Edgar Filing: PRELUDE VENTURES INC

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-QSB

Quarterly Report Under
the Securities Exchange Act of 1934

For Quarter Ended: June 30, 2002

Commission File Number:

Prelude Ventures, Inc.
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(Exact name of small business issuer as specified in its charter)

Nevada
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(State or other jurisdiction of incorporation or organization)

98-0232018

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(IRS Employer Identification No.)

2585 West 14th Avenue
Vancouver, BC, Canada V6K 2W6

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(Address of principal executive offices)

None

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(Former name or former address, if changed since last report)

V6K 2W6
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(Zip Code)

(604) 817-8095
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(Issuer's Telephone Number)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days: Yes
__X__ No ____.

The number of shares of the registrant's only class of common stock issued and
outstanding, as of June 30, 2002 was 1,000,000 common shares.

PART ITEM 1. FINANCIAL STATEMENTS.

The unaudited financial statements for the three-month period ended June
30, 2001 are attached hereto.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with our audited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by, or our behalf. We disclaim any obligation to update forward
looking statements.

OVERVIEW

History And Organization

Prelude Ventures, Inc. (the "Company") was incorporated under the laws of
the state of Nevada on May 24, 2000. We have not commenced business operations
and we are considered an exploration stage enterprise. To date, our activities
have been limited to organizational matters, obtaining a mining engineer's
report and the preparation and filing of the registration statement of which
this prospectus is a part. In connection with the organization of our company,
the founding shareholder of our company contributed an aggregate of $25,000 cash
in exchange for 1,000,000 shares of common stock. We have no significant assets,
and we are totally dependent upon the successful completion of this offering and
receipt of the proceeds there from, of which there is no assurance, for the
ability to commence our proposed business operations.

Proposed Business

On March 9, 2001, we acquired a 20 year mining lease from Steve Sutherland,
the owner of 24 unpatented lode mining claims, sometimes referred to as the
Medicine Project, located in Elko County, Nevada. An unpatented claim is one in
which more assessment work is necessary before all mineral rights can be
claimed. As the owner of the claims, Mr. Sutherland has the right to lease the
claims to a third party but he remains responsible for compliance with all
applicable federal, state and county laws and regulations. Under the terms of
our lease with Mr. Sutherland, we are entitled to all of Mr. Sutherlands mineral
rights and we are also made responsible for compliance for all laws and
regulations that apply to the claims. We are presently in the pre-exploration
stage and there is no assurance that a commercially viable precious mineral
deposit exists in our property until appropriate geological exploration is done
and a final comprehensive evaluation concludes that there is economic and legal
feasibility to conduct mining operations.

The exploration program proposed by Prelude is designed to determine
whether mineralization exists to the extent that mining operations would be
economically feasible. It is uncertain at this time the precise quantity of
minerals in the property that would justify actual mining operations.

Prelude has leased the claims from Mr. Sutherland who is our landlord. We
also have the right to locate additional claims within one mile of the claims
which become part of the lease. Under the terms of the lease, Prelude must pay a
three percent production royalty and may extend the initial term of 20 years for
one additional period of 20 years provided that all conditions of the lease have
previously been met. Prelude has the exclusive possession of the property for
mining purposes during the term of the lease.

Under the terms of the lease, Prelude must pay a three percent annual
production royalty and must pay an annual minimum royalty as follows:

Anniversary Date

- $5,000 upon execution (paid);
- $1,500 on March 9, 2002 (paid);
- $6,000 on September 9, 2002;
- $10,000 on March 9, 2003
- $20,000 on March 9, 2004
- $50,000 on March 9, 2005 and every March 9 thereafter

If Prelude fails to meet the above lease payments, the lease may be
terminated if the landlord gives written notice of such default. After receipt
of default, Prelude has 15 days to cure the default. In addition, the lease may
be terminated if Prelude fails to make federal, state, and county maintenance
payments or filing fees at least 15 days prior to due date. In that event, the
landlord must notify Prelude of a possible default. After 10 days, if the
default is not cured the landlord may initiate payment on the claims. Prelude
will be able to cure this default by reimbursing all federal, state and county
payments made by the landlord plus a 20% penalty within 30 days.

