---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C.
20549

FORM 20-F

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

OR

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

FOR THE FISCAL YEAR ENDED MARCH 31, 2007

OR

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

OR

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

For the transition period from  _______________ to 
  _______________

Commission File Number: 000-50953

EVOLVING GOLD CORP.(Exact
name of Registrant as specified in its charter)

CANADA
  (Jurisdiction of incorporation or organization)

725  666 Burrard StreetVancouver, British Columbia, Canada V6C 2X8
  (Address of principal executive offices)

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

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

COMMON SHARES WITHOUT PAR VALUE(Title of
Class)

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

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:

28,127,811 common shares as of March 31,
2007

---

Indicate by check mark if the Registrant is a well known
seasoned issuer as defined in Rule 405 of the Securities Act.

YES [   ]    NO [X]

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 [   ]    NO [X]

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
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] I       tem 18 [
]

If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).

YES [   ]     NO [X]

- 2 -

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EVOLVING GOLD CORP.

FORM 20-F ANNUAL REPORT

TABLE OF CONTENTS

|          |                                                                                    | Page
|--------- | ---------------------------------------------------------------------------------- | ----
|Glossary  |                                                                                    | 4   
|          |                                                                                    |     
|Part I    |                                                                                    |     
|          |                                                                                    |     
|Item 1.   | Identity of Directors, Senior Management and Advisors                              | 10  
|Item 2.   | Offer Statistics and Expected Timetable                                            | 10  
|Item 3.   | Key Information                                                                    | 10  
|Item 4.   | Information on the Company                                                         | 15  
|Item 4A.  | Unresolved Staff Comments                                                          | 30  
|Item 5.   | Operating and Financial Review and Prospects                                       | 30  
|Item 6.   | Directors, Senior Management, and Employees                                        | 34  
|Item 7.   | Major Shareholders and Related Party Transactions                                  | 41  
|Item 8.   | Financial Information                                                              | 43  
|Item 9.   | The Offer and Listing                                                              | 43  
|Item 10.  | Additional Information                                                             | 45  
|Item 11.  | Quantitative and Qualitative Disclosures About Market Risk                         | 53  
|Item 12.  | Description of Securities Other Than Equity Securities                             | 53  
|          |                                                                                    |     
|Part II   |                                                                                    |     
|          |                                                                                    |     
|Item 13.  | Defaults, Dividend Arrearages and Delinquencies                                    | 53  
|Item 14.  | Material Modifications to the Rights of Security Holders
      and Use of Proceeds | 53  
|Item 15.  | Controls and Procedures                                                            | 53  
|Item 16.  | Reserved                                                                           | 54  
|Item 16A. | Audit Committee Financial Expert                                                   | 54  
|Item 16B. | Code of Ethics                                                                     | 54  
|Item 16C. | Principal Accountant Fees and Services                                             | 54  
|Item 16D. | Exemptions from the Listing Standards for Audit Committee                          | 55  
|Item 16E. | Purchases of Equity Securities by the Company and Affiliated
      Purchasers      | 55  
|          |                                                                                    |     
|Part III  |                                                                                    |     
|          |                                                                                    |     
|Item 17.  | Financial Statements                                                               | 55  
|Item 18.  | Financial Statements                                                               | 55  
|Item 19.  | Exhibits                                                                           | 55  

- 3 -

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GLOSSARY

|Term             | Definition                                                                                                                                  
|---------------- | --------------------------------------------------------------------------------------------------------------------------------------------
|                 |                                                                                                                                             
|2004 Plan        | Stock option plan of the Company
        dated September 28, 2004                                                                           
|                 |                                                                                                                                             
|2007 Plan        | Stock option plan of the Company
        dated March 14, 2007, presented to shareholders at September 21, 2007
        meeting for approval.
|                 |                                                                                                                                             
|adularia         | A mineral, potassium feldspar                                                                                                               
|                 |                                                                                                                                             
|Ag               | Silver                                                                                                                                      
|                 |                                                                                                                                             
|AHL              | AHL Holdings Ltd.                                                                                                                           
|                 |                                                                                                                                             
|anorthosite      | A plagioclase-rich intrusive
        rock                                                                                                   
|                 |                                                                                                                                             
|arsenopyrite     | A mineral composed of arsenic,
        iron and sulphur                                                                                     
|                 |                                                                                                                                             
|As               | Arsenic                                                                                                                                     
|                 |                                                                                                                                             
|Au               | Gold                                                                                                                                        
|                 |                                                                                                                                             
|Award Date       | The date of the grant of a
        stock option in the Company                                                                              
|                 |                                                                                                                                             
|Bi               | Bismuth                                                                                                                                     
|                 |                                                                                                                                             
|BLM              | Bureau of Land Management,
        US Department of the Interior                                                                            
|                 |                                                                                                                                             
|brecciated       | A rock consisting of angular
        fragments                                                                                              
|                 |                                                                                                                                             
|CBCA             | Canada Business Corporations
        Act                                                                                                    
|                 |                                                                                                                                             
|chalcopyrite     | A mineral composed of copper,
        iron and sulphur                                                                                      
|                 |                                                                                                                                             
|CNQ              | Canadian Quotation and Trading
        System                                                                                               
|                 |                                                                                                                                             
|Code             | Internal Revenue Code of 1986,
        as amended                                                                                           
|                 |                                                                                                                                             
|Company          | Evolving Gold Corp.                                                                                                                         
|                 |                                                                                                                                             
|Crone Geophysics | Crone Geophysics and Exploration
        Limited Company                                                                                    
|                 |                                                                                                                                             
|CSAMT            | Controlled Source Audio
        Magnetic Tellurics, a geophysical method used in mineral exploration                                      
|                 |                                                                                                                                             
|Cu               | Copper                                                                                                                                      
|                 |                                                                                                                                             
|Dighem V         | A geophysical technique used
        for surveying                                                                                          
|                 |                                                                                                                                             
|Eligible Person  | Any individual that is eligible
        to be granted stock options under the Plan                                                          
|                 |                                                                                                                                             
|EM               | Electromagnetic                                                                                                                             
|                 |                                                                                                                                             
|Evolving Gold    | Evolving Gold Corp.                                                                                                                         

- 4 -

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|Term                             | Definition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|fracture fillings                | A fracture in rock mass filled
        with another material                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|galena                           | A mineral composed of lead
        and sulphur                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Geocore                          | Geocore Exploration Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|gneiss                           | A banded or foliated metamorphic
        rock, usually of the same composition as granite                                                                                                                                                                                                                                                                                                                                                                                                    
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Golden Arc                       | Golden Arc Mining & Refining
        Inc., a Nevada Corporation                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Golden Arc Claims                | The unpatented mining claims
        under option from Golden Arc                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Golden Sands                     | Golden Sands Exploration Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|GOR                              | Gross productions                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|gossan                           | An exposed, oxidized portion
        of a mineral vein, especially a rust-coloured outcrop of iron                                                                                                                                                                                                                                                                                                                                                                                           
|                                 | ore                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Hg                               | Mercury                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|induced polarization             | A geophysical method used
        in mineral exploration                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|IRS                              | Internal Revenue Service                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Malone Property                  | A property located in Lordsburg,
        New Mexico, U.S.A.                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Malone Property 
      Agreement | The agreement dated April
        17, 2006 pursuant to which the Company entered into a quitclaim deed and
        royalty agreement with Newmont North America Exploration Ltd and was granted
        a 100% interest in exchange for payment of US$ 10,000 (paid) and an additional
        US$10,000 payable in one year and is subject to a royalty of 2% of net
        smelter returns.                                                                                               
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Mineral Property
      Agreement | The agreement dated June 10,
        2003 made between Zimtu and Jody Dahrouge, an unrelated individual, pursuant
        to which Mr. Dahrouge retained a 1% NSR royalty on minerals other than
        diamonds and 1% GOR on diamonds from the Murray Property                                                                                                                                                                                                                            
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Mineral Reserve                  | Economically mineable part
        of a Measured or Indicated Resource demonstrated by at least a comprehensive
        study of the viability of a mineral property that has advanced to a stage
        where the mining method, in the case of underground mining, or the pit
        configuration, in the case of an open pit, has been established, and where
        an effective method of mineral processing has been determined.                                                   
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                 | Probable (Indicated) Reserves.
        Reserves for which quantity and grade and/or quality are computed from
        information similar to that used for proven (measured) reserves, but the
        sites for inspection, sampling and measurement are farther apart or are
        otherwise less adequately spaced. The degree of assurance, although lower
        than that for proven (measured) reserves, is high enough to assume continuity
        between points of observation.
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                 | Proven (Measured) Reserves.
        Reserves for which: (a) quantity is computed from dimensions revealed
        in outcrops, trenches, workings or drill holes; grade and/or quality are
        computed from the results of detailed sampling; and (b) the sites for
        inspection, sampling and measurement are spaced so closely and the geologic
        character is so well defined that size, shape, depth and mineral content
        of reserves are well-established.      

- 5 -

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|Term                | Definition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Mineral Resource    | Concentration or occurrence
        of natural, solid, inorganic or fossilized organic material in or on the
        earths crust in such form and quantity and of such a grade or quality
        that it has reasonable prospects for economic extraction. The location,
        quantity, grade, geological characteristics and continuity of a mineral
        resource are known, estimated or interpreted from specific geological
        evidence and knowledge.                                                                                                                                                                                                                                                                                  
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                    | The SECs Industry Guide
        7  Description of Property by Issuers Engaged or to be Engaged
        in Significant Mining Operations does not define or recognize resources.
        As used in this Annual Report, resources are as defined in
        Canadian NI 43-101-Standards of Disclosure for Mineral Projects
        .                                                                                                                                                                                                                                                                                                                                                                                                                
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                    | Mineral Resources are sub-divided,
        in order of increasing geological confidence, into Inferred, Indicated
        and Measured categories. An Inferred Resource has a lower level of confidence
        than that applied to an Indicated Resource. An Indicated Resource has
        a higher level of confidence than an Inferred Resource but has a lower
        level of confidence than a Measured Resource.                                                                                                                                                                                                                                                                                                                                 
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                    | Inferred Resource.
        That part of the Mineral Resource for which quantity and grade or quality
        can be estimated on the basis of geological evidence and limited sampling
        and reasonably assumed, but not verified, geological and grade continuity.
        The estimate is based on limited information and sampling gathered through
        appropriate techniques from locations such as outcrops, trenches, pits,
        workings and drill holes.                                                                                                                                                                                                                                                                             
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                    | Indicated Resource.
        That part of the Mineral Resource for which quantity, grade or quality,
        densities, shape and physical characteristics can be estimated with a
        level of confidence sufficient to allow the appropriate application of
        technical and economic parameters, to support mine planning and evaluation
        of the economic viability of the deposit. The estimate is based on detailed
        and reliable exploration and testing information gathered through appropriate
        techniques from locations such as outcrops, trenches, pits, workings and
        drill holes that are spaced closely enough for geological and grade continuity
        to be reasonably assumed.                    
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                    | Measured Resource.
        That part of a Mineral Resource for which quantity, grade or quality,
        densities, shape, physical characteristics are so well established that
        they can be estimated with confidence sufficient to allow the appropriate
        application of technical and economic parameters, to support production
        planning and evaluation of the economic viability of the deposit. The
        estimate is based on detailed and reliable exploration, sampling and testing
        information gathered through appropriate techniques from locations such
        as outcrops, trenches, pits, workings and drill holes that are spaced
        closely enough to confirm both geological and grade continuity.
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|NSR                 | Net smelter returns                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|open space fillings | Minerals filling an open space
        in the earth or a rock mass.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|OTCBB               | Over-The-Counter Bulletin
        Board Quotation System                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Part XIII Tax       | Canadian withholding tax                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Pb                  | Lead                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|PFIC                | Passive foreign investment
        company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

- 6 -

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|Term                               | Definition                                                                                                                                                                        
|---------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                   |                                                                                                                                                                                   
|Pulse EM survey                    | A time domain tool that uses
        large transmitting loops and a high power transmitter for surveying                                                                          
|                                   |                                                                                                                                                                                   
|pyrite, pyrrhotite                 | A mineral composed of iron
        and sulphur                                                                                                                                    
|                                   |                                                                                                                                                                                   
|QEF                                | Qualified electing fund                                                                                                                                                           
|                                   |                                                                                                                                                                                   
|quartz                             | A mineral composed of silica
        and oxygen                                                                                                                                   
|                                   |                                                                                                                                                                                   
|Sante Fe                           | Sante Fe Pacific Mining Inc.                                                                                                                                                      
|                                   |                                                                                                                                                                                   
|Sb                                 | Antimony                                                                                                                                                                          
|                                   |                                                                                                                                                                                   
|SFAS 123                           | Statement of Financial Accounting
        Standards No. 123 Accounting for Stock-Based Compensation                                                                             
|                                   |                                                                                                                                                                                   
|SFAS 145                           | Statement of Financial Accounting
        Standards no. 145 Rescission of FASB Statements No.4, 44, and 64,
        Amendment of FASB Statement No. 13 and Technical Corrections
|                                   |                                                                                                                                                                                   
|silica                             | A element, occasionally used
        to refer to the mineral, quartz                                                                                                              
|                                   |                                                                                                                                                                                   
|stockworks                         | A pattern of closely spaced
        fractures in rock, commonly filled with minerals of economic value                                                                            
|                                   |                                                                                                                                                                                   
|Tax Act                            | Income Tax Act(Canada)                                                                                                                                                            
|                                   |                                                                                                                                                                                   
|Treaty                             | The Canada-U.S. Income Tax
        Convention (1980) as amended by the Protocols signed on June 14, 1983,
        March 28, 1984, March 17, 1995 and July 29, 1997                
|                                   |                                                                                                                                                                                   
|troctolitic                        | A mafic igneous rock                                                                                                                                                              
|                                   |                                                                                                                                                                                   
|TSX-V                              | TSX Venture Exchange                                                                                                                                                              
|                                   |                                                                                                                                                                                   
|U.S. Holder                        | A holder of common shares
        of the Company resident in the United States of America                                                                                         
|                                   |                                                                                                                                                                                   
|U.S. Taxpayer                      | An individual who is a citizen
        or resident of the United States of America or a domestic corporation
        in the United States                                         
|                                   |                                                                                                                                                                                   
|Underlying Option                  | The option and royalty agreement
        dated March 22, 2004, made between AHL and Golden                                                                                        
|                                   |                                                                                                                                                                                   
|Agreement                          | Arc                                                                                                                                                                               
|                                   |                                                                                                                                                                                   
|Veining                            | A fracture filled with a mineral
        usually of economic value                                                                                                                
|                                   |                                                                                                                                                                                   
|VLF-EM survey                      | Very low frequency electromagnetic
        survey                                                                                                                                 
|                                   |                                                                                                                                                                                   
|Winnemucca Mountain
      Property | A property consisting of 266
        mining claims located in Humboldt County, Nevada                                                                                             
|                                   |                                                                                                                                                                                   
|Winnemucca Option                  | The option granted to the
        Company with respect to the Winnemucca Mountain Property under the Winnemucca
        Option and Royalty Agreement                              

- 7 -

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|Term                                                    | Definition                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Winnemucca Option
        and Royalty
        Agreement | The agreement dated December
        3, 2004 made among the Company, Golden and AHL, as amended on January
        7, 2005, February 25, 2005, April 21, 2005, January 26, 2006, April 27,
        2006, June 16, 2006 and as amended and restated on July 7, 2006 and April
        11, 2007 pursuant to which the Company was granted an option to acquire
        a 100% interest in the Winnemucca Mountain Property subject to 2% NSR
        royalty
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Zimtu                                                   | International Zimtu Technologies
        Inc., a related public company                                                                                                                                                                                                                                                                                                                                                                                   
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Zn                                                      | Zinc                                                                                                                                                                                                                                                                                                                                                                                                                                                      

- 8 -

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CAUTIONARY NOTE TO U.S. INVESTORSCONCERNING ESTIMATES OF
INFERRED RESOURCES

This Annual Report uses the term inferred resources. We
advise U.S. investors that while this term is recognized and required by
Canadian regulations, the SEC does not recognize it. Inferred resources have a
great amount of uncertainty as to their economic and legal feasibility. It
cannot be assumed that all or any part of an inferred resource will ever be
upgraded to a higher category. Under Canadian rules, estimates of inferred
resources may not form the basis of feasibility or pre-feasibility studies,
except in rare cases. U.S. investors are cautioned not to assume that part or
all of an inferred resource exists, or is economically or legally
mineable.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains forward-looking statements within
the meaning of federal securities laws. You can identify these statements by
forward-looking words such an anticipate, believe, could, estimate,
expect, intend, may, plan, potential, should, will, and would or
similar words. Forward-looking statements are not guarantees of future
performance and involve substantial risks and uncertainties. You should read
statements that contain these words carefully because they discuss our future
expectations, contain projections of our future results of operations or of our
financial position, or state other forward-looking information. We believe that
it is important to communicate our future expectations to our shareholders.
However, there may be events in the future that we are not able to predict
accurately or control. Therefore, these statements should not be regarded as a
representation by us that any of our objectives or plans will be achieved or
that any of our operating expectations will be realized. Our revenues and
results of operations are difficult to forecast and could differ materially from
those projected in the forward-looking statements contained in this Annual
Report.

The factors listed below in the section captioned Risk
Factors, as well as any cautionary language in this Annual Report, provide
examples of risks, uncertainties, and events that may cause our actual results
to differ materially from the expectations we describe in our forward-looking
statements. You should be aware that the occurrence of the events described in
these risk factors and elsewhere in this Annual Report could have a material
adverse effect on our business, results of operations and financial position. We
undertake no obligation to release publicly the results of any future revisions
we may make to forward-looking statements to reflect events after the date
hereof, or to reflect the occurrence of unanticipated events.

__________________________________

Unless the context otherwise requires in this Annual Report,
all references to Evolving Gold, the Company, we, us, and our refer to
Evolving Gold Corp. and its subsidiaries. All dollar amounts set forth in this
Annual Report are in Canadian dollars, except where otherwise indicated.

- 9 -

---

PART I

ITEM 1. Identity of Directors, Senior Management and
Advisors

Not Applicable.

ITEM 2. Offer Statistics and Expected Timetable.

Not Applicable.

ITEM 3. KEY INFORMATION.

3.A. Selected Financial Data

The following selected financial data is derived from the
audited financial statements of the Company for the last four fiscal years ended
March 31, 2007 and should be read together with the sections of this Annual
Report entitled, Information on the Company and Operating and Financial
Review and Prospects. The financial statements are presented in Canadian
dollars and have been prepared in accordance with generally accepted accounting
principles in Canada (CDN GAAP). Note 11 to the financial statements provides
a summary of the differences between Canadian GAAP and U.S. GAAP.

|Table No. 1                          |  
|------------------------------------ | -
|Selected Financial Data              |  
|(CDN$ in 000, except per share data) |  
|                                     |  
|                                     |  
|                                     |  
|CANADIAN GAAP                        |  
|Revenue                              |  
|Net Loss for the Year                | $
|Basic and Diluted Loss Per Share     | $
|Dividends Per Share                  |  
|Weighted Avg. Shares (000)           |  
|Period-end Shares (000)              |  
|                                     |  
|Working Capital                      | $
|Mineral Properties                   | $
|Long-Term Debt                       |  
|Capital Stock                        | $
|Shareholders Equity (Deficit)       | $
|Total Assets                         | $
|                                     |  
|US GAAP                              |  
|Net Loss                             | $
|Loss Per Share                       | $
|Mineral Properties                   |  
|Shareholders Equity                 | $
|Total Assets                         | $

|(1) | Cumulative Net Loss since incorporation through March 31,
      2007 under US GAAP was $3,078,908.                                       
|--- | -----------------------------------------------------------------------------------------------------------------------------------------
|(2) | Under US GAAP, options granted to non-employees as
      compensation for services provided are fair valued as an expense
      recorded.
|(3) | Under US GAAP, all costs related to exploration stage
      properties are expensed in the period incurred.                              

- 10 -

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Exchange Rates

The following tables set forth: (i) the average exchange rate
  for the financial period-end indicated and (ii) the high and low for each month
  during the previous six months, each based on the noon rate of exchange as reported
  by the Bank of Canada for conversion of Canadian dollars into U.S. dollars.

**Table No. 2
  Exchange Rates**

|March 31, 2007 | March 31, 2006 | March 31, 2005 | March 31, 2004
|-------------- | -------------- | -------------- | --------------
|0.8674         | 0.8376         | 0.7818         | 0.7631        

|     | September 2007 | August 2007 | July 2007 | June 2007 | May 2007 | April 2007
|---- | -------------- | ----------- | --------- | --------- | -------- | ----------
|High | 1.0564         | 0.9525      | 0.9641    | 0.9452    | 0.9347   | 0.9036    
|Low  | 0.9931         | 0.9298      | 0.9358    | 0.9320    | 0.8981   | 0.8633    

On October 12, 2007, the rate of exchange for the U.S. dollar
was U.S.$1.00 = Cdn.$1.0268.

3.B. Capitalization and Indebtedness

Not Applicable.

3.C. Reasons For The Offer And Use Of Proceeds

Not Applicable

3.D. Risk Factors

Before making an investment decision, you should carefully
consider the risks and uncertainties described below as well as the other
information contained and incorporated by reference in this Annual Report. These
risks and uncertainties are not the only ones facing us. Additional risks and
uncertainties not presently known to us or that we currently consider immaterial
may also impair our business operations. If any of such risks actually occur,
our business, prospects, financial condition, cash flows and operating results
could be materially harmed.

Risks Related to the Company

Cumulative unsuccessful exploration efforts by Evolving Gold
personnel could result in the company having to cease operations.

The expenditures to be made by Evolving Gold in the exploration
of its properties as described herein may not result in discoveries of
mineralized material in commercial quantities. Most exploration projects do not
result in the discovery of commercially mineable ore deposits and this
occurrence could ultimately result in Evolving Gold having to cease
operations.

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Evolving Gold has no reserves on the properties in which it
has an interest and if reserves are not defined the company would have to cease
operations.

The properties in which Evolving Gold has an interest or the
concessions in which Evolving Gold has the right to earn an interest are in the
exploratory stage only and are without a known body of ore. If Evolving Gold
does not ultimately find a body of ore, it would have to cease operations.

Evolving Gold has minimal positive cash flow and no recent
history of significant earnings and is dependent upon public and private
distributions of equity to obtain capital in order to sustain operations. Public
distributions of capital result in dilution to existing shareholders.

None of the Companys properties have advanced to the
commercial production stage and the Company has no history of earnings or
positive cash flow from operations. The cumulative net loss since the Companys
inception under U.S. GAAP is $3,078,908. The Company does not know if it will
ever generate material revenue from mining operations or if it will ever achieve
self-sustaining commercial mining operations. Historically, the only source of
funds available to the Company has been through the sale of its common shares.
Any future additional equity financing would cause dilution to current
stockholders. Management has no current plans to enter into any debt obligations
and plans to meet all capital requirements through the issuance of the Companys
capital stock.

Evolving Gold currently has 2,750,000 share purchase options
outstanding and 27,385,675 share purchase warrants outstanding. If all of the
share purchase options and share purchase warrants were exercised, the number of
common shares issued and outstanding would increase from 42,867,311 to
73,003,986 .

The risks associated with penny stock classification could
affect the marketability of the common stock of Evolving Gold and shareholders
could find it difficult to sell their stock.

The Companys stock is subject to penny stock rules as
defined in 1934 Securities and Exchange Act rule 3a51-1. The Commission has
adopted rules that regulate broker-dealer practices in connection with
transactions in penny stocks. The Companys common shares are subject to these
penny stock rules. Transaction costs associated with purchases and sales of
penny stocks are likely to be higher than those for other securities. Penny
stocks generally are equity securities with a price of less than U.S. $5.00
(other than securities registered on certain national securities exchanges or
quoted on the NASDAQ system, provided that current price and volume information
with respect to transactions in such securities is provided by the exchange or
system).

The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document that provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customers account. The bid and
offer quotations, and the broker-dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before or
with the customers confirmation.

In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from such rules; the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchasers written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the
Companys common shares in the United States and shareholders may find it more
difficult to sell their shares.

Evolving Gold is dependent on key personnel and the absence
of any of these individuals could result in the Company having to cease
operations.

While engaged in the business of exploiting mineral properties,
the nature of Evolving Golds business, its ability to continue its exploration
of potential exploration projects, and to build a competitive edge in the
marketplace,

- 12 -

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depends, in large part, on its ability to attract and maintain
qualified key management personnel. Competition for such personnel is intense
and the Company may not be able to attract and retain such personnel. Evolving
Golds growth will depend, on the efforts of its Senior Management, particularly
its President, Dr. Lawrence Dick; and its Chief Executive Officer, Robert Bick.
We do not carry key person insurance on senior management and other
personnel.

Evolving Golds directors may have a conflict of interest
with the company as such directors or senior management also serve on boards of
companies in the same industry as the Company.

