---

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

FORM 20-FSEC File No. 001-31799

(Mark One)

__ Registration statement pursuant to Section 12(b) or (g) of
  the Securities Exchange Act of 1934 or

X Annual report pursuant to Section
  13 or 15(d) of the Securities Exchange Act of 1934
  For the fiscal year ended January 31, 2007or

___ Transition report pursuant to Section 13 or 15(d) of the Securities
  Exchange Act of 1934
  For the transition period from ___________ to _________________

____ 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 _______________________

GEMSTAR RESOURCES LTD.(Exact name of registrant as specified in this charter)

British Columbia, Canada(Jurisdiction of
incorporation or organization)

220 Decourcy Drive, Gabriola Island, British Columbia,
Canada, V0R 1X0(Address of principal executive offices)

Securities registered or to be registered pursuant to section
12(b) of the Act:

|None                  | None                  
|--------------------- | ----------------------
|(Title of each class) | (Name of each exchange
|                      | on which registered)  

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
  (Title of Class)

Indicate the number of outstanding shares of each of the
issuers classes of capital or common stock as of the close of the period
covered by the annual report.

5,651,714 Common Shares

---

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

Indicate by check mark 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 one):

Large accelerated filer [ ] 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 [X] No

TABLE OF CONTENTS

II

---

|         |                                                             |                                                                          | PAGE
|-------- | ----------------------------------------------------------- | ------------------------------------------------------------------------ | ----
|PART I  
|         |                                                             |                                                                          |     
|ITEM 1.  | Identity
      of Directors, Senior Management and Advisors |                                                                         
|         | 1.1                                                         | Directors and Senior Management                                          | 1   
|         | 1.2                                                         | Advisors                                                                 | 1   
|         | 1.3                                                         | Auditor                                                                  | 1   
|         |                                                             |                                                                          |     
|ITEM 2.  | Offer Statistics and
      Expected Timetable               | 2                                                                       
|         |                                                             |                                                                          |     
|ITEM 3.  | Key Information                                             |                                                                         
|         | 3.1                                                         | Selected Financial
      Data                                            | 2   
|         | 3.2                                                         | Capitalization and Indebtedness                                          | 4   
|         | 3.3                                                         | Reasons for the
      Offer and Use of Proceeds                          | 4   
|         | 3.4                                                         | Risk Factors                                                             | 4   
|         |                                                             |                                                                          |     
|ITEM 4.  | Information on the
      Company                            |                                                                         
|         | 4.1                                                         | History and
      Development                                            | 8   
|         | 4.2                                                         | The Dotted Lake Property                                                 | 10  
|         | 4.3                                                         | Competition                                                              | 12  
|         | 4.4                                                         | Management & Employees                                                   | 13  
|         | 4.5                                                         | Environmental Regulations                                                | 13  
|         |                                                             |                                                                          |     
|ITEM 5.  | Operating
      and Financial Review and Prospects          |                                                                         
|         | 5.1                                                         | Results of Operations                                                    | 14  
|         | 5.2                                                         | Liquidity and
      Capital Resources                                    | 15  
|         |                                                             |                                                                          |     
|ITEM 6.  | Directors,
      Senior Management and Employees            |                                                                         
|         | 6.1                                                         | Directors and Senior Management                                          | 16  
|         | 6.2                                                         | Compensation
      of Directors                                          | 17  
|         | 6.3                                                         | Board Practices                                                          | 18  
|         | 6.4                                                         | Employees                                                                | 19  
|         | 6.5                                                         | Share Ownership of Directors
      and Officers                          | 19  
|         |                                                             |                                                                          |     
|ITEM 7.  | Major Shareholders
      and Related Party Transactions     |                                                                         
|         | 7.1                                                         | Beneficial Ownership                                                     | 19  
|         | 7.2                                                         | Related Party Transactions                                               | 20  
|         | 7.3                                                         | Interests of
      Experts and Counsel                                   | 21  
|         |                                                             |                                                                          |     
|ITEM 8.  | Financial
      Information                                 |                                                                         
|         | 8.1                                                         | Legal Proceedings                                                        | 21  
|         | 8.2                                                         | Significant
      Changes                                                | 22  
|         |                                                             |                                                                          |     
|ITEM 9.  | The
      Offer and Listing                                 |                                                                         
|         | 9.1                                                         | Offering and Listing Details                                             | 22  
|         |                                                             |                                                                          |     
|ITEM 10. | Additional Information                                      |                                                                         
|         | 10.1                                                        | Share Capital                                                            | 22  
|         | 10.2                                                        | Memorandum and Articles of
      Association                             | 23  
|         | 10.3                                                        | Material Contracts                                                       | 24  
|         | 10.4                                                        | Exchange Controls and other
      Limitations Affecting Security Holders | 24  

III

---

|          | 10.5                                                                               | Canadian Federal Income Tax Consequences to United States
      Investors | 25
|--------- | ---------------------------------------------------------------------------------- | ------------------------------------------------------------------------- | --
|          | 10.6                                                                               | United States Federal Income Tax Consequences to U.S. Investors           | 25
|          | 10.7                                                                               | Statements by Experts                                                     | 29
|          | 10.8                                                                               | Documents on Display                                                      | 29
|ITEM 11.  | Quantitative and Qualitative Disclosures About Market Risk                         | 30                                                                       
|ITEM 12.  | Descriptions of Securities
      Other than Equity Securities                      |                                                                          
|          | 12.1                                                                               | Warrants                                                                  | 30
|          | 12.2                                                                               | Stock Options                                                             | 30
|          | PART II                                                                            |                                                                          
|ITEM 13.  | Defaults, Dividend Arrearages and Delinquencies                                    | 30                                                                       
|ITEM 14.  | Material Modifications to the Rights of Security Holders
      and Use of Proceeds | 31                                                                       
|          | PART III                                                                           |                                                                          
|ITEM 15   | Controls and Procedures                                                            | 31                                                                       
|ITEM 16A  | Audit Committee Financial Expert                                                   | 31                                                                       
|ITEM 16B  | Code of Ethics                                                                     | 32                                                                       
|ITEM 16C  | Public Accountant Fees and Services                                                | 33                                                                       
|ITEM 16D  | Exemptions from the listing Standards for Audit Committees                         | 33                                                                       
|ITEM 16E  | Purchases of Equity Securities by the Issuer and Affiliated
      Purchasers       | 33                                                                       
|ITEM 17.  | Financial
      Statements                                                         |                                                                          
|ITEM 18.  | Financial Statements                                                               |                                                                          
|ITEM 19.  | Exhibits                                                                           |                                                                          
|SIGNATURE |                                                                                    |                                                                          

IV

---

FORWARD-LOOKING STATEMENTS

We caution you that certain important factors (including
without limitation those set forth in this Form 20-F) may affect our actual
results and could cause such results to differ materially from any
forward-looking statements that may be deemed to have been made in this Form
20-F annual report, or that are otherwise made by or on our behalf. For this
purpose, any statements contained in this annual report that are not statements
of historical fact may be deemed to be forward-looking statements. Without
limiting the generality of the foregoing, words such as may, except,
believe, anticipate, intend, could, estimate, or continue, or the
negative or other variations of comparable terminology, are intended to identify
forward-looking statements.

PART I

|Item 1. | Identity of Directors, Senior Management and
      Advisors
|------- | -----------------------------------------------------------

1.1 Directors and Senior Management:

Linda Smith 220 Decourcy Dr, Gabriola Island, BC, V0R
      1X0
    President, Chief Executive Officer and
      DirectorShannon Krell 220 Decourcy Dr, Gabriola Island, BC, V0R
      1X0
    DirectorAlexander Mancor 5715 Royal Oak Ave. Burnaby, BC, V5H
      3N3
    DirectorAndre Pauwels 4900 Mariposa Court, Richmond, BC, V7C
      2J9
    Director and Consulting GeologistDarcy Krell
      220 Decourcy Dr, Gabriola Island, BC, V0R 1X0
    Secretary and Chief Financial Officer


|1.2            | Advisors:
|-------------- | ---------
|               |          
|Not Applicable
|              
|1.3            | Auditor: 

Morgan & Company, Chartered Accountants Suite 1488
       700 West Georgia St Vancouver BC V7Y 1A1
    Auditor


1

---

Our auditors are members in good standing with the Institute of
Chartered Accountants of British Columbia and are registered with the Canadian
Public Accountability Board (CPAB) and the Public Company Accounting Oversight
Board (United States) (PCAOB).

|Item 2. | Offer Statistics and Expected Timetable
|------- | ---------------------------------------

Not applicable

|Item 3. | Key Information
|------- | ---------------

| | 3.1 | Selected Financial Data
| | --- | -----------------------

The following tables set forth selected financial data of the
Company for the fiscal years ended January 31, 2007, 2006, 2005, 2004 and 2003.
We derived all figures from our financial statements, which were audited by our
independent auditor. This information should be read in conjunction with our
audited financial statements included in this annual report. Our audited
financial statements for the fiscal years ended January 31, 2005, 2004 and 2003
are not included in this annual report.

Our audited financial statements included in this annual report
and the table below have been prepared in accordance with accounting principles
generally accepted in Canada. A reconciliation to United States generally
accepted accounting principles is included in Note 11 to our audited financial
statements. All amounts are expressed in Canadian dollars.

The first table below presents this financial data for five
years in accordance with United States generally accepted accounting principles.
The second table presents the data in accordance with Canadian generally
accepted accounting principles.