Under applicable federal, state, and county laws and regulations, annual
mining claim maintenance or rental fees are required to be paid by Prelude for
the unpatented mining claims which constitute all or part of the leased
property, beginning with the annual assessment work period of September 1, 2001
to September 1, 2002. Prelude must timely and properly pay the federal, state,
and county annual mining claim maintenance or rental fees, and must execute and
record or file, as applicable, proof of payment of the federal, state, and
county annual mining claim maintenance or rental fees and the landlord's
intention to hold the unpatented mining claims. If Prelude does not terminate
the agreement before June 1 of any subsequent lease year, Prelude will be
obligated either to pay the federal, state, and local annual mining claim
maintenance or rental fees for the property due that year or to reimburse the
landlord.

Prelude also has the right to buy out the landlord's interest in exchange
for a payment of $5,000,000 from which royalty payments made up to the time of
the buyout may be deducted. If a buyout occurs, Prelude must also pay the
landlord a perpetual 0.5% royalty on all minerals recovered from the property.

The lease may be terminated at any time by Prelude provided that we give
written notice 30 days prior to relinquishing the leased property. In the event
Prelude desires to terminate the agreement after June 1 of any year, we are
responsible for all federal, state, and county maintenance and filing fees for
the next assessment year regarding the leased property. In addition, we must
deliver to the landlord in reproducible form all data generated or obtained for
the leased property, whether factual or interpretive. Finally, we must quitclaim
to the landlord all claims located or acquired by us.

Our business activities to date have been restricted to obtaining a report
from our mining engineer, Edward P. Jucevic and preparing this offering. Mr.
Jucevic's report details the geological and mining history of the claims leased
by Prelude, including the land status, climate, geology and mineralization. In
preparing his report, Mr. Jucevic did not perform any actual field work on the
claims. Mr. Jucevic believes that based upon previous mining activity in the
area, sufficient evidence exists to warrant further exploration on the leased
property which could then lead to actual mining operations.

The property leased by Prelude is located in Elko County, Nevada and
comprises 24 unpatented claims. Mr. Jucevic has concluded that the claims
demonstrate a potential for surface-mineable oxidized-zinc deposits and
surface-mineable heap leachable silver deposits. Heap leaching is a process for
the extraction of valuable minerals utilizing chemical solutions that percolate
through crushed ore. A two phase exploration and drilling program has been
proposed. Phase 1, including a recommendation to stake four neighboring targets,
with estimated costs of $50,000. No exploration work will be performed until the
additional claim staking has taken place. We have not yet determined whether Mr.
Jucevic will be commissioned to perform additional research on the claims for
us. That would be followed by Phase 2 with estimated costs of $100,000. The
purpose of this offering is to finance the implementation of Phase I.

Location and Access

The leased property is located in Elko County, Nevada, approximately 50
airline miles southeast of the town of Elko, Nevada. Access from Elko, Nevada is
obtained by driving 20 miles on I-80 to Halleck, Nevada and then turning
southeast on paved Highway 229 for forty-two miles through Secret Pass across
the Ruby Mountains and then proceeding about 24 miles south on dirt roads to the
property. The claims are in what is known as the Mud Springs mining district.
2

Claim Status

The claims have been leased by Prelude form Steve Sutherland who currently
holds the property via 24 unpatented mining claims located during the month of
September 2000. The owner of the property is the United States government. The
land is administered by the Bureau of Land Management (BLM). Mr. Sutherland has
documentation that all requisite county and United States Bureau of Land
Management (BLM) papers have been filed and all fees paid. Two claims not
belonging to Mr. Sutherland lie within the claim boundary and are held by a
local prospector. Mr. Jucevic believes these two claims are most likely
available for lease under reasonable terms. We do intend to lease these claims
if possible. The local prospector who owns these two claims is Jerry Baughman.
He has no relationship to Prelude. At this time, he has not been approached by
us about leasing his two unpatented claims. We believe that reasonable terms for
the lease of these two claims would include a standard mining lease including an
anticipated $5,000 payment upon execution, with an option to purchase priced at
approximately $50,000 payable over a period of five years. The Sutherland claim
block comprises about 460 acres.

Climate And Local Resources

The claims leased by Prelude are located at elevations ranging from 5900 to
7950 feet in gently rolling hills covered with sagebrush and Pinion pines. The
climate is temperate with moderate snow cover from December to March. No
perennial streams exist on the property. However, groundwater is plentiful.
Power lines are located about three miles east of the property. The closest
population center is Bishop, located about 48 miles to the northwest.