Directors of the Company also serve as directors of other
similar companies involved in natural resource development. Accordingly, it may
occur that properties will be offered to both the Company and such other
companies. Furthermore, those other companies may participate in the same
properties as those in which the Company has an interest. As a result, there may
be situations which involve a conflict of interest. In that event, the directors
would not be entitled to vote at meetings of directors which evoke any such
conflict. The directors will attempt to avoid dealing with such other companies
in situations where conflicts might arise and will at all times use their best
efforts to act in the best interests of the Company. If the directors fail to do
so, however, there could be material adverse consequences to the Company, its
business and results of operations.

Dilution through employee/director/consultant options could
adversely affect Evolving Golds stockholders.

Because the success of Evolving Gold is highly dependent upon
its respective employees, the Company has granted to some or all of its key
employees, Directors and consultants options to purchase common shares as
non-cash incentives. To the extent that significant numbers of such options may
be granted and exercised, the interests of the other stockholders of the Company
may be diluted. There are currently 2,750,000 share purchase options
outstanding, which, if exercised, would result in an additional 2,750,000 common
shares being issued and outstanding. (For a breakdown of dilution, refer to the
risk factor entitled: Evolving Gold Has Minimal Positive Cash Flow and No
Recent History of Significant Earnings and Is Dependent upon Public and Private
Distributions of Equity to Obtain Capital in Order to Sustain Operations. Public
distributions of capital result in dilution to existing shareholders)

U.S. Investors may not be able to enforce their civil
liabilities against us or our directors, controlling persons and
officers.

It may be difficult to bring and enforce suits against Evolving
Gold. The Company is a corporation incorporated in Canada under the CBCA. A
majority of the Companys directors must be residents of Canada, and all or
substantial portions of their assets are located outside of the United States,
predominately in Canada. As a result, it may be difficult for U.S. holders of
our common shares to affect service of process on these persons within the
United States or to realize in the United States upon judgments rendered against
them. In addition, a shareholder should not assume that the courts of Canada (i)
would enforce judgments of U.S. courts obtained in actions against us or such
persons predicated upon the civil liability provisions of the U.S. federal
securities laws or other laws of the United States, or (ii) would enforce, in
original actions, liabilities against us or such persons predicated upon the
U.S. federal securities laws or other laws of the United States.

However, U.S. laws would generally be enforced by a Canadian
court provided that those laws are not contrary to Canadian public policy, are
not foreign penal laws or laws that deal with taxation or the taking of property
by a foreign government and provided that they are in compliance with applicable
Canadian legislation regarding the limitation of actions. Also, a Canadian court
would generally recognize a judgment obtained in a U.S. Court except, for
example:

a) where the U.S. court where the
judgment was rendered had no jurisdiction according to applicable Canadian
law;

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b) the judgment was subject to ordinary
remedy (appeal, judicial review and any other judicial proceeding which renders
the judgment not final, conclusive or enforceable under the laws of the
applicable state) or not final, conclusive or enforceable under the laws of the
applicable state;

c) the judgment was obtained by fraud
or in any manner contrary to natural justice or rendered in contravention of
fundamental principles of procedure;

d) a dispute between the same parties,
based on the same subject matter has given rise to a judgment rendered in a
Canadian court or has been decided in a third country and the judgment meets the
necessary conditions for recognition in a Canadian court;

e) the outcome of the judgment of the
U.S. court was inconsistent with Canadian public policy;

f) the judgment enforces obligations
arising from foreign penal laws or laws that deal with taxation or the taking of
property by a foreign government; or

g) there has not been compliance with
applicable Canadian law dealing with the limitation of actions.

As a foreign private issuer, Evolving Gold is exempt from
the Section 14 proxy rules and Section 16 of the 1934 Securities Act may result
in shareholders having less complete and timely data.

The submission of proxy and annual meeting of shareholder
information (prepared to Canadian standards) on Form 6-K may result in
shareholders having less complete and timely data. The exemption from Section 16
rules regarding sales of common shares by insiders may result in shareholders
having less data. This data includes:

1. Insider trading data disclosed on
Canadian regulatory websites is different.

2. U.S. companies have specified
content and filing requirements regarding disclosures to shareholders for the
annual meeting and Canadian regulations specify a modestly different
content.

3. Canadian interim financial
statements are not necessarily prepared according to U.S. GAAP.

4. The filing deadlines for foreign
private issuers are different than for U.S. issuers.

Evolving Golds possible foreign investment company status
has consequences for U.S. Investors.

Potential investors who are U.S. taxpayers should be aware that
the Company could be considered a passive foreign investment company
(PFIC) for U.S. tax purposes for the fiscal year ended March 31, 2007.
If the Company is a PFIC for any year during a U.S. taxpayers holding period,
then such U.S. taxpayer generally will be required to treat any so-called
excess distribution received on its common shares, or any gain realized upon a
disposition of common shares, as ordinary income and to pay an interest charge
on a portion of such distribution or gain, unless the taxpayer makes a qualified
electing fund (QEF) election or a mark-to-market election with respect
to the shares of the Company. In certain circumstances, the sum of the tax and
the interest charge may exceed the amount of the excess distribution received,
or the amount of proceeds of disposition realized, by the taxpayer. A U.S.
taxpayer who makes a QEF election generally must report on a current basis its
share of the Companys net capital gain and ordinary earnings for any year in
which the Company is a PFIC, whether or not the Company distributes any amounts
to its shareholders. A U.S. taxpayer who makes the mark-to-market election
generally must include as ordinary income each year the excess of the fair
market value of the common shares over the taxpayers tax basis therein. See
also Item 10E United States Tax Consequences.

Risks Related to the Industry

Operating hazards and risks associated with the mining
industry could result in Evolving Gold having to cease operations.

Resource exploration activities generally involve a high degree
of risk. Hazards such as unusual or unexpected formations and other conditions
are involved. Operations in which the Company has a direct or indirect interest
will

- 14 -

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be subject to all the hazards and risks normally incidental to
exploration for precious and base metals, any of which could result in work
stoppages, damage to or destruction of exploration facilities, damage to life
and property, environmental damage and legal liability for any or all damage.
Evolving Gold may become subject to liability for cave-ins and other hazards for
which it cannot insure or against which it may elect not to insure where premium
costs are disproportionate to the Companys perception of the relevant risks.
The payment of such insurance premiums and of such liabilities would reduce the
funds available for exploration activities and could force Evolving Gold to
cease operations.

The amount of capital necessary to meet all environmental
regulations associated with the exploration programs of the Company could be in
an amount great enough to force Evolving Gold to cease operations.

The current and anticipated future operations of the Company,
including further exploration activities require permits from various Federal
and Provincial governmental authorities in Canada and the United States.
(Evolving Gold has the required permissions to enable it to engage in
exploration work consisting of rock sampling and geophysical mapping.) Such
operations are subject to various laws governing land use, the protection of the
environment, production, exports, taxes, labour standards, occupational health,
waste disposal, toxic substances, mine safety and other matters. Unfavourable
amendments to current laws, regulations and permits governing operations and
activities of resource exploration companies, or more stringent implementation
thereof, could have a materially adverse impact on the Company and cause
increases in capital expenditures which could result in a cessation of
operations by the Company.

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

Large increases in capital expenditures resulting from any of
the above factors could force Evolving Gold to cease operations.

Mineral prices may not support corporate profit for Evolving
Gold.

The resource exploration industry is intensely competitive and
even if commercial quantities of mineral resources are found (which is not
guaranteed), a profitable market may not exist for the sale. If a profitable
market does not exist, Evolving Gold may have to cease operations.

ITEM 4. INFORMATION ON THE COMPANY

4.A. History of the Company

General

The Company was incorporated under the CBCA on June 19, 2003 as
6109527 Canada Ltd. On September 30, 2003, the Company changed its name to
Evolving Gold Corp. The Companys registered office is located at 1500  1055
West Georgia Street, PO Box 11117, Vancouver, British Columbia, Canada, V6E 4N7.
The Companys principal place of business is located at 725 - 666 Burrard
Street, Vancouver, British Columbia, V6C 2X8, its telephone number is (604)
685-6375 and its facsimile number is (604) 669-2960. The Companys website
address is www.evolvinggold.com and its e-mail
address is info@evolvinggold.com. The Company
became a reporting issuer in the Provinces of Alberta, British Columbia and
Ontario on May 14, 2004. On June 14, 2004, the Company officially began trading
on the Canadian Trading and Quotation System Inc. (the CNQ) under stock symbol
GOLD. On July 28, 2005, the Company began trading on the NASD.OTCBB exchange
in the United States under the stock symbol EVOGF. During the 2007 fiscal year
the Company applied to list its shares on the Canadian TSX Venture Exchange and
effective June 13, 2007 began trading on this exchange under the symbol EVG.
The

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Company continues to be listed for trading on the OTCBB
exchange and ceased to be listed for trading on the CNQ exchange. Effective
August 13, 2007 the Company was also listed on the Frankfurt Stock Exchange
under the symbol EV7.

Evolving Gold Corp. is a Canadian-based precious mineral
exploration company engaged in the acquisition and exploration of natural
resource properties. Currently its focus is on projects in Southwestern United
States, particularly Nevada with an additional property located in New Mexico,
United States of America. The Company continues to emphasize the exploration of
properties where management believes there is potential for the discovery of
high grade deposits.

Even if the Company completes its exploration programs on its
properties and is successful in identifying mineral deposits, a substantial
amount of capital over the next 3 years, will still have to be spent on each
deposit on further drilling and engineering studies before management will know
that the Company has a commercially viable mineral deposit on each of the
properties. No assurance can be provided that commercially viable mineral
deposits will be located on any of the Companys properties.

Past Property Interests

Murray Property

On July 22, 2003, the Company entered into the Murray Property
Option Agreement with International Zimtu Technologies Inc., pursuant to which
the Company was granted an option to acquire a 70% undivided interest in the
Murray property. At the date of the Murray Property Option Agreement the Company
was a wholly owned subsidiary of Zimtu which currently now owns less than 3% of
the outstanding shares of the Company. The property consists of one mineral
claim totaling 2,965 acres and is located 78 kilometres northeast of
Yellowknife, Northwest Territories.

The Company terminated its option on the Murray Property in
2007.

Voisey Bay Labrador Property

On May 4, 2005 the Company entered into an option agreement
with Geocore Exploration Inc. whereby they had the right to earn up to an 80%
interest in two blocks, comprising 192 claims, in Geocores Voiseys Bay area
property located in Labrador. A first option for the purchase of a 60% interest
was purchased for cash of $ 35,000 and the obligation to incur $ 200,000 in
exploration expenditures by October 31, 2006 with cumulative exploration costs
of $ 500,000 incurred by October 31, 2007. During the 2007 fiscal year the
Company terminated this option agreement and accordingly wrote-off $80,170 in
expenditures related to this property.

Current Property Interests

Winnemucca Property

Pursuant to an option agreement dated December 3, 2004 and
amended January 7, 2005, February 25, 2005, April 21, 2005, January 26, 2006,
April 27, 2006, June 16, 2006 and July 7, 2006, with Golden Sands Exploration
Inc. and its subsidiary company AHL Holdings Ltd., the company was granted the
right to acquire a 100% interest in unpatented mining claims, located in
Humboldt County, Nevada. In addition the Company has staked additional
unpatented mining claims.

Pursuant to an earn-in agreement between the Company and
Meridian Gold Inc. (subsequently assigned to Meridian Minerals Corp. dated July
31, 2006, the Company agreed to grant Meridian an earn-in to acquire, directly
or indirectly, an undivided 70% interest in Evolvings option to purchase 100%
of the right, title and interest in the Winnemucca Claims.

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Malone Property

On April 17, 2006 the Company entered into a quitclaim deed and
royalty agreement with Newmont North America Exploration Limited whereby the
Company was granted all rights, title, estate and interest in unpatented mineral
claims located in Lordsburg, New Mexico, United States of America in exchange
for payment of US$ 10,000 (paid) and an additional US$ 10,000 payable in one
year (paid subsequent to March 31, 2007). The agreement is subject to a royalty
of 2% of net smelter returns.

Siesta Property

The Company has acquired, by staking, 638 claims covering 4,400
hectares on the west flank of the Slumbering Hills in Humboldt County.

Alpha Butte Property

The Company has acquired, by staking, 279 claims covering 2,200
hectares.

Fisher Canyon Property

The Company has acquired, by staking,179 unpatented lode mining
claims covering 1,100 hectares.

Battle Mountain Property

The Company has acquired, by staking, approximately 1,959
claims (38,000 acres) of open land north of the town of Battle Mountain,
Nevada.

Rattlesnake Hills Property

The Company has entered into a letter of intent with Golden
Predator Mines (US) Inc. for the acquisition of Golden Predators mining options
on a 100% undivided interest in the Rattlesnake Hills Property, located in
Natrona County, Wyoming.

For more information on the Companys current properties of
interest, please refer to Item 4.B. Business Overview and Item 4.D. Property,
Plants and Equipment below.

Capital Expenditures

During the year ended March 31, 2007, the Company paid
US$10,000 for advance royalty payments with respect to the Winnemucca property
option and US$10,000 in compliance with the terms of the Malone property quit
claim deed and royalty agreement. Evolving also issued common shares with an
imputed value of $184,000 with respect to the Winnemucca property option,
incurred $767,588 in deferred exploration expenses relating to its various
property options and paid legal costs of $83,939 which were recorded as part of
resource property acquisition cost. Reclamation deposits of $18,982 and office
furnishings and equipment totaling $23,106 were also acquired during the
year.

During the year ended March 31, 2006, the Company paid $35,000
in compliance with the terms of the Voisey Bay property option. Evolving also
issued common shares with an imputed value of $244,000 and paid cash of US$
50,000 on account of the Winnemucca property option as well as paying US$10,000
for advance royalty payments payable pursuant to the terms of this option
agreement. The Company also incurred $173,466 in geological consulting, staking
and recording and field expenses related to its various property options and
paid legal costs of $39,596 which were recorded as part of the resource property
acquisition cost.

During the year ended March 31, 2005, the Company purchased the
Winnemucca property option for $133,046 and spent $48,477 on deferred
exploration costs relating to a review of the geological data and additional
staking and

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recording costs for additional claims. They also incurred
$7,617 of deferred exploration costs with respect to extending the claim
deadline date and preparation for a site visit with respect to the Murray
property.

Material Effects of Government
Regulations

The current and anticipated future operations of the Company,
including further exploration activities, require permits from various Canadian
Federal and Provincial governmental authorities. Such operations are subject to
various laws governing land use, the protection of the environment, production,
exports, taxes, labour standards, occupational health, waste disposal, toxic
substances, well safety and other matters. Unfavourable amendments to current
laws, regulations and permits governing operations and activities of resource
exploration companies, or more stringent implementation thereof, could have a
materially adverse impact on the Company and cause increases in capital
expenditures which could result in a cessation of operations by the Company. The
Company has had no material costs related to compliance and/or permits in recent
years, and anticipates no material costs in the next year.

4.B. Business Overview

The Companys principal business since its incorporation has
been the acquisition and exploration of natural resource properties with the
goal of placing into production any properties warranting such. Currently its
focus is on projects in Southwestern United States, particularly Nevada with an
additional property located in New Mexico, United States of America. The Company
continues to emphasize the development of properties where management believes
there is potential for the discovery of high grade deposits (Figure 1). The
Malone property in New Mexico is considered to be at an early stage of
exploration. The Winnemucca Mountain property in Nevada is at the intermediate
stage of exploration. Six additional Nevada properties have recently been
acquired, by staking, along known, gold-mineralized trends and the Company has
recently signed a letter of intent with respect to acquiring a property option
in Wyoming, United States. The Company has had no revenue since inception.

Figure 1: Properties Location Map



Winnemucca Property

Effective December 3, 2004 and subsequently amended January 7,
2005, February 25, 2005, April 21, 2005, January 26, 2006, April 27, 2006, June
16, 2006, July 7, 2006 and April 11, 2007 the Company entered into an option
agreement with Golden Sands Exploration Inc. and its subsidiary company AHL
Holdings Ltd. to acquire unpatented mineral claims in Humboldt County, Nevada.
Subsequent to this acquisition the Company also staked additional

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adjoining unpatented mining claims. The property, which has
excellent road access, encompasses 560 hectares in Humboldt Countys high desert
region, home of the Battle Mountain Mining District and the Carlin Trend. In
order to earn its interest, the Company must spend US$4,000,000 on exploration
prior to December 31, 2008 including at least US$ 200,000 on Golden Arc claims
by December 31, 2006. As of December 31, 2006, the Company spent US $500,000 on
exploration on this project, however, only approximately US $151,000 of this US
$500,000 is attributable to the Golden Arc claims specifically. The Company is
presently negotiating an extension with respect to the Golden Arc commitments.
In addition the Company must pay US$90,000 to the vendors (US$50,000 has now
been paid in cash and US$40,000 has been paid by the issue of shares for debt)
and issue 1,800,000 shares of Evolving to the vendor at various times on or
before December 31, 2007 (1,300,000 shares have now been issued). The Company
must also prepare, pay for and deliver a pre-feasibility study by June 30, 2009.
The property is subject to a 2% net smelter royalty. The NSR is divided between
two parties as to the respective mineral claims held by each party. With respect
to the Golden Arc unpatented mineral claims, the Company may purchase the NSR
for US $1,000,000 per 1% or an aggregate of US $2,000,000. No agreement exists
for such purchase of NSR on the remaining mineral claims. The property is also
subject to advance royalty payments of US$20,000 (paid), and US$20,000 due by
December 3, 2007. On each successive December 3rd advance royalty payments of
US$20,000 per year will continue until production from the claims commences and
continues uninterrupted for twelve consecutive months. These advance royalty
payments will be deducted from the NSR payments otherwise needed. A finders fee
of 100,000 shares was also paid by the Company in connection with this property
transaction

On April 10, 2007, the Company paid US$10,000 to extend certain
terms of the agreement. The parties are currently negotiating further amendments
to the agreements.

Earn In Agreement with Meridian Gold Inc. -In
September, 2005 the Company signed a letter of intent with Meridian Gold Inc.
regarding an option by Meridian Gold Inc. to acquire, directly or indirectly, an
undivided 70% interest in 100% of Evolvings Winnemucca property option. An
earn-in agreement was subsequently signed on July 31, 2006 to formalize this
arrangement under which Meridian Gold Inc. has assigned their interest to
Meridian Minerals Corp. (Meridian). Under the terms of the agreement,
Meridian can earn a 70% interest in the property by making a total contribution
of US$500,000 in staged cash payments to Evolving by December 31, 2008 (US$
160,000 has been received to date), investing a minimum of US$500,000 in
exploration expenditures before December 31, 2006 (CDN$412,019 has been paid to
March 31, 2007) and incurring total exploration expenditures of US$4,000,000 by
December 31, 2008. The Company is currently in the process of extending the
exploration expenditure deadline due to unforeseen drilling program delays. In
addition Meridian must deliver a pre-feasibility report on the property before
June 30, 2009. Upon completion of the required payments and expenditures, the
Company intends to establish a joint venture with Meridian with respect to the
claims on the property.

Technical Report -In February 2007 a NI 43-101
technical geological report prepared by Chris Osterman, P. Geol. as the
qualified person and dated as at October 29, 2006 on the Winnemucca Mountain
property was filed on SEDAR.

Malone Property

On April 17, 2006 the Company entered into a quitclaim deed and
royalty agreement with Newmont North America Exploration Limited whereby the
Company was granted all rights, title, estate and interest in unpatented mineral
claims located in Lordsburg, New Mexico, United States of America in exchange
for payment of US$20,000 (paid). The agreement is subject to a royalty of 2% of
net smelter returns. The Company has incurred deferred exploration costs of
$191,253 on this property during the year ended March 31, 2007 which includes
$93,955 for geophysical and geological studies, $64,324 for geological
consulting, $13,192 for permits, licenses and fees and $19,782 for field and
other expenses.

Technical Report -A technical geological NI 43-101
report dated February 20, 2007 on the Malone property was filed on SEDAR in
March 2007. The report was prepared by Gerald E. Ray, Ph.D. as the qualified
person and dated as at February 20, 2007 and later amended as at May 23, 2007
and filed on SEDAR on June 1, 2007.

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***SiestaProperty***

The Companys interest in the Siesta group is comprised of 638
claims situated in the Slumbering Hills area of Humboldt County. The Company
intends to conduct a systematic geophysical survey of this claim group, and is
planning a concurrent geochemical survey with the objective of defining drill
targets by the fall of 2007.

Fisher Canyon Property

Evolving Golds interest in the Fisher Canyon property consists
of 179 unpatented lode mining claims staked by Evolving Gold covering
approximately 1,100 hectares. The Company plans to conduct geochemical and
geophysical surveys on the property.

Alpha Butte Property

The Companys interest in Alpha Butte consists of 279 staked
claims covering 2,200 hectares. The Company intends to perform surface mapping
and sampling also with the objective of defining drill targets over the next
several months.

Battle Mountain Property

The Company acquired by staking, approximately 38,000 acres of
open land near the town of Battle Mountain, Nevada. Evolving Gold is developing
a drill program to determine where cover is indeed acceptably thin and to
determine the location of favorable host rocks.

4.C. Organizational Structure

The Company has one active wholly-owned subsidiary, Evolving
Gold Corp., incorporated pursuant to the laws of the State of Nevada.

4.D. Property, Plant and Equipment

Office Space

The Company subleases its office space pursuant to the terms of
a written lease agreement at 725  666 Burrard Street, Vancouver, British
Columbia, Canada V6C 2X8. The lease expires in April 30, 2012 and calls for
monthly payments of $4,394 plus an applicable portion of operating costs

The Winnemucca Mountain Property

The Winnemucca Mountain Property is without known reserves and
the work being done by the Company is exploratory in nature. The Companys
interest in the Winnemucca Mountain Property also stems from previous
exploration work described below.

Acquisition of Interest

On December 3, 2004, the Company entered into the Winnemucca
Option and Royalty Agreement pursuant to which the Company was granted the
Winnemucca Option to acquire a 100% interest in 62 unpatented mining claims
(subsequently increased to 266 unpatented mining claims as discussed further
below) located in Humboldt County, Nevada. In order to exercise the Winnemucca
Option, the Company must incur exploration expenditures of US$4,000,000, make
aggregate cash payments to Golden Sands of US$80,000 (paid) and issue and
deliver 1,800,000 shares (1,300,000 have been issued) in the capital of the
Company as follows:

|(a) | Cash Payments
|--- | -------------
|    |              
|    |              
|    |              

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|(b) | Share Issuances         
|--- | ------------------------
|    |                         
|    |                         
|    |                         
|    |                         
|    |                         
|    |                         
|(c) | Exploration Expenditures
|    |                         
|    |                         
|    |                         

A finders fee of 100,000 common shares in the capital of the
Company was issued in connection with the acquisition of the Winnemucca Mountain
Property in December 2004.

Under the Winnemucca Option and Royalty Agreement, any
unpatented or patented mining claims located within three miles of the subject
claims acquired or located would, at the option of the other parties, form part
of the subject claims. Since entering into the Winnemucca Option and Royalty
Agreement, 204 additional claims have been staked by AHL and the Company with
the result that there are now 266 unpatented subject claims in total.

The Winnemucca Mountain Property is subject to a 2% NSR
royalty. The Company has the right to purchase the royalty relating to the
Golden Arc Claims listed in the table below and any other unpatented mining
claims which may become subject to the option and royalty agreement between AHL
and Golden Arc for US$1,000,000 for each of the two percentage royalty points.
The Company is required to pay, in addition to the mentioned option payments,
advance royalty payments of US$10,000 by March 16, 2006 (paid), US$10,000 by
December 3, 2006 (paid), the second anniversary of the Winnemucca Option and
Royalty Agreement and US$20,000 by December 3, 2007, the third anniversary of
the Winnemucca Option and Royalty Agreement and each successive anniversary
until production commences at which time the obligation to pay advance royalty
payments will terminate. The total of the advance royalty payments is to be
deducted from the total amount of NSR royalty payable under the Winnemucca
Option and Royalty Agreement. The Company is also required to pay various costs
relating to the amending of the option agreement as well as for a
pre-feasibility study which is to be delivered to Golden Arc by June 30,
2009.

In September, 2005 the Company signed a letter of intent with
Meridian Gold Inc. regarding an option by Meridian Gold Inc. to acquire,
directly or indirectly, an undivided 70% interest in 100% of Evolvings
Winnemucca property option. An earn-in agreement was subsequently signed on July
31, 2006 to formalize this arrangement under which Meridian Gold Inc. has
assigned their interest to Meridian Minerals Corp. Under the terms of the
agreement, Meridian can earn a 70% interest in the property by making a total
contribution of US$500,000 in staged cash payments to Evolving by December 31,
2008 (US$ 160,000 has been received to date), investing a minimum of US$500,000
in exploration expenditures before December 31, 2006 (CDN$412,019 has been paid
to March 31, 2007) and incurring total exploration expenditures of US$4,000,000
by December 31, 2008. The Company is currently in the process of extending the
exploration expenditure deadline due to unforeseen drilling program delays.

