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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C.
20549

FORM 20-F

[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934.

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

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

For the transition period from January 31, 2007 to December 31,
2007

[ ] SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company
report______________

Commission File Number 0-9266

AVINO SILVER & GOLD MINES
LTD.(Exact name of Company as specified in its
charter)

A CORPORATION FORMED UNDER THE LAWS OF BRITISH COLUMBIA,
CANADA(Jurisdiction of Incorporation or Organization)

455 Granville Street, Suite 400 Vancouver, British Columbia
V6C 1T1, Canada(Address of principal executive offices)

Securities registered or to be registered pursuant to Section
12(b) of the Act: NONE

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

Common Shares, without Par Value(Title of
Class)

Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act: None

The number of outstanding Common Shares as of December 31, 2007
was 20,584,727.

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.[ ] Yes [X]
No

If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934. [ ] Yes [X] No

Indicate by check mark whether the Company (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Company was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No

*Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of
the Exchange Act. (Check on): Large Accelerated File [ ] Accelerated Filer [
] Non-Accelerated Filer [X]

Indicate by check mark which financial statement item the
registrant has elected to follow. Item 17 [X] Item 18 [ ]

If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS.)

Indicate by check mark whether the Company has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. NOT APPLICABLE

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TABLE OF CONTENTS

|Introduction                                                                                                           |                                                                                    | 3 
|---------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | --
|Currency                                                                                                               |                                                                                    | 3 
|Forward-looking Statements                                                                                             | 3                                                                                 
|Cautionary Note
      to United States Investors Concerning Estimate of Measured and Indicated
      Mineral Resources | 3                                                                                 
|Glossary of Mining Terms                                                                                               | 4                                                                                 
|Part I                                                                                                                 |                                                                                    | 7 
|Item 1.                                                                                                                | Identity of Directors, Senior Management and Advisors                              | 7 
|Item 2.                                                                                                                | Offer
      Statistics and Expected Timetable                                      | 7 
|Item 3.                                                                                                                | Key Information                                                                    | 7 
|Item 4.                                                                                                                | Information on
      the Company                                                   | 14
|Item 5.                                                                                                                | Operating and Financial Review and Prospects                                       | 31
|Item 6.                                                                                                                | Directors,
      Senior Management and Employees                                   | 39
|Item 7.                                                                                                                | Major Shareholders and Related Party Transactions                                  | 44
|Item 8.                                                                                                                | Financial
      Information                                                        | 46
|Item 9.                                                                                                                | The Offer and Listing                                                              | 46
|Item 10.                                                                                                               | Additional
      Information                                                       | 48
|Item 11.                                                                                                               | Quantitative and Qualitative Disclosures About Market Risk                         | 54
|Item 12.                                                                                                               | Description of
      Securities Other than Equity Securities                       | 55
|Part II                                                                                                                |                                                                                    | 55
|Item 13.                                                                                                               | Defaults,
      Dividend Arrearages and Delinquencies                              | 55
|Item 14.                                                                                                               | Material Modifications to the Rights of Security Holders
      and Use of Proceeds | 55
|Item 15.                                                                                                               | Controls and
      Procedures                                                      | 55
|Item 16A.                                                                                                              | Audit Committee Financial Expert                                                   | 55
|Item 16B.                                                                                                              | Code of Ethics                                                                     | 55
|Item 16C.                                                                                                              | Principal Accountant Fees and Services                                             | 56
|Item 16D.                                                                                                              | Exemptions
      from the Listing Standards for Audit Committees                   | 56
|Item 16E.                                                                                                              | Purchases of Equity Securities by the Issuer and
      Affiliated Purchasers       | 56
|Part III                                                                                                               |                                                                                    | 57
|Item 17.                                                                                                               | Financial Statements                                                               | 57
|Item 18.                                                                                                               | Financial
      Statements                                                         | 57
|Item 19.                                                                                                               | Exhibits                                                                           | 57

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Introduction

Avino Silver & Gold Mines
Ltd., which we refer to as the "Company", was incorporated by Memorandum of
Association under the laws of the Province of British Columbia on May 15, 1969,
and on August 22, 1969, by virtue of an amalgamation with Ace Mining Company
Ltd., became a public company whose common shares are registered under the
United States Securities Exchange Act of 1934, as amended, and changed
its name to Avino Mines & Resources Limited. On April 12, 1995, the Company
changed its corporate name to International Avino Mines Ltd. and affected a
reverse stock split of one common share for every five common shares
outstanding. On August 29, 1997, the Company changed its corporate name to Avino
Silver & Gold Mines Ltd. to better reflect the business of the Company of
exploring for and mining silver and gold. Our principal executive office is
located at Suite 400, 455 Granville Street, Vancouver, British Columbia V6C 1T1,
Canada.

In this transition report on Form
20-F, which we refer to as the "Transition Report", except as otherwise
indicated or as the context otherwise requires, the "Company", "we" or "us"
refers to Avino Silver & Gold Mines Ltd.

You should rely only on the
information contained in this Transition Report. We have not authorized anyone
to provide you with information that is different. The information in this
Transition Report may only be accurate on the date of this Transition Report or
on or as at any other date provided with respect to specific information.

Currency

Unless we otherwise indicate in
this Transition Report, all references to "Canadian Dollars", "CDN$" or "$" are
to the lawful currency of Canada and all references to "U.S. Dollars" or "US$"
are to the lawful currency of the United States

Forward-looking Statements

The following discussion contains
forward-looking statements within the meaning of the United States Private
Securities Legislation Reform Act of 1995concerning the Company's plans for
its mineral properties which may affect the future operating results and
financial position. Such statements are subject to risks and uncertainties that
could cause our actual results and financial position to differ materially from
those anticipated in the forward-looking statements. These factors include, but
are not limited to, the factors set forth in the sections entitled "Risk
Factors" in Item 3.D., and "Operating and Financial Review and Prospects" in
Item 5. Statements concerning reserves and resources may also be deemed to
constitute forward-looking statements to the extent that such statements reflect
the conclusion that deposits may be economically exploitable. Any statements
that express or involve discussions with respect to predictions, expectations,
plans, projections, objectives, assumptions or future events or performance
(often, but not always, using words or phrases such as "expects", "does not
expect", "is expected", "anticipates", "does not anticipate", "plans",
"estimates", or "intends", or stating that certain actions, events or results
"may", "could", "would", or "will" be taken, occur or be achieved) are not
statements of historical fact and may be "forward-looking statements".

Cautionary Note to United States Investors Concerning
Estimate of Measured and Indicated Mineral Resources

We advise United States investors
that although the terms "measured resources" and "indicated resources" are
recognized and required by Canadian regulations, the United States Securities
and Exchange Commission, referred to as the "SEC", does not recognize them.
United States investors are cautioned not to

3

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assume that all or any part of our mineral resources in these
categories will ever be converted into mineral reserves.

GLOSSARY OF MINING TERMS

|agglomeration            | Cementing crushed or ground rock particles together into
      larger pieces, usually to make them easier to handle; used frequently in
      heap-leaching operations.                                                                                                                                                                                                                                                                                         
|------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|anomalous                | A value, or values, in which the amplitude is
      statistically between that of a low contrast anomaly and a high contrast
      anomaly in a given data set.                                                                                                                                                                                                                                                                                                 
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|anomaly                  | Any concentration of metal noticeably above or below the
      average background concentration.                                                                                                                                                                                                                                                                                                                                                                
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|assay                    | An analysis to determine the presence, absence or
      quantity of one or more components.                                                                                                                                                                                                                                                                                                                                                                     
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|breccia                  | A rock in which angular fragments are surrounded by a
      mass of finer-grained material.                                                                                                                                                                                                                                                                                                                                                                     
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Cretaceous               | The geologic period extending from 135 million to 65
      million years ago.                                                                                                                                                                                                                                                                                                                                                                                   
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|cubic meters or
      m3 | A metric measurement of volume, being a cube one meter in
      length on each side.                                                                                                                                                                                                                                                                                                                                                                            
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|cyanidation              | A method of extracting exposed gold or silver grains from
      crushed or ground ore by dissolving it in a weak cyanide solution.                                                                                                                                                                                                                                                                                                                              
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|Diamond drill            | A rotary type of rock drill that cuts a core of rock that
      is recovered in long cylindrical sections, two centimeters or more in
      diameter.                                                                                                                                                                                                                                                                                                           
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|fault                    | A fracture in a rock where there has been displacement of
      the two sides.                                                                                                                                                                                                                                                                                                                                                                                  
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|grade                    | The concentration of each ore metal in a rock sample,
      usually given as weight percent. Where extremely low concentrations are
      involved, the concentration may be given in grams per tonne (g/t or gpt)
      or ounces per ton (oz/t). The grade of an ore deposit is calculated, often
      using sophisticated statistical procedures, as an average of the grades of
      a very large number of samples collected from throughout the deposit.
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|heap leaching            | A process whereby valuable metals, usually gold and
      silver, are leached from a heap, or pad, of crushed ore by leaching
      solutions percolating down through the heap and collected from a sloping,
      impermeable liner below the pad.                                                                                                                                                                                                            
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|hectare or ha            | An area totaling 10,000 square meters.                                                                                                                                                                                                                                                                                                                                                                                                                          
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|highly anomalous         | An anomaly which is 50 to 100 times average background,
      i.e. it is statistically much greater in amplitude.                                                                                                                                                                                                                                                                                                                                               
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|lp induced polarization  | A method of ground geophysics surveying employing an
      electrical current to determine indications of mineralization, also
      referred to as "IP".                                                                                                                                                                                                                                                                                                       

4



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|laterite                                                     | A residual product of rock decay that is red in color and
      has a high content in the oxides of iron and hydroxide of aluminum.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------------------------------------------------------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|mineral reserve                                              | The economically mineable part of a measured or indicated
      mineral resource demonstrated by at least a preliminary feasibility study.
      This study must include adequate information on mining, processing,
      metallurgical, economic and other relevant factors that demonstrate, at
      the time of the reporting, that economic extraction can be justified. A
      mineral reserve includes diluting materials and allowances for losses that
      may occur when the material is mined. Mineral resources are sub-divided in
      order of increasing confidence into "probable" and "proven" mineral
      reserves. A probable mineral reserve has a lower level of confidence than
      a proven mineral reserve. The term "mineral reserve" does not necessarily
      signify that extraction facilities are in place or operative or that all
      governmental approvals have been received. It does signify that there are
      reasonable expectations of such approvals.                                   
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|mineral resource                                             | The estimated quantity and grade of mineralization that
      is of potential economic merit. A resource estimate does not require
      specific mining, metallurgical, environmental, price and cost data, but
      the nature and continuity or mineralization must be understood. Mineral
      resources are sub-divided in order of increasing geological confidence
      into "inferred", "indicated", and "measured" categories. An inferred
      mineral resource has a lower level of confidence than that applied to an
      indicated mineral resource. An indicated mineral resource has a higher
      level of confidence than an inferred mineral resource, but has a lower
      level of confidence than a measured mineral resource. A mineral resource
      is a concentration or occurrence of natural, solid, inorganic or
      fossilized organic material in or on the earth's crust in such form and
      quantity and of such grade or quality that it has reasonable prospects for
      economic extraction.
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|mineralization                                               | Usually implies minerals of value occurring in rocks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|net smelter or NSR Royalty                                   | Payment of a percentage of net mining profits after
      deducting applicable smelter charges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|oxide                                                        | A compound of oxygen and some other element.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|ore                                                          | A natural aggregate of one or more minerals which may be
      mined and sold at a profit, or from which some part may be profitably
      separated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|outcrop                                                      | An exposure of rock at the earth's surface.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|possible or inferred ore                                     | Term used to describe ore where the mineralization is
      believed to exist on the basis of some geological information, but the
      size, shape, grade, and tonnage are a matter of speculation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|prefeasibility study and
      preliminary feasibility study | Each means a comprehensive study of the viability of a
      mineral project that has advanced to a stage where mining method, in the
      case of underground mining, or the pit configuration, in the case of open
      pit mining, has been established, and which, if an effective method of
      mineral processing has been determined, includes a financial analysis
      based on reasonable assumptions of technical,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

5



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|.                        | engineering, operating and economic factors, and the
      evaluation of other relevant factors which are sufficient for a qualified
      person, acting reasonably, to determine if all or part of the mineral
      resource may be classified as a mineral reserve.                                                                                                                                                                                                                                                                                                         
|------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|probable mineral reserve | The economically mineable part of an indicated, and in
      some circumstances, a measured mineral resource demonstrated by at least a
      prefeasibility study. This study must include adequate information on
      mining, processing, metallurgical, economic, and other relevant factors
      that demonstrate, at the time of reporting, that economic extraction can
      be justified.                                                                                                                                                                            
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|proven mineral reserve   | The economically mineable part of a measured mineral
      resource demonstrated by at least a prefeasibility study. This study must
      include adequate information on mining, processing, metallurgical,
      economic, and other relevant factors that demonstrate, at the time of
      reporting, that economic extraction is justified. The term should be
      restricted to that part of the deposit where production planning is taking
      place and for which any variation in the estimate would not significantly
      affect potential economic viability.
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|quartz                   | Silica or SiO2, a common constituent of
      veins, especially those containing gold and silver mineralization.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|tailings                 | Material rejected from a mill after most of the
      recoverable valuable minerals have been extracted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|ton                      | Imperial measurement of weight equivalent to 2,000
      pounds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|trench                   | A long, narrow excavation dug through overburden, or
      blasted out of rock, to expose a vein or ore structure.                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|tonne                    | Metric measurement of weight equivalent to 1,000
      kilograms (or 2,204.6 pounds).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|veins                    | The mineral deposits that are found filling openings in
      rocks created by faults or replacing rocks on either side of faults.                                                                                                                                                                                                                                                                                                                                                                                                                                              

6



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Part I

Item 1. Identity of Directors, Senior Management and
Advisors

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

|A. | Selected Financial Data
|-- | -----------------------

The selected historical financial
information presented in the table below for each of the years ended December
31, 2007(1) and January 31, 2007, 2006, 2005 and 2004, is derived
from the audited financial statements of the Company. The audited consolidated
financial statements and notes for the eleven month period ended December 31,
2007 and the years ended January 31, 2007 and 2006 are included in this
Transition Report. The selected historical financial information for each year
ended January 31, 2005 and 2004, presented in the table below are derived from
financial statements of the Company that are not included in this Transition
Report. The selected financial information presented below should be read in
conjunction with the Company's consolidated financial statements and the notes
thereto (Item 17) and the Operating and Financial Review and Prospects (Item 5)
included elsewhere in this Transition Report.

The selected financial data has
been prepared in accordance with Canadian generally accepted accounting
principles, which we refer to as "Canadian GAAP". The consolidated financial
statements included in Item 17 in this Transition Report are also prepared under
Canadian GAAP. Included within these consolidated financial statements in Note
23 is a reconciliation between Canadian GAAP and United States generally
accepted accounting principals, referred to as "US GAAP", which differ, among
other things, in respect to the recording of the investments in marketable
securities, deferred exploration expenditures and recognition of future income
tax benefits on renouncement of Canadian exploration expenditures to
flow-through investors.

_____________________________(1)In January
2008, the Company changed its financial year end from January 31 to December 31.
Consequently this Annual Report is filed in connection to an 11 month fiscal
year (referred hereinafter as fiscal year end 2007-II)

7

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|Canadian GAAP                           |  | Eleven     |   |   |            |   |   |            |   |   |            |   |   |           |  
|--------------------------------------- |  | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | --------- | -
|                                        |  | Months     |   |   |            |   |   |            |   |   |            |   |   |           |  
|                                        |  | Ended      |   |   |            |   |   | Year Ended |   |   |            |  
|                                        |  | December   |   |   |            |   |   | January    |   |   |            |  
|                                        |  | 31,        |   |   |            |   |   | **31,**    |   |   |            |  
|                                        |  | 2007       |   |   | 2007       |   |   | 2006       |   |   | 2005       |   |   | 2004      |  
|                                        |  |            |   |   |            |   |   |            |   |   |            |   |   |           |  
|Summary of Operations:                  |  |            |   |   |            |   |   |            |   |   |            |   |   |           |  
|Revenue                                 |  | -          |   |   | -          |   |   | -          |   |   | -          |   |   | -         |  
|Interest Income                         |  | 359,339    |   | $ | 430,231    |   | $ | 46,082     |   | $ | 41,999     |   | $ | 8,299     |  
|Expenses                                |  |            |   |   |            |   |   |            |   |   |            |   |   |           |  
|Operating and Administrative            |  | 868,527    |   |   | 4,014,734  |   |   | 1,416,797  |   |   | 506,039    |   |   | 331,446   |  
|Write-down of mining Properties         |  | -          |   |   | -          |   |   | 103,342    |   |   | -          |   |   | -         |  
|Equity losses in Cia Minera Mexicana de |  |            |   |   |            |   |   |            |   |   |            |   |   |           |  
|Avino, S.A. de C.V.                     |  | -          |   |   | 33,581     |   |   | 342,596    |   |   | -          |   |   | -         |  
|Litigation settlement                   |  | (759,302   | ) |   | -          |   |   | -          |   |   | -          |   |   | -         |  
|Misappropriation loss                   |  | (86,155    | ) |   |            |   |   |            |   |   |            |   |   |           |  
|Write-down of investment                |  | -          |   |   | -          |   |   | 217,000    |   |   | -          |   |   | -         |  
|Due diligence review of Cia Minera      |  |            |   |   |            |   |   |            |   |   |            |   |   |           |  
|Mexicana
      de Avino, S.A. de C.V.   |  | -          |   |   | -          |   |   | 355,921    |   |   | 391,899    |   |   | 122,444   |  
|Future income tax benefit               |  | 501,083    |   |   | -          |   |   | 19,750     |   |   | 41,200     |   |   | -         |  
|Net Loss                                |  | (885,863   | ) |   | (3,648,539 | ) |   | (2,369,724 | ) |   | (814,710   | ) |   | (445,591  | )
|Loss per share                          |  | (0.04      | ) |   | (0.20      | ) |   | (0.22      | ) |   | (0.08      | ) |   | (0.06     | )
|                                        |  |            |   |   |            |   |   |            |   |   |            |   |   |           |  
|Weighted Average Number of Shares       |  |            |   |   |            |   |   |            |   |   |            |   |   |           |  
|Outstanding                             |  | 20,584,727 |   |   | 18,385,007 |   |   | 10,965,718 |   |   | 10,410,379 |   |   | 7,015,604 |  

|                          |  | As at      |  |  |            |  |  | As at     |  |  |           | 
|------------------------- |  | ---------- |  |  | ---------- |  |  | --------- |  |  | --------- | 
|                          |  | December   |  |  |            |  |  | January   |  |  |           | 
|                          |  | 31,        |  |  |            |  |  | 31,       |  |  |           | 
|                          |  | 2007       |  |  | 2007       |  |  | 2006      |  |  | 2005      | 
|Balance Sheet Data:       |  |            |  |  |            |  |  |           |  |  |           | 
|Total assets              |  | 21,190,940 |  |  | 23,295,039 |  |  | 3,901,160 |  |  | 3,219,431 | 
|Cash and cash equivalents |  | 6,342,481  |  |  | 11,045,106 |  |  | 3,067,011 |  |  | 2,283,535 | 
|Total liabilities         |  | 2,532,414  |  |  | 3,789,083  |  |  | 586,714   |  |  | 341,174   | 
|Shareholders' equity      |  | 18,658,526 |  |  | 19,505,956 |  |  | 3,314,446 |  |  | 2,878,257 | 

|United States GAAP:        |  |            |   |   |             |   |   |            |   |   |          |   |   |          |  
|-------------------------- |  | ---------- | - | - | ----------- | - | - | ---------- | - | - | -------- | - | - | -------- | -
|                           |  | Eleven     |   |   |             |   |   |            |   |   |          |   |   |          |  
|                           |  | Months     |   |   |             |   |   |            |   |   |          |   |   |          |  
|                           |  | Ended      |   |   |             |   |   | Year Ended |   |   |          |  
|                           |  | December   |   |   |             |   |   | January    |   |   |          |  
|                           |  | 31,        |   |   |             |   |   | 31,        |   |   |          |  
|                           |  | 2007       |   |   | 2007        |   |   | 2006       |   |   | 2005     |   |   | 2004     |  
|Summary of Operations:     |  |            |   |   |             |   |   |            |   |   |          |   |   |          |  
|Net Loss per Canadian GAAP |  | (885,863   | ) | $ | (3,648,539  | ) | $ | (2,369,724 | ) | $ | (814,710 | ) | $ | (445,591 | )
|Adjustments                |  | (2,332,350 | ) |   | (10,277,556 | ) |   | (74,147    | ) |   | (132,600 | ) |   | (20,100  | )
|Net Loss per US GAAP       |  | (3,218,213 | ) |   | (13,962,095 | ) |   | (2,443,871 | ) |   | (947,310 | ) |   | (465,691 | )
|Loss per share per US GAAP |  | (0.16      | ) |   | (0.76       | ) |   | (0.22      | ) |   | (0.09    | ) |   | (0.07    | )

8

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|                            |  | As at       |   |  | As at       |  
|--------------------------- |  | ----------- | - |  | ----------- | -
|                            |  | December    |   |  | January     |  
|                            |  | 31,         |   |  | 31,         |  
|                            |  | 2007        |   |  | 2007        |  
|Balance Sheet Data:         |  |             |   |  |             |  
|Total assets under Canadian |  |             |   |  |             |  
|GAAP                        |  | 21,190,940  |   |  | 23,295,039  |  
|Adjustments                 |  | (13,096,805 | ) |  | (10,747,339 | )
|Total assets under US GAAP  |  | 8,094,135   |   |  | 12,547,700  |  
|                            |  |             |   |  |             |  
|Total equity under Canadian |  |             |   |  |             |  
|GAAP                        |  | 18,658,526  |   |  | 19,505,956  |  
|Adjustments                 |  | (13,096,805 | ) |  | (10,747,339 | )
|Total equity under US GAAP  |  | 5,561,721   |   |  | 8,758,617   |  

Exchange Rates

The following table sets forth information as to the period
end, average, the high and the low exchange rate for Canadian Dollars and U.S.
Dollars for the periods indicated based on the noon buying rate in New York City
for cable transfers in Canadian Dollars as certified for customs purposes by the
Federal Reserve Bank of New York (Canadian dollar = US$1).

|Year
      Ended | Average | Period End | High   | Low   
|---------------- | ------- | ---------- | ------ | ------
|2004             | 1.3803  | 1.3265     | 1.5315 | 1.2690
|2005             | 1.2961  | 1.2396     | 1.3970 | 1.1775
|2006             | 1.2061  | 1.1436     | 1.2703 | 1.1436
|2007             | 1.1357  | 1.1792     | 1.1824 | 1.0989
|2007 II          | 1.0651  | 0.9913     | 1.1853 | 0.9170

The following table sets forth
the high and low exchange rate for the past six months. As of June 20, 2008, the
exchange rate was CDN$1.0172 for each US$1.

Month
    High
    LowDecember 2007
    1.0217
    0.9785January 2008
    1.0324
    0.9905February 2008
    1.0190
    0.9719March 2008
    1.0279
    0.9798April 2008
    1.0270
    1.0025May 2008
    1.0189
    0.9844


|B. | Capitalization and Indebtedness          
|-- | -----------------------------------------
|   |                                          
|   | Not Applicable.                          
|   |                                          
|C. | Reasons for the Offer and Use of
Proceeds
|   |                                          
|   | Not Applicable.                          
|   |                                          
|D. | Risk Factors                             

In addition to the other
information presented in this Transition Report, the following should be
considered carefully in evaluating the Company and its business. This Transition
Report contains

9

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forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed below and
elsewhere in this Transition Report.

We will be required to raise
additional capital to mine our properties.The Company is currently in the
exploration stage of its properties. If the Company determines based on its most
recent information that it is feasible to begin operations on its properties,
the Company will be required to raise additional capital in order to develop and
bring the properties into production.

We have incurred net losses
since our inception and expect losses to continue.We have not been
profitable since our inception. For the eleven months period ended December 31,
2007, we had a net loss of $885,863 and an accumulated deficit on December 31,
2007 of $21,644,049. The Company has not generated revenues from operations
since 1998 and does not expect to generate revenues from operations until one or
more of its properties are placed in production. There is no assurance that any
of the Company's properties will be placed in production or that the Company's
operations will be profitable in the future.

The mining industry is highly
speculative and involves substantial risks.Even when mining is conducted on
properties known to contain significant quantities of ore deposits it is
generally accepted in the mining industry that most exploration projects do not
result in the discovery of mineable deposits of ore in a commercially economical
manner. There may be limited availability of water, which is essential to
milling operations, and interruptions may be caused by adverse weather
conditions. Operations are subject to a variety of existing laws and regulations
relating to exploration and development, permitting procedures, safety
precautions, property reclamation, employee health and safety, air quality
standards, pollution and other environmental protection controls. Mining
activities are subject to substantial operating hazards, some of which are not
insurable or may not be insured for economic reasons.

The commercial quantities of
ore cannot be accurately predicted.Whether an ore body will be commercially
viable depends on a number of factors including the particular attributes of the
deposit, such as size, grade and proximity to infrastructure, as well as mineral
prices and government regulations, including regulations relating to prices,
taxes, royalties, land tenure, land use, importing and exporting of minerals and
environmental protection. The exact effect of these factors cannot be accurately
predicted, but the combination of these factors may result in a mineral deposit
being unprofitable.

There are no assurances that
we can produce minerals on a commercially viable basis. The Company's
ability to generate revenue and profit is expected to occur through exploration
of its existing properties as well as through acquisitions of interests in new
properties. Substantial expenditures will be incurred in an attempt to establish
the economic feasibility of mining operations by identifying mineral deposits
and establishing ore reserves through drilling and other techniques, developing
metallurgical processes to extract metals from ore, designing facilities and
planning mining operations. The economic feasibility of a project depends on
numerous factors, including the cost of mining and production facilities
required to extract the desired minerals, the total mineral deposits that can be
mined using a given facility, the proximity of the mineral deposits to a user of
the minerals, and the market price of the minerals at the time of sale. There is
no assurance that existing or future exploration programs or acquisitions will
result in the identification of deposits that can be mined profitably.

Mining operations and
exploration activities are subject to various federal, provincial and local laws
and regulations.Laws and regulation govern the development, mining,
production, importing and exporting of minerals, taxes, labour standards,
occupational health, waste disposal, protection of the environment, mine safety,
toxic substances, and other matters. In many cases, licenses and permits are
required to conduct mining operations. Amendments to current laws and
regulations governing operations and activities of mining companies or more
stringent implementation thereof could have a substantial adverse impact on the
Company.

10

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Applicable laws and regulations will require the Company to
make certain capital and operating expenditures to initiate new operations.
Under certain circumstances, the Company may be required to close an operation
once it is started until a particular problem is remedied or to undertake other
remedial actions.

Market price is highly
speculative.The market price of metals is highly speculative and volatile.
Instability in metal prices may affect the interest in mining properties and the
development of and production of such properties.

Penny stock rules may make it
more difficult to trade the Company's common shares.The SEC has adopted
regulations which generally define a "penny stock" to be any equity security
that has a market price, as defined, less than US$5.00 per share or an exercise
price of less than US$5.00 per share, subject to certain exceptions. Our
securities may be covered by the penny stock rules, which impose additional
sales practice requirements on broker-dealers who sell to persons other than
established customers and accredited investors such as institutions with assets
in excess of US$5,000,000 or an individual with net worth in excess of
US$1,000,000 or annual income exceeding US$200,000 or US$300,000 jointly with
his or her spouse. For transactions covered by this rule, the broker-dealers
must make a special suitability determination for the purchase and receive the
purchaser's written agreement of the transaction prior to the sale.
Consequently, the rule may affect the ability of broker-dealers to sell our
securities and also affect the ability of our investors to sell their shares in
the secondary market.

Title risks.The validity
and ownership of mining property holdings can be uncertain and may be contested.
Although the Company's properties in Canada are currently wholly owned by the
Company, there are currently a number of pending and potential native title or
traditional land owner claims in Canada. Accordingly, there can be no assurance
that the Company's properties in Canada will not be affected.

Competition for mineral
land. There is a limited supply of desirable mineral lands available for
acquisition, claim staking or leasing in the areas where the Company
contemplates expanding its operations and conducting exploration activities.
Many participants are engaged in the mining business, including large,
established mining companies. Accordingly, there can be no assurance that the
Company will be able to compete successfully for new mining properties.

Competition for recruitment
and retention of qualified personnel. We compete with other exploration
companies, many of which have greater financial resources than us or are further
in their development, for the recruitment and retention of qualified employees
and other personnel. Competition for exploration resources at all levels is
currently very intense, particularly affecting the availability of manpower,
drill rigs and supplies. If we require and are unsuccessful in acquiring
additional personnel or other exploration resources, we will not be able to grow
at the rate we desire or at all.

Uncertainty of exploration and
development programs. The Company's profitability is significantly affected
by the costs and results of its exploration and development programs. As mines
have limited lives based on proven and probable mineral reserves, the Company
actively seeks to expand its mineral reserves, primarily through exploration,
development and strategic acquisitions. Exploration for minerals is highly
speculative in nature, involves many risks and is frequently unsuccessful. Among
the many uncertainties inherent in any gold and silver exploration and
development program are the location of economic ore bodies, the development of
appropriate metallurgical processes, the receipt of necessary governmental
permits and the construction of mining and processing facilities. Assuming the
discovery of an economic deposit, depending on the type of mining operation
involved, several years may elapse from the initial phases of drilling until
commercial operations are commenced and, during such time, the economic
feasibility of production may change. Accordingly, the Company's exploration and
development programs may not result in any new economically viable mining
operations or yield new mineral reserves to expand current mineral reserves.

11

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Licenses and permits. The
operations of the Company require licenses and permits from various governmental
authorities. The Company believes that it holds all necessary licenses and
permits under applicable laws and regulations and believes that it is presently
complying in all material respects with the terms of such licenses and permits.
However, such licenses and permits are subject to change in various
circumstances. There can be no guarantee that the Company will be able to obtain
or maintain all necessary licenses and permits as are required to explore and
develop its properties, commence construction or operation of mining facilities
and properties under exploration or development or to maintain continued
operations that economically justify the cost.

Political or economic
instability or unexpected regulatory change.Certain of our properties are
located in countries, provinces and states more likely to be subject to
political and economic instability, or unexpected legislative change, than is
usually the case in certain other countries, provinces and states. Our mineral
exploration activities could be adversely effected by:

- political instability and violence;
- war and civil disturbances;
- expropriation or nationalization;
- changing fiscal regimes;
- fluctuations in currency exchange rates;
- high rates of inflation;
- underdeveloped industrial and economic infrastructure;
- changes in the regulatory environment governing mineral properties; and
- unenforceability of contractual rights;

any of which may adversely affect our business in that
country.

