4,542,760) (629,383) (127,691)
Purchase of fixed assets (981,660) (182,587) (172,482)
Sale of investments 14,420 16,614 86,326
----------- ----------- -----------
Net cash provided (used) by investing activities (5,622,360) (828,151) (247,736)
----------- ----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock for cash 288,500 4,728,324 708,566
Issuance of redeemable preferred stock -- 59,925 --
Issuance of warrants for cash -- 46,125 233,334
Payments of preferred stock dividends (749) (6,739) --
Proceeds from secured notes payable 5,920,000 -- --
Proceeds from notes payable and loans payable 115,000 600,000 --
Payments of notes payable (1,016,695) (140,000) (45,000)
----------- ----------- -----------
Net cash provided by financing activities 5,306,056 5,287,635 896,900
----------- ----------- -----------
Net increase (decrease) in cash $(1,696,352) $ 3,579,334 $ (151,673)
----------- ----------- -----------

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

F-9

CADENCE RESOURCES CORPORATION
STATEMENTS OF CASH FLOWS

Year Ended
September 30,
----------------------------------------
2004 2003 2002
----------- ----------- -----------

Net increase (decrease) in cash (balance forward) $(1,696,352) $ 3,579,334 $ (151,673)

Cash, beginning of period 3,619,345 40,011 191,684
----------- ----------- -----------
Cash, end of period $ 1,922,993 $ 3,619,345 $ 40,011
=========== =========== ===========

SUPPLEMENTAL CASH FLOW DISCLOSURE:

Income taxes paid $ -- $ -- $ --
Interest paid $ -- $ -- $ --

NON-CASH INVESTING AND FINANCING
ACTIVITIES:

Common stock issued for services rendered,
accrued compensation and prepaid expenses $ 144,955 $ 540,675 $ 211,667
Common stock issued for exchange of debt $ 25,000 $ -- $ 90,000
Common stock issued in exchange for investments $ -- $ -- $ 120,000
Common stock issued for reimbursement
of expenses paid $ 196,025 $ -- $ 7,000
Common stock issued for loan consideration $ -- $ 327,000 $ --
Investment received for mining claims $ -- $ -- $ 350,000
Investment received for note receivable $ -- $ -- $ 15,000
Investment given for related party receivable $ -- $ -- $ 8,231
Investment given for consulting services $ -- $ 14,700 $ --
Stock options issued for services $ 360,000 $ 222,343 $ 626,790
Stock options issued for financing fees $ 71,910 $ 429,671 $ --
Exchange of unproved property leases for
interest in limited partnership $ -- $ -- $ 2,700
Stock issued for exercise of warrants $ -- $ 233,334 $ --
Issuance of accounts payable to related party
for financing fees $ 300,000 $ -- $ --

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

F-10

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Cadence Resources Corporation (formerly Royal Silver Mines, Inc.) hereinafter
("Cadence" or "the Company") was incorporated in April of 1969 under the laws of
the State of Utah primarily for the purpose of acquiring and developing mineral
properties. The Company changed its name from Royal Silver Mines, Inc. to
Cadence Resources Corporation on May 2, 2001 upon obtaining approval from its
shareholders and filing an amendment to its articles of incorporation. The
Company shall be referred to as "Cadence" or "Cadence Resources Corporation"
even though the events described may have occurred while the Company's name was
"Royal Silver Mines, Inc." The Company has elected a September 30 fiscal
year-end.

On July 1, 2001, Cadence developed a plan for acquisition, exploration and
development of oil and gas properties and accordingly began a new exploration
stage as an energy project development company. Prior to this, Cadence conducted
its business as a "junior" mineral resource company, meaning that it intended to
receive income from property sales or joint ventures of its mineral projects
with larger companies. The Company continues to hold several mineral properties,
which are described in Note 3.

Celebration Mining Company ("Celebration"), a wholly owned subsidiary of
Cadence, was incorporated for the purpose of identifying, acquiring, exploring
and developing mining properties. Celebration was organized on February 17, 1994
as a Washington corporation. Celebration has not yet realized any revenues from
its operations.

On August 8, 1995, Cadence and Celebration completed an agreement and plan of
reorganization whereby the Company issued 207,188 shares of its common stock and
72,750 warrants in exchange for all of the outstanding common stock of
Celebration. Pursuant to the reorganization, the name of the Company was changed
to Royal Silver Mines, Inc. Immediately prior to the agreement and plan of
reorganization, the Company had 118,773 common shares issued and outstanding.

The acquisition was accounted for as a purchase by Celebration of Cadence,
because the shareholders of Celebration controlled the Company after the
acquisition. Therefore, Celebration is treated as the acquiring entity. There
was no adjustment to the carrying value of the assets or liabilities of Cadence
in the exchange as the market value approximated the net carrying value. Cadence
is the acquiring entity for legal purposes and Celebration is the surviving
entity for accounting purposes.

As a result of the Company's entering a new exploration stage on July 1, 2001,
the Company elected to dispose of its mineral properties and has accordingly
reclassified those remaining properties, which total $197,406 at September 30,
2004, as other assets. The Company has not determined whether these mineral
exploration properties contain ore reserves that are economically recoverable,
and is in the process of disposing of these properties. The ultimate realization
of the Company's investment in these properties cannot be determined at this
time and, accordingly, no provision for any asset impairment that may result in
the event the

F-11

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS (Continued)

Company is not successful in selling these properties has been made in the
accompanying financial statements. See Note 3.

The costs of prepaid oil and gas leases ($456,219 and $395,973, respectively)
included in the accompanying balance sheets as of September 30, 2004 and
September 30, 2003 are principally related to natural gas properties. The
Company has not determined whether the properties in Kansas or New Mexico
contain economically recoverable gas reserves. The ultimate realization of the
Company's investment in oil and gas properties in these locations is dependent
upon finding and developing economically recoverable reserves, the ability of
the Company to obtain financing or make other arrangements for development and
upon future profitable production. The ultimate realization of the Company's
investment in these oil and gas properties cannot be determined at this time
and, accordingly, no provision for any asset impairment that may result in the
event the Company is not successful in developing these properties, has been
made in the accompanying financial statements. The Company has completed reserve
studies on its properties located in Texas and Lousiana.

The Company was in the exploration stage through most of the year ending
September 30, 2002. During the fourth quarter of the year ended September 30,
2002, the Company entered a very brief development stage and has since been
considered an operating company. For the years ending September 30, 2002, the
Company's auditors expressed a going concern qualification on the Company's
audited financial statements.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Cadence Resources Corporation
is presented to assist in understanding the Company's financial statements. The
financial statements and notes are representations of the Company's management,
which is responsible for their integrity and objectivity. These accounting
policies conform to accounting principles generally accepted in the United
States of America and have been consistently applied in the preparation of the
financial statements.

Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting in accordance with accounting principles generally accepted in the
United States of America.

Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

F-12

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Derivative Instruments
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended by SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB No.
133", and SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities" and SFAS No. 149, "Amendment of Statement No. 133 on
Derivative Instruments and Hedging Activities." These standards establish
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
They require that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.

If certain conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging derivative with the recognition of (i) the changes in the fair
value of the hedged asset or liability that are attributable to the hedged risk
or (ii) the earnings effect of the hedged forecasted transaction. For a
derivative not designated as a hedging instrument, the gain or loss is
recognized in income in the period of change.

Historically, the Company has not entered into derivatives contracts to hedge
existing risks or for speculative purposes.

At September 30, 2004 and for the periods covered in these statements, the
Company has not engaged in any transactions that would be considered derivative
instruments or hedging activities.

Environmental Remediation and Compliance
Expenditures for ongoing compliance with environmental regulations that relate
to current operations are expensed or capitalized as appropriate. Expenditures
resulting from the remediation of existing conditions caused by past operations
that do not contribute to future revenue generations are expensed. Liabilities
are recognized when environmental assessments indicate that remediation efforts
are probable and the costs can be reasonably estimated.

Estimates of such liabilities are based upon currently available facts, existing
technology and presently enacted laws and regulations taking into consideration
the likely effects of inflation and other societal and economic factors, and
include estimates of associated legal costs. These amounts also reflect prior
experience in remediating contaminated sites, other companies' clean-up
experience and data released by The Environmental Protection Agency or other
organizations. Such estimates are by their nature imprecise and can be expected
to be revised over time because of changes in government regulations,
operations, technology and inflation. Recoveries are evaluated separately from
the liability and, when recovery is assured, the Company records and reports an
asset separately from the associated liability. At September 30, 2004, the
Company had no accrued liabilities for compliance with environmental
regulations.

F-13

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Estimates
The process of preparing financial statements in conformity with accounting
principles generally accepted in the United States of America requires the use
of estimates and assumptions regarding certain types of assets, liabilities,
revenues, and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial statements. Accordingly,
upon settlement, actual results may differ from estimated amounts.

Fair Value of Financial Instruments
The carrying amounts for cash, receivables, deposits, payables, and advances
from related parties approximate their fair value.

Fair Value Standards
The Company has adopted the fair value accounting rules to record all
transactions in equity instruments for goods or services.

Impaired Asset Policy
The Company adopted Statement of Financial Accounting Standards No. 144 titled
"Accounting for Impairment of Disposal of Long-Lived Assets." In complying with
this standard, the Company reviews its long-lived assets quarterly to determine
if any events or changes in circumstances have transpired which indicate that
the carrying value of its assets may not be recoverable. The Company determines
impairment by comparing the undiscounted future cash flows estimated to be
generated by its assets to their respective carrying amount whenever events or
changes in circumstances indicate that an asset may not be recoverable. Because
of write-downs and write-offs taken in 2004 and in prior years, the Company does
not believe any further adjustments are needed to the carrying value of its
assets at September 30, 2004. See Note 3.