Mineral Claims

The Winnemucca Mountain Property consists of 266 unsurveyed
contiguous mining claims covering approximately 2,115 hectares on Lands
administered by the Bureau of Land Management, US Department of the Interior. In
order to maintain the mineral claims comprising the Winnemucca Mountain Property
in good standing, the Company must pay to the BLM a maintenance fee of US$125
per mineral claim prior to September 1, 2008 and, in each successive year, the
Company must pay the County in which the mining claims are located (the Humboldt
County) a yearly fee

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prior to November 1 and file a form called a Notice of Intent
to Hold. If the Company fails to duly pay such fees and file such form, then
the mining claims will lapse and the Company will lose all interest that it has
in these mining claims.

Location, Accessibility, Climate, Local Resources,
Infrastructure and Physiography

The Winnemucca Mountain Property is located in north-western
Nevada, approximately 6 kilometres northwest of the municipality of Winnemucca.
The property is within the Winnemucca Mountain Mining District of Humboldt
County. The claims are situated on certain sections of the west flank of the
Winnemucca Mountain (Figure 2).

The Winnemucca Mountain Property is accessible from State Route
49, a graded gravel road from Winnemucca to Jungo. The claims that comprise the
Winnemucca Mountain Property lie in an irregular, northerly trending block along
the western flanks of Winnemucca Mountain. The mountain slopes are generally
moderate along the west side of the claims, steepening on the east and in
drainages. Pediment and alluvium cover is extensive, particularly in the
western, or lower, part of the property where a classic bajada is developed.
Within the claims, elevations range from approximately 1435 metres in the
southwest corner to nearly 2000 metres in the east. The area is devoid of trees,
and vegetation consists of sagebrush and sparse grass. The climate in southern
Humboldt County is arid with annual rainfall averaging 20 cm (8 inches;
Winnemucca Chamber of Commerce Website) and snowfall of 38 cm (16 inches; Nevada
Climate Summaries Website). The area is characterized by hot summers and short,
cold winters.

History and Previous Work

Gold and silver were first discovered in the Winnemucca Mining
District in 1863 and several smelters were constructed along the Humboldt River
during the 1860s. In late 1988, Santa Fe Pacific Mining, Inc. (now Newmont
Mining Corporation) (Santa Fe) entered into a joint venture with Arctic
Precious Metals Inc. with respect to the Winnemucca Mountain Property and became
operator. Previous exploration work performed by Santa Fe focused on the
pediment-covered Swordfish Zone. Between 1988 and 1990, Santa Fe conducted
geological mapping, rock sampling, trenching, CSAMT, induced polarization
geophysical surveys, collected 286 auger hole bedrock samples and completed a
total of 18,260 metres (52,470.8 feet) in 73 reverse circulation drill holes. In
1994, Anvil Resources Ltd. acquired the Winnemucca Mountain Property, became
project operator and performed internal compilation work, prepared a topographic
base map and collected surface samples to confirm previous gold tenors. An
induced polarization (IP) survey conducted in 1996 confirmed that resistivity
highs correlated well with known mineralized areas and delineated two new target
zones. There has been no record of exploration work since 1996.

Present Condition and Current State of
Exploration

The Winnemucca Mountain Property is undeveloped and does not
contain any open-pit or underground mines. There is no plant or equipment
located on the property. No reserves have been identified on the mineral claims
that comprise the Winnemucca Mountain Property.

Mineralization

The Winnemucca Mountain Property and surrounding area has had a
long history of mineral exploration. As a result, gold occurrences and targets
have been identified at several areas within the current property boundaries.
Types of gold-bearing occurrences identified to date on the Winnemucca Mountain
Property are: quartz stockworks in hornfelsed intrusive contact zones, quartz
veins, volcanic breccias, and quartz-calcite veins. The most intensively
explored sector of the property to date is called the Swordfish zone.

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Figure 2: Winnemucca Property Location Map



Gold mineralization at the Swordfish Zone occurs within a
northeast-trending, low sulfide, quartz-adularia vein-type and brecciated
system. Santa Fe completed 73 reverse circulation drill holes, nearly all of
which were focused on the Swordfish Zone. Near the end of Santa Fes tenure on
the Winnemucca Mountain Property, gold mineralization was found approximately
500 metres northeast of the Swordfish Zone, at what is now called the SF
Extension Zone. This intercept has never been followed up by further drilling,
and has been interpreted by the Company to indicate that the Swordfish Zone may
be much more extensive than previously indicated, and that higher gold grades
may occur in structurally-controlled zones northeast of Swordfish. The SF
Extension, and beyond to the northeast, is a high-priority drill target for the
Company.

In addition to the Swordfish and SF Extension areas, additional
exploration targets have been identified and are comprised of multiple
outcropping vein-style occurrences reported to carry anomalous gold values that
have yet to be explored in detail.

Planned Work Program by the Company

In February 2007 a NI 43-101 technical geological report
prepared by Chris Osterman, P. Geol. as the qualified person and dated as at
October 29, 2006 on the Winnemucca Mountain property was filed on SEDAR.

The Company and Meridian plan to focus future exploration on
the Swordfish Extension Zone within the Winnemucca Mountain vein system based on
their preliminary review of the database constructed from data generated from
previous exploration programs on the property. During the 2007 fiscal year
Meridian completed 12 reverse circulation drill holes with ten of the twelve
holes intersecting the epithermal vein system and it is expected that drilling
will be continued as drill rigs become available. Under the terms of the Earn-In
Agreement Meridian will manage the exploration at Winnemucca Mountain while they
complete their earn-in requirements. Field work will consist of surface
geological mapping, geochemical rock chip sampling, geophysical surveying of
newly-interpreted target trends and drilling of the higher priority targets. As
at June 30, 2007, the Company had incurred exploration costs of $619,109 on this
property comprised of $243,408 for drilling, $98,698 for geological consulting
and other database review work, $61,078 in permits and fees, $112,035 in staking
and recording costs and $103,888

- 23 -

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in assays and other field expenses. These costs were offset by
Meridians contribution pursuant to the earn-in agreement which totalled
$412,019 for the same period.

The Malone Property

On April 17, 2006 the Company entered into a quitclaim deed and
royalty agreement with Newmont North America Exploration Limited whereby the
Company was granted all rights, title, estate and interest in unpatented mineral
claims located in Lordsburg, New Mexico, United States of America in exchange
for payment of US$20,000 (paid). The agreement is subject to a royalty of 2% of
net smelter returns. The Company has incurred deferred exploration costs of
$191,253 on this property during the year ended March 31, 2007 which includes
$93,955 for geophysical and geological studies, $64,324 for geological
consulting, $13,192 for permits, licenses and fees and $19,782 for field and
other expenses.

Mineral Claims and Location

The Malone property in south-west New Mexico (Figure 3) is
wholly owned by the Companys subsidiary. It consists of 80 MAL claims that were
staked in the February 2005 (Figure 4). The claims cover a partial rectangular
area that is approximately 4 km long north to south and 1.7 km wide east to
west.

The property lies in Grant County of New Mexico (Figure 3) in
Sections 17-20, and 29 and 30, in T20S and R16W. It is situated approximately 17
miles northeast of Lordsburg township, New Mexico, and is easily accessible from
State Highway No. 90 which connects Lordsburg and Silver City. At UTM
731915-3597835, approximately 17 miles from Lordsburg, access is made by turning
north-north-west onto the Mill Canyon Road (dirt road No. 859). A drive of
approximately 3 miles reaches the southern claim boundary.

Figure 3: Location of the Malone claim block in SW New
Mexico



- 24 -

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Access, Climate, and Infrastructure

The district surrounding the Malone property has a basin and
range topography characterized by wide, flat, alluvial-covered semi-desert
plains that alternate with elongate stretches of rocky hills and escarpments.
The semi-desert vegetation is sparse, and there is no difficulty for foot
access. Elevations on the claims range from 1,700 metres up to 2,000 metres. The
topography is dominated by the north to south trending Brock Ridge whose highest
point (Mill Hill) reaches 2,000 metres.

The claims lie in an arid, semi desert part of New Mexico that
has a low annual rainfall. The summers are hot and dry with temperatures
exceeding 25 degrees Celsius. Winters are also dry and temperatures can reach
down to freezing.

Figure 4: The Malone claims, SW New Mexico.



History and Previous Work

Early work at Malone may have taken place in the 1890s. There
are a number of prospect pits and adits in the southern part of the property,
all of which are inaccessible. One adit labeled the Paracutin lode suggests that
more recent work, possibly in the 1940s or 1950s may have taken place, but
there is no record of this work.

- 25 -

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Additionally, at least three drillhole collars were noted
during the Companys initial reconnaissance of the property. Results of that
drilling are not known.

In 2005, Newmont Gold Corporation staked the MAL 1-80 claims
with the concept that mineralization in the granite may be related to an alkali
gold system. Q. Hennigh and J.T Ray, Newmont geologists, collected 232 samples
which were analyzed for gold, silver, and trace elements.

Present Condition and Current State of
Exploration

During 2005, the Company undertook property-scale geological
mapping and geochemical sampling of the Malone property. Subsequently, Dr. G. E.
Ray was contracted to prepare an NI 43-101 compliant report, including a
recommended program for follow-up exploration.

Property Geology

Regionally, the Malone claims lie in a zone of northerly to
north-west trending Basin and Range structures that lie off the south-east flank
of the Colorado Plateau. Extensional faulting and rifting during Tertiary time
was accompanied by continental volcanism dominated by rhyolite tuffs and flows,
with lesser amounts of andesite.

The exposed geology on the property includes a package of
northerly striking and easterly dipping Tertiary age volcaniclastics and flows.
This package overlies a highly leucocratic Pre-Cambrian granitoid basement. The
nature of the volcanic-granite contact is uncertain, but the Dr. Ray believes it
represents a steep easterly dipping fault that was related to recurrent
down-dropping along the western margin of a graben structure.

The Tertiary rhyodacitic volcaniclastics outcrop extensively
along the north-north-west trending Brock Ridge escarpment but the older
granitoids are only seen in a relatively narrow belt at lower elevation
immediately west of the ridge. The Pre-Cambrian basement includes several
generations of intrusive granitic rocks that range from fine to extremely coarse
grained and pegmatitic. Many are cut by several sets of brittle planar
structures, some of which contain quartz-feldspar ± pyrite veins up to 2 metres
thick. Locally the hosting granitoids are extensively and pervasively
overprinted and bleached by clay-sericite ± silica ± pyrite alteration, as well
as being stained or coated by Fe and Mn oxides. Extensive zones of quartz vein
stockworks also cut the granites.

The following types of basement granitic rocks occur on the
claims:

Type 1: An early generation of coarse to very coarse
grained massive and quartz-rich leuco-granite that ranges from weakly to
strongly feldspar porphyritic.

Type 2: A fine to coarse grained quartz-rich
granite-microgranite that is commonly bleached and which tends to be less
feldspar porphyritic than the Type 1 rock. In many cases the Type 1 and 2
granites are separated by a fault which may contain gold-bearing quartz veins.

In addition, dikes of aplite, dacite-microgranite and K spar
rich pegmatite occur in the basement rocks on the claim. Structures on the
property are dominated by brittle faulting and block tilting, as evident from
the easterly dip of the younger Tertiary volcanics. No small scale folds were
noted and all the igneous rocks are unfoliated. The brittle faults are probably
related to the regional extension that accompanied the formation of the grabens
and half-grabens, as well as the extrusive volcanism. The claims are believed to
overlie the fault-zone boundary of one graben, and the 35 to 55 degree easterly
dip of the volcanics shows that most of the graben-related movement in this area
involved east-side down-dropping accompanied by easterly tilting.

Plotted rose diagrams of the planar structures show the
following:

| | (1) | The major brittle faults (up to 3 meters thick) are
      generally steep to sub-vertical (60 to 90 degrees). Several sets are
      present, the most common of which has an average strike azimuth of 115
      degrees
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

- 26 -

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| |     | (east-south-east to west-north-west). Less common sets
      strike east to west (azimuth 095 degrees) and north to
      north-north-east.                                                                                                                
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                            
| | (2) | Sets of thin, closely spaced hair-line fractures occur
      where the granitic rocks have undergone brittle shattering.                                                                                                                                   
| |     |                                                                                                                                                                                                                                                            
| | (3) | There are several sets of planar structures containing
      veins and dikes of either fine-grained granitic aplite or very coarse
      grained K-spar-rich pegmatites. One set strikes east-south-east, similar
      to an important set of major fault.

The nature of the volcanic-granite contact and the age of the
gold-silver mineralization are unknown. However, Dr. Ray believes that the
volcanic-granitic contact represents a graben-related fault zone that has
controlled the gold-bearing quartz veins. The following geological and
structural history is suggested:

| | (1) | Unconformable deposition of the Tertiary volcanics on a
      peneplaned granitic basement, possibly coeval with incipient development
      of graben structures.                                                                                                                                                                                                                     
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                        
| | (2) | Continued down-drop movement along a steeply east-dipping
      structure that formed the western margin of a graben; movement resulted in
      easterly tilting of the volcanics accompanied by fault- controlled
      mesothermal and epithermal mineralization that extended up into both the
      granites and younger volcanics.                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                        
| | (3) | Continued graben down-dropping east of the structure
      resulted in the mineralized granites to the west being juxtaposed against
      unaltered volcanics further east. Subsequent erosion has exposed the
      granite-hosted mesothermal mineralization, while east of the main
      structure the epithermal portion of the system may exist at depth in the
      volcanics.

If this model is correct it suggests the following:

| | (i)   | The main granite-volcanic structure(s) is steep
      east-dipping.                                                                                                                                                                                                                                                                        
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                            
| | (ii)  | The Malone gold-silver mineralization is not related to
      the granite intrusions but is instead controlled by splay and cross-faults
      related to an extensional graben structure. It may post-date the Tertiary
      volcanics, but is more likely to have been coeval with the
    volcanism.                                   
| |       |                                                                                                                                                                                                                                                                                                                                            
| | (iii) | The volcanic rocks east of the structure could host
      epithermal mineralization, although this may be too deep to be
      economically viable. However, other granite-hosted mineralized structures
      may be present in the alluvium-covered western part of the claims, and
      some exploration should be done over this area.

Mineralization

The Malone gold-silver mineralization is mainly hosted by
planar quartz veins and irregular quartz stockworks and stringer zones. In
addition, some of the wide areas of fracturing with silicification and
disseminated pyrite represent good bulk tonnage targets, although to date little
methodical work has been done.

Assay chemistry suggests the gold is free although nothing is
known about the size of the gold grains, or whether they are spatially
associated with mineral crystals such as pyrite or quartz. Positive gold-silver
correlations suggest some of the silver is held in the lattice of the gold
grains, and it is also possible that some electrum is present. It is not known
whether some gold is chemically locked in the lattices of pyrite or any other
sulfides, and some of the granite-bearing pyritic zones should be systematically
tested for precious metals. Generally the precious metals are not associated
with significant base metals. Sporadic trace chalcopyrite is reported, and
assays suggest the local presence of some sphalerite and galen.

- 27 -

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Previous sampling work done by a third party on the Malone
claims show maximum values of 17.7 ppm Au and 695 ppm Ag, indicating the
presence of high grade Bonanza-type mineralization. In addition, assays up to
1320 ppm Cu, 148 ppm As, 112 ppm Bi, 0.87 ppm Hg, 672 ppm Mo, 62 ppm Sb, 1.08%
Pb and 1.59% Zn were present. The silver:gold ratios for the 178 samples average
39.1. Binary plots show there is a good to moderate positive correlation between
Au:Ag, Au:As, Au:Pb, Au:Cu and Au:Sb. However, there appears to be no
significant correlation between Au:Hg, Au:Bi and Au:Zn.

Consulting geologist Dr. G.E. Ray, working on behalf of the
Company, collected 23 additional samples. This work included taking 13 chip
samples, each 8 feet in length, around the margins of an open pit located at UTM
732296-3604138. This pit exposes the structural contact between Type 1 and Type
2 granites, and the contact is occupied by one or more mineralized quartz veins
as well as some adjacent silica flooding and quartz stockworks. The assay
results from the open pit demonstrate that not only is the narrow zone of
fracturing and veining enriched in precious metals, but the stockwork-veined
Type 1 granite adjacent to the zone is enriched also with values up to 0.095
oz/t Au and 10 oz/t Ag. This indicates that other stockwork zones on the
property should be tested for their bulk tonnage potential.

Planned Work Program by the Company

A technical geological NI 43-101 report dated February 20, 2007
on the Malone property was filed on SEDAR in March 2007. The report was prepared
by Gerald E. Ray, Ph.D. as the qualified person and dated as at February 20,
2007 and later amended as at May 23, 2007 and filed on SEDAR on June 1,
2007.

At the Malone property, consultant Dr. G.E.Ray has outlined a
success-contingent exploration program which the Company intends to carry out.
Dr. Rays conclusions are that at Malone, Pre-Cambrian granitic rocks host
Au-Ag-bearing mesothermal and possibly deep-level epithermal quartz veins,
stockworks and stringer zones. Assays from over 200 samples indicate the
presence of some high grade Bonanza-type precious metal mineralization, as well
as the possibility of bulk tonnage targets in the stockwork zones. The Au-Ag
mineralization is generally not associated with very high quantities of base
metals or other pathfinder elements such as Bi, As, Sb or Hg. The granite-hosted
quartz veins, which reach up to 2 meters in width, are probably controlled by a
steep easterly dipping structural zone related to Tertiary-age extensional
movements related to graben down-dropping. Many of the larger veins
preferentially occur along the structural contact between two different
generations of granite (Type 1 and Type 2). Mapping the distribution of these
two granite types may be useful in the discovery of more veins and stockwork
zones.

Dr. Ray recommended further exploration for the following
reasons:

| | (i)   | There has been widespread past near surface small-scale
      mining via shallow pits and short tunnels/adits although little is known
      about this work.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                              
| | (ii)  | Recent grab and chip sampling indicates the local
      presence of high Au and Ag values in the quartz veins and in some quartz
      stockwork zones.      
| |       |                                                                                                                                                              
| | (iii) | To his knowledge, there has been no modern exploration
      conducted on the property.                                                                      

The recommended exploration involves:

| | (a) | Further geochemical sampling, including rock, grid-soil
      and creek silt sampling. Emphasis should be directed to searching for both
      high grade veins and lower grade bulk tonnage deposits.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                       
| | (b) | Some suitable geophysical methods could be used under
      areas of alluvial cover to detect vein structures.                                                                                        
| |     |                                                                                                                                                                                                       
| | (c) | Areas with favourable geology and geochemistry should be
      drilled.                                                                                                                               

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Fisher Canyon

At Fisher Canyon, prospective gold-bearing sedimentary rocks
have recently been found over a broad area. The geology of these rocks displays
striking similarities to other such deposits throughout the state. Two of the
main showings on the property show no evidence of past drilling.The
Company is not aware of any previous operators on this property. The Company
staked 179 unpatented lode mining claims in late-March, 2007 covering about
2,700 acres of BLM maintained land with federal minerals. It is anticipated that
geologic work will make the project drill ready by late summer, 2007. This
property is located 20 miles East of Lovelock and can be accessed by vehicles 12
months of the year.

Siesta

The Companys interest in the Siesta group is comprised of 638
claims situated in the Slumbering Hills area of Humboldt County. Evolving has
signed a contract with Zonge Geosciences, Inc. to begin a systematic geophysical
survey of this claim group, and is planning a concurrent geochemical survey with
the objective of defining drill targets by late summer, 2007. The Company is not
aware of any previous operators on this property. This property is located 25
miles Northwest of the Winnemuca property and is and can be accessed by vehicles
11 months of the year.

Alpha Butte Properties

With respect to its interest in Alpha Butte, Evolving has
staked 279 claims covering approximately 2,200 hectares. The Company intends to
perform surface mapping and sampling also with the objective of defining drill
targets over the next several months. There is evidence on this property of
drilling within the past 40 years, however, the area has not experienced
exploration in recent times.The Company is not aware of the results of
any previous operators on this property. This property is located 15 miles West
of the Winnemuca Property and can be accessed by vehicles 12 months of the
year.

Battle Mountain Property

Evolving Gold has staked approximately 1959 claims (38,000
acres) of open land north of the town of Battle Mountain, Nevada. Subsequent to
year end, $341,007 in staking and recording costs have been incurred for this
property.

For years, exploration geologists have debated the relationship
between the prolific north-northwest trending Carlin Trend, host to over 100
million oz Au (Gold) and the northeast-trending Getchell Trend, host to over 30
million oz Au. The region lying at their projected intersection is largely
covered with volcanic rocks thought by many geologists to be thick and
prohibitive to exploration.

A new geologic model proposed by Evolving Gold based on
geophysical data and recognition of certain styles of faulting suggests that
much of this area is actually shallowly buried and that the same rocks that host
ore on the Carlin and Getchell trends are perhaps nearly outcropping in places
under a veneer of cover.

This model suggests that there may be about as much ground that
is shallowly buried as is presently exposed along these trends, a discovery that
would quickly revolutionize exploration in what is considered a well-hit area.
This is the next generation of gold target, and the time is right to take the
leap and test what could become an entirely new play.

Evolving Gold is developing a drill program to determine where
cover is indeed acceptably thin and the location of favorable host rocks are
located.

Additional Technical Information

The Company has filed at www.sedar.com a number of in-depth technical reports on
the various properties discussed above, which are available free of charge to
investors seeking additional information of a technical nature.

- 29 -

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Compliance with Government Regulation

The Company will be required to conduct all mineral exploration
activities on the Winnemucca Mountain Property in accordance with the Bureau of
Land Management of the United States Department of the Interior. No permits will
be required to be obtained in connection with the completion of stage one of the
planned exploration program on the Winnemucca Mountain Property. The Company
will be required to obtain a permit prior to the initiation of the second stage
of the recommended exploration program as this stage will involve drilling on
the Winnemuca and Malone properties. A plan of operation would be required to be
submitted to the BLM in connection with each of the permit applications. It is
estimated that it would take approximately 3-6 weeks to obtain the required
permit at an estimated cost of approximately US$50. The Company will also have
to provide a reclamation bond in the order of US$10,000 to US$20,000 before
drilling may be commenced.

To date, payments have been made to the BLM and to the
applicable counties to maintain the Companys claims in good standing.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion for the fiscal years ended March 31,
2007 and 2006 should be read in conjunction with the financial statements of the
Company and the notes thereto and the section of this Annual Report entitled
Information on the Company.

Over the next 12 months, the Company plans to continue with the
exploration of its properties and proceed with the recommended work programs
outlined in its technical reports.

5.A. Results of Operations

Year ended March 31, 2007 compared to year ended March
31, 2006

During the year ended March 31, 2007, the Company reported a
net loss of $831,278 ($0.07 loss per share) compared to a loss of $590,779
reported for the fiscal year ended March 31, 2006. The Company did not generate
any revenue during either of the reporting periods. The net loss for 2007 is
primarily due to stock-based compensation, a write-down of exploration
expenditures and an increase in advertising and travel. Stock-based compensation
of $136,675 was recorded for the year ended March 31, 2007 versus $224,925 for
the 2006 fiscal year. The Company recorded a write-down of mineral property
exploration expenditures amounting to $120,290 for 2007 and $44,038 for the year
ended March 31, 2006. Advertising and travel of $93,618 was incurred for the
year ended March 31, 2007 compared to $109,473 for the previous year as more
tradeshows were attended, additional stock market publications were subscribed
to and service agreements were negotiated with an investor relations
specialists. Major expense items in 2007 also included management fees of
$145,059, consulting of $90,600, and legal of $91,469 which all increased over
the 2006 fiscal year as a direct reflection of the increase in activity related
to property option, private placement and stock option and other agreements
prepared or amended during the year.

5.B. Liquidity and Capital Resources

Source of Funds

The Companys primary source of funds since incorporation has
been through the issuance of common shares. As at March 31, 2007, the company
had cash of $65,942 and a working capital deficiency of ($177,676). Accordingly,
the Company will require additional funds to pursue its plan of operations over
the next twelve months. There can be no assurance that we will obtain any
additional financing in the amounts required or on terms favorable to us. If we
are unable to obtain additional financing, we may have to abandon our business
activities and plan of operations.

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Fiscal Year Ended March 31, 2007

Since incorporation in June 2003, the Companys capital
resources have been limited. The Company has had to rely upon the sale of equity
securities for the cash required for capital acquisitions, exploration and
development, and administration, among other things.

The Company will to require additional funds to meet its
obligations under the Malone Property Option Agreement, the Winnemucca Option
and Royalty Agreement and as a result, will have to continue to rely on equity
and debt financing during such period. Subsequent to March 31, 2007, the Company
completed private placements for gross proceeds of $9,220,750 there can be no
assurance that financing, whether debt or equity, will always be available to
the Company in the amount required at any particular time or for any particular
period or, if available, that it can be obtained on terms satisfactory to the
Company. In order to maintain the Winnemucca Option and Royalty Agreement in
good standing the Company must expend a total of US$4,000,000 on the Winnemucca
Mountain Property over a period of three years, and deliver a pre-feasibility
study by June 30, 2009.

The Company is presently contemplating the material capital
expenditures required under the definitive agreement that will result from the
Rattlesnake Hills Property Letter of Intent. If the Letter of Intent is
formalized by a definitive agreement, the Company could potentially need to
expend an estimated total of US$5,000,000 on the Rattlesnake Hills Property in
order to maintain the option in good standing.