History Of The Claims

Mr. Jucevic has examined the available literature on the claims. According
to these sources, base metals and silver were discovered on the property in
1910. Production from high grade veins started as early as 1915. Partial records
indicate lead, silver and zinc were produced through 1956. Recent exploration
efforts were started in the 1980's by United States Minerals Exploration (USMX),
and Cominco American Inc. USMX made 105 drill holes totaling 11,190 feet between
1980 and 1996 which defined a mineralization of ore containing silver, lead and
zinc. Cominco controlled the property for a short time and conducted geophysical
surveys which identified potential mineralization through the claims area that
extend north of the claims.

Our Proposed Exploration Program

We must conduct exploration to determine what amount of minerals, if any,
exist on our properties, and if any minerals which are found can be economically
extracted and profitably processed. Our exploration program is designed to
economically explore and evaluate our claims.

We do not claim to have any minerals or reserves whatsoever at this time on
any of our claims. We intend to implement an exploration program and to proceed
in the following two phases:

Phase I will involve expanding our block of claims by locating
approximately 50 additional claims and acquiring third party claims within the
area. There has been no staking of additional claims at this time. The initial
work of Phase I will be centered on opportunities and targets within the
boundaries of the leased claims. However, it is anticipated that expansion of
the existing claim position will be advisable following completion of the
geological investigations in Phase I. For example, U. S. Minerals Exploration, a
previous explorer of the claims, calculated potential mineralization along the
northeast area of the leased claims. Therefore, it appears probable that
additional claim staking in northeast and southwest extensions off this trend
would capture neighboring mineralization, as well as northeast trending fault
zones within the claims. With respect to maintenance costs, the current 24
claims are subject to total annual fees of $2,580.00 Annual maintenance fees for
an additional 50 claims would be $5,375.00. No land status work has been
conducted on neighboring lands by Mr. Jucevic. We will also take 200 rock
samples and 300 soil samples and perform geological mapping and geophysical
surveys followed by a written analysis of this exploration. The cost of Phase I
will is estimated to be $50,000 and will take approximately two months to
complete.

Upon completion of Phase I, we will determine the cost effectiveness of
proceeding to Phase II. In making this determination, we will undertake to have
our data from Phase I independently verified for accuracy by an independent
registered engineer to confirm the existence of mineralization.

Phase II will consist of substantial test drilling of a total of 5,000 feet
to determine the extent, depth and dip of ore discovered in Phase I. It is
anticipated that Phase II will cost $100,000 and will also take approximately
two months to complete. If we decide not to proceed to Phase II, we will likely
cancel the lease and search for other mineral exploration sites to lease. As of
the date of this prospectus, no such search has been undertaken.

Competitive Factors

The mineral industry is fragmented. We compete with other exploration
companies looking for a variety of mineral reserves. We may be one of the
smallest exploration companies in existence. Although we will be competing with
other exploration companies, there is no competition for the exploration or
removal of minerals from our property. Readily available markets exist in North
America and around the world for the sale of minerals. Therefore, we intend to
develop mining claims to the production point in which major mining production
companies would seriously consider pursuing the property as a valuable and
significant acquisition.

Regulations

We will secure all necessary permits for exploration and, if development is
warranted on the property, will file final plans of operation before we start
any mining operations. We anticipate no discharge of water into active stream,
creek, river, lake or any other body of water regulated by environmental law or
regulation. No endangered species will be disturbed. Restoration of the
disturbed land will be completed according to law. All holes, pits and shafts
will be sealed upon abandonment of the property. It is difficult to estimate the
cost of compliance with the environmental law since the full nature and extent
of our proposed activities cannot be determined until we start our operations
and know what that will involve from an environmental standpoint.