We may be adversely affected
by fluctuations in foreign exchange rates. We maintain our bank accounts
mainly in Canadian and U.S. Dollars. Any appreciation in the currency of Mexico
or other countries where we may carryout exploration activities against the
Canadian or U.S. Dollar will increase our costs of carrying out operations in
such countries. In addition, any decrease in the U.S. Dollar against the
Canadian Dollar will result in a loss on our books to the extent we hold funds
in U.S. Dollars.

Land Reclamation
requirements. Although variable depending on location and the governing
authority, land reclamation requirements are generally imposed on mineral
exploration companies (as well as companies with mining operations) in order to
minimize the long term effects of land disturbance. Reclamation may include
requirements to control dispersion of potentially deleterious effluents and
reasonably re-establish pre-disturbance land forms and vegetation. In order to
carry out reclamation obligations imposed on us in connection with our mineral
exploration we must allocate financial resources that might otherwise be spent
on further exploration programs.

Litigation.Although the
Company is not currently subject to litigation, it may become involved in
disputes with other parties in the future which may result in litigation. Any
litigation could be costly and time consuming and could divert our management
from our business operations. In addition, if the Company is unable to resolve
any litigation favorably, it may have a material adverse impact on the Company's
financial performance, cash flow and results of operations.

Acquisitions. The Company
undertakes evaluations of opportunities to acquire additional gold and silver
mining properties. Any resultant acquisitions may be significant in size, may
change the scale of the Company's business, and may expose the Company to new
geographic, political, operating, financial and geological risks. The Company's
success in its acquisition activities depends on its ability to identify
suitable

12

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acquisition candidates, acquire them on acceptable terms, and
integrate their operations successfully. Any acquisitions would be accompanied
by risks, such as a significant decline in the price of gold or silver, the ore
body proving to be below expectations, the difficulty of assimilating the
operations and personnel of any acquired companies, the potential disruption of
the Company's ongoing business, the inability of management to maximize the
financial and strategic position of the Company through the successful
integration of acquired assets and businesses, the maintenance of uniform
standards, controls, procedures and policies, the impairment of relationships
with customers and contractors as a result of any integration of new management
personnel and the potential unknown liabilities associated with acquired mining
properties. In addition, the Company may need additional capital to finance an
acquisition. Historically, the Company has raised funds through equity financing
and the exercise of options and warrants. However, the Company's ability to
raise capital to acquire and explore resource properties may be adversely
affected by the market prices for natural resources which are highly speculative
and volatile. There can be no assurance that the Company would be successful in
overcoming these risks or any other problems encountered in connection with such
acquisitions.

Conflict of interest.Certain directors and officers of the Company are officers and/or directors
of, or are associated with, other natural resource companies that acquire
interests in mineral properties. Such associations may give rise to conflicts of
interest from time to time. The directors are required by law, however, to act
honestly and in good faith with a view to the best interests of the Company and
its shareholders and to disclose any personal interest which they may have in
any material transaction which is proposed to be entered into with the Company
and to abstain from voting as a director for the approval of any such
transaction.

Dependence on management.
We are dependent on the services of key executives including our President and
Chief Executive Officer and other highly skilled and experienced executives and
personnel focused on advancing our corporate objectives as well as the
identification of new opportunities for growth and funding. Due to our
relatively small size, the loss of these persons or our inability to attract and
retain additional highly skilled employees required for our activities may have
a material adverse effect on our business and financial condition.

Uncertainty of continuing as a
going concern.The continuation of the Company depends upon its ability to
develop a self-supporting business and generate cash flow from operations and/or
to raise equity capital through the sale of its securities. The Company will be
required to raise new financing through the sale of shares or issuance of debt
to continue with the exploration and development of its mineral properties. As a
result, there is uncertainty about the Company's ability to continue as a going
concern. The Company's consolidated financial statements do not include the
adjustments that would be necessary if the Company were unable to continue as a
going concern.

Limited and volatile trading
volume.Although the Company's common shares are listed on the TSX Venture
Exchange, referred to as the "TSX-V" and the Frankfurt Stock Exchange, referred
to as the "FSE" and quoted in the United States on the OTC Bulletin Board,
referred to as the "OTC BB", the volume of trading has been limited and volatile
in the past and is likely to continue to be so in the future, reducing the
liquidity of an investment in the Company's common shares and making it
difficult for investors to readily sell their shares in the open market. Without
a liquid market for the Company's common shares, investors may be unable to sell
their shares at favorable times and prices and may be required to hold their
shares in declining markets or to sell them at unfavorable prices.

Volatility of share price.In recent years, securities markets in Canada have experienced a high level
of price volatility. The market price of many resource companies, particularly
those, like the Company, that are considered speculative exploration companies,
have experienced wide fluctuations in price, resulting in substantial losses to
investors who have sold their shares at a low price point. These fluctuations
are based only in part on the level of progress of exploration, and can reflect
general economic and market trends, world

13

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events or investor sentiment, and may sometimes bear no
apparent relation to any objective factors or criteria. During the 2007-II
fiscal year, the Company's common share price fluctuated between a low of $1.46
and a high of $2.75. Subsequent to the 2007-II fiscal year and as of May 31,
2008, the Company's common share price has fluctuated between a low of $1.36 and
a high of $1.78. Significant fluctuations in the Company's common share price is
likely to continue, and could potentially increase in the future.

Difficulty for United States
investors to effect services of process against the Company.The Company is
incorporated under the laws of the Province of British Columbia, Canada.
Consequently, it will be difficult for United States investors to affect service
of process in the United States upon the directors or officers of the Company,
or to realize in the United States upon judgments of United States courts
predicated upon civil liabilities under the United States Securities Exchange
Act of 1934, as amended. The majority of the Company's directors and
officers are residents of Canada and all of the Company's assets are located
outside of the United States. A judgment of a United States court predicated
solely upon such civil liabilities would probably be enforceable in Canada by a
Canadian court if the United States court in which the judgment was obtained had
jurisdiction, as determined by the Canadian court, in the matter. There is
substantial doubt whether an original action could be brought successfully in
Canada against any of such persons or the Company predicated solely upon such
civil liabilities.

Item 4. Information on the Company

Cautionary Note to United States Investors

We describe our properties
utilizing mining terminology such as "measured resources" and "indicated
resources" that are required by Canadian regulations but are not recognized by
the SEC. United States investors are cautioned not to assume that any part of
the mineral deposits in these categories will ever be converted into
reserves.

|A. | History and Development of the Company
|-- | --------------------------------------

The Company was incorporated by
Memorandum of Association under the laws of the Province of British Columbia on
May 15, 1969, and on August 22, 1969, by virtue of an amalgamation with Ace
Mining Company Ltd., became a public company whose common shares are registered
under the United States Securities Exchange Act of 1934, changing its
name to Avino Mines & Resources Limited. On April 12, 1995, the Company
changed its corporate name to International Avino Mines Ltd. and affected a
reverse stock split of one common share for every five common shares
outstanding. On August 29, 1997, the Company changed its corporate name to Avino
Silver & Gold Mines Ltd., its current name, to better reflect the business
of the Company of exploring for and mining silver and gold.

We are a natural resource
company, primarily engaged in the acquisition, exploration and development of
natural resource properties. Our principal business activities have been the
exploration of certain mineral properties located in Canada, specifically
British Columbia and the Yukon Territory, and in Mexico. Since fiscal 2001 we
capitalized expenditures of $607,668 on the properties in Canada. These
capitalized expenditures consist of $187,854 on the Aumax property, $163,467 on
the Olympic-Kelvin property, and $256,347 on the Minto property.

On July 17, 2006, the Company
completed the acquisition of Cia Minera, a Mexican corporation, through the
acquisition of an additional 39.25% interest in Cia Minera which combined with
the Company's pre-existing 49% share of Cia Minera, brought the Company's
ownership interest in Cia Minera to 88.25% . The additional 39.25% interest in
Cia Minera was obtained though the acquisition of 76.88% of the common shares of
Promotora Avino S.A. De C.V., referred to as "Promotora", which in turn owns
49.75% of Cia Minera's common shares, and the direct acquisition of 1% of the
common shares of Cia Minera.

14

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The July 17, 2006 acquisition was
accomplished by a share exchange by which the Company issued 3,164,702 shares as
consideration, which we refer to as the "Payment Shares", for the purchase of
the additional 39.25% interest in Cia Minera. The Payment Shares were valued
based on the July 17, 2006 closing market price of the Company's shares on the
TSX-V.

The Company has also acquired a
further 1.1% interest in Cia Minera through the acquisition from an estate
subject to approval and transfer of the shares to the Company by the trustee for
the estate. On December 21, 2007 approval was received and the Company obtained
the 1.1% interest from the estate for no additional consideration. As at
December 31, 2007 the Companys interest in Cia Minera is 89.35% .

The principal executive office of
the Company is located at Suite 400, 455 Granville Street, Vancouver, British
Columbia V6C 1T1, and its telephone number is 604-682-3701.

|B. | Business Overview
|-- | -----------------

Operations and Principal Activities

The Company is a Canadian-based
resource firm focused on silver and gold exploration. The Company has a long
prior history of operation, beginning in 1968 with the development of the Avino
Mine. From 1974 to 2001, the Avino Mine produced silver, gold, copper and lead
and provided hundreds of jobs for the Durango region before closing due to
depressed metal prices. Beginning in 2002, the Company re-directed its corporate
strategy to focus almost entirely on silver and began acquiring silver
properties in North America. The Company's most recent acquisitions, consisting
of the Eagle property in Canada's Yukon Territory and the Aumax property in
British Columbia, have produced positive assays for silver through drilling and
sampling. The Avino Mine and surrounding mineral leases continue to hold silver
potential. These properties, along with other silver and gold projects, will
remain the Company's principal focus for the foreseeable future.

Presently, the Company is an
"exploration stage company", as all of the Company's properties are currently in
the exploratory stage of development. In order to determine if a commercially
viable mineral deposit exists in any of the Company's properties, further
geological work will need to be done and a final evaluation based upon the
results obtained to conclude economic and legal feasibility.

Significant Acquisitions and Significant
Dispositions

On July 17, 2006, the Company
completed the acquisition of Cia Minera, a Mexican corporation, through the
acquisition of an additional 39.25% interest in Cia Minera which combined with
the Company's pre-existing 49% share of Cia Minera, brought the Company's
ownership interest in Cia Minera to 88.25% . The additional 39.25% interest in
Cia Minera was obtained though the acquisition of 76.88% of the common shares of
Promotora, which in turn owns 49.75% of Cia Minera's common shares, and the
direct acquisition of 1% of the common shares of Cia Minera.

The July 17, 2006 acquisition was
accomplished by a share exchange by which the Company issued 3,164,702 Payment
Shares, for the purchase of the additional 39.25% interest in Cia Minera. The
Payment Shares were valued based on the July 17, 2006 closing market price of
the Company's shares on the TSX-V.

The Company has also acquired a
further 1.1% interest in Cia Minera through the acquisition from an estate
subject to approval and transfer of the shares to the Company by the trustee for
the estate. On December 21, 2007 approval was received and the Company obtained
the 1.1% interest from the estate for no additional consideration. As at
December 31, 2007 the Companys interest in Cia Minera is 89.35% .

15

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We have no other significant
acquisitions or dispositions of property, other than as otherwise disclosed in
this Transition Report.

Competition

The mining industry in which the
Company is engaged is highly competitive. Competitors include well-capitalized
mining companies, independent mining companies and other companies having
financial and other resources far greater than those of the Company. The Company
competes with other mining companies in connection with the acquisition of gold,
silver and other precious metal properties. In general, properties with a higher
grade of recoverable mineral and/or which are more readily mined afford the
owners a competitive advantage in that the cost of production of the final
mineral product is lower. In 2007, demand for silver exceeded supply and
worldwide demand is expected to increase through 2008. This, in part, has fueled
the increases in silver prices over the same period. Thus, a degree of
competition exists between those engaged in the mining industry to acquire the
most valuable properties. As a result, the Company may eventually be unable to
acquire attractive gold or silver mining properties.

Seasonality

Certain of our operations are
conducted in British Columbia and the Yukon Territory. The weather during the
colder seasons in these areas can be extreme and can cause interruptions or
delays in our operations. As a result, the preferable time for activities in
these regions is the spring and summer when costs are more reasonable and access
to the properties is easier. In the summer months, however, if the weather has
been unusually hot and dry, access to the Company's properties may be limited as
a result of access restrictions being imposed to monitor the risks of forest
fires.

Governmental Regulation

The current and anticipated
future operations of the Company, including development activities and
commencement of production on its properties, require permits from various
federal, territorial and local governmental authorities and such operations are
and will be governed by laws and regulations governing prospecting, development,
mining, production, exports, taxes, labor standards, occupational health, waste
disposal, toxic substances, land use, environmental protection, mine safety and
other matters. Companies engaged in the development and operation of mines and
related facilities generally experience increased costs and delays in production
and other schedules as a result of the need to comply with applicable laws,
regulations and permits. Such operations and exploration activities are also
subject to substantial regulation under these laws by governmental agencies and
may require that the Company obtain permits from various governmental agencies.
The Company believes it is in substantial compliance with all material laws and
regulations which currently apply to its activities. There can be no assurance,
however, that all permits which the Company may require for construction of
mining facilities and conduct of mining operations will be obtainable on
reasonable terms or that such laws and regulations, or that new legislation or
modifications to existing legislation, would not have an adverse effect on any
exploration or mining project which the Company might undertake.

Mineral exploration and mining in
Mexico is covered under the Mining Law as first published in June 1992, and
amended in April 2005. Mining operations in Mexico are administered by the
Ministry of Economy. Environmental regulations are covered under "Ley General
del Equilibrio Ecológio y la Protección al Ambiente" (General Law of Ecological
Balance and Environmental Protection) and its regulations. Certain other
environmental laws, including "Ley de Aguas Nacionales" (Law of National Waters)
and "Ley Forestal" (Forestry Law) and their associated regulations may also
cover certain operations. The kind of permits or authorizations required to
conduct mining or mineral exploration operations in Mexico depend upon the type
of operation. Common exploration activities do not require prior environmental
authorization or licenses, but it is advisable to request a confirmation from
the National Water Commission that planned operations will not

16

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affect the water table. It is also necessary to confirm that
any planned operations will not be conducted in protected natural areas.

The Company has obtained all
necessary permits and authorizations required for its current and anticipated
exploration. The Company has had no material costs related to compliance and/or
permits in recent years, and anticipates no material costs in the next year.
Unfavorable amendments to current laws, regulations and permits governing
operations and activities of resource exploration companies, or more stringent
implementation thereof, could have a materially adverse impact on the Company
and cause increases in capital expenditures which could result in a cessation of
operations by the Company.

Failure to comply with applicable
laws, regulations and permitting requirements may result in enforcement actions
thereunder, including orders issued by regulatory or judicial authorities
causing operations to cease or be curtailed, and may include corrective measures
requiring capital expenditures, installation of additional equipment or remedial
actions. Parties engaged in exploration and mining operations may be required to
compensate those suffering loss or damage by reason of the mining activities and
may have civil or criminal fines or penalties imposed for violation of
applicable laws or regulations.

The enactment of new laws or
amendments to current laws, regulations and permits governing operations and
activities of mining companies, or more stringent implementation thereof, could
have a material adverse impact on the Company and cause increases in capital
expenditures or production costs or reduction in levels of production at
producing properties or require abandonment or delays in the development of new
mining properties.

|C. | Organizational Structure
|-- | ------------------------

The Company's subsidiaries are
the wholly-owned Oniva Silver and Gold Mines S.A. de C.V., referred to as
"Oniva", Promotora, in which the Company has direct ownership of 79.09%, and Cia
Minera in which the Company has a 50% direct ownership and an additional 49.75%
of Cia Minera is held through Promotora. The Company's total ownership interest
in Cia Minera is 89.35% .

All of the above subsidiaries are incorporated under the laws
of Mexico.

|D. | Property, Plants and Equipment
|-- | ------------------------------

The Company is exploring five
silver and gold projects in Canada and Mexico. All of the Company's mineral
property interests in Canada are wholly owned by the Company. In Mexico, the
Company has a 89.35% interest in Cia Minera, a Mexican company which is involved
in the mining of commercial ores and resource exploration and development,
including the operation of the Avino Mine. Exploration in Canada has in recent
years, been limited to drill programs on our Olympic-Kelvin Property.

17

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Eagle Property

Ownership.The Eagle
property is wholly owned by the Company and was acquired in 2003 when it
acquired its 100% interest in 14 quartz leases by issuing 200,000 common shares
at a price of $0.50 per share for total consideration of $100,000. The property
was written down to a nominal value of $1 in fiscal 2006 by a charge to
operations of $103,242.

Property Description and
Location.This property is located in the Yukon Territory approximately
eight kilometers west of Keno City. The property covers approximately 516
hectares. It is currently in its Phase I stage of exploration. The property is
accessed by road. Whitehorse, the nearest major city, is approximately 380
kilometres to the south of the village of Mayo. The village of Mayo is 60
kilometers to the southeast of Keno City. The Eagle property lies on the
south-east facing slope of Galena Hill where the elevations range from about
1350 to 1540 m. Permafrost, while thin to non-existent in places, is reported to
be found under accumulations of surface rubble left from glaciation.

History.The Eagle
property has produced positive assays for silver since exploration first
occurred there in 1964. The initial drill program, consisting of 29 holes,
encountered assays as high as 6,900 grams per tonne of silver over 1.2 metres in
hole #23 and 1,708 grams per tonne of silver over 2.1 metres in hole JB1.
Follow-up drilling in 1978, designed to expand on the discoveries of hole #23,
encountered 18.7 metres of mineralization with values ranging from 11 to 132
grams per tonne of silver. This discovery became known as the Eagle vein. The
Eagle property is part of the historic Keno Hill mining camp. The Keno Hill
mining camp has historically been one of Canada's most productive for silver,
lead and zinc. Between 1920 and 1988, the total reported production was
4,787,423 tonnes with recovered grades of 1.3 kilograms per tonne of silver,
5.6% lead and 3.1% zinc. Subsequent exploration in the district has discovered
additional mineral deposits which may become productive.

Proposed Work Program.A
study carried out in August of 2002 recommended geochemical and geophysical
exploration to examine the continuity of the Eagle vein. Drilling and
underground exploration would follow based on the success of the first work. A
budget of $160,000 has been proposed to carry out further work on the Eagle
property. Our management is presently considering this proposal.

18

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**Aumax Property**



Ownership.The Aumax
Property is wholly owned by the Company and was acquired in 2003 when it
acquired a 100% interest in six unpatented mineral claims by issuing 200,000
common shares at a price of $0.50 per share and paying $4,000 in cash for total
consideration of $104,000.

Property Description and
Location.The property is located in southern British Columbia approximately
16 kilometers southwest of the town of Lillooet. The property can be accessed
from Lillooet by a logging road. The upper zone of the Aumax property can be
accessed by hiking a further 1.5 km to the southwest. The property covers
approximately 975 hectares and is located between Cayoosh Creek and Phair Creek.
The showings were discovered in 1999. The showings have economically interesting
gold and silver values.

History.Cayoosh Creek has
a history of limited placer gold production starting in the 1860's. Some of this
production occurred immediately downstream of the property, near the mouth of
Downtown Creek.

A limited exploration program of
prospecting, rock and soil sampling and mechanized trenching was carried out in
October of 1999. Trenching on the Aumax showing was inconclusive. Many highly
anomalous quartz-carbonate boulders, up to 2.2 grams per tonne of gold and 305
grams per tonne of silver, were excavated but bedrock was not reached in
critical areas. Chip samples of veins exposed in the trenches were highly
anomalous, generally in the hundreds of parts per billion gold, with one sample
over one gram per tonne of gold over 0.5 metres. Further prospecting and soil
sampling of the southeast (upslope) of the Aumax showing was recommended.

19

---

Limited soil sampling and
prospecting in 1999 on the Upper Zone returned extremely anomalous soil samples
to 4,560 parts per billion gold. A grid geochemical sampling and further
prospecting in this area was recommended.

The Company has placed a deposit
of $1,500 at December 31, 2007 (January 31, 2007:$1,500), registered in the name
of the Ministry of Finance of British Columbia, as security for estimated future
reclamation costs.

Proposed Work Program.Geological studies conducted late in 2002 concluded that the discoveries to
date lie downslope of the mineral source. A subsequent report in November 2004
recommended a Phase 1 program of more prospecting, geological mapping and
additional soil sampling to determine the source of the mineralization. Based on
the results of this program, Phase 2 exploration would include trenching and
possible diamond drilling but to date, no work program has been proposed.

Olympic-Kelvin Property

Ownership.The
Olympic-Kelvin property is wholly owned by the Company and was acquired in 1987
when it acquired a 100% interest in 20 reverted Crown granted mineral claims,
one located mineral claim and three fractions. The property was written down
entirely in fiscal 2002.

Property Description and
Location.The Olympic-Kelvin property totals approximately 662.5 hectares
and is located on the south side of Carpenter Lake, five kilometers northeast of
Goldbridge in the Lillooet Mining Division, British Columbia.

The Olympic-Kelvin property is
easily accessible by the all-weather, publicly maintained, Grey Rock logging
road which runs northeast from Goldbridge. Access on the Olympic-Kelvin property
is possible on a number of cat trails built by the Company and previous
operators.

The Olympic-Kelvin property
covers rocks of the Pioneer Formation and Bridge River Terrane. These rocks are
cut by northwest trending regional scale structures sub-parallel to the Ferguson
and Cadwallader Structures. The structures on the Olympic-Kelvin property are
roughly the same distance from the Upper Cretaceous-Tertiary granitic Bendor
Intrusions as the Bralorne/Pioneer mines. These mines are the largest past
producers in the Canadian Cordillera (4.1 million ounces). The Bendor Intrusions
are a postulated source for the gold mineralization at Bralorne, which is
thought to be localized by a northwest to north flexure in the Cadwallader
structure. A similar flexure is present in the northwest trending structures on
the Olympic-Kelvin property. These structures on the property are mineralized
with gold and silver and have received considerable past work, including at
least four adits.

History.The Company
recommenced exploration on the Olympic-Kelvin property in January 2004,
following up on work completed in 1988 that outlined two prospective areas for
gold and silver, the Margarita Zone and the Enigma Zone.

In the Margarita Zone, hole OLY
88-4 returned 24 grams per tonne of gold over 0.85 metres within a much wider
intersection of 8.2 grams per tonne of gold over 3.48 metres. The true width of
this zone is estimated to be 1.47 metres. A large part of the zone is
listwanite, indicating the potential for better grade mineralization immediately
below this intersection. Hole OLY 88-6 cut the same zone 75 metres to the
northwest and returned 4.26 grams per tonne of gold over 1.34 metres within an
eight metre section (5.6 m true width) of mainly listwanite. The area of these
intersections is approximately 50 metres off of the Gray Rock Road and could be
accessed for mining purposes by an underground ramp from the road.

20

---

The Enigma Zone is a colour
anomaly on the south shore of Carpenter Lake on Lot 6280, approximately 700
metres east, north-east of the Margarita Zone. Trenching revealed a quartz stock
work zone with areas of abundant stibnite. Sampling returned 1.7 grams per ton
of gold over 21 metres within a 75 metre mineralized zone. This is a very wide
zone for the Bridge River Camp and, if the zone has significant strike length,
it could be amenable to open pit mining. Hole 04-0k-04 was drilled 154 metres
under the Enigma Zone. This hole returned highly anomalous gold values to 0.38
grams per tonne. Detailed geological mapping and geochemical sampling has been
recommended.

Drilling in January of 2005 was
unsuccessful in intersecting the Margarita Zone. One hole was drilled from the
east to attempt to intersect the zone. This hole was abandoned at 21.3 metres
because of bad ground conditions. No values of economic interest were returned
from samples taken from the hole.

The Company has placed a deposit
of $1,500 at December 31, 2007 (January 31, 2007: $1,500), registered in the
name of the Ministry of Finance of British Columbia, as security for estimated
future reclamation costs.

No drilling on the Olympic Property
was completed in 2007.

*Proposed Work Program.*No
further work is proposed at this time.

Minto Property

Ownership.The Minto
Property is wholly owned by the Company and was acquired in early 1985 when it
acquired its 100% interest in eight Crown granted mineral claims, eight reverted
Crown granted mineral claims and one located mineral claim. In fiscal 2002, the
property was written down to a nominal value of $1.

Property Description and
Location.The Minto Property is situated about ten kilometers east of
Goldbridge in the Bridge River gold district of British Columbia and adjoins the
Olympic-Kelvin Property. The property covers approximately 204 hectares. The
Minto property is situated in the Bralorne gold camp, about 160 kilometers, by
air, north of Vancouver. The claims occupy the lake bed and north flank of
Carpenter Lake. Access from Goldbridge is made via an all-weather gravel road
which skirts the north shore of Carpenter Lake.

Gold Bridge itself can be reached
from Vancouver via Hope and Lillooet, a distance of 445 kilometers, or via
Pemberton using the four-wheel-drive Hurley Pass route, a distance of 225
km.

The terrain is rugged, typical of
the eastern margin of the Coast Range Mountains. The claim group ranges in
elevation from 650 meters on Carpenter Lake to a maximum of 1020 meters.

The climate of the Bridge River
District is transitional between humid coastal belt and more arid interior
plateau. Annual precipitation is modest with a significant proportion falling as
snow in the winter. Summers tend to be warm to hot depending on the altitude,
and winters are moderately cold.

History.The claim group
has been explored intermittently for over sixty years and several gold-bearing
structures are known on the property. Production from the Minto mine between
1934 and 1940 amounted to 88,900 tons of ore returning 17,558 ounces of gold and
50,582 ounces of silver. During 1985, geological, geochemical, and geophysical
(VLF-EM) surveys were conducted and trenches were excavated in anomalous areas.
In-fill soil geochemistry and further trenching were undertaken in 1987.

21

---

A mechanized trenching program
was carried out on the Minto Property in June, 2005 to test the Minto North and
Jumper Zones. Seven trenches were excavated, sampled, mapped and reclaimed,
usually in a one day period. Chip samples from all the trenches returned values
from anomalous to economic levels in gold.

In December 2006, the Company
announced the results of the 2006 drilling program on the Minto Property. The
four diamond core holes were drilled to explore down dip extensions of gold
bearing structures originally discovered in trench 827 on the Minto North
Zone.

Holes MO-06-01 and 02 were
drilled from a site approximately 10 metres west of trench 827. Hole MO-06-03
was drilled from a site approximately 2 metres north and 7 metres east of
MO-06-01 and 02. Hole MO-06-04 was drilled from the same set-up.

The gold bearing structures
consist of sets of parallel narrow (1-2 mm) fractures containing quartz,
carbonate, grey sulphide veinlets. Assay samples from the four holes drilled
conveyed from 1.04 grams per ten to 45.4 grams per ton.

The Company has placed a deposit
of $2,500 at December 31, 2007 (January 31, 2007: $2,500), registered in the
name of the Ministry of Finance of British Columbia, as security for estimated
future reclamation costs.

Proposed Work Program.One
hole has been drilled to a depth of approximately 1,647 feet and the assay
results are still pending. No further work program has been proposed.

Avino Mine



Ownership.The Company has
a 89.35% ownership interest in Cia Minera, a company incorporated under the laws
of Mexico. Cia Minera owns the Avino Mine. The Company acquired its 49% interest
in Cia

22

---

Minera in 1968, an additional interest of 39.25% in July 2006
and a further 1.1% interest in December 2007. The Company continues to consider
its options with relation to the remaining equity interest.

Cia Minera leases four core mineral claims in consideration for
royalties. The lessor had contested the underlying royalty agreement, and had
filed a legal action claiming royalties were owed from years prior to the
Companys acquisition of control of Cia Minera. An amicable settlement was
negotiated during the period ended December 31, 2007 whereby the Company settled
the dispute at a cost of $1,497,604 (settlement denominated in USD$1,500,000).
The $1,497,604 amount, less a prior year accrual of $738,302 is recorded in
litigation settlement expense. The Company paid a $1,398,457 (USD$1,400,000)
portion of the settlement and the $99,130 balance owing (USD$100,000) is
recorded in accounts payable, which is to be repaid during the Companys 2008
year-end.

Property Description and
Location.The Avino Mine is located approximately 74 kilometers to the
northeast of the city of Durango and covers approximately 4,364 hectares. The
mine is accessible via road. The Avino Mine had been an open pit operation until
March 1993, at which time Cia Minera commenced underground operations.
Mineralized rock is broken by ripping, drilling and blasting and is trucked to
the concentrator, approximately 415 meters from the pit, where it is processed.
The Avino Mine was an underground operation at the time of closure.

History.On July 17, 2006,
the Company completed the acquisition of an additional 39.25% equity interest on
Cia Minera in consideration of the issuance of an aggregate of 3,164,702 common
shares of the Company. As a result of this transaction, the Company increased
its ownership interest in Cia Minera to 88.25% . There was no change in the
effective control of the Company as a result of this transaction. The
acquisition of a further 1.1% interest in Cia Minera from an estate for no
additional consideration was approved on December 21, 2007. As at December 31,
2007, the Companys ownership interest in Cia Minera is 89.35% .

The Avino Mine operated from 1974
to 2001, producing about 497 tons of silver, three tons of gold, and 11,000 tons
of copper until the suspension of mining operations in November 2001. Since that
time, the mine plant and equipment have been on care and maintenance and the
Company has spent $515,816 on the care and maintenance of the mine.

The Avino Mine and mill were
historically serviced by a heavy equipment repair shop, a mechanical and
electrical shop, an assay office, a metallurgical laboratory, a warehouse and
other auxiliary facilities. Electric power can be supplied by the
government-owned Federal Electricity Commission, referred to as the "FEC" which
presently is capable of supplying up to 2500 HP to the Avino Mine and mill. As
the mill is expanded, additional power must be obtained from the FEC. In order
to obtain the additional electric power, it has been necessary for the FEC in
1983 to construct a new power line approximately 12 miles in length which is
capable of supplying an additional 2750 HP, sufficient for the maximum proposed
increase in mill capacity.

Water for use at the mill is
primarily obtained from: (i) wells; (ii) old underground workings; and (iii)
earth dams. In prior years, the water supply has been insufficient to increase
the capacity of the mill. In 1989, Cia Minera constructed a dam in hope of
storing water for use in the dry season. The dam has a capacity of 1,000,000
cubic meters. Cia Minera had entered into an agreement with the Federal
Government of Mexico for the repair and improvement of a government dam located
approximately five and one-half kilometers from the mine. The contract provides
that the Government and Cia Minera will each contribute 50% of the cost of
repairing the dam and raising the height by six meters and to construct a new
spillway. The work was substantially completed during 1989, and Cia Minera
installed a pipeline system allowing water to flow from the Government dam to
the mill. The contract provides that Cia Minera will share the use of the
Government dam with local farmers. The local farmers have priority for the use
of a specific volume of the water and the balance is available for use by the
mine. The water can be transmitted to the mine by means of five kilometers

23

---

of pipe which has been installed by Cia Minera. In early 1996,
Cia Minera also drilled a well 400 meters in depth on a property owned by Cia
Minera, ten kilometers from the mill site. A pipeline has been constructed, and
Cia Minera has sufficient water for its own needs. Further, from 1995 to 1998,
Mexico experienced a drought. While the drought adversely affected operations in
late 1995 until April 1996, Cia Minera believes that the new well will
adequately meet its water requirements. In addition, Cia Minera utilizes water
conservation practices, such as recirculation of water and capturing rain water
in earth dams.