United States Generally Accepted Accounting Principles

Fiscal Year ended
      January 31, 2007 (in Cdn$)
    Fiscal Year ended
      January 31, 2006 (in Cdn$)
    Fiscal Year ended
      January 31, 2005 (in Cdn$)
    Fiscal Year ended
      January 31, 2004 (in Cdn$)
    Fiscal Year ended
      January 31 2003 (in Cdn$)Net Operating
      Revenue
    Nil
    Nil
    Nil
    Nil
    NilLoss from
      operations
    ($182,422)
    ($204,612)
    ($92,349)
    ($79,684)
    ($421,332)Loss per common
      share
    ($0.02)
    ($0.04)
    ($0.02)
    ($0.01)
    ($0.07)Total assets
    $21,873
    $34,856
    $170,236
    $4,202
    $3,644Net assets
    ($1,208,132)
    ($1,025,710)
    ($821,098)
    ($877,455)
    ($819,541)Long term debt
    Nil
    $39,676
    Nil
    Nil
    NilCash dividends per
      share
    Nil
    Nil
    Nil
    Nil
    NilDeficit
    ($2,333,179)
    ($2,150,757)
    ($1,946,145)
    ($1,999,922)
    $
      (1,933,012)Capital stock
    $1,113,471
    $1,113,471
    $1,113,471
    $
      1,113,471
    $
      1,113,471Weighted average number of common shares
      5,651,714
      5,651,714
      5,651,714
      5,651,714
      5,651,714


2

---

Canadian Generally Accepted Accounting Principles

Fiscal Year ended
      January 31, 2007 (in Cdn$)
    Fiscal Year ended
      January 31, 2006 (in Cdn$)
    Fiscal Year ended
      January 31, 2005 (in Cdn$)
    Fiscal Year ended
      January 31, 2004 (in Cdn$)
    Fiscal Year ended
      January 31 2003 (in Cdn$)Net Operating
      Revenue
    Nil
    Nil
    Nil
    Nil
    NilLoss from
      operations
    ($182,422)
    ($138,379)
    ($92,349)
    ($79,684)
    $
      (262,432)Loss per common
      share
    ($0.03)
    ($0.02)
    ($0.02)
    ($0.01)
    ($0.05)Total assets
    $88,106
    $101,089
    $170,236
    $167,662
    $162,544Net assets
    ($1,141,899)
    ($959,477)
    ($821,098)
    ($713.995)
    ($660,641)Long term debt
    Nil
    $39,676
    Nil
    Nil
    NilCash dividends per
      share
    Nil
    Nil
    Nil
    Nil
    NilDeficit
    ($2,266,946)
    ($2,084,524)
    ($1,946,145)
    ($1,853,796)
    ($1,774,112)Capital stock
    $1,113,471
    $1,113,471
    $1,113,471
    $1,113,471
    $1,113,471Weighted average number of common shares
      5,651,714
      5,651,714
      5,651,714
      5,651,714
      5,651,714


Since June 1, 1970, the government of Canada has permitted a
floating exchange rate to determine the value of the Canadian dollar as compared
to the United States dollar. On June 18, 2007, the exchange rate in effect for
Canadian dollars exchanged for United States dollars, expressed in terms of
Canadian dollars was $1.0638. This exchange rate is based on the noon buying
rates in New York City, for cable transfers in Canadian dollars, as certified
for customs purposes by the Federal Reserve Bank of New York. For the past five
fiscal years ended January 31 and for the six-month period between August 31,
2006 and January 31, 2007, the following exchange rates were in effect for
Canadian dollars exchanged for United States dollars, calculated in the same
manner as above:

|TimePeriod                     | Average Exchange Rate for
      Period
|------------------------------ | --------------------------------------
|Year ended Jan 31, 2007        |                                       
|Year ended Jan 31, 2006        |                                       
|Year ended Jan 31, 2005        |                                       
|Year ended Jan 31, 2004        |                                       
|Year ended Jan 31, 2003        |                                       
|                               |                                       
|Time Period                    | Low - High                            
|Month ended January 31, 2007   | $1.1647 - $1.1824                     
|Month ended December 31, 2006  | $1.1415 - $1.1652                     
|Month ended November 31, 2006  | $1.1275 - $1.1474                     
|Month ended October 31, 2006   | $1.1154 - $1.1384                     
|Month ended September 30, 2006 | $1.1052 - $1.1272                     
|Month ended August 31, 2006    | $1.1066 - $1.1312                     




---

| | 3.2 | Capitalization and Indebtedness
| | --- | -------------------------------

The following table sets forth our capitalization and indebtedness
  as at January 31, 2007

Short term debt (unsecured and not guaranteed)
    $1,230,005Long
      term debt
    $NilTotal debt
    $1,230,005Shareholders DeficiencyCommon shares and equity component of convertible note
    $1,125,047Accumulated deficit
    ($2,266,946)Total
      shareholders deficiency
    $1,141,899


| | 3.3 | Reasons for the Offer and Use of
      Proceeds
| | --- | -----------------------------------------------

Not Applicable

| | 3.4 | Risk Factors
| | --- | ------------

Any investment in our common shares involves a high degree of
risk. You should consider carefully the following information before you decide
to buy our common shares. If any of the events discussed in the following risk
factors actually occurs, our business, financial condition or results of
operations would likely suffer. In this case, the market price of our common
shares could decline, and you could lose all or part of your investment in our
shares The following is a list of all known material risks relating to our
business and an investment in our common shares:

We have a history of losses. Our inability to achieve
profitability will negatively impact any investment in our shares.

We have incurred losses in our business operations since
inception, and we expect that we will continue to incur losses for the
foreseeable future. From March 31, 1998, the date of incorporation, to January
31, 2007, we have incurred losses totalling $2,266,946 under Canadian GAAP
(Cdn$2,333,179 under US GAAP). Very few junior resource companies ever become
profitable. Failure to achieve and maintain profitability may adversely affect
the market price of our common stock.

We have limited financial resources and no source of
operating cash flow. If we are unable to generate revenue, our business will
fail.

We have limited financial resources, no source of operating
cash flow and no commitments for additional funding for further exploration of
the Dotted Lake property. Failure to obtain such additional financing could
result in delay or indefinite postponement of further exploration and ultimately
the failure of our business.

4

---

Very few mineral properties are ultimately developed into
producing mines. If we are unable to prove that a mineral reserve exists on our
Dotted Lake property, our business may fail.

The business of exploration for minerals and mining involves a
high degree of risk. Few properties that are explored are ultimately developed
into producing mines. At present, our mineral properties have no known body of
commercial ore. Most exploration projects do not result in the discovery of
commercially mineable deposits of ore.

Substantial expenditures are required for us to establish ore
reserves through drilling, to develop metallurgical processes, to extract the
metal from the ore and, in the case of new properties, to develop the mining and
processing facilities and infrastructure at any site chosen for mining.

It is unknown whether we will discover minerals in sufficient
quantities to justify commercial operations or that we can obtain the funds
required for development on a timely basis. The probability of an individual
mineral exploration prospect such as the Dotted Lake Property ever containing
reserves is extremely remote. It is unlikely that the property contains
reserves, so any funds expended on the property will most likely be lost.

If we do not obtain additional financing, our business will
fail.

As at January 31, 2007, we had cash in the amount of $9,656.
Our ability to continue as a going concern is dependent upon the ability of
management to obtain sufficient financing. Management is actively seeking
additional financing, but has no specific commitments for investment. These
matters raise doubt about the companys ability to continue as a going concern.
These financial statements do not include adjustments that would be necessary
should the company be unable to continue as a going concern.

Because management has only limited experience in resource
exploration, the business has a higher risk of failure.

Our management has only limited experience in resource
exploration. None of our directors or officers has any significant technical
training or experience in resource exploration for, starting and operating a
mine. With no direct training or experience in this sector, our management may
not be fully aware of many of the specific requirements related to working
within the industry. Their business decisions may not take into account standard
engineering or managerial approaches that mineral exploration companies with
qualified management commonly use. As a result, our operations, earnings and
ultimate financial success could suffer irreparable harm due to managements
lack of experience in this industry.

Mineral exploration involves a high degree of risk against
which we are not currently insured. If an environmental liability was incurred,
it may irreparably harm our business.

Unusual or unexpected rock formations, formation pressures,
fires, power outages, labour disruptions, flooding, cave-ins, landslides and the
inability to obtain suitable or adequate machinery, equipment or labour are
risks involved in the operation of mines and the conduct of exploration
programs.

5

---

It is not always possible to fully insure against such risks
and we may decide not to take out insurance against such risks as a result of
high premiums or other reasons. Should such liabilities arise, they could reduce
or eliminate any future profitability and result in increasing costs and a
decline in the value of our common stock. We do not currently maintain insurance
against environmental risks relating to the Dotted Lake property.

If title to the Dotted Lake is disputed, we may lose our
sole business asset and our business may fail.

The Dotted Lake property may be subject to prior unregistered
agreements or transfers or native land claims and title may be affected by
undetected defects. There is a risk that the property boundaries could be
challenged. In such circumstances, we will incur costs defending our title to
the Dotted Lake property and may lose our interest in the claims, causing our
business to fail.

We may require permits and licenses that we may not be able
to obtain. If we are unable to obtain such permits and licenses, our business
plan will fail.

Our operations may require licenses and permits from various
governmental authorities. If we are unable to obtain such licenses and permits,
we will not be able to continue exploration and development of the Dotted Lake
property and we may have to abandon our business plan.

We will be required to obtain work permits from the Ontario
Ministry of Northern Development and Mines for the Phase II drilling program and
any subsequent exploration work that results in a physical disturbance to the
land if the program calls for the disturbance of more than 10,000 square meters
of the property surface, or such areas that would total that amount when
combined. A work permit is also required for the erection of structures on the
property. There is no charge to obtain a work permit under the Mining Act.

Metal prices fluctuate widely. A decrease in metal prices
may prevent us from raising the capital necessary to continue our business plan
in the future. As well, low metal prices will reduce the value of any reserve we
discover on the Dotted Lake property.

Factors beyond our control may affect the marketability of any
minerals we discover. Metal prices have fluctuated widely, particularly in
recent years. Our ability to raise capital for continuing exploration of the
Dotted Lake property depends to a large degree on the market price for metals
generally, as well as for gold in particular. In addition, the value of any
reserve we discover on the Dotted Lake property will fluctuate depending on
current metal prices. Low metal prices may make it uneconomical to commence
production on the Dotted Lake property if a reserve is established, of which
there is no guarantee.

The resource industry is very competitive. The competitive
nature of the business may increase our cost of operations and prevent us from
obtaining interests in additional mineral properties.

The resource industry is intensely competitive in all its phases.
  We compete with many companies possessing greater financial resources and technical
  facilities than us for the acquisition of mineral concessions, claims, leases
  and other mineral interests as well as for the recruitment and retention of
  qualified employees.

6

---

In conducting exploration on the Dotted Lake property, we
will be subject to environmental regulations. In addition, our operations may be
adversely affected by changes in environmental regulations. A significant change
in such regulations may prevent us from proceeding with our business
plan.

Our operations are be subject to environmental regulations
promulgated by government agencies from time to time. Environmental legislation
provides for restrictions and prohibitions on spills, release or emissions of
various substances produced in association with certain mining industry
operations, such as seepage from tailings disposal areas, which would result in
environmental pollution. A breach of such legislation may result in the
imposition of fines and penalties. In addition, certain types of operations
require the submission and approval of environmental impact assessments.
Environmental legislation is evolving in a manner which means that standards,
enforcement, fines and penalties for non-compliance are more stringent.
Environmental assessments of proposed projects carry a heightened degree of
responsibility for us and our directors, officers and consultants. The cost of
compliance with changes in governmental regulations has a potential to reduce
the profitability of our operations. We do not maintain environmental liability
insurance.