The initial drilling program outlined in Phase I will be conducted on BLM
lands. The BLM will require the submittal of a plan of operation which would be
used as the basis for the bonding requirement, water permit and reclamation
program. The reclamation program could include both surface reclamation and
drill hole plugging and abandonment. The amount of the bonding would be based
upon an estimate by the BLM related to the cost of reclamation if done by an
independent contractor. Bonding costs vary on case by case basis. The scope of
the proposed program determines amount of reclamation bond required by the BLM.
Among the factors considered are the degree of proposed land disturbance,
whether there have been previous disturbances and the nature of previous
reclamation efforts. Since there is a substantial infrastructure of existing
roads across the property the amount of initial bonding would likely be reduced.
In addition, the terrain is relatively subdued which should further reduce the
necessity for road building. The estimate for Phase II reclamation and bonding
would depend upon the results of Phase I.

We would be subjected to the BLM rules and regulations governing federal
lands including a draft environmental impact statement or EIS, public hearings
and a final EIS. The final EIS would address county and state needs and
requirements and would cover issues and permit requirements concerning: air
quality, heritage resources, geology, energy, noise, soils, surface and ground
water, wetlands, use of hazardous chemicals, vegetation, wildlife, recreation,
land use, socioeconomic impact, scenic resources, health and welfare,
transportation and reclamation. Bonding requirements are developed from the
final EIS.

We are in compliance with the all laws and will continue to comply with the
laws in the future. We believe that compliance with the laws will not adversely
affect our business operations. Prelude anticipates that it will be required to
post bonds in the event the expanded work programs involve extensive surface
disturbance.

Employees

Initially, we intend to use the services of subcontractors for manual labor
exploration work on our properties. Prelude will consider hiring technical
consultants as funds from this offering and additional offerings or revenues
from operations in the future permit. At present, our only employee is William
Iverson.

Mr. Iverson has been the President, Secretary-Treasurer and Director since
our company's inception on May 24, 2000. Since November 1999, Mr. Iverson has
also been employed by First Quantum Minerals Corporation of Vancouver, British
Columbia where he performs corporate relations services, including the
preparation of corporate profiles, brochures and advertisements. From November
1999 to February 2000 Mr. Iverson was also employed by Nevada Pacific Gold, Ltd.
From January 1996 to August 1997, Mr. Iverson was employed by Treminco
Resources, Ltd., an exploration stage company, located in Vancouver, British
Columbia, where he performed corporate development services. In this capacity he
acted as a liaison between Tremninco and the financial community. From October
1997 to November 1998, Mr. Iverson was employed by Cee Bee Natural Gas, Ltd.
From January of 1988 until December of 1995 Mr. Iverson was also employed as a
stockbroker with Georgia Pacific Securities Corporation in Vancouver, British
Columbia. Mr. Iverson will continue to serve in his present positions with
Prelude until the next annual meeting of shareholders and devote approximately
15 hours per week of his time to the Prelude. Mr. Iverson has no formal training
or experience with mineral exploration. Mr. Iverson completed two years of
college in 1974 from the University of Alberta but he did not obtain a degree.
In addition, he was formerly licensed as a stockbroker in Canada between 1995
and 1998. That license, however, was allowed to lapse by Mr. Iverson in 1998
because he was pursuing a career in corporate relations. Mr. Iversen's
responsibilities with Prelude consist mainly of communicating with the
appropriate governmental agencies to ensure the company claims are kept in good
standing and coordinating the filing of this offering. In addition, Phase I of
the company's business plan will be performed by subcontractors, the activities
of which will be managed by Mr. Iverson. It is anticipated that additional
officers will be hired if Phase I of our business plan is successful to manage
the company's day to day mineral exploration activities.

Executive Compensation

Our sole director does not currently receive and has never received any
compensation for serving as a director to date. In addition, at present, there
are no ongoing plans or arrangements for compensation of any of our officers.
However, we expect to adopt a plan of reasonable compensation to our officers
and employees when and if we become operational and profitable.

Employees and Employment Agreements

At present, we have no employees, other than Mr. Iverson, our president and
sole director who has received no compensation for his services. Mr. Iverson
does not have an employment agreement with us. We presently do not have pension,
health, annuity, insurance, stock options, profit sharing or similar benefit
plans; however, we may adopt plans in the future. There are presently no
personal benefits available to any employees.

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

We are a start-up, exploration stage company and have not yet started our
business operations or generated or realized any revenues from our business
operations.