The Companys aggregate operating, investing and financing
activities for the year ended March 31, 2007 resulted in a cash decrease of
$157,011. As at March 31, 2007, the Companys cash balance was recorded as
$65,942 and the Company had a working capital deficiency of $177,676. The
Company has not as yet put into commercial production any of its mineral
properties and as such has no operating revenues. Accordingly, the Company is
dependent on the equity markets as its sole source of operating working capital.
The Companys capital resources are largely determined by the strength of the
junior resource markets and by the status of the Companys projects in relation
to these markets, and its ability to compete for the investor support of its
projects. The Company will continue to require funds to meet its obligations
under its property option agreements and as a result, will have to continue to
rely on equity and debt financing during such period. There can be no assurance
that financing, whether debt or equity, will always be available to the Company
in the amount required at any particular time or for any particular period or,
if available, that it can be obtained on terms satisfactory to the Company.

The Company has signed three employment agreements with
directors or companies controlled by directors of the Company whereby the
Company will pay fixed monthly management fees of $7,500, $6,500 and $5,000
respectively. These employment agreements have a term of two years and are
expected to expire on January 31, 2009.

Effective March 14, 2007 the Company is also committed to a one
year consulting agreement whereby fees will be paid based on services provided
to a maximum of US$8,250 per month. The Company has also hired a consultant at
the rate of $3,000 per month commencing February 21, 2007. On September 1, 2007
we issued 50,000 options to this consultant as part of an agreement pursuant to
which he will continue to provide his services to us for twelve additional
months at the rate of $5,000 per month.

The Company has also signed an office lease expiring April 30,
2012 which calls for monthly payments of $4,394 . Operating costs are subject to
change but are currently $3,217 per month. The total estimated commitment over
the term of the lease, based on the current amount of operating costs is
$91,329.

Recent Financings

Subsequent to year end, in April 2007, the Company completed a
non-brokered private placement of 2,350,000 units at $0.25 per unit resulting in
proceeds of $587,500. Each unit was comprised of one common share and one share
purchase warrant. Each warrant will entitle the holder to purchase one common
share of the Company at a price of $0.35 per share until April 19, 2009.
Finders fees of 55,000 units were issued with respect to this issue.

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Also in April, 2007, the Company completed a brokered private
placement of 12,053,000 units at $0.25 per unit resulting in net proceeds of
$2,931,291. The agent for this private placement elected to receive their
commission of 8% of gross proceeds in cash of $36,500 together with 818,000
units. Each unit was comprised of one common share and one share purchase
warrant. Each warrant will entitle the holder to purchase one common share of
the Company at a price of $0.35 per share until April 26, 2009. The agent also
received 1,205,300 compensation options which entitle the agent to purchase that
number of units at $0.30 per unit for two years.

In May 2007 the Company received exchange approval to change
the exercise price of 432,742 warrants issued in May 2005 from $0.82 to $0.35
per share. Also in May, 2007 321,969 of these warrants were exercised for
proceeds of $112,689 and the remaining 110,773 warrants expired.

In August 2007 the Company completed a non-brokered private
placement of 14,050,000 units at $0.40 per unit for proceeds of $5,620,000. Each
unit consisted of one common share and one-half of a share purchase warrant.
Each whole warrant entitles the holder thereof to purchase one additional share
of the Company at a price of $0.60 per share for a two year period from the date
of issue. The Company paid a finders fee of 10% of the proceeds in cash and 7%
in warrants, which are exercisable at $0.65 per warrant over a two year period
from the date of issue.

Financial Condition and Cash Flows

The Company had a working capital deficiency of $177,676 and
cash of $65,942 as at March 31, 2007 and working capital of $2,021,836 and cash
of $2,275,380 as at June 30, 2007. The 2007 fiscal year working capital
deficiency reflects receipt of $610,201 (net of share issue expense) from a
private placement, the exercise of warrants and share subscriptions received,
and offset by working capital required for administrative costs, deferred
exploration expenses and property option payments.

Significant Changes To Accounting Policy During The
Year

New U.S. Accounting Pronouncements

In February 2006, FASB issued SFAS No. 155, Accounting for
Certain Hybrid Financial Instruments  an Amendment of FASB Statements No. 133
and 140. Among other things, SFAS No. 155 permits the election of fair value
remeasurement for certain hybrid financial instruments that would otherwise
require bifurcation under Statement 133, Accounting for Derivative Instruments
and Hedging Activities. These hybrid financial instruments would include both
assets and liabilities SFAS No. 155 is effective for fiscal years beginning
after September 15, 2006. The Company has not yet completed its evaluation of
the potential impact, if any, that the adoption of SFAS 155 will have on its
consolidated financial statements.

The SEC has issued Staff Accounting Bulletin No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements (SAB 108). SAB 108
provides guidance on how prior year misstatements should be considered when
quantifying misstatements in the current year financial statements. SAB 108
requires misstatements to be quantified using both a balance sheet and an income
statement approach and evaluate whether either approach results in an error that
is material. SAB 108 is effective for fiscal years ending after November 15,
2006. Upon initial application, SAB 108 permits a one-time cumulative effect
adjustment to beginning retained earnings. The Companys adoption of SAB 108 had
no impact on the periods presented.

The FASB has issued FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109 (FIN
48). FIN 48 prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. The Interpretation also provides guidance
on derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. FIN 48 is effective for fiscal years
beginning after December 15, 2006. The provisions of FIN 48 are to be applied to
all tax positions upon initial adoption, with the cumulative effect adjustment
reported as an adjustment to the opening balance of retained earnings. The
Company has not yet completed its evaluation of the potential impact, if any,
that the adoption of FIN 48 will have on its consolidated financial
statements.

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The FASB has issued SFAS No. 157, Fair Value Measurements
(SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring
fair value under other accounting pronouncements that permit or require
measurements, changes the methods used to measure fair value and expands
disclosures about fair value measurements. In particular, disclosures are
required to provide information on the extent to which fair value is used to
measure assets and liabilities; the inputs used to develop measurements; and the
effect of certain of the measurements on earnings (or changes in net assets).
SFAS 157 is effective for fiscal years beginning after November 15, 2007. The
Company has not yet completed its evaluation of the potential impact, if any,
that the adoption of SFAS 157 will have on the consolidated financial
statements.

The FASB has issued SFAS No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities (SFAS 159) was
issued in February 2007. The statement permits entities to choose to measure
many financial instruments and certain other items at fair value, providing the
opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without the need to apply hedge
accounting provisions. SFAS 159 is effective for fiscal years beginning after
November 15, 2007 with earlier adoption permitted.

The Company has not yet determined the effect of future
implementation of these new standards on its consolidated financial
statements.

Critical Accounting Policies

Our consolidated financial statements have been prepared in
accordance with accounting principle generally accepted in Canada. Differences
from United States accounting principles are disclosed in Note 16 in the Notes
to the Consolidated Financial Statements in Item 17 of this Annual Report on
Form 20-F. Some accounting policies have a significant impact on the amount
reported in these financial statements. A summary of those significant
accounting policies can be found in the Summary of Significant Accounting
Policies in our consolidated financial statements. Note that our preparation of
this Annual Report on Form 20-F requires us to make estimates and assumptions
that affect the reported amount of assets and liabilities, disclosure of
contingent assets and liabilities at the date of our financial statements, and
the reported amounts of revenue and expenses during the reporting period. There
can be no assurance that actual results will not differ from those estimates. We
believe as explained below that our most critical accounting policies cover the
following areas: resource properties, long-term investments and stock-based
compensation.

5.C. Research and Development

Not applicable.

5.D. Trend Information

Some of the factors in mineral market fluctuations include the
pricing and demand, producing costs and capacity of natural resource markets and
processing equipment, governmental regulations, land tenure, land use,
regulation concerning the importing and exporting of minerals, and environmental
protection regulations. The exact effect of these factors cannot be accurately
predicted, but the combination of these factors may result in the Company not
receiving an adequate return on invested capital to be profitable or viable.

5.E. Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
is material to investors.

5.F. Tabular disclosure of contractual
obligations

Not Applicable.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES

6.A. Directors and Senior Management

The following table sets forth information as at the date of
this annual report relating to the directors and senior officers of the
Company.

**Table No. 3****Directors and Senior
Management**

Position with the Corporation and Province
      and Country of Residence
    Occupation, Business or
      Employment(1)
    Age
    Period as a Director of the
      CorporationLawrence A. Dick President and Director West Vancouver,
      B.C. CANADA
    Professional Geologist; President and Director of
      the Corporation. President and a Director of Confederation
      Minerals Ltd.; Director of General Minerals Corp.
    57
    Since June 19, 2003Robert Bick Chief Executive Officer and Director
      Vancouver, B.C. CANADA
    President of Click It Marketing Inc. (formerly
      called Fruits of the Earth Importers Limited) since 1995; Self-
      employed Management Consultant from 1999 to 2006; Co-founder and
      partner, Thinkx Intellectual Capital Inc. from 2004 to 2005.
    60
    Since February l, 2007Donald Gee Chief Financial Officer and Director Burnaby,
      B.C. CANADA
    Chartered Accountant, Chief Financial Officer of
      the Corporation, Director of the Corporation, Yankee Hat Minerals
      Ltd., Journey Resources Inc., CMC Metals Ltd., Eagle Hill
      Exploration Corp., and Acero-Martin Exploration Inc.
    57
    Since February 1, 2007Gildar (Gilles) Arseneau Director Vancouver, B.C., CANADA
    Geologist; Manager Geology, Wardrop Engineering
      Ltd. since April 2006; Manager Geology, TSX Venture Exchange, from
      February 2002 to April 2006; Senior Geologist, RPA Consulting Ltd.
      from September 1996 to October 2002.
    51
    Since February l, 2007William Majcher Director Vancouver, B.C., CANADA
    Managing Director, Baron International Limited,
      part of the Baron Group (a HK based merchant bank) since August l,
      2007; RCMP Officer from July 19, 1985 to August 15, 2007.
    45
    Since September 21, 2007


Lawrence Dick (President and Director):Dr. Dick
is a Professional Geologist who received a B.Sc. (Hons.) from the University of
British Columbia in 1973 and a Ph.D. in Economic Geology from Queens University
in 1979. He also serves as the Vice President of Exploration and a Director of
Continuum Resources Ltd., an unrelated public

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company. He has been in those capacities with Continuum
Resources Ltd. since 2002. During 2001 and 2002 he was a self employed
geological consultant. He has been a Director of General Minerals Corp., an
unrelated public company, since 1994 and he served as the Executive Vice
President of General Minerals Corp. from August, 1995 until January 2001. From
1980 to 1984 Dr. Dick served as the Manager of Exploration for Chevron Minerals
Ltd. based in Santiago, Chile.

Robert F. Bick, MusBac. (CEO and Director):Robert F. Bick is an integral part of Canadian business legend Bicks
Pickles. As an entrepreneur, Mr. Bick founded a childrens clothing company and
raised $25,000,000 in venture capital while president of a software start-up. As
a marketer, Mr. Bick worked directly with national Shell companies around the
world to launch Formula Shell and to develop exclusive, innovative pump
promotions. Mr. Bick has wide-ranging experience as a management consultant and
is co-founder of thinkX Intellectual Capital Inc.

Quinton Hennigh, M.Sc., Ph.D, (Vice President,
Exploration and Chief Geologist): Through his career, Mr. Hennigh has
made significant contributions to Newmont Mining, Newcrest Mining and Homestake
Mining. He has experience working throughout North America, in Europe,
Australia, Asia and South America. He possesses the invaluable ability to
balance the pragmatics of business with bold innovation. Over the past fifteen
years, Quinton has established an enviable reputation for timely and efficient
completion of exploration programs under his supervision and maintains a network
of industry colleagues who are committed to maintaining ongoing business
relationships with him at Evolving Gold.

Donald Gee, B.Sc. (Geology), Lic. Acct., C.A. (CFO and
Director)Mr. Gee has over 28 years experience in private and public
company financing, corporate/capital structuring and management. His network of
relationships with retail brokers, fund managers and individual investors adds
to the Companys financing effectiveness. Don has served as a Director and key
executive of several public companies. His recent past positions were Chief
Financial Officer for a TSE listed gaming company and financial advisor to a
national aerospace company. He is presently President and CEO of TSX listed
Acero-Martin Exploration Inc. Mr. Gee is a member of the Chartered Accountants
of British Columbia, Canadian Institute of Chartered Accountants and the
Canadian Institute of Mining and Metallurgy.

Gilles J. Arseneau, Ph.D., P.Geo (Director) Mr.
Arseneau has over 25 years in mineral exploration working as a consultant and
senior geologist for major and junior mining companies with experience in gold,
base metal, uranium and bauxite deposits in Canada, United States and South
America. He has particular expertise in resource modeling and mineral property
valuations. Most recently he was Manager  Geologist with the TSX Venture
Exchange where he was responsible for the review of NI 43-101 technical reports.
He is presently Manager of Geology at Wardrop Engineering Inc.

William Majcher, (Director):Mr. Majcher is
Managing Director for Baron International Limited (a member of the Baron Group
which is a Hong Kong based merchant bank), a fully licensed and registered
investment bank, asset manager and a member of the board for the Hong Kong Stock
Exchange. He is also a director of Disaster Preparedness System Inc., a Nevada
corporation that is currently finalizing filings with the SEC for a listing on
the OTCBB and he is the Executive Director of China Investment Fund Company
Limited, a reporting company listed on the Hong Kong Stock Exchange. He is also
a Director of Baron Total Absolute Return Fund, a hedge fund managed in Hong
Kong.

Chris Osterman, Ph.D., P.Geo (Consulting Geologist):Mr.
  Osterman has years of experience in the mining and exploration industry on several
  continents. Starting as a mining engineer at the San Manuel mine in Arizona,
  he received a M.S. in Geological Engineering from the University of Arizona
  and a Ph.D. in Geology from the Colorado School of Mines. He has spent over
  three years in the search for epithermal gold and silver deposits in the western
  Sierra Madres and for porphyry copper deposits in Sonora, Mexico. His experience
  includes gold, nickel and copper mining and exploration in Southern Africa,
  silver exploration in Bolivia and porphyry copper exploration in Chile, Peru
  and Mongolia.

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The Directors have served in their respective capacities since
their election and/or appointment and will serve until the next Annual General
Meeting or until a successor is duly elected, unless the office is vacated in
accordance with the Articles/By-Laws of the Company. The Senior Management
serves at the pleasure of the Board of Directors.

No Director and/or Senior Management had been the subject of
any order, judgment, or decree of any governmental agency or administrator or of
any court or competent jurisdiction, revoking or suspending for cause any
license, permit or other authority of such person or of any corporation of which
he is a Director and/or Senior Management, to engage in the securities business
or in the sale of a particular security or temporarily or permanently
restraining or enjoining any such person or any corporation of which he is an
officer or director from engaging in or continuing any
conduct/practice/employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanour involving a
security or any aspect of the securities business or of theft or of any
felony.

There are no family relationships between any two or more
Directors or Senior Management. There are no arrangements or understandings with
major shareholders, customers, suppliers or others, pursuant to which any person
referred to above was selected as a Director or member of senior management.

6.B. Compensation

Total compensation accrued or paid to all directors and senior
officers of the Company during the year ended March 31, 2007 was $145,059. The
following table sets forth options granted to the Companys senior officers in
the fiscal year ended March 31, 2007.

In this section Named Executive Officer means each Chief
Executive Officer, each Chief Financial Officer and each of the three most
highly compensated executive officers, other than each Chief Executive Officer
and Chief Financial Officer, who were serving as executive officers at the end
of the most recently completed fiscal year and whose total salary and bonus
exceeds $150,000.

**Table No. 4**Compensation paid to the
Named Executive Officers during the Companysthree most recently
completed financial years is as set out below:

NAMED EXECUTIVE OFFICERS
      Name and Principal 
        Position
    Year
    Annual Compensation
    Long Term Compensation
    All Other
      Compensation ($)Salary ($)
    Bonus ($)
    Other Annual Compen- sation ($)
    Awards
    PayoutsSecurities Under Options
      Granted (#)
    Shares or Units Subject to Resale
      Restrictions ($)
    LTIP Payouts ($)Lawrence A. Dick(1)President and Former
      Chief Executive Officer
    2007 2006 2005
    45,449 2,675 Nil
    Nil Nil Nil
    Nil 15,000(5)Nil
    80,000 Nil Nil
    Nil Nil Nil
    Nil Nil Nil
    Nil Nil NilRobert Bick(2)Chief Executive Officer
    2007
    22,000
    Nil
    15,000(6)
    Nil
    Nil
    Nil
    NilWarren M. McIntyre(3)Former Chief Financial
      Officer
    2007 2006 2005
    22,500 7,500 49,500
    Nil Nil Nil
    Nil Nil Nil
    Nil Nil Nil
    Nil Nil Nil
    Nil Nil Nil
    Nil Nil NilDonald Gee(4)Chief Financial Officer
    2007
    10,000
    Nil
    15,000(7)
    Nil
    Nil
    Nil
    Nil


Notes:

|(1) | Mr. Dick resigned as Chief Executive Officer on February
      l, 2007.                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Mr. Bick was appointed as Chief Executive Officer on
      February l, 2007.                                                                                                                                                                          
|(3) | Mr. McIntyre resigned as Chief Financial Officer on
      February l, 2007.                                                                                                                                                                           
|(4) | Mr. Gee was appointed as Chief Financial Officer on
      February l, 2007.                                                                                                                                                                           
|(5) | These funds represent a signing bonus.                                                                                                                                                                                                                
|(6) | These funds represent a signing bonus pursuant to
      Management Services Agreements entered into on February l, 2007 between
      the Corporation, Click It Marketing Inc. (ClickIt) and Mr. Bick. Mr.
      Bick is the President of ClickIt.  
|(7) | These funds represent a signing bonus pursuant to
      Management Services Agreements entered into on February l, 2007 between
      the Corporation, Cantech Capital Corporation (Cantech) and Mr. Gee. Mr.
      Gee is the President of Cantech.

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Long-Term Incentive Plan Awards

Long term incentive plan awards (LTIP) means a plan
providing compensation intended to motivate performance over a period greater
than one financial year. LTIPs do not include option or stock appreciation
rights plans or plans for compensation through shares or units that are subject
to restrictions on resale. The Company did not award any LTIPs to any Named
Executive Officer during the most recently completed financial year.

Options

The share options granted to the Named Executive Officers
during the financial year ended March 31, 2007 were as follows:

Table No. 5Option Grants During the Most Recently
Completed Financial Year

NAMED EXECUTIVE OFFICERS
    Securities Under Options Granted
      (#)
    % of Total Options Granted to
      Employees in Financial Year
    Exercise or Base Price
      ($/Security)
    Market Value of Securities Underlying
      Options on the Date of Grant ($/Security)
    Expiration DateLawrence A. Dick
    80,000
    33%
    $0.36
    $0.30
    April 7, 2011


Notes:

|(1) | These options were granted on April 7, 2006.                                                                                                                                                                                                                                                                   
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                
|(2) | Following the year end of the Company options to purchase
      an aggregate of 1,450,000 Shares at an exercise price of $0.42 per Share
      were granted to directors of the Corporation (200,000 to Mr. Dick, 400,000
      to Mr. Gee and 500,000 to Mr. Bick). These options expire on May 2,
      2012.

No share options were exercised by the Named Executive Officers
during the financial year ended March 31, 2007. The value of the unexercised
in-the-money options at the financial year March 31, 2007 was nil.

No share options were repriced on behalf of the Named Executive
Officers during the financial year ended March 31, 2007.

Subsequent to fiscal year end, on May 3, 2007 the following
directors were granted options to purchase Shares pursuant to the Corporations
share option plan.

Table No. 6**Stock Option Grants Subsequent to
Fiscal Year End**

Name of Director
    Securities Under Options Granted
      (#)
    Exercise or Base Price
      ($/Security)
    Market Value of Securities Underlying
      Options on the Date of Grant ($/Security)
    Expiration DateLawrence A. Dick
    200,000
    $0.42
    $0.30
    May 2, 2012Paul
      Cowley(1)
    50,000
    $0.42
    $0.30
    May 2, 2012Robert Bick
    500,000
    $0.42
    $0.30
    May 2, 2012Donald Gee
    400,000
    $0.42
    $0.30
    May 2, 2012Gildar (Gilles)
      Arseneau
    350,000
    $0.42
    $0.30
    May 2, 2012


(1)Mr. Cowley was not nominated to be re-elected as
a director at the Companys annual general meeting on September 21, 2007.

No Stock Options were exercised during the year ended March 31,
2007 by senior management or directors.

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Change of Control Remuneration. The Company had no plans
or arrangements in respect of remuneration received or that may be received by
Executive Officers of the Company in Fiscal 2007 to compensate such officers in
the event of termination of employment (as a result of resignation, retirement,
change of control) or a change of responsibilities following a change of
control, where the value of such compensation exceeds US$60,000 per Senior
Management.

Other Compensation. No Senior Management/Director
received other compensation in excess of the lesser of US$25,000 or 10% of
such officers cash compensation, and all Senior Management/Directors as a group
did not receive other compensation which exceeded US$25,000 times the number of
persons in the group or 10% of the compensation.

Bonus/Profit Sharing/Non-Cash Compensation. Except for
the Companys stock option plan, the Company had no material bonus or profit
sharing plans pursuant to which cash or non-cash compensation is or may be paid
to the Companys Directors or Senior Management.

Pension/Retirement Benefits. No funds were set aside or
accrued by the Company during Fiscal 2007 to provide pension, retirement or
similar benefits for Directors or Senior Management.

Termination of Employment, Change in Responsibilities and
Employment Contracts

During 2007 the Company continued to build a strong team of
highly experienced geo-science and financial professionals. In February 2007,
Mr. Robert Bick became Evolvings new Chief Executive Officer replacing Dr.
Lawrence A. Dick who assumed the duties of President and Chief Operations
Officer and Mr. Donald Gee B.Sc. (Geology), C.A. became the Companys new Chief
Financial Officer. In May, 2007 Dr. Quinton Hennigh, M. Sc., Ph.D. was named as
the new Vice-President of Exploration replacing Dr. Chris Osterman who will
remain as Evolvings Consulting Geologist.

On February l, 2007, the Corporation entered into a management
services agreement with Lawrence Dick for a term of two years. During the term
of the above management services agreement, the Corporations management will
nominate Lawrence A. Dick for election as a director of the Corporation. The
management fee payable to Mr. Dick shall be $6,500 per month, together with
goods and services taxes and any and all other taxes payable by law. Mr. Dick
shall be entitled to a signing bonus of $15,000 payable in cash and entitlement
to participate in the Corporations share option plan or any successors thereto.
The Corporation may terminate this agreement before its expiry date for cause
which constitutes just cause for termination at law and only if the Corporation
gives written notice to Mr. Dick specifying in detail the act or acts which the
Corporation alleges would constitute just cause for termination of the
employment of Mr. Dick at law if Mr. Dick were an employee of the Corporation
and upon the death of Mr. Dick, without notice.

On February l, 2007, the Corporation entered into a management
services agreement with the Corporation, Click It Marketing Inc.
(ClickIt) and Mr. Bick for a term of two years. Mr. Bick is the
President of ClickIt. During the term of the above management services
agreement, the Corporations management will nominate Robert Bick for election
as a director of the Corporation. The management fee payable to Mr. Bick shall
be $7,500 per month, together with goods and services taxes and any and all
other taxes payable by law. Mr. Bick shall be entitled to a signing bonus of
$15,000 payable in cash and entitlement to participate in the Corporations
share option plan or any successors thereto. The Corporation may terminate this
agreement before its expiry date for cause which constitutes just cause for
termination at law and only if the Corporation gives written notice to Mr. Bick
specifying in detail the act or acts which the Corporation alleges would
constitute just cause for termination of the employment of Mr. Bick at law if
Mr. Bick were an employee of the Corporation and upon the death of Mr. Bick,
without notice.

On February l, 2007 the Corporation entered into a management
services agreement with the Corporation, Cantech Capital Corporation
(Cantech) and Mr. Gee for a term of two years. Mr. Gee is the President
of Cantech. During the term of the above management services agreement, the
Corporations management will nominate Donald Gee for election as a director of
the Corporation. The management fee payable to Mr. Gee shall be $5,000 per
month, together with goods and services taxes and any and all other taxes
payable by law. Mr. Gee shall be entitled to a

- 38 -

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signing bonus of $15,000 payable in cash and entitlement to
participate in the Corporations share option plan or any successors thereto.
The Corporation may terminate this agreement before its expiry date for cause
which constitutes just cause for termination at law and only if the Corporation
gives written notice to Mr. Gee specifying in detail the act or acts which the
Corporation alleges would constitute just cause for termination of the
employment of Mr. Gee at law if Mr. Gee were an employee of the Corporation and
upon the death of Mr. Gee, without notice.

6.C. Board Practices

The Directors have served in their respective capacities since
their election and/or appointment and will serve until the next Annual General
Meeting or until a successor is duly elected, unless the office is vacated in
accordance with the Articles/By-Laws of the Company. The Senior Management
serves at the pleasure of the Board of Directors.