When our exploration program on the Dotted Lake property
proceeds to the drilling stage, we may be required to post small bonds if the
rights of a private land owner may be affected. We may also be required to file
statements of work with the Ministry of Northern Development and Mines. We will
also be required to undertake remediation work on any exploration that results
in physical disturbance to the land. The cost of remediation work will vary
according to the degree of physical disturbance.

Our listed securities are subject to penny stock regulation,
which may impede an investors ability to purchase our common shares.

The price of our common stock is below $5.00 per share and is
  subject to "penny stock" regulation. "Penny stock" rules impose additional sales
  practice requirements on broker-dealers who sell such securities to persons
  other than established customers and accredited investors (generally those with
  assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000
  together with a spouse). For transactions covered by these rules, the broker-dealer
  must make a special suitability determination for the purchase of such securities
  and have received the purchaser's written consent to the transaction prior to
  the purchase. Additionally, for any transaction involving a penny stock, unless
  exempt, the rules require the delivery, prior to the transaction, of a disclosure
  schedule prescribed by the Commission relating to the penny stock market. The
  broker-dealer also must disclose the commissions payable to both the broker-dealer
  and the registered representative and current quotations for the securities.
  Finally, monthly statements must be sent disclosing recent price information
  on the limited market in penny stocks. Consequently, the "penny stock" rules
  may restrict the ability of broker-dealers to sell our shares of common stock.
  The market price of our shares would likely suffer as a result.

7

---

Enforcement of legal process may be difficult.

All members of our Board of Directors and management reside in
Canada. As well, our address for service is a Canadian address. Accordingly,
investors will not be able to:

|1. | effect legal process upon us or upon individuals related
      to us within the United States;                                                             
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                            
|2. | enforce judgments obtained in United States courts
      against us based upon the civil liability provisions of the United States
      securities law; or
|   |                                                                                                                                                            
|3. | enforce United States court judgments based upon the
      civil liability provisions of the United States federal securities
    law.                     

However, investors may commence original actions against us,
our directors and officers and our experts in British Columbia courts. However,
as our sole mineral property asset is located in Ontario, additional legal
proceedings would need to be commenced in that province in order to satisfy any
judgment.

Investors may not be able to seek judgment in British Columbia
or Ontario if the court determines that it is unable to rule in a matter that
involves determinations respecting United States securities laws. In such
circumstances, investors would be prevented from obtaining judgment that is
enforceable against us.

As we are incorporated pursuant to the laws of British
Columbia, duties of our directors and officers, and the ability of shareholders
to initiate a lawsuit on our behalf, are governed by the British ColumbiaBusiness Corporations Act.

|Item 4 | Information on the Company
|------ | --------------------------
|       |                           
|4.1    |                           

We were incorporated under the name Gemstar Resources Ltd.
pursuant to the Company Act in the Province of British Columbia, Canada
by registration of our Memorandum and Articles of Association and the issuance
by the Registrar of Companies of a Certificate of Incorporation on March 31,
1988. In March 2006, we transitioned to the provinces Business Corporations
Act. We are an exploration stage company that beneficially owns mineral
claims in Ontario, Canada. There is no assurance that a commercially viable
mineral deposit exists on our claims. Further exploration will be necessary
before a final evaluation as to the economic and legal feasibility of our claims
is determined.

Our head office is located at 220 Decourcy Drive, Gabriola
Island, British Columbia, Canada, V0R 1X0. Our telephone number is (604)
831-2739.

We have not been involved in any bankruptcy, receivership or
similar proceedings, nor have we been a party to any material reclassification,
merger, consolidation or purchase or sale of a significant amount of assets.

8

---

In 2001, we entered into an agreement to acquire 100% interest
in the Dotted Lake property consisting of 76 mineral claim units located in the
Thunder Bay Mining District, approximately 16 miles south-southeast of
Manitouwadge, Ontario. In the following fiscal year ended January 31, 2002, the
Company completed the acquisition of the Property by paying $200,000 in cash to
the vendor, LCM Equity Inc. (LCM), a private British Columbia company
unrelated to us. We also advanced $152,000 to LCM for planned exploration of the
Property. All funds, totaling $352,000, came to us from our officers and
immediate family members in the form of related party loans.

Originally, the claims were registered in the name of 1179406
Ontario Ltd., a private Ontario company holding them in trust for us. This trust
arrangement is common practice due to the expense that would have to be incurred
by registering as an extra-provincial claim holder in Ontario. However, we can
request that the claims be registered in our name at any time.

Near the end of calendar 2002, as a result of extreme weather
conditions, we were having difficulty undertaking our planned work program on
the Property, which included the required assessment work to keep the claims in
good standing. Following consultation with our consulting geologist, Mr Andre
Pauwels P. Geo, we determined it would be less expensive to allow the claims to
lapse and then re-stake them early in the following year. As a result, the
claims were permitted to lapse and once the weather conditions improved, our
consulting geologist re-staked the claims in March 2003 at a cost to us of
$4,206 with initial expiry date of March 14, 2007. This expiry date was recently
extended to March 14, 2008. The claims continue to be held in trust for us by
1179406 Ontario Ltd., a private Ontario company owned by Mr. R. J. Reukl.

During the quarter ended April 30, 2005, we completed an
airborne magnetic survey of the 76 mineral claims at a cost of $40,000 paid in
full from the funds advanced to LCM as mentioned above. Also, we commissioned
and paid $4,500 to our consulting geologist as an advance against a new 43-101
evaluation report regarding the merits of the Property, required in prescribed
form by the regulatory authorities.

During the quarter ended July 31, 2005, the Company undertook a
ground VLF (Very Low Frequency) and magnetic survey over 100 metre spaced cut
lines (15 km) at the north western side of the Property which cost $14,636. The
43-101 compliant geological report was completed by our consulting geologist,
for an additional cost of $7,097, bringing the total for geological consulting
fees to $26,233 to date. This report dated December 6, 2005 is available under
our disclosure on www.sedar.com. It should be noted, the $112,000 balance
of the funds advanced to LCM per above was returned to us in the quarter ended
July 31, 2005 due to our discontinued use of LCM for exploration purposes.

The 43-101 report recommends a two phase exploration program on
the property to determine whether it has the potential to host economic
mineralization. The first phase would involve further geophysical surveys,
including a TDEM survey, at an estimated cost of $51,500. The second phase calls
for extensive diamond drilling at an estimated cost of $171,900 which will
proceed only when the Phase I program has proven to be successful.

The Company did not conduct any work on the Property during the
year ended January 31, 2007.

9

---

| | 4.2 | The Dotted Lake Property
| | --- | ------------------------

Location and Access

The Dotted Lake property is situated in north central Ontario,
approximately 50 kilometers northeast of Lake Superior and 260 kilometers
east-northeast from the city of Thunder Bay. Manitouwadge (45 kilometers to the
north), Marathon (45 kilometers southwest) and White River (50 kilometers
southeast) are the closest towns. The latter two communities are situated along
Highway 17, part of the Trans-Canada Highway network, while the property itself
lies some 20 kilometers north of Highway 17.

Currently, there is no road access directly onto the Dotted
Lake property. From Highway 614, located 13 kilometres north of Highway 17, a
bush road leads seven kilometers north-eastward to the southwest shore of Dead
Otter Lake. From there, the property may be conveniently reached by boat in
summer or by snowmobile in winter. Alternatively, another bush road that
connects with Highway 614, some 19.2 kilometers north of Hwy 17, terminates
approximately 0.7 kilometers north of the north claim boundary.

Title and Claim Status

We currently hold a 100% interest in 1 mineral claim comprising
15 claim units on the Dotted Lake property described above. In order to maintain
its mineral claim in good standing, we are required to spend approximately
$4,000 in exploration on the Property by March 14, 2008. We intend to commence
the recommended Phase I program during the 2007/2008 winter work season. We do
not have any other third party obligations with respect to the claim. There is
no assurance that a commercially viable mineral deposit exists on the Dotted
Lake property. Further exploration will be required before a final evaluation of
the economic feasibility of the property.

As previously mentioned, the principal benefit of having a
trustee hold the claims on our behalf is to avoid the expense that would
otherwise be incurred by registering as an extra-provincial claim holder in
Ontario. However, if the trustee becomes bankrupt or transfers the claims to a
third party, we may incur significant legal expenses in enforcing our interest
in the claims in Ontario courts. The registration of the claims in the name of a
trustee does not impact a third partys ability to commence an action against us
respecting the Dotted Lake property or to seize the claims after obtaining
judgment.

Previous Exploration

Several companies and individuals have conducted exploration
activities on various parts of the Dotted Lake property. To date, no mineral
deposit has been delineated on the property, and consequently there has been no
production from the property nor any reserve or resource estimated. We have not
yet conducted any exploration on the Dotted Lake property.

10

---

In March 2005, the magnetic and VLF-EM survey involved using an
airplane to search for changes in the magnetic field over certain areas of the
Dotted Lake property. Magnetic anomalies may be the result of accumulations of
certain magnetic rocks such as phrrhotite, hematite and magnetite. These rock
types are often found alongside base metals such as copper, zinc and nickel, or
precious metals such as gold and silver.

VLF-EM surveys consist of two separate surveys: a very low
frequency survey and an electromagnetic survey. Very low frequency surveys use
radio waves to determine whether rocks on a mineral property conduct
electricity. Almost all of the precious and base metals that we seek are above
average conductors of electricity and will affect VLF readings. Electromagnetic
surveys involve measuring the strength of the earths magnetic field. Variations
in the magnetic readings on a property may indicate the increased likelihood of
precious or base minerals in the area.

We will focus future exploration programs on specific areas of
the Dotted Lake property based on the results of these surveys.

Proposed Exploration

In his December 2005 report on the Dotted Lake property, our
consulting professional geologist, Mr. Andre Pauwels, recommended a two phase
exploration program. The first phase consists of a TDEM (time domain
electromagnetic) survey and research for an estimated cost of $51,500. The TDEM
survey is one of several geophysical exploration methods. In the conventional
TDEM survey, an induction coil is used as the magnetometer. It allows
conductivity of rock below the surface to be measured at greater depths.