Our auditors have issued a going concern opinion. This means that our
auditors believe there is doubt that we can continue as an on-going business for
the next twelve months unless we obtain additional capital to pay our bills.
This is because we have not generated any revenues and no revenues are
anticipated until we begin removing and selling minerals. Accordingly, we must
raise cash from sources other than the sale of minerals found on our property.
Our only other source for cash at this time is investments by others in our
company. We must raise cash to implement our project and stay in business.

To meet our need for cash we are attempting to raise money from this
offering. There is no assurance that we will be able to raise enough money
through to stay in business. Whatever money we do raise will be applied first to
exploration and then to development, if development is warranted. If we do not
raise all of the money we need from this offering, we will have to find
alternative sources, like a second public offering, a private placement of
securities, or loans from our officers or others. At the present time, we have
not made any arrangements to raise additional cash, other than through this
offering. If we need additional cash and cannot raise it, we will either have to
suspend operations until we do raise the cash, or cease operations entirely.

We will be conducting research in connection with the exploration of our
property. We are not going to buy or sell any plant or significant equipment. We
do not expect a change in our number of employees.

Limited Operating History; Need for Additional Capital

There is no historical financial information about our company upon which
to base an evaluation of our performance. We are an exploration stage company
and have not generated any revenues from operations. We cannot guarantee we will
be successful in our business operations. Our business is subject to risks
inherent in the establishment of a new business enterprise, including limited
capital resources, possible delays in the exploration of our properties, and
possible cost overruns due to price and cost increases in services. To become
profitable and competitive, we conduct research and exploration of our
properties. We are seeking equity financing to provide for the capital required
to implement our research and exploration phases.

We have no assurance that future financing will be available to us on
acceptable terms. If financing is not available on satisfactory terms, we may be
unable to continue, develop or expand our operations. Equity financing could
result in additional dilution to existing shareholders.

Results of Operations

From Inception on May 24, 2000

We just recently acquired our first interest in lode mining claims. At this
time we have not yet commenced the research and/or exploration stage of our
mining operations on that property. We have paid $5,000 for a mining lease. As
of June 30, 2002 we have experienced operating losses of $64,901.

Plan of Operations

Since inception, we have used our common stock to raise money for our
property acquisition, for corporate expenses and to repay outstanding
indebtedness. Net cash provided by financing activities from inception on May
24, 2000 to June 30, 2001 was $5,500 as a result of proceeds received from our
president and sole director. On April 11, 2001 we received additional cash
financing of $19,500 as a result of proceeds received from our president and
sole director. Our business activities to date have been restricted to obtaining
a mining engineer's report and preparing this offering.

Prelude's plan of operations for the next twelve months is to undertake
Phase I of our exploration program. We can commence Phase I assuming at least
50% of the offering is sold. However, the total cost of Phase I is estimated to
be $50,000.00 and therefore can not be completed unless nearly all of the
offering is sold. We have no plan to engage in any alternative business if
Prelude ceases or suspends operations as a result of not having enough money to
complete any phase of the exploration program.

Phase I will involve staking of 50 additional claims at a cost of $15,000.
Obtaining leases for third party claims in the area is estimated to cost $5,000.
We will then initiate rock sampling at a cost of $4,000 and soil sampling at a
cost of $6,000 in areas of potential interest that indicate the presence of ore.
Thereafter, geological mapping will be conducted that will cost approximately
$10,000 along with geophysical surveying that will cost approximately $2,000.
The total cost of Phase I will is estimated to be $50,000 and will take
approximately two months to complete.

Upon completion of Phase I, we will determine the cost effectiveness of
proceeding to Phase II. We will undertake to have our data from Phase I
independently verified for accuracy by an independent registered engineer to
confirm the existence of mineral deposits.

Our public offering will only be adequate to finance Phase I. Assuming we
decide to proceed with Phase II, we will be required to obtain additional
financing. Phase II will consist of extensive drilling totaling approximately
5,000 feet which is estimated to cost $100,000 to determine the extent, depth
and dip of mineralization discovered in Phase I. Phase II will take
approximately two months to complete.

Liquidity and Capital Resources

As of the date of this report, we have yet to generate any revenues from
our business operations. Since our inception, Mr. Iverson has paid $25,000 in
cash in exchange for 1,000,000 shares of common stock. We have also issued
1,500,000 shares of stock pursuant to our Form SB-2 registration statement. This
money has been utilized for organizational and start-up costs and as operating
capital. As of June 30, 2002 we had sustained operating losses of $64,901.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are no material legal proceedings to which we (or any of our officers
and directors in their capacities as such) is a party or to which our property
is subject and no such material proceedings is known by our management to be
contemplated.