In April 2006, Wardrop
Engineering Inc., which we refer to as "Wardrop", completed the study on
"Tailings Retreatment Process Options for the Avino Tailings Project in Durango,
Mexico", referred to as the "Wardrop Report". The Wardrop Report concluded the
oxide tailing is amenable to cyanidation with agglomerated heap leach as the
method of choice followed by Merril Crowe precipitation of the silver and gold.
The sulphide tailing would require sampling and further metallurgical test work
before a proper assessment can be made.

The preliminary evaluation of the
oxide tailings suggested the capital cost for a 500,000 ton per year, 4 year
operation is US$16,200,000 and the cost to operate per ton of tailings is
US$8.64. Capital Costs for a plant twice the size and half the life was
US$22,700,000. The internal rate of return and the net present value favoured
the 4 year operation.

The capital cost estimate
includes a 25% contingency and it is based on new equipment. A reduction in
capital cost can be accomplished with good used equipment.

The disclosure of the implied
values is preliminary in nature and includes inferred mineral resources that are
considered to be too speculative geologically to have the economic
considerations applied to them that would enable them to be categorized as
mineral reserves, and there is no certainty that the preliminary assessment will
be realized.

The heap leach process design in
the study was based on a column test performed at Process Research Associates
Limited from a composite of samples from the lower and middle bench. These
samples were collected and documented in the October 2005 report entitled "A
Tailings Resource" by Minestart Management Inc. for whom the qualified person
was Bryan Slim, MBA, P. Eng. Recovery of silver and gold from the column test
was 73% and 78.9% respectively after 81 days.

Mr. Rick Alexander P. Eng., an
independent qualified person as defined by applicable Canadian rules has
prepared the capital cost estimate and co-coordinated Wardrop's work on the
Avino Tailings Project.

In December 2006, the Company
announced results of the first 6 diamond core drill holes exploring the Avino
silver, gold and copper deposit at its wholly owned property 80 km northeast of
Durango, Mexico.

The Company operated the mine
from 1976 to 2001 when closure was caused by low silver, gold and copper prices
and the local smelter closing for toll processing. The 2006 drill program was
designed to test for continuity down dip below the existing workings of the
three principal areas of mineralization (San Luis, Elena-Tolosa, and Chirumbo).
The Avino vein system strikes principally east west over 1.2 km and dips south
at 60 - 70o.

The initial hole CH-06-03
intersected the Avino vein system 180 m below the original Chirumbo workings.
The hole intersected both the main Vein/Breccia zone and the footwall breccias
as follows:

CH-06-03 Azimuth 340o Dip - 50o length
453.75 mAvino Vein 182.8  194.8 m, (12 m), 32.61 g/t Ag, 0.29% Cu
Footwall Breccia 204.8 m  216.8 m, (12 m), 52.41 g/t Ag, 0.31% Cu

24

---

(Down Hole Lengths) True widths are not
known.

The four holes ET-06-01, 02, 03,
04 explored the down dip and down plunge, extension of the main ore shoot
(Elena-Tolosa) on which most underground mining has occurred in the past. Holes
ET-06-01 and ET-06-02 intersected the Avino Vein System approximately 40 m below
Level 11 1⁄2 (the last level in production when the mine closed in November 2001).
Holes ET-06-03 and ET-06-04 intersected the ore-zone approximately 180 m below
Level 11 1⁄2. Results from the four holes were as follows:

(All lengths are down hole) True widths
are not known.

| | ET-06-01           AZ
      340           Dip 
      50           Length
      431.2 m 
| | ----------------------------------------------------------------------------------------
| | o                                                                                       
| | o                                                                                       
| |                                                                                         
| | ET-06-02           AZ
      340           Dip 
      50           Length
      416.70 m
| | o                                                                                       
| |                                                                                         
| | ET-06-03           AZ
      340           Dip 
      50           Length
      421.15 m
| | o                                                                                       
| |                                                                                         
| | ET-06-04           AZ
      340           Dip 
      50           Length
      444.05 m
| | o                                                                                       
| | o                                                                                       

Hole SL-06-01 was drilled below
the San Luis workings at the western end of the Avino Vein System. Details were
as follows:

| | SL-06-01 Azimuth 000 Dip - 90o, Length 219.2 m
| | ----------------------------------------------
| | o                                             
| | o                                             

Drill core from the holes was
assayed by Inspectorate Labs at their facilities in Durango Mexico and Sparks
Nevada U.S.A. The assay methods were gold (Au) fire assay with AA finish, silver
(Ag) fire assay with gravimetric finish and copper (Cu) by 30 element ICP
package. Sampling procedures, chain of custody etc. are compliant with NI
43-101.

As at December 31, 2007, the
Company had drilled 82 holes totaling approximately 18,000 metres on different
targets across the Avino Property. Significant intersections are as follows:

25

---

|                                                                         | Total  |                                  |        |              |        |        |      |        |           
|------------------------------------------------------------------------ | ------ | -------------------------------- | ------ | ------------ | ------ | ------ | ---- | ------ | ----------
|Vein or                                                                  | Depth  | From                             |        | Intersection |        |        | Cu   |        |           
|Structure                                                                | (m)    | (m)                              | To (m) | (m)          | Au g/t | Ag g/t | ppm  | Pb ppm | **Zn ppm**
|LA ESTELA VEIN                                                           |        |                                  |        |              |        |        |      |       
|LE-06-01                                                                 | 200.00 | Did not intersect vein structure |        |              |        |        |     
|LE-06-02                                                                 | 238.25 | 215.05                           | 219.1  | 4.05         | 0.73   | 239    |      |        |           
|Includes:                                                                |        |                                  |        |              |        |        |      |        |           
|Footwall La                                                              |        |                                  |        |              |        |        |      |        |           
|Estela Vein                                                              |        | 215.05                           | 216.0  | 0.95         | 0.869  | 52.5   |      |        |           
|                                                                         |        | 216.05                           | 217.10 | 1.05         | 0.025  | 9.0    |      |        |           
|                                                                         |        | 217.10                           | 218.10 | 1.00         | 0.015  | 14.8   |      |        |           
|                                                                         |        | 218.10                           | 218.60 | 0.50         | 0.052  | 18.0   |      |        |           
|Hangingwall                                                              |        |                                  |        |              |        |        |      |        |           
|La Estela                                                                |        | 218.60                           | 219.10 | 0.50         | 3.95   | 1744.1 | 9460 | 24600  | 5500      
|LE-06-03                                                                 | 251.85 | 221.85                           | 223.70 | 1.85         | 0.85   | 80     |      |        |           
|Includes                                                                 |        | 221.85                           | 222.85 | 1.00         | 1.37   | 132.1  |      |        |           
|                                                                         |        | 222.85                           | 223.70 | 0.85         | 0.24   | 18.4   |      |        |           
|                                                                         |        |                                  |        |              |        |        |      |        |           
|CERRO SAN JOSEThe two drill holes did not
      intersect the structure. |        |                                  |        |             
|SJ-06-01                                                                 | 320.55 |                                  |        |              |        |        |      |        |           
|SJ-06-02                                                                 | 373.70 |                                  |        |              |        |        |      |        |           
|                                                                         |        |                                  |        |              |        |        |      |        |           
|LOS ANGELES                                                              |        |                                  |        |              |        |        |      |        |           
|LA-07-01                                                                 | 358.90 | 327.25                           | 329.65 | 2.40         | 0.39   | 119    |      |        |           
|Includes                                                                 |        | 327.25                           | 327.25 | 0.30         | 13.645 | 711.9  | 5602 | 8259   | 4220      
|                                                                         |        | 327.55                           | 328.35 | 0.80         | 0.368  | 5.5    | 141  | 1192   | 1490      
|                                                                         |        | 328.35                           | 329.25 | 0.90         | 0.044  | 1.1    | 29   | 317    | 1217      
|                                                                         |        | 329.25                           | 329.65 | 0.40         | 0.649  | 168.7  | 3346 | 61700  | 59000     
|                                                                         |        |                                  |        |              |        |        |      |        |           
|LA-07-02                                                                 | 358.90 | 100.35                           | 101.35 | 1.00         | 0.052  | 15.5   | 9    | 76     | 356       
|                                                                         |        | 101.35                           | 102.35 | 1.00         | 0.015  | 3.3    | 9    | 301    | 644       
|                                                                         |        | 102.35                           | 103.35 | 1.00         | 0.085  | 7.2    | 35   | 259    | 849       
|                                                                         |        | 103.35                           | 104.35 | 1.00         | 0.480  | 45.5   | 49   | 229    | 487       
|                                                                         |        |                                  |        |              |        |        |      |        |           
|LA-07-03                                                                 | 185.30 | 123.30                           | 124.30 | 1.00         | 0.130  | 59.7   | 135  | 1994   | 15800     
|                                                                         |        | 127.10                           | 127.75 | 0.65         | 0.040  | 43.1   | 602  | 2952   | 26000     
|                                                                         |        | 130.35                           | 131.30 | 0.95         | 0.319  | 59.1   | 1143 | 1330   | 3580      
|                                                                         |        | 132.15                           | 132.30 | 0.15         | 1.783  | 71.2   | 445  | 64200  | 60000     
|                                                                         |        |                                  |        |              |        |        |      |        |           
|LA-07-04                                                                 | 140.40 | 100.70                           | 107.4  | 6.7          |        |        |      |        |           
|                                                                         |        | 100.70                           | 101.70 | 1.00         | 0.404  | 48.8   | 48   | 402    | 2189      
|                                                                         |        | 101.70                           | 102.80 | 1.10         | 0.630  | >200   | 555  | 1277   | 3660      
|                                                                         |        | 102.80                           | 103.80 | 1.00         | 0.373  | 45.3   | 35   | 470    | 589       
|                                                                         |        | 103.80                           | 104.75 | 0.95         | 0.149  | 20.9   | 36   | 258    | 403       
|                                                                         |        | 104.75                           | 105.80 | 1.05         | 3.444  | 67.9   | 42   | 285    | 589       
|                                                                         |        | 105.80                           | 106.80 | 1.00         | 0.830  | >200   | 210  | 2519   | 7532      
|                                                                         |        | 106.80                           | 107.40 | 0.60         | 0.329  | 168.5  | 78   | 1103   | 2762      
|                                                                         |        |                                  |        |              |        |        |      |        |           
|LA-07-05                                                                 | 115.25 | 95.80                            | 96.60  | 0.80         | 0.093  | 54.4   | 1836 | 806    | 1300      
|                                                                         |        | 99.80                            | 100.15 | 0.35         | 0.992  | 87     | 103  | 248    | 337       
|                                                                         |        | 100.55                           | 101.25 | 0.70         | 0.418  | 174.2  | 304  | 2563   | 13500     

26

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|SANTIAGO STRUCTURE                                                                                 |        |        |         |              |       |       |      
|-------------------------------------------------------------------------------------------------- | ------ | ------ | ------- | ------------ | ----- | ----- | -----
|ST-07-01                                                                                           | 309.05 | 51.00  | 51.25   | 0.25         | 7.260 | 37    | 108  
|                                                                                                   |        | 55.45  | 56.45   | 1.00         | 0.040 | 55.9  | 9940 
|                                                                                                   |        |        |         |              |       |       |      
|ST-07-02                                                                                           | 200.05 | 120.80 | 121.10  | 0.30         | 0.09  | 59.1  | 2652 
|                                                                                                   |        |        |         |              |       |       |      
|SANTA ANA, SAN PEDRO & SAN
      PAUL: No significant intercepts                                   |        |        |         |             
|STA-07-01                                                                                          | 315.30 |        |         |              |       |       |      
|SP&P-07-01                                                                                         | 181.25 |        |         |              |       |       |      
|                                                                                                   |        |        |         |              |       |       |      
|NUESTRA SENORA                                                                                     |        |        |         |              |       |       |      
|NS-07-01                                                                                           | 167.10 | 99.40  | 99.85   | 0.45         | 0.045 | 258.2 | 7184 
|                                                                                                   |        | 159.90 | 161.05  | 1.15         | 3.291 | 53.6  | 14700
|                                                                                                   |        | 161.05 | 161.95  | 0.90         | 1.195 | 33.8  | 8469 
|                                                                                                   |        |        |         |              |       |       |      
|NS-07-02                                                                                           | 134.05 |        |         |              |       |       |      
|NS-07-03                                                                                           | 121.35 |        |         |              |       |       |      
|HOLES NS-07-02, AND 03 did not intersect the
      Nuestra Senora Vein (probably due to faulting). |        |       
|NS-07-04                                                                                           | 101.60 | 68.90  | 69.55   | 0.65         | 0.115 | 38.8  | 1669 
|                                                                                                   |        | 90.55  | 91.25   | 0.70         | 0.02  | 53.9  | 225  
|                                                                                                   |        | 91.25  | 91.90   | 0.65         | 0.01  | 22    | 50   
|                                                                                                   |        | 91.90  | 94.15   | 2.25         | 0.04  | 143   |      
|Includes:                                                                                          |        | 91.90  | 92.90   | 1.00         | 0.03  | 146   | 233  
|                                                                                                   |        | 92.90  | 93.40   | 0.50         | 0.015 | 196.5 | 578  
|                                                                                                   |        | 93.40  | 94.15   | 0.75         | 0.065 | 103.4 | 875  
|                                                                                                   |        |        |         |              |       |       |      
|NS-07-05                                                                                           | 124.85 | 61.05  | 61.45   | 0.40         | 0.195 | 27.4  | 126  
|                                                                                                   |        | 61.45  | 62.45   | 1.00         | 0.115 | 19.6  | 49   
|                                                                                                   |        | 62.45  | 63.15   | 0.70         | 0.150 | 58.9  | 314  
|                                                                                                   |        |        |         |              |       |       |      
|GEOPHYSICAL  IP TARGET                                                                            |        |        |         |              |       |       |      
|                                                                                                   | Depth  | From   | To      | Intersection | Au    | Ag    | Cu   
|                                                                                                   | (m)    | (m)    | (m)     | (m)          | g/t   | g/t   | ppm  
|GFA-07-01                                                                                          | 360.75 | 260.30 | 262.355 | 2.05         |       |       |      
|                                                                                                   |        | 260.30 | 261.20  | 0.90         | 0.055 | 10.6  | 33   
|                                                                                                   |        | 261.20 | 261.95  | 0.75         | 0.030 | 4.7   | 14   
|                                                                                                   |        | 261.95 | 262.35  | 0.40         | 0.790 | 209.2 | 554  

Sample lengths of the NQ drill
core were diamond sawed into halves by mine staff and shipped to Inspectorate
Labs in Durango, Mexico, for preparation into pulps and rejects. Pulps were
analyzed at Inspectorate Labs in Sparks, Nevada. Gold and silver were analyzed
by fire assay using Aqua Regia Leach and AA finish. Other elements are reported
from a 29 element I.C.P. package.

Sample lengths of the NQ drill
core were diamond sawed into halves by mine staff and shipped to Inspectorate
Labs in Durango, Mexico, for preparation into pulps and rejects. Pulps were
analyzed at Inspectorate Labs in Sparks, Nevada. Gold and silver were analyzed
by fire assay using Aqua Regia Leach and AA finish. Other elements are reported
from a 29 element I.C.P. package.

The Company is now focusing on
drilling the San Gonzalo vein system in order to establish a drill indicated
resource for San Gonzalo. The Company has also recently completed building a new
drill core storage facility which will store in excess of 40,000 metres of
core.

27

---

Subsequent to the year end, the
Company announced the results of a seven hole diamond drill program on the San
Gonzalo gold, silver, lead, zinc structure situated 2 km northeast of its former
producing Avino mine (1976  2001).

The San Gonzalo structure strikes
northwest/southeast and dips very steeply (85-90°) towards the southwest. The
principal intersections are:

|Vein or Structure     | From     | To       | Down Hole   | Au    | Ag    |       |      
|--------------------- | -------- | -------- | ----------- | ----- | ----- | ----- | -----
|                      | (metres) | (metres) | Lengths (m) | (g/t) | (g/t) | Pb%   | Zn(%)
|Hole SG-07-01         |          |          |             |       |       |       |      
|Santiago Vein         | 147.0    | 149.7    | 2.70        | 1.19  | 227   | > 1%  | > 1% 
|San Gonzalo Vein      | 357.3    | 362.15   | 4.85        | 0.64  | 343.2 | 0.36% | 0.63%
|Hanging Wall Zone     |          |          |             |       |       |       |      
|San Gonzalo Vein Foot | 372.65   | 375.05   | 2.4         | 2.41  | 712.4 | 0.5%  | 0.13%
|Wall Zone             |          |          |             |       |       |       |      
|Hole SG-07-02         |          |          |             |       |       |       |      
|San Gonzalo Vein      | 214.65   | 219.10   | 4.45        | 6.11  | 583.8 | 1.4   | 2.54 
|Hanging Wall Zone     |          |          |             |       |       |       |      
|San Gonzalo Vein Foot | 252.65   | 256.00   | 3.35        | 6.91  | 21.1  | 1.55  | 2.33 
|Wall Zone             |          |          |             |       |       |       |      
|Hole SG-07-03         |          |          |             |       |       |       |      
|San Gonzalo Vein      | 187.45   | 188.70   | 1.25        | 3.57  | 341   | 0.6   | 0.87 
|Hole SG-07-04         |          |          |             |       |       |       |      
|Santiago Vein         | 18.55    | 25.00    | 6.45        | 0.21  | 364   | NS    | NS   
|(includes)            | 20.85    | 21.9     | 1.05        | 0.29  | 990   | 0.21  | NS   
|                      | 21.90    | 22.8     | 0.90        | 0.49  | 433   | 0.16  | NS   
|Cross Vein            | 31.00    | 34.05    | 3.05        | 0.18  | 86    | 0.17  | NS   
|San Gonzalo HW        | 248.15   | 249.25   | 1.10        | 0.43  | 58    | 0.25  | 0.26 
|FW                    | 258.75   | 259.00   | 0.25        | 2.66  | 114   | 4.8   | 4.22 
|Hole SG-07-05         |          |          |             |       |       |       |      
|Santiago Vein         | 28.70    | 31.80    | 3.10        | 0.49  | 201   | NS    | NS   
|Includes              | 31.10    | 31.80    | 0.70        | 1.54  | 272   | NS    | NS   
|Hole SG-07-06         |          |          |             |       |       |       |      
|Santiago Vein         | 24.80    | 28.30    | 3.50        | 0.40  | 226   | NS    | NS   
|Cross Vein            | 280.65   | 280.90   | 0.25        | 0.50  | 2,120 | 7.82  | NS   
|San Gonzalo Vein      | 367.35   | 371.5    | 3.85        | 0.10  | 11    | NS    | NS   
|Hole SG-07-07         |          |          |             |       |       |       |      
|San Gonzalo Vein      | 247.75   | 250.35   | 2.60        | 2.85  | 351   | 1.04  | 0.66 

Hole SG-07-08 missed the ore
shoot and encountered only low gold and silver values. For holes SG-07-09, 10
and 11 only gold results have been received to date. We will release results
when silver and base metal assays are received.

The Company also announced significant
intersections from holes SG-07-12 and SG-07-13 as follows:

SG-07-12 (Dip 53 total length 175.45
m)

Down hole intersection length
165.65 -- 169.45 m (3.80 m) 9.5 g/t gold, 655 g/t silver, 574 ppm copper, 2,872
ppm lead, 2503 ppm zinc.

Includes:

28

---

|From   | To     | Metres | Au g/t | Ag g/t  | Cu ppm | Pb ppm | Zn ppm
|------ | ------ | ------ | ------ | ------- | ------ | ------ | ------
|165.65 | 166.40 | 0.75   | 22.902 | 1,609.6 | 840    | 2,106  | 3,692 
|166.40 | 167.05 | 0.65   | 8.366  | 898.0   | 262    | 974    | 2,266 
|167.05 | 167.75 | 0.70   | 13.508 | 427.6   | 261    | 1,188  | 1,282 
|167.75 | 168.55 | 0.80   | 1.890  | 283.6   | 1,169  | 9,356  | 4,652 
|168.55 | 169.45 | 0.90   | 2.792  | 194.4   | 293    | 427    | 723   

SG-07-13 (Dip 50 total length
160.55)

Down Hole Intersection Lengths 147.45
-- 153.00 m (5.55m) 1.12 g/t gold, 189 g/t silver, 0.28% lead, 0.43% zinc.

Or

149.05 -- 153.00 m (3.59m) 1.39 g/t
gold, 230 g/t silver 544 ppm Copper, 3,211 ppm Lead and 4368 Zinc

Includes:

|From   | To     | Metres | Au g/t | Ag g/t | Cu ppm | Pb ppm | Zn ppm
|------ | ------ | ------ | ------ | ------ | ------ | ------ | ------
|147.45 | 148.45 | 1.00   | 0.550  | 91.5   | 3,199  | 2,205  | 2,436 
|148.45 | 149.05 | 0.60   | 0.155  | 77.9   | 326    | 724    | 7,039 
|149.05 | 149.70 | 0.65   | 1.209  | 150.8  | 192    | 1,284  | 1,670 
|149.70 | 150.70 | 1.00   | 0.778  | 500.6  | 264    | 1.779  | 3,037 
|150.70 | 151.50 | 0.80   | 3.153  | 238.9  | 1,910  | 11,000 | 10,700
|151.50 | 152.20 | 0.70   | 0.822  | 121.3  | 241    | 922    | 4,552 
|152.20 | 153.00 | 0.80   | 1.057  | 44.5   | 91     | 783    | 1,730 

In September 2006, the Company
commissioned an independent plant audit by Herb Osborne and Associates, a widely
recognized expert in process plant evaluations, to conduct a full review of the
plant, including the condition of all equipment, the capacity of each circuit,
and the efficiency of plant. The report was an order of magnitude cost estimate
for the processing plant and is not NI 43-101 compliant as it does not include
underground development work.

The Avino process plant was built
initially in the 1970s refurbished and capacity increased in 1993. Most of the
infrastructure is in place for an ongoing 1000 TPD operation. Some of the
buildings will require cleanup and repair and refurbishment. The plant was fully
permitted but remains in temporary closure. Permits will have to be brought
current.

At the time of shutdown in 2001
with low commodity prices the mill was operating at an average rate of 1130 TPD.
The concentration ratio (weight) ranged from 2.5 to 3.5% i.e. producing 25-30
TPD of concentrate at a 20-25 g/t Au, 2-4 Kg/t Ag and 22-24% Cu. Prior to shut
down the average cost per ton milled was approximately US $16/ton and about US
$7/ton for freight treatment and refining charges from the smelter. A new mining
value cut off grade was determined to be around US $30/ton. This followed a
review of the historical production and financial figures.

The report concluded that the
process plant can be brought back into operation in as little as three months
contingent upon the availability of operators and mechanics for about US $1
million for an operating life of 5 to 10 years. A more realistic schedule would
be nine months to accommodate the time required to ready the mine for continuous
production. The operating life of 5 to 10 years refers to the operating life of
the

29

---

processing plant after the capital expenditures and not the
operating life of the mine. The Company has not completed a feasibility study
and this should not be perceived as a projection.

The report also concluded that
the existing tailings pond is near capacity and that there is adequate space
with reasonable gradients adjacent to the existing tailings to construct a new
tailings area as well as space for a future heap leach operation on previously
disturbed ground. Order of magnitude cost estimate for this tailings facility is
based on a starter dam and monitoring devices necessary for a ten year life is a
little over US $2 million.

Total capital expenditure to
achieve a 10 year operating plan is therefore estimated to be around US $3
million and a reasonable valuation of the property as an operating entity is US
$40 million. The valuation of US $40 million by Herb Osborne and Associates is
the construction value for a new 1,000 TPD plant with new equipment and is not a
value of the property as an operating entity.

The Company is also considering
dewatering the main trackless decline ramp in 2008. This will allow access for
development of underground workings and drilling to bring the ore blocks into NI
43-101 compliance.

In December 2006, the Company
contracted Peter E. Walcott & Associates to carry out an 80 km line deep
penetrating IP Survey at its Avino property in Mexico. IP Geophysics will help
identify drill targets for the upcoming years. The IP Survey was completed in
2007. Once a final report has been received from Peter E. Walcott &
Associates, Avino is planning to conduct follow-up soil geochemical, satellite
imagery and other surveys to better define targets in the covered areas.

Proposed Work Program.As a result of the numerous
ore-grade intersections encountered at San Gonzalo, a 43-101-compliant resource
calculation is now underway for this zone. Avino has retained David Gunning, P.
Eng., a Qualified Person under 43-101, who is reviewing all results. Avino also
plans to extract and process a 10,000-tonne bulk sample from San Gonzalo. This
program will provide concentrate for testing at various smelters. In preparation
for the sampling, Avino will re-commission a 250-ton circuit at the mill to
facilitate the processing of lead-silver ore from San Gonzalo. A critical part
of the 2008 exploration will include further drilling on a number of known
zones. Cerro San Jose, Aguila Mexicana and Santa Ana are expected key targets,
but drilling should be widespread across the property.

Bralorne Mine Property

On November 26, 1991, the Company
acquired a 100% interest in a property consisting of 154 Crown granted mineral
claims, five reverted Crown granted claims, four located mineral claims and two
placer leases. These interests are collectively referred to as the "Bralorne
Property". Pursuant to an option and joint venture agreement with Bralorne Gold
Mines Ltd. (Bralorne) dated July 21, 1993 and amended on July 12, 1994,
referred to as the "JV Agreement", Bralorne acquired the right to acquire a 50%
interest in the Bralorne Property. We then entered into a further agreement with
Bralorne dated July 21, 1995 under which the original JV Agreement was amended.
Under the terms of the amended agreement, Bralorne acquired its 50% interest in
the Bralorne Property. The Bralorne Property was then operated as a joint
venture between the Company and Bralorne.

Effective June 20, 2002, the
Company transferred its interest in the Bralorne Property to Bralorne for a
nominal amount of $1 and the assumption by Bralorne of the full amount of the
principal of US$2,000,000 and interest payable under the mortgage bonds
originally issued for a loan obtained by the Company and Bralorne in 1995, the
proceeds of which were to be used for further development of the Bralorne
Property. As a result of the disposition of the Bralorne Property, the Company
recognized a loss of $40,097 and removed certain assets and liabilities from
proportionate consolidation in 2003.

30

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Item 5. Operating and Financial Review and Prospects

The following discussion and analysis of the operations,
results and financial position of Avino Silver & Gold Ltd. for the eleven
month period ended December 31, 2007 should be read in conjunction with the
December 31, 2007 Consolidated Financial Statements and the notes thereto.

This Management Discussion and Analysis (MD&A) is dated
April 29, 2008 and discloses specified information up to that date. Avino is
classified as a venture issuer for the purposes of National Instrument 51-102.
The Companys financial statements are prepared in accordance with generally
accepted accounting principles in Canada. Unless otherwise cited, references to
dollar amounts are Canadian dollars.

Throughout this report we refer to Avino, the Company,
we, us, our or its. All these terms are used in respect of Avino Silver
& Gold Mines Ltd. We recommend that readers consult the Cautionary
Statement on the last page of this report. Additional information
relating to the Company is available on SEDAR at www.sedar.com.

Business Description

Founded in 1969, Avinos principal business activities are the
exploration and development of mineral properties. The Company holds an 89.35%
ownership interest in Compañía Minera Mexicana de Avino, S.A. de C.V. (Cia
Minera), a Mexican corporation which owns the Avino Silver Mine, located in
Durango, Mexico (Avino Mine). The Company also holds mineral claims in the
Yukon and British Columbia.

Avino is a reporting issuer in British Columbia and Alberta, a
foreign issuer with the Securities & Exchange Commission and trades on the
TSX Venture Exchange under the symbol ASM, on the OTCBB under the symbol ASGMF
and on the Berlin & Frankfurt Stock Exchanges under the symbol GV6. In
November 2006, the Companys listing on the TSX Ventures Exchange was elevated
to Tier 1 status. In January 2008, Avino announced the change of its financial
year end from January 31 to December 31. The change was completed in order to
align the Companys financial statements reporting requirement with its Mexico
subsidiaries which operate on a calendar fiscal year.

Overall Performance

The following is a summary of significant events and
transactions during the period ended December 31, 2007:

|1. | We completed an extensive exploration diamond drilling
      program on 11 different targets across the Avino property. This program
      focused on two zones: the high-grade San Gonzalo and the Avino Vein ET
      zone. Out of 82 holes, totaling approximately 18,000 metres, 40 holes were
      drilled at San Gonzalo with outstanding results for silver (for assay
      details see 2007 news releases at www.avino.com). A 12- hole
      program at the ET zone also produced a number of high-grade silver
      intercepts (see news release dated Jan. 17, 2008).
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|2. | We completed an 80-line-kilometre IP geophysical survey
      over the property under the conduction of Peter E. Walcott &
      Associates of Vancouver, BC. A report detailing the results of this survey
      is expected early in 2008.                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3. | We concluded an agreement regarding the mill site with
      the local surface rights holders of the Avino Mine, whereby Avino retains
      surface rights for 20 years with a possible extension for another 10
      years.                                                                                                                                                                                                                                                                                                                                                     

31

---

|4. | As set out in Note 4, we obtained an additional 1.1%
      interest in Cia Minera bringing the Companys ownership interest to
      89.35%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|5. | As set out in Note 19, we executed an amicable settlement
      agreement with the lessor of four core mineral claims leased by Cia Minera
      for royalties. In consideration for settlement and final dismissal of the
      lawsuit, the Company agreed to pay the lessor US $1.5 million with US$1.4
      million paid prior to December 31, 2007 and US$0.1 million paid subsequent
      to the year end.                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|6. | As a result of a fraudulent disbursement initiated by an
      unknown third party who was able to access the Companys Mexican bank
      account, the Company incurred a misappropriation loss of $86,155. The
      Company is attempting to retrieve the funds with the assistance of the
      Mexican authorities; however, there is no guarantee that the funds will be
      recovered. The Company has adopted stringent measures to prevent future
      occurrences of this type by tightening its controls at the subsidiary
      level and by changing its Mexican bank account to another
  bank.

Outlook

In the near term, we will continue our exploration on the Avino
property. A critical part of the 2008 exploration will include further drilling
on a number of known zones, including the San Gonzalo ore deposit and the ET
zone on the main Avino Vein from which the company mined gold from 1975 through
2001. We also plan to extract and process a 10,000-tonne bulk sample from San
Gonzalo. This program will provide concentrate for testing at various smelters.
In preparation for the sampling, Avino will re-commission a 250-ton circuit at
the mill to facilitate the processing of lead-silver ore from San Gonzalo. In
addition, as a result of the numerous ore-grade intersections encountered at San
Gonzalo, a 43-101 compliant resource calculation will be produced in the 2008
fiscal year.