The second phase consists of an extensive diamond drilling
program for an estimated cost of $171,900 to determine the mineral content of
rock below the surface of the Dotted Lake property. Drillinginvolves
extracting a long cylinder of rock from the ground to determine amounts of
metals at different depths. Pieces of the rock obtained, known as drill core,
are analysed for mineral content.

Our consulting geologist has recommended the following
exploration budgets:

Phase I: TDEM Survey and Research

|Planning , organization, supervision
      (senior geologist 9 days at $600 each): | $ | 5,400  | 
|---------------------------------------------------------------------------------- | - | ------ | 
|Line cutting (15 kilometers at $500 each):                                         | $ | 7,500  | 
|TDEM contract (12 kilometers at $1,500
      each)                                 | $ | 18,000 | 
|Mobilization of TDEM crew:                                                         | $ | 6,000  | 
|Supplemental VLF/HLEM ground surveys:                                              | $ | 3,000  | 
|Research western area of the claims (senior geologist 6
      days at $600 each):  | $ | 3,600  | 
|Processing 2005 airborne VLF data:                                                 | $ | 2,500  | 
|Drafting, travel costs and miscellaneous:                                          | $ | 3,000  | 
|Contingency 5%:                                                                    | $ | 2,500  | 
|                                                                                   |   |        | 
|Total:                                                                             | $ | 51,500 | 

11

---

Phase II: Diamond Drilling  Six Holes

|Contract price (1,000 meters at $85 per
      meter):                       | $ | 85,000  | 
|--------------------------------------------------------------------------- | - | ------- | 
|Drill mobilization and de-mobilization:                                     | $ | 15,000  | 
|Drill site preparation:                                                     | $ | 7,200   | 
|Core boxes and supplemental drill supplies:                                 | $ | 6,000   | 
|Assays (75 samples at $20):                                                 | $ | 1,500   | 
|Senior geologist supervision, organization, logging travel:                 | $ | 21,000  | 
|Field assistant for sampling and core
      handling (25 days at $200/day): | $ | 5,000   | 
|Report:                                                                     | $ | 5,000   | 
|Drafting:                                                                   | $ | 3,000   | 
|Domicile for geologist and field assistant:                                 | $ | 5,200   | 
|Transportation (rental of trucks and
      snowmobiles)                     | $ | 2,000   | 
|Supplies for sampling and surveys, sample transport:                        | $ | 2,000   | 
|Permitting and reclamation:                                                 | $ | 6,000   | 
|Contingency 5%:                                                             | $ | 8,000   | 
|                                                                            |   |         | 
|Total:                                                                      | $ | 171,900 | 

The Dotted Lake property area experiences a temperate climate
with moderate to long cold winters and short warm to hot summers. Total
precipitation is about 1,000 millimeters, including over three meters of snow.
Break up or freeze up conditions may impinge upon exploration activities, but
normally exploration and mining may be conducted year round. However, it is more
economical to conduct exploration programs in spring and summer when access to
and travel across the property is easier, and when snow removal for surface
exploration is not required.

| | 4.3 | Competition
| | --- | -----------

The mineral property exploration business, in general, is
intensively competitive and there is no assurance that even if commercial
quantities of ore are discovered, a ready market will exist for sale of same.
Numerous factors beyond our control may affect the marketability of any
substances discovered. These factors include market fluctuations, the proximity
and capacity of natural resource markets and processing equipment, government
regulations relating to prices, taxes, royalties, land tenure, land use,
importing and exporting of minerals, environmental protection, etc. The exact
effect of these factors cannot be accurately predicted, but in combination these
factors may make it very difficult to realize an adequate return on investment.

We compete with many companies possessing greater financial
resources and technical capabilities than we have regarding the acquisition of
mineral concessions, claims, leases and other mineral interests as well as for
the recruitment and retention of qualified staff.

| | 4.4 | Management and Employees
| | --- | ------------------------

We do not have any employees other than our directors and
officers.

12

---

We are party to an agreement with Mr. Darcy Krell, our
Secretary and Chief Financial Officer, whereby he is engaged to perform certain
management and administrative services on our behalf for a fee of $4,000 per
month, including $2,500 as management fees. Mr. Krell is the husband of our
President, Ms. Linda Smith, and the father of our director, Ms. Shannon Krell.

We retain Mr. Krell to arrange and negotiate mineral property
acquisitions and exploration contracts (subject to director approval), arrange
for and secure financings for the company, arrange for the collection of all
receivables and the payment of all obligations, establishing and maintaining
suitable banking relations, ensuring the maintenance of proper accounting
records and perusing and replying to all corporate inquiries and correspondence.

| | 4.5 | Environmental Regulations
| | --- | -------------------------

We will be required to comply with all regulations, rules and
directives of governmental authorities and agencies applicable to the
exploration of minerals in Canada generally, and in the Province of Ontario,
specifically. Under these laws, prior to production, we have the right to
explore the property, subject only to a notice of work which may entail posting
a bond. To date, we have not been required to post a bond with respect to
exploration on the Dotted Lake property.

In addition, production of minerals in Ontario will require
prior approval of applicable governmental regulatory agencies. We can provide no
assurance to investors that such approvals will be obtained. The cost and delay
involved in attempting to obtain such approvals cannot be known at this time.

We have budgeted for regulatory compliance costs as part of our
operations. We will have to sustain the cost of reclamation and environmental
mediation for all exploration work undertaken. The amount of these costs is not
known at this time as we do not know the extent of future exploration.

Permits and regulations will control all aspects of any
production program if the project continues to that stage because of the
potential impact on the environment. Examples of regulatory requirements
include:

- Water discharge will have to meet water standards;
- Dust generation will have to be minimal or otherwise re-mediated;
- Dumping of material on the surface will have to be re-contoured and
  re-vegetated;
- An assessment of all material to be left on the surface will need to be
  environmentally benign;
- Ground water will have to be monitored for any potential contaminants;

13

---

- The socio-economic impact of the project will have to be evaluated and if
  deemed negative, will have to be re-mediated; and
- There will have to be an impact report of the work on the local fauna and
  flora.

We do not require any authorization to proceed with the first
Phase of the recommended exploration program. However, we will be required to
obtain work permits from the Ontario Ministry of Northern Development and Mines
for the second Phase drilling program and any subsequent exploration work that
results in a physical disturbance to the land. If more than 10,000 square meters
of property surface are affected, or such areas that would total that amount
when combined, a work permit is required. There is no charge to obtain a work
permit under the Mining Act.

When our exploration program proceeds to the drilling stage, we
may be required to post small bonds if the rights of a private land owner may be
affected. We may also be required to file statements of work with the Ministry
of Northern Development and Mines and to undertake remediation work on any
exploration that results in physical disturbance to the land. The cost of
remediation work will vary according to the degree of physical disturbance.

|Item 5. | Operating and Financial Review and
      Prospects
|------- | --------------------------------------------------

| | 5.1 | Results of Operations
| | --- | ---------------------

We are an exploration stage company that owns 1 claim now on
the Dotted Lake property located in Ontario. To date, a majority of our
operations and our expenditures have been the result of related party
transactions.

In the fiscal year ended January 31, 2007, we incurred a net
loss of $182,422 consisting primarily of the following general and
administrative expenses: office and sundry expenses $47,456, accounting and
audit fees $30,150, management fees $30,000, travel and promotion expenses
$35,333, professional fees $20,150, transfer agent and filing fees $9,194, bad
debt expense $8,169, convertible note accretion $1,356 and depreciation expense
$614.

Our net loss increased from $138,379 for the year ended January
31, 2006 to $182,422 for the year ended January 31, 2007 primarily due to an
increase in the following general and administrative expenses: office and sundry
expenses (from $38,855 to $47,456), travel and promotion expenses (from $23,061
to $35,333), professional fees (from $5,000 to $20,150), transfer agent and
filing fees (from $4,239 to $9,194) and bad debt expense (from $nil to $8,169);
all partially offset by a decrease in accounting and audit fees (from $35,128 to
$30,150).

At January 31, 2007, we had total assets of $88,106 consisting
of cash $9,656, term deposit $6,900, mineral properties and deferred exploration
costs $70,439 and computer equipment $1,111. At the same date, we had total
liabilities of $1,230,005 consisting of $129,331 in accounts payable and accrued
liabilities and $1,100,674 in loans from related parties.

14

---

| | 5.2 | Liquidity and Capital Resources
| | --- | -------------------------------

Since incorporation, we have financed our operations initially
through the sale of common shares to investors and, over the past five years,
exclusively through loans from officers and immediate family members. We expect
to fund future exploration and corporate administration in the same manner since
we have no source of revenue from our business operations. However, there is no
guarantee we will be successful in arranging future financing on acceptable
terms.

We are required to spend approximately $4,000 on the Dotted
Lake property by March 14, 2008, in order to keep the mineral claim in good
standing. We also anticipate starting-up the Phase I exploration program during
the 2007/2008 winter work season and continuing to incur expenses of
approximately $90,000 for administration of our corporate affairs over the next
six month period. Accordingly, we will need approximately $120,000 to meet
planned expenditures in the foreseeable future. However, we do not have
sufficient funds on hand to pay these amounts nor to complete the Phase 1
exploration program. Additional loans or advances from related parties will be
required but there is no assurance this can be arranged.

For the second phase of the exploration program, we anticipate
that equity financing from the sale of common stock is our preferred source of
funds as opposed to debt financing. However, there are no present arrangements
in place for equity financing and we can not provide investors with any
assurance that sufficient equity funds will be available going forward.

To a significant extent, our ability to raise capital is
affected by trends and uncertainties beyond our control. These include the
market prices for base and precious metals and results from our exploration
programs. Our ability to attain our business objectives may be significantly
impaired if prices for metals such as gold, copper and platinum fall or if
results from our intended exploration programs on our properties are
unsuccessful.

|Item 6. | Directors, Senior Management and
      Employees
|------- | ------------------------------------------------

| | 6.1 | Directors and Senior Management
| | --- | -------------------------------

Directors:

|Name             | Age
|---------------- | ---
|Linda Smith      | 58 
|Shannon Krell    | 30 
|Alexander Mancor | 62 
|Andre Pauwels    | 62 

Executive Officers:

|Name        | Age | Office                                     
|----------- | --- | -------------------------------------------
|Linda Smith | 58  | President and Chief Executive
      Officer
|Darcy Krell | 59  | Secretary and Chief Financial Officer      

15

---

Ms. Linda Smith and Mr. Darcy Krell are husband and wife and
Mr. Krell is the father of Ms. Shannon Krell.