The Company has an Audit Committee, which advises the Board of
Directors with respect to the engagement of the independent auditors of the
Company and reviews the scope and results of the Companys audits with the
independent auditors, the Companys internal accounting controls, and the
professional services furnished by the independent auditors to the Company. The
current members of the Audit Committee are: William Majcher , Donald Gee and
Gilles Arseneau. The Audit Committee met four times during fiscal 2007.

6.D. Employees

The Company has 2 employees, excluding Senior Management, and
has utilized independent contractors, who perform work on the Companys
properties.

6.E. Share Ownership

As at the date of this Annual Report, there were 42,867,311
Shares issued and outstanding, each carrying the right to one vote. No group of
shareholders has the right to elect a specified number of directors, nor are
there cumulative or similar voting rights attached to the Shares.

To the knowledge of the directors and executive officers of the
Company, the only persons or corporations that beneficially owned, directly or
indirectly, or exercised control or direction over, Shares carrying more than
10% of the voting rights attached to all outstanding Shares of the Corporation
as at the date of this Annual Report are set forth in the following table:

Table No. 7Corporations Carrying More Than 10% of
Outstanding Shares

|Shareholder Name                   | Number of Shares Held | Percentage of Issued Shares
|---------------------------------- | --------------------- | ---------------------------
|Pinetree Resource Partnership      | 5,000,000             | 11.66%                     
|Passport Materials Master Fund, LP | 4,900,000             | 11.43%                     

- 39 -

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The following table sets forth, to the Companys knowledge, as
at the date of this Annual Report, information relating to shares of the Company
held by directors and officers of the Company and persons owning more than 10%
of the Companys outstanding shares:

Table No. 8Shareholdings of Directors and Senior
Management

|                         |                  |             | Number of  | Exercise | Expiry Date       
|------------------------ | ---------------- | ----------- | ---------- | -------- | ------------------
|                         |                  | Percent of  | Options    | Price    |                   
|                         | Number of Common | Shares      | and        |          |                   
|Name of Beneficial Owner | Shares           | Outstanding | Warrants   |          |                   
|                         |                  |             |            |          |                   
|                         |                  |             | 80,000     | $0.36    | April 7, 2011     
|Lawrence A. Dick         | 944,640          | *           | 200,000    | $0.42    | May 2, 2012       
|                         |                  |             | 200,000(1) | $0.35    | April 19, 2009    
|                         |                  |             | 500,000    | $0.42    | May 2, 2012       
|Robert F. Bick           | 188,000          | *           | 188,000(2) | $0.35    | April 19, 2009    
|                         |                  |             | 400,000(3) | $0.42    | May 2, 2012       
|Donald Gee               | Nil              | Nil         | 200,000(4) | $0.35    | April 19, 2009    
|                         |                  |             |            |          |                   
|Gildar (Gilles) Arseneau | Nil              | Nil         | 350,000    | $0.42    | May 2, 2012       
|William Majcher          | Nil              | Nil         | 200,000    | $0.40    | September 21, 2012
|                         |                  |             |            |          |                   
|Total                    | 1,132,640        | *           |            |          |                   

* Less than 1%.

|(1) | Warrants to purchase 200,000 Shares at $0.35 expiring on
      April 19, 2009.                               
|--- | -------------------------------------------------------------------------------------------------------------
|    |                                                                                                              
|(2) | Warrants to purchase 188,000 Shares at an exercise price
      of $0.35 per Share expiring on April 19, 2009.
|    |                                                                                                              
|(3) | 200,000 of these 400,000 options are owned by Mr. Gees
      spouse.                                        
|    |                                                                                                              
|(4) | Warrants to purchase 200,000 Shares at $0.35 per Share
      expiring on April 19, 2009.                     

Stock Options

The shareholders of the Company originally approved the 2004
Plan in September 2004 wherein 10% of the issued and outstanding Shares were
reserved for issuance. In March 2007 the directors proposed that the Company
terminate its existing share compensation arrangements and adopt the 2007
Plan to comply with the policies of the TSX-V, this proposal was accepted by
the shareholders at the Companys annual general meeting on September 21, 2007.
The 2007 Plan also uses a rolling number of shares. Under the 2007 Plan, a
maximum of 10% of the issued and outstanding Shares of the Company at the time
an option is granted, less any outstanding options, will be reserved for
issuance as options to be granted at the discretion of the Companys Board to
eligible optionees (the Optionees). In other words, while the 2007 Plan
is in effect, there can never be more than 10% of the Companys issued and
outstanding Shares reserved for issuance under the 2007 Plan at any point in
time. Currently, the Company has 42,867,311 Shares issued and outstanding and
options to purchase 2,750,000 Shares have been granted and are outstanding.
Options granted under the 2004 Plan will be rolled into and be deemed to be
granted under the 2007 Plan. It is the responsibility of the Companys Board to
ensure that the provisions of the 2007 Plan are adhered to. This type of plan is
called a rolling plan.

The Corporation is of the view that the 2007 Plan permits the
Company to attract and maintain the services of executives, employees and other
service providers with other companies in the industry. Directors have the
authority to amend the 2007 Plan to reduce, but not increase the benefits to its
participants if in their discretion it is necessary or advisable in order to
obtain any necessary regulatory approvals

The 2007 Plan requires TSX-V approval.

Eligible Optionees

- 40 -

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Under the policies of the TSX-V, to be eligible for the
issuance of a stock option under the 2007 Plan an Optionee must either be a
director, officer, employee, consultant or an employee of a company providing
management or other services to the Company or a subsidiary at the time the
option is granted.

Options may be granted only to an individual or to a
non-individual that is wholly owned by individuals eligible for an option grant.
If the option is granted to a non-individual, it must provide the TSX-V with an
undertaking that it will not permit any transfer of its securities, nor issue
further securities, to any individual or other entity as long as the option
remains in effect, without the consent of the TSX-V.

Material Terms of the Plan

The following is a summary of the material terms of the 2007
Plan:

(a) all options granted under the 2007
Plan are non-assignable, non-transferable and exercisable for a period of up to
5 years (10 years if the Company becomes a Tier 1 issuer on the TSX-V); (b)
for stock options granted to employees or service providers (inclusive of
management company employees), the Company must ensure that the proposed
Optionee is a bona fide employee or service provider (inclusive of management
company employees), as the case may be, of the Company or any subsidiary;(c)
if an Optionee ceases to be employed by the Company (other than as a result of
termination with cause) or ceases to act as a director or officer of the Company
or a subsidiary of the Company, any option held by such Optionee may be
exercised within 90 days after the date of such Optionee ceases to be employed
or act as an officer or director (30 days if the Optionee is engaged in Investor
Relations Activities and the Company is a Tier 2 issuer);(d) the minimum
exercise price of an option granted under the 2007 Plan must not be less than
the Discounted Market Price (as defined in the policies of the TSX-V);(e) no
Optionee can be granted an option or options to purchase more than 5% of the
outstanding listed shares of the Company in any one year period; and(f)
Options granted under the 2004 Plan will be deemed to have been granted under
the 2007 Plan and will be subject to the terms and conditions of the 2007
Plan.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS

7.A. Major Shareholders

For holdings by major shareholders, see Item 6.E and Table No.
7. The Companys major shareholders do not have different voting rights. As at
the date of this Annual Report, there were 42,867,311 common shares outstanding
held by 36 holders of record resident in Canada holding 15,850,001 common
shares, 3 holders of record resident in the USA holding 400,000 common shares
and 8 holders of record resident in other countries holding 2,132,500 common
shares.

7.B. Related Party Transactions

To the knowledge of management of the Company, no informed
person (a director, officer or holder of 10% or more of the Shares) or nominee
for election as a director of the Company or any associate or affiliate of any
informed person or proposed director had any interest in any transaction which
has materially affected or would materially affect the Company or any of its
subsidiaries during the period beginning April 1, 2006 up to the date hereof, or
has any interest in any material transaction in the current year other than as
set out herein or in the audited year end financial statements of the
Company.

For the Years Ended March 31, 2007 and
2006

- 41 -

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During the year ended March 31, 2007, the Company issued
260,000 common shares to directors of the Company, pursuant to the exercise of
warrants at an exercise price of $0.25 per share for proceeds of $65,000.
Deferred exploration costs, promotion and advertising, rent and consulting fees
for the year ended March 31, 2007 include $122,398 (2006: $107,505), $15,713
(2006: $2,442), $3,000 (2006: $9,000) and $184,659 (2006: $47,675) respectively,
charged by directors and a significant shareholder of the Company. As at that
date accounts payable and accrued liabilities include $101,950 owing to related
parties.

In February, 2007, the Company signed three employment
agreements with directors or companies controlled by directors of the Company
whereby the Company will pay fixed monthly management fees of $7,500, $6,500 and
$5,000 respectively. See Item 6.B for a description of each of these
agreements.

During the years ended March 31, 2007, 2006 and 2005 the
Company incurred charges to significant shareholders, directors and former
directors of the Company as follows:

|                             |   | Year ended March 31, | 
|---------------------------- | - | -------------------- | 
|                             |   | 2007                 | 
|                             |   |                      | 
|Consulting                   | $ | 39,600               | 
|Management fees              |   | 145,059              | 
|Promotion and advertising    |   | 15,713               | 
|Rent and administration fees |   | 3,000                | 
|Deferred exploration costs   |   |                      | 
|- geological consulting      |   | 110,573              | 
|- staking cost and recording |   | 11,825               | 
|                             |   |                      | 
|                             | $ | 325,770              | 

These transactions were measured by the exchange amount, which
  is agreed upon by the transacting parties.

Prepaid expenses include $11,360 (2006: Nil) derived from payments
  to directors.

Accounts payable and accrued liabilities include $101,950
(2006: $64,257) due to significant shareholders, directors and former directors
of the Company.

April 1, 2007 to Present

Subsequent to fiscal year end, in April 2007 the Corporation
completed a non-brokered private placement of 2,350,000 units at $0.25 per unit
resulting in proceeds of $587,500 of which $100,000 is included in share
subscriptions as at March 31, 2007. Each unit was comprised of one Share and one
share purchase warrant. Each warrant will entitle the holder to purchase one
Share of the Corporation at a price of $0.35 per Share until April 19, 2009.
Lawrence A. Dick, a director and officer of the Corporation participated in this
private placement for 200,000 units. Donald Gee, a director and officer of the
Corporation participated in this private placement for 200,000 units. Robert
Bick, a director and officer of the Corporation participated in this private
placement for 188,000 units.

Additionally, on September 21, 2007 the Companys board of
directors approved management bonuses totalling $350,000.

Accounting Fees

The Company paid accounting fees of $17,808 and $18,730 to
Amisano Hanson during Fiscal 2006 and Fiscal 2007 (to date), respectively. These
accounting fees consisted of auditing the Companys annual financial statements.

Shareholder Loans

None.

- 42 -

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7.C. Interests of Experts and Counsel

Not Applicable.

ITEM 8. FINANCIAL INFORMATION

8.A. Consolidated Statements and Other Financial
Information

The Companys financial statements are stated in Canadian
Dollars (CDN$) and are prepared in accordance with Canadian Generally Accepted
Accounting Principles (GAAP), the application of which, in the case of the
Company, conforms in all material respects for the periods presented with United
States GAAP, except as discussed in footnotes to the financial statements.

The financial statements as required under Item 17 are attached
hereto and found immediately following the text of this Annual Report. The audit
reports of Amisano Hanson, Independent Chartered Accountants, are included
herein immediately preceding the financial statements.

Legal Proceedings

The Directors and the management of the Company do not know of
any material, active or pending, legal proceedings against them; nor is the
Company involved as a plaintiff in any material proceeding or pending
litigation. The Directors and the management of the Company know of no active or
pending proceedings against anyone that might materially adversely affect an
interest of the Company.

8.B. Significant Changes

Other than as described in this document, there have been no
significant changes since the financial statements contained herein.

ITEM 9. THE OFFER AND LISTING

9.A. Common Share Trading Information

The Companys common shares trade on the TSX Venture Exchange,
under the symbol EVG. The Company began listing on the TSX-V on June 13, 2007.
Further, the Companys common shares began trading on the Over-The-Counter
Bulletin Board Quotation System under the symbol EVOGF on July 26, 2005 and
the Frankfurt Stock Exchange on August 13, 2007 under the symbol EV7.

The Companys common shares traded on the CNQ in Toronto,
Ontario, Canada from June 14, 2004 until the Company graduated to the TSX-V on
June 13, 2007.

- 43 -

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The following table sets forth the high and low sales prices on
the CNQ, TSX-V and OTCBB for the periods indicated.

Table No. 9Common Shares Trading
Activity

TSX-V Canadian Dollars
      OTCBB U.S. Dollars
      CNQ Canadian DollarsHigh
      Low
      High
      Low
      High
      LowMonthlySeptember 2007
      0.40
      0.33
      0.42
      0.30August 2007
      0.56
      0.30
      0.54
      0.30July 2007
      0.55
      0.37
      0.51
      0.37June 2007
      0.44
      0.35
      0.46
      0.32
      0.47
      0.35May 2007
      
      
      0.46
      0.34
      0.48
      0.34April 2007
      
      
      0.38
      0.16
      0.44
      0.25QuarterlyJune 30, 2007
      0.44
      0.35
      0.46
      0.16
      0.48
      0.25March 31, 2007
      
      
      0.26
      0.18
      0.28
      0.20December 31, 2006
      
      
      0.34
      0.17
      0.36
      0.17September 30, 2006
      
      
      0.42
      0.20
      0.45
      0.20June 30, 2006
      
      
      0.51
      0.30
      0.57
      0.30March 31, 2006
      
      
      0.35
      0.22
      0.42
      0.25December 31, 2005
      
      
      0.55
      0.22
      0.65
      0.29YearlyMarch 31, 2007
      
      
      0.51
      0.17
      0.57
      0.17March 31, 2006
      
      
      0.71
      0.22
      1.05
      0.25March 31, 2005
      
      
      
      
      0.60
      0.14March 31, 2004


Common Share Description

Registrar/Common Shares Outstanding/Shareholders

The Company has an authorized capital of an unlimited number of
common shares without par value. As the date of this annual report a total of
42,867,311 shares were issued and outstanding. All shares are initially issued
and registered in the name of the shareholder or its nominee. There are no
restrictions on the transferability of the shares imposed by the Companys
contacting documents. The registrar and transfer agent for the common shares is
Pacific Corporate Trust of Canada located at 2nd Floor, 510 Burrard
Street, Vancouver, BC V6C 3B9.

Common Share Description

All of the authorized common shares of the Company are of the
same class and, once issued, rank equally as to dividends, voting powers, and
participation in assets.

Holders of common shares are entitled to one vote for each
share held of record on all matters to be acted upon by the shareholders.
Holders of common shares are entitled to receive such dividends as may be
declared from time to time by the Board of Directors, in its discretion, out of
funds legally available therefore.

- 44 -

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Upon liquidation, dissolution or winding up of the Company,
holders of common shares are entitled to receive pro rata the assets of
Company, if any, remaining after payments of all debts and liabilities.

No shares have been issued subject to call or assessment. There
are no pre-emptive or conversion rights and no provisions for redemption or
purchase for cancellation, surrender, or sinking or purchase funds.

Provisions as to the modification, amendment or variation of
such shareholder rights or provisions are contained in the CBCA. Unless the
CBCA, the Companys Articles or Articles of Incorporation otherwise provide, any
action to be taken by a resolution of the shareholders may be taken by an
ordinary resolution, being approval by a vote of a majority of the votes cast in
respect of the matter at the shareholders meeting.

There are no restrictions on the repurchase or redemption of
common shares of the Company while there is any arrearage in the payment of
dividends or sinking fund instalments.

Stock Options

Refer to Item 6.E for information relating to the Companys
stock options.

Share Purchase Warrants

At the date of this annual report there were 27,386,675 share
purchase warrants outstanding entitling the holders thereof the right to
purchase one common share for each warrant held:

Table No. 10Share Purchase Warrants
Outstanding

Number of Shares
      Exercise Price
      Expiry Date1,464,000
      $0.40
      Jan 18, 20081,600,000
      $0.40
      Sept 7, 200855,000
      $0.35
      April 19, 20092,350,000
      $0.35
      April 24, 200912,871,000
      $0.35
      April 26, 20091,205,300
      $0.30
      April 26, 2009816,375
      $0.65
      July 25, 20097,025,000
      $0.60
      July 25, 200927,386,675


9.C. Stock Exchanges Identified

The common shares of the Company trade on the TSX-V, the OTCBB
and the Frankfurt Stock Exchange. Refer to Item 9.A.

ITEM 10. ADDITIONAL INFORMATION

10.A. Share Capital

Not applicable.

10.B. Memorandum and Articles of Association

The Company has unlimited common shares without par value
authorized. As of the date of this annual report there were 42,867,311 common
shares issued and outstanding.

- 45 -

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The Company was incorporated on June 19, 2003 under the CBCA.
There are no restrictions on the business that the Company may carry on in the
Articles of Incorporation.

A director of the Company is not allowed to vote on a proposal,
arrangement, contract or transaction in which the director is materially
interested. A director who is, in any way, directly or indirectly, interested in
a material contract or proposed material contract with the Company shall
disclose the nature and extent of his interest at a meeting of the directors in
accordance with the provisions of the CBCA. A director shall not vote in respect
of any such contract unless the contract is:

| | (a) | one primarily relating to the directors
      remuneration as a director, officer, employee or agent of the Company or
      an affiliate;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | one for indemnity or insurance of the director;
      or                                                                                   
| | (c) | one with an affiliate.                                                                                                                     

Article 7 of the Companys bylaws address the borrowing powers
of the directors. The borrowing powers are summarized as follows:

The Directors may, from time to time on behalf of the
Company:

| | (a) | borrow money in such manner and amount, on such
      security from such sources and upon such terms and conditions as they
      think fit;         
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | issue bonds or other debt instruments outright
      or as security for any liability or obligation for either the Company or
      any other person;
| | (c) | mortgage any part or the whole of any property
      or assets of the Company;                                                                       

There are no age limit requirements pertaining to the
retirement or non-retirement of directors and a director need not be a
shareholder of the Company. The rights, preferences and restrictions attaching
to each class of the Companys shares are as follows:

Common Shares

All of the authorized shares of common stock of the Company are
of the same class and, once issued, rank equally as to dividends, voting powers,
and participation in assets. Holders of common stock are entitled to one vote
for each share held of record on all matters to be acted upon by the
shareholders. Holders of common stock are entitled to receive such dividends as
may be declared from time to time by the Board of Directors, in its discretion,
out of funds legally available therefore.

Upon liquidation, dissolution or winding up of the Company,
holders of common stock are entitled to receive pro rata the assets of
Company, if any, remaining after payments of all debts and liabilities. No
shares have been issued subject to call or assessment. There are no pre-emptive
or conversion rights and no provisions for redemption or purchase for
cancellation, surrender, or sinking or purchase funds.

The Company may by ordinary resolution filed with the Registrar
amend its Memorandum to increase the authorized capital of the Company by:

| | (a) | creating shares with par value or shares without par
      value                                          
| | --- | ----------------------------------------------------------------------------------------------------------
| |     |                                                                                                           
| | (b) | increasing the number of shares with par value or without
      par value                                 
| |     |                                                                                                           
| | (c) | increasing the par value of a class of shares with par
      value, if no shares of that class are issued.

- 46 -

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The Company may by special resolution alter its Memorandum to
subdivide, consolidate or change the designation of any or all of its shares in
such manner and with such consents of members holding a class of shares as the
Company Act provides.

The Company may alter its Memorandum or Articles:

| | (a) | by special resolution, to create, define and attach
      special rights and restrictions to any shares, and
| | --- | ------------------------------------------------------------------------------------------------------------
| |     |                                                                                                             
| | (b) | by special resolution to vary or abrogate any special
      rights and restrictions attached to any shares  

But no right attached to any issued shares shall be prejudiced
or interfered with unless all members holding shares of each class whose right
is so affected has given consent in writing, or unless a resolution consenting
is passed by three-fourths of such holders at a separate class meeting of the
holders.

There are no provisions discriminating against any existing or
prospective holder of securities as a result of such shareholder owning a
substantial number of shares.

The conditions governing the manner in which annual meetings
and special meetings of shareholders are convoked, including conditions of
admission are described in Articles 39 and 40 of the Companys bylaws. These
conditions are summarized as follows:

Annual Meeting. An annual meeting shall be held once in
every calendar year at such time and place as determined by the Directors, but
not more than 15 months after the holding of the last preceding annual meeting.

Special Meetings. The Board, the Chairman of the Board,
the Managing Director or the President may convene a special meeting whenever
they see fit. Others who wish to convene a meeting may requisition to do so
through the process provided under the Corporations Act.

Every member who is present in person shall have one vote and
every member shall have one vote for which he is the registered holder either in
person or by proxy. A member holding more than one share in respect of which he
is entitled to vote shall be entitled to a proxy holder, or one or more
alternate proxy holders to attend, act and vote for him.

There are no limitations on the rights to own
securities.

There are no provisions of the Companys articles of
association, charter or bylaws that would have an effect of delaying, deferring
or preventing a change in control of the Company and that would operate only
with respect to a merger, acquisition or corporate restructuring involving the
Company.

10.C. Material Contracts

| | (a) | Meridian Earn-in Agreement between the Company and
      Meridian dated July 31, 2006. Please refer to Item 4.A. for a summary of
      this agreement.                                                                                                                                                                        
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                
| | (b) | Amended and Restated Option and Royalty Agreement among
      the Company, Golden Sands and AHL dated July 7, 2006 and as amended on
      April 11, 2007. Please refer to Item 4.A. for a summary of this agreement.
      A copy of the April 11, 2007 amending agreement is filed as an exhibit to
      this Annual Report.
| |     |                                                                                                                                                                                                                                                                                                                                
| | (c) | Malone Property Agreement between the Company and Newmont
      North America Exploration Ltd., dated April 17, 2006. Please refer to Item
      4.A. for a summary of this agreement.                                                                                                                                         

- 47 -

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| | (d) | Investor Relations Agreement between the Company and
      Renmark Financial Communications Inc. (Renmark) dated June 15, 2007.
      Under this agreement, Renmark is to provide investor relations services,
      in exchange for which the Company has agreed to pay a monthly retainer of
      $5,000. This agreement is for a term of one year. A copy of this agreement
      is filed as an exhibit to this Annual Report.                                                                                                                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (e) | Corporate Advisory Agreement between the Company and
      Excelsior Communications Incorporated (Excelsior) dated September 1,
      2007. Under the agreement, Excelsior is to provide investor relations
      services, in exchange for which the Company has granted to Excelsior
      options to acquire common shares of the Company, exercisable for a period
      of five years at a price of $0.35, paid to Excelsior a $6,500 advance and
      y agreed to pay to Excelsior a monthly retainer of $6,500. This agreement
      is for a term of one year. A copy of this agreement is filed as an exhibit
      to this Annual Report.

10.D. Exchange Controls

Canada has no system of exchange controls. There are no
exchange restrictions on borrowings from foreign countries or on the remittance
of dividends, interest, royalties and similar payments, management fees, loan
repayments, settlement of trade debts, or the repatriation of capital. The
Investment Canada Act (the ICA) enacted on June 20, 1985, as
amended by the Canada-United States Free Trade Agreement Implementation Act
(Canada), requires the notification and, in certain cases, advance review and
approval by the Government of Canada of the acquisition by a non-Canadian of
control of a Canadian business, all as defined in the ICA. For the purposes
of the ICA, control can be acquired through the acquisition of all or
substantially all of the assets used in carrying on the Canadian business, or
the direct or indirect acquisition of interests in an entity that carries on a
Canadian business or which controls the entity, which carries on the Canadian
business. Under the ICA, control of a corporation is deemed to be acquired
through the acquisition of a majority of the voting shares of a corporation, and
is presumed to be acquired where one third or more, but less than a majority, of
the voting shares of a corporation are acquired, unless it can be established
that the corporation is not controlled in fact by the acquirer through the
ownership of voting shares. Other rules apply with respect to the acquisition of
non-corporate entities.

To the best of the registrants knowledge, there are no
governmental laws, decrees or regulations in Canada relating to restriction on
the import/export of capital, or which affect the remittance of interest,
dividends, or other payments to non-resident holders of the Companys common
stock. Any such remittance to United States residents, however, is subject to a
15% withholding tax pursuant to Articles X, Xl, and XII of the reciprocal
Canada-United States Income Tax Convention. Except for the ICA, there are no
limitations under the laws of Canada, the Province of British Columbia, or in
the Charter or any other constituent documents of the registrant on the rights
of foreigners to hold and/or vote the shares of the registrant. The provisions
of the ICA provide legislative guidelines for screening and evaluating new
foreign investment in Canada. The purpose of the legislation is to:

| | (a) | encourage investment in Canada that contributes to
      economic growth and employment; and                        
| | --- | --------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                     
| | (b) | provide for the review of significant investments in
      Canada by non-Canadians to ensure such benefit to
Canada.