Investments
Investments, principally consisting of equity securities of private and small
public companies, are stated at current market value.

Loss Per Share
Loss per share was computed by dividing the net loss by the weighted average
number of shares outstanding during the year. The weighted average number of
shares was calculated by taking the number of shares outstanding and weighting
them by the amount of time they were outstanding. Outstanding warrants were not
included in the computation of diluted loss per share because their inclusion
would be antidilutive.

Mineral Properties
Costs of acquiring, exploring and developing mineral properties are capitalized
by project area. Costs to maintain the mineral rights and leases are expensed as
incurred. When a property reaches the production stage, the related capitalized
costs will be amortized, using the units of production method on the basis of
periodic estimates of ore reserves. At September 30, 2004, 2003, and 2002 the
cost of the Company's mineral properties are included in other assets in the

F-14

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Mineral Properties (continued)
accompanying financial statements, as the Company has changed its focus from
minerals exploration to oil and gas.

Mineral properties are periodically assessed for impairment of value and any
losses are charged to operations at the time of impairment.

Should a property be abandoned, its capitalized costs are charged to operations.
The Company charges to operations the allocable portion of capitalized costs
attributable to properties sold. Capitalized costs are allocated to properties
sold based on the proportion of claims sold to the claims remaining within the
project area.

Oil and Gas Properties
The Company uses the successful efforts method of accounting for oil and gas
producing activities. Costs to acquire mineral interests in oil and gas
properties, to drill and equip exploratory wells that find proved reserves, and
to drill and equip development wells are capitalized. Costs to drill exploratory
wells that do not find proved reserves, geological and geophysical costs, and
costs of carrying and retaining unproved properties are expensed.

Unproved oil and gas properties that are individually significant are
periodically assessed for impairment of value, and a loss is recognized at the
time of impairment by providing an impairment allowance. Other unproved
properties are amortized based on the Company's experience of successful
drilling and average holding period. Capitalized costs of producing oil and gas
properties, after considering estimated dismantlement and abandonment costs and
estimated salvage values, are depreciated and depleted by the unit-of-production
method. Support equipment and other property and equipment are depreciated over
their estimated useful lives.

On the sale or retirement of a complete unit of a proven property, the cost and
related accumulated depreciation, depletion, and amortization are eliminated
from the property accounts, and the resultant gain or loss is recognized. On the
retirement or sale of a partial unit of proven property, the cost is charged to
accumulated depreciation, depletion, and amortization with a resulting gain or
loss recognized in income.

On the sale of an entire interest in an unproved property for cash or cash
equivalent, gain or loss on the sale is recognized, taking into consideration
the amount of any unrecorded impairment if the property had been assessed
individually. If a partial interest in an unproved property is sold, the amount
received is treated as a reduction of the cost of the interest retained.

Principles of Consolidation
The financial statements include those of the Cadence Resources Corporation and
Celebration Mining Company. All significant inter-company accounts and
transactions have been

F-15

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Principles of Consolidation (continued)
eliminated. The financial statements are not considered consolidated statements
since Cadence Resources Corporation was the successor by merger to Celebration
Mining Company.

Provision For Taxes
Income taxes are provided based upon the liability method of accounting pursuant
to Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes." Under this approach, deferred income taxes are recorded to reflect the
tax consequences in future years of differences between the tax basis of assets
and liabilities and their financial reporting amounts at each year-end. A
valuation allowance is recorded against deferred tax assets if management does
not believe the Company has met the "more likely than not" standard imposed by
SFAS No. 109 to allow recognition of such an asset.

Recent Accounting Pronouncements
In November 2004, the Financial Accounting Standards Board (FASB) issued SFAS
No. 151, Inventory Costs-- an amendment of ARB No. 43, Chapter 4. This Statement
amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify
the accounting for abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4,
previously stated that ". . . under some circumstances, items such as idle
facility expense, excessive spoilage, double freight, and rehandling costs may
be so abnormal as to require treatment as current period charges. . . ." This
Statement requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
this Statement requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities. This statement is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. Management does not believe the
adoption of this Statement will have any immediate material impact on the
Company as the Company maintains no inventory.

In May 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity" (hereinafter
"SFAS No. 150"). SFAS No. 150 establishes standards for classifying and
measuring certain financial instruments with characteristics of both liabilities
and equity and requires that those instruments be classified as liabilities in
statements of financial position. Previously, many of those instruments were
classified as equity. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003 and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. The Company
has determined that there was no impact on the Company's financial statements
from the adoption of this statement.

In April 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities" (hereinafter "SFAS No. 149").
SFAS No. 149 amends and clarifies the

F-16

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recent Accounting Pronouncements (continued)
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". This statement
is effective for contracts entered into or modified after June 30, 2003 and for
hedging relationships designated after June 30, 2003. The adoption of SFAS No.
149 did not have a material impact on the financial position or results of
operations of the Company.

In December 2002, the Financial Accounting Standards Board, issued Statement of
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," 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, the statement
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosure 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 provisions of the statement are effective for
financial statements for fiscal years ending after December 15, 2002. The
Company currently reports stock issued to employees under the rules of SFAS No.
123. Accordingly there is no change in disclosure requirements due to SFAS No.
148.

In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46 "Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51" (hereinafter "FIN 46"). FIN 46 requires certain
variable interest entities to be consolidated by the primary beneficiary of the
entity if the equity investors in the entity do not have the characteristics of
a controlling financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 is effective for all new variable interest
entities created or acquired after January 31, 2003. The provisions of FIN 46
must be applied for the first interim or annual period beginning after June 15,
2003. The Company does not have any entities that require disclosure or new
consolidation as a result of adopting the provisions of FIN 46.

In November 2002, the Financial Accounting Standards Board issued FASB
Interpretation No. 45 "Guarantor's Accounting and Disclosure Requirements for
Guarantees, including Indirect Guarantees of Indebtedness of Others"
(hereinafter "FIN 45"). FIN 45 requires a company, at the time it issues a
guarantee, to recognize an initial liability for the fair value of obligations
assumed under the guarantee and elaborates on existing disclosure requirements
related to guarantees and warranties. The initial recognition requirements of
FIN 45 are effective for guarantees issued or modified after December 31, 2002
and do not have an impact on the financial statements of the Company. The
Company does not anticipate issuing any guarantees which would be required to be
recognized as a liability under the provisions of FIN 45 and thus does not
expect the adoption of this interpretation to have an impact on its results of
operations or financial position.

F-17

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Reclassifications
Certain amounts from prior periods have been reclassified to conform with the
current period presentation. These reclassifications have resulted in no changes
to the Company's accumulated deficit and net losses presented.

Revenue Recognition
Cadence began producing revenues during July 2002. Oil and gas revenues are
recorded using the sales method. Under this method, the Company recognizes
revenues based on actual volumes of oil and gas sold to purchasers.

NOTE 3 - MINERAL PROPERTIES

Over the last three years, the Company's mineral properties have for the most
part been disposed of or written off as the Company's focus and direction have
shifted to oil and gas production.

Utah Property
The Company has elected to retain its 25% undivided interest in the Vipont Mine
located in northwest Utah. This interest was carried on the Company's books at
$246,757 at September 30, 2003 and 2002. During the year ended September 30,
2004, the Company elected to reduce the interest's carrying value to $197,406 in
order to better reflect its market value. This asset is included in "other
assets" on the Company's balance sheet.

Mineral Properties in North Idaho
At September 30, 2004, the Company, directly and through its subsidiary,
Celebration Mining Company, held unpatented mining claims in the Coeur d'Alene
Mining District in distinct groups called the South Galena Group, Moe Group,
Rock Creek Group and Palisades Group. The Company has undertaken only minimal
exploration and development work on these properties, such as general geological
reconnaissance and claim-staking activities. All of these claims have been
written off as permanently impaired.

In September 2000, the Company, through its wholly owned subsidiary Celebration
Mining Company, entered into a five-year lease agreement with an affiliated
company, Oxford Metallurgical, Inc.("Oxford") on its eight-claim Palisades Group
property. The lease called for a semi-annual payment of $3,000, or
alternatively, the semi-annual payment of 10,000 shares of the common stock of
Oxford. Oxford had the right to explore and potentially develop the property
under certain conditions. This lease was rescinded during the year ended
September 30, 2002.

Other Domestic Properties
In the fourth quarter of the year ended September 30, 2001, the Company elected
to write off all of its interests in mineral properties except for the ViPont
Mine, Kil Group Claims and West

F-18

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 3 - MINERAL PROPERTIES (Continued)

Other Domestic Properties (continued)
Mullan Group Claims. The net effect of this write down was to record a loss on
asset impairment of $432,090 during the year ended September 30, 2001.

On October 31, 2001, the Company sold its Kil Group and West Mullan Group claims
to Caledonia Silver-Lead Mines, Inc., an affiliated company. The combined sale
price for these claims was 3,501,980 shares of the common stock of Caledonia,
having an estimated market value of $0.10 per share and valued at $350,198. The
net effect of the transaction was a gain of $330,198. See Note 5.

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Major additions and improvements
are capitalized. Minor replacements, maintenance and repairs that do not
increase the useful life of the assets are expensed as incurred. Depreciation of
property and equipment is determined using the straight-line method over the
expected useful lives of the assets of five to ten years. Depreciation expense
for the years ended September 30, 2004, 2003, and 2002 was $92,158, $21,222 and
$4,303, respectively.

NOTE 5 - INVESTMENTS

The Company's investment securities are classified as available for sale
securities which are recorded at fair value on the balance sheet as investments.
The change in fair value during the period is excluded from earnings and
recorded net of tax as a component of other comprehensive income. The Company
has no investments which are classified as trading securities.