The following describes the business experience of our
directors and executive officers, including other directorships held in
reporting companies:

Linda Smith

Ms. Linda Smith has acted as our president and as a director
since October 27, 2000. Ms. Smith also acted as Blue Lightning Ventures Inc.s
president and as a director from October 1999 to July 2004. She also acted in
the same capacities for Big Bar Gold Corporation from August 1999 to June 2003
and for Candorado Operating Company Ltd. from June 2000 to November 2001. All of
these companies are British Columbia and Alberta reporting corporations involved
in mineral property exploration. Ms. Smith also acted as treasurer and a
director of Zeno Inc. from January 2003 to November 2005. Zeno Inc. was a U.S.
reporting company involved in mineral property exploration. Mr. Smith was also
employed part-time as a dental assistant from 1995 to 2002. Ms. Smith aids Mr.
Darcy Krell in providing management services to us. She is not currently
compensated for her services.

Shannon Krell

Ms. Shannon Krell has acted as our director since October 27,
2000. She has been a psychology student for the past six years and is currently
attending Douglas College and the University of British Columbia. She is
pursuing her undergraduate degree.

Ms. Krell does not have any professional training or technical
credentials in the field of mineral property exploration or development. She
spends approximately 10% of her time on our affairs.

Alexander Mancor

Mr. Mancor has acted as our director since October 27, 2000.
For the past five years, Mr. Mancor has owned and managed a series of
residential rental properties in Burnaby, British Columbia. From 1973 to 1995,
he acted as a contract distributor for Pacific Press Ltd. where he was in charge
of wholesale and retail distribution of the Vancouver Province and Vancouver Sun
newspapers in the Burnaby region.

Mr. Mancor does not have any professional training or technical
credentials in the field of mineral property exploration or development. He
spends approximately 10% of his time on our affairs. The rest of his business
time is spent on his private property management business.

Andre Pauwels

Mr Andre Pauwels is a consulting geologist and serves as a director
  on various public mineral exploration companies including Gemstar Resources
  Ltd, Dundarave Resources Inc and Strikezone Minerals (Canada) Ltd. He graduated
  from the State University of Ghent, Belgium with a BSc in Geology and is a long
  term member in good standing with the Association of Professional Engineers
  and Geoscientists of British Columbia. He has practiced world-wide mineral exploration
  since 1970 as a staff geologist for Union Miniere Explorations Canada (from
  1970 to 1980), as senior geologist then exploration manager for Cominco Ltd
  (from 1981 to 2001) and as consulting geologist since 2001.

16

---

Darcy Krell

Mr. Krell has acted as a private investor in various reporting
and private companies since 1996,. He also acted as a director of Big Bar Gold
Corporation (March 2002 to April 2004) and Blue Lightning Ventures Inc. (March
2002 to July 2004), both of which are Alberta and British Columbia reporting
companies involved in mineral property exploration. In addition, Mr. Krell acts
as a director of Algorithm Media Inc., an Alberta and British Columbia reporting
company that is pursuing mineral property acquisitions.

Mr. Krell does not have any professional training or technical
credentials in the field of mineral property exploration or development. He
spends approximately 35% of his time on our affairs.

There are no arrangements or understandings between any of our
directors or executive officers, pursuant to which they were selected to be a
director or executive officer, nor are there any family relationships among any
of our directors and officers other than as follows:

Ms. Linda Smith and Mr. Darcy Krell are husband and wife and
Mr. Krell is the father of Ms. Shannon Krell.

| | 6.2 | Compensation of Directors
| | --- | -------------------------

We are required, under applicable securities legislation in
Canada, to disclose to our shareholders details of compensation paid to our
directors. The following fairly reflects all material information regarding
compensation paid to our directors in our fiscal year ended January 31, 2007.

Summary Compensation Table

NAME ANDPRINCIPALPOSITION
    YEAR  ANNUAL COMPENSATION  LONG-TERM COMPENSATION
    All Other Compen-
      sationSalary
    Bonus
    Other Annual
      Compensation
      Awards
    LTIP
      payoutsRestricted Stock Awards
    Securities UnderlyingOptions/ SARsLinda Smith President,
    2007
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil


17

---

Chief 
        Executive 
        Officer and 
        DirectorShannon 
        Krell 
        Director
      2007
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil
      NilAlexander 
        Mancor 
        Director
      2007
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil
      NilAndre 
        Pauwels 
        Director
      2007
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil
      NilDarcy Krell 
        Secretary 
        and Chief 
        Financial 
        Officer
      2007
      $30,000
      Nil
      Nil
      Nil
      Nil
      Nil
      Nil


We did not pay any compensation to our directors in the fiscal
year ended January 31, 2007. Management fees are paid to Mr. Darcy Krell, our
Secretary and Chief Financial Officer, at the rate of $2,500 per month.

| | 6.3 | Board Practices
| | --- | ---------------

Linda Smith has acted as our President and a director since
October 27, 2000. Alexander Mancor and Shannon Krell were appointed as our
directors on the same date. Andre Pauwels was appointed director on December 20,
2006. The directors hold office until the next annual general meeting of the
shareholders at which time they may stand for re-election. We are required to
hold an annual general meeting once in every calendar year and not longer than
thirteen months from the last annual general meeting.

Our audit committee is comprised of Linda Smith, Alexander
Mancor and Shannon Krell. We have not appointed a compensation committee.

| | 6.4 | Employees
| | --- | ---------

We do not have any employees other than our directors and
officers. When required, we retain geological, financial and other consultants.

18

---

| | 6.5 | Share Ownership of Directors and Officers
| | --- | -----------------------------------------

Our directors and officers own beneficially the following
shares as of the date of this annual report:

|                 |  |                        |  |  | Percentage of Outstanding | 
|---------------- |  | ---------------------- |  |  | ------------------------- | 
|                 |  | Number of Shares Owned |  |  | Common Shares             | 
|                 |  |                        |  |  |                           | 
|Linda Smith      |  | 567,825                |  |  | 10.05%                    | 
|Shannon Krell    |  | 0                      |  |  | 0.00%                     | 
|Alexander Mancor |  | 0                      |  |  | 0.00%                     | 
|Darcy Krell      |  | 900,000                |  |  | 15.92%                    | 
|                 |  | 1,467,825              |  |  | 25.97%                    | 

The above percentages are based on the 5,651,714 common shares
issued and outstanding in our capital stock as of the date of this annual
report.

In December 2006, we adopted an incentive stock option plan but
to date no stock options have been granted to our directors and officers and no
stock options are outstanding to the date of this annual report.

|Item 7. | Major Shareholders and Related Party
      Transactions
|------- | -------------------------------------------------------

| | 7.1 | Beneficial Ownership
| | --- | --------------------

As used in this section, the term "beneficial ownership" with
respect to a security is defined by Regulation 228.403 under the Securities
exchange Act of 1934, as amended, as consisting of: (1) any person who, directly
or indirectly, through any contract, arrangement, understanding, relationship or
otherwise has or shares voting power (which includes the power to vote, or to
direct the voting of such security) or investment power (which includes the
power to dispose, or to direct the disposition of, such security); and (2) any
person who, directly or indirectly, creates or uses a trust, proxy, power of
attorney, pooling arrangement or any other contract, arrangement or device with
the purpose or effect of divesting such person of beneficial ownership of a
security or preventing the vesting of such beneficial ownership.

As of the date of this annual report, 5,651,714 common shares
are issued and outstanding. The Company is authorized to issue up to 100,000,000
common shares without par value.

As of the date of this annual report, the following persons
known to us were the beneficial owner of more than five percent of our
outstanding common shares.

|Name of Shareholder | Number of Shares | Percentage of Issued Shares
|------------------- | ---------------- | ---------------------------
|                    |                  |                            
|Darcy Krell*        | 900,000          | 15.92%                     
|Sherman Jen         | 637,500          | 11.28%                     
|Linda Smith*        | 567,825          | 10.05%                     
|Ryan Krell*         | 500,000          | 8.85%                      
|Frank McGill        | 409,119          | 7.24%                      
|                    | 3,014,444        | 53.34%                     

19

---

* Darcy Krell and Linda Smith are husband and wife. Ryan Krell
is the son of Darcy Krell who has a non-interest bearing promissory note with us
in the face amount of $106,754 which is convertible into 2,135,080 of our common
shares prior to maturity on January 1, 2008.

Each of our issued shares entitles the holder to one vote in
our general meetings. There are no disproportionate or weighted voting
privileges.

We are not controlled directly or indirectly by any other
corporation or any other foreign government or by any other natural or legal
person, severally or jointly.

There are no arrangements the operation of which at a
subsequent date may result in a change in our control.

| | 7.2 | Related Party Transactions
| | --- | --------------------------

Since January 31, 2004, there have been no transactions which
have materially affected or will materially affect us in which any director,
executive officer or beneficial holder of more than 10% of our outstanding
common stock, or any of their respective relatives, spouses, associates or
affiliates has had or will have any direct or material indirect interest except
as follows:

| | a) | we have paid or accrued $2,500 per month for management
      fees to Darcy Krell doing business as DK Financial Consultants. Mr. Krell
      is our secretary and is the spouse of our president, Ms. Linda
    Smith.                                                                                                                                                                                                                                                                                                                          
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | b) | we have paid or accrued $1,500 per month for rent and
      office expenses to Darcy Krell doing business as DK Financial
      Consultants.                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | c) | as at January 31, 2007, Ryan Krell, brother of Shannon
      Krell, our director, and son of Darcy Krell, our secretary, has advanced a
      total face amount of $106,754 to us as a convertible non-interest bearing
      promissory note with no fixed terms of repayment. This amount is currently
      outstanding and will mature on January 1, 2008 unless converted into
      equity prior to maturity. Each $0.05 of principal outstanding is
      convertible into one common share which is equivalent to 2,135,080
      shares.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | e) | as at January 31, 2007, Linda Smith, our president and a
      director, has advanced a total of $411,129 to us as a non-interest bearing
      loan with no fixed term and no guarantee of repayment. This amount is
      currently outstanding.                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | f) | as at January 31, 2007, Darcy Krell, our secretary and
      chief financial officer, has advanced a total of $377,445 to us as a
      non-interest bearing loan with no fixed term and no guarantee of
      repayment. This amount is currently outstanding.                                                                                                                                                                                                                                                                                  

20

---

| | g) | as at January 31, 2007, Shannon Krell has advanced a
      total of $206,701 to us as a non- interest bearing loan with no fixed term
      and no guarantee of repayment. This amount is currently
  outstanding.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We believe that the above related party contracts are more
favorable than those that would be obtained in arms length transactions with
third parties. Our management and rental agreements with Mr. Darcy Krell are
comparable to other such agreements in the industry.

| | 7.3 | Interests of Experts and Counsel
| | --- | --------------------------------

Our experts and legal counsel have no interest in our
shareholdings.

|Item 8. | Financial Information
|------- | ---------------------

The financial statements required by this Item 8 are attached
hereto as an exhibit and are incorporated herein by reference.

| | 8.1 | Legal Proceedings
| | --- | -----------------

To the best of our knowledge there are no legal or arbitration
proceedings threatened, pending or in progress against us, except for a British
Columbia Supreme Court action by Ellis Foster, Chartered Accountants, our former
auditor, for $51,681 as at June 30, 2001, plus interest accruing thereafter at a
rate of 1% per month.