ITEM 2. CHANGES IN SECURITIES - NONE

ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NONE

ITEM 5. OTHER INFORMATION - NONE

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -

(a) Exhibits - NONE

(b) Reports on Form 8-K - NONE

SIGNATURE

In accordance with the requirements of the Securities and Exchange Act of
1934, as amended, the Registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

PRELUDE VENTURES, INC.

Dated: August 14, 2002 /s/ William Iverson
William Iverson
President

PRELUDE VENTURES, INC.
(A Pre-exploration Stage Company)
INTERIM BALANCE SHEET
June 30, 2002 and March 31, 2002
(Stated in US Dollars)
(Unaudited)
---------

ASSETS June 30, March 31,
------
2002 2002
---- ----

Current
Cash ................................................................. $36,275 $ 7,495
Prepaid expenses ..................................................... 2,000 --
----- -----

$38,275 $ 7,495
======= =======

LIABILITIES
-----------
Current
Accounts payable ..................................................... $ 6,868 $ 9,205
------- -------

STOCKHOLDERS' EQUITY (DEFICIENCY)
---------------------------------
Preferred stock, $0.001 par value
5,000,000 shares authorized, none outstanding
Common stock, $0.001 par value
45,000,000 shares authorized
1,000,000 (2001: 1,000,000) shares outstanding .................... 1,000 1,000
Paid-in capital ......................................................... 24,000 24,000
Stock subscriptions ..................................................... 72,000 31,000
Less: stock subscriptions receivable .................................... (692) --
Deficit accumulated during the pre-exploration stage .................... (64,901) (57,710)
------- -------

31,407 (1,710)
------ ------

$38,275 $ 7,495
======= =======

SEE ACCOMPANYING NOTES

PRELUDE VENTURES, INC.
(A Pre-exploration Stage Company)
INTERIM STATEMENT OF OPERATIONS
for the three months ended June 30, 2002 and 2001,
and for the period May 4, 2001 (Date of Incorporation) to June 30, 2002
(Stated in US Dollars)
(Unaudited)
---------

May 4, 2001
Three months Three months (Date of
ended ended Incorporation) to
June 30, June 30, June 30,
2002 2001 2002
---- ---- ----

Expenses
Accounting and audit fees ................ $ 1,000 $ 1,000 $ 7,491
Bank charges ............................. 95 95 424
Filing fees .............................. 25 -- 7,185
Legal fees ............................... -- -- 23,078
Management fees .......................... 3,000 1,500 12,500
Office and miscellaneous ................. 53 -- 660
Resource property costs .................. 2,608 5,000 11,688
Transfer agent fees ...................... 410 1,435 1,875

Net loss for the period ..................... $ (7,191) $ (9,030) $(64,901)

Loss per share .............................. $ (0.01) $ (0.01)

Weighted average number of shares outstanding 1,000,000 1,000,000

SEE ACCOMPANYING NOTES

PRELUDE VENTURES, INC.
(A Pre-exploration Stage Company)
INTERIM STATEMENT OF CASH FLOWS for the
three months ended June 30, 2002 and 2001,
and for the period May 4, 2001 (Date of Incorporation) to June 30, 2002
(Stated in US Dollars)
(Unaudited)
---------

May 4, 2001
Three months Three months (Date of
ended ended Incorporation) to
June 30, June 30, June 30,
2002 2001 2002
---- ---- ----

Cash Flows from Operating Activities
Net loss for the period .................................... $ (7,191) $ (9,030) $(64,901)

Change in non-cash working capital balance
related to operations
Accounts payable ......................................... (2,337) -- 6,868
Prepaid expenses ......................................... (2,000) (10,000) (2,000)

(11,528) 470 (60,033)

Cash Flows from Financing Activities
Shares issued for cash ..................................... -- -- 25,000
Stock subscriptions received ............................... 40,308 -- 71,308

40,308 -- 96,308

Increase in cash during the period ............................ 28,780 470 36,275

Cash, beginning of the period ................................. 7,495 396 --

Cash, end of the period ....................................... $ 36,275 $ 866 $ 36,275