F-19

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 5 - INVESTMENTS (Continued)

At September 30, 2004, 2003, and 2002, the market values of stock investments
were as follows:

2004 2003 2002
-------- -------- --------

Elite Logistics, Inc. $ 204 $ 656 $ 2,950
Ashington Mining Company 5,709 5,709 5,709
Cadence Resources Corp. LP -- -- 15,200
Enerphaze Corporation 655 5,400 5,400
Exhaust Technology -- -- 2,244
Integrated Pharmaceuticals, Inc. 27,984 9,406 --
Metalline Mining Company 1,605 925 --
Nevada-Comstock (formerly Caledonia Silver-Lead
Mines, Inc.) 12,000 0 350,198
Rigid Airship Tech 310 310 --
Sterling Mining Co. -- -- 4,859
The Williams Companies, Inc. -- -- 6,800
Trend Mining Company 27,083 24,483 54,567
Western Goldfields, Inc. 102,148 351,373 866
TN Oil Co 50,000 -- --
White Mtn Titanium 9,940 -- --
Other investments 450 610 --
-------- -------- --------
Total $238,088 $394,454 $448,793
======== ======== ========

The carrying value of these shares are reevaluated at each reporting period and
adjustments, if appropriate, are made to the carrying value of these securities.
Of all the aforementioned investments owned by the Company at September 30,
2004, only Trend Mining Company, Metalline Mining Company, Western Goldfields,
Inc., White Mtn Titanium, and Integrated Pharmaceuticals are public companies
with a trading market.

Other information regarding the Company's investments follows:

Enerphaze Corporation
In October 2001, the Company received 8,000 shares of Enerphaze Corporation
common stock in payment of a $15,000 note receivable. In January and February
2002, the Company received 65,000 shares of Enerphaze Corporation common stock
in exchange for 400,000 shares of the Company's common stock. No gain or loss
was recognized on these transactions.

F-20

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 5 - INVESTMENTS (Continued)

Nevada-Comstock Mining Company (formerly Caledonia Silver-Lead Mines, Inc.)
The Company on October 31, 2001 received 3,501,980 shares of the $0.10 par value
common stock of Caledonia Silver-Lead Mines, Inc. (an affiliated company) in
exchange for its Kil Group and West Mullan Group claims. The stock received was
recorded at its par value of $350,198 which, in the opinion of management,
approximates its fair value. At September 30, 2003, this investment was written
off to reflect the mining company's dormancy. In the year ended September 30,
2004, the Company's investment in the mining company increased to $12,000 as
funds were advanced to cover annual filing fees on patented mining claims.

TN Oil Company
In August 2004, the Company acquired a 25% equity ownership in TN Oil Company,
which owns oil leases in central and north central Tennessee.

Western Goldfields, Inc.
In 2002, the Company exchanged fully depreciated mining equipment for shares of
a privately held business, Calumet Mining Company, which was eventually acquired
by Western Goldfields, Inc. Upon completion of the acquisition, the Company
received 160,000 shares of Western's common stock. During 2003, the Company
acquired an additional 21,200 shares of Western stock for $24,730. At September
30, 2004, the fair market value of the Company's holdings in Western was
$102,148.

Cadence Resources Corporation Limited Partnership
On August 8, 2002, the Company formed a limited partnership in the State of
Washington whereby the Company became the managing general partner and an
outside individual investor became the initial limited partner. In connection
with the formation of the Partnership, the Company agreed to contribute $12,500
and its leasehold interest in an oil well ("2B", which ultimately was a dry
hold) in Wilbarger County, Texas and the limited partner contributed $250,000 in
cash. The entity, Cadence Resources Corporation Limited Partnership (hereinafter
"CRCLP" or "the Partnership") was formed to invest in oil and gas properties in
Texas and Louisiana. The limited partner's interest was purchased by the Company
in a transaction with an effective date of September 30, 2003, at which time the
Company held all of the general partner interests and limited partner interests
in the Partnership. See Note 13.

NOTE 6 - COMMON STOCK

During the year ended September 30, 2004, the Company issued 219,500 shares of
its common stock to officers, directors and consultants for services valued at
$329,355, 25,000 shares in repayment of a related party loan of $25,000, 15,000
shares for financing expense valued at $11,625, 110,000 shares for cash proceeds
of $275,000. Warrants previously issued were exercised for 10,000 shares at
$1.35 per share.

F-21

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 6 - COMMON STOCK (Continued)

During the year ended September 30, 2003, the Company sold 212,500 "units" to
investors at prices ranging from $0.50 to $0.80 per unit in a private placement.
Each unit consists of one share of common stock and one warrant exercisable at
$1.35 per common share for three years. Sales of these units generated cash
proceeds of $110,000. Warrants previously issued (2,320,175) were exercised for
1,956,984 shares of common stock in "cashless" redemptions. (See Note 9.) During
this same period the Company sold 2,625,183 shares of its common stock for
$4,316,599 net of expenses of $347,850. The Company also issued 496,500 shares
of its common stock to officers, directors and consultants for services valued
at $540,675 and 220,000 shares for loan consideration valued at $207,000. In
addition, the Company issued to a related party an additional 120,000 shares
valued at $120,000 as an inducement for a loan. The value of this inducement was
used to reduce the payable to related party.

During the year ended September 30, 2002, the Company issued 589,184 shares of
its common stock to officers, consultants and others for services and prepaid
expenses valued at $211,667, 400,000 shares of its common stock for an
investment, 6,800 shares of its common stock to an officer for reimbursement of
expenses valued at $7,000 and 300,000 shares of its common stock to an officer
in payment of a note payable. These transactions were valued in accordance with
a plan for stock issuance previously approved by the board of directors. The
Company also sold 783,000 shares of its common stock for $241,900.

During the year ended September 30, 2002, the Company also sold 2,333,336
"units" to investors, two officers of the Company and another entity under
common control at $0.30 per unit in a private placement. Each unit consists of
one share of common stock and one warrant exercisable at $0.30 per common share
for five years. Sales of these units generated cash proceeds of $700,000. Two
officers of the Company and another entity under common control invested $50,000
in these common stock units. (See Note 9.)

NOTE 7 - REDEEMABLE PREFERRED STOCK

On April 23, 2001, the Company's board of directors authorized 20,000,000 shares
of preferred stock with a par value of $0.01 per share and rights and
preferences to be determined. No shares were issued and outstanding as of
September 30, 2002. During the year ended September 30, 2003, the Company issued
34,950 shares of its preferred stock to investors at prices ranging from $1.50
to $2.00 per share for aggregate proceeds of $59,925. The shares are convertible
to common stock at a price of $1.50 per share under certain terms and
conditions. At September 30, 2003, the shares carried a preferred dividend of
15% per annum. During the year ended September 30, 2004, the dividend feature
was discontinued because certain conditions, which required the payment of
dividends, were considered satisfied.

F-22

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 7 - REDEEMABLE PREFERRED STOCK (Continued)

The Class A shares mature seven years from the date of issuance. At maturity,
the Class A shares will be redeemed for cash or common stock at Cadence's option
in an amount equal to the amount paid by the investors for the shares plus any
accrued and unpaid dividends. If shares of common stock are to be issued at
maturity, the conversion price shall be determined by the average closing bid
price for the 20 trading days prior to the maturity date.

At September 30, 2004, the Company had no accrued dividends payable to preferred
shareholders.

NOTE 8 - COMMON STOCK OPTION AND AWARD PLAN

In January 1992, the shareholders of Cadence approved a 1992 Stock Option and
Stock Award Plan under which up to ten percent of the issued and outstanding
shares of the Company's common stock could be awarded based on merit or work
performed. As of September 30, 2004, only 638 shares of common stock had been
awarded under the Plan.

The Company has a stock-based compensation plan whereby the Company's board of
directors may grant common stock to its employees and directors. Over the years,
a total of 72,750 options have been granted under the plan. These options have
been forfeited and none have been exercised through the year ending September
30, 2004. The old existing options are attributed to the merger of Celebration
Mining Company with Royal in August 1995.

The Company's board of directors has made option awards to select officers,
directors, consultants and shareholder/investors. These common stock options
were not awarded pursuant to a qualified plan and carry various terms and
conditions. The Company granted a total of 750,000 common stock options at an
average exercise price of $1.08 per share during the year ended September 30,
2002 and granted 287,140 common stock options at an average exercise price of
$2.23 during the year ended September 30, 2003.

During the year ended September 30, 2004, the Company issued 400,000 stock
options to two directors and one officer with an exercise price of $3.73. These
options were granted upon the acceptance by the individual of the position of
officer and/or director and the approval of the Company's qualified stock option
plan at its April 2004 annual shareholders meeting. The Company also granted
during the year ended September 30, 2004 an option to purchase 76,500 shares of
stock to a shareholder valued at $71,910 as a fee for his services in relation
to finding investors for the senior secured notes. See Note 9 and Note 12.

All options granted were exercisable immediately. The Company's board of
directors has reserved the right to cancel these awards for non-performance or
other reasons.

F-23

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 8 - COMMON STOCK OPTION AND AWARD PLAN (Continued)

The fair value of each option granted during the year ended September 30, 2002
was estimated on the grant date using the Black-Scholes Option Price
Calculation. The following assumptions were made in estimating fair value during
fiscal 2002: risk-free interest rate of 5%, volatility of 100%, expected life of
3 to 5 years, and no expected dividends. The value of these options in the
amount of $626,790 was included in operating expense in the financial
statements. The following assumptions were made in estimating fair value during
the year ended September 30, 2003: risk-free interest rate of 3% to 4%,
volatility of 106% to 337%, expected life of 4 to 5 years and no expected
dividends. The value of these options in the amount of $222,343 was included in
the Company's statement of operations for 2003. The following assumptions were
made in estimating fair value during the year ended September 30, 2004: risk
free interest rate of 4%, volatility of 39%, expected life of three years and no
expected dividends. The value of these options, in the aggregate amount of
$431,910, was included in the Company's statement of operations for 2004.