Ellis Foster commenced legal action against us, Dalian Maple
Leaf International School, Sherman Investment Ltd. and Shu Liang Sherman Jen and
Lan Ying Li on October 19, 2001. The claim alleges that Ellis Foster provided
accounting and audit services to the defendants in connection with the
preparation of financial statements relating to our proposed acquisition of
Dalian Maple Leaf International School.

We have filed a Statement of Defense in the action denying that
we retained Ellis Foster to provide accounting and audit services in connection
with the preparation of financial statements for Dalian Maple Leaf International
School. We further state that the other defendants are responsible for any fees
incurred. Ellis Foster has not taken any steps to proceed with its legal claim
since November 23, 2001.

| | 8.2 | Significant Changes
| | --- | -------------------

There have been no significant changes since the date of the
audited financial statements included herein.

21

---

|Item 9. | The Offer and Listing
|------- | ---------------------

| | **9.1** | Offer and Listing Details
| | ------- | -------------------------

We are currently a reporting issuer in both British Columbia
and Alberta and files as a foreign issuer with the United States Securities and
Exchange Commission. After filing and receipting a registration statement on
Form 20-F with the United States Securities and Exchange Commission, our common
shares were posted for trading on the Over-The-Counter: Bulletin Board (OTC:BB)
in the United States under the symbol GMSRF:OB on February 14, 2007.

Previously our common shares traded on the Canadian Venture
Exchange and its predecessor, the Vancouver Stock Exchange, under the symbol
GMS. On July 12, 2001, our shares were suspended from trading on the TSX
Venture Exchange due to failure to meet the Exchanges minimum working capital
requirements. The TSX Venture Exchange requires that listed companies have a
minimum of $50,000 in allocated working capital. At that time, we did not meet
this requirement and trading in our shares was suspended.

The Cease Trade Orders issued against us on November 7, 2003 by
the Alberta Securities Commission (the ASC) and on January 14, 2004 by the
British Columbia Securities Commission (the BCSC) were lifted on August 18,
2006 by the BCSC and on August 23, 2006 by the ASC. These reactivation and
revocation orders resulted from the Company bringing its disclosure records
up-to-date on SEDAR (www.sedar.com); preparing a new 43-101 report
regarding the merits of the Dotted Lake property; meeting other regulatory
requirements; and paying all required fees and penalties.

The following table sets forth the high and low closing prices
in Canadian funds of our common shares during the time they traded through the
facilities of the Canadian Venture Exchange, and its predecessor, the Vancouver
Stock Exchange:

|Period                               |   | High |  |   | Low  | 
|------------------------------------ | - | ---- |  | - | ---- | 
|February 1, 1999 to January 31, 2000 | $ | 0.15 |  | $ | 0.03 | 
|February 1, 2000 to January 31, 2001 | $ | 0.25 |  | $ | 0.06 | 
|February 1, 2001 to July 12, 2001    | $ | 0.10 |  | $ | 0.06 | 

|Item 10. | Additional Information
|-------- | ----------------------
|         |                       
|         | **10.1**              

Our authorized share capital consists of 100,000,000 common
shares without par value. Our issued share capital as of the date of this annual
report is 5,651,714 fully paid common shares without par value. We have not
issued any common shares since February 1, 2000 and no common shares were issued
during the fiscal year ended January 31, 2007 and none since that date.

All shares issued and to be issued in the future must be and
have been approved by authorizing resolution consisting of a simple majority of
our board of directors.

We do not hold any of our own shares. We do not have any
potential obligations to increase our issued capital.

22

---

| | 10.2 | Memorandum and Articles of Association
| | ---- | --------------------------------------

We were incorporated under the Company Act of British
  Columbia by registration of our articles of incorporation and memorandum and
  were subsequently transitioned to the replacement Business Corporations Act
  in 2006. Pursuant to the provisions of the Business Corporations Act,
  a company may conduct any business that it is not restricted by the terms of
  its articles from conducting. Our articles contain no such restrictions.

Our directors are required to disclose to the board of
directors the nature and extent of their interest in any proposed transaction or
contract and must thereafter refrain from voting in respect thereof. An
interested director may be counted in the quorum when a determination as to such
directors remuneration is being considered but may not vote in respect thereof.
The directors have an unlimited power to borrow money, issue debt obligations
and mortgage or charge our assets provided such actions are conducted bona fide
and in our best interests. There are no mandatory retirement ages for directors
or any required shareholdings.

All holders of common shares are entitled to receive dividends
out of assets legally available therefore at such times and in such amounts as
the board of directors may from time to time determine. All holders of common
shares will share equally on a per share basis in any dividend declared by the
board of directors. The dividend entitlement time limit will be fixed by the
board of directors at the time any such dividend is declared. Each outstanding
common share is entitled to one vote on all matters submitted to a vote of our
shareholders in general meeting. There are no cumulative voting rights attached
to any of our shares and, accordingly, the holders of more than half of the
shares represented at a general meeting can elect all of the directors to be
elected in a general meeting. All directors stand for re-election annually. Upon
any liquidation, dissolution or winding up, all common shareholders are entitled
to share ratably in all net assets available for distribution after payment to
creditors. The common shares are not convertible or redeemable and have no
preemptive, subscription or conversion rights. In the event of a merger or
consolidation, all common shareholders will be entitled to receive the same per
share consideration.

The rights of shareholders may only be altered by the
shareholders passing a special resolution at a general meeting. A special
resolution may only be passed when it has been circulated to all shareholders by
way of an information circular and then must be passed by seventy-five percent
of the votes cast at the general meeting.

The board of directors may call annual and extraordinary
general meetings when required. One or more shareholders holding in aggregate
five percent or more of our issued shares may requisition an extraordinary
meeting and the directors are required to hold such meeting within four months
of such requisition. Only registered shareholders or persons duly appointed by
proxy may be admitted to meetings unless otherwise permitted by the chairman of
the meeting.

There are no national limitations or restrictions on the right
to own our common shares.

There are no provisions in our articles of association that
would have the effect of delaying, deferring or preventing a change in control.

23

---

There are no provisions in our articles of association that
establish any threshold for disclosure of ownership. However, the British
Columbia and Alberta Securities Commissions require that persons that are the
registered owners of, and/or have voting control over 10% or more of our common
shares must file insider reports disclosing securities holdings.

| | 10.3 | Material Contracts
| | ---- | ------------------

We have not entered into any material contracts over the past
two years.

| | 10.4 | Exchange Controls and Other Limitations
      Affecting Security Holders
| | ---- | ------------------------------------------------------------------------

There is no law or governmental decree or regulation in Canada
that restricts the export or import of capital, or affects the remittance of
dividends, interest or other payments to a non-resident holder of common shares,
other than withholding tax requirements. See "Item 10.5 Taxation"

There is no limitation imposed by Canadian law or by our
constituent documents on the right of a non-resident to hold or vote common
shares, other than are provided in the Investment Canada Act (Canada). The
following summarizes the principal features of the Investment Canada Act
(Canada).

The Investment Canada Act (Canada) requires certain
"non-Canadian" individuals, governments, corporation or other entities who wish
to acquire a "Canadian business" (as defined in the Investment Canada Act), or
establish a "new Canadian business" (as defined in the Investment Canada Act) to
file either a notification or an application for review with a governmental
agency known as "Investment Canada". The Investment Canada Act requires that
certain acquisition of control of Canadian business by a "non-Canadian" must be
reviewed and approved by the Minister responsible for the Investment Canada Act
on the basis that the Minister is satisfied that the acquisition is "likely to
be of net benefit to Canada", having regard to criteria set forth in the
Investment Canada Act. Only acquisitions of control are reviewable under the
Investment Canada Act; however, the Investment Canada Act provides detailed
rules for the determination of whether control has been acquired and, pursuant
to those rules, the acquisition of one-third or more of the voting shares of a
corporation may, in some circumstances, be considered to constitute an
acquisition of control. Certain reviewable acquisitions of control may not be
implemented before being approved by the Minister; if the Minister does not
ultimately approve a reviewable acquisition, which has been completed, the
acquired Canadian business must be divested. Failure to comply with the review
provisions of the Investment Canada Act could result in, amongst other things,
an injunction or a court order directing disposition of assets of shares.

| | 10.5 | Canadian Federal Income Tax Consequences to
      United States Investors
| | ---- | -------------------------------------------------------------------------

A brief description of certain provisions of the tax treaty between
  Canada and the United States is included below, together with a brief outline
  of certain taxes, including withholding provisions to which United States security
  holders are subject under existing laws and regulations of Canada and United
  States; the consequences, if any, of state and local taxes are not considered.
  The following information is general and security holders are urged to seek
  the advice of their own tax advisors, tax counsel or accountants with respect
  to the applicability or effect on their own individual circumstances of not
  only the matters referred to herein, but also any state or local taxes.

24

---

Canadian federal tax legislation generally requires a 25%
withholding from dividends paid or deemed to be paid to the Company's
nonresident shareholders. However, shareholders resident in the United States
will generally have this rate reduced to 15% through the tax treaty between
Canada and the United States. The amount of stock dividends paid to
non-residents of Canada will be subject to withholding tax at the same rate as
cash dividends. The amount of stock dividend (for tax purposes) would generally
be equal to the amount by which our stated capital has increased by reason of
the payment of such dividend. We will furnish additional tax information to
shareholders in the event of such a dividend. Interest paid or deemed to be paid
on our debt securities held by non-Canadian residents may also be subject to
Canadian withholding tax, depending upon the terms and provisions of such
securities and any applicable tax treaty. Under present legislation in the
United States, we are generally not subject to United States back up withholding
rules, which would require withholding at a rate of 20% on dividends and
interest paid to certain United States persons who have not provided us with a
taxpayer identification number.