Selected Annual Information

The following financial data is derived from the Companys
financial statements for the three most recently completed financial years:

|                        |   | December 31, 2007 |   |   | January 31, 2007 |   |   | January 31, 2006 |  
|----------------------- | - | ----------------- | - | - | ---------------- | - | - | ---------------- | -
|Total revenues          | $ | -                 |   | $ | -                |   | $ | -                |  
|Loss before other items |   | (868,527          | ) |   | (4,014,734       | ) |   | (1,416,797       | )
|Loss for the year       |   | (885,863          | ) |   | (3,648,539       | ) |   | (2,369,724       | )
|Loss per share          |   | (0.04             | ) |   | (0.20            | ) |   | (0.22            | )
|Total assets            |   | 21,190,940        |   |   | 23,295,039       |   |   | 3,901,160        |  
|Total liabilities       |   | 2,532,414         |   |   | 3,789,083        |   |   | 586,714          |  
|Working capital         |   | 6,091,032         |   |   | 9,780,918        |   |   | 2,871,446        |  

The eleven month period ended December 31, 2007 experienced a
draw down on working capital and total assets because there were no funds raised
through the issuance of stock in that period or by other means whereas the
fiscal year ended January 31, 2007 saw the Company significantly increase its
working capital by raising $10 million in cash through a private placement of 5
million units at a price of $2.00 per unit.

The private placement noted above also contributed to the total
assets increasing in the year ended January 31, 2007 in conjunction with the
acquisition of controlling interest in Cia Minera. Because of the acquisition,
mineral property and property, plant and equipment carrying values on the books
increased by $9,525,575 and $996,964 respectively during that year.

In the fiscal year ended January 31, 2006 there was a $342,596
obligation regarding Cia Minera. With the

32

---

acquisition of control of Cia Minera in the year ended January
31, 2007 the liabilities in Cia Minera became consolidated with the Company and
are no longer reported as a separate obligation. The acquisition of control of
Cia Minera also resulted in a different liability at that time however and that
was a future income tax liability of $2,335,999. The most recent fiscal year has
seen a reduction in that liability of $501,083 due to a future income tax
recovery representing Mexican tax loss carry forward amounts available to offset
the Mexican based future income tax liability. The future income tax liability
and the future income tax recovery are due to the difference in carrying amounts
and tax bases of the Mexican mineral properties, mine plant, and equipment,
which were acquired in the purchase of Cia Minera.

Results of Operations

Two months ended December 31, 2007 compared with the
three months ended January 31, 2007.

Operating and administrative expenses

Operating and administrative expenses had a negative amount of
$99,136 for the two month period ended December 31, 2007 compared with $793,890
for quarter ended January 31, 2007, a positive difference of $893,026. The
amount for the current quarter was negative as a result of an adjustment whereby
$139,779 in general exploration and $104,386 in office and miscellaneous were
capitalized instead of expensed. Excluding these adjustments, the current
quarter operating and administrative expenses would have been $145,029, a
decrease of $648,861 from the comparative quarter. This change is attributed to
decreases of $7,160 in amortization, $8,000 in management fees, $39,392 in
salaries and benefits, $225,411 in shareholder and investor relations, $389,287
in stock-based compensation and $19,329 in travel and entertainment. Offsetting
those decreases were increases of $21,412 in professional fees and $38,705 in
regulatory and compliance fees.

As noted earlier, the Company changed its fiscal year end from
January 31 to December 31, thus creating a fourth quarter consisting of two
months for the current period compared to the standard three month period for
the comparative quarter. The shorter current period length is solely responsible
for the decrease in management fees and partially responsible for the other cost
reductions with the exception of amortization. Salaries and benefits were also
lower due to some of these costs being capitalized under exploration instead of
being expensed. The shareholder and investor relations expense was dramatically
higher in the prior years fourth quarter because of the fair value attributed
to the granting of stock options to investor relations service providers. There
were also fewer investor relations service agreements in effect for the current
period. Another factor was employee stock-based compensation which had an amount
charged to operations in the quarter ended January 31, 2007 as opposed to no
such cost applied in the current year. Travel costs decreased partially as a
result of less international trade show participation in the current period.

Part of the reason for higher professional fees is the reliance
on a professional Mexican-based accounting firm to provide accounting services
for Cia Mineras operations. Regulatory and appliance fees in the two month
period ended December 31, 2007 were minimal due to no share capital activity.
The prior years quarter had a year end adjustment whereby some regulatory and
compliance fees were reclassified as share issuance costs and this created an
overall increase when the two periods are compared.

Loss for the period

The loss for the two month period ended December 31, 2007 was
$168,616 compared with a loss of $891,249 for the quarter ended January 31,
2007, a decrease of $722,633. The current period had a future income tax benefit
of $501,083 which accounts for a large part of this difference. The large
difference in operating and administrative expenses between the two periods
discussed above is primarily negated by a litigation settlement expense of
$759,302 in the current period. This was the excess amount paid over the
previously booked accrued liability concerning the royalty dispute on the four
core mineral claims leased by Cia Minera.

33

---

In regards to interest income, the current two month period
earned $51,996 compared to $114,647 in the comparative period, a decrease of
62,651.

Eleven months ended December 31, 2007 compared with the
twelve months ended January 31, 2007.

Operating and administrative expenses

General and administrative expenses totaled $868,527 for the
eleven month period ended December 31, 2007 compared with $4,014,734 for the
twelve month period ended January 31, 2007, a decrease of $3,146,207. The
largest individual expense decrease for the period was due to the recognition of
stock based compensation for options to employees in the twelve month period
ended January 31, 2007. The amount charged to operations in the current year was
$nil compared to $2,860,603 in the comparative period. Other cost decreases
include $88,263 in general exploration, $4,505 in office and miscellaneous,
$13,241 in regulatory and compliance fees, $14,203 in salaries and benefits,
$201,614 in shareholder and investor relations and $33,261 in travel costs.
Offsetting these decreases were increases of $1,000 in management fees and
$69,114 in professional fees.

The reasons for the changes to shareholder and investor
relations and travel and entertainment are the same as those for the fourth
quarter comparison. The lower costs that were mostly influenced by the shorter
fiscal year were office and miscellaneous, salaries and benefits, and management
fees. Management fees however, showed a slight increase because there was an
increase in the monthly compensation for the President that took effect part way
through the year ended January 31, 2007. Professional fees were quite higher in
the current year because of legal fees associated with the royalty settlement
and prior year audit fees which turned out to be higher than the estimated year
end accrual and as such the extra amount was charged to the current year. Audit
fees had also risen due to complex accounting issues arising from the
acquisition of control of Cia Minera and the first year of consolidation.
General exploration expenses decreased by a large amount because with control of
Cia Minera and the resulting consolidation, more of these costs are now
capitalized. Regulatory and compliance fees in the twelve month period ended
January 31, 2007 were higher due to the filing fees associated with the $10
million private placement compared to no such items in the current period. There
was no share capital activity in the current year and this resulted in minimal
fees with the exception of annual sustaining and SEDAR fees.

Loss for the period

Loss for the eleven month period ended December 31, 2007 was
$885,863 compared with a loss of $3,648,539 for the twelve month period ended
January 31, 2007, a decrease of $2,762,676. Whereas the overall general and
administrative costs for the current year were $3,146,207 lower than the prior
year, the other income and expense items in the current year had a net effect of
reducing this difference. The current period had a decrease of $70,892 in
interest and other income and charges of $759,302 relating to the royalty
settlement and $86,155 relating to the misappropriation of bank funds. The prior
year did not incur such other expenses. The prior year also did not incur a
future income tax benefit compared to the $501,083 that was incurred in the
current period.

Summary of Quarterly Results

|                     |   | 2007       |   |   | 2007       |   |   | 2007       |   |   | 2007       |   |   | 2007       |   |   | 2006       |   |   | 2006       |   |   | 2006       |  
|-------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | - | - | ---------- | -
|Period ended         |   | Dec 31     |   |   | Oct. 31    |   |   | Jul. 31    |   |   | Apr. 30    |   |   | Jan. 31    |   |   | Oct. 31    |   |   | Jul. 31    |   |   | Apr. 30    |  
|                     |   | Q4         |   |   | Q3         |   |   | Q2         |   |   | Q1         |   |   | Q4         |   |   | Q3         |   |   | Q2         |   |   | Q1         |  
|Loss for the period  | $ | (168,616   | ) | $ | (232,414   | ) | $ | (236,719   | ) | $ | (248,114   | ) | $ | (891,249   | ) | $ | (141,156   | ) | $ | (193,510   | ) | $ | (2,422,624 | )
|Loss per
      share |   | (0.01      | ) |   | (0.01      | ) |   | (0.01      | ) |   | (0.01      | ) |   | (0.01      | ) |   | (0.01      | ) |   | (0.01      | ) |   | (0.17      | )
|Total assets         |   | 21,190,940 |   |   | 22,600,515 |   |   | 22,691,455 |   |   | 23,040,232 |   |   | 23,295,039 |   |   | 20,998,110 |   |   | 21,229,527 |   |   | 13,127,233 |  

34

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The quarterly losses have been influenced by site assessment
costs pertaining to Cia Minera including feasibility studies and associated
overhead costs pertaining to traveling to Mexico on a frequent basis. These
costs have been replaced with general exploration and administrative costs
associated with ramping up exploration on Cia Mineras mineral properties. Since
the $10 million private placement that took place in the quarter ended April 30,
2006, there was more emphasis on shareholder and investor relations activities
and company promotion for the following five quarters. Higher interest revenue
in each quarter since Q1-April 30, 2006 is due to the Company carrying more cash
and has helped offset the increase in costs and make them appear more consistent
with periods prior to the private placement. Stock-based compensation is one
item that causes significant swings in the losses between the first four
quarters. The degree of impact caused by stock-based compensation in Q1-April
30, 2006 was $2,363,336 followed by $389,287 in Q4-January 31, 2007, and $53,990
in each of Q3-October 31, 2006 and Q2-July 31, 2006. There was no employee
stock-based compensation charged to operations in the most recent four quarters.
If not for some adjustments that reduced general exploration expenditures by
$139,779 and office and miscellaneous charges by $104,386, the loss for the
period in Q4-December, 2007 would have been significantly higher than the prior
three quarters. The Q4-December 31, 2007 period also incurred a litigation
settlement expense of $759,302 and a future income tax recovery of $501,083
whereas the other quarters did not incur such items.

Liquidity and Capital Resources

During the eleven month period ended December 31, 2007 the
Company capitalized exploration expenditures that increased its mineral property
carrying value on its Mexican properties by $2,263,332 and by $69,018 on its
British Columbia properties. At this time the Company has no operating revenues
but has earned interest income of $359,339 in the current eleven month period.
Although the Companys cash and cash equivalents continues to be drawn down by
operations, the Company will continue to earn significant interest revenue
throughout the next fiscal year.

At December 31, 2007, the Company had working capital of
$6,091,032 and cash and cash equivalents of $6,342,481. The Company is
continuing its exploration program and preparing for a bulk sampling program in
Mexico. The estimated drilling costs for Mexico this year is $1,200,000 and the
cost for the 10,000 tonne bulk sampling program is estimated to be $2,100,000
for capital costs and $500,000 for operating costs. There are no significant
plans for the British Columbia properties for the remainder of the new fiscal
year. The Company has sufficient cash on hand at this time to finance the
planned exploration work on its mineral properties and maintain administrative
operations through December 31, 2008.

The Company is in the exploration stage until such time that
the Avino mine is opened again. The investment in and expenditures on the
mineral properties comprise most of the Companys assets along with a lesser
asset amount in regards to the Avino mine facilities and equipment. The
recoverability of amounts shown for its mineral property interest and related
deferred costs and the Companys ability to continue as a going concern is
dependent upon the continued support from its directors, the discovery of
economically recoverable reserves and the ability of the Company to obtain the
financing necessary to complete development and achieve profitable operations in
the future. The outcome of these matters cannot be predicted at this time.

Mineral exploration and development is capital extensive, and
in order to re-commence operations at the Avino Mine, the Company may be
required to raise new equity capital in the future. There is no assurance that
the Company will be successful in raising additional new equity capital.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

35

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Transactions with Related Parties

During the eleven month period ended December 31, 2007, the
company paid, or made provision for the future payment of the following amounts
to related parties:

| | i)    | $153,733 (January 31, 2007 - $119,857; January 31, 2006 -
      $163,328) for administrative expenses (rent, salaries, office supplies and
      other miscellaneous disbursements) to Oniva International Services Corp
      (Oniva), a private company beneficially owned by the Company and five
      other public companies related through common directors;
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                      
| | ii)   | $88,000 (January 31, 2007 - $87,000; January 31, 2006 -
      $60,000) to a private company controlled by a Director for management
      fees;                                                                                                                                                                                                                      
| |       |                                                                                                                                                                                                                                                                                                                                                                      
| | iii)  | $27,500 (January 31, 2007 - $30,000; January 31, 2006 -
      $30,000) in consulting fees to a private company controlled by a director
      of a related company for administrative, financial and marketing
      services;                                                                                                                                       
| |       |                                                                                                                                                                                                                                                                                                                                                                      
| | iv)   | $40,513 (January 31, 2007 - $84,279; January 31, 2006 -
      $Nil) for investor relations services to National Media Associates, a
      business significantly influenced by a director of the Company.                                                                                                                                                            
| |       |                                                                                                                                                                                                                                                                                                                                                                      
| | v)    | $36,100 (January 31, 2007 - $36,600; January 31, 2006 -
      $12,600) for geological consulting services to a private company
      controlled by a director of a related pubic company.                                                                                                                                                                            
| |       |                                                                                                                                                                                                                                                                                                                                                                      
| | vi)   | $Nil (January 31, 2007 - $6,854; January 31, 2006 -
      $20,433) for exploration services to a public company with common
      management and directors.                                                                                                                                                                                                          
| |       |                                                                                                                                                                                                                                                                                                                                                                      
| | vii)  | $65,577 (January 31, 2007 - $53,837; January 31, 2006 -
      $146,092) in drilling expenses to ABC Drilling Services Inc. (ABC
      Drilling), a private drilling company owned by Oniva, for 1,741 feet
      (January 31, 2007 - 1,571 feet; January 31, 2006 - 3,616 feet) of
      drilling.                                                                 
| |       |                                                                                                                                                                                                                                                                                                                                                                      
| | viii) | $13,750 (January 31, 2007 - $7,500) to Directors for
      quarterly Directors fees.                                                                                                                                                                                                                                                                                 

Amounts due to related parties consist of $147,424 (January 31,
2007 - $133,919) due to Oniva; $18,250 (January 31, 2007 - $7,500) due to
Directors for Directors fees; $3,707 (January 31, 2007 - $105) due to a Director
for expense reimbursements; $145 (January 31, 2007 - $Nil) due to a company
controlled by a director of a related public company for expense reimbursements;
$2,684 (January 31, 2007 - $Nil) due to a company controlled by a director of a
related public company for geological services; and $4,578 (January 31, 2007 -
$Nil) due to ABC Drilling.

All related party transactions are recorded at the value agreed
upon by the Company and the related party. The amounts due from and due to
related parties are non-interest bearing, non-secured and with no stated terms
of repayment.

Disclosure of Management Compensation

During the eleven month period ended December 31, 2007, $88,000
was paid to the President for services as director and officer of the Company;
$13,633 was paid to the Secretary for services as an officer of the Company; and
$2,250 was paid to the Chief Financial Officer for services as an officer of the
Company.

36

---

Changes in Accounting Policies

Effective February 1, 2007, the Company adopted the following
new accounting standards issued by the Canadian Institute of Chartered
Accountants (CICA). These accounting policy changes were adopted on a
prospective basis with no restatement of prior period consolidated financial
statements:

Section 1530 Comprehensive Income

Section 3251 Equity

Section 3855 Financial Instruments  Recognition and
Measurement

Section 3861 Financial Instruments  Disclosure and
Presentation

Section 3865 Hedges

These standards address the classification, recognition and
measurement of financials instruments, the inclusion of other comprehensive
income, and establish the standards for hedge accounting. Upon the adoption of
these new standards the Company classified its investments in related companies
as available-for-sale, which are measured at fair value, and recorded a $17,117
increase in their carrying value as at February 1, 2007; representing the
aggregate cumulative unrealized gain, on the statement of accumulated other
comprehensive income. There were no other opening adjustments recorded on the
adoption of these standards.

On February 1, 2007, the Company also adopted CICA Section 1506
Accounting Changes, which expands requirements relating to voluntary
changes in accounting principles, and requires the Company to disclose new
sources of GAAP that have been issued but are not yet effective.

Outstanding Share Data

The Company has an unlimited number of common shares without
par value as authorized share capital of which 20,584,727 were outstanding as at
December 31, 2007 and April 29, 2008.

The following are details of outstanding share options as at
December 31, 2007 and April 29, 2008:

Expiry Date
    Exercise Price Per
      Share (Dec 31/07)
    Number of Shares Remaining
      Subject to Options (Dec 31/07)
    Exercise Price Per
      Share (Apr 29/08)
    Number of Shares Remaining
      Subject to Options (Apr 29/08)October 21, 2008
    $1.20
    41,800
    $1.20
    41,800April 5, 2010
    $1.35
    262,000
    $1.35
    262,000September 26, 2010
    $1.35
    52,500
    $1.35
    52,500March 15, 2011
    $2.72
    120,000
    $2.72
    120,000April 26, 2011
    $3.99
    975,000
    $3.99
    975,000February 27, 2013
    --
    --
    $1.65
    600,0001,451,300
    
    2,051,300


37

---

The following are details of outstanding warrants as at
December 31, 2007 and April 29, 2008:

Expiry Date
    Exercise Price Per Share
      (Dec 31/07)
    Number of Underlying Shares
      (Dec 31/07)
    Exercise Price Per Share
      (Apr 29/08)
    Number of Underlying
      Shares (Apr 29/08)March 20, 2008 (original expiry date)
    $2.50
    2,498,750
    $2.50
    2,498,750March 20, 20091(new expiry date)
    
    2,498,750
    
    2,498,750


|_______________
|---------------
|1              

Commitments

The Company entered into a cost sharing agreement dated October
1, 1997, and amended November 1, 2003 to reimburse Oniva for a percentage of its
overhead expenses, to reimburse 100% of its out-of-pocket expenses incurred on
behalf of the Company, and to pay a percentage fee based on the total overhead
and corporate expenses. The agreement may be terminated with one-month notice by
either party. Transactions and balances with Oniva, which is a related company,
are disclosed in the transactions with related parties section.

The Company has a contractual minimum drilling commitment for
the exploration of its mineral properties in Durango, Mexico. As at December 31,
2007 the Company is committed to drilling services at an estimated cost of
$286,949 (USD$290,405). Management expects that the Companys drilling services
equipment in fiscal 2008 will likely exceed the minimum commitment amount.

The Company has also entered into a service agreement in which
operating services will be performed in Durango, Mexico at a U.S. dollar
denominated cost of USD$7,500/month until September 2008 resulting in a
commitment of $66,913 (USD$67,500).

Disclosure Controls and Procedures

The Chief Executive Officer and the Chief Financial Officer of
the Company are responsible for evaluating the effectiveness of the Companys
disclosure controls and procedures and have concluded, based on our evaluation,
that they are effective as at December 31, 2007 to ensure that information
required to be disclosed in reports filed or submitted under Canadian securities
legislation is recorded, processed, summarized and reported within the time
period specified in those rules and regulations.

Internal Controls Over Financial Reporting

The Chief Executive Officer and the Chief Financial Officer of
the Company are responsible for designing internal controls over financial
reporting, or causing them to be designed under their supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
Canadian GAAP. The Company assessed the design of the internal controls over
financial reporting as at December 31, 2007 and concluded that there are
material weaknesses in internal controls over financial reporting, which are as
follows:

| | a) | Due to the limited number of staff resources, the Company
      believes there are instances where a lack of segregation of duties exist
      to provide effective controls; and
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                  
| | b) | Due to the limited number of staff resources, the Company
      may not have the necessary in-                                                                                   

38

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house knowledge to address complex
accounting and tax issues that may arise.

The weaknesses and their related risks are not uncommon in a
company the size of the Company because of limitations in size and number of
staff. The Company believes it has taken steps to mitigate these risks by
consulting outside advisors and involving the Audit Committee and Board of
Directors in reviews and consultations where necessary. However, these
weaknesses in internal controls over financial reporting could result in a more
than remote likelihood that a material misstatement would not be prevented or
detected. The Company believes that it must take additional steps to further
mitigate these risks by consulting outside advisors on a more regular and timely
basis and continuing to do periodic on-site inspections of the accounting
records in Mexico.

There have been no changes in the Companys internal controls
over financial reporting that occurred during the quarter ended December 31,
2007 that have materially affected, or are reasonably likely to materially
affect, the Companys internal controls over financial reporting.

|Cautionary Statement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|This MD&A is based on a review of the Companys
      operations, financial position and plans for the future based on facts and
      circumstances as of April 29, 2008. Except for historical information or
      statements of fact relating to the Company, this document contains
      forward-looking statements within the meaning of applicable Canadian
      securities regulations. There can be no assurance that such statements
      will prove to be accurate, and future events and actual results could
      differ materially from those anticipated in such statements. Important
      factors that could cause actual results to differ materially from our
      expectations are disclosed in the Companys documents filed from time to
      time via SEDAR with the Canadian regulatory agencies to whose policies we
      are bound. Forward-looking statements are based on the estimates and
      opinions of management on the date the statements are made, and we do not
      undertake any obligation to update forward-looking statements should
      conditions or our estimates or opinions change. These statements involve
      known and unknown risks, uncertainties, and other factor that may cause
      the Companys actual results, levels of activity, performance or
      achievements to be materially different from any future results, levels of
      activity, performance or achievement expressed or implied by these
      forward-looking statements.

Item 6. Directors, Senior Management and Employees

|A. | Directors and Senior Management
|-- | -------------------------------

The following is a list of the
Company's directors and senior management as at June 20, 2008. The directors are
elected for a term of one year during the annual meeting of shareholders. This
years annual meeting will be held on July 4, 2008.

|Name and Present Position          |                                                                                                                  |                       
|---------------------------------- | ---------------------------------------------------------------------------------------------------------------- | ----------------------
|with the
      Company             | Principal Occupation                                                                                             | Director/Officer Since
|                                   |                                                                                                                  |                       
|Lloyd J. Andrews Director/Chairman | Chairman and Director of
      Berkley Resources Inc., Bralorne Gold Mines Ltd., Coral Gold
      Resources Ltd. | June 2005             
|Michael Baybak Director            | A Business Consultant.                                                                                           | June 1990             

39

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|Name and Present Position                          |                                                                                                                                                                                                                                                                                                                                            |                       
|-------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------------------
|with the
      Company                             | Principal Occupation                                                                                                                                                                                                                                                                                                                       | Director/Officer Since
|                                                   |                                                                                                                                                                                                                                                                                                                                            |                       
|Gary Robertson                                     | Certified Financial Planner,
      Director of Bralorne Gold Mines Ltd., Coral Gold Resources Ltd.,
      Levon Resources Ltd., Mill Bay Ventures Inc. and Sage Gold Inc.                                                                                                                                                                  | August 2005           
|David Wolfin(1)Director/President                  | Director and VP Finance of
      Berkley Resources Inc., Director and VP Finance of Bralorne Gold
      Mines Ltd., Director and VP, Finance, of Levon Resources Ltd.,
      President and Director of Coral Gold Resources Ltd. and Gray Rock
      Resources Ltd. and Director of Mill Bay Ventures Ltd. and Cresval
      Capital Corp. | October 1995          
|Louis Wolfin Director/CEO                          | Director and
      Chief Executive Officer of Bralorne Gold Mine Ltd., Coral Gold
      Resources Ltd. and Levon Resources Ltd. and Director of Cresval
      Capital Corp.                                                                                                                                                                | August 1969           
|Vic Chevillon Director                             | Professional Geologist and
      Director of Coral Gold Resources Ltd. and Levon Resources Ltd.                                                                                                                                                                                                                                            | July 2008             
|Mimy Fernandez-Maldonado Corporate
      Secretary | Corporate Secretary of Berkley
      Resources Inc., Bralorne Gold Mines Ltd., Coral Gold Resources
      Ltd., Gray Rock Resources Ltd., Levon Resources Ltd. and Mill Bay
      Ventures Inc.; formerly Corporate Secretary of La Mancha Resources
      Inc, Leisure Canada Inc and X-Tal Minerals Inc.                                 | September 2007        
|Lisa Sharp Chief Financial Officer                 | Chief Financial Officer of Berkley Resources
      Inc., Bralorne Gold Mines Ltd., Coral Gold Resources Ltd., Gray
      Rock Resources Ltd., Levon Resources Ltd., Mill Bay Ventures Inc.
      and Sonic Technology Solutions Inc.                                                                                                       | June 2008             

|__________________
|------------------
|(1)               

|B. | Compensation
|-- | ------------

The Company pays its independent
directors $750 per quarter. The Chairman of each committee is also paid $250 per
quarter. During the most recent fiscal year, the Company paid an aggregate of
$88,000 to Intermark Capital Corp., a private BC corporation controlled by David
Wolfin, President and a director of the Company for management advisory
services. The Company paid an aggregate of $65,577 to ABC Drilling Services
Inc., a BC private corporation whose common directors include Louis Wolfin and
David Wolfin for drilling services. The Company paid an aggregate of $40,513 to
National Media Associates, a business significantly influenced by Michael
Baybak, a director of the Company for investor relations services. As at June
20, 2008, incentive stock options have been granted to non-employee directors of
the Company to purchase an aggregate of 180,000 shares of the Company at a price
of $1.20 per share exercisable on or before October 21, 2008, of which 138,200
have been exercised; 180,000 shares of the Company at a price of $1.35 per share
exercisable on or before April 5, 2010 and September 26, 2010, of which 7,500
have been exercised; 380,000 shares of the Company at a price of $3.99 per share
exercisable on or before April 26, 2011, none of

40

---

which have been exercised; and 140,000 shares of the Company at
a price of $1.65 per share exercisable on or before February 27, 2013, none of
which have been exercised.

The following table sets forth
particulars concerning the compensation paid or accrued for services rendered to
the Company in all capacities during each of the last three financial years of
the Company to its Chief Executive Officer, Chief Financial Officer and to the
other executive officers of the Company who received a combined salary and bonus
in excess of $150,000 (the Named Executive Officers during the financial year
ended December 31, 2007).

|Summary Compensation
      Table(1) | 
|----------------------------------- | 
|                                    | 
|                                    | 
|                                    | 
|                                    | 
|                                    | 
|Name/Principal                      | 
|Position                            | 
|                                    | 
|Louis Wolfin                        | 
|Chief Executive                     | 
|Officer and                         | 
|Director                            | 
|                                    | 
|Kevin Bales(4)                      | 
|Chief Financial                     | 
|Officer                             | 

|________________
|----------------
|(1)             
|(2)             
|(3)             
|(4)             

The Company granted no stock
options to the Named Executive Officers during the most recent fiscal year.

The Company currently maintains a
formal stock option plan, referred to as the "Plan", under which stock options
have been granted and may be granted to purchase a number equal to 10% of the
Company's issued capital from time to time. To date, stock options to purchase a
total of up to 2,051,300 shares have been granted and remain outstanding under
the Plan, leaving 7,173 options available for issuance.

Termination of Employment, Changes in Responsibilities and
Employment Contracts

There are no employment contracts
between the Company and its executive officers and the Company has no
compensatory plan or arrangement with respect to its executive officers in the
event of the resignation, retirement or any other termination of the executive
officers' employment with the Company or in the event of a change of control of
the Company or in the event of a change in the executive officers'
responsibilities following a change in control, where in respect of the
executive officers the value of such compensation exceeds $100,000.

|C. | Board Practices
|-- | ---------------

The board of directors is
currently comprised of five directors. The size and experience of the board is
important for providing the Company with effective governance in the mining
industry. The board's mandate and responsibilities can be effectively and
efficiently administered at its current size. The chairman of the

41

---

board is not a member of management. The board has functioned,
and is of the view that it can continue to function, independently of management
as required. At the Annual General Meeting, held on July 4, 2008, the
shareholders elected Messrs. Andrews, Baybak, Robertson, Wolfin, Wolfin and
Chevillon as directors.

The board has considered the
relationship of each director to the Company and currently considers four of the
six directors to be "unrelated" (Messrs. Andrews, Baybak, Robertson and
Chevillon). "Unrelated director" means a director who is independent of
management and free from any interest and any business or other relationship
which could reasonably be perceived to materially interfere with the director's
ability to act with a view to the best interest of the Company, other than
interests and relationships arising solely from shareholdings.

Two of the directors (Messrs. Wolfin
and Wolfin) are related family members.

Procedures are in place to allow
the board to function independently. At the present time the board has
experienced directors that have made a significant contribution to the Company's
success, and are satisfied that it is not constrained in its access to
information, in its deliberations or in its ability to satisfy the mandate
established by law to supervise the business and affairs of the Company.
Committees meet independent of management and other directors.

Mandate of the Board of Directors, its Committees and
Management

The role of the board is to
oversee the conduct of the Company's business, including the supervision of
management, and determining the Company's strategy. Management is responsible
for the Company's day to day operations, including proposing its strategic
direction and presenting budgets and business plans to the board of directors
for consideration and approval. The strategic plan takes into account, among
other things, the opportunities and risks of the Company's business. Management
provides the board with periodic assessments as to those risks and the
implementation of the Company's systems to manage those risks. The board reviews
the personnel needs of the Company from time to time, having particular regard
to succession issues relating to senior management. Management is responsible
for the training and development of personnel. The board assesses how
effectively the Company communicates with shareholders, but has not adopted a
formal communications policy. Through the audit committee, and in conjunction
with its auditors, the board assesses the adequacy of the Company's internal
control and management information systems. The board looks to management to
keep it informed of all significant developments relating to or effecting the
Company's operations. Major financings, acquisitions, dispositions and
investments are subject to board approval. A formal mandate for the board of
directors, the chief executive officer and the chief financial officer has not
been considered necessary since the relative allocation of responsibility is
well understood by both management and the board. The board meets as required.
The board and committees may take action at these meetings or at a meeting by
conference call or by written consent.

Committees

Audit Committee

The audit committee assists the
board in its oversight of the Company's financial statements and other related
public disclosures, the Company's compliance with legal and regulatory
requirements relating to financial reporting, the external auditors,
qualifications and independence and the performance of the internal audit
function and the external auditors. The committee has direct communications
channels with the Company's auditors. The committee reviews the Company's
financial statements and related management's discussion and analysis of
financial and operating results. The committee can retain legal, accounting or
other advisors.