The value of options issued in 2003 for financing fees in the amount of $429,671
was deducted against additional paid-in capital, as a cost of selling common
stock.

F-24

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 8 - COMMON STOCK OPTION AND AWARD PLAN (Continued)

Following is a summary of the stock options during the years ended September 30,
2004, 2003, and 2002:

Weighted
Number Average
of Exercise
Options Price
---------- ----------

Outstanding at 10/1/2001 60,000 $ 18.60
Granted 750,000 1.08
Exercised -- --
---------- ----------
Expired or forfeited (60,000) 18.60
---------- ----------
Outstanding at 9/30/2002 750,000 $ 1.08
========== ==========

Options exercisable at 9/30/2002 750,000 $ 1.08
========== ==========
Weighted average fair value of options granted during
the year ended 9/30/2002 $ 0.84
==========

Outstanding at 10/1/2002 750,000 $ 1.08
Granted 287,140 2.23
Exercised (100,000) (0.68)
Expired or forfeited -- --
---------- ----------
Outstanding at 9/30/2003 937,140 $ 1.47
========== ==========
Options exercisable at 9/30/2003 937,140 $ 1.47
========== ==========
Weighted average fair value of options granted
during the year ended 9/30/2003 $ 2.27

Outstanding at 10/1/2003 937,140 $ 1.47
Granted 476,500 3.77
Exercised -- --
Expired or forfeited -- --
---------- ----------
Outstanding at 9/30/2004 1,413,640 $ 2.25
========== ==========
Options exercisable at 9/30/2004 1,413,640 $ 2.25
========== ==========
Weighted average fair value of options granted
during the year ended 9/30/2004 $ 0.91
==========

F-25

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 8 - COMMON STOCK OPTION AND AWARD PLAN (Continued)

Weighted Average
Exercise Date Number of Shares Price per Share
------------- ---------------- ---------------

On or before June 21, 2005 200,000 $1.50
On of before August 1, 2005 50,000 $1.50
On or before March 1, 2007 700,000 $2.45
On or before April 2, 2007 76,500 $4.00
On or before July 8, 2007 100,000 $1.35
On or before June 18, 2007 50,000 $1.70
On or before June 1, 2007 75,000 $2.00
On or before September 30, 2008 162,140 $2.50

In July 2003, 100,000 of the outstanding options were exercised for the purchase
of 100,000 shares of the Company's common stock.

Prior to April 2001, a total of 72,750 options were granted by the board to
officers, directors and other consultants. As shown above, the 60,000 options
remaining were forfeited during the fiscal year ending September 30, 2002.

The following table gives information about the Company's common stock that may
be issued upon the exercise of options under all of the Company existing stock
option plans as of September 30, 2004.

Remaining
Exercise Number of Weighted Average ContractualLife Number Weighted Average
Prices Options Exercise Price (in years) Exercisable Exercise Price
------------------------------------------------------------------------------- ----------

$0.75 300,000 $ 0.75 2.42 300,000 $0.75
1.35 100,000 1.35 2.75 100,000 1.35
1.50 200,000 1.50 0.75 200,000 1.50
1.50 50,000 1.50 0.83 50,000 1.50
1.70 50,000 1.70 2.75 50,000 1.70
2.00 75,000 2.00 2.67 75,000 2.00
2.50 162,140 2.50 4.00 162,140 2.50
3.73-4.00 476,500 3.77 2.50 476,500 3.77
-------- ----- ------ --------- ------
1,413,640 $2.25 1,413,640 $2.25
=========== ===== =========== ======

Stock Award Plan
During the year ended September 30, 2001, the Company's board of directors
approved the issuance of 15,000 shares of the Company's common stock per quarter
to each entitled director as compensation for service to the Company and 5,000
shares of the Company's common stock per quarter to officers in addition to
their salaried compensation for services.

F-26

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 9 - WARRANTS

During the year ended September 30, 2002, the Company issued 2,333,336 shares of
stock with 2,333,336 warrants attached. These warrants were valued at $233,334
using the Black-Scholes Option Price Calculation. The following assumptions were
made in estimating fair value: risk free interest rate is 5%, volatility is 100%
and expected life is 5 years. These warrants may be used in a cashless exercise
to purchase 2,333,336 shares of the Company's common stock at $0.30 per share.
The warrants remain exercisable through April 15, 2007. During the year ended
September 30, 2003, all of these warrants were exercised in cashless exercises
in accordance with the terms of the warrants and 1,956,984 shares of the
Company's common stock were then issued to the warrant holders. As of the date
of these financial statements, none of these warrants remain outstanding and
exercisable.

During the year ended September 30, 2003, the Company issued 212,500 shares of
stock with 212,500 warrants attached, and 25,000 warrants related to a July 2002
purchase. The warrants were valued at $51,375 using the Black-Scholes Option
Price Calculation. The following assumptions were made is estimating fair value:
risk free interest rate is 5%, volatility is 100% and expected life is 3 years.
These warrants may be used to purchase 237,500 shares of the Company's common
stock at $1.35 per share. The warrants remain exercisable through October 15,
2005. As of the date of these financial statements, all but 10,000 of these
warrants remain outstanding and exercisable.

During the year ended September 30, 2004, the Company issued certain noteholders
warrants to purchase a total of 765,000 shares of common stock, exercisable at
$4.00 per share, expiring in three years. Both the number of warrants and the
exercise price are adjustable, dependent upon certain future equity transactions
of the Company. The warrants were valued at $745,237 using the Black-Scholes
Option Price Calculation. The following assumptions were made in estimating fair
value: risk-free interest rate is 5%, volatility is 100%, and expected life is
three years.

NOTE 10 - OIL AND GAS PROPERTIES

The Company's oil and gas producing activities are subject to laws and
regulations controlling not only their exploration and development, but also the
effect of such activities on the environment. Compliance with such laws and
regulations may necessitate additional capital outlays, affect the economics of
a project, and cause changes or delays in the Company's activities. The
Company's oil and gas properties are valued at the lower of cost or net
realizable value.

Louisiana
During the fourth quarter of the year ended September 30, 2001, the Company
began leasing acreage in a natural gas field in Desoto Parish, Louisiana. As of
the date of these financial statements, the Company has leased over 4,250 acres.
At September 30, 2004 and September 30, 2003, Louisiana leases of $42,711 and
$350,675, respectively, are included in the attached

F-27

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 10 - OIL AND GAS PROPERTIES (Continued)

Louisiana (continued)
financial statements as part of unproved properties. Under the terms of a joint
operating agreement with Bridas Energy USA, Bridas commenced drilling wells, 13
of which were completed and of these 11 are producing at September 30, 2004. The
Company has various working interests in and net revenue interests in the wells
drilled. Bridas is the operator of all of Cadence's properties in Louisiana.

Texas
During the year ended September 30, 2002, the Company acquired an exploration
permit and lease option agreement for an oil well project in Wilbarger County,
Texas known as the Waggoner Ranch Project. During the quarter ended March 31,
2002 under the terms of a joint operating agreement with the W.T. Waggoner
Estate, Waggoner drilled an initial test well. By

September 30, 2004, Waggoner had drilled a total of eight wells in Wilbarger
County, of which five were producing oil. The W.T. Waggoner Estate is the
operator of all of Cadence's properties in Wilbarger County and the sole
purchaser of all production from these properties.

During the year ended September 30, 2002, the Company sold 40% of the working
interest in its initial well in this area (known as the "1A" well) to private
investors and two officers of the Company for $210,000. The Company's initial
cost in the portion of the prospect sold totaled $3,200.

During February 2003, the Company completed the West Electra Lake Well on the
Waggoner Ranch Project. The Company entered into a 45% working interest joint
operating agreement with the Waggoner Ranch for the operations conducted on this
acreage. In the quarter ending September 30, 2003, the Company drilled and
completed two additional wells on the West Electra Lake joint venture operating
area on the Waggoner Ranch. The Company owns a 50% working interest in these
last two wells.

At September 30, 2004 and 2003, prepaid oil and gas leases relating to Texas
property of $6,500 and $4,500, respectively, are included in the attached
financial statements.

Michigan
In December 2002, the Company began participating in a natural gas drilling
program in Alpena County, Michigan with Aurora Energy, Ltd. As of September 30,
2004, Cadence had a 22.5% working interest (before payout, 20% after payout),
18% net revenue interest (before payout, 16% after payout), in ten producing
wells in Alpena County. Production commenced from this field in June 2003.
Aurora is the operator of all of Cadence's properties in Alpena County. At
September 30, 2004, Michigan leases totaling $96,375 are included in the
attached financial statements as unproved property.

F-28

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 10 - OIL AND GAS PROPERTIES (Continued)

Kansas
During the year ended September 30, 2003, and 2004, the Company leased over
26,000 acres of land in the Anadarko Basin in west central Kansas. No drilling
has commenced on any of this acreage. Cadence holds a 100% working interest and
82% net revenue interest in these leases.

At September 30, 2004, $253,213 of leases in Kansas are included in the attached
financial statements as unproved property.

New Mexico
At September 30, 2004, $57,420 of leases in New Mexico are included in the
attached financial statements as unproved property.

In June 2004, the Company began participating for a 20% working interest and 15%
net revenue interest in the Santa Nina Prospect in Eddy County. Earlier in the
year, the Company signed an agreement with SDX Resources to participate for up
to a 25% working interest and 20% net revenue interest in up to 17 development
wells in a project called the Sparkplug Unit.