Gains derived from a disposition of shares of the company by a
non-resident shareholder will be subject to tax in Canada only if not less than
25% of any class of our shares was owned by the nonresident shareholder and/or
persons with whom the nonresident did not deal at arm's length at any time
during the five-year period immediately preceding the disposition. In such cases
gains derived by a U.S. shareholder from a disposition of our shares would
likely be exempt from tax in Canada by virtue of the Canada-U.S. tax treaty.

| | 10.6 | United States Federal Income Tax
      Consequences to United States Investors
| | ---- | ------------------------------------------------------------------------------

The following general discussion sets forth a summary of the
material United States federal income tax consequences that are applicable to
the following persons who invest in and hold our common shares as capital assets
("U.S. Shareholders"): (i) citizens or residents (as specially defined for
federal income tax purposes) of the United States, (ii) corporations or
partnerships created or organized in the United States or under the laws of the
United States or of any state and (iii) estates or trust the income of which is
subject to United States federal income taxation regardless of its source. This
discussion does not deal with (a) all aspects of federal income taxation that
may be relevant to a particular U.S. Shareholder based on such U.S.
Shareholder's particular circumstances (including potential application of the
alternative minimum tax, (b) certain U.S. Investors subject to special treatment
under federal income tax laws or foreign individuals or entities, (c) U.S.
Investors owning directly or by attribution 10% or more of our common shares, or
(d) any aspect of state, local or non-United States tax laws. Additionally, the
following discussion assumes that the Company will not be classified as a
"foreign personal holding company" under the Internal Revenue Code of 1986 as
amended (the "Code").

Passive Foreign Investment Company

For any of our taxable years, if 75% or more of our gross income
  is "passive income" (as defined in the Code) or if at least 50% of our assets,
  by average fair market value (or adjusted income basis if the Company elects),
  are assets that produce or are held for the production of passive income, we
  will be deemed to be a Passive Foreign Investment Company ("PFIC").

25

---

A U.S. Shareholder of a PFIC is subject to special U.S. federal
income tax rules in Section 1291 to 1297 of the Code. As described below, these
provisions set forth two alternative tax regimes at the election of each such
U.S. Shareholder, depending upon whether the U.S. Shareholder elects to treat us
as a "qualified electing fund" (a QEF election").

U.S. SHAREHOLDERS ARE STRONGLY URGED TO CONSIDER MAKING A
QEF ELECTION TO AVOID CERTAIN POTENTIALLY SIGNIFICANT ADVERSE U.S. TAX
CONSEQUENCES

The QEF Election Alternative

Each U.S. Shareholder is strongly urged to consider making a
QEF Election because of the potential benefits of such election that are
discussed below, and because we anticipate that we will not have any earnings
and profits (as computed for United States federal income tax purposes) for the
current taxable year and little, if any, earnings and profits for any future
taxable year in which we are a PFIC. There can be no assurance, however, that
this will be the case. Accordingly, the timely making of the QEF election, as
discussed below, generally should, subject to the discussion below under "Other
PFIC Rules", avoid any significant adverse United State federal income tax
consequences resulting from any classification of us as a PFIC, although this
may depend on a particular U.S. Shareholder's particular circumstances.

A U.S. Shareholder who elects in a timely manner to treat us as
a QEF (an "Electing U.S. Shareholder") will be subject, under Section 1293 of
the Code, to current federal income tax for any taxable year in which we are a
PFIC (or is treated as a PFIC with respect to the U.S. Shareholder) on such
Electing U.S. Shareholder's pro-rata share of our (i) "net capital gain" (the
excess of net long-term capital gain over short-term capital loss), which will
be taxed as long-term capital gain to the Electing U.S. Shareholder and (ii)
"ordinary earnings" (the excess of earnings and profits over net capital gain),
which will be taxed as ordinary income to the Electing U.S. Shareholder, in each
case, for the shareholder's taxable year in which, or with which, our taxable
year ends, regardless of whether such amounts actually are distributed. An
Electing U.S. Shareholder, however, would not take into account any income with
respect to any of our taxable years for which we have no earnings and profits.
Adjustments are provided generally to prevent double taxation at the time of
later distributions on or dispositions of Common Shares.

The QEF election also allows the Electing U.S. Shareholder to
(i) generally treat any gain realized on the disposition of our common shares
(or deemed to be realized on the pledge of such shareholder's common shares) as
capital gain; (ii) treat such shareholder's share of our net capital gain, if
any, as long-term capital gain instead of ordinary income; (iii) probably
(although in the absence of regulations this matter is not free from doubt)
retain in the case of an individual Electing U.S. Shareholder, the "step-up" in
the tax basis of Common Shares to the fair market value of such shares on the
date of such Electing U.S. Shareholder's death (which would otherwise not be
retained); and (iv) generally avoid interest charges resulting from PFIC status
altogether.

26

---

In the event we are deemed a PFIC, we intend to comply with the
reporting requirements prescribed by Treasury regulations. In particular, we
will maintain information so that our ordinary earnings and net capital gain may
be determined. However, future regulations may contain reporting and
record-keeping requirements that are so onerous that it would not be practicable
for us to comply. If, after review of the requirements, we decide not to comply
with the PFIC record-keeping requirements, we will so notify our shareholders.

A QEF Election must be made by attaching the following
documents to the timely filed U.S. federal income tax return for the first
taxable year of the U.S. Shareholder in which or with which our taxable year
during which we were a PFIC and the U.S. Shareholder held (or was considered to
have held) common shares ends: (i) a "Shareholder Section 1295 Election
Statement" executed by the U.S. Shareholder, (ii) a "PFIC Annual Information
Statement" received by the U.S. Shareholder from us, and (iii) a Form 8621. In
addition, the Electing U.S. Shareholder must file a copy of the Shareholder
Section 1295 Election Statement with the Internal Revenue Center, PO Box 21086,
Philadelphia, PA 19114. In the case of common shares owned through a U.S entity,
the election is made at the entity level.

The following three paragraphs apply to Electing U.S.
Shareholders:

Dividends Paid on Common Shares:

Dividends paid on our common shares (including any Canadian
taxes withheld) to an Electing U.S. Shareholder will be treated as ordinary
dividend income for United States federal income tax purposes to the extent of
our current and accumulated earnings and profits (as computed for U.S. federal
income tax purposes) unless paid out of earnings and profits that were taxed to
the Electing U.S. Shareholder under the QEF rules. Such dividends generally will
not qualify for the dividends-received deduction available to corporations.
Amount in excess of such earnings and profits will be applied against the
Electing U.S. Shareholder's tax basis in the common shares, and to the extent in
excess of such tax basis, will be treated as gain from a sale or exchange of
such common shares.

Credit for Canadian Taxes Withheld:

Subject to the limitations set forth in Section 904 of the Code
  (which generally restricts the availability of foreign tax credits to a U.S.
  Shareholder's tax liability attributable to foreign-source income of the same
  type as the income with respect to which the tax was imposed, as determined
  under complex U.S. tax rules), the Canadian tax withheld or paid with respect
  to dividends on the common shares generally may be taken as a foreign tax credit
  against United States federal income taxes by an Electing U.S. Shareholder who
  chooses to claim such a credit for the taxable year. Electing U.S. Shareholders
  who do not choose to claim foreign tax credits for a taxable year may claim
  United States tax deduction for such Canadian tax in such taxable year.

27

---

Disposition of Common Shares:

Any gain or loss on a sale or exchange of common shares by an
Electing U.S. Shareholder will be capital gain or loss, which will be long-term
capital gain or loss if the common shares have been held for more than one year,
and otherwise will be short-term capital or loss. The sale of common shares
through certain brokers may be subject to the information reporting and back-up
withholdings rules of the Code.

| | 1. | The Non-QEF Election Alternative
| | -- | --------------------------------

If a U.S. Shareholder does not timely make a QEF Election for
the first taxable year during which he holds (or is considered to hold) the
common shares in question and we are a PFIC (a "Non-electing U.S. Shareholder"),
then special rules under Section 1291 will apply to (i) gains realized on the
disposition (or deemed to be realized by reason of a pledge) of common shares,
and (ii) certain "excess distribution" (as defined in the Code) by us. We have
never made any distributions with respect to our common shares and we do not
anticipate making any such distribution in the foreseeable future.

A non-electing U.S. Shareholder generally would be required to
pro-rate all gains realized on the disposition of our common shares and all
excess distributions over such shareholder's entire holding period for the
common shares. All gains or excess distributions allocated to prior years of the
U.S. Shareholder (provided such U.S. Shareholder's holding period and beginning
after December 31, 1986 for which it was a PFIC) would be taxed at the highest
tax rates for each such prior year applicable to ordinary income. Special
foreign tax credit rules apply with respect to withholding taxes imposed on
amounts that are treated as excess distributions. The Non-electing U.S.
Shareholder also would be liable for interest on the foregoing tax liability for
each such prior year calculated as if such liability had been due with respect
to each such prior year. A Non-electing U.S. Shareholder that is not a
corporation must treat this interest charge as "personal interest" which is
non-deductible. The balance of the gain or the excess distribution will be
treated as ordinary income in the year of the disposition or distribution and no
interest charge will be incurred with respect to such balance.

If we are a PFIC for any taxable year during which a
non-electing U.S. Shareholder holds, or is considered to hold, our common
shares, then we will continue to be treated as a PFIC with respect to such
common shares, even if we no longer meet the definition of a PFIC. A
Non-electing U.S. Shareholder may determine this deemed PFIC status by electing
to recognize gain (which will be taxed under the rules discussed above for
Non-electing U.S. Shareholders) as if such common shares had been sold on the
last day of the last taxable year for which it was a PFIC. Certain other
elections are also available to Non-Electing U.S. Shareholders.

Other PFIC Rules

Certain special, generally adverse, rules will apply with respect
  to our common shares while we are a PFIC, regardless of whether the common shares
  are held, or considered to be held, by an Electing or Non-electing U.S. Shareholder.
  For example, under Section 1297(b)(6) of the Code, a U.S. Shareholder who uses
  PFIC stock as security for a loan (including a margin loan) will, except as
  may be provided in regulations, be treated as having made a taxable disposition
  of such stock. In addition, under Section 1291(f) of the Code, the Treasury
  has authority to issue regulations that would treat as taxable certain transfers
  that are generally not so treated, such as gifts, exchanges pursuant to corporate
  reorganizations, and transfers at death, although it is not clear that such
  authority extends to transfers by Electing U.S. Shareholders.