42

---

The audit committee currently
consists of three directors (Messrs. David Wolfin, Lloyd J. Andrews and Gary
Robertson). Two of the members are unrelated and all of whom are financially
literate, and have accounting or related financial expertise. "Financially
literate" means the ability to read and understand a balance sheet, an income
statement, and a cash flow statement. "Accounting or related financial
expertise" means the ability to analyze and interpret a full set of financial
statements, including the notes attached thereto, in accordance with Canadian
GAAP.

The board has adopted a charter
for the audit committee which is reviewed annually and sets out the role and
oversight responsibilities of the audit committee with respect to:

- its relationship with and expectation of the external auditors, including
  the establishment of the independence of the external auditor and the approval
  of any non-audit mandates of the external auditor;
- determination of which non-audit services the external auditor is
  prohibited from providing;
- the engagement, evaluation, remuneration, and termination of the external
  auditors;
- appropriate funding for the payment of the auditor's compensation and for
  any advisors retained by the audit committee;
- its relationship with and expectation of the internal auditor;
- its oversight of internal control;
- disclosure of financial and related information; and
- any other matter that the audit committee feels is important to its mandate
  or that which the board chooses to delegate to it.

Compensation Committee

The compensation committee
recommends to the board of directors the compensation of the Company's directors
and the Chief Executive Officer which the compensation committee feels is
suitable. Its recommendations are reached primarily by comparison of the
remuneration paid by the Company with publicly available information on
remuneration paid by other reporting issuers that the compensation committee
feels are similarly placed within the same business of the Company.

The compensation committee
consists of two unrelated directors (Messrs. Robertson and Andrews) and one
related director (Mr. D. Wolfin). It is intended that the compensation committee
will eventually be comprised of solely unrelated directors.

Corporate Governance Committee

The corporate governance
committee assists the board in establishing the Companys corporate governance
policies and practices generally, identifying individuals qualified to become
members of the board, reviewing the composition and functioning of the board and
its committees and making recommendations to the board of directors as
appropriate. When considering nominees to the board the committees mandate
requires that it consider the current composition of the board and give
consideration to candidates having experience in the industry, life experience
and background. The committee is also responsible for the Companys corporate
governance guidelines. The committee may retain legal or other advisors.

43

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The corporate governance
committee currently consists of three directors (Messrs. Lloyd J. Andrews, Gary
Robertson and Louis Wolfin). Messrs. Andrews and Robertson are unrelated
directors. It is intended that this committee will eventually be comprised
solely of unrelated and independent directors.

|D. | Employees
|-- | ---------

The Company has 11 employees located
in Mexico, nine with Cia Minera and 2 with Oniva.

|E. | Share Ownership
|-- | ---------------

The following table sets forth
the share ownership of the directors and officers of the Company as of May 27,
2008.

Name of
      Beneficial Owner
    Number of Shares
    PercentLloyd Andrews
    2,500
    *Michael Bayback
    2,400
    *Gary Robertson
    20,800
    *David Wolfin
    70,484
    *Louis Wolfin
    4,345
    *Vic Chevillon
    Nil
    N/AMimy Fernandez-Maldonado
    Nil
    N/ALisa Sharp
    Nil
    N/A* Less than one percent


Outstanding Options

The following information, as of
May 27, 2008, reflects outstanding options held by the Named Executive
Officers:

|             |  |               |     |  |                   |  |   | Exercise |  |  |                   | 
|------------ |  | ------------- | --- |  | ----------------- |  | - | -------- |  |  | ----------------- | 
|             |  | No. of Shares |     |  | Date of Grant     |  |   | Price    |  |  | Expiration Date   | 
|Louis Wolfin |  | 11,800        |     |  | October 21, 2003  |  | $ | 1.20     |  |  | October 23, 2008  | 
|             |  | 100,000       |     |  | April 5, 2005     |  | $ | 1.35     |  |  | April 5,2010      | 
|             |  | 180,000       |     |  | April 26, 2006    |  | $ | 3.99     |  |  | April 26, 2011    | 
|             |  | 65,000        |     |  | February 27, 2008 |  | $ | 1.65     |  |  | February 27, 2008 | 
|Kevin Bales  |  | 35,000        | (1) |  | April 26, 2006    |  | $ | 3.99     |  |  | April 26, 2011    | 
|             |  | 50,000        |     |  | February 27, 2008 |  | $ | 1.65     |  |  | February 27, 2008 | 

(1) Options granted prior to his appointment as
CFO

Item 7. Major Shareholders and Related Party
Transactions

|A. | Major Shareholders
|-- | ------------------

As far as it is known to the
Company, it is not directly or indirectly owned or controlled by any other
corporation or by the Canadian Government, or any foreign government, or by any
other natural or legal person.

44

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As of May 27, 2008 the Company
knew of no person who owned more than five (5%) percent of the outstanding
shares of each class of the Company's voting securities.

|B. | Related Party Transactions
|-- | --------------------------

During the eleven months ended
December 31, 2007, the Company paid, or made provision for the future payment,
of the following amounts to related parties:

| | i)    | $153,733 (January 31, 2007 - $119,857; January 31, 2006 -
      $163,328) for administrative expenses (rent, salaries, office supplies and
      other miscellaneous disbursements) to Oniva International Services Corp
      (Oniva), a private company beneficially owned by the Company and five
      other public companies related through common directors;
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                      
| | ii)   | $88,000 (January 31, 2007 - $87,000; January 31, 2006 -
      $60,000) to a private company controlled by a Director for management
      fees;                                                                                                                                                                                                                      
| |       |                                                                                                                                                                                                                                                                                                                                                                      
| | iii)  | $27,500 (January 31, 2007 - $30,000; January 31, 2006 -
      $30,000) in consulting fees to a private company controlled by a director
      of a related company for administrative, financial and marketing
      services;                                                                                                                                       
| |       |                                                                                                                                                                                                                                                                                                                                                                      
| | iv)   | $40,513 (January 31, 2007 - $84,279; January 31, 2006 -
      $Nil) for investor relations services to National Media Associates, a
      business significantly influenced by a director of the Company.                                                                                                                                                            
| |       |                                                                                                                                                                                                                                                                                                                                                                      
| | v)    | $36,100 (January 31, 2007 - $36,600; January 31, 2006 -
      $12,600) for geological consulting services to a private company
      controlled by a director of a related pubic company.                                                                                                                                                                            
| |       |                                                                                                                                                                                                                                                                                                                                                                      
| | vi)   | $Nil (January 31, 2007 - $6,854; January 31, 2006 -
      $20,433) for exploration services to a public company with common
      management and directors.                                                                                                                                                                                                          
| |       |                                                                                                                                                                                                                                                                                                                                                                      
| | vii)  | $65,577 (January 31, 2007 - $53,837; January 31, 2006 -
      $146,092) in drilling expenses to ABC Drilling Services Inc. (ABC
      Drilling), a private drilling company owned by Oniva, for 1,741 feet
      (January 31, 2007 - 1,571 feet; January 31, 2006 - 3,616 feet) of
      drilling.                                                                 
| |       |                                                                                                                                                                                                                                                                                                                                                                      
| | viii) | $13,750 (January 31, 2007 - $7,500) to Directors for
      quarterly Directors fees.                                                                                                                                                                                                                                                                                 

Amounts due to related parties consist of $147,424 (January 31,
2007 - $133,919) due to Oniva; $18,250 (January 31, 2007 - $7,500) due to
Directors for Directors fees; $3,707 (January 31, 2007 - $105) due to a Director
for expense reimbursements; $145 (January 31, 2007 - $Nil) due to a company
controlled by a director of a related public company for expense reimbursements;
$2,684 (January 31, 2007 - $Nil) due to a company controlled by a director of a
related public company for geological services; and $4,578 (January 31, 2007 -
$Nil) due to ABC Drilling.

All related party transactions are recorded at the value agreed
upon by the Company and the related party. The amounts due from and due to
related parties are non-interest bearing, non-secured and with no stated terms
of repayment.

|C. | Interests of Experts and Counsel
|-- | --------------------------------

Not Applicable.

45

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Item 8. Financial Information

|A. | Statements and Other Financial
      Information
|-- | ------------------------------------------------

The following financial statements of the Company are attached
to this Transition Report:

- Audit Report of Independent Registered Public Accounting Firm;
- Consolidated Balance Sheets as at December 31, 2007 and January 31, 2007;
- Consolidated Statements of Operations and Comprehensive Loss for the eleven
  month period ended December 31, 2007 and the years ended January 31, 2007 and
  2006;
- Consolidated Statements of Deficit and Accumulated Other Comprehensive
  Income for the eleven month period ended December 31, 2007 and the years ended
  January 31, 2007 and January 31, 2006;
- Consolidated Statements of Cash Flows for the eleven month period ended
  December 31, 2007, and the years ended January 31, 2007 and January 31, 2006;
  and
- Notes to the Consolidated Financial Statements for the eleven months period
  ended December 31, 2007, and the years ended January 31, 2007, and January 31,
  2006.

Dividend Policy

The Company has never paid any dividends and does not intend to
in the near future.

|B. | Significant Changes
|-- | -------------------

None.

Item 9. The Offer and Listing

|A. | Offer and Listing Details
|-- | -------------------------

The common shares of the Company
are listed on the TSX-V under the symbol "ASM", on the FSE under the symbol
"GV6" and quoted in the United States on the OTC BB, under the symbol
"ASGMF".

As of June 18, 2008, there were
692 holders of record in the United States holding 75.32% of the Company's
outstanding common shares representing approximately 68.58% of the total
shareholders. The Company's common shares are issued in registered form and the
percentage of shares reported to be held by record holders in the United States
is taken from the records of the Pacific Corporate Trust Company in the City of
Vancouver, the registrar and transfer agent for the common shares.

The following sets forth the high
and low prices expressed in Canadian Dollars on the TSX-V for the Company's
common shares for the past five years, for each quarter for the last two fiscal
years, and for the last six months.

46

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TSX-V(Canadian Dollars)Last Six
      Months
    
    High
    
    
    LowMay 2008
    
    1.50
    
    
    1.36April 2008
    
    1.70
    
    
    1.40March 2008
    
    1.74
    
    
    1.55February 2008
    
    1.66
    
    
    1.51January 2008
    
    1.78
    
    
    1.46December 2007
    
    1.65
    
    
    1.462007-II/2007
    
    High
    
    
    LowFourth Quarter ended December 31, 2007
    
    1.83
    
    
    1.46Third Quarter ended October 31, 2007
    
    2.07
    
    
    1.53Second Quarter ended July 31, 2007
    
    2.30
    
    
    1.69First Quarter ended April 30, 2007
    
    2.75
    
    
    1.832007/2006
    
    High
    
    
    LowFourth Quarter ended January 31, 2007
    
    2.66
    
    
    1.80Third Quarter ended October 31, 2006
    
    2.45
    
    
    1.50Second Quarter ended July 31, 2006
    
    4.48
    
    
    1.70First Quarter ended April 30, 2006
    
    4.35
    
    
    2.00Last Five Fiscal Years
    
    High
    
    
    Low2007-II
    
    2.75
    
    
    1.462007
    
    4.48
    
    
    1.502006
    
    2.29
    
    
    1.112005
    
    2.50
    
    
    1.002004
    
    3.00
    
    
    0.33


|B. | Plan of Distribution
|-- | --------------------

Not Applicable.

|C. | Markets
|-- | -------

The common shares of the Company
are listed on the TSX-V under the symbol "ASM", on the FSE under the symbol
"GV6" and quoted in the United States on the OTC BB, under the symbol
"ASGMF".

|D. | Selling Shareholders
|-- | --------------------

Not Applicable.

|E. | Dilution
|-- | --------

Not Applicable.

|F. | Expenses of the Issue
|-- | ---------------------

Not Applicable.

47

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Item 10. Additional Information

|A. | Share Capital
|-- | -------------

Not Applicable.

|B. | Memorandum and Articles of Association
|-- | --------------------------------------

Common Shares

All issued and outstanding common
shares are fully paid and non-assessable. Each holder of record of common shares
is entitled to one vote for each common share so held on all matters requiring a
vote of shareholders, including the election of directors. The holders of common
shares will be entitled to dividends on a pro-rata basis, if and when as
declared by the board of directors. There are no preferences, conversion rights,
preemptive rights, subscription rights, or restrictions or transfers attached to
the common shares. In the event of liquidation, dissolution, or winding up of
the Company, the holders of common shares are entitled to participate in the
assets of the Company available for distribution after satisfaction of the
claims of creditors.

Powers and Duties of Directors

The directors shall manage or
supervise the management of the affairs and business of the Company and shall
have authority to exercise all such powers of the Company as are not, by the
British Columbia Business Corporations Actor by the Memorandum or the
Articles, required to be exercised by the Company in a general meeting.

Directors will serve as such
until the next annual meeting. In general, a director who is, in any way,
directly or indirectly interested in an existing or proposed contract or
transaction with the Company whereby a duty or interest might be created to
conflict with his duty or interest as a director, shall declare the nature and
extent of his interest in such contract or transaction or the conflict or
potential conflict with his duty and interest as a director. Such director shall
not vote in respect of any such contract or transaction with the Company in
which he is interested and if he shall do so, his vote shall note be counted,
but he shall be counted in the quorum present at the meeting at which such vote
is taken. However, notwithstanding the foregoing, directors shall have the right
to vote on determining the remuneration of the directors.

The directors may from time to
time on behalf of the Company: (a) borrow money in such manner and amount from
such sources and upon such terms and conditions as they think fit; (b) issue
bonds, debentures and other debt obligations; and (c) mortgage, charge or give
other security on the whole or any part of the property and assets of the
Company.

The directors of the Company must
be persons of the full age of 18 years. There is no minimum share ownership to
be a Director. No person shall be a Director of the Company who is not capable
of managing their own affairs; is an undischarged bankrupt; convicted of an
offense in connection with the promotion, formation or management of a
corporation or involved in fraud within the last five years; or a person that
has had a registration in any capacity under the British Columbia Securities
Act or the British Columbia Mortgage Brokers Act canceled within the
last five years.

Shareholders

An annual general meeting shall
be held once in every calendar year at such time and place as may be determined
by the directors. A quorum at an annual general meeting and special meeting
shall be two shareholders or one or more proxy holders representing two
shareholders, or one shareholder and a proxy

48

---

holder representing another shareholder. There is no limitation
imposed by the laws of Canada or by the charter or other constituent documents
of the Company on the right of a non-resident to hold or vote the common shares,
other than as provided in the Investment Canada Act, referred to as the
"Investment Act", discussed below under "Item 10. Additional Information, D.
Exchange Controls."

In accordance with British
Columbia law, directors shall be elected by an "ordinary resolution" which
means: (a) a resolution passed by the shareholders of the Company at a general
meeting by a simple majority of the votes cast in person or by proxy; or (b) a
resolution that has been submitted to the shareholders of the Company who would
have been entitled to vote on it in person or by proxy at a general meeting of
the Company and that has been consented to in writing by such shareholders of
the Company holding shares carrying not less than the requisite majority of the
votes entitled to be cast on it.

Under British Columbia law
certain items such as an amendment to the Company's articles or entering into a
merger requires approval by a special resolution which means: (a) a resolution
passed by a majority of not less than the requisite majority of the votes cast
by the shareholders of the Company who, being entitled to do so, vote in person
or by proxy at a general meeting of the company; or (b) a resolution consented
to in writing by every shareholder of the Company who would have been entitled
to vote in person or by proxy at a general meeting of the Company, and a
resolution so consented to is deemed to be a special resolution passed at a
general meeting of the Company.

|C. | Material Contracts
|-- | ------------------

The Company entered into a share
exchange agreement dated for reference the 9th day of June, 2004 with
Pedro Sanchez Mejorada, Fernando Ysita Del Hoyo, Francisco Ysita del Hoyo,
Bernardo Ysita del Hoyo, Carlos Ysita del Hoyo, Manuel Ysita del Hoyo, Eduardo
Ysita del Hoyo, Mercedes Ysita del Hoyo, Cia Minera and Promotora in connection
with the acquisition of the remaining 51% interest in Cia Minera. The
consideration to be paid by the Company for the 51% interest consists of four
million common shares of the Company. This agreement was subject to a number of
conditions including a satisfactory due diligence review and final regulatory
approval. The TSX-V approved the agreement on October 18, 2005. The acquisition
of an additional 39.25% interest in Cia Minera was completed on July 17, 2006
for consideration of 3,164,702 common shares of the Company and the acquisition
of a further 1.1% from an estate for no additional consideration was completed
on December 21, 2007. The Company now has an 89.35% ownership interest in Cia
Minera and continues to consider its options with relation to the balance of the
interest.

The Company entered into a cost
sharing agreement dated October 1, 1997, and amended November 1, 2003 to
reimburse Oniva International for a variable percentage of its overhead
expenses, to reimburse 100% of its out-of-pocket expenses incurred on behalf of
the company, and to pay a percentage fee based on the total overhead and
corporate expenses. The agreement may be terminated with one-month notice by
either party.

The Company entered into a 12
month agreement in with National Media to provide financial relations, media
relations and public market development services. The Company has agreed to pay
National Media US$6,000 per month, and the contract can be terminated after
September 15, 2006 upon 30 days' notice by the Company. The agreement with
National Media expired on March 15, 2007, and the Companys commitment under the
agreement as at January 31, 2007 totaled $10,613 (US$9,000).

The Company entered into a 12
month Investor Relations Agreement with Investor Relations Group Inc., formerly
called Investors Relations Services Group John Mullen & Partners, referred
to as "IRS", to provide investor relations services in Europe. In consideration
for the services rendered, the Company agreed to pay IRS fees of $2,000 per
month plus expenses. Pursuant to the agreements terms and conditions, the
agreement with IRS was terminated on June 27, 2007, and the Companys commitment
under the agreement as at January 31, 2007 totaled $16,000.

49

---

The Company has a contractual
minimum drilling commitment for the exploration of its mineral properties in
Durango, Mexico. As at December 31, 2007 the Company is committed to drilling
services at an estimated cost of $286,949, which is denominated in U.S. dollars
(US$290,405). Management has determined that the Companys exploration in fiscal
2008 will likely exceed the minimum commitment.

The Company has also entered into
an agreement in which monthly operation services will be performed through to
September 2008 in Durango, Mexico at a total committed cost of $66,913 (services
denominated in US$67,500).

Please refer to note 20 of the
financial statements included elsewhere in this Transition Report (Item 17) for
further disclosure regarding material commitments.

|D. | Exchange Controls
|-- | -----------------

Canada has no system of exchange
controls. There are no Canadian restrictions on the repatriation of capital or
earnings of a Canadian public company to non-resident investors. There are no
laws in Canada or exchange restrictions affecting the remittance of dividends,
profits, interest, royalties and other payments to non-resident holders of the
Issuers securities, except as discussed in 10.E. Taxation below.

There are no limitations under
the laws of Canada or in the organizing documents of the Company on the right of
foreigners to hold or vote securities of the Company, except that the Investment
Canada Act may require review and approval by the Minister of Industry (Canada)
of certain acquisitions of control of the Company by a
non-Canadian. The threshold for acquisitions of control is generally
defined as being one-third or more of the voting shares of the Company.
Non-Canadian generally means an individual who is not a Canadian
citizen, or a corporation, partnership, trust or joint venture that is
ultimately controlled by non-Canadians.

|E. | Taxation
|-- | --------

Canadian Federal Income Tax Consequences

The following summarizes the
principal Canadian federal income tax consequences applicable to the holding and
disposition of common shares in the capital of the Company by a United States
resident, and who holds common shares solely as capital property, referred to as
a "U.S. Holder". This summary is based on the current provisions of the
Income Tax Act (Canada), referred to as the "Tax Act", the regulations
thereunder, all amendments thereto publicly proposed by the government of
Canada, the published administrative practices of Revenue Canada, Customs,
Excise and Taxation, and the current provisions of the Canada-United States
Income Tax Convention, 1980, as amended, referred to as the "Treaty". Except
as otherwise expressly provided, this summary does not take into account any
provincial, territorial or foreign (including without limitation, any United
States) tax law or treaty. It has been assumed that all currently proposed
amendments will be enacted substantially as proposed and that there is no other
relevant change in any governing law or practice, although no assurance can be
given in these respects.

Each U.S. Holder is advised to
obtain tax and legal advice applicable to such U.S. Holder's particular
circumstances.

Every U.S. Holder is liable to
pay a Canadian withholding tax on every dividend that is or is deemed to be paid
or credited to the U.S. Holder on the U.S. Holder's common shares. The statutory
rate of withholding tax is 25% of the gross amount of the dividend paid. The
Treaty reduces the statutory rate with respect to dividends paid to a U.S.
Holder for the purposes of the Treaty. Where applicable, the general rate of
withholding tax under the Treaty is 15% of the gross amount of the dividend, but
if the U.S. Holder is a

50

---

company that owns at least 10% of the voting stock of the
Company and beneficially owns the dividend, the rate of withholding tax is 5%
for dividends paid or credited after 1996 to such corporate U.S. Holder. The
Company is required to withhold the applicable tax from the dividend payable to
the U.S. Holder, and to remit the tax to the Receiver General of Canada for the
account of the U. S. Holder.

Pursuant to the Tax Act, a U.S.
Holder will not be subject to Canadian capital gains tax on any capital gain
realized on an actual or deemed disposition of a common share, including a
deemed disposition on death, provided that the U.S. Holder did not hold the
common share as capital property used in carrying on a business in Canada, and
that neither the U.S. Holder nor persons with whom the U.S. Holder did not deal
at arms length (alone or together) owned or had the right or an option to
acquire 25% or more of the issued shares of any class of the Company at any time
in the five years immediately preceding the disposition.

United States Federal Income Tax Consequences

Passive Foreign Investment Company

The Company believes that it is a
passive foreign investment company, referred to as a "PFIC" for United States
federal income tax purposes with respect to a United States Investor. The
Company will be a PFIC with respect to a United States Investor if, for any
taxable year in which such United States Investor held the Company's shares,
either (i) at least 75 % of the gross income of the Company for the taxable year
is passive income, or (ii) at least 50% of the Company's assets are attributable
to assets that produce or are held for the production of passive income. In each
case, the Company must take into account a pro-rata share of the income and the
assets of any company in which the Company owns, directly or indirectly, 25% or
more of the stock by value (the "look-through" rules). Passive income generally
includes dividends, interest, royalties, rents (other than rents and royalties
derived from the active conduct of a trade or business and not derived from a
related person), annuities and gains from assets that produce passive income. As
a publicly traded corporation, the Company would apply the 50% asset test based
on the value of the Company's assets.

Because the Company believes it
qualifies as a PFIC, unless a United States Investor who owns shares in the
Company (i) elects (a section 1295 election) to have the Company treated as a
"qualified electing fund", referred to as a "QEF" (described below), or (ii)
marks the stock to market (described below), the following rules apply:

| | 1. | Distributions made by the Company during a taxable year
      to a United States Investor who owns shares in the Company that are an
      "excess distribution" (defined generally as the excess of the amount
      received with respect to the shares in any taxable year over 125% of the
      average received in the shorter of either the three previous years or such
      United States Investor's holding period before the taxable year) must be
      allocated ratably to each day of such shareholder's holding period. The
      amount allocated to the current taxable year and to years when the
      corporation was not a PFIC must be included as ordinary income in the
      shareholder's gross income for the year of distribution. The remainder is
      not included in gross income but the shareholder must pay a deferred tax
      on that portion. The deferred tax amount, in general, is the amount of tax
      that would have been owed if the allocated amount had been included in
      income in the earlier year, plus interest. The interest charge is at the
      rate applicable to deficiencies in income taxes.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 2. | The entire amount of any gain realized upon the sale or
      other disposition of the shares will be treated as an excess distribution
      made in the year of sale or other disposition and as a consequence will be
      treated as ordinary income and, to the extent allocated to years prior to
      the year of sale or disposition, will be subject to the interest charge
      described above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

51

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A shareholder that makes a
section 1295 election will be currently taxable on his or her pro-rata share of
the Company's ordinary earnings and net capital gain (at ordinary income and
capital gain rates, respectively) for each taxable year of the Company,
regardless of whether or not distributions were received. The shareholder's
basis in his or her shares will be increased to reflect taxed but undistributed
income. Distributions of income that had previously been taxed will result in a
corresponding reduction of basis in the shares and will not be taxed again as a
distribution to the shareholder.

A shareholder may make a section
1295 election with respect to a PFIC for any taxable year of the shareholder
(shareholder's election year). A section 1295 election is effective for the
shareholder's election year and all subsequent taxable years of the shareholder.
Procedures exist for both retroactive elections and filing of protective
statements. Once a section 1295 election is made it remains in effect, although
not applicable, during those years that the Company is not a PFIC. Therefore, if
the Company re-qualifies as a PFIC, the section 1295 election previously made is
still valid and the shareholder is required to satisfy the requirements of that
election. Once a shareholder makes a section 1295 election, the shareholder may
revoke the election only with the consent of the Commissioner.

If the shareholder makes the
section 1295 election for the first tax year of the Company as a PFIC that is
included in the shareholder's holding period, the PFIC qualifies as a pedigreed
QEF with respect to the shareholder. If a QEF is an unpedigreed QEF with respect
to the shareholder, the shareholder is subject to both the non-QEF and QEF
regimes. Certain elections are available which enable shareholders to convert an
unpedigreed QEF into a pedigreed QEF thereby avoiding such dual application.

A shareholder making the section
1295 election must make the election on or before the due date, as extended, for
filing the shareholder's income tax return for the first taxable year to which
the election will apply. A shareholder must make a section 1295 election by
completing Form 8621, attaching said Form to its federal income tax return, and
reflecting in the Form the information provided in the PFIC Annual Information
Statement, or if the shareholder calculated the financial information, a
statement to that effect. The PFIC Annual Information Statement must include the
shareholder's pro-rata shares of the ordinary earnings and net capital gain of
the PFIC for the PFIC's taxable year or information that will enable the
shareholder to calculate its pro-rata shares. In addition, the PFIC Annual
Information Statement must contain information about distributions to
shareholders and a statement that the PFIC will permit the shareholder to
inspect and copy its permanent books of account, records, and other documents of
the PFIC necessary to determine that the ordinary earnings and net capital gain
of the PFIC have been calculated according to federal income tax accounting
principles. A shareholder may also obtain the books, records and other documents
of the foreign corporation necessary for the shareholder to determine the
correct earnings and profits and net capital gain of the PFIC according to
federal income tax principles and calculate the shareholder's pro-rata shares of
the PFIC's ordinary earnings and net capital gain. In that case, the PFIC must
include a statement in its PFIC Annual Information Statement that it has
permitted the shareholder to examine the PFIC's books of account, records, and
other documents necessary for the shareholder to calculate the amounts of
ordinary earnings and net capital gain. A shareholder that makes a Section 1295
election with respect to a PFIC held directly or indirectly for each taxable
year to which the Section 1295 election applies must comply with the foregoing
submissions.

Because the Company's stock is
"marketable" under section 1296(e), a United States Investor may elect to mark
the stock to market each year. In general, a PFIC shareholder who elects under
section 1296 to mark the marketable stock of a PFIC includes in income each year
an amount equal to the excess, if any, of the fair market value of the PFIC
stock as of the close of the taxable year over the shareholder's adjusted basis
in such stock. A shareholder is also generally allowed a deduction for the
excess, if any, of the adjusted basis of the PFIC stock over the fair market
value as of the close of the taxable year. Deductions under this rule, however,
are allowable only to the extent of any net mark to market gains with respect to
the stock included by the shareholder for prior taxable years. While the
interest charge regime under the PFIC rules generally does

52

---

not apply to distributions from and dispositions of stock of a
PFIC where the United States Investor has marked to market, coordination rules
for limited application will apply in the case of a United States Investor that
marks to market PFIC stock later than the beginning of the shareholder's holding
period for the PFIC stock.

Special rules apply with respect
to the calculation of the amount of the foreign tax credit with respect to
excess distributions by a PFIC or inclusions under a QEF.

Controlled Foreign Corporations

Sections 951 through 964 and
Section 1248 of the Internal Revenue Code, referred to as the "Code",
relate to controlled foreign corporations, referred to as "CFCs". A foreign
corporation that qualifies as a CFC will not be treated as a PFIC with respect
to a shareholder during the portion of the shareholder's holding period after
December 31, 1997, during which the shareholder is a 10% United States
shareholder and the corporation is a CFC. The PFIC provisions continue to apply
in the case of a PFIC that is also a CFC with respect to shareholders that are
less than 10% United States shareholders.

The 10% United States
shareholders of a CFC are subject to current United States tax on their pro-rata
shares of certain income of the CFC and their pro-rata shares of the CFC's
earnings invested in certain United States property. The effect is that the CFC
provisions may impute some portion of such a corporation's undistributed income
to certain shareholders on a current basis and convert into dividend income some
portion of gains on dispositions of stock, which would otherwise qualify for
capital gains treatment.

The Company does not believe that
it will be a CFC. It is possible that the Company could become a CFC in the
future. Even if the Company were classified as a CFC in a future year, however,
the CFC rules referred to above would apply only with respect to 10%
shareholders.

Personal Holding Company/Foreign Personal Holding
Company/Foreign Investment Company

A corporation will be classified
as a personal holding company, or a "PHC", if at any time during the last half
of a tax year (i) five or fewer individuals (without regard to their citizenship
or residence) directly or indirectly or by attribution own more than 50% in
value of the corporation's stock and (ii) at least 60% of its ordinary gross
income, as specially adjusted, consists of personal holding company income
(defined generally to include dividends, interest, royalties, rents and certain
other types of passive income). A PHC is subject to a United States federal
income tax of 39.6% on its undistributed personal holding company income
(generally limited, in the case of a foreign corporation, to United States
source income).

A corporation will be classified
as a foreign personal holding company, or an "FPHC", and not a PHC if at any
time during a tax year (i) five or fewer individual United States citizens or
residents directly or indirectly or by attribution own more than 50% of the
total combined voting power or value of the corporation's stock and (ii) at
least 60% of its gross income consists of foreign personal holding company
income (defined generally to include dividends, interest, royalties, rents and
certain other types of passive income). Each United States shareholder in a FPHC
is required to include in gross income, as a dividend, an allocable share of the
FPHC's undistributed foreign personal holding company income (generally the
taxable income of the FPHC, as specially adjusted).

A corporation will be classified
as a foreign investment company, or an "FIC", if for any taxable year it: (i) is
registered under the Investment Company Act of 1940, as amended, as a management
company or share investment trust or is engaged primarily in the business of
investing or trading in securities or commodities (or any interest therein); and
(ii) 50% or more of the value or the total combined voting power of all the
corporation's stock is owned directly or indirectly (including stock owned
through the application of attribution rules) by United States persons. In
general, unless an FIC elects to distribute 90% or more of its

53

---

taxable income (determined under United States tax principles
as specially adjusted) to its shareholders, gain on the sale or exchange of FIC
stock is treated as ordinary income (rather than capital gain) to the extent of
such shareholder's ratable share of the corporation's earnings and profits for
the period during which such stock was held.