NOTE 11 - NOTES PAYABLE - RELATED PARTIES

All of the Company's notes payable are considered short-term. At September 30,
2004, notes payable consisted of the following:

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

Nathan Low Family Trust (a shareholder of the Company), secured by $ -- $ 50,000
assignment of a prorata interest in gas producing properties located in
Alpena County, Michigan, interest at 8%, dated February 24, 2003,
originally due on April 4, 2003, extended to December 31, 2003 --

Kevin Stulp (a shareholder of the Company),interest at 8%, dated February 24,
2003, originally due on April 5, 2003, extended to
December 31, 2003 -- 25,000

Howard Crosby (an officer and shareholder of the Company), interest at 8%, dated
February 24, 2003, originally due on April 5, 2003, extended
to December 31, 2003 -- 25,000

Howard Crosby (an officer and shareholder of the Company), unsecured, interest
at 5%, dated January 9, 2003, originally due on February 28,
2003, extended to December 31, 2003 -- 60,000
NOTE 11 - NOTES PAYABLE - RELATED PARTIES (Continued)

CGT Management Ltd., unsecured, interest at 10%, dated July 16, 2003
(paid in full October 2, 2003) -- 300,000
-------- --------

Total $ -- $460,000
======== ========

F-29

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 12 - LONG-TERM DEBT

In April 2004, the Company completed a private placement of $6,000,000 of senior
secured notes from a group of institutional and individual lenders. A financing
fee of $380,000 was paid in connection with securing of this debt. This
financing fee has been recorded as a discount on long-term debt, and will be
written off ratably over the life of the debt. For the period ending September
30, 2004, $70,000 of this financing fee was written off. These notes accrue
interest at the rate of 10% per year (subject to increase under certain
conditions), payable quarterly, with the principal due and payable on March 31,
2006. The Company is obligated however, to make principal repayments equivalent
to 10% of the principal amount of the notes on each of September 30 and December
31 of 2005 if the Company's weighted average share price falls below $5.00 per
share at such times. The notes are secured by all of the assets of Cadence.

As part of the private placement, the noteholders received warrants to purchase
a total of 765,000 shares of common stock, exercisable at $4 per share, expiring
in three years. Both the number of warrants and the exercise price per share are
adjustable, dependent upon certain future equity transactions of the Company.
The value of the warrants upon issuance of $745,237 has been recorded as a
discount on long-term debt, and will be written off ratably over the life of the
debt. For the period ended September 30, 2004, $186,309 of this discount was
written off. Additionally, a related party was granted 76,500 options valued at
$71,910 as a finders fee related to these notes.

NOTE 13- COMMITMENTS AND CONTINGENCIES

Litigation
The Company was a defendant in a lawsuit alleging that the Company failed to
transfer common stock in exchange for a mining property interest. In June 1999,
Box Elder County Superior Court rejected the plaintiff's lawsuit and let stand
the Company's countersuit alleging fraudulent misrepresentation. Although the
plaintiff filed an appeal (regarding the originally filed lawsuit), the Utah
Supreme Court rejected the appeal in a judgment rendered on July 31, 2001.

The Company's countersuit, which sought both full title to the aforementioned
mineral property and compensatory damages as well as punitive damages, was
rejected in a jury trial in October 2002. Although the Company filed an appeal,
it expects the jury verdict will stand. As a result, the Company has and will
continue to hold an undivided 25% interest in the Vipont Mine. See Note 3.

F-30

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 13- COMMITMENTS AND CONTINGENCIES (Continued)

Environmental Issues
The Company is engaged in oil and gas exploration and may become subject to
certain liabilities as they relate to environmental cleanup of well sites or
other environmental restoration procedures as they relate to the drilling of oil
and gas wells and the operation thereof. In the Company's acquisition of
existing or previously drilled wells, the Company may not be aware of what
environmental safeguards were taken at the time such wells were drilled or
during such time the wells were operated.

The Company could incur significant costs, including cleanup costs resulting
from a release of hazardous material, third-party claims for property damage and
personal injuries fines and sanctions, as a result of any violations or
liabilities under environmental or other laws. Changes in or more stringent
enforcement of environmental laws could also result in additional operating
costs and capital expenditures. In the course of routine oil and natural gas
operations, surface spills and leaks, including casing leaks, of oil or other
materials do occur, and the Company may incur costs for waste handling and
environmental compliance.

The Company was previously engaged in exploration of mineral properties. These
properties are classified as assets from discontinued operations or were
previously written off as permanently impaired. Although the Company has
discontinued the exploration of mineral properties, the possibility exists that
environmental cleanup or other environmental restoration procedures could remain
to be completed or be mandated by law, causing unpredictable and unexpected
liabilities to arise. At the date of this report, the Company is not aware of
any environmental issues related to any of its assets from discontinued
operations.

Capital Commitments
At September 30, 2004, the Company's future capital commitments are dependent
upon the Company's decision to proceed with additional well development. See
Note 10. No accruals have been made in the accompanying financial statements for
these amounts.

Lease Commitments
The Company began leasing office facilities in Walla Walla, Washington
commencing in June 2001. After a three-year lease with monthly payments of $400
expired in June 2004, the Company began a month to month tenancy, again paying
$400 per month. Total rent paid for this office space during the year ended
September 30, 2003 and 2002 was $4,800.

The Company began leasing additional office space in Hilton Head Island, South
Carolina in August 2003. The one-year lease calls for monthly rental payments of
$550. For the year ended September 30, 2004, the Company expended $4,967 for
this rental space.

F-31

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 13 - COMMITMENTS AND CONTINGENCIES (Continued)

Cadence Resources Corporation Limited Partnership (continued)
Partnership ("CRCLP" or the "Partnership") was formed to invest in oil and gas
properties in Texas and Louisiana.

In connection with the formation of the Partnership, the Company agreed to
contribute $12,500 in cash and its leasehold interest in an oil well ("2B",
which ultimately was a dry hole) in Wilbarger County, Texas and the limited
partner contributed $250,000 in cash.

Effective September 30, 2003, Cadence purchased the limited partner's interest
in the Partnership and thereby terminated the limited partner's security
interest in the equipment and fixtures affixed to wells 1A and 1B in Wilbarger
County, Texas. In this transaction, Cadence made a cash payment of $250,000 in
October 2003 to the limited partner and received, from the limited partner his
5% working interest in the West Electra Lake #1 oil well in Wilbarger, Texas.

In connection with the aforementioned transaction, Cadence also repaid in
October 2003 to the limited partner the unsecured sum of $300,000. These funds
were previously advanced to the Partnership in June 2003 for the exploration of
natural gas interests in the Black Bean Unit in Michigan in return for the
limited partner's receiving 120,000 shares of Cadence stock and a working
interest in each well drilled in the unit. Upon repayment of the $300,000
advance, the limited partner's working interest in each well drilled in the
Black Bean Unit was fixed at 2%.

Consulting Commitments
In June 2002, the Company entered into an agreement with Memphis Consulting
Group ("Memphis") for financial consulting and public relations services
beginning on August 1, 2002 through August 1, 2003. The agreement called for
monthly payments of $3,000, and an initial 50,000 stock options exercisable
through August 1, 2005 at $1.50 per share. See Note 8. This agreement was
terminated during the quarter ended March 31, 2003.

In September 2001, the Company entered into a consulting agreement with American
Financial Group for promotion to investors. The agreement called for monthly
payments of $2,000 to cover all expenses, 20,000 shares of the Company's common
stock (which were issued in October 2001) and an override of 2.5% of monies
raised in private placements from referrals or directed business. The agreement
was terminated during the quarter ended March 31, 2003.

In June 2003, the Company entered into a corporate advisory agreement with
Proteus Capital Corp. calling for a monthly fee of $3,000 in cash and 2,000
restricted shares of the common stock of the Company. Additionally, Proteus
received an option for 50,000 shares exercisable at $1.75 for a period of four
years, such shares bearing certain registration rights should the Company file a
registration statement on behalf of other shareholders.

F-32

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 13 - COMMITMENTS AND CONTINGENCIES (Continued)

Consulting Commitments (continued)
Lucius C. Geer, a consultant to the Company who manages its acquisition,
exploration and production operations, has entered into several agreements with
Cadence and has contractually received a 2% overriding royalty interest in oil,
gas and mineral leases in Wilbarger County, Texas and a 1% overriding royalty
interest in oil and gas leases in Desoto Parish, Louisiana.

Effective August 1, 2003, Cadence agreed to pay Mr. Geer $7,500 per month plus
an overriding royalty interest of 2% of the sales price received for all oil,
gas and minerals from leases which Geer acquires for Cadence. Effective August
1, 2004, the agreement with Mr. Geer was changed to increase the monthly fee
from $7,500 to $10,000.

Other Commitments
The Company entered into an exploration agreement with the W.T. Waggoner Estate
(Waggoner) and its trustees on August 1, 2002. This agreement calls for
exploration of the West Electra Lake Project located in Wilbarger County, Texas.
See Note 10.

On August 13, 2002, the Company entered into a public relations retainer
agreement for one year whereby the Company agreed to issue 60,000 shares of its
common stock during this period for services received. The agreement also calls
for reimbursement of expenses incurred pursuant to terms of this agreement. This
agreement was terminated in the quarter ending September 30, 2003.

NOTE 14 - RELATED PARTY TRANSACTIONS

At September 30, 2004 and 2003, the Company had related party accounts payable
outstanding in the amounts of $300,000 and $550,000, respectively. At September
30, 2004 and 2003, the Company had related party notes payable outstanding in
the amounts of $0 and $460,000, respectively.

In February 2004, the Company borrowed $250,000 from an officer, a total of
$95,000 from two directors, and $50,000 from Dotson Exploration Company, a
related entity. All of these borrowings were repaid by Cadence in April 2004.

In January 2004, Cadence hired Mr. Douglas Newby as a Vice President; Mr. Newby
is the president and owner of Proteus Capital Corp., with whom the Company has a
consulting agreement. See Note 13.