28

---

Future Developments

The foregoing discussion is based on existing provisions of the
Code, existing and proposed regulations thereafter, and current administrative
rulings and court decisions, all of which are subject to change. Any such
changes could affect the validity of this discussion. In addition, the
implementation of certain aspects of the PFIC rules requires the issuance of
regulations which in many such instances have not yet been promulgated and which
may have retroactive effect. Furthermore, legislation has been proposed which
would replace the PFIC provisions with a consolidated anti-deferral regime.
While this legislation was vetoed, it may be re-introduced in subsequent years.

ALL PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF PURCHASING THE COMMON
SHARES.

| | 10.7 | Statement by Experts
| | ---- | --------------------

We have placed reliance upon Morgan & Company, Chartered
Accountants, of 700 West Georgia Street, Suite 1488, Vancouver, B.C., Canada V7Y
1A1, as experts in accounting and auditing matters relating to the disclosure in
this annual report and the financial statements included therein.

All financial information and related contents included in this
annual report have been reviewed and authorized by Morgan & Company.

| | 10.8 | Documents on Display
| | ---- | --------------------

You may review a copy of our filings with the SEC, including
  exhibits and schedules filed with it, at the SEC's public reference facilities
  at 100 F Street NE, Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330
  for further information on the public reference rooms. The SEC maintains a Web
  site (HTTP://WWW.SEC.GOV) that contains reports, proxy and information statements
  and other information regarding registrants that file electronically with the
  SEC. We have made our filings with the SEC electronically as a reporting foreign
  private issuer.

29

---

|Item 11. | Quantitative and Qualitative Disclosures About
      Market Risk
|-------- | ----------------------------------------------------------------

Market risk represents the risk of loss that may impact our financial
  statements due to adverse changes in financial market prices and rates, including
  foreign exchange and interest rates.

Foreign Exchange Rate Sensitivity

Our functional currency is the Canadian dollar with expenses
predominantly incurred in Canadian dollars. A relatively small portion of
expenses is in U.S. dollars creating some exposure to both currency transaction
and currency translation risk. The fluctuation of the US dollar in relation to
the Canadian dollar will consequently have a relatively minor financial impact
on our operations and may also affect the value of our assets and the amount of
our shareholders equity. We have not entered into any agreements or purchased
any instruments to hedge possible currency risks at this time.

Interest Rate Sensitivity

We currently have no significant exposure to changes in
interest rates. Our long-term and short-term debt is non-interest bearing and
requires no interest payments. Thus, we have not entered into any agreement or
purchased any instrument to hedge against possible interest rate risks at this
time. Our interest earning investments are relatively small. So any reductions
in interest rates will have a relatively minor effect on interest income from
these investments.

|Item 12. | Descriptions of Securities Other than Equity
      Securities
|-------- | -------------------------------------------------------------

| | 12.1 | Warrants
| | ---- | --------

We have no share purchase warrants issued and outstanding.

| | 12.2 | Stock Options
| | ---- | -------------

In December 2006, we adopted an incentive stock option plan but
to date no stock options have been granted and no stock options are outstanding.

PART II

|Item 13. | Defaults, Dividend Arrearages and
      Delinquencies
|-------- | -----------------------------------------------------

Not applicable

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

Not applicable

30

---

|Item 15. | Controls and Procedures
|-------- | -----------------------

As required by Rule 13a-15 under the Securities Exchange Act of
1934, as of the end of the period covered by this twelve month transition
report, being January 31, 2007, we have carried out an evaluation of the
effectiveness of the design and operation of our companys disclosure controls
and procedures. This evaluation was carried out under the supervision and with
the participation of our companys management, including our companys Chief
Executive Officer and our Chief Financial Officer. Based upon that evaluation,
our companys Chief Executive Officer and our Chief Financial Officer concluded
that our companys disclosure controls and procedures are effective as at the
end of the period covered by this report. There have been no changes in our
companys internal controls or in other factors, which could affect internal
control subsequent to the date we carried out our evaluation.

Disclosure controls and procedures and other procedures that
are designed to ensure that information required to be disclosed in our reports
filed or submitted under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time period specified in the
Securities and Exchange Commissions rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed in our reports filed under the
Securities Exchange Act of 1934 is accumulated and communicated to management
including our Chief Executive Officer and our Chief Financial Officer as
appropriate, to allow timely decisions regarding required disclosure.

|Item 16A. | Audit Committee Financial Expert
|--------- | --------------------------------

Audit Committee

Our companys board of directors acts as our audit committee.
Our board of directors undertakes an independent review of our companys
financial statements, and meets with management to determine the adequacy of
internal controls and other financial reporting matters. The members of our
board of directors are Linda Smith, Shannon Krell, Alexander Mancor and Andre
Pauwels. Our board of directors has determined that Alexander Mancor is the only
member of our board of directors that is independent as the term is used in
Rule 10A-3 of the Securities Exchange Act of 1934, as amended, and the
definition of independent director as defined in section 4200 of the Marketplace
Rules of the NASD.

Audit Committee Financial Expert

Our board of directors has determined that it does not have a
member that qualifies as an audit committee financial expert as defined in
Item 401(e) of Regulation S-B. We believe that our board of directors is capable
of analyzing and evaluating our financial statements and understanding internal
controls and procedures for financial reporting. In addition, we believe that
retaining an independent director who would qualify as an audit committee
financial expert would be overly costly and burdensome and is not warranted in
our circumstances given the early stages of our development and the fact that we
have not generated revenues to date.

31

---

|Item 16B. | Code of Ethics
|--------- | --------------

Our board of directors has adopted a Code of Business Conduct
and Ethics that applies to, among other persons, members of our board of
directors, our companys officers including President , Chief Financial Officer,
contractors, consultants and advisors. As adopted, our Code of Business Conduct
and Ethics sets forth written standards that are designed to deter wrongdoing
and to promote:

(1) honest and ethical conduct, including the ethical handling
of actual or apparent conflicts of interest between personal and professional
relationships;

(2) full, fair, accurate, timely, and understandable disclosure
in reports and documents that we file with, or submit to, the Securities and
Exchange Commission and in other public communications made by us;

(3) compliance with applicable governmental laws, rules and
regulations;

(4) the prompt internal reporting of violations of the Code of
Business Conduct and Ethics to an appropriate person or persons identified in
the Code of Business Conduct and Ethics; and

(5) accountability for adherence to the Code of Business
Conduct and Ethics.

Our Code of Business Conduct and Ethics requires, among other
things, that all of our companys personnel shall be accorded full access to our
president with respect to any matter which may arise relating to the Code of
Business Conduct and Ethics. Further, all of our companys personnel are to be
accorded full access to our companys board of directors if any such matter
involves an alleged breach of the Code of Business Conduct and Ethics by our
company officers.

In addition, our Code of Business Conduct and Ethics emphasizes
that all employees, and particularly managers and/or supervisors, have a
responsibility for maintaining financial integrity within our company,
consistent with generally accepted accounting principles, and federal,
provincial and state securities laws. Any employee who becomes aware of any
incidents involving financial or accounting manipulation or other
irregularities, whether by witnessing the incident or being told of it, must
report it to his or her immediate supervisor or to our companys President. If
the incident involves an alleged breach of the Code of Business Conduct and
Ethics by the President, the incident must be reported to any member of our
board of directors. Any failure to report such inappropriate or irregular
conduct of others is to be treated as a severe disciplinary matter. It is
against our company policy to retaliate against any individual who reports in
good faith the violation or potential violation of our Code of Business Conduct
and Ethics by another.

|Item 16C. | Principal Accountant Fees and Services
|--------- | --------------------------------------

During the fiscal years ended January 31, 2007 and 2006, we
incurred approximately $14,000 and $12,000 respectively in fees to its principal
independent accountant for professional services rendered in connection with the
audits of our year end financial statements and its annual report filed on Form
20-F.

During fiscal years ended January 31, 2007 and 2006, we did not
incur any fees for professional services rendered by our principal independent
accountant for any of the following:

32

---

(i) information technology services including, but not limited
to, operating or supervising or managing our information or local area network
or designing or implementing a hardware or software system that aggregate source
data underlying the financial statements.

(ii) any other non-assurance services including, but not
limited to, tax-related services, actuarial services or valuation services.

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

Not Applicable

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

Not Applicable

PART III

|Item 17. | Financial Statements
|-------- | --------------------

Our audited financial statements include:

- our balance sheets as at January 31, 2007 and January 31, 2006;
- the following statements for the fiscal years ended January 31, 2007, 2006
  and 2005:
- statements of operations and deficit
- statements of cash flows
- notes to the financial statements.

The financial statements for the years ended January 31, 2007
and 2006 were audited by Morgan & Company, Chartered Accountants. The
financial statements for the year ended January 31, 2005 were audited by other
auditors who have ceased operations. These auditors expressed an opinion without
reservation in their report dated April 4, 2005. All are prepared in accordance
with generally accepted accounting principles in Canada and are reconciled to
United States generally accepted accounting principles in the note disclosure.
All figures are expressed in Canadian dollars.

|Item 18. | Financial Statements
|-------- | --------------------

See "Item 17 Financial Statement"

33

---

|Item 19. | Exhibits
|-------- | --------

|Exhibit 1:          | Financial
        Statements                                                                                                                                     
|------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 2:          | Certificate of Incorporation*                                                                                                                                    
|Exhibit 3:          | Memorandum
        and Articles of Association*                                                                                                                  
|Exhibit 4:          | Management Agreement
        dated November 1, 2000 between Gemstar Resources Ltd. and Darcy Krell
        doing business as DK Financial Consultants.*          
|Exhibit 5:          | Consent
        of Geologist**                                                                                                                                   
|Exhibit 12.1:       | Certification
        of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
        Act of 2002                                               
|Exhibit
      12.2: | Certification
        of Chief Financial Officer pursuant to Section 302 of the Sarbanes- Oxley
        Act of 2002                                              
|Exhibit 13.1:       | Certification
        of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
        pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|Exhibit
      13.2: | Certification
        of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
        pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Previously filed with Form 20-F on September 16, 2003

** Previously filed with Form 20-F on December 20, 2004

34

---

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 statement on its behalf.

|                     |     | GEMSTAR RESOURCES LTD.               
|-------------------- | --- | -------------------------------------
|                     |     |                                      
|Dated: June 20, 2007 |     |                                      
|                     | By: | /s/
      Linda Smith                
|                     |     |                                      
|                     |     | Linda Smith,                         
|                     |     | President and Chief Executive Officer

---