The Company believes that it is
not and will not be a PHC, FPHC or FIC. However, no assurance can be given as to
the Company's future status.

United States Information Reporting and Backup
Withholding

Dividends are generally subject
to the information reporting requirements of the Code. Dividends may be subject
to backup withholding at the rate of 31% unless the holder provides a taxpayer
identification number on a properly completed Form W-9 or otherwise establishes
an exemption.

The amount of any backup
withholding will not constitute additional tax and will be allowed as a credit
against the United States Investor's federal income tax liability.

Filing of Information Returns

Under a number of circumstances,
a United States Investor acquiring shares of the Company may be required to file
an information return. In particular, any United States Investor who becomes the
owner, directly or indirectly, of 10% or more of the shares of the Company will
be required to file such a return. Other filing requirements may apply and
United States Investors should consult their own tax advisors concerning these
requirements.

|F. | Dividends and Paying Agents
|-- | ---------------------------

Not Applicable.

|G. | Statement by Experts
|-- | --------------------

Not Applicable.

|H. | Documents on Display
|-- | --------------------

The Company files annual reports
and furnishes other information with the SEC. You may read and copy any document
that we file at the SEC's Public Reference Room at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549 or by accessing the Commission's website
(http://www.sec.gov). The Company also files its annual reports and other
information with the Canadian Securities Administrators via SEDAR
(www.sedar.com).

Copies of the Company's material
contracts are kept in the Company's administrative headquarters.

|I. | Subsidiary Information
|-- | ----------------------

None.

Item 11. Quantitative and Qualitative Disclosures about
Market Risk

Not Applicable.

54

---

Item 12. Description of Securities Other than Equity
Securities

Not Applicable.

Part II

Item 13. Defaults, Dividend Arrearages and
Delinquencies

None.

Item 14. Material Modifications to the Rights of Security
Holders and Use of Proceeds

None.

Item 15. Controls and Procedures

The Chief Executive Officer and
the Chief Financial Officer of the Company are responsible for designing
internal controls over financial reporting, or causing them to be designed under
their supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with Canadian GAAP. The Company assessed the design of
the internal controls over financial reporting as at December 31, 2007 and
concluded that there are material weaknesses in internal controls over financial
reporting, which are as follows:

| | c) | Due to the limited number of staff resources, the Company
      believes there are instances where a lack of segregation of duties exist
      to provide effective controls; and       
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                         
| | d) | The Company is evaluating the effectiveness of its staff
      resources, as currently the Company seeks outside guidance to address
      complex accounting and tax issues that arise.

The weaknesses and their related
risks are not uncommon in a company the size of Avino because of limitations in
size and number of staff. The Company believes it has taken initial steps to
mitigate these risks by consulting outside advisors and involving the Audit
Committee and Board of Directors in reviews and consultations where necessary.
However, these weaknesses in internal controls over financial reporting could
result in a more than remote likelihood that a material misstatement would not
be prevented or detected. The Company believes that it must take additional
steps to further mitigate these risks by consulting outside advisors on a more
regular and timely basis.

There have been no changes in the
Companys internal controls over financial reporting that occurred during the
quarter ended December 31, 2007 that have materially affected, or are reasonably
likely to materially affect, the Companys internal controls over financial
reporting.

Item 16A. Audit Committee Financial Expert

The board of directors determined
that Mr. Gary Robertson is qualified as an Audit Committee Financial Expert. Mr.
Robertson is independent as determined by the National Association of Securities
Dealers listing standards.

Item 16B. Code of Ethics

The Company has not currently
adopted a code of ethics but is evaluating its internal procedures to determine
the necessity of same. In the event that it is determined a code of ethics is
necessary, an appropriate code will be implemented.

55

---

Item 16C. Principal Accountant Fees and Services

The independent auditors for the
eleven-month period ended December 31, 2007 and for the year ended January 31,
2007 was Manning Elliott LLP. For the fiscal years ending January 31, 2006 and
2005 the independent auditor was Vellmer & Chang, Chartered Accountants
(formerly Hoogendoorn Vellmer, Chartered Accountants).

Audit Fees

The aggregate fees billed by
Manning Elliott LLP for professional services rendered for the audit of the
Company's eleven-month period ended December 31, 2007 was $85,000 (January 31,
2007: $101,800). The aggregate fees billed by Vellmer & Chang for the audit
of the Company's annual financial statements for the fiscal year ended January
31, 2006 was $40,780.

Audit-Related Fees

The audit-related fees billed by
the Companys independent auditors for the eleven-month period ended December
31, 2007 was $4,636 (January 31, 2007: $5,438).

Tax Fees

There were no tax fees billed by
the Company's independent auditors for the eleven-month period ended December
31, 2008. The aggregate tax fees billed by the Company's independent auditors
for the January 31, 2007 fiscal year were $2,180, which were related to the
preparation of the corporate tax return for the January 31, 2007 fiscal
year.

All Other Fees

There were no aggregate fees
billed for any other professional services rendered by the Company's independent
auditors for the eleven month period ended December 31, 2007. The aggregate fees
billed by the Company's independent auditors for advisory and review services
relating to the Company's annual report on Form 20-F was $7,500 for the year
ended January 31, 2007.

The audit committee approved 100%
of the fees paid to the principal accountant for audit-related, tax and other
fees in the fiscal year 2007. The audit committee pre-approves all non-audit
services to be performed by the auditor in accordance with the audit committee
Charter. There were no hours expended on the principal accountant's engagement
to audit the Company's financial statements for the most recent fiscal year that
were attributed to work performed by persons other than the principal
accountant's full-time, permanent employees.

Item 16D. Exemptions from the Listing Standards for Audit
Committees

Not applicable.

Item 16E. Purchases of Equity Securities by the Issuer and
Affiliated Purchasers

None.

56

---

Part III

Item 17. Financial Statements

The following financial
statements pertaining to the Company are filed as part of this Transition
Report:

| | Audit
        Report of Independent Registered Public Accounting Firm                                                                                                                                               | 59        
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------
| | Consolidated Balance Sheets
        as at December 31, 2007 and January 31, 2007                                                                                                                                    | 60        
| | Consolidated
        Statements of Operations and Comprehensive Loss for the eleven month period
        ended December 31, 2007 and the years ended January 31, 2007 and 2006                                      | 61        
| | Consolidated Statements
        of Deficit and Accumulated Other Comprehensive Income for the eleven month
        period ended December 31, 2007 and the years ended January 31, 2007 and
        January 31, 2006 | 62        
| | Consolidated
        Statements of Cash Flows for the eleven month period ended December 31,
        2007, and the years ended January 31, 2007 and January 31, 2006                                                | 63        
| | Notes to the Consolidated
        Financial Statements for the eleven month period ended December 31, 2007,
        and the years ended January 31, 2007, and January 31, 2006                                      | 64 thru 86

|Item 18. Financial Statements
|-----------------------------
|                             
|See Item 17.                 
|                             
|Item 19. Exhibits            

|Exhibit Number | Name                                                                             
|-------------- | ---------------------------------------------------------------------------------
|1.1            | Memorandum of Avino Silver &
      Gold Mines Ltd.*                              
|1.2.           | Articles of Avino Silver & Gold Mines Ltd.*                                      
|4.1            | Share Purchase Agreement dated
      March 22, 2004*                             
|8.1            | List of Subsidiaries                                                             
|12.1           | Certification
      of the Principal Executive Officer                           
|12.2           | Certification of the
      Principal Financial Officer                           
|13.1           | Certificate
      under the Sarbanes-Oxley Act of the Principal Executive Officer
|13.2           | Certificate under the
      Sarbanes-Oxley Act of the Principal Financial Officer

_____________* Previously filed.

57

---

AVINO SILVER & GOLD MINES
LTD.

Consolidated Financial Statements

for the Eleven-Month Period Ended December 31, 2007

and the Years Ended January 31, 2007 and 2006

|Index                                                                  
|-----------------------------------------------------------------------
|Consolidated Balance Sheets                                            
|Consolidated Statements of Operations and
      Comprehensive Loss     
|Consolidated Statements
      of Deficit                               
|Consolidated Statements of Accumulated Other
      Comprehensive Income
|Consolidated Statements
      of Cash Flows                            
|Notes to Consolidated Financial Statements                             

---



|                                                       
|-------------------------------------------------------
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of Avino Silver & Gold Mines
Ltd.

We have audited the consolidated balance sheets of Avino Silver
& Gold Mines Ltd. as at December 31, 2007 and January 31, 2007 and the
consolidated statements of operations and comprehensive loss, deficit, and
accumulated other comprehensive loss, and cash flows for the eleven-month period
ended December 31, 2007 and the year ended January 31, 2007. These consolidated
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with Canadian generally
accepted auditing standards and the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance 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. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. An audit includes
consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of internal
control over financial reporting. Accordingly, we express no such opinion. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.

In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the Company as at
December 31, 2007 and January 31, 2007 and the results of its operations and its
cash flows for the eleven-month period ended December 31, 2007 and the year
ended January 31, 2007 in accordance with Canadian generally accepted accounting
principles.

The statements of operations, deficit and cash flows for the
year ended January 31, 2006 were audited by another independent registered
public accounting firm which expressed an opinion without reservation on these
financial statements in its report dated May 31, 2006.

MANNING ELLIOTT LLP

CHARTERED ACCOUNTANTS

Vancouver, British Columbia

April 25, 2008

|                                                                        
|------------------------------------------------------------------------
|COMMENTS BY AUDITORS ON CANADA-UNITED STATES REPORTING
      DIFFERENCES

The standards of the Public Company Accounting Oversight Board
(United States) require the addition of an explanatory paragraph when the
financial statements are affected by conditions and events that cast substantial
doubt on the Companys ability to continue as a going concern, such as those
described in Note 1 to the financial statements. Our report to the shareholders
dated April 25, 2008, is expressed in accordance with Canadian reporting
standards which do not permit a reference to such conditions and events in the
auditors report when these are adequately disclosed in the financial
statements.

MANNING ELLIOTT LLP

CHARTERED ACCOUNTANTS

Vancouver, British Columbia

April 25, 2008

---

|AVINO SILVER & GOLD MINES LTD.              
|--------------------------------------------
|Consolidated Balance Sheets                 
|As at December 31, 2007 and January 31, 2007
|(Expressed in
      Canadian Dollars)       

|                                                    |   | December 31, 2007 |   |   | January 31, 2007 |  
|--------------------------------------------------- | - | ----------------- | - | - | ---------------- | -
|                                                    |   | **(Note 2)**      |   |   |                  |  
|ASSETS                                              |   |                   |   |   |                  |  
|Current                                             |   |                   |   |   |                  |  
|Cash and cash equivalents                           | $ | 6,342,481         |   | $ | 11,045,106       |  
|Interest receivable                                 |   | 19,183            |   |   | 38,179           |  
|Sales tax recoverable                               |   | 394,549           |   |   | 96,674           |  
|Prepaid
      expenses and amounts receivable       |   | 32,317            |   |   | 54,042           |  
|                                                    |   | 6,788,530         |   |   | 11,234,001       |  
|Property, Plant and Equipment (Note 5)              |   | 1,085,390         |   |   | 1,015,228        |  
|Reclamation Bonds                                   |   | 5,500             |   |   | 5,500            |  
|Mineral Properties (Note 6)                         |   | 13,096,805        |   |   | 10,764,455       |  
|Advances to Related Companies (Note 15(a))          |   |                  |   |   | 65,770           |  
|Investments in
      Related Companies (Note 7)     |   | 214,715           |   |   | 210,085          |  
|                                                    | $ | 21,190,940        |   | $ | 23,295,039       |  
|                                                    |   |                   |   |   |                  |  
|LIABILITIES                                         |   |                   |   |   |                  |  
|Current                                             |   |                   |   |   |                  |  
|Accounts payable and accrued
      liabilities      | $ | 520,710           |   | $ | 1,311,560        |  
|Amounts due
      to related parties (Note 15(b))   |   | 176,788           |   |   | 141,524          |  
|                                                    |   | 697,498           |   |   | 1,453,084        |  
|Future income tax
      liability (Note 14)         |   | 1,834,916         |   |   | 2,335,999        |  
|                                                    |   | 2,532,414         |   |   | 3,789,083        |  
|SHAREHOLDERS' EQUITY                                |   |                   |   |   |                  |  
|Share Capital (Note 10(a))                          |   | 33,112,072        |   |   | 33,112,072       |  
|Shares Issued For Proceeds Receivable               |   |                  |   |   | (5,940           | )
|Contributed Surplus (Note 11)                       |   | 7,287,742         |   |   | 7,259,879        |  
|Treasury Shares
      (14,180 Shares, at cost)      |   | (101,869          | ) |   | (101,869         | )
|                                                    |   | 40,297,945        |   |   | 40,264,142       |  
|Accumulated other comprehensive income              |   | 4,630             |   |   | -                |  
|Deficit                                             |   | (21,644,049       | ) |   | (20,758,186      | )
|                                                    |   | (21,639,419       | ) |   | (20,758,186      | )
|                                                    |   | 18,658,526        |   |   | 19,505,956       |  
|                                                    | $ | 21,190,940        |   | $ | 23,295,039       |  
|NATURE AND CONTINUANCE OF OPERATIONS (Note
      1) |   |                   |   |   |                  |  
|COMMITMENTS (Note 20)                               |   |                   |   |   |                  |  

Approved on behalf of the Board:

|/s/ David
      Wolfin | Director |  | /s/
      Louis Wolfin | Director
|------------------------ | -------- |  | ------------------------ | --------

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

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Consolidated Statements of Operations and Comprehensive
      Loss                             
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

|                                                  |   | December 31, |   |   | January 31, |   |   | January 31, |  
|------------------------------------------------- | - | ------------ | - | - | ----------- | - | - | ----------- | -
|                                                  |   | 2007         |   |   | 2007        |   |   | 2006        |  
|                                                  |   | **(Note 2)** |   |   |             |   |   |             |  
|Revenue                                           | $ |             |   | $ |            |   | $ |            |  
|                                                  |   |              |   |   |             |   |   |             |  
|Operating and Administrative
      Expenses       |   |              |   |   |             |   |   |             |  
|Amortization                                      |   | 2,046        |   |   | 2,677       |   |   | 980         |  
|General
      exploration                         |   | 18,636       |   |   | 106,899     |   |   |            |  
|Management fees                                   |   | 88,000       |   |   | 87,000      |   |   | 60,000      |  
|Office
      and miscellaneous                    |   | 141,843      |   |   | 146,348     |   |   | 119,864     |  
|Professional fees                                 |   | 196,555      |   |   | 127,441     |   |   | 141,005     |  
|Regulatory and compliance fees                    |   | 21,175       |   |   | 34,416      |   |   | 21,690      |  
|Salaries and benefits                             |   | 73,610       |   |   | 87,813      |   |   | 73,529      |  
|Investor
      relations (Note 12)                |   | 263,192      |   |   | 464,806     |   |   | 197,330     |  
|Stock-based compensation
      (Note 13)          |   |             |   |   | 2,860,603   |   |   | 725,125     |  
|Travel and promotion                              |   | 63,470       |   |   | 96,731      |   |   | 77,274      |  
|                                                  |   |              |   |   |             |   |   |             |  
|                                                  |   | 868,527      |   |   | 4,014,734   |   |   | 1,416,797   |  
|                                                  |   |              |   |   |             |   |   |             |  
|Other Income (Expenses)                           |   |              |   |   |             |   |   |             |  
|Interest and other income                         |   | 359,339      |   |   | 430,231     |   |   | 46,082      |  
|Foreign
      exchange loss                       |   | (32,301      | ) |   | (30,455     | ) |   |            |  
|Litigation settlement
      (Note 19)             |   | (759,302     | ) |   |            |   |   |            |  
|Misappropriation loss (Note 21)                   |   | (86,155      | ) |   |            |   |   |            |  
|Impairment of investment
      in related company |   |             |   |   |            |   |   | (217,000    | )
|Impairment of mineral property                    |   |             |   |   |            |   |   | (103,242    | )
|Site assessment costs
      (Note 9)              |   |             |   |   |            |   |   | (355,921    | )
|Equity loss (Note 9)                              |   |             |   |   | (33,581     | ) |   | (342,596    | )
|                                                  |   |              |   |   |             |   |   |             |  
|LOSS BEFORE INCOME TAXES                          |   | (1,386,946   | ) |   | (3,648,539  | ) |   | (2,389,474  | )
|                                                  |   |              |   |   |             |   |   |             |  
|Future income tax recovery (Note 14)              |   | 501,083      |   |   |            |   |   | 19,750      |  
|                                                  |   |              |   |   |             |   |   |             |  
|NET LOSS                                          | $ | (885,863     | ) | $ | (3,648,539  | ) | $ | (2,369,724  | )
|                                                  |   |              |   |   |             |   |   |             |  
|Other Comprehensive Loss                          |   |              |   |   |             |   |   |             |  
|Unrealized loss on
      investments in related   |   |              |   |   |             |   |   |             |  
|companies                                         |   | (12,487      | ) |   |            |   |   |            |  
|                                                  |   |              |   |   |             |   |   |             |  
|COMPREHENSIVE LOSS                                | $ | (898,350     | ) | $ |            |   | $ |            |  
|                                                  |   |              |   |   |             |   |   |             |  
|BASIC AND DILUTED LOSS PER SHARE                  | $ | (0.04        | ) | $ | (0.20       | ) | $ | (0.22       | )
|                                                  |   |              |   |   |             |   |   |             |  
|WEIGHTED AVERAGE NUMBER OF SHARES                 |   |              |   |   |             |   |   |             |  
|OUTSTANDING                                       |   | 20,584,727   |   |   | 18,385,007  |   |   | 10,965,718  |  

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

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Consolidated Statements of Deficit                                                             
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

|                |   | December 31, |   |   | January 31, |   |   | January 31, |  
|--------------- | - | ------------ | - | - | ----------- | - | - | ----------- | -
|                |   | 2007         |   |   | 2007        |   |   | 2006        |  
|                |   | **(Note 2)** |   |   |             |   |   |             |  
|                |   |              |   |   |             |   |   |             |  
|Opening Deficit | $ | (20,758,186  | ) | $ | (17,109,647 | ) | $ | (14,739,923 | )
|Net Loss        |   | (885,863     | ) |   | (3,648,539  | ) |   | (2,369,724  | )
|                |   |              |   |   |             |   |   |             |  
|Closing Deficit | $ | (21,644,049  | ) | $ | (20,758,186 | ) | $ | (17,109,647 | )

|Consolidated Statements of Accumulated Other Comprehensive
      Income                        
|-----------------------------------------------------------------------------------------------
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

|                                                            |   | December 31, |   |   | January 31, |  |   | January 31, | 
|----------------------------------------------------------- | - | ------------ | - | - | ----------- |  | - | ----------- | 
|                                                            |   | 2007         |   |   | 2007        |  |   | 2006        | 
|                                                            |   | **(Note 2)** |   |   |             |  |   |             | 
|                                                            |   |              |   |   |             |  |   |             | 
|Opening Accumulated Other Comprehensive
      Income        | $ |             |   | $ |            |  | $ |            | 
|New Accounting Policy, February 1, 2007 (Note
      3(xvi)) |   | 17,117       |   |   |             |  |   |             | 
|Unrealized loss on investments in related
      companies   |   | (12,487      | ) |   |            |  |   |            | 
|                                                            |   |              |   |   |             |  |   |             | 
|Closing Accumulated Other Comprehensive Income              | $ | 4,630        |   | $ |            |  | $ |            | 

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

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Consolidated Statements of Cash Flows                                                          
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

|                                                                     |   | December 31, 2007 |   |   | January 31, 2007 |   |   | January 31, 2006 |  
|-------------------------------------------------------------------- | - | ----------------- | - | - | ---------------- | - | - | ---------------- | -
|                                                                     |   | **(Note 2)**      |   |   |                  |   |   |                  |  
|CASH PROVIDED BY (USED IN):                                          |   |                   |   |   |                  |   |   |                  |  
|OPERATING ACTIVITIES                                                 |   |                   |   |   |                  |   |   |                  |  
|Net loss                                                             | $ | (885,863          | ) | $ | (3,648,539       | ) | $ | (2,369,724       | )
|Adjustments for non-cash items:                                      |   |                   |   |   |                  |   |   |                  |  
|Amortization                                                         |   | 2,046             |   |   | 2,677            |   |   | 980              |  
|Stock-based compensation                                             |   |                  |   |   | 2,860,603        |   |   | 725,125          |  
|Stock-based compensation
      included in investor relations        |   | 27,863            |   |   | 195,600          |   |   | 103,981          |  
|Impairment of investment in related company                          |   |                  |   |   |                 |   |   | 217,000          |  
|Impairment of mineral property
      interest                        |   |                  |   |   |                 |   |   | 103,242          |  
|Equity loss                                                          |   |                  |   |   | 33,581           |   |   | 342,596          |  
|Future income tax recovery                                           |   | (501,083          | ) |   |                 |   |   | (19,750          | )
|                                                                     |   |                   |   |   |                  |   |   |                  |  
|                                                                     |   | (1,357,037        | ) |   | (556,078         | ) |   | (896,550         | )
|                                                                     |   |                   |   |   |                  |   |   |                  |  
|Net change in non-cash working capital (Note 17)                     |   | (987,164          | ) |   | 61,750           |   |   | (91,529          | )
|                                                                     |   |                   |   |   |                  |   |   |                  |  
|                                                                     |   | (2,344,201        | ) |   | (494,328         | ) |   | (988,079         | )
|FINANCING ACTIVITIES                                                 |   |                   |   |   |                  |   |   |                  |  
|Share subscriptions received                                         |   |                  |   |   |                 |   |   | 247,730          |  
|Collection of share proceeds receivable                              |   | 5,940             |   |   | 56,732           |   |   |                 |  
|Shares issued for cash, net                                          |   |                  |   |   | 9,511,593        |   |   | 1,748,827        |  
|                                                                     |   |                   |   |   |                  |   |   |                  |  
|                                                                     |   | 5,940             |   |   | 9,568,325        |   |   | 1,996,557        |  
|INVESTING ACTIVITIES                                                 |   |                   |   |   |                  |   |   |                  |  
|Reclamation bonds                                                    |   |                  |   |   | (2,500           | ) |   | (3,000           | )
|Property, plant and equipment purchases                              |   | (72,208           | ) |   | (18,331          | ) |   | (768             | )
|Mineral property exploration
      expenditures                      |   | (2,292,156        | ) |   | (777,586         | ) |   | (273,234         | )
|Advances to related companies                                        |   |                  |   |   |                 |   |   | 52,000           |  
|Advances to Cia Minera prior to acquisition of
      control         |   |                  |   |   | (297,485         | ) |   |                 |  
|                                                                     |   |                   |   |   |                  |   |   |                  |  
|                                                                     |   | (2,364,364        | ) |   | (1,095,902       | ) |   | (225,002         | )
|                                                                     |   |                   |   |   |                  |   |   |                  |  
|Increase (decrease) in cash and cash
      equivalents               |   | (4,702,625        | ) |   | 7,978,095        |   |   | 783,476          |  
|                                                                     |   |                   |   |   |                  |   |   |                  |  
|CASH AND CASH EQUIVALENTS,beginning                                  |   | 11,045,106        |   |   | 3,067,011        |   |   | 2,283,535        |  
|                                                                     |   |                   |   |   |                  |   |   |                  |  
|CASH AND CASH EQUIVALENTS,end                                        | $ | 6,342,481         |   | $ | 11,045,106       |   | $ | 3,067,011        |  
|                                                                     |   |                   |   |   |                  |   |   |                  |  
|SUPPLEMENTARY CASH FLOW DISCLOSURES                                  |   |                   |   |   |                  |   |   |                  |  
|Cash paid for:                                                       |   |                   |   |   |                  |   |   |                  |  
|Interest expense                                                     | $ | 87                |   | $ | 16               |   | $ |                 |  
|Income taxes                                                         |   |                  |   |   |                 |   |   |                 |  
|Non-cash investing activity:                                         |   |                   |   |   |                  |   |   |                  |  
|3,164,702 shares issued in acquisition of
      controlling interest |   |                   |   |   |                  |   |   |                  |  
|in Cia
      Minera                                                  |   |                  |   |   | 7,215,520        |   |   |                 |  

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

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 1 - NATURE OF OPERATIONS

Avino Silver & Gold Mines Ltd. (the Company or Avino)
was incorporated in 1969 under the laws of the Province of British Columbia,
Canada. The Companys principal business activities include the acquisition,
exploration and development of mineral properties. The Company owns interests in
mineral properties located in Durango, Mexico and in British Columbia and the
Yukon, Canada.

The Company is in the exploration stage and is in the process
of determining whether these properties contain ore reserves which are
economically recoverable.

The recoverability of amounts recorded as mineral properties
and related deferred costs is dependent upon the discovery of economically
recoverable reserves, maintenance of the Companys legal interests in its
mineral claims, obtaining further financing for exploration and development of
its mineral claims, re-development of its mining and processing operations and
commencement of future profitable production, or receiving proceeds from the
sale of all or an interest in its mineral properties.

These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles applicable to a going
concern, which assume that the Company will realize its assets and discharge its
liabilities in the normal course of business. The Company will be required to
raise new financing through the sale of shares or issuance of debt to continue
with the exploration and development of its mineral properties. Although
management intends to secure additional financing, there can be no assurance
that management will be successful in its efforts to secure additional financing
or that it will ever develop a self-supporting business. These factors together
raise substantial doubt about the Companys ability to continue as a going
concern. These consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

NOTE 2 - CHANGE IN FISCAL YEAR END

During 2007, the Company changed its fiscal year end from
January 31st to December 31st to correspond to the
December 31st fiscal year end of the Companys Mexican operating
subsidiaries, which report on a calendar year basis. The effect of this change
resulted in a current fiscal period of eleven months ended December 31, 2007,
for the consolidated statements of operations and comprehensive loss, deficit
and accumulated other comprehensive income, while the comparative figures are
for twelve-month periods ended January 31st.

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES

|i) | Basis of presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | These consolidated financial statements have been
      prepared in Canadian Dollars in accordance with Canadian generally
      accepted accounting principles and include the accounts of the Company and
      its Mexican subsidiaries. A summary of the differences between accounting
      principles generally accepted in Canada and those generally accepted in
      the United States is contained in Note 23. All significant inter-company
      balances and transactions have been eliminated on consolidation. The
      Companys Mexican subsidiaries are Oniva Silver and Gold Mines S. A.,
      (Oniva Silver) which is wholly-owned, Promotora Avino, S.A. De C.V.
      (Promotora) in which the Company has a direct 79.09% ownership, and
      Compania Minera Mexicana de Avino, S.A. de C.V. (Cia Minera) in which
      the Company has 50.0% direct ownership and an additional 39.35% indirect
      effective ownership held through Promotora.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company acquired control of Promotora and Cia Minera
      on July 17, 2006 (see Note 4). Prior to the acquisition of control, the
      Company accounted for its 49% ownership of Cia Minera using the equity
      method. Under the equity method, the Companys original investment in Cia
      Minera was recorded at cost, and subsequently adjusted to reflect the
      Companys share of earnings or loss in Cia Minera.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | These consolidated financial statements include the net
      assets and operations of the Promotora and Cia Minera subsidiaries on a
      consolidated basis beginning from July 17, 2006
onward.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

|ii)  | Cash and cash equivalents                                                                                                                                                                                                                                                
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                          
|     | The Company considers all highly liquid instruments with
      original maturities of three months or less on the date of purchase to be
      cash equivalents. Cash equivalents are carried at cost, plus accrued
      interest, which approximates fair market value.
|     |                                                                                                                                                                                                                                                                          
|iii) | Property, plant and equipment                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                          
|     | Property, plant and equipment is stated at cost less
      accumulated amortization. Amortization is recorded over the estimated
      useful lives of the assets on the declining balance basis at the following
      annual rates:                                    

Office equipment, furniture and fixtures
    20%Computer equipment
    30%Mine mill, machinery and plant
    12%Mine facilities and equipment
    6% to 10%


The mine mill, machinery, plant
facilities and equipment (see Note 5) were acquired on July 17, 2006 and are not
in active use, as the Company is in the process of refurbishing these assets.
Accordingly, these assets are considered to be under reconstruction and no
amortization has been recorded on them.

|iv) | Mineral properties, deferred exploration and
      development expenditures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | The Company follows CICA Accounting Guideline 11,
      Enterprises in the Development Stage. Mineral property acquisition,
      exploration and development costs are deferred until the property to which
      they relate is placed into production, sold, allowed to lapse or
      abandoned. Mineral property acquisition costs include the cash
      consideration and the fair value of common shares issued for mineral
      property interests based on the observed trading price of the shares.
      Mineral exploration costs such as field labour and consultants, geology
      and assaying, and mining claims are capitalized and carried at cost until
      the properties to which they relate are placed into production, sold or
      where management has determined there to be a permanent impairment in
      value. Development costs incurred to access ore bodies identified in the
      current mining plan will be expensed as incurred after production has
      commenced.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Development costs necessary to extend a mine beyond those
      areas identified in the current mining plan and which are incurred to
      access additional reserves are deferred until the incremental reserves are
      mined. Mineral properties and development costs, including the mineral
      acquisition and direct mineral exploration costs relating to the current
      mining plan, will be depleted and amortized using the units-of-production
      method over the estimated life of the ore body based on proven and
      probable reserves once commercial production
commences.                                                                                                                                                                                                                                                                                                                                                                                                          

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

|v)    | Investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      | Investments in the shares of companies over which Avino
      has the ability to exercise significant influence, but not control, are
      accounted for using equity method. Accordingly, the Company includes its
      share of the investees net income or loss for the year in its operations.
      The investment is initially recorded at cost and increased or decreased
      for the Companys share of net income or loss respectively. In those
      instances where the Companys share in the investees cumulative net
      losses exceeds the carrying amount of the Companys investment, the
      Company records its share of the investees losses as a liability only if
      it has determined that it has ongoing obligations or commitments towards
      the investee. In those circumstances where the Company has no ongoing
      obligations or commitments to support the investee, the Company records
      cumulative losses only to the extent of the carrying amount of the
      investment.
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      | Investments in the shares of companies over which Avino
      does not have control or exercises significant influence are classified as
      available-for-sale and accounted for at fair market value. Unrealized
      gains or losses on these investments are recorded as other comprehensive
      income or loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|vi)   | Translation of foreign currencies and foreign
      subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      | The Companys integrated Mexican foreign subsidiaries are
      financially and operationally dependent on the Company. The Company uses
      the temporal method to translate the accounts of its integrated foreign
      operations into Canadian dollars. Monetary assets and liabilities are
      translated at the exchange rates in effect at the balance sheet date.
      Non-monetary assets and liabilities are translated at historical rates.
      Revenues and expenses are translated at rates in effect during the period,
      except for amortization, which is translated on the same basis as the
      related assets. The resulting exchange gains or losses are recognized in
      income.                                                                                                                                                                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|vii)  | Comprehensive loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      | Effective February 1, 2007 comprehensive loss is
      comprised of the sum of the net loss and other comprehensive income or
      loss which includes unrealized gains or losses from changes in the fair
      market value of available-for- sale investments, changes in the fair
      market value of derivative instruments designated as cash flow hedges and
      currency translation adjustments on self-sustaining foreign operations.
      The Company does not have any derivative instruments or self-sustaining
      foreign operations and currently the Companys other comprehensive income
      (loss) is comprised only of changes in the fair value of the Companys
      available-for-sale investments.                                                                                                                                                                                                                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|viii) | Financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

In managements opinion, the Company is not exposed to
significant interest rate risk.