Supplemental disclosure of cash flow information Cash paid for:
Interest ................................................. $ -- $ -- $ --

Income taxes ............................................. $ -- $ -- $ --

SEE ACCOMPANYING NOTES

PRELUDE VENTURES, INC.
(A Pre-exploration Stage Company)
INTERIM STATEMENT OF STOCKHOLDERS' EQUITY for
the period May 24, 2000 (Date of Incorporation) to June 30, 2002
(Stated in US Dollars)
(Unaudited)
---------

Deficit
Accumulated
Additional During the
Common Shares Paid-in Stock Exploration
Number Par Value Capital Subscriptions Stage Total
------ --------- ------- ------------- ----- -----

Capital stock subscribed for cash
- at $0.025 1,000,000 $1,000 $24,000 $ -- $ -- $ 25,000

Net loss for the period .................... -- -- -- -- (7,301) (7,301)

Balance, as at March 31, 2001 .............. 1,000,000 1,000 24,000 -- (7,301) 17,699
--- ---- --------- ----- ------ ------ ------ ------

Stock subscriptions received ............... -- -- -- 31,000 -- 31,000

Net loss for the year ...................... -- -- -- -- (50,409) (50,409)
--------- ----- ----- ------ ------ ------
Balance, as at March 31, 2002 .............. 1,000,000 1,000 24,000 31,000 (57,710) (1,710)

Srock subscriptions received ............... -- -- -- 41,000 -- 41,000

Net loss for the period .................... -- -- -- -- (7,191) (7,191)
--------- ----- ------ ------ ------ ------
Balance, as at June 30, 2002 ............... 1,000,000 $1,000 $24,000 $72,000 $(64,901) $ 32,099
========= ====== ======= ======= ======== ========

SEE ACCOMPANYING NOTES

PRELUDE VENTURES, INC.
(A Pre-exploration Stage Company)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
June 30, 2002 and March 31, 2002
(Stated in US Dollars)
(Unaudited)
---------

Note 1 Interim Reporting

While information presented in the accompanying interim three
months financial statements is unaudited, it includes all
adjustments which are, in the opinion of management, necessary to
present fairly the financial position, results of operations and
cash flows for the interim period presented. All adjustments are
of a normal recurring nature. It is suggested that these interim
financial statements be read in conjunction with the company's
March 31, 2002 financial statements.

Note 2 Continuance of Operations

The financial statements have been prepared using generally
accepted accounting principles in the United States of America
applicable for a going concern which assumes that the Company will
realize its assets and discharge its liabilities in the ordinary
course of business. As at June 30, 2002, the Company has
accumulated losses of $64,901 since its commencement. Its ability
to continue as a going concern is dependent upon the ability of
the Company to obtain the necessary financing to meet its
obligations and pay its liabilities arising from normal business
operations when they come due.

Note 3 Commitments

a) Mining Lease

By a lease letter agreement effective March 9, 2001 and
amended March 4, 2002, the Company was granted the exclusive
right to explore, develop and mine the Medicine Project
property located in Elko County of the State of Nevada. The
term of the lease is for 20 years, with automatic extensions
so long as the conditions of the lease are met. Minimum
payments and performance commitments are as follows:

Minimum Advance Royalty Payments:

The owner shall be paid a royalty of 3% of the net smelter
returns from a production. In respect to this royalty, the
Company is required to pay minimum advance royalty payments of
the following:

Note 3 Commitments - (cont'd)
-----------

a) Mining Lease - (cont'd)

The Company can reduce the net smelter return royalty to 0.5%
by payment of a buy-out price of $5,000,000. Advance royalty
payments made to the date of the buy-out will be applied to
reduce the buy-out price.

Performance Commitment:

In the event that the Company terminates the lease after June
1 of any year, it is required to pay all federal and state
mining claim maintenance fees for the next assessment year.
The Company is required to perform reclamation work in the
property as required by federal state and local law for
disturbances resulting from the Company's activities on the
property.

b) Initial Public Offering

The Company has filed a SB-2 registration statement, which
includes an initial public offering of 1,500,000 common shares
at $0.05 per share. At June 30, 2002, the Company had received
$72,000 in stock subscriptions and an additional $3,000 was
received subsequent to June 30, 2002.