GOLDEN PHOENIX MINERALS (GPXM)

[Cousin IT]

On May 22, 2013, Pinnacle Minerals Corporation, a Florida corporation (“Pinnacle”), sued the Company, seeking payments allegedly due on the two promissory notes issued in connection with a membership interest purchase agreement entered into as of March 7, 2011, relating to a Peruvian mining venture. The case was filed in the United States District Court for the District of Nevada, as “Pinnacle Minerals Corporation v. Golden Phoenix Minerals, Inc., Case number 2:13 – CV – 00915 – MMD – NJK. We filed a motion to stay the litigation and compel arbitration, pursuant to a provision of the subject purchase agreement. Based on negotiations, and agreement and stipulation between the parties, this case was dismissed on July 22, 2013. The parties have submitted the dispute to binding arbitration in Reno, Nevada. No date has been set for the arbitration, and no discovery or other proceedings have yet taken place. While denying the allegations of the complaint, we have also asserted counterclaims against Pinnacle and intend to vigorously defend the claims, all of which will be pursued through the arbitration proceedings.