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

|viii) | Financial instruments (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      | (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      | (e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      | (f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|ix)   | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      | The preparation of financial statements in accordance
      with Canadian generally accepted accounting principles requires management
      to make estimates and assumptions that affect the reported amounts of
      assets and liabilities and disclosures of contingent assets and
      liabilities at the date of the financial statements and the reported
      amounts of revenues and expenses during the reported periods. Significant
      areas requiring the use of estimates relate to the recoverability or
      valuation of sales taxes recoverable, property, plant, equipment, and
      mineral properties, the valuation of asset retirement obligations, useful
      lives for amortization, recognition and disclosure of future income tax
      assets and liabilities, and stock-based compensation. Actual results could
      differ from those estimates.
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|x)    | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      | The Company follows the asset and liability method of
      accounting for income taxes. Future income tax assets and liabilities are
      determined based on temporary differences between the accounting and taxes
      bases for existing assets and liabilities, and are measured using the tax
      rates expected to apply when these differences reverse. A valuation
      allowance is recorded against any future income tax asset if it is more
      likely than not that the asset will not be
realized.                                                                                                                                                                                                                                                                                                                                                                   

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

|x)    | Income taxes (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|      | The Company follows CICA Emerging Issues Committee
      Abstract 146 Flow-Through Shares. Canadian tax legislation permits
      a company to issue securities referred to as flow-through shares whereby
      the Company assigns the tax deductions arising from the related resource
      expenditures, to the shareholders. When resource expenditures are
      renounced to the investors and the Company has reasonable assurance that
      the expenditures will be completed, a future income tax liability is
      recognized for the net tax effect of the deductions renounced, and share
      capital is reduced.                                                                                                                                                                                                                                                                                                                                                                                                                 
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|      | If the Company has sufficient unrecognized tax losses
      carried forward or other unrecognized future income tax assets to offset
      all or part of this future income tax liability, a portion of such
      unrecognized future income tax assets is recorded as a future income tax
      recovery up to the amount of the future income tax liability that would
      otherwise be recognized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|xi)   | Stock-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|      | The Company follows CICA Handbook Section 3870 Stock
      Based Compensation and Other Stock-Based Payments. Accordingly the
      Company recognizes stock-based compensation expense for the estimated fair
      value of stock-based payments. Compensation costs attributable to stock
      options or similar equity instruments granted to employees are measured at
      the fair value at the grant date using the Black-Scholes option pricing
      model, and are expensed over the expected vesting period. Transactions in
      which goods or services are received from non- employees in exchange for
      the issuance of equity instruments are accounted for based on the fair
      value of the consideration received or the fair value of the equity
      instruments issued, whichever is more reliably measurable. Consideration
      received on the exercise of stock options is recorded as share capital
      with a corresponding reduction in the contributed surplus related to the
      options exercised.
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|xii)  | Loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|      | Basic loss per share is calculated using the weighted
      average number of common shares outstanding during the year. Diluted loss
      per share is calculated giving effect to the potential dilution that would
      occur if securities or other contracts to issue common shares were
      exercised or converted to common shares using the treasury method. The
      treasury method assumes that proceeds received from the exercise of stock
      options and warrants are used to repurchase common shares at the
      prevailing market rate. Stock options and warrants are dilutive when the
      average market prices of the common shares during the year exceed the
      exercise prices of the options and warrants.                                                                                                                                                                                                                                                                                                    
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|      | For the period ended December 31, 2007 and the years
      ended January 31, 2007 and 2006, the existence of warrants and options
      affects the calculation of loss per share on a fully diluted basis. As the
      affect of this dilution is to reduce the reported loss per share
      (anti-dilutive), fully diluted loss per share information has not been
      shown.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|xiii) | Asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|      | The Company recognizes the fair value of its liability
      for asset retirement obligations, including site restoration costs in the
      year in which such liabilities are incurred and can be reasonably
      estimated. Upon recognition of an asset retirement obligation, the site
      restoration costs are capitalized as a part of the mineral property. In
      periods subsequent to initial measurement, the asset retirement obligation
      is adjusted for both the passage of time and revisions to the original
      estimates. If the obligation is settled for other than the carrying amount
      of the liability, a gain or loss on the settlement is recognized. The
      Company estimated its site restoration costs as at December 31, 2007 to be
      $nil (January 31, 2007 - $nil) as significant disturbance of sites giving
      rise to restoration obligations has not yet
occurred.                                                                                                                   

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

|xiv) | Impairment of long-lived assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | The recoverability of long-lived assets, which includes
      property, plant, equipment, and mineral properties is assessed for
      impairment annually or whenever events or changes in circumstances
      indicate that the carrying amount may not be recoverable. Recoverability
      is based on factors such as future asset utilization and the future
      undiscounted cash flows expected to result from the use or sale of the
      related assets. An impairment loss is recognized when the carrying amount
      of an asset that is held and used exceeds the projected undiscounted
      future net cash flows expected from its use and disposal less costs to
      sell, and is measured as the amount by which the carrying amount of the
      asset exceeds its fair value, which is measured based on discounted cash
      flows when quoted market prices are not available.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | Impairment in the carrying value of non-producing mineral
      properties may occur when one of the following conditions
exists:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | Once impairment has been determined in the carrying value
      of a mineral property, it will be written-down to fair value. Amounts
      shown for mineral properties reflect costs incurred to date, less
      impairments, and are not intended to reflect present or future
    values.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|xv)  | Variable Interest Entities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | Variable interest entities (VIE) are consolidated by
      the Company when it is determined that it will, as the primary
      beneficiary, absorb the majority of the VIEs expected losses or expected
      residual returns. The Company does not currently have any variable
      interest entities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|xvi) | New Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | Effective February 1, 2007, the Company adopted the
      following new accounting standards issued by the Canadian Institute of
      Chartered Accountants (CICA). These accounting policy changes were
      adopted on a prospective basis with no restatement of prior period
      consolidated financial statements:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | Section 1530 Comprehensive Income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     | Section 3251 Equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     | Section 3855 Financial Instruments  Recognition and
      MeasurementSection 3861 Financial Instruments  Disclosure and
      Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|     | Section 3865 Hedges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | These standards address the classification, recognition
      and measurement of financials instruments, the inclusion of other
      comprehensive income, and establish the standards for hedge accounting.
      Upon the adoption of these new standards the Company classified its
      investments in related companies as available-for-sale, which are measured
      at fair value, and recorded a $17,117 increase in their carrying value as
      at February 1, 2007; representing the aggregate cumulative unrealized
      gain, on the statement of accumulated other comprehensive income. There
      were no other opening adjustments recorded on the adoption of these
      standards.                                                                                                                                                                                                

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES (continued)

|xvi)  | New Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|      | On February 1, 2007, the Company also adopted CICA
      Section 1506 Accounting Changes, which expands requirements
      relating to voluntary changes in accounting principles, and requires the
      Company to disclose new sources of GAAP that have been issued but are not
      yet effective. The Company has not made any voluntary changes in
      accounting principles affecting these consolidated financial statements.
      The recent accounting pronouncements that have been issued as new sources
      of GAAP but are not yet effective are described below:
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|xvii) | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|      | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|      | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|      | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|      | (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|      | (e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|      | (f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 4 - ACQUISITION OF COMPANIA MINERA MEXICANA DE AVINO,
S.A. DE C.V.

On July 17, 2006 the Company acquired control of Compania
Minera Mexicana de Avino, S.A. de C.V. (Cia Minera) through the acquisition of
an additional 39.25% interest in Cia Minera which combined with the Companys
pre-existing 49% share of Cia Minera, brought the Companys ownership interest
in Cia Minera to 88.25% . The additional 39.25% interest in Cia Minera was
obtained through the acquisition of 76.88% of the common shares of Promotora
Avino S.A. De C.V. (Promotora) which in turn owns 49.75% of Cia Mineras
common shares, and the direct acquisition of 1% of the common shares of Cia
Minera.

The historic operations of Cia Minera involved the mining of
commercial grade ores which produced silver, gold and copper. This plant and
mine ceased operations in November 2001 due to low metal prices and the closure
of a smelter. The Company is evaluating the re-activation of the mine and has
commenced exploration activities on Cia Mineras mineral properties in the state
of Durango, Mexico (see Note 6).

The July 17, 2006 acquisition was accomplished by a share
exchange in which the Company issued 3,164,702 shares as consideration for the
purchase of the additional 39.25% interest in Cia Minera. The shares issued as
consideration were valued based on the July 17, 2006 closing market price per
share of $2.28. The acquisition was accounted for using the purchase method and
these consolidated financial statements include the assets, liabilities and
operations of these subsidiaries beginning on July 17, 2006, the date of
acquisition of control. The acquisition of the 39.25% interest described above
did not include an effective 1.1% interest to be acquired from an estate subject
to approval and transfer of the shares to the Company by the trustee for that
estate. On December 21, 2007 approval was received and the Company obtained the
1.1% interest from the estate for no additional consideration. As at December
31, 2007 the Companys ownership interest in Cia Minera is 89.35% .

The cost of the acquisition of Cia Minera was comprised as
follows:

|Issuance of 3,164,702 shares issued as
      consideration              | $ | 7,215,521 |  
|----------------------------------------------------------------------- | - | --------- | -
|Direct acquisition costs                                                |   | 24,705    |  
|Cash advances to Cia Minera prior to July
      17, 2006                |   | 297,485   |  
|Assumption of
      equity based commitment made prior to July 17, 2006 |   | (376,177  | )
|                                                                        | $ | 7,161,534 |  

The cost of Cia Minera was allocated to the estimated fair
values of the assets acquired and liabilities assumed as at July 17, 2006 as
follows:

|Cash                                     | $ | 21,154     |  
|---------------------------------------- | - | ---------- | -
|Taxes and other amounts recoverable      |   | 27,977     |  
|Mine mill and processing plant           |   | 934,654    |  
|Mine facilities, machinery and equipment |   | 62,310     |  
|Mineral properties                       |   | 9,525,575  |  
|Accounts payable and accrued liabilities |   | (864,816   | )
|Future income tax liability              |   | (2,335,999 | )
|Taxes payable                            |   | (209,321   | )
|                                         | $ | 7,161,534  |  

Prior to the July 17, 2006 acquisition of the additional 39.25%
in Cia Minera, the Company accounted for its original 49% interest using the
equity method.

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 5 - PROPERTY, PLANT AND EQUIPMENT

|                                          |   |           |  |   |              |  |   | December 31,         |  |   | January 31,          | 
|----------------------------------------- | - | --------- |  | - | ------------ |  | - | -------------------- |  | - | -------------------- | 
|                                          |   |           |  |   | Accumulated  |  |   | 2007                 |  |   | 2007                 | 
|                                          |   | Cost      |  |   | Amortization |  |   | Net
      Book Value |  |   | Net
      Book Value | 
|Office equipment, furniture and fixtures  | $ | 5,512     |  | $ | 4,019        |  | $ | 1,493                |  | $ | 1,828                | 
|Computer equipment                        |   | 24,632    |  |   | 2,323        |  |   | 22,309               |  |   | 18,331               | 
|Mine mill, machinery and processing plant |   | 1,016,823 |  |   |             |  |   | 1,016,823            |  |   | 934,654              | 
|Mine facilities
      and equipment       |   | 46,732    |  |   | 1,967        |  |   | 44,765               |  |   | 60,415               | 
|                                          | $ | 1,093,699 |  | $ | 8,309        |  | $ | 1,085,390            |  | $ | 1,015,228            | 

NOTE 6 - MINERAL PROPERTIES

|                                        |   |            |  |   | British  |  |   |        |  |   |            | 
|--------------------------------------- | - | ---------- |  | - | -------- |  | - | ------ |  | - | ---------- | 
|                                        |   | Durango    |  |   | Columbia |  |   | Yukon  |  |   |            | 
|                                        |   | Mexico     |  |   | Canada   |  |   | Canada |  |   | Total      | 
|Balance, January 31, 2006               | $ |           |  | $ | 486,899  |  | $ | 1      |  | $ | 486,900    | 
|                                        |   |            |  |   |          |  |   |        |  |   |            | 
|Acquisition costs                       |   | 9,525,575  |  |   |         |  |   |       |  |   | 9,525,575  | 
|                                        |   |            |  |   |          |  |   |        |  |   |            | 
|Exploration costs incurred during year: |   |            |  |   |          |  |   |        |  |   |            | 
|Assays                                  |   |           |  |   | 2,001    |  |   |       |  |   | 2,001      | 
|Assessment and taxes                    |   |           |  |   | 2,410    |  |   |       |  |   | 2,410      | 
|Drilling                                |   | 609,518    |  |   | 14,837   |  |   |       |  |   | 624,355    | 
|Field supplies and
      services       |   |           |  |   | 11,242   |  |   |       |  |   | 11,242     | 
|Geological                              |   | 90,712     |  |   | 21,260   |  |   |       |  |   | 111,972    | 
|                                        |   |            |  |   |          |  |   |        |  |   |            | 
|Balance, January 31, 2007               |   | 10,225,805 |  |   | 538,649  |  |   | 1      |  |   | 10,764,455 | 
|                                        |   |            |  |   |          |  |   |        |  |   |            | 
|Exploration costs incurred during year: |   |            |  |   |          |  |   |        |  |   |            | 
|Assays                                  |   | 59,901     |  |   | 1,379    |  |   |       |  |   | 61,280     | 
|Assessment and taxes                    |   | 13,198     |  |   | 139      |  |   |       |  |   | 13,337     | 
|Drilling                                |   | 1,891,527  |  |   | 65,577   |  |   |       |  |   | 1,957,104  | 
|Field supplies and services             |   |           |  |   | 911      |  |   |       |  |   | 911        | 
|Geological                              |   | 298,706    |  |   | 1,012    |  |   |       |  |   | 299,718    | 
|                                        |   |            |  |   |          |  |   |        |  |   |            | 
|Balance, December 31, 2007              | $ | 12,489,137 |  | $ | 607,667  |  | $ | 1      |  | $ | 13,096,805 | 

Additional information on the Companys mineral properties by
region is as follows:

|(a) | Durango, Mexico                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                           
|    | The Company acquired the Durango mineral properties
      through the acquisition of Cia Minera during the January 31, 2007 year-end
      (see Note 4). The Companys subsidiary Cia Minera owns 42 mineral claims
      in the state of Durango, Mexico.

In addition four core mineral claims are under leased
concessions  exploitation rights to and for the Unification La Platosa, are
granted by a lease agreement, to Cia Minera from Minerales de Avino SA de CV.
The two concessions, Primer Rey and Avino y Emma, are included in the lease
agreement, but are discrete and lie under the town of San Jose de Avino. The
agreement is valid until October 31, 2010. An ongoing dispute regarding
royalties on the leased mineral claims was settled in the current period (see
Note 19).

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 6 - MINERAL PROPERTIES (continued)

|(a) | Durango, Mexico (continued)                                                                            
|--- | -------------------------------------------------------------------------------------------------------
|    |                                                                                                        
|    | The Companys mineral claims in Mexico are divided into
      the following four properties:           
|    |                                                                                                        
|    | (i)                                                                                                    
|    |                                                                                                        
|    |                                                                                                        
|    |                                                                                                        
|    | (ii)                                                                                                   
|    |                                                                                                        
|    |                                                                                                        
|    |                                                                                                        
|    | (iii)                                                                                                  
|    |                                                                                                        
|    |                                                                                                        
|    |                                                                                                        
|    | (iv)                                                                                                   
|    |                                                                                                        
|    |                                                                                                        
|    |                                                                                                        
|(b) | British Columbia, Canada                                                                               
|    |                                                                                                        
|    | The Companys mineral claims in British Columbia are
      divided into the following three properties:
|    |                                                                                                        
|    | (i)                                                                                                    
|    |                                                                                                        
|    |                                                                                                        
|    |                                                                                                        
|    | (ii)                                                                                                   
|    |                                                                                                        
|    |                                                                                                        
|    |                                                                                                        
|    | (iii)                                                                                                  
|    |                                                                                                        
|    |                                                                                                        

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 6 - MINERAL PROPERTIES (continued)

|(c) | Yukon, Canada                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                      
|    | In 2003 the Company acquired a 100% interest in 14 quartz
      leases, located in the Mayo Mining Division of the Yukon, Canada by
      issuing 200,000 common shares at a price of $0.50 per share for total
      consideration of $100,000. The property was written down to a nominal
      value of $1 in fiscal 2006 by a charge to operations of
  $103,242.

NOTE 7 - INVESTMENTS IN RELATED COMPANIES

Investments in related companies comprise the following:

|                             |   |         |  |   | Accumulated    |   |   |                   |  |   |                  | 
|---------------------------- | - | ------- |  | - | -------------- | - | - | ----------------- |  | - | ---------------- | 
|                             |   |         |  |   | Unrealized     |   |   | December 31, 2007 |  |   | February 1, 2007 | 
|                             |   | Cost    |  |   | Gains (losses) |   |   | Fair Value        |  |   | Fair Value       | 
|Bralorne Gold Mines Ltd.     | $ | 205,848 |  | $ | (8,784         | ) | $ | 197,064           |  | $ | 206,021          | 
|Levon Resources Ltd.         |   | 4,236   |  |   | 13,414         |   |   | 17,650            |  |   | 21,180           | 
|Oniva International Services |   |         |  |   |                |   |   |                   |  |   |                  | 
|Corporation                  |   | 1       |  |   | -              |   |   | 1                 |  |   | 1                | 
|                             | $ | 210,085 |  | $ | 4,630          |   | $ | 214,715           |  | $ | 227,202          | 

During the fiscal period ended December 31, 2007, the Company
recognized a $12,487 unrealized loss on investments in related companies
classified as available-for-sale in other comprehensive income, representing the
change in fair value during the fiscal period. On the adoption of the new
accounting standards disclosed in Note 3(xvi) the Company recorded a $17,117
increase in the carrying value as at February 1, 2007; representing the
aggregate cumulative unrealized gain in fair value that is presented the
statement of accumulated other comprehensive income.

Bralorne Gold Mines Ltd. (Bralorne)

The Companys investment in Bralorne consists of 179,149 common
shares with a quoted market value of $197,064 as at December 31, 2007 (January
31, 2007 - $206,021). Bralorne is a public company with common directors.

Levon Resources Ltd. (Levon)

The Companys investment in Levon consists of 141,200 common
shares with a quoted market value of $17,650 as at December 31, 2007 (January
31, 2007 - $21,180). Levon is a public company with common directors.

Oniva International Services Corporation (Oniva)

The Company owns a 16.67% interest in Oniva, a private company
with common management, which provides office and administration services to the
Company. The remaining 83.33% is shared equally between five other companies
that are related by some common directors and management. See Note 20 for
disclosure on the Companys commitment to Oniva.

NOTE 8 - NON-CONTROLLING INTEREST

The Company has an 89.35% interest in its subsidiary Cia
Minera, and the remaining 10.65% portion is presented as a non-controlling
interest. The non-controlling interest in Cia Mineras cumulative losses has
been recorded as a net amount recoverable by the Company from Cia Minera, net of
a valuation allowance, since the owners of the 10.65% minority interest in Cia
Minera do not have a demonstrated commitment towards funding their share of Cia
Mineras net losses. Accordingly, the non-controlling interest in the Cia Minera
operating losses recoverable are not recognized as an asset in these financial
statements.

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 8 - NON-CONTROLLING INTEREST (continued)

The carrying amount of the non-controlling interest comprised
is as follows:

|Non-controlling interest in Cia Minera
      recoverable at acquisition, July 17, 2006 | $ | 111,874  |  
|-------------------------------------------------------------------------------------- | - | -------- | -
|Non-controlling interest in Cia Mineras net loss
      recoverable since acquisition  |   | 199,459  |  
|Loss valuation allowance                                                               |   | (311,333 | )
|Non-controlling
      interest - net carrying amount                                   | $ |         |  

NOTE 9 - COMMITMENT AND SITE ASSESSMENT COSTS RELATED TO CIA
MINERA

The Company incurred and expensed the following site assessment
costs in contemplation of its acquisition of the additional 39.25% interest in
Cia Minera:

|                              |   | December 31, 2007 |  |   | January 31, 2007 |  |   | January 31, 2006 | 
|----------------------------- | - | ----------------- |  | - | ---------------- |  | - | ---------------- | 
|Geological assessment         | $ |                  |  | $ |                 |  | $ | 133,915          | 
|Professional fees             |   |                  |  |   |                 |  |   | 26,054           | 
|Site overhead and maintenance |   |                  |  |   |                 |  |   | 195,952          | 
|                              | $ |                  |  | $ |                 |  | $ | 355,921          | 

Prior to fiscal 2006, the Company had determined that it did
not have a commitment or obligation to Cia Minera and accordingly did not record
its equity interest in the losses of Cia Minera. During fiscal 2006 the Company
determined that it had a commitment to Cia Minera. Accordingly, it began to
recognize in operations its equity interest in the losses of Cia Minera. In
fiscal 2006, the Company recognized into operations its interest in previously
unrecorded equity losses of Cia Minera in the amount $342,596. During the year
ended January 31, 2007 the Company recognized a further $33,581 of equity losses
in Cia Minera, resulting in cumulative equity losses recognized of $376,177 in
Cia Minera prior to the acquisition of control on July 17, 2006 (see Note
4).

NOTE 10 - SHARE CAPITAL

|(a) | Authorized: | Unlimited common shares without par value
|--- | ----------- | -----------------------------------------
|    | Issued:     |                                          

| |                                                                         |  | Shares     |  |   | Amount     |  
| | ----------------------------------------------------------------------- |  | ---------- |  | - | ---------- | -
| | Balance, January 31, 2006                                               |  | 11,962,075 |  | $ | 19,264,265 |  
| | Shares issued for cash:                                                 |  |            |  |   |            |  
| | Private placement                                                       |  | 5,000,000  |  |   | 10,000,000 |  
| | Less value of warrants transferred to
      contributed surplus         |  |           |  |   | (3,578,383 | )
| | Exercise of stock
      options                                         |  | 456,700    |  |   | 585,866    |  
| | Exercise of warrants                                                    |  | 1,250      |  |   | 3,125      |  
| | Shares issued for Cia Minera acquisition
      (Note 4)                 |  | 3,164,702  |  |   | 7,215,521  |  
| | Transferred from contributed surplus on exercise of stock
      options |  |           |  |   | 443,831    |  
| | Transfer from contributed surplus on
      exercise of warrants         |  |           |  |   | 1,575      |  
| | Share issuance
      costs                                              |  |           |  |   | (823,728   | )
| |                                                                         |  | 8,622,652  |  |   | 13,847,807 |  
| | Balance, January
      31, 2007 and December 31, 2007                   |  | 20,584,727 |  | $ | 33,112,072 |  

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 10 - SHARE CAPITAL (continued)

Private placement

During the year ended January 31, 2007, the Company completed a
private placement of 5,000,000 units at a price of $2.00 per unit, each unit
consisted of one common share and one-half of a non-transferable share purchase
warrant. Each whole warrant entitles the holder to purchase one additional share
at a price of $2.50 until March 20, 2008. The gross proceeds from the private
placement was $10,000,000 and share issuance costs were $823,728 consisting of
finders fees of $778,795 paid in cash and $44,933 in other costs. Consideration
of $3,578,383 was allocated to contributed surplus for the warrants issued under
the placement.

|(b) | Warrants
|--- | --------

| |                                                                    |  | Underlying |   |   | Weighted Average | 
| | ------------------------------------------------------------------ |  | ---------- | - | - | ---------------- | 
| |                                                                    |  | Shares     |   |   | Exercise Price   | 
| | Warrants outstanding, January 31, 2006                             |  |           |   |   |                 | 
| | Issued                                                             |  | 2,500,000  |   | $ | 2.50             | 
| | Exercised                                                          |  | (1,250     | ) | $ | 2.50             | 
| | Warrants
      outstanding, January 31, 2007 and December 31, 2007 |  | 2,498,750  |   | $ | 2.50             | 

|(c) | Stock options
|--- | -------------

| |                                              |  |                   |   |   | Weighted Average | 
| | -------------------------------------------- |  | ----------------- | - | - | ---------------- | 
| |                                              |  | Underlying Shares |   |   | Exercised Price  | 
| | Stock options outstanding, January 31, 2006  |  | 813,000           |   | $ | 1.31             | 
| | Granted                                      |  | 1,120,000         |   | $ | 3.85             | 
| | Exercised                                    |  | (456,700          | ) | $ | 1.28             | 
| | Expired or cancelled                         |  |                  |   |   |                 | 
| |                                              |  |                   |   |   |                  | 
| | Stock options outstanding, January 31, 2007  |  | 1,476,300         |   | $ | 3.25             | 
| | Granted                                      |  |                  |   |   |                 | 
| | Exercised                                    |  |                  |   |   |                 | 
| | Expired or cancelled                         |  | (25,000           | ) | $ | 3.99             | 
| |                                              |  |                   |   |   |                  | 
| | Stock options outstanding, December 31, 2007 |  | 1,451,300         |   | $ | 3.23             | 

Details of stock options
outstanding:

| |                    |   |                |  |  | December 31, 2007         |  |  | January 31, 2007          | 
| | ------------------ | - | -------------- |  |  | ------------------------- |  |  | ------------------------- | 
| | Expiry Date        |   | Exercise Price |  |  | Stock Options Outstanding |  |  | Stock Options Outstanding | 
| | October 21, 2008   | $ | 1.20           |  |  | 41,800                    |  |  | 41,800                    | 
| | April 5, 2010      | $ | 1.35           |  |  | 262,000                   |  |  | 262,000                   | 
| | September 26, 2010 | $ | 1.35           |  |  | 52,500                    |  |  | 52,500                    | 
| | March 15, 2011     | $ | 2.72           |  |  | 120,000                   |  |  | 120,000                   | 
| | April 26, 2011     | $ | 3.99           |  |  | 975,000                   |  |  | 1,000,000                 | 
| |                    |   |                |  |  | 1,451,300                 |  |  | 1,476,300                 | 

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 10 - SHARE CAPITAL (continued)

|(c) | Stock options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | As at December 31, 2007 1,451,300 stock options were
      exercisable and as at January 31, 2007 1,443,800 stock options were
      exercisable. The weighted average remaining contractual life of the
      outstanding stock options at December 31, 2007 is 3.03 years (January 31,
      2007 3.95 years).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Company amended its stock option plan during the year
      ended January 31, 2007, under which it may grant stock options up to 10%
      of the Companys total number of shares issued and outstanding on a
      non-diluted basis. The stock option plan provides for the granting of
      stock options to regular employees and persons providing investor-relation
      or consulting services up to a limit of 5% and 2% respectively of the
      Companys total number of issued and outstanding shares per year. The
      stock options vest on the date of grant, except for those issued to
      persons providing investor-relation or consulting services, which vest
      over a period of one year. The option price must be greater or equal to
      the discounted market price on the grant date and the option term cannot
      exceed five years from the grant date.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(d) | Flow-through common shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Company issues flow-through common shares to finance
      part of its exploration expenditures. The income tax deductions related to
      the exploration expenditures renounced may be claimed only by the
      investors of the flow-through common shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | As at December 31, 2007, the Company has no commitment to
      incur further Canadian exploration expenditures qualifying for
      flow-through, as defined in the Canadian Income Tax
Act.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

NOTE 11  CONTRIBUTED SURPLUS

|                                                |   | Period Ended      |  |   | Year Ended       |  
|----------------------------------------------- | - | ----------------- |  | - | ---------------- | -
|                                                |   | December 31, 2007 |  |   | January 31, 2007 |  
|Opening Balance                                 | $ | 7,259,879         |  | $ | 1,070,699        |  
|Stock options granted during the year (Note 13) |   |                  |  |   | 2,860,603        |  
|Stock options issued for services (Note 12)     |   | 27,863            |  |   | 195,600          |  
|Warrants on private placement (Note 10(a))      |   |                  |  |   | 3,578,383        |  
|Stock options exercised                         |   |                  |  |   | (443,831         | )
|Warrants exercised                              |   |                  |  |   | (1,575           | )
|Closing Balance                                 | $ | 7,287,742         |  | $ | 7,259,879        |  

The fair value of warrants issued as consideration to agents on
private placement is included in share issuance cost and netted against share
capital. The fair value of these warrants is calculated using the Black-Scholes
option pricing model with the following assumptions:

The fair value of warrants issued under the private placement
was calculated using the Black-Scholes model with the following assumptions:

|                                       | January 31, 2007
|-------------------------------------- | ----------------
|Assumptions:                           |                 
|Risk-free interest rate (%)            | 3.93            
|Expected dividend yield (%)            |                
|Expected option life (years)           | 1.92            
|Expected stock price volatility (%)    | 92              
|Weighted average grant date fair value | $ 1.43          

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 12  INVESTOR RELATIONS EXPENSES

The fair values of stock options granted to investor relations
consultants are included in shareholder and investor relations expenses. The
fair values of the stock options is calculated using the Black-Scholes option
pricing model and is measured and expensed over the 12 month period over which
services are provided and the options vest. During fiscal December 31, 2007
investor relations consultants were granted no stock options. During fiscal
January 31, 2007, 130,000 options (fiscal 2006  95,000) were granted and these
options are exercisable at $2.72 (fiscal 2006 - $1.35) per share. The
shareholder and investor relations expense for fiscal December 31, 2007 includes
$27,863 ((January 31, 2007 -$195,600) (January 31, 2006 - $103,981)) for the
fair value of stock options vesting to investor relations consultants. The
fiscal December 31, 2007 weighted average fair value of these options on the
date of grant was $1.73. The fair value of these options were calculated using
the Black-Scholes model with following weighted average assumptions:

|                                          |  | Period Ended      |  |  | Year Ended       |  |  | Year Ended       | 
|----------------------------------------- |  | ----------------- |  |  | ---------------- |  |  | ---------------- | 
|                                          |  | December 31, 2007 |  |  | January 31, 2007 |  |  | January 31, 2006 | 
|Assumptions:                              |  |                   |  |  |                  |  |  |                  | 
|Risk-free interest rate (%)               |  | 3.5               |  |  | 4.1              |  |  | 3.4              | 
|Expected dividend yield
      (%)         |  |                  |  |  |                 |  |  |                 | 
|Expected option life (years)              |  | 3.0               |  |  | 4.7              |  |  | 3                | 
|Expected stock price
      volatility (%) |  | 90                |  |  | 90               |  |  | 180              | 

NOTE 13  STOCK-BASED COMPENSATION

During fiscal December 31, 2007 the Company did not grant any
stock options to its directors, officers, and employees. In fiscal January 31,
2007 the Company granted 990,000 options having a life of five years and an
exercise price of $3.99 per share to directors, officers, and employees of the
Company. In the year ended January 31, 2007 the Company recognized $2,860,603 in
stock-based compensation representing the fair value of these stock options.