During the year ended September 30, 2002, the Company sold several mineral
properties located in Shoshone County, Idaho to Caledonia Silver-Lead Mines,
Inc., later renamed Nevada-Comstock Mining Company. Two officers of the Company
collectively own 2.4% of this entity and Cadence owns 35%.

F-33

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 14 - RELATED PARTY TRANSACTIONS (Continued)

Two officers of the Company collectively own in excess of 40% of the stock of
Dotson Exploration Company and are the sole officers and directors of Dotson.
Dotson owns 109,000 shares of the Company's common stock. During fiscal year
2002 and the first quarter of fiscal year 2003, Cadence repaid Dotson a loan in
the amount of $10,000 and made two new loans to Dotson, one for $35,000 and one
for $20,000, each at an interest rate of 10% per annum. Dotson transferred to
Cadence marketable securities in the form of common stock of two unaffiliated
companies, Enerphaze Corporation and The Williams Companies, Inc., valued by
Cadence's board of directors at $33,380, as partial payment of the amount
loaned. During the nine months ended June 30, 2003, Dotson repaid the $20,000
loan in cash. At September 30, 2004 and 2003, Dotson owed Cadence $3,720, which
amount is payable on demand and bears interest at 10% per annum.

Because Dotson Exploration Company, Oxford Metallurgical, Inc. and
Nevada-Comstock Mining Company are controlled by two officers of Cadence, these
transactions cannot be considered to be the product of an arms-length
negotiation.

During fiscal 2003, the Company's president made two loans to Cadence. One loan
in December 2002 was in the principal amount of $70,000, bearing interest at 5%
and the other loan made in February 2003 was in the principal amount of $50,000
bearing interest at a rate of 8%. Cadence issued 14,000 shares of its common
stock valued at $10,920, as an inducement to making the $70,000 loan and 20,000
shares valued at $15,600, as an inducement to making the $50,000 loan. Cadence
repaid $60,000 and has agreed to issue 4,000 shares of its common stock in
repayment of the remaining $10,000 principal amount outstanding on the $70,000
loan. Cadence repaid $25,000 of the $50,000 loan in cash and issued 25,000
shares of its common stock in the year ending September 30, 2004 to repay the
remaining $25,000 principal amount.

In February 2003, a Company director made a bridge loan to Cadence in the
principal amount of $50,000, bearing interest of 8% per annum. Cadence issued
20,000 shares of its stock valued at $15,600 as an inducement for the director
to make the loan. Cadence repaid $25,000 of the $50,000 loan in 2003 and settled
the remaining amount in 2004 with common stock. In July 2003, the director
exercised a warrant to purchase 100,000 shares of common stock at $0.75 per
share.

On August 8, 2002, the Company formed a limited partnership whereby the Company
became the managing general partner and an outside individual investor (a
Company shareholder) became the initial limited partner. During the year ended
September 30, 2003, the limited partner advanced $300,000 to the limited
partnership in exchange for an unsecured note, which was repaid in October 2003.

In October 2002, the Nathan A. Low Roth IRA and various entities controlled by
Thomas Kaplan, shareholders of Cadence, exercised warrants in separate cashless
transactions whereby each party surrendered a total of 175,676 shares of common
stock valued at $325,000 to exercise warrants for the acquisition of 1,083,334
shares of Cadence common stock.

F-34

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 14 - RELATED PARTY TRANSACTIONS (Continued)

In April 2002, Mr. Crosby purchased 83,334 Cadence investment units and Mr. Ryan
purchased 43,334 Cadence investment units at $0.30 per unit consisting of one
share of common stock and one warrant exercisable at $0.30. The warrants
contained a provision which allowed cashless exercise when and if Cadence common
stock traded at or above $1.50 per share. Also, in April 2002, Cadence issued to
Mr. Ryan 6,800 shares of its common stock in repayment of 6,800 Cadence shares
owned by Mr. Ryan that he had transferred to third parties to pay Cadence
invoices.

In January 2002, Cadence transferred 41,667 shares of the common stock it owned
in Trend Mining Company, of which Mr. Ryan is a director, to Mr. Ryan in payment
of past due salary of $16,000. Further, in October 2001, Mr. Ryan transferred
marketable securities of Enerphaze Corporation valued at $90,000 to Cadence in
exchange for 300,000 shares of Cadence, which shares are held by J.P. Ryan
Company, Inc. (which is held 100% by John Ryan), Andover Capital Corporation
(which is held 100% by John Ryan), and Dotson Exploration Company.

In October 2001, Cadence issued 200,000 shares of its common stock to Mr. Crosby
for cash in the amount of $60,000. On January 15, 2002, Cadence issued 100,000
shares of its common stock to Mr. Crosby in payment of a loan made to Cadence in
the principal amount of $30,000 in November 2001. On January 22, 2002, Mr.
Crosby made an additional loan of $30,000 bearing interest at 8% for which
Cadence issued him 15,000 shares valued at $4,500 as an inducement to making the
loan.

Other related party transactions are disclosed in Notes 3, 5, 6, and 11.

NOTE 15 - INCOME TAXES

At September 30, 2004, the Company had net deferred tax assets calculated at an
expected rate of 34% of approximately $5,672,000 as indicated below. As
management of the Company cannot determine that it is more likely than not that
the Company will realize the benefit of the net deferred tax asset, a valuation
allowance equal to the net deferred tax asset has been established at September
30, 2004.

The significant components of the deferred tax asset at September 30, 2004, 2003
and 2002 were as follows:

2004 2003 2002
---------- ---------- ----------
Net operating loss carryforwards $4,317,000 $2,829,000 $1,423,000
Stock options and warrants issued 623,000 622,000 172,000
Section 1231 loss carryforwards 146,000 151,000 89,000
Capital loss carryforwards 586,000 1,532,000 887,000
---------- ---------- ----------
Total deferred tax asset 5,672,000 5,134,000 2,571,000
Less valuation allowance 5,672,000 5,134,000 2,571,000
---------- ---------- ----------
Net deferred tax asset $ -- $ -- $ --
========== ========== ==========

F-35

CADENCE RESOURCES CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2004

NOTE 15 - INCOME TAXES (Continued)

At September 30, 2004, the Company has net operating loss carryforwards of
approximately $12,700,000, which expire in the years 2009 through 2024. In
addition, the Company has net Section 1231 loss carryforwards of approximately
$432,000, which expire in 2006, and net capital loss carryforwards of
approximately $1,700,000, which expire in the years 2005 through 2009. The
change in the allowance account from September 30, 2003 to September 30, 2004
was $538,000, which was primarily due to the Company's operating and capital
losses and the expiration of Section 1231 and capital losses.

The Company may have had a control change as defined under the Internal Revenue
Code, because of new stock issuances and changes in ownership. The effect of
such control changes has not been calculated but may limit the future use of net
operating losses.

NOTE 16 - SUBSEQUENT EVENTS

Aurora Energy, Ltd.
On November 19, 2004, the Company announced that it had signed a letter of
intent establishing a 60-day period in which to conduct due diligence and
negotiate terms for acquisition of all of the outstanding common stock of Aurora
Energy, Ltd., a privately held company based in Traverse City, Michigan, in
exchange for shares of common stock of Cadence. The Company and Aurora Energy,
Ltd. are currently negotiating terms of the proposed transaction.

F-36

================================================================================

CADENCE RESOURCES CORPORATION

3,919,540 SHARES OF

COMMON STOCK

--------------------

PROSPECTUS

--------------------

================================================================================

WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR ANY OTHER PERSON TO GIVE
ANY INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU
MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT OFFER TO
SELL OR BUY ANY SHARES IN ANY JURISDICTION WHERE IT IS UNLAWFUL. THE INFORMATION
IN THIS PROSPECTUS IS CURRENT AS OF _______________, 2005

================================================================================

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

LIMITATION OF LIABILITY OF DIRECTORS, OFFICERS AND OTHERS.

In accordance with Utah law, our articles of incorporation eliminate or
limit the liability of a director to the corporation or to its shareholders for
monetary damages for any action taken or any failure to take any action as a
director, except liability for (a) the amount of a financial benefit received by
a director to which he is not entitled; (b) an intentional infliction of harm on
the corporation or the shareholders; (c) specified unlawful distributions; or
(d) an intentional violation of criminal law.

In addition, in Utah, unless a corporation's articles of incorporation
provide otherwise:

(1) an officer of the corporation is entitled to mandatory
indemnification, and is entitled to apply for court-ordered indemnification, to
the same extent as a director of the corporation;

(2) the corporation may indemnify and advance expenses to an officer,
employee, fiduciary, or agent of the corporation to the same extent as to a
director; and

(3) a corporation may also indemnify and advance expenses to an officer,
employee, fiduciary, or agent who is not a director to a greater extent, if not
inconsistent with public policy, and if provided for by its articles of
incorporation, bylaws, general or specific action of its board of directors, or
contract.

Our officers and directors are accountable to us as fiduciaries, which
mean they are required to exercise good faith and fairness in all dealings
affecting us. In the event that a shareholder believes the officers and/or
directors have violated their fiduciary duties to us, the shareholder may,
subject to applicable rules of civil procedure, be able to bring a class action
or derivative suit to enforce the shareholder's rights, including rights under
certain federal and state securities laws and regulations to recover damages
from and require an accounting by management. Shareholders who have suffered
losses in connection with the purchase or sale of their interest in Cadence
Resources Corporation in connection with such sale or purchase, including the
misapplication by any such officer or director of the proceeds from the sale of
these securities, may be able to recover such losses from us.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of Cadence Resources Corporation, we have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore, unenforceable.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated expenses in connection with
the issuance and distribution of the securities covered by this registration
statement, other than underwriting discounts and commissions. All of the
expenses will be borne by the company except as otherwise indicated.