All investments that meet the following criteria are subject to
a review:

| | (a) | direct acquisition of control of an existing Canadian
      business with assets of $5 million dollars or more by a non-WTO
      investor;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                            
| | (b) | indirect acquisition of an existing Canadian business
      with assets of $50 million dollars or more by a non-WTO
  investor;            

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| | (c) | indirect acquisition of control of an existing Canadian
      business with assets of $5 million dollars or more where the assets of the
      Canadian business being acquired exceed 50% of the total assets involved
      in the worldwide transaction; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                
| | (d) | direct acquisition of control of an existing Canadian
      business with assets of $281 million dollars or more by a WTO
    investor.                                                                                                                        

The foregoing assumes the Company will not engage in the
production of uranium or own an interest in a producing uranium property in
Canada, or provide any financial service or transportation service or is a
cultural business, as the rules under the ICA governing those businesses are
different. In addition, the foregoing discussion of Canadian taxation and
foreign investment and United States taxation is of a general and summary nature
only and is not intended to be, nor should it be considered to be, legal or tax
advice to any particular shareholder. Accordingly, prospective investors should
consult their own tax advisors as to the tax consequences of receiving dividends
from the Company or disposing of their Common Stock.

10.E. Taxation

Certain Canadian Federal Income Tax Information for United
States Residents

The following summarizes the principal Canadian federal income
tax considerations generally applicable to the holding and disposition of Common
Shares of the Company by a holder (a) who, for the purposes of the Income Tax
Act (Canada) (the Tax Act), is not resident in or deemed to be resident in
Canada, deals at arms length with the Company, holds the Common Shares as
capital property and does not use or hold the Common Shares in the course of
carrying on, or otherwise in connection with, a business in Canada, and (b) who,
for the purposes of the Canada0United States Income Tax Convention (the
Treaty), is a resident of the United States, has never been a resident of
Canada, has not held or used (and does not hold or use) Common Shares in
connection with a permanent establishment or fixed base in Canada, and who
otherwise qualifies for the full benefits of the Treaty. Holders who meet all
such criteria in clauses (a) and (b) are referred to herein as a U.S. Holder
or U.S. Holders, and this summary only addresses such U.S. Holders. The
summary does not deal with special situations, such as particular circumstances
of traders or dealers, limited liability companies, tax-exempt entities,
insurers, financial institutions (including those to which the mark-to-market
provisions of the Tax Act apply), or otherwise.

This summary is based on the current provisions of the Tax Act
and the regulations thereunder, all proposed amendments to the Tax Act and
regulations publicly announced by the Minister of Finance (Canada) to the date
hereof, the current provisions of the Treaty and the current administrative
practices of the Canada Revenue Agency. It has been assumed that all currently
proposed amendments will be enacted as proposed and that there will be no other
relevant change in any governing law, the Treaty or administrative policy,
although no assurance can be given in these respects. This summary does not take
into account provincial, U.S. or other foreign income tax considerations, which
may differ significantly from those discussed herein. The summary also assumes
that the Company will be treated as a resident of Canada for purposes of the Tax
Act.

This summary is not exhaustive of all possible Canadian income
tax consequences. It is not intended as legal or tax advice to any particular
holder of Common Shares and should not be so construed. The tax consequences to
any particular holder of Common Shares will vary according to the status of that
holder as an individual, trust, corporation or member of a partnership, the
jurisdictions in which that holder is subject to taxation and, generally,
according to that holders particular circumstances. Each holder should
consult the holders own tax advisor with respect to the income tax consequences
applicable to the holders own particular circumstances.

Dividends

Dividends paid or deemed to be paid or credited by the Company
to a U.S. Holder are subject to Canadian withholding tax. Under the Treaty, the
rate of withholding tax on dividends paid to a U.S. Holder is generally limited
to 15% of the gross dividend (or 5% in the case of corporate shareholders owning
at least 10% of the Companys voting shares).

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Disposition

A US Holder is subject to tax under the Tax Act in respect of a
capital gain realized on the sale or other disposition of a Common Share only if
the US Holder holds the Common Share as taxable Canadian property for purposes
of the Tax Act and is not entitled to relief under the Treaty.

In general, provided the Common Shares are listed on a
prescribed exchange in Canada at the relevant time (maintaining the current
TSX-V listing would be sufficient for this purpose), Common Shares will not be
taxable Canadian property unless (i) at any time during the 60 month period
ending at the time of disposition, the US Holder and/or persons and entities not
dealing at arms length with the US Holder owned 25% or more of the issued
shares of any class or series of the capital stock of the Company, or (ii) the
US Holders Common Shares were acquired in certain types of tax-deferred
exchanges in consideration for property that was itself taxable Canadian
property.

Furthermore, even if Common Shares are so held as taxable
Canadian property, relief under the Treaty is generally available if and
provided that the value of the Common Shares is not derived principally from
real property situated in Canada at the relevant time. US Holders claiming
Treaty relief should do so by filing a Canadian income tax return for the
relevant taxation year, and should consult with their own advisors in this
regard.

Investors are advised to consult their tax advisors with
respect to the tax implications of acquiring, holding or disposing of Common
Shares and the application of any applicable income tax treaty.

United States Federal Income Tax
Consequences

The following is a general discussion of all material United
  States federal income tax consequences, under current law, generally applicable
  to a U.S. Holder (as hereinafter defined) of common shares of the Company. This
  discussion does not address individual consequences to persons subject to special
  provisions of federal income tax law, such as those described below as excluded
  from the definition of a U.S. Holder. In addition, this discussion does not
  cover any state, local or foreign tax consequences. (See “Canadian Federal
  Income Tax Considerations above”).

The following discussion is based upon the sections of the Internal
  Revenue Code of 1986, as amended (the “**Code**”),
  Treasury Regulations, published Internal Revenue Service (“**IRS**”)
  rulings, published administrative positions of the IRS and court decisions that
  are currently applicable, any or all of which could be materially and adversely
  changed, possibly on a retroactive basis, at any time. This discussion does
  not consider the potential effects, both adverse and beneficial, of any recently
  proposed legislation which, if enacted, could be applied, possibly on a retroactive
  basis, at any time. This discussion is for general information only and it is
  not intended to be, nor should it be construed to be, legal or tax advise to
  any holder or prospective holder of common shares of the Company and no opinion
  or representation with respect to the United States federal income tax consequences
  to any such holder or prospective holder is made. Accordingly, holders and prospective
  holders of common shares of the Company are urged to consult their own tax advisors
  about the federal, state, local, and foreign tax consequences of purchasing,
  owning and disposing of common shares of the Company.

As used herein, a “U.S. Holder” means a holder of
  common shares of the Company who is a citizen or individual resident of the
  United States, a corporation or partnership created or organized in or under
  the laws of the United States or of any political subdivision thereof or a trust
  whose income is taxable in the United States irrespective of source. This summary
  does not address the tax consequences to, and U.S. Holder does not include,
  persons subject to specific provisions of federal income tax law, such as tax-exempt
  organizations, qualified retirement plans, individual retirement accounts and
  other tax-deferred accounts, financial institutions, insurance companies, real
  estate investment trusts, regulated investment companies, broker-dealers, non-resident
  alien individuals, persons or entities that have a “functional currency”
  other than the U.S. dollar, shareholders who hold common shares as part of a
  straddle, hedging or a conversion transaction, and shareholders who acquired
  their common shares through the exercise of employee stock options or otherwise
  as compensation for services. This summary is limited to U.S. Holders who own
  common shares as capital assets. This summary does not address the consequences
  to a person or entity holding an interest in a shareholder or the consequences
  to a person of the ownership, exercise or disposition of any options, warrants
  or other rights to acquire common shares.

U.S. Holders receiving dividend distributions (including constructive
  dividends) with respect to common shares of the Company are required to include
  in gross income for United States federal income tax purposes the gross amount
  of such distributions equal to the U.S. dollar value of such dividends on the
  date of receipt (based on the exchange rate on such date) to the extent that
  the Company has current or accumulated earnings and profits, without reduction
  for any Canadian income tax withheld from such distributions. Such Canadian
  tax withheld may be credited, subject to certain limitations, against the U.S.
  Holder’s federal income tax liability or, alternatively, may be deducted
  in computing the U.S. Holder’s federal taxable income by those who itemize
  deductions. (See more detailed discussion at “Foreign Tax Credit”
  below). To the extent that distributions exceed current or accumulated earnings
  and profits of the Company, they will be treated first as a return of capital
  up to the U.S. Holder’s adjusted basis in the common shares and thereafter
  as gain from the sale or exchange of the common shares. Preferential tax rates
  for long-term capital gains are applicable to a U.S. Holder which is an individual,
  estate or trust. There are currently no preferential tax rates for long-term
  capital gains for a U.S. Holder which is a corporation.

In the case of foreign currency received as a dividend that
  is not converted by the recipient into U.S. dollars on the date of receipt,
  a U.S. Holder will have a tax basis in the foreign currency equal to its U.S.
  dollar value on the date of receipt. Generally any gain or loss recognized upon
  a subsequent sale or other disposition of the foreign currency, including the
  exchange for U.S. dollars, will be ordinary income or loss. However, an individual
  whose realized gain does not exceed $200 will not recognize that gain, to the
  extent that there are no expenses associated with the transaction that meet
  the requirement for deductibility as a trade or business expense (other than
  travel expenses in connection with a business trip) or as an expense for the
  production of income.

Dividends paid on the common shares of the Company will not generally
  be eligible for the dividends received deduction provided to corporations receiving
  dividends from certain United States corporations. A U.S. Holder which is a
  corporation may, under certain circumstances, be entitled to a 70% deduction
  of the United States source portion of dividends received from the Company (unless
  the Company qualifies as a “foreign personal holding company” or
  a “passive foreign investment company,” as defined below) if such
  U.S. Holder owns shares representing at least 10% of the voting power and value
  of the Company. The availability of this deduction is subject to several complex
  limitations which are beyond the scope of this discussion.

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Under current temporary Treasury Regulations, dividends paid
  on the Company’s common shares, if any, generally will not be subject
  to information reporting and generally will not be subject to U.S. backup withholding
  tax. However, dividends paid, and the proceeds of a sale of the Company’s
  common shares, in the U.S. through a U.S. or U.S. related paying agent (including
  a broker) will be subject to U.S. information reporting requirements and may
  also be subject to the 28% U.S. backup withholding tax, unless the paying agent
  is furnished with a duly completed and signed Form W-9. Any amounts withheld
  under the U.S. backup withholding tax rules will be allowed as a refund or a
  credit against the U.S. Holder’s U.S. federal income tax liability, provided
  the required information is furnished to the IRS.

A U.S. Holder who pays (or has withheld from distributions)
  Canadian income tax with respect to the ownership of common shares of the Company
  may be entitled, at the option of the U.S. Holder, to either receive a deduction
  or a tax credit for such foreign tax paid or withheld. Generally, it will be
  more advantageous to claim a credit because a credit reduces United States federal
  income taxes on a dollar-for-dollar basis, while a deduction merely reduces
  the taxpayer’s income subject to tax. This election is made on a year-by-year
  basis and applies to all foreign taxes paid by (or withheld from) the U.S. Holder
  during that year. There are significant and complex limitations which apply
  to the credit, among which is the general limitation that the credit cannot
  exceed the proportionate share of the U.S. Holder’s United States income
  tax liability that the U.S. Holder’s foreign sources income bears to his
  or its worldwide taxable income. In the determination of the application of
  this limitation, the various items of income and deduction must be classified
  into foreign and domestic sources. Complex rules govern this classification
  process. In addition, this limitation is calculated separately with respect
  to specific classes of income such as “passive income,” “high
  withholding tax interest,” “financial services income,” “shipping
  income,” and certain other classifications of income. Dividends distributed
  by the Company will generally constitute “passive income” or, in
  the case of certain U.S. Holders, “financial services income” for
  these purposes. The availability of the foreign tax credit and the application
  of the limitations on the credit are fact specific, and U.S. Holders of common
  shares of the Company should consult their own tax advisors regarding their
  individual circumstances.

A U.S. Holder will recognize gain or loss upon the sale of common
  shares of the Company equal to the difference, if any, between (i) the amount
  of cash plus the fair market value of any property received, and (ii) the shareholder’s
  tax basis in the common shares of the Company. Preferential tax rates apply
  to long-term capital gains of U.S. Holders who are individuals, estates or trusts.
  This gain or loss will be capital gain or loss if the common shares are a capital
  asset in the hands of the U.S. Holder, which will be long-term capital gain
  or loss if the common shares of the Company are held for more than one year.
  Deductions for net capital loss may be carried over to be used in later tax
  years until such net capital loss is thereby exhausted. For U.S. Holders that
  are corporations (other than corporations subject to Subchapter S of the Code),
  an unused net capital loss may be carried back three years and carried forward
  five years from the loss year to be offset against capital gains until such
  net capital loss is thereby exhausted.

In the following circumstances, the above sections of this discussion
  may not describe the United States federal income tax consequences resulting
  from the holding and disposition of common shares:

A U.S. Holder who holds stock in a foreign corporation during
  any year in which such corporation qualifies as a passive foreign investment
  company ("PFIC") is subject to U.S. federal income taxation of that
  foreign corporation under one of two alternative tax methods at the election
  of each such U.S. Holder.

Section 1297 of the Code defines a PFIC as a foreign (non-U.S.)
  corporation, if for any taxable year, either (i) 75% or more of its gross income
  is "passive income," which includes but is not limited to interest,
  dividends and certain rents and royalties or (ii) the average percentage, by
  value (or, if the company is a controlled foreign corporation or makes an election,
  adjusted tax basis), of its assets that produce or are held for the production
  of "passive income" is 50% or more. The Company believes that it is
  presently a PFIC.

As a PFIC, each U. S. Holder’s income or gain with respect
  to a disposition or deemed disposition of the Company’s shares or a distribution
  payable on such shares will generally be subject to tax at the highest marginal
  rates applicable to ordinary income and certain interest charges discussed below,
  unless the U.S. Holder has timely made a “qualified electing fund”
  election or a “mark-to-market” election for those shares. A U.S.
  Holder who elects in a timely manner to treat the Company as a Qualified Electing
  Fund ("QEF"), as defined in the Code, (an "Electing U.S. Holder")
  will be subject, under Section 1293 of the Code, to current federal income tax
  for any taxable year in which the Company's qualifies as a PFIC on his pro-rata
  share of the Company's (i) "net capital gain" (the excess of net long-term
  capital gain over net short-term capital loss), which will be taxed as long-term
  capital gain to the Electing U.S. Holder 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. Holder, in each case, for the U.S. Holder's
  taxable year in which (or with which) the Company taxable year ends, regardless
  of whether such amounts are actually distributed. A U.S. Holder's tax basis
  in the common shares will be increased by such amount that is included in income
  but not distributed.

A QEF election also allows the Electing U.S. Holder to (i) generally
  treat any gain realized on the disposition of his common shares (or deemed to
  be realized on the pledge of his common shares) as capital gain; (ii) treat
  his share of the Company's net capital gain, if any, as long-term capital gain
  instead of ordinary income, and (iii) either avoid interest charges resulting
  from PFIC status altogether (see discussion of interest charge below), or make
  an annual election, subject to certain limitations, to defer payment of current
  taxes on his share of the Company's annual realized net capital gain and ordinary
  earnings subject, however, to an interest charge. If the Electing U.S. Holder
  is not a corporation, such an interest charge would be treated as nondeductible
  "personal interest."

The procedure a U.S. Holder must comply with in making a timely
  QEF election will depend on whether the year of the election is the first year
  in the U.S. Holder's holding period in which the Company is a PFIC. If the U.S.
  Holder makes a QEF election in such first year, (sometimes referred to as a
  "Pedigreed QEF Election"), then the U.S. Holder may make the QEF election
  by simply filing the appropriate documents at the time the U.S. Holder files
  its tax return for such first year. If, however, the Company qualified as a
  PFIC in a prior year, then in addition to filing documents, the U.S. Holder
  may also elect to recognize as an "excess distribution" (i) under
  the rules of Section 1291 (discussed below), any gain that he would otherwise
  recognize if the U.S. Holder sold his stock on the application date or (ii)
  if the Company is a controlled foreign corporation ("CFC"), the Holder's
  pro rata share of the corporation's earnings and profits. (But see "Elimination
  of Overlap Between Subpart F Rules and PFIC Provisions"). Either the deemed
  sale election or the deemed dividend election will result in the U.S. Holder
  being deemed to have made a timely QEF election.

With respect to a situation in which a Pedigreed QEF election
  is made, if the Company no longer qualifies as a PFIC in a subsequent year,
  normal Code rules and not the PFIC rules will apply.

If a U.S. Holder has not made a QEF Election at any time (a "Non-electing
  U.S. Holder"), then special taxation rules under Section 1291 of the Code
  will apply to (i) gains realized on the disposition (or deemed to be realized
  by reason of a pledge) of his common shares and (ii) certain "excess distributions",
  as specially defined, by the Company.

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A Non-electing U.S. Holder generally would be required to pro-rate
  all gains realized on the disposition of his common shares and all excess distributions
  over the entire holding period for the common shares. All gains or excess distributions
  allocated to prior years of the U.S. Holder (other than years prior to the first
  taxable year of the Company during such U.S. Holder's holding period and beginning
  after January 1, 1987 for which it was a PFIC) would be taxed at the highest
  marginal tax rate for each such prior year applicable to ordinary income. The
  Non-electing U.S. Holder 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, non-corporate U.S.
  Holder must treat this interest charge as "personal interest" which,
  as discussed above, is wholly 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 the Company is a PFIC for any taxable year during which a
  Non-electing U.S. Holder holds common shares, then the Company will continue
  to be treated as a PFIC with respect to such common shares, even if it is no
  longer by definition a PFIC. A Non-electing U.S. Holder may terminate this deemed
  PFIC status by electing to recognize gain (which will be taxed under the rules
  discussed above for Non-Electing U.S. Holders) as if such common shares had
  been sold on the last day of the last taxable year for which it was a PFIC.

Under Section 1291(f) of the Code, the Department of the Treasury
  has issued proposed regulations that would treat as taxable certain transfers
  of PFIC stock by Non-electing U.S. Holders that are generally not otherwise
  taxed, such as gifts, exchanges pursuant to corporate reorganizations, and transfers
  at death.

If a U.S. Holder makes a QEF Election that is not a Pedigreed
  Election (i.e., it is made after the first year during which the Company is
  a PFIC and the U.S. Holder holds shares of the Company) (a "Non-Pedigreed
  Election"), the QEF rules apply prospectively but do not apply to years
  prior to the year in which the QEF first becomes effective. U.S. Holders are
  encouraged to consult their tax advisors regarding the specific consequences
  of making a Non-Pedigreed QEF Election.

Certain special, generally adverse, rules will apply with respect
  to the common shares while the Company is a PFIC whether or not it is treated
  as a QEF. For example under Section 1298(b)(6) of the Code, a U.S. Holder 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.

*Mark-to-Market Election for PFIC Stock*

A U.S. Holder of a PFIC may make a mark-to-market election with
  respect to the stock of the PFIC if such stock is marketable as defined below.
  This provision is designed to provide a current inclusion provision for persons
  that are Non-Electing Holders. Under the election, any excess of the fair market
  value of the PFIC stock at the close of the tax year over the Holder's adjusted
  basis in the stock is included in the Holder's income. The Holder may deduct
  any excess of the adjusted basis of the PFIC stock over its fair market value
  at the close of the tax year. However, deductions are limited to the net mark-to-market
  gains on the stock that the Holder included in income in prior tax years, or
  so called "unreversed inclusions."

For purposes of the election, PFIC stock is marketable if it
  is regularly traded on (1) a national securities exchange that is registered
  with the Securities and Exchange Commission (“SEC”), (2) the national
  market system established under Section 11A of the Securities Exchange Act of
  1934, or (3) an exchange or market that the IRS determines has rules sufficient
  to ensure that the market price represents legitimate and sound fair market
  value.

A Holder's adjusted basis of PFIC stock is increased by the income
  recognized under the mark-to-market election and decreased by the deductions
  allowed under the election. If a U.S. Holder owns PFIC stock indirectly through
  a foreign entity, the basis adjustments apply to the basis of the PFIC stock
  in the hands of the foreign entity for the purpose of applying the PFIC rules
  to the tax treatment of the U.S. owner. Similar basis adjustments are made to
  the basis of the property through which the U.S. persons hold the PFIC stock.

Income recognized under the mark-to-market election and gain
  on the sale of PFIC stock with respect to which an election is made is treated
  as ordinary income. Deductions allowed under the election and loss on the sale
  of PFIC with respect to which an election is made, to the extent that the amount
  of loss does not exceed the net mark-to-market gains previously included, are
  treated as ordinary losses. The U.S. or foreign source of any income or losses
  is determined as if the amount were a gain or loss from the sale of stock in
  the PFIC.

If PFIC stock is owned by a controlled foreign corporation (“CFC”),
  the CFC is treated as a U.S. person that may make the mark-to-market election.
  Amounts includable in the CFC's income under the election are treated as foreign
  personal holding company income, and deductions are allocable to foreign personal
  holding company income. A CFC is a foreign corporation in which more than 50%
  of the voting power of all classes of stock or the total value of the stock
  is owned, directly or indirectly, by U.S. Holders, each of whom own 10% or more
  of the total combined voting power.

The above provisions apply to tax years of U.S. persons beginning
  after December 31, 1997, and to tax years of foreign corporations ending with
  or within such tax years of U.S. persons.

The rules of Code Section 1291 applicable to nonqualified funds
  generally do not apply to a U.S. Holder for tax years for which a mark-to-market
  election is in effect. If Code Section 1291 is applied and a mark-to-market
  election was in effect for any prior tax year, the U.S. Holder's holding period
  for the PFIC stock is treated as beginning immediately after the last tax year
  of the election. However, if a taxpayer makes a mark-to-market election for
  PFIC stock that is a nonqualified fund after the beginning of a taxpayer's holding
  period for such stock, a coordination rule applies to ensure that the taxpayer
  does not avoid the interest charge with respect to amounts attributable to periods
  before the election.

The foregoing discussion is based on currently effective provisions
  of the Code, existing and proposed regulations thereunder, and current administrative
  rulings and court decisions, all of which are subject to change. Any such change
  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 instances have not been promulgated and which may have retroactive effect.
  There can be no assurance that any of these proposals will be enacted or promulgated,
  and if so, the form they will take or the effect that they may have on this
  discussion. Accordingly, and due to the complexity of the PFIC rules, U.S. Holders
  of the Company are strongly urged to consult their own tax advisors concerning
  the impact of these rules on their investment in the Company.

If 50% or more of the combined voting power or total value of
  the Company’s outstanding shares are held, directly or indirectly, by
  citizens or residents of the United States, United States domestic partnerships
  or corporations, or estates or trusts other than foreign estates or trusts (as
  defined by the Code Section 7701(a)(31)), and the Company is found to be engaged
  primarily in the business of investing, reinvesting, or trading in securities,
  commodities, or any interest therein, it is possible that the Company may be
  treated as a “foreign investment company” as defined in Section
  1246 of the Code, causing all or part of any gain realized by a U.S. Holder
  selling or exchanging common shares to be treated as ordinary income rather
  than capital gain.

If more than 50% of the voting power of all classes of shares
  or the total value of the shares of the Company is owned, directly or indirectly,
  by citizens or residents of the United States, United States domestic partnerships
  and corporations or estates or trusts other than foreign estates or trusts,
  each of whom own 10% or more of the total combined voting power of all classes
  of shares of the Company (“**United States shareholder**”),
  the Company could be treated as a “controlled foreign corporation”
  under Subpart F of the Code. This classification would effect many complex results
  one of which is the inclusion of certain income of a CFC which is subject to
  current U.S. tax. The United States generally taxes a United States shareholder
  of a CFC currently on their pro rata shares of the Subpart F income of the CFC.
  Such U.S. shareholders are generally treated as having received a current distribution
  out of the CFC’s Subpart F income and are also subject to current U.S.
  tax on their pro rata shares of the CFC’s earnings invested in U.S. property.
  The foreign tax credit described above may reduce the U.S. tax on these amounts.
  In addition, under Section 1248 of the Code, gain from the sale or exchange
  of shares by a U.S. Holder of common shares of the Company who is or was a United
  States shareholder at any time during the five-year period ending with the sale
  or exchange is treated as ordinary income to the extent of earnings and profits
  of the Company attributable to the shares sold or exchanged. If a foreign corporation
  is both a PFIC and a CFC, the foreign corporation generally will not be treated
  as a PFIC with respect to United States shareholders of the CFC. This rule generally
  will be effective for taxable years of United States shareholders beginning
  after 1997 and for taxable years of foreign corporations ending with or within
  such taxable years of United States shareholders. Special rules apply to United
  States shareholders who are subject to the special taxation rules under Section
  1291 discussed above with respect to a PFIC. Because of the complexity of Subpart
  F, and because it is not clear that Subpart F would apply to U.S. Holders of
  common shares of the Company, a more detailed review of these rules is outside
  of the scope of this discussion.

10.F. Dividends and Paying Agents

Not Applicable.

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10.G. Statement by Experts

Not Applicable.