In fiscal January 31, 2006, the Company granted 547,500 options
vesting immediately, having a life of five years and on exercise price of $1.35
per share to directors, officers and employees. The Company recognized stock
based compensation of $725,125 for those options.

The fair value of these options was calculated using the
Black-Scholes model with following weighted average assumptions:

|                                                    |  | Period Ended      |  |  | Year Ended       |  |  | Year Ended       | 
|--------------------------------------------------- |  | ----------------- |  |  | ---------------- |  |  | ---------------- | 
|                                                    |  | December 31, 2007 |  |  | January 31, 2007 |  |  | January 31, 2006 | 
|Assumptions:                                        |  |                   |  |  |                  |  |  |                  | 
|Risk-free interest rate (%)                         |  |                  |  |  | 4.4              |  |  | 3.4              | 
|Expected dividend yield
      (%)                   |  |                  |  |  |                 |  |  |                 | 
|Expected option life (years)                        |  |                  |  |  | 5                |  |  | 3                | 
|Expected stock price
      volatility (%)           |  |                  |  |  | 91               |  |  | 180              | 
|Weighted average fair value at grant
      date ($) |  |                  |  |  | 2.89             |  |  | 1.33             | 

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 14 - INCOME TAXES

The components of the income tax provision including, the
statutory tax rate, effective tax rate and the effect of the valuation allowance
are as follows:

|                                                               |   | Period Ended |   |   | Year Ended  |   |   | Year Ended  |  
|-------------------------------------------------------------- | - | ------------ | - | - | ----------- | - | - | ----------- | -
|                                                               |   | December 31, |   |   | January 31, |   |   | January 31, |  
|                                                               |   | 2007         |   |   | 2007        |   |   | 2006        |  
|Statutory rate                                                 |   | 34.12%       |   |   | 34.12%      |   |   | 34.5%       |  
|                                                               |   |              |   |   |             |   |   |             |  
|Income taxes recovered at the Canadian
      statutory rate    | $ | 473,225      |   | $ | 1,244,882   |   | $ | 817,555     |  
|                                                               |   |              |   |   |             |   |   |             |  
|Less permanent differences:                                    |   |              |   |   |             |   |   |             |  
|Stock-based compensation                                       |   |             |   |   | (976,038    | ) |   | (250,169    | )
|Investor relations
      expense for stock options granted     |   | (9,507       | ) |   | (66,739     | ) |   | (35,873     | )
|Reduction for effect of lower Mexican
      tax rates          |   | (64,829      | ) |   | (10,644     | ) |   |            |  
|Equity based accounting
      loss for interest in Cia         |   |              |   |   |             |   |   |             |  
|Minera Mexicana de Avino, S.A. de C.V.                         |   |             |   |   | (11,458     | ) |   | (118,200    | )
|Other non-tax
      deductible expenses                        |   | (1,574       | ) |   | (3,373      | ) |   |            |  
|                                                               |   |              |   |   |             |   |   |             |  
|Effect of temporary differences:                               |   |              |   |   |             |   |   |             |  
|Share issuance costs                                           |   | 71,239       |   |   | 71,239      |   |   |            |  
|Impairment of
      investment                                 |   |             |   |   |            |   |   | (74,900     | )
|Impairment of mineral property                                 |   |             |   |   |            |   |   | (35,600     | )
|Geological exploration
      expenditures                      |   |             |   |   |            |   |   | (45,000     | )
|                                                               |   |              |   |   |             |   |   |             |  
|Valuation allowance on benefit of tax loss                     |   | (468,554     | ) |   | (247,869    | ) |   | (257,813    | )
|                                                               |   |              |   |   |             |   |   |             |  
|Benefit of income tax asset recognized on
      renouncement   |   |              |   |   |             |   |   |             |  
|of Canadian exploration expenditures to
      flow-through     |   |              |   |   |             |   |   |             |  
|share investors                                                |   |             |   |   |            |   |   | 19,750      |  
|                                                               |   |              |   |   |             |   |   |             |  
|Benefit of Mexican tax losses recognized on
      reduction of |   |              |   |   |             |   |   |             |  
|future income tax liability                                    |   | 501,083      |   |   |            |   |   |            |  
|                                                               |   |              |   |   |             |   |   |             |  
|Income tax
      recovery recognized in the year               | $ | 501,083      |   | $ |            |   | $ | 19,750      |  

The approximate tax effects of each type of temporary
difference that gives rise to potential future income tax assets are as
follows:

|                                                                            |   | December 31, 2007 |   |   | January 31, 2007 |  
|--------------------------------------------------------------------------- | - | ----------------- | - | - | ---------------- | -
|Expected tax recovery rate                                                  |   | 29%               |   |   | 34.12%           |  
|Non-capital tax losses carried forward                                      | $ | 1,092,322         |   | $ | 1,392,852        |  
|Capital tax losses carried forward                                          |   | 213,470           |   |   | 251,159          |  
|Canadian exploration expenses, Canadian development
      expenses and      |   |                   |   |   |                  |  
|foreign
      exploration, and development expenses in excess of book       |   |                   |   |   |                  |  
|value of Canadian mineral
      properties                                  |   | 507,413           |   |   | 557,738          |  
|Share issuance costs                                                        |   | 143,329           |   |   | 239,873          |  
|Tax basis of investments in related companies in excess of
      book value |   | 30,793            |   |   | 37,020           |  
|Undeducted capital cost allowance in excess
      of book value of Canadian |   |                   |   |   |                  |  
|equipment                                                                   |   | 60,325            |   |   | 70,862           |  
|Future income tax assets                                                    |   | 2,047,652         |   |   | 2,549,504        |  
|Less: valuation
      allowance                                             |   | (2,047,652        | ) |   | (2,549,504       | )
|Net tax assets                                                              | $ |                  |   | $ |                 |  

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 14 - INCOME TAXES (continued)

The potential benefit of Canadian net operating tax loss
carry-forwards and other Canadian future income tax assets has not been
recognized in the financial statements since the Company cannot be assured that
it is more likely than not that such benefit will be utilized in future
years.

The future income tax liability presented in these consolidated
financial statements is due to the difference in the carrying amounts and tax
bases of the Mexican mineral properties, mine plant and equipment, which were
acquired in the purchase of Cia Minera (see Note 4). The carrying values of the
Mexican mineral properties, mine plant and equipment reflect the fair values
assigned on the acquisition of control of Cia Minera based on a share exchange,
while the tax bases of these assets are historical undeducted tax amounts that
were nil on acquisition. The future tax liability is attributable to assets in
the tax jurisdiction of Mexico and is presented net of Mexican tax losses
carried forward; and the $501,083 decrease in the future tax liability in fiscal
December 31, 2007 is presented as a recovery of Mexican tax losses on the income
tax provision table above. The approximate tax effects of each type of temporary
difference that gives rise to future income tax liabilities are as follows:

|                                                               |   | December 31, 2007 |   |   | January 31, 2007 |  
|-------------------------------------------------------------- | - | ----------------- | - | - | ---------------- | -
|Mexican statutory rate                                         |   | 28%               |   |   | 28%              |  
|Book value of mineral properties in excess of tax bases        | $ | 2,889,045         |   | $ | 2,255,311        |  
|Book value of plant and equipment in excess
      of tax bases |   | 275,266           |   |   | 276,752          |  
|Less: Mexican tax
      losses carried forward                 |   | (1,329,395        | ) |   | (196,064         | )
|Future income tax liability                                    | $ | 1,834,916         |   | $ | 2,335,999        |  

The Company has capital losses of $1,472,210 carried forward
and $3,765,769 in non-capital tax losses carried forward available to reduce
future Canadian taxable income. The capital losses can be carried forward
indefinitely unless used. Additionally, the Company has $4,747,837 (denominated
in MEX$47,681,237) in tax losses which are available to reduce future Mexican
taxable income. The Companys Canadian non-capital tax losses and Mexican tax
losses, if unused, expire as follows:

Year of Expiry
    
    Canada
    
    
    Mexico2008
    $
    904,279
    
    $
    2009
    
    343,690
    
    
    2010
    
    
    
    
    1,305,3232013
    
    568,450
    
    
    2016
    
    
    
    
    3,442,5142024
    
    799,044
    
    
    2025
    
    646,331
    
    
    2026
    
    503,975
    
    
    $
    3,765,769
    
    $
    4,747,837


---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 15 - RELATED PARTY TRANSACTIONS AND BALANCES

The balances and transactions with related parties are as
follows:

|(a) | Advances to related parties:
|--- | ----------------------------

| |                                                                    |   | December 31, 2007 |  |   | January 31, 2007 | 
| | ------------------------------------------------------------------ | - | ----------------- |  | - | ---------------- | 
| | ABC Drilling Services Inc.  a subsidiary
      of Oniva           | $ |                  |  | $ | 64,933           | 
| | Oniva International Services Corp.  a company controlled
      by |   |                   |  |   |                  | 
| | a director of Avino                                                |   |                  |  |   | 837              | 
| | Advances to
      related parties                                  | $ |                  |  | $ | 65,770           | 

The advance to ABC Drilling Services
Inc. was an exploration advance for drilling services performed subsequent to
the fiscal year end.

|(b) | Amounts due to related parties:
|--- | -------------------------------

| |                                                                      |   | December 31, 2007 |  |   | January 31, 2007 | 
| | -------------------------------------------------------------------- | - | ----------------- |  | - | ---------------- | 
| | Directors                                                            | $ | 18,250            |  | $ | 7,500            | 
| | ABC Drilling Services Inc.  a subsidiary of Oniva                   |   | 4,578             |  |   |                 | 
| | Frobisher Securities Ltd.  a company
      controlled by a director |   |                   |  |   |                  | 
| | and officer of Avino                                                 |   | 3,707             |  |   | 105              | 
| | Sampson Engineering Inc.  a company
      controlled by a           |   |                   |  |   |                  | 
| | director of a related
      company                                  |   | 2,684             |  |   |                 | 
| | Wear Wolfin Design Ltd.  a company
      controlled by a director   |   |                   |  |   |                  | 
| | of a related company                                                 |   | 145               |  |   |                 | 
| | Oniva International Services Corp.  a
      company controlled by   |   |                   |  |   |                  | 
| | a director of Avino                                                  |   | 147,424           |  |   | 133,919          | 
| |                                                                      | $ | 176,788           |  | $ | 141,524          | 

The amounts due to related parties are
non-interest bearing, unsecured and due on demand.

|(c) | The Company recorded the following amounts for
      administrative services and expenses provided by Oniva International
      Services Corp.:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------

| |                                |   | Period Ended      |  |   | Year Ended       |  |   | Year Ended       | 
| | ------------------------------ | - | ----------------- |  | - | ---------------- |  | - | ---------------- | 
| |                                |   | December 31, 2007 |  |   | January 31, 2007 |  |   | January 31, 2006 | 
| | Salaries and benefits          | $ | 72,365            |  | $ | 59,523           |  | $ | 73,529           | 
| | Office and
      miscellaneous |   | 81,368            |  |   | 60,334           |  |   | 89,799           | 
| |                                | $ | 153,733           |  | $ | 119,857          |  | $ | 163,328          | 

---

|AVINO SILVER & GOLD MINES LTD.                                                                     
|---------------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                     
|Eleven-Month Period Ended December 31, 2007 and the Years
          Ended January 31, 2007 and 2006
|(Expressed in
          Canadian Dollars)                                                          

NOTE 15 - RELATED PARTY TRANSACTIONS AND BALANCES

|(d) | The Company recorded the following amounts for management
          and consulting services provided by the following
          companies:
|--- | ------------------------------------------------------------------------------------------------------------------------------------------

| |                                                  |   | Period Ended |  |   | Year Ended  |  |   | Year Ended  | 
| | ------------------------------------------------ | - | ------------ |  | - | ----------- |  | - | ----------- | 
| |                                                  |   | December 31, |  |   | January 31, |  |   | January 31, | 
| |                                                  |   | 2007         |  |   | 2007        |  |   | 2006        | 
| |                                                  |   |              |  |   |             |  |   |             | 
| | Intermark Capital Corp.  a company controlled   |   |              |  |   |             |  |   |             | 
| | by a director and officer of Avino               | $ | 88,000       |  | $ | 87,000      |  | $ | 60,000      | 
| | Frobisher Securities Ltd.  a company controlled |   |              |  |   |             |  |   |             | 
| | by a director and officer of Avino               |   |             |  |   |            |  |   | 2,000       | 
| | Wear Wolfin Design Ltd.  a company controlled   |   |              |  |   |             |  |   |             | 
| | by a director of a related company               |   | 27,500       |  |   | 30,000      |  |   | 30,000      | 
| |                                                  |   |              |  |   |             |  |   |             | 
| |                                                  | $ | 115,500      |  | $ | 117,000     |  | $ | 92,000      | 

|(e) | The Company paid or accrued $65,577 (January 31, 2007 -
          $53,837; January 31, 2006 - $146,092) to ABC Drilling Services Inc. for
          drilling services; $Nil (January 31, 2007 - $6,854; January 31, 2006 -
          $20,433) to Bralorne Gold Mines Ltd. for exploration services; and $36,100
          (January 31, 2007 - $36,600; January 31, 2006 - $12,600) to Sampson
          Engineering Inc. for geological consulting services.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(f) | The Company paid or accrued $40,513 (January 31, 2007 -
          $84,279; January 31, 2006 - $Nil) for investor relations services to
          National Media Associates, a business significantly influenced by a
          director of the Company.                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | All related party transactions are recorded at the
          exchange amount, representing the value agreed upon by the Company and the
          related party, which management believes approximates fair
          value.                                                                                                                                                                                                                               

NOTE 16 - SEGMENTED INFORMATION

The Companys operations are limited to one industry segment,
      being the acquisition, exploration and development of mineral properties.
      Regional geographic information pertaining to the Companys mineral properties
      is disclosed in Note 6.

NOTE 17 - SUPPLEMENTARY CASH FLOW INFORMATION

|                                                   |   | December 31, 2007 |   |   | January 31, 2007 |   |   | January 31, 2006 |  
|-------------------------------------------------- | - | ----------------- | - | - | ---------------- | - | - | ---------------- | -
|Net change in non-cash working capital items:      |   |                   |   |   |                  |   |   |                  |  
|Interest
          receivable                      | $ | 18,996            |   | $ | (38,179          | ) | $ |                 |  
|Sales tax recoverable                              |   | (338,069          | ) |   | (61,665          | ) |   | (1,871           | )
|Prepaid
          expenses and amounts receivable  |   | 21,725            |   |   | (40,497          | ) |   | 8,804            |  
|Advances to related
          companies            |   | 65,770            |   |   | 17,230           |   |   |                 |  
|Accounts
          payable and accrued liabilities |   | (790,850          | ) |   | 224,755          |   |   | (3,235           | )
|Amounts due to related parties                     |   | 35,264            |   |   | (39,894          | ) |   | (95,227          | )
|                                                   | $ | (987,164          | ) | $ | 61,750           |   | $ | (91,529          | )

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 18 - COMPARATIVE FIGURES

Certain fiscal January 31, 2007 and 2006 comparative figures
have been reclassified to conform to the financial statement presentation
adopted for period ended December 31, 2007. These reclassifications do not
affect the net loss or closing deficit of the comparative figures.

NOTE 19  LITIGATION SETTLEMENT

The Companys subsidiary Cia Minera leases four core mineral
claims in consideration for royalties. The lessor had contested the underlying
royalty agreement, and had filed a legal action claiming royalties were owed
from years prior to the Companys acquisition of control of Cia Minera. An
amicable settlement was negotiated during the period ended December 31, 2007
whereby the Company settled the dispute at a cost of $1,497,604 (settlement
denominated in USD$1,500,000). The $1,497,604 amount, less a prior year accrual
of $738,302 is recorded in litigation settlement expense. The Company paid a
$1,398,457 (USD$1,400,000) portion of the settlement and the $99,130 balance
owing (USD$100,000) is recorded in accounts payable, which is to be repaid
during the Companys 2008 year-end.

NOTE 20 - COMMITMENTS

The Company entered into a cost sharing agreement dated October
1, 1997, and amended November 1, 2003 to reimburse Oniva for a percentage of its
overhead expenses, to reimburse 100% of its out-of-pocket expenses incurred on
behalf of the Company, and to pay a percentage fee based on the total overhead
and corporate expenses. The agreement may be terminated with one-month notice by
either party. Transactions and balances with Oniva are disclosed in Note 15.

The Company has a contractual minimum drilling commitment for
the exploration of its mineral properties in Durango, Mexico. As at December 31,
2007 the Company is committed to drilling services at an estimated cost of
$286,949 (services denominated in USD$290,405). Management expects that the
Companys drilling services requirement in fiscal 2008 will likely exceed the
minimum commitment amount.

The Company has also entered into an agreement in which monthly
operating services will be performed through to September 2008 in Durango,
Mexico at a total committed cost of $66,913 (services denominated in
USD$67,500).

NOTE 21 - MISAPPROPRIATION LOSS

During fiscal December 31, 2007, the Company incurred a
misappropriation loss of MXN$930,000 (CAD$86,155) as a result of a fraudulent
disbursement initiated by an unknown third party who was able to access the
Companys Mexican bank account. The Companys legal representative and the
Mexican authorities are attempting to retrieve the funds, however there is no
guarantee that these funds will be recovered and the Company has fully provided
for this loss. The Company has taken stringent steps as a result of this loss
including the use of another banks services and has added additional internal
controls over banking transactions to prevent the reoccurrence of such a loss in
the future.

NOTE 22 - SUBSEQUENT EVENTS

Subsequent to December 31, 2007, the Company granted incentive
stock options to purchase up to 600,000 common shares at a price of $1.65 per
share to certain employees, officers, directors, and consultants of the Company.
The incentive stock options are exercisable on or before February 26, 2013.

The Company also amended the terms of the warrants issued
pursuant to a private placement announced on January 25, 2006. The amendment
extends the expiry date of 2,498,750 warrants from March 20, 2008 to March 20,
2009.

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 23 - DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The consolidated financial statements of the Company have been
prepared in accordance with Canadian generally accepted accounting principles
(Canadian GAAP), which in most respects conform to accounting principals
generally accepted in the United States (US GAAP). There are certain material
differences between Canadian and US GAAP and if these consolidated financial
statements were prepared in accordance with US GAAP, the impact would be as
follows:

|                                        |   | December 31, 2007 |   |   | January 31, 2007 |  
|--------------------------------------- | - | ----------------- | - | - | ---------------- | -
|Balance sheets                          |   |                   |   |   |                  |  
|Total assets under Canadian GAAP        | $ | 21,190,940        |   | $ | 23,295,039       |  
|                                        |   |                   |   |   |                  |  
|Deferred exploration expenditures (iii) |   | (13,096,805       | ) |   | (10,764,455      | )
|Investments (i)                         |   |                  |   |   | 17,116           |  
|Total assets under
      US GAAP        |   | 8,094,135         |   |   | 12,547,700       |  
|                                        |   |                   |   |   |                  |  
|Total equity under Canadian GAAP        |   | 18,658,526        |   |   | 19,505,956       |  
|Deferred exploration expenditures (iii) |   | (13,096,805       | ) |   | (10,764,455      | )
|Investments (i)                         |   |                  |   |   | 17,116           |  
|Total equity under US GAAP              | $ | 5,561,721         |   | $ | 8,758,617        |  

|                                                             |   | December 31, |   |   | January 31, |   |   | January 31, |  
|------------------------------------------------------------ | - | ------------ | - | - | ----------- | - | - | ----------- | -
|                                                             |   | 2007         |   |   | 2007        |   |   | 2006        |  
|Consolidated statements of
      operations                  |   |              |   |   |             |   |   |             |  
|Loss for year under Canadian GAAP                            | $ | (885,863     | ) | $ | (3,684,539  | ) | $ | (2,369,724  | )
|Future income tax benefit on renouncement
      of qualified |   |              |   |   |             |   |   |             |  
|Canadian exploration expenditures (ii)                       |   |             |   |   |            |   |   | (19,750     | )
|Exploration expenses (iii)                                   |   | (2,332,350   | ) |   | (10,277,556 | ) |   | (271,397    | )
|Write-down of
      investment (i)                           |   |             |   |   |            |   |   | 217,000     |  
|Net loss for the year under US GAAP (iv)                     |   | (3,218,213   | ) |   | (13,962,095 | ) |   | (2,443,871  | )
|Comprehensive income (loss) items:                           |   |              |   |   |             |   |   |             |  
|Unrealized gain (loss) on investments (i)                    |   | (12,487      | ) |   | 17,116      |   |   | (146,470    | )
|Net comprehensive
      loss                                 | $ | (3,230,700   | ) | $ | (13,944,979 | ) | $ | (2,590,341  | )
|Loss per share under US GAAP - basic and diluted             | $ | (0.16        | ) | $ | (0.76       | ) | $ | (0.22       | )

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 23 - DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)

|                                                                    |   | December 31, |   |   | January 31, |   |   | January 31, |  
|------------------------------------------------------------------- | - | ------------ | - | - | ----------- | - | - | ----------- | -
|                                                                    |   | 2007         |   |   | 2007        |   |   | 2006        |  
|Statements of cash flows                                            |   |              |   |   |             |   |   |             |  
|Cash flows used in operating activities under Canadian GAAP         | $ | (2,344,201   | ) | $ | (494,328    | ) | $ | (988,079    | )
|Mineral properties expenditures (iii)                               |   | (2,292,156   | ) |   | (751,981    | ) |   | (273,234    | )
|Cash flows used in
      operating activities under US GAAP         |   | (4,636,357   | ) |   | (1,246,309  | ) |   | (1,261,313  | )
|Cash flows (used in) from investing
      activities under Canadian |   |              |   |   |             |   |   |             |  
|GAAP                                                                |   | (2,364,364   | ) |   | (1,095,902  | ) |   | (225,002    | )
|Mineral properties expenditures (iii)                               |   | 2,292,156    |   |   | 751,981     |   |   | 273,234     |  
|Cash flows (used
      in) from investing activities under US GAAP  | $ | (72,208      | ) | $ | (343,921    | ) | $ | 48,232      |  

|i)  | Investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | US GAAP requires investments available for sale to be
      recorded at fair value. The periodic fluctuation in value is recorded as
      part of comprehensive income (loss); under US GAAP such fluctuations are
      not recognized into operations until the investments are sold. Effective
      for fiscal December 31, 2007 the Canadian GAAP treatment is the same,
      however in fiscal January 31, 2007 and 2006 such investments were recorded
      in accordance with Canadian GAAP at the lower of cost and market;
      long-term investments in marketable securities are written down to market
      when impairment is considered other than temporary, in which case the
      written-down value becomes the new cost base, and the impairment is
      charged to operations.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|ii) | Flow-through shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Under Canadian income tax legislation a company is
      allowed to issue flow-through shares pursuant to which the Company
      renounces Canadian exploration expenditures to the flow-through share
      investors for an amount equal to the share issuance price.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Under Canadian GAAP, the Company recognizes a future
      income tax benefit upon the renouncement of these exploration expenditures
      for the amount of the future tax value of the expenditures renounced.
      Under US GAAP, the recognition of this future income tax benefit is
      limited to the extent that the issue price of the flow- through shares
      exceeds the fair value of the Companys shares on the date that the
      flow-through shares are sold.                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    | Under Canadian GAAP, unexpended flow-through funds are
      not classified as restricted. Under US GAAP, however, unexpended
      flow-through funds are considered restricted and not part of cash and cash
      equivalents. As at December 31, 2007 the Company had $nil of restricted,
      unexpended flow-through funds (January 31, 2007 and 2006 -
    $120,401).                                                                                                                                                                                                                                                                                                                                                                                                                             

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 23 - DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)

|iii) | Mineral properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     | Canadian GAAP permits the deferral of costs for the
      acquisition of mineral properties and exploration expenditures subject to
      periodic assessments for impairment. US GAAP requires that exploration
      expenditures relating to unproven mineral properties as well as
      acquisition costs to be expensed as incurred. For US GAAP cash flow
      statement purposes, mineral property acquisition and exploration
      expenditures would be shown under operating activities rather than
      investing activities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|iv)  | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     | In March 2008, the Financial Accounting Standards Board
      (FASB) issued SFAS No. 161, Disclosures about Derivative Instruments
      and Hedging Activities  an amendment to FASB Statement No. 133.SFAS
      No. 161 is intended to improve financial standards for derivative
      instruments and hedging activities by requiring enhanced disclosures to
      enable investors to better understand their effects on an entity's
      financial position, financial performance, and cash flows. Entities are
      required to provide enhanced disclosures about: (a) how and why an entity
      uses derivative instruments; (b) how derivative instruments and related
      hedged items are accounted for under Statement 133 and its related
      interpretations; and (c) how derivative instruments and related hedged
      items affect an entitys financial position, financial performance, and
      cash flows. It is effective for financial statements issued for fiscal
      years beginning after November 15, 2008, with early adoption encouraged.
      The Company is currently evaluating the impact of SFAS No. 161 on its
      financial statements, and the adoption of this statement is not expected
      to have a material effect on the Companys financial statements.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     | In December 2007, the Financial Accounting Standards
      Board (FASB) issued SFAS No. 141 (revised 2007), Business
      Combinations. SFAS No. 141 (revised 2007) establishes principles and
      requirements for how the acquirer of a business recognizes and measures in
      its financial statements the identifiable assets acquired, the liabilities
      assumed, and any noncontrolling interest in the acquiree. The statement
      also provides guidance for recognizing and measuring the goodwill acquired
      in the business combination and determines what information to disclose to
      enable users of the financial statements to evaluate the nature and
      financial effects of the business combination. SFAS No. 141 (revised 2007)
      applies prospectively to business combinations for which the acquisition
      date is on or after the beginning of the first annual reporting period
      beginning on or after December 15, 2008. The adoption of this statement is
      not expected to have a material effect on the Company's future reported
      financial position or results of operations.                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     | In December 2007, the FASB issued SFAS No. 160,
      Noncontrolling Interests in Consolidated Financial Statements - an
      amendment of ARB No. 51.SFAS No. 160 establishes accounting and
      reporting standards for the noncontrolling interest in a subsidiary and
      for the deconsolidation of a subsidiary. SFAS No. 160 is effective for
      fiscal years, and interim periods within those fiscal years, beginning on
      or after December 15, 2008. The adoption of this statement is not expected
      to have a material effect on the Company's future reported financial
      position or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     | In February 2007, the FASB issued SFAS No. 159, The
      Fair Value Option for Financial Assets and Financial Liabilities 
      Including an Amendment of FASB Statement No. 115. This statement
      permits entities to choose to measure many financial instruments and
      certain other items at fair value. Most of the provisions of SFAS No. 159
      apply only to entities that elect the fair value option. However, the
      amendment to SFAS No. 115,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     | Accounting for Certain Investments in Debt and Equity
      Securities, applies to all entities with available-for-sale and
      trading securities. SFAS No. 159 is effective as of the beginning of an
      entitys first fiscal year that begins after November 15, 2007. Early
      adoption is permitted as of the beginning of a fiscal year that begins on
      or before November 15, 2007, provided the entity also elects to apply the
      provision of SFAS No. 157, Fair Value Measurements. The adoption of this
      statement is not expected to have a material effect on the Company's
      future reported financial position or results of
  operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

---

|AVINO SILVER & GOLD MINES LTD.                                                                 
|-----------------------------------------------------------------------------------------------
|Notes to the Consolidated Financial Statements                                                 
|Eleven-Month Period Ended December 31, 2007 and the Years
      Ended January 31, 2007 and 2006
|(Expressed in
      Canadian Dollars)                                                          

NOTE 23 - DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (continued)

|v) | Recent Accounting Pronouncements
      (continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | In September 2006, the FASB issued SFAS No. 157, Fair
      Value Measurements. The objective of SFAS No. 157 is to increase
      consistency and comparability in fair value measurements and to expand
      disclosures about fair value measurements. SFAS No. 157 defines fair
      value, establishes a framework for measuring fair value in generally
      accepted accounting principles, and expands disclosures about fair value
      measurements. SFAS No. 157 applies under other accounting pronouncements
      that require or permit fair value measurements and does not require any
      new fair value measurements. The provisions of SFAS No. 157 are effective
      for fair value measurements made in fiscal years beginning after November
      15, 2007. The adoption of this statement is not expected to have a
      material effect on the Company's future reported financial position or
      results of operations.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | In June 2006, the FASB issued Interpretation No. 48,
      Accounting for Uncertainty in Income Taxes, an interpretation of
      FASB Statement No. 109(FIN 48). FIN 48 clarifies the accounting for
      uncertainty in income taxes by prescribing a two-step method of first
      evaluating whether a tax position has met a more likely than not
      recognition threshold and, second, measuring that tax position to
      determine the amount of benefit to be recognized in the financial
      statements. FIN 48 provides guidance on the presentation of such positions
      within a classified balance sheet as well as on de-recognition, interest
      and penalties, accounting in interim periods, disclosure and transition.
      FIN 48 is effective for fiscal years beginning after December 15, 2006.
      The adoption of this statement did not have a material effect on the
      Company's financial statements.      

---

SIGNATURE

The registrant hereby certifies
that it meets all of the requirements for filing on Form 20-F and that it has
duly caused and authorized the undersigned to sign this Transition Report on its
behalf.

|Dated: July 14, 2008 | AVINO SILVER & GOLD MINES LTD.
|-------------------- | ------------------------------
|                     |                               
|                     |                               
|                     | By:
      /s/ David Wolfin    
|                     | David Wolfin, President       
|                     | (Principal Executive Officer) 

---

|Exhibit Number | Name                                                                             
|-------------- | ---------------------------------------------------------------------------------
|               |                                                                                  
|1.1            | Memorandum of Avino Silver &
      Gold Mines Ltd.*                              
|1.2.           | Articles of Avino Silver & Gold Mines Ltd.*                                      
|4.1            | Share Purchase Agreement dated
      March 22, 2004*                             
|8.1            | List of Subsidiaries                                                             
|12.1           | Certification
      of the Principal Executive Officer                           
|12.2           | Certification of the
      Principal Financial Officer                           
|13.1           | Certificate
      under the Sarbanes-Oxley Act of the Principal Executive Officer
|13.2           | Certificate under the
      Sarbanes-Oxley Act of the Principal Financial Officer

____________________* Previously filed.

---