Registration fee ...................................... $ 0.00

Fees and expenses of accountants....................... 10,000.00

Fees and expenses of legal counsel .................... 25,000.00

Printing and engraving expenses........................ 0.00

Miscellaneous expenses................................. 1,000.00
--------------

Total.................................................. $ 36,000.00

II-1

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

At the time of issuance, each investor or recipient of unregistered
securities was either an accredited investor or a sophisticated investor. Each
investor had access to Cadence's most recent Form 10-K, all quarterly and
periodic reports filed subsequent to such Form 10-K and Cadence's most recent
proxy materials.

Between August 2001 and February 2002, Cadence sold an aggregate of
1,716,834 units to 25 accredited investors, each unit consisting of one share of
common stock and a warrant to purchase one share of common stock, for an
aggregate of $515,050.20. No sales commissions were paid in connection with this
transaction. The units were issued in reliance upon the exemption from
registration provided by Section 4 (2) of the Securities Act.

In October 2001, Cadence sold 200,000 shares of its common stock to an
accredited investor, for $60,000. No sales commissions were paid in connection
with this transaction. The shares were issued in reliance upon the exemption
from registration provided by Section 4 (2) of the Securities Act.

Between October 15, 2001 and October 26, 2001 Cadence issued an aggregate
of 110,000 shares of its common stock to three sophisticated investors in
consideration of certain consulting services provided to Cadence. No sales
commissions were paid in connection with this transaction. The shares were
issued in reliance upon the exemption from registration provided by Section 4(2)
of the Securities Act.

On November 30, 2001, Cadence issued 800,000 shares of its common stock to
three sophisticated investors in consideration of certain consulting services
provided to Cadence. No sales commissions were paid in connection with this
transaction. The shares were issued in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act.

On November 30, 2001, Cadence issued 12,500 shares of its common stock to
one sophisticated investor in consideration of certain services provided to
Cadence. No sales commissions were paid in connection with this transaction. The
shares were issued in reliance upon the exemption from registration provided by
Section 4(2) of the Securities Act.

In January 2002, (i) Cadence issued 100,000 shares of its common stock to
one accredited investor in payment of $30,000 of principal and interest on a
note made by Cadence in favor of the investor, (ii) Cadence issued 113,500
shares of its common stock to two of its executive officers in payment of
salaries that were past due, aggregating $34,000, and (iii) Cadence issued
300,000 shares of its common stock to three accredited investors and received
marketable securities of Enerphaze Corporation valued at $90,000. No sales
commissions were paid in connection with these transactions. The shares were
issued in reliance upon the exemption from registration provided by Section 4(2)
of the Securities Act.

On January 15, 2002, Cadence issued 10,000 shares of its common stock to
one sophisticated investor in consideration of certain consulting services
provided to Cadence. No sales commissions were paid in connection with this
transaction. The shares were issued in reliance upon the exemption from
registration provided by Section 4 (2) of the Securities Act.

Between April and June 2002, Cadence sold an aggregate of 1,932,802 units
to 5 accredited investors, each unit consisting of one share of common stock and
a warrant to purchase one share of common stock, for an aggregate of
$579,840.60. Each warrant was exercisable at a price of $.15 per share and have
all been exercised. No sales commissions were paid in connection with this
transaction. The Units were issued in reliance upon the exemption from
registration provided by Section 4 (2) of the Securities Act. On October 23,
2002, Cadence issued 1,815,316 shares of common stock to four accredited
investors upon the cashless exercise of the warrants granted in the April
through June 2002 offering. On September 15, 2003, Cadence issued 141,668 shares
of its common stock to three accredited investors upon the cashless exercise of
the warrants granted in the April through June 2002 offering. No sales
commissions were paid in connection with the exercise of the warrants. The
shares were issued in reliance upon the exemption from registration provided by
Section 4 (2) of the Securities Act.

On June 5, 2002, Cadence issued an aggregate of 85,000 shares of its
common stock to three of its officers and/or directors in consideration of
services provided to Cadence. No sales commissions were paid in connection with
this transaction. The shares were issued in reliance upon the exemption from
registration provided by Section 4 (2) of the Securities Act.

II-2

On June 5, 2002, Cadence issued 20,000 shares of its common stock to one
sophisticated investor in consideration of certain consulting services provided
to Cadence. No sales commissions were paid in connection with this transaction.
The shares were issued in reliance upon the exemption from registration provided
by Section 4 (2) of the Securities Act.

On July 1, 2002, Cadence issued 100,000 shares of its common stock to one
sophisticated investor in consideration of certain consulting services provided
to Cadence. No sales commissions were paid in connection with this transaction.
The shares were issued in reliance upon the exemption from registration provided
by Section 4 (2) of the Securities Act.

From July through October 2002, Cadence sold an aggregate of 212,500 units
to 7 accredited investors, each unit consisting of one share of common stock and
a warrant to purchase one share of common stock, for an aggregate of $140,625.
Each warrant is exercisable at a price of $1.35 per share and expires three
years from the date of issuance. No sales commissions were paid in connection
with this transaction. The units were issued in reliance upon the exemption from
registration provided by Section 4 (2) of the Securities Act.

On August 28, 2002, Cadence issued 60,000 shares of its common stock to
one sophisticated investor in consideration of certain services provided to
Cadence. No sales commissions were paid in connection with this transaction. The
shares were issued in reliance upon the exemption from registration provided by
Section 4(2) of the Securities Act.

On August 30, 2002, Cadence issued 10,150 shares of its common stock to
one sophisticated investor in consideration of certain consulting services
provided to Cadence. No sales commissions were paid in connection with this
transaction. The shares were issued in reliance upon the exemption from
registration provided by Section 4 (2) of the Securities Act.

On October 17, 2002, Cadence issued 13,500 shares of its common stock to
one sophisticated investor in consideration of certain consulting services
provided to Cadence. No sales commissions were paid in connection with this
transaction. The shares were issued in reliance upon the exemption from
registration provided by Section 4 (2) of the Securities Act.

Between November 2002 and March 2003, Cadence issued 34,950 shares of
Class A Preferred Shares to 8 investors who were not US persons under Regulation
S of the Securities Act for an aggregate of $52,425. No sales commissions were
paid in connection with this transaction. The shares were issued in reliance
upon the exemption from registration provided by Regulation S of the Securities
Act.

During fiscal 2003, Howard M. Crosby made two loans to Cadence. One loan
in December 2002 was in the principal amount of $70,000, bearing interest at 5%
and the other loan made in February 2003 in the principal amount of $50,000
bearing interest at a rate of 8%. Cadence issued 14,000 shares of its common
stock as an inducement to making the $70,000 loan and 20,000 shares as an
inducement to making the $50,000 loan. Cadence repaid $60,000 and has agreed to
issue 4,000 shares of its common stock in repayment of the remaining $10,000
principal amount outstanding on the $70,000 loan. Cadence repaid $25,000 of the
$50,000 loan in cash and issued 25,000 shares of its common stock to repay the
remaining $25,000 principal amount outstanding. No sales commissions were paid
in connection with these transactions. The shares were issued in reliance upon
the exemption from registration provided by Section 4(2) of the Securities Act.

In February 2003, Kevin Stulp, one of Cadence's directors, made a bridge
loan to Cadence in the principal amount of $50,000, bearing interest of 8% per
annum. Cadence issued 20,000 shares of its stock to Mr. Stulp as an inducement
to making the loan. In July 2003, Cadence issued 25,000 shares of its stock in
repayment of $25,000 of the principal amount of such loan and 100,000 shares of
common stock upon the exercise of a warrant at $.75 per share. At September 30,
2004, the Company issued another 25,000 shares of its stock in full payment of
the remaining loan principal of $25,000. No sales commissions were paid in
connection with these transactions. The shares were issued in reliance upon the
exemption from registration provided by Section 4 (2) of the Securities Act.

II-3

On February 4, 2003, Cadence issued an aggregate of 150,000 shares of its
common stock to four of its officers and/or directors in consideration of
services provided to Cadence. No sales commissions were paid in connection with
this transaction. The shares were issued in reliance upon the exemption from
registration provided by Section 4 (2) of the Securities Act.

On February 19, 2003, Cadence issued 5,000 shares of its common stock to
one sophisticated investor in consideration of certain consulting services
provided to Cadence. No sales commissions were paid in connection with this
transaction. The shares were issued in reliance upon the exemption from
registration provided by Section 4 (2) of the Securities Act.

On February 19, 2003, Cadence issued 40,000 shares of its common stock to
an accredited investor as an inducement for making a loan to Cadence of
$100,000. No sales commissions were paid in connection with this transaction.
The shares were issued in reliance upon the exemption from registration provided
by Section 4 (2) of the Securities Act.

Between April and May 2003, Cadence issued an aggregate of 44,000 shares
of its common stock to two sophisticated investor in consideration of certain
consulting services provided to Cadence. No sales commissions were paid in
connection with this transaction. The shares were issued in reliance upon the
exemption from registration provided by Section 4 (2) of the Securities Act.

On May 7, 2003, Cadence issued an aggregate of 75,000 shares of its common
stock to four of its officers and/or directors in consideration of services
provided to Cadence. No sales commissions were paid in connection with this
transaction. The shares were issued in reliance upon the exemption from
registration provided by Section 4 (2) of the Securities Act.

On May 7, 2003, Cadence issued 10,000 shares of its common stock to one
sophisticated investor in consideration of certain consulting services provided
to Cadence. No sales commissions were paid in connection with this transaction.
The shares were issued in reliance upon the exemption from registration provided
by Section 4 (2) of the Securities Act.

Between May and August 2003, Cadence sold an aggregate of 730,000 shares
of its common stock to 16 accredited investors for an aggregate of $710,000. No
sales commissions were paid in connection with this transaction. The shares were
issued in reliance upon the exemption from registration provided by Section 4
(2) of the Securities Act.

On February 19, 2003, Cadence issued 6,000 shares of its common stock to
one sophisticated investor in consideration for a loan of $30,000, which was
subsequently repaid.

In June 2003, Nathan Low loaned $300,000 to Cadence Resources Corporation
Limited Partnership, of which Cadence was the sole general partner and Mr. Low
was the sole limited partner. As partial inducement for making this loan,
Cadence issued Mr. Low 120,000 shares of common stock. No sales commissions were
paid in connection with this transaction. The shares were issued in reliance
upon the exemption from registration provided by Section 4(2) of the Securities
Act.

In July 2003, CGT Management, Ltd. loaned Cadence $300,000 at 10%
interest. See "Related Parties Transactions." As an inducement for making the
loan, Cadence issued 120,000 shares to CGT Management. No sales commissions were
paid in connection with this transaction. The shares were issued in reliance
upon the exemption from registration provided by Section 4 (2) of the Securities
Act.

On July 1, 2003, Cadence issued an aggregate of 95,000 shares of its
common stock to four of its officers and/or directors in consideration of
services provided to Cadence. No sales commissions were paid in connection with
this transaction. The shares were issued in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act.

II-4

In August 2003, Cadence issued 102,000 shares of its common stock to four
sophisticated investors in consideration of certain consulting services provided
to Cadence. No sales commissions were paid in connection with this transaction.
The shares were issued in reliance upon the exemption from registration provided
by Section 4 (2) of the Securities Act.

On September 15, 2003, Cadence issued an aggregate of 95,000 shares of its
common stock to four of its officers and/or directors in consideration of
services provided to Cadence. No sales commissions were paid in connection with
this transaction. The shares were issued in reliance upon the exemption from
registration provided by Section 4 (2) of the Securities Act.

Between September and October 2003, Cadence sold an aggregate of 1,721,400
shares of its common stock to 29 accredited investors for an aggregate of
$4,303,500. Sales commissions consisting of (i) $376,565 in cash, (ii) 11,000
shares of common stock valued at $2.90 per share or $31,900 in the aggregate and
(iii) options to purchase 162,140 shares of common stock at $2.50 per share to
one finder or an entity controlled by such finder, and additional fees totaling
$11,250 to two other finders. All finders are accredited investors. The shares
and warrant were issued in reliance upon the exemption from registration
provided by Section 4 (2) of the Securities Act.

On January 23, 2004, Cadence issued 5,000 shares of its common stock and
an option to purchase 75,000 shares of its common stock to each of Glenn
DeHekker and Jeffrey M. Christian in consideration of their becoming directors
of Cadence. The shares and options were issued in reliance upon the exemption
from registration provided by Section 4 (2) of the Securities Act.

On January 23, 2004, Cadence issued an option to purchase 250,000 shares
of its common stock to Douglas Newby in consideration of his becoming a Vice
President of Cadence. The options were issued in reliance upon the exemption
from registration provided by Section 4 (2) of the Securities Act.

On February 25, 2004, Cadence issued 15,000 shares to David Nahmias and
15,000 shares to Lyons Capital, LLC in consideration of services provided to
Cadence. The shares were issued in reliance upon the exemption from registration
provided by Section 4 (2) of the Securities Act.

On April 2, 2004, Cadence sold 120 units consisting of a note in the
principal amount of $50,000 and a warrant to purchase 6,375 shares of Common
Stock, exercisable at $4.00 per share, to seven accredited investors for an
aggregate sales price of $6,000,000. As compensation for his services in
connection with this private placement, Cadence paid Nathan A. Low, an
accredited investor, $300,000 and issued him a warrant to purchase 76,500 shares
of Common Stock, exercisable at $4.00 per share. On January 31, 2004, Cadence
paid off the notes without a prepayment penalty in exchange for the exercise
price of the warrants being reduced to $1.25. All the warrants described in this
paragraph expire on April 2, 2007. The shares and warrant were issued in
reliance upon the exemption from registration provided by Section 4 (2) of the
Securities Act.

On April 15, 2004 Cadence issued 10,000 shares each to Glenn DeHekker,
Jeff Christian, and Kevin Stulp for Director services for two quarters. On the
same date Cadence also issued 5,000 shares each to Howard Crosby and John Ryan
for Director services for one quarter, and 5,000 shares each to Howard Crosby,
John Ryan, and Doug Newby for Officer services for one quarter. The shares were
issued in reliance upon the exemption from registration provided by Section 4
(2) of the Securities Act.

On June 2, 2003, Cadence issued 6,000 shares to Proteus Capital Corp. in
consideration of services rendered to the Company. On the same date Cadence
issued 10,000 shares to Robert Denison upon exercise of warrants at $1.35. The
shares were issued in reliance upon the exemption from registration provided by
Section 4 (2) of the Securities Act.

On August 20, 2004 Cadence issued 25,000 shares to Howard Schraub and
17,500 shares to Lyons Capital LLC for professional services rendered. On the
same date Cadence issued 5,000 shares to Glenn DeHekker, Kevin Stulp and Jeff
Christian for quarterly services as Directors to the Company, and issued 5,000
shares to Doug Newby for quarterly services as an Officer of the Company. Also
on the same date Cadence issued 15,000 shares to RMB International (Dublin),
Limited as a break-up fee for a proposed debt financing. In each case the shares
were issued in reliance upon the exemption from registration provided by Section
4 (2) of the Securities Act.

II-5

On January 31, 2005, Cadence issued 7,810,000 shares of common stock
and warrants to purchase 14,050,000 shares of common stock at an exercise price
of $1.75 per shares to 22 accredited investors for $9,762,500. Sunrise
Securities Corporation, an affiliate of Nathan Low (a 10% shareholder of
Cadence), will receive a commission equal to $926,250 and a warrant to purchase
2,186,000 shares of Cadence's common stock at an exercise price of $1.75 per
share for services rendered as the placement agent in the transaction. All the
warrants described in this paragraph expire on January 31, 2009. The shares were
issued in reliance upon the exemption from registration provided by Section 4
(2) of the Securities Act.

ITEM 27. EXHIBITS

EXHIBIT NO. DOCUMENT DESCRIPTION
- ----------- --------------------------------------------------------------

4.1* Form of Promissory Note in favor of the investors in the April
2, 2004 private placement

4.2* Form of Warrant issued to the investors in the April 2, 2004
private placement

5** Opinion of Jenkens & Gilchrist, a Professional Corporation, as
to the validity of the Securities being registered hereunder

10.1* Securities Purchase Agreement between Cadence and the
investors signatory thereto, dated April 2, 2004*

10.2* Security Agreement between Cadence Resources Corporation and
the investors signatory thereto, dated April 2, 2004*

23.1 Consent of Ralph E. Davis Associates, Inc.

23.2** Consent of Jenkens & Gilchrist, a Professional Corporation
(included in Exhibit 5)

23.3 Consent of Williams & Webster, P.S.

24*** Power of Attorney (included on signature page)

- -----------
* Filed as an exhibit to the registrant's Current Report on Form 8-K dated
April 5, 2004, filed with the SEC on April 5, 2004
** Filed as an exhibit to the registrant's registration statements on Form
SB-2, file numbers 333-117493 and 333-110099
*** Previously filed.

ITEM 28. UNDERTAKINGS

(a). The undersigned hereby undertakes:

1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Securities and Exchange Commission pursuant to Rule 424(b) under
the Securities Act of 1933 if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement;

(iii) To include any additional or changed material information on
the plan of distribution.

2. That, for the purpose of determining any liability under the Securities
Act of 1933, as amended, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

II-6

3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

C. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

II-7

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Post-Effective
Amendment on Form SB-2 Registration Statement to be signed on its behalf by the
undersigned, in the city of Spokane, state of Washington, on this 11th day of
February, 2005.

CADENCE RESOURCES CORPORATION

By: /s/ Howard M. Crosby
---------------------------
Howard M. Crosby, President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment on Form SB-2 Registration Statement has been signed by
the following persons in the capacities and on the dates indicated:

SIGNATURE TITLE DATE
- --------- ----- ----

/s/ Howard M. Crosby President and Director February 11, 2005
- ------------------------------------ (Principal Executive Officer)
Howard M. Crosby

/s/ John P. Ryan* Vice President and Director February 11, 2005
- ------------------------------------ (Principal Financial Officer)
John P. Ryan

- ------------------------------------ Director
Kevin Stulp

/s/ Glenn DeHekker* Director February 11, 2005
- ------------------------------------
Glenn DeHekker

/s/ Jeffrey M. Christian* Director February 11, 2005
- ------------------------------------
Jeffrey M. Christian

* By /s/ Howard M. Crosby
-----------------------------------
Howard M. Crosby, Attorney in Fact

EXHIBIT INDEX

EXHIBIT NO. DOCUMENT DESCRIPTION
- ----------- --------------------------------------------------------------

4.1* Form of Promissory Note in favor of the investors in the April
2, 2004 private placement

4.2* Form of Warrant issued to the investors in the April 2, 2004
private placement

5** Opinion of Jenkens & Gilchrist, a Professional Corporation, as
to the validity of the Securities being registered hereunder

10.1* Securities Purchase Agreement between Cadence and the
investors signatory thereto, dated April 2, 2004*

10.2* Security Agreement between Cadence Resources Corporation and
the investors signatory thereto, dated April 2, 2004*

23.1 Consent of Ralph E. Davis Associates, Inc.

23.2** Consent of Jenkens & Gilchrist, a Professional Corporation
(included in Exhibit 5)

23.3 Consent of Williams & Webster, P.S.

24*** Power of Attorney (included on signature page)

- --------------
* Filed as an exhibit to the registrant's Current Report on Form 8-K dated
April 5, 2004, filed with the SEC on April 5, 2004
** Filed as an exhibit the registrant's registration statements on Form SB-2,
file numbers 333-117493 and 333-110099
*** Previously filed.