10.H. Document on Display

The documents concerning the Company referred to in this Annual
Report may be viewed at Suite 725, 666 Burrard Street, Vancouver, British
Columbia, Canada during normal business hours. Copies of our financial
statements and other continuous disclosure documents required under the British
Columbia Securities Act are available for viewing on the internet at
www.SEDAR.com. Copies of our financial statements and other continuous
disclosure documents are also available for viewing at www.sec.gov

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

We are not subject to any material market risks at this
time.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY
SECURITIES

Not Applicable.

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.

ITEM 15. CONTROLS AND PROCEDURES

The Company carried out an evaluation of the effectiveness of
the design and operation of the Companys disclosure controls and procedures as
of March 31, 2007 being the date of our most recently completed fiscal year.
Based upon that evaluation, our chief executive officer and our chief financial
officer concluded that the Companys disclosure controls and procedures are
effective in timely alerting management to material information relating to us
required to be included in our periodic SEC filings.

Disclosure controls and procedures are controls 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 (the
Exchange Act) is recorded, processed, summarized and reported, within the time
periods 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 our
reports filed under the Exchange Act is accumulated and communicated to
management, including our chief executive officer and chief financial officer to
allow timely decisions regarding required disclosure.

- 53 -

---

During our most recently completed fiscal year ended March 31,
2007, there were no changes in the Companys internal control over financial
reporting that have materially affected, or are reasonably likely to affect, our
internal control over financial reporting.

ITEM 16. RESERVED

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

The Company does not have an audit committee financial expert
serving on its audit committee. The Company has had some difficulty in
attracting financial experts to serve on its board of directors, due to the
Companys small size. The Company believes its financial statements are not
complex, and the Company does not view the retention of a financial expert as
critical to its further development. However, the Company is currently
considering appointing a director to the board and to the audit committee who
would be a financial expert.

ITEM 16B. CODE OF ETHICS

The Company has not formally adopted a written code of ethics.
The Company is reviewing the adoption of a formal code of ethics. The Company
has guided its conduct by the provisions of the CBCA and the securities
legislation applicable to it. Due to its size, management had not deemed it
necessary to adopt a formal written code of ethics at this time.

ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES

Fees incurred with Amisano Hanson for audit and non-audit
services in the last two fiscal years for audit fees are outlined in the
following table.

Table No. 11Principal Accounting Fees

Nature of Services
    Fees Paid to Auditor in
      Year Ended March 31, 2007.
    Fees Paid to Auditor in Year Ended
      March 31, 2006.Audit
      Fees(1)
    $16,800
    $16,800Audit-Related
      Fees(2)
    $1,930
    NilTax
      Fees(3)
    Nil
    $1,008All Other
      Fees(4)
    Nil
    NilTotal
    $18,730
    $17,808


Notes:

(1) Audit Fees include fees necessary to perform the annual
audit and quarterly reviews of the Corporations consolidated financial
statements. Audit Fees include fees for review of tax provisions and for
accounting consultations on matters reflected in the financial statements. Audit
Fees also include audit or other attest services required by legislation or
regulation, such as comfort letters, consents, reviews of securities filings and
statutory audits.

(2) Audit-Related Fees include services that are
traditionally performed by the auditor. These audit-related services include
employee benefit audits, due diligence assistance, accounting consultations on
proposed transactions, internal control reviews and audit or attest services not
required by legislation or regulation.

(3) Tax Fees include fees for all tax services other than
those included in Audit Fees and Audit-Related Fees. This category includes
fees for tax compliance, tax planning and tax advice. Tax planning and tax
advice includes assistance with tax audits and appeals, tax advice related to
mergers and acquisitions, and requests for rulings or technical advice from tax
authorities.

(4) All Other Fees include all other non-audit services.

- 54 -

---

A. Audit Fees

The aggregate fees billed by the auditors of the Company were
$16,800 and $16,800 for the fiscal years ended March 31, 2006 and 2007,
respectively. These fees relate to the audit of the Companys financial
statements.

B. Audit-Related Fees

$1,930.00.

C. Tax Fees

Nil

D. All Other Fees

Nil

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES

Not Applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE
ISSUER/AFFILIATED PURCHASERS

Not Applicable.

PART III

ITEM 17. FINANCIAL STATEMENTS

This Annual Report on Form 20-F includes the Companys
consolidated audited financial statements for the years ended March 31, 2007 and
2006, including the following:

|1. | Independent Auditors Report of Amisano Hanson dated July
      3, 2007.                                 
|-- | ---------------------------------------------------------------------------------------------------------
|   |                                                                                                          
|2. | Balance Sheets as at March 31, 2007 and March 31,
      2006.                                            
|   |                                                                                                          
|3. | Statements of Operations for the years ended March 31,
      2007, 2006 and 2005.                        
|   |                                                                                                          
|4. | Statements of Cash Flows for the years ended March 31,
      2007, 2006 and 2005.                        
|   |                                                                                                          
|5. | Statement of Shareholders Equity for the period for the
      years ended March 31, 2007, 2006 and 2005.
|   |                                                                                                          
|6. | Notes to the Financial
Statements.                                                                       

ITEM 18. FINANCIAL STATEMENTS

The Company has elected to provide financial statements
pursuant to Item 17.

ITEM 19. EXHIBITS

The following exhibits are included in this Form 20-F:

- 55 -

---

|EXHIBITNUMBER | DESCRIPTION OFEXHIBIT                                                                                                                                                    
|------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.1           | Earn-in Agreement between the Company
      and Meridian dated July 31, 2006(1)                                                                                          
|              |                                                                                                                                                                          
|4.2           | Amended and Restated Option and
      Royalty Agreement among the Company, Golden Sands and AHL dated July 7,
      2006(1)                                              
|              |                                                                                                                                                                          
|4.3           | Amending
      Agreement to the Amended and Restated Option and Royalty Agreement among
      the Company, Golden Sands and AHL, dated April 11, 2007                    
|              |                                                                                                                                                                          
|4.4           | Malone Property Agreement between
      the Company and Newmont North America Exploration Ltd., dated April 17,
      2006(1)                                            
|              |                                                                                                                                                                          
|4.5           | Investor
      Relations Agreement between Renmark Financial Communications Inc. and the
      Company dated June 15, 2007                                               
|              |                                                                                                                                                                          
|4.6           | Corporate
      Advisory Agreement between the Company and Excelsior Communications Incorporated
      dated September 1, 2007.                                          
|              |                                                                                                                                                                          
|8.1           | Subsidiaries of the Company                                                                                                                                              
|              |                                                                                                                                                                          
|              | Evolving Gold Corp., incorporated
      in the jurisdiction of Nevada.                                                                                                   
|              |                                                                                                                                                                          
|12.1          | Certification
      of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002                                                           
|              |                                                                                                                                                                          
|12.2          | Certification
      of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002                                                           
|              |                                                                                                                                                                          
|13.1          | Certification
      of Chief Executive Officer pursuant to pursuant to 18 U.S.C. Section 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|              |                                                                                                                                                                          
|13.2          | Certification
      of Chief Financial Officer pursuant to pursuant to 18 U.S.C. Section 1350,
      as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1) Incorporate by reference to the Companys Annual Report on
Form 20-F for the fiscal year ended March 31, 2006.

- 56 -

---

SIGNATURE

Pursuant to the requirements of Section 12 of the Securities
  Exchange Act of 1934, the Registrant certifies that it meets all of the requirements
  for filing of Form 20-F and has duly caused this Annual Report to be signed
  on its behalf by the undersigned, thereunto duly authorized.

| |     | EVOLVING GOLD
        CORP.   
| | --- | ------------------------------
| |     | (Registrant)                  
| | By: | /s/ Robert F. Bick            
| |     | Name:
        ROBERT F. BICK  
| |     | Title: Chief Executive Officer
| |     |                               
| |     | DATE: October 15, 2007        

---

EVOLVING GOLD CORP.

(An Exploration Stage Company)

REPORT AND CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2007 and 2006

(Stated in Canadian Dollars)

---

|PARTNERSHIPOFINCORPORATEDPROFESSIONALS | AMISANOHANSON       
|-------------------------------------- | --------------------
|                                       | CHARTEREDACCOUNTANTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
  FIRM

To the Shareholders,
  Evolving Gold Corp.
  (An Exploration Stage Company)

We have audited the consolidated balance sheets of Evolving Gold
  Corp. as at March 31, 2007 and 2006 and the consolidated statements of operations,
  cash flows and shareholders equity for each of the years in the three
  year period ended March 31, 2007. These financial statements are the responsibility
  of the Companys management. Our responsibility is to express an opinion
  on these financial statements based on our audits.

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

In our opinion, these consolidated financial statements present
  fairly, in all material respects, the financial position of the Company as at
  March 31, 2007 and 2006 and the results of its operations and its cash flows
  for each of the years in the three year period ended March 31, 2007, in accordance
  with Canadian generally accepted accounting principles.

|Vancouver, Canada | AMISANO HANSON     
|----------------- | ---------------------
|July 3, 2007      | Chartered Accountants

|750 WEST PENDER STREET, SUITE 604 | TELEPHONE: | 604-689-0188     
|--------------------------------- | ---------- | -----------------
|VANCOUVER CANADA                  | FACSIMILE: | 604-689-9773     
|V6C 2T7                           | E-MAIL:    | amishan@telus.net

---

EVOLVING GOLD CORP.
  (An Exploration Stage Company)
  CONSOLIDATED BALANCE SHEETS
  March 31, 2007 and 2006
  (Stated in Canadian Dollars)

|ASSETS                                                    |   | 2007       |   |   | 2006       |  
|--------------------------------------------------------- | - | ---------- | - | - | ---------- | -
|                                                          |   |            |   |   |            |  
|Current                                                   |   |            |   |   |            |  
|Cash                                                      | $ | 65,942     |   | $ | 222,953    |  
|Other receivables                                         |   | 22,046     |   |   | 4,961      |  
|Prepaid expenses 
      Note 6                           |   | 23,331     |   |   | -          |  
|                                                          |   |            |   |   |            |  
|                                                          |   | 111,319    |   |   | 227,914    |  
|Equipment  Note 3                                        |   | 22,543     |   |   | 1,187      |  
|Mineral properties  Notes 4 and 5, Schedule
      1      |   | 1,113,875  |   |   | 737,297    |  
|                                                          |   |            |   |   |            |  
|                                                          | $ | 1,247,737  |   | $ | 966,398    |  
|                                                          |   |            |   |   |            |  
|LIABILITIES                                               |   |            |   |   |            |  
|                                                          |   |            |   |   |            |  
|Current                                                   |   |            |   |   |            |  
|Accounts payable and accrued liabilities
       Note 6   | $ | 288,995    |   | $ | 107,254    |  
|                                                          |   |            |   |   |            |  
|SHAREHOLDERS' EQUITY                                      |   |            |   |   |            |  
|                                                          |   |            |   |   |            |  
|Share capital  Notes 4, 5 and 9                          |   |            |   |   |            |  
|Authorized:                                               |   |            |   |   |            |  
|Unlimited number of
      common shares without par value |   |            |   |   |            |  
|Issued:                                                   |   |            |   |   |            |  
|12,529,842 shares
      (2006: 10,269,842 shares)         |   | 2,408,045  |   |   | 1,713,844  |  
|Share subscriptions  Note 9                              |   | 100,000    |   |   | -          |  
|Contributed surplus  Note 5                              |   | 427,090    |   |   | 290,415    |  
|Deficit accumulated during the exploration
      stage    |   | (1,976,393 | ) |   | (1,145,115 | )
|                                                          |   |            |   |   |            |  
|                                                          |   | 958,742    |   |   | 859,144    |  
|                                                          |   |            |   |   |            |  
|                                                          | $ | 1,247,737  |   | $ | 966,398    |  

Commitments  Notes 4, 5, 9 and 10 
  Subsequent Events  Notes 4, 5 and 9

APPROVED BY THE DIRECTORS:

|Robert Bick | Director | Donald Gee | Director
|------------- | -------- | ------------ | --------
|Robert Bick   |          | Donald Gee   |         

SEE ACCOMPANYING NOTES

---

EVOLVING GOLD CORP.
  (An Exploration Stage Company)
  CONSOLIDATED STATEMENTS OF OPERATIONS
  for the years ended March 31, 2007, 2006 and 2005
  (Stated in Canadian Dollars)

|                                                 |   | 2007       |   |   | 2006      |   |   | 2005      |  
|------------------------------------------------ | - | ---------- | - | - | --------- | - | - | --------- | -
|                                                 |   |            |   |   |           |   |   |           |  
|Expenses                                         |   |            |   |   |           |   |   |           |  
|Accounting and audit                             | $ | 46,630     |   | $ | 47,852    |   | $ | 16,390    |  
|Bank charges and interest                        |   | 2,031      |   |   | 1,593     |   |   | 913       |  
|Consulting  Note
      6                        |   | 90,600     |   |   | 51,605    |   |   | 35,264    |  
|Depreciation                                     |   | 1,750      |   |   | 44        |   |   | -         |  
|Legal                                            |   | 91,469     |   |   | 55,715    |   |   | 30,820    |  
|Management fees  Note 6                         |   | 145,059    |   |   | 7,279     |   |   | 103,879   |  
|Office and miscellaneous                         |   | 35,897     |   |   | 13,713    |   |   | 4,689     |  
|Promotion, advertising and travel 
      Note 6 |   | 93,618     |   |   | 109,473   |   |   | 31,389    |  
|Rent and administration
      fees  Note 6      |   | 34,250     |   |   | 15,007    |   |   | 16,800    |  
|Stock-based compensation  Note 5                |   | 136,675    |   |   | 224,925   |   |   | 128,165   |  
|Transfer agent and filing
      fees             |   | 33,009     |   |   | 19,535    |   |   | 33,909    |  
|Write-down of exploration expenditures           |   | 120,290    |   |   | 44,038    |   |   | -         |  
|                                                 |   |            |   |   |           |   |   |           |  
|Net loss for the year                            | $ | (831,278   | ) | $ | (590,779  | ) | $ | (402,218  | )
|                                                 |   |            |   |   |           |   |   |           |  
|Basic and diluted loss per share                 | $ | (0.07      | ) | $ | (0.07     | ) | $ | (0.07     | )
|                                                 |   |            |   |   |           |   |   |           |  
|Weighted average number of shares outstanding    |   | 11,581,952 |   |   | 8,505,316 |   |   | 5,601,196 |  

SEE ACCOMPANYING NOTES

---

EVOLVING GOLD CORP.
  (An Exploration Stage Company)
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  for the years ended March 31, 2007, 2006 and 2005
  (Stated in Canadian Dollars)

|                                                                       |   | 2007     |   |   | 2006     |   |   | 2005     |  
|---------------------------------------------------------------------- | - | -------- | - | - | -------- | - | - | -------- | -
|Operating Activities                                                   |   |          |   |   |          |   |   |          |  
|Net loss for the year                                                  | $ | (831,278 | ) | $ | (590,779 | ) | $ | (402,218 | )
|Add items not affecting cash:                                          |   |          |   |   |          |   |   |          |  
|Stock-based
      compensation                                         |   | 136,675  |   |   | 224,925  |   |   | 128,165  |  
|Depreciation                                                           |   | 1,750    |   |   | 44       |   |   | -        |  
|Write-down
      of mineral exploration expenditures                   |   | 120,290  |   |   | 44,038   |   |   | -        |  
|Changes in non-cash working capital items
      related to operations: |   |          |   |   |          |   |   |          |  
|Other
      receivables                                                |   | (17,085  | ) |   | (976     | ) |   | (6       | )
|Prepaid expenses                                                       |   | (23,331  | ) |   | -        |   |   | 25,550   |  
|Accounts
      payable and accrued liabilities                         |   | 181,741  |   |   | 252,414  |   |   | 125,217  |  
|                                                                       |   |          |   |   |          |   |   |          |  
|                                                                       |   | (431,238 | ) |   | (70,334  | ) |   | (123,292 | )
|Investing Activities                                                   |   |          |   |   |          |   |   |          |  
|Purchase of equipment                                                  |   | (23,106  | ) |   | (1,231   | ) |   | -        |  
|Deferred exploration costs                                             |   | (374,551 | ) |   | (147,729 | ) |   | (56,093  | )
|Amounts received pursuant
      to earn-in agreement                   |   | 168,552  |   |   | -        |   |   | -        |  
|Acquisition of resource properties                                     |   | (106,869 | ) |   | (173,466 | ) |   | (37,047  | )
|                                                                       |   |          |   |   |          |   |   |          |  
|                                                                       |   | (335,974 | ) |   | (322,426 | ) |   | (93,140  | )
|Financing Activities                                                   |   |          |   |   |          |   |   |          |  
|Issue of common shares for cash, net of
      share issue expense      |   | 510,201  |   |   | 622,959  |   |   | 96,000   |  
|Share subscriptions                                                    |   | 100,000  |   |   | -        |   |   | -        |  
|Advance payable                                                        |   | -        |   |   | (10,000  | ) |   | 10,000   |  
|                                                                       |   |          |   |   |          |   |   |          |  
|                                                                       |   | 610,201  |   |   | 612,959  |   |   | 106,000  |  
|                                                                       |   |          |   |   |          |   |   |          |  
|Increase (decrease) in cash during the year                            |   | (157,011 | ) |   | 220,199  |   |   | (110,432 | )
|                                                                       |   |          |   |   |          |   |   |          |  
|Cash, beginning of the year                                            |   | 222,953  |   |   | 2,754    |   |   | 113,186  |  
|                                                                       |   |          |   |   |          |   |   |          |  
|Cash, end of the year                                                  | $ | 65,942   |   | $ | 222,953  |   | $ | 2,754    |  
|                                                                       |   |          |   |   |          |   |   |          |  
|Supplemental disclosure of cash flow information:                      |   |          |   |   |          |   |   |          |  
|Shares issued for share
      issue expense                            | $ | 30,000   |   | $ | 29,100   |   | $ | -        |  
|Shares issued for acquisition of mineral
      property                |   | 184,000  |   |   | 244,000  |   |   | 96,000   |  
|Shares issued for debt
      settlement                                |   | -        |   |   | 285,610  |   |   | -        |  
|Warrants issued for finders fee                                       |   | -        |   |   | 11,640   |   |   | -        |  
|Exchange of special warrants
      for common shares                   |   | -        |   |   | -        |   |   | 306,500  |  
|                                                                       |   |          |   |   |          |   |   |          |  
|                                                                       | $ | 214,000  |   | $ | 570,350  |   | $ | 402,500  |  
|Supplemental disclosure of cash flow information                       |   |          |   |   |          |   |   |          |  
|Cash paid for:                                                         |   |          |   |   |          |   |   |          |  
|Interest                                                               | $ | -        |   | $ | -        |   | $ | -        |  
|                                                                       |   |          |   |   |          |   |   |          |  
|Income taxes                                                           | $ | -        |   | $ | -        |   | $ |          |  

SEE ACCOMPANYING NOTES

---

EVOLVING GOLD CORP.
  (An Exploration Stage Company)
  CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
  for the years ended March 31, 2007, 2006 and 2005
  (Stated in Canadian Dollars)

|                                                 |  |            |  |  |               |  |   |                  |  |  |            |   |   |             |   |   |               |  |   |         |  |   | Deficit     |   |   |          |  
|------------------------------------------------ |  | ---------- |  |  | ------------- |  | - | ---------------- |  |  | ---------- | - | - | ----------- | - | - | ------------- |  | - | ------- |  | - | ----------- | - | - | -------- | -
|                                                 |  |            |  |  |               |  |   |                  |  |  |            |   |   |             |   |   |               |  |   |         |  |   | Accumulated |   |   |          |  
|                                                 |  |            |  |  |               |  |   |                  |  |  |            |   |   |             |   |   |               |  |   |         |  |   | During the  |   |   |          |  
|                                                 |  |            |  |  | Share Capital |  |   | Special Warrants |  |  | Share      |   |   | Contributed |   |   | Exploration   |  |   |         | 
|                                                 |  |            |  |  | Number        |  |   | Amount           |  |  | Number     |   |   | Amount      |   |   | Subscriptions |  |   | Surplus |  |   | Stage       |   |   | Total    |  
|                                                 |  |            |  |  |               |  |   |                  |  |  |            |   |   |             |   |   |               |  |   |         |  |   |             |   |   |          |  
|Balance, March 31, 2004                          |  |            |  |  | 100           |  | $ | 100              |  |  | 6,150,000  |   | $ | 306,500     |   | $ | -             |  | $ | -       |  | $ | (152,118    | ) | $ | 154,482  |  
|Issuance of shares                               |  |            |  |  |               |  |   |                  |  |  |            |   |   |             |   |   |               |  |   |         |  |   |             |   |   |          |  
|Pursuant to conversion
      of special warrants |  |            |  |  |               |  |   |                  |  |  |            |   |   |             |   |   |               |  |   |         |  |   |             |   |  
|Series A warrants                              |  |            |  |  | 1,400,000     |  |   | 14,000           |  |  | (1,400,000 | ) |   | (14,000     | ) |   | -             |  |   | -       |  |   | -           |   |   | -        |  
|Series B warrants                              |  |            |  |  | 3,250,000     |  |   | 162,500          |  |  | (3,250,000 | ) |   | (162,500    | ) |   | -             |  |   | -       |  |   | -           |   |   | -        |  
|Series F warrants                              |  |            |  |  | 1,100,000     |  |   | 110,000          |  |  | (1,100,000 | ) |   | (110,000    | ) |   | -             |  |   | -       |  |   | -           |   |   | -        |  
|Series L warrants                              |  |            |  |  | 200,000       |  |   | 10,000           |  |  | (200,000   | ) |   | (10,000     | ) |   | -             |  |   | -       |  |   | -           |   |   | -        |  
|Series P warrants                              |  |            |  |  | 200,000       |  |   | 10,000           |  |  | (200,000   | ) |   | (10,000     | ) |   | -             |  |   | -       |  |   | -           |   |   | -        |  
|Pursuant to resource property acquisition        |  | - at $0.16 |  |  | 600,000       |  |   | 96,000           |  |  | -          |   |   | -           |   |   | -             |  |   | -       |  |   | -           |   |   | 96,000   |  
|Pursuant to private placement                    |  | - at $0.16 |  |  | 600,000       |  |   | 96,000           |  |  | -          |   |   | -           |   |   | -             |  |   | -       |  |   | -           |   |   | 96,000   |  
|Stock-based compensation charge                  |  |            |  |  | -             |  |   | -                |  |  | -          |   |   | -           |   |   | -             |  |   | 128,165 |  |   | -           |   |   | 128,165  |  
|Net loss for the year ended March 31, 2005       |  |            |  |  | -             |  |   | -                |  |  | -          |   |   | -           |   |   | -             |  |   | -       |  |   | (402,218    | ) |   | (402,218 | )
|                                                 |  |            |  |  |               |  |   |                  |  |  |            |   |   |             |   |   |               |  |   |         |  |   |             |   |   |          |  
|                                                 |  |            |  |  | 7,350,100     |  |   | 498,600          |  |  | -          |   |   | -           |   |   | -             |  |   | 128,165 |  |   | (554,336    | ) |   | 72,429   |  

contd

SEE ACCOMPANYING NOTES

---

|EVOLVING GOLD CORP.                               | Continued
|------------------------------------------------- | ---------
|(An Exploration Stage Company)                    |          
|CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY   |          
|for the years ended March 31, 2007, 2006 and 2005 |          
|(Stated in Canadian Dollars)                      |          

|                                                           |  |            |         |  |               |         |   |                  |   |  |        |  |   |             |   |  |               |   |   |         |   |   | Deficit     |         |   |          |  
|---------------------------------------------------------- |  | ---------- | ------- |  | ------------- | ------- | - | ---------------- | - |  | ------ |  | - | ----------- | - |  | ------------- | - | - | ------- | - | - | ----------- | ------- | - | -------- | -
|                                                           |  |            |         |  |               |         |   |                  |   |  |        |  |   |             |   |  |               |   |   |         |   |   | Accumulated |         |   |          |  
|                                                           |  |            |         |  |               |         |   |                  |   |  |        |  |   |             |   |  |               |   |   |         |   |   | During the  |         |   |          |  
|                                                           |  |            |         |  | Share Capital |         |   | Special Warrants |   |  | Share  |  |   | Contributed |   |  | Exploration   |   |   |         |  
|                                                           |  |            |         |  | Number        |         |   | Amount           |   |  | Number |  |   | Amount      |   |  | Subscriptions |   |   | Surplus |   |   | Stage       |         |   | Total    |  
|                                                           |  |            |         |  |               |         |   |                  |   |  |        |  |   |             |   |  |               |   |   |         |   |   |             |         |   |          |  
|Balance, March 31, 2005                                    |  |            |         |  | 7,350,100     |         |   | 498,600          |   |  | -      |  |   |             |   |  | -             |   |   | 128,165 |   |   | (554,336    | )       |   | 72,429   |  
|Issuance of shares                                         |  |            |         |  |               |         |   |                  |   |  |        |  |   |             |   |  |               |   |   |         |   |   |             |         |   |          |  
|Pursuant to resource
      property acquisition - at $0.61 |  |            | 400,000 |  |               | 244,000 |   |                  | - |  |        |  |   |             | - |  |               | - |   |         | - |   |             | 244,000 |  
|Pursuant to debt settlement                                |  | - at $0.66 |         |  | 432,742       |         |   | 285,610          |   |  | -      |  |   |             |   |  | -             |   |   | -       |   |   | -           |         |   | 285,610  |  
|Pursuant to private placement                              |  | - at $0.50 |         |  | 290,000       |         |   | 145,000          |   |  | -      |  |   |             |   |  | -             |   |   | -       |   |   | -           |         |   | 145,000  |  
|Pursuant to private placement                              |  | - at $0.30 |         |  | 1,270,000     |         |   | 381,000          |   |  | -      |  |   |             |   |  | -             |   |   | -       |   |   | -           |         |   | 381,000  |  
|Pursuant to conversion
      of options                    |  |            |         |  | 300,000       |         |   | 79,500           |   |  | -      |  |   |             |   |  | -             |   |   | -       |   |   | -           |         |   | 79,500   |  
|Pursuant to conversion of warrants                         |  |            |         |  | 130,000       |         |   | 32,500           |   |  | -      |  |   |             |   |  | -             |   |   | -       |   |   | -           |         |   | 32,500   |  
|Stock-based compensation charge                            |  |            |         |  | -             |         |   | -                |   |  | -      |  |   |             |   |  | -             |   |   | 224,925 |   |   | -           |         |   | 224,925  |  
|Transfer from contributed surplus on conversion of         |  |            |         |  |               |         |   |                  |   |  |        |  |   |             |   |  |               |   |   |         |   |   |             |         |  
|stock options                                              |  |            |         |  | -             |         |   | 74,315           |   |  | -      |  |   |             |   |  | -             |   |   | (74,315 | ) |   | -           |         |   | -        |  
|Share issue expense - Cash                                 |  |            |         |  | -             |         |   | (15,041          | ) |  | -      |  |   |             |   |  | -             |   |   | -       |   |   | -           |         |   | (15,041  | )
|- Finders fees                                             |  |            |         |  | 97,000        |         |   | -                |   |  | -      |  |   |             |   |  | -             |   |   | -       |   |   | -           |         |   | -        |  
|- Finders warrants                                         |  |            |         |  | -             |         |   | (11,640          | ) |  | -      |  |   |             |   |  | -             |   |   | 11,640  |   |   | -           |         |   | -        |  
|Net loss for the year ended March 31, 2006                 |  |            |         |  | -             |         |   | -                |   |  | -      |  |   |             |   |  | -             |   |   | -       |   |   | (590,779    | )       |   | (590,779 | )
|                                                           |  |            |         |  |               |         |   |                  |   |  |        |  |   |             |   |  |               |   |   |         |   |   |             |         |   |          |  
|Balance, March 31, 2006                                    |  |            |         |  | 10,269,842    |         |   | 1,713,844        |   |  | -      |  |   |             |   |  | -             |   |   | 290,415 |   |   | (1,145,115  | )       |   | 859,144  |  
|Issuance of shares                                         |  |            |         |  |               |         |   |                  |   |  |        |  |   |             |   |  |               |   |   |         |   |   |             |         |   |          |  
|Pursuant to resource
      property acquisition - at $0.46 |  |            | 400,000 |  |               | 184,000 |   |                  | - |  |        |  |   |             | - |  |               | - |   |         | - |   |             | 184,000 |  
|Pursuant to private placement                              |  | - at $0.30 |         |  | 1,500,000     |         |   | 450,000          |   |  | -      |  |   |             |   |  | -             |   |   | -       |   |   | -           |         |   | 450,000  |  
|Pursuant to conversion
      of warrants                   |  |            |         |  | 260,000       |         |   | 65,000           |   |  | -      |  |   |             |   |  | -             |   |   | -       |   |   | -           |         |   | 65,000   |  
|Stock-based compensation charge                            |  |            |         |  | -             |         |   | -                |   |  | -      |  |   |             |   |  | -             |   |   | 136,675 |   |   | -           |         |   | 136,675  |  
|Share issue expense - Cash                                 |  |            |         |  | -             |         |   | (4,799           | ) |  | -      |  |   |             |   |  | -             |   |   | -       |   |   | -           |         |   | (4,799   | )
|- Finders fees                                             |  |            |         |  | 100,000       |         |   | -                |   |  | -      |  |   |             |   |  | -             |   |   | -       |   |   | -           |         |   | -        |  
|Net loss for the year ended March 31, 2007                 |  |            |         |  | -             |         |   | -                |   |  | -      |  |   |             |   |  | -             |   |   | -       |   |   | (831,278    | )       |   | (831,278 | )
|Share subscriptions                                        |  |            |         |  | -             |         |   | -                |   |  | -      |  |   |             |   |  | 100,000       |   |   | -       |   |   | -           |         |   | 100,000  |  
|                                                           |  |            |         |  |               |         |   |                  |   |  |        |  |   |             |   |  |               |   |   |         |   |   |             |         |   |          |  
|Balance, March 31, 2007                                    |  |            |         |  | 12,529,842    |         | $ | 2,408,045        |   |  | -      |  | $ |             |   |  | 100,000       |   | $ | 427,090 |   | $ | (1,976,393  | )       | $ | 958,742  |  

SEE ACCOMPANYING NOTES

---

|EVOLVING GOLD CORP.                         | Schedule 1
|------------------------------------------- | ----------
|(An Exploration Stage Company)              |           
|CONSOLIDATED SCHEDULE OF MINERAL PROPERTIES |           
|for the years ended March 31, 2007 and 2006 |           
|(Stated in Canadian Dollars)                |           

|                            |   | Canada   |   |   |            |  |   | United States |  |   |          |  |   |             | 
|--------------------------- | - | -------- | - | - | ---------- |  | - | ------------- |  | - | -------- |  | - | ----------- | 
|                            |   |          |   |   |            |  |   |               |  |   |          |  |   | Fisher,     | 
|                            |   |          |   |   |            |  |   |               |  |   |          |  |   | Siesta and  | 
|                            |   | Murray   |   |   | Voisey Bay |  |   | Winnemucca    |  |   | Malone   |  |   | Alpha Butte | 
|                            |   | Property |   |   | Property   |  |   | Property      |  |   | Property |  |   | Properties  | 
|                            |   |          |   |   |            |  |   |               |  |   |          |  |   |             | 
|Balance, March 31, 2005     | $ | 34,617   |   | $ | -          |  | $ | 181,523       |  | $ | -        |  | $ | -           | 
|                            |   |          |   |   |            |  |   |               |  |   |          |  |   |             | 
|Acquisition costs           |   |          |   |   |            |  |   |               |  |   |          |  |   |             | 
|Cash                        |   | -        |   |   | 35,000     |  |   | 61,525        |  |   | -        |  |   | -           | 
|Legal                       |   | -        |   |   | 1,647      |  |   | 37,949        |  |   |          |  |   |             | 
|Advance Royalty Payments    |   | -        |   |   | -          |  |   | 11,608        |  |   | -        |  |   | -           | 
|Shares                      |   | -        |   |   | -          |  |   | 244,000       |  |   | -        |  |   | -           | 
|                            |   |          |   |   |            |  |   |               |  |   |          |  |   |             | 
|                            |   | -        |   |   | 36,647     |  |   | 355,082       |  |   | -        |  |   | -           | 
|                            |   |          |   |   |            |  |   |               |  |   |          |  |   |             | 
|Deferred exploration costs  |   |          |   |   |            |  |   |               |  |   |          |  |   |             | 
|Field expenses and other    |   | 3,381    |   |   | -          |  |   | -             |  |   | -        |  |   | -           | 
|Geological consulting       |   | -        |   |   | 14,731     |  |   | 60,011        |  |   | -        |  |   | -           | 
|Staking and recording costs |   | -        |   |   | 7,440      |  |   | 81,863        |  |   | -        |  |   | -           | 
|                            |   |          |   |   |            |  |   |               |  |   |          |  |   |             | 
|                            |   | 3,381    |   |   | 22,171     |  |   | 141,874       |  |   | -        |  |   | -           | 
|                            |   |          |   |   |            |  |   |               |  |   |          |  |   |             | 
|Write-down of properties    |   | (37,998  | ) |   | -          |  |   | -             |  |   | -        |  |   | -           | 
|                            |   |          |   |   |            |  |   |               |  |   |          |  |   |             | 
|Balance, March 31, 2006     |   | -        |   |   | 58,818     |  |   | 678,479       |  |   | -        |  |   | -           | 

contd

SEE ACCOMPANYING NOTES

---

|EVOLVING GOLD CORP.                         | Schedule 1  (contd)
|------------------------------------------- | ---------------------
|(An Exploration Stage Company)              |                      
|CONSOLIDATED SCHEDULE OF MINERAL PROPERTIES |                      
|for the years ended March 31, 2007 and 2006 |                      
|(Stated in Canadian Dollars)                |                      

|                                               |   | Canada   |   |   |            |   |   | United States |   |   |          |  |   |             | 
|---------------------------------------------- | - | -------- | - | - | ---------- | - | - | ------------- | - | - | -------- |  | - | ----------- | 
|                                               |   |          |   |   |            |   |   |               |   |   |          |  |   | Fisher,     | 
|                                               |   |          |   |   |            |   |   |               |   |   |          |  |   | Siesta and  | 
|                                               |   | Murray   |   |   | Voisey Bay |   |   | Winnemucca    |   |   | Malone   |  |   | Alpha Butte | 
|                                               |   | Property |   |   | Property   |   |   | Property      |   |   | Property |  |   | Properties  | 
|                                               |   |          |   |   |            |   |   |               |   |   |          |  |   |             | 
|                                               |   |          |   |   |            |   |   |               |   |   |          |  |   |             | 
|Balance, March 31, 2006                        |   | -        |   |   | 58,818     |   |   | 678,479       |   |   | -        |  |   | -           | 
|                                               |   |          |   |   |            |   |   |               |   |   |          |  |   |             | 
|Acquisition costs                              |   |          |   |   |            |   |   |               |   |   |          |  |   |             | 
|Cash                                           |   | -        |   |   | -          |   |   | 11,570        |   |   | 11,360   |  |   | -           | 
|Shares                                         |   | -        |   |   | -          |   |   | 184,000       |   |   | -        |  |   | -           | 
|Legal                                          |   |          |   |   | 554        |   |   | 83,385        |   |   | -        |  |   | -           | 
|                                               |   |          |   |   |            |   |   |               |   |   |          |  |   |             | 
|                                               |   | -        |   |   | 554        |   |   | 278,955       |   |   | 11,360   |  |   | -           | 
|                                               |   |          |   |   |            |   |   |               |   |   |          |  |   |             | 
|Deferred exploration costs                     |   |          |   |   |            |   |   |               |   |   |          |  |   |             | 
|Assays and reports                             |   | -        |   |   | -          |   |   | 8,621         |   |   | -        |  |   | -           | 
|Field expenses and other                       |   | -        |   |   | -          |   |   | 115           |   |   | 19,782   |  |   | -           | 
|Geological consulting 
      Note 6           |   | -        |   |   | 2,198      |   |   | 23,559        |   |   | 64,324   |  |   | 12,500      | 
|Geophysical and geological studies             |   | -        |   |   | -          |   |   | -             |   |   | 93,955   |  |   | -           | 
|Licenses and fees                              |   | -        |   |   | -          |   |   | -             |   |   | 13,192   |  |   | -           | 
|Staking and recording costs  Note
      6     |   | 11,825   |   |   | 18,600     |   |   | -             |   |   | -        |  |   | 77,585      | 
|                                               |   |          |   |   |            |   |   |               |   |   |          |  |   |             | 
|                                               |   | 11,825   |   |   | 20,798     |   |   | 32,295        |   |   | 191,253  |  |   | 90,085      | 
|                                               |   |          |   |   |            |   |   |               |   |   |          |  |   |             | 
|Write-down of properties                       |   | (11,825  | ) |   | (80,170    | ) |   | -             |   |   | -        |  |   | -           | 
|Amounts received pursuant to earn-in agreement |   | -        |   |   | -          |   |   | (168,552      | ) |   | -        |  |   | -           | 
|                                               |   |          |   |   |            |   |   |               |   |   |          |  |   |             | 
|Balance, March 31, 2007                        | $ | -        |   | $ | -          |   | $ | 821,177       |   | $ | 202,613  |  | $ | 90,085      | 

SEE ACCOMPANYING NOTES

---

EVOLVING GOLD CORP.
  (An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
  March 31, 2007 and 2006
  (Stated in Canadian Dollars)

|Note 1 | Continuance of Operations
|------ | -------------------------

Evolving Gold Corp. (the Company)
  was incorporated as 6109527 Canada Ltd. on June 19, 2003, under the Canada Business
  Corporation Act and is in the business of acquiring, exploring and evaluating
  mineral properties. On September 30, 2003, the Company changed its name to Evolving
  Gold Corp. The Company is in the exploration stage and has interests in mineral
  properties located in Canada and in the United States of America. Effective
  June 13, 2007, the common shares of the Company were listed on the TSX Venture
  Exchange (TSX) and trade under the symbol EVG.

The recoverability of amounts shown
  for mineral properties is dependent upon the discovery of economically recoverable
  reserves, confirmation of the Companys interest in the underlying mineral
  claims, the ability of the Company to obtain financing to complete their development,
  and future profitable production or disposition thereof.

|Note 2 | Summary of Significant Accounting Policies
|------ | ------------------------------------------

The consolidated financial statements
  of the Company have been prepared in accordance with generally accepted accounting
  principles in Canada. Differences with respect to accounting principles generally
  accepted in the United States of America are described in Note 11. Because a
  precise determination of many assets and liabilities is dependent upon future
  events, the preparation of financial statements for a period necessarily involves
  the use of estimates, which have been made using careful judgement. Actual results
  may vary from these estimates.

The consolidated financial statements,
  have in managements opinion, been properly prepared within the framework
  of the significant accounting policies summarized below:

| | a) | Principles of Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | These consolidated financial statements include the
        accounts of the Company and its wholly-owned subsidiary Evolving Gold
        Corp., a United States company incorporated on March 16, 2007. All significant
        intercompany transactions have been eliminated.                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | b) | Mineral Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Company defers the cost of acquiring, maintaining
        its interest, exploring and developing mineral properties until such time
        as the properties are placed into production, abandoned, sold or considered
        to be impaired in value. Costs of producing properties will be amortized
        on a unit of production basis and costs of abandoned properties are written-off.
        Proceeds received from the sale of interests in mineral properties are
        credited to the carrying value of the mineral properties, with any excess
        included in operations. Write-downs due to impairment in value are charged
        to operations.

---

Evolving Gold Corp.
  (An Exploration Stage Company)
  Notes to the Consolidated Financial Statements
  March 31, 2007 and 2006
  (Stated in Canadian Dollars)  Page 2

|Note 2 | Summary of Significant Accounting Policies
      (contd)
|------ | ----------------------------------------------------------

| | b) | Mineral Properties (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Company is in the process of exploring and developing
        its mineral properties and has not yet determined the amount of reserves
        available. Management reviews the carrying value of mineral properties
        on a periodic basis and will recognize impairment in value based upon
        current exploration results, the prospect of further work being carried
        out by the Company, the assessment of future probability of profitable
        revenues from the property or from the sale of the property. Amounts shown
        for properties represent costs incurred net of write-downs and recoveries,
        and are not intended to represent present or future values.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | Environmental expenditures that relate to current operations
        are expensed or capitalized as appropriate. Expenditures that relate to
        an existing condition caused by past operations and which do not contribute
        to current or future revenue generation are expensed. Liabilities are
        recorded when environmental assessments and/or remedial efforts are probable,
        and the costs can be reasonably estimated. Generally, the timing of these
        accruals coincides with the earlier of completion of a feasibility study
        or the Companys commitment to a plan of action based on the then
        known facts.                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | c) | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Company follows the asset and liability method of
        accounting for income taxes. Under this method, current income taxes are
        recognized for the estimated income taxes payable for the current period.
        Future income tax assets and liabilities are recognized for temporary
        differences between the tax and accounting basis of assets and liabilities
        as well as for the benefit of losses available to be carried forward to
        future years for tax purposes only if it is more likely than not that
        they can be realized.                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | d) | Stock Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Company has a stock-based compensation plan as disclosed
        in Note 5, whereby stock options are granted in accordance with the policies
        of regulatory authorities. The fair value of all share purchase options
        are expensed over their vesting period with a corresponding increase to
        contributed surplus.                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | Upon exercise of share purchase options, the consideration
        paid by the option holder, together with the amount previously recognized
        in contributed surplus, is recorded as an increase to share capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Company uses the Black-Scholes option valuation
        model to calculate the fair value of share purchase options at the date
        of grant. Option valuation models require the input of highly subjective
        assumptions, including the expected price volatility. Changes in these
        assumptions can materially affect the fair value estimate and, therefore,
        the existing models do not necessarily provide a reliable single measure
        of the fair value of the Companys share purchase options.                                                                                                                                                                       

---

Evolving Gold Corp.
  (An Exploration Stage Company)
  Notes to the Consolidated Financial Statements
  March 31, 2007 and 2006
  (Stated in Canadian Dollars)  Page 3

|Note 2 | Summary of Significant Accounting Policies
      (contd)
|------ | ----------------------------------------------------------

| | e) | Basic and Diluted Loss Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | Basic loss per share is computed by dividing the loss
        for the year by the weighted average number of common shares outstanding
        during the year. Diluted loss per share reflects the potential dilution
        that could occur if potentially dilutive securities were exercised or
        converted to common stock. The dilutive effect of options and warrants
        and their equivalent is computed by application of the treasury stock
        method and the effect of convertible securities by the if converted
        method. Fully dilutive amounts are not presented when the effect of the
        computations are anti-dilutive due to the losses incurred. Accordingly,
        there is no difference in the amounts presented for basic and diluted
        loss per share.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | f) | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | The carrying value of the Companys financial instruments,
        consisting of cash, other receivables and accounts payable and accrued
        liabilities approximate their fair value due to the short-term maturity
        of such instruments. Unless otherwise noted, it is managements opinion
        that the Company is not exposed to significant interest, currency or credit
        risks arising from these financial instruments.                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | g) | Equipment and Depreciation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | Equipment is carried at cost and consists of computer
        equipment and office furniture and equipment. Depreciation is calculated
        on the straight-line method over the estimated useful life of the asset,
        being three years. No depreciation is taken on artwork.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | h) | Asset Retirement Obligation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | The fair value of obligations associated with the retirement
        of tangible long-lived assets are recorded in the period the asset is
        put to use, with a corresponding increase to the carrying amount of the
        related asset. The obligations recognized are statutory, contractual or
        legal obligations. The liability is accreted over time for changes in
        the fair value of the liability through charges to accretion, which is
        included in depletion, depreciation and accretion expense. The costs capitalized
        to the related assets are amortized in a manner consistent with the depletion
        and depreciation of the related asset.                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    | At March 31, 2007, the fair value of the mineral properties
        site restoration costs is not significant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

---

Evolving Gold Corp.
  (An Exploration Stage Company)
  Notes to the Consolidated Financial Statements
  March 31, 2007 and 2006
  (Stated in Canadian Dollars)  Page 4

|Note 2 | Summary of Significant Accounting Policies
      (contd)
|------ | ----------------------------------------------------------

| | i) | Impairment of Long-lived Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Canadian generally accepted accounting principles require
        that long-lived assets and intangibles to be held and used by the Company
        be reviewed for possible impairment whenever events or changes in circumstances
        indicate that the asset may not be recoverable. If changes in circumstances
        indicate that the carrying amount of an asset that an entity expects to
        hold and use may not be recoverable, future cash flows expected to result
        from the use of the asset and its disposition must be estimated. If the
        undiscounted value of the future cash flows is less that the carrying
        amount of the asset, impairment is recognized.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | j) | Foreign Currency Translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

Monetary items denominated in a foreign
  currency are translated into Canadian dollars at exchange rates prevailing at
  the balance sheet date and non-monetary items are translated at exchange rates
  prevailing when the assets were acquired or obligations incurred. Foreign currency
  denominated revenue and expense items are translated at exchange rates prevailing
  at the transaction date. Gains or losses arising from the translations are included
  in operations.

|Note 3 | Equipment
|------ | ---------

| |                                |   |        |  |   | 2007         |  |   |        |  |   | 2006  | 
| | ------------------------------ | - | ------ |  | - | ------------ |  | - | ------ |  | - | ----- | 
| |                                |   |        |  |   | Accumulated  |  |   |        |  |   |       | 
| |                                |   | Cost   |  |   | Amortization |  |   | Net    |  |   | Net   | 
| |                                |   |        |  |   |              |  |   |        |  |   |       | 
| | Artwork                        | $ | 7,223  |  | $ | -            |  | $ | 7,223  |  | $ | -     | 
| | Office furniture and equipment |   | 3,720  |  |   | 300          |  |   | 3,420  |  |   | -     | 
| | Computer equipment             |   | 13,394 |  |   | 1,494        |  |   | 11,900 |  |   | 1,187 | 
| |                                |   |        |  |   |              |  |   |        |  |   |       | 
| |                                | $ | 24,337 |  | $ | 1,794        |  | $ | 22,543 |  | $ | 1,187 | 

|Note 4 | Mineral Properties Note 6
|------ | --------------------------

| | a) | Murray Property                                                                                                                                                                                                                                                                                                                                                                            
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                            
| |    | Pursuant to a property option agreement dated July 22,
        2003 and amended September 16, 2004, between the Company and International
        Zimtu Technologies Inc., a public company, the Company has the option
        to earn a 70% undivided interest in certain mineral claims (the Property),
        located 78 kilometres northeast of Yellowknife, Northwest Territories.
| |    |                                                                                                                                                                                                                                                                                                                                                                                            
| |    | During the year ended March 31, 2006, the Company abandoned
        this option and wrote-off $37,998 in resource property costs. Similarly
        $11,825 of resource property incurred during the year ended March 31,
        2007, was also written off.                                                                                                                              

---

Evolving Gold Corp.
  (An Exploration Stage Company)
  Notes to the Consolidated Financial Statements
  March 31, 2007 and 2006
  (Stated in Canadian Dollars)  Page 5

|Note 4 | Mineral Properties Note 6 
      (contd)
|------ | -------------------------------------------

| | b) | Voisey Bay Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | Pursuant to an option agreement dated May
        4, 2005 between the Company and Geocore Exploration Inc. the Company was
        granted the right to acquire a 60% interest in a licence to a mine and
        explore 192 claims located in Labrador, Canada in exchange for $35,000
        and the obligation to incur exploration expenditures of $500,000 by October
        31, 2007. During the year ended March 31, 2007, the Company terminated
        this option agreement and wrote-off $80,170 in expenditures related to
        this property.                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | c) | Winnemucca Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | Pursuant to an option agreement dated December
        3, 2004 and amended January 7, 2005, February 25, 2005, April 21, 2005,
        January 26, 2006, April 27, 2006, June 16, 2006 and July 7, 2006, with
        Golden Sands Exploration Inc. (Golden) and its subsidiary
        company AHL Holdings Ltd. (AHL), the company was granted the
        right to acquire a 100% interest in unpatented mining claims (referred
        to as Golden Arc claims), located in Humboldt County, Nevada (the Winnemucca
        Property). In addition the Company has staked additional unpatented
        mining claims.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | On April 11, 2007, the Company paid US$10,000
        to extend certain terms of the agreement. The parties are currently negotiating
        further amendments to the agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | In order to vest its interest in the Winnemucca
        Property the Company must make aggregate cash payments to Golden of US$70,000,
        issue 1,800,000 shares to Golden (or its nominee), incur exploration expenditures
        of US$4,000,000 and make advance royalty payments as follows:                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | iii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

---

Evolving Gold Corp.
  (An Exploration Stage Company)
  Notes to the Consolidated Financial Statements
  March 31, 2007 and 2006
  (Stated in Canadian Dollars)  Page 6

|Note 4 | Mineral Properties Note 6 
      (contd)
|------ | -------------------------------------------

| | c) | Winnemucca Property (contd)                                                                                                                                                                                                                                                                                                                                                                                          
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | iv)                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | v)                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | The Company must pay for a pre-feasibility
        study and have it delivered to Golden by June 30, 2009. The Company must
        also prepare a technical report and an exploration expense report and
        deliver this to Golden with all relevant data, information and reports
        by October 15, 2007.                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | In addition, a finders fee of 100,000
        shares was paid by the Company in December 2004 in connection with this
        transaction.                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | The Winnemucca Property is subject to a
        2% net smelter return (NSR). With respect to the original
        Golden Arc unpatented mineral claims, the Company may purchase the NSR
        for US $1,000,000 per 1% or an aggregate of US $2,000,000. No agreement
        exists for such purchase of the NSR on the remaining mineral claims.                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    | Pursuant to an earn-in agreement between
        the Company and Meridian Gold Inc. (subsequently assigned to Meridian
        Minerals Corp. (Meridian)) dated July 31, 2006, the Company
        agreed to grant Meridian an earn-in to acquire, directly or indirectly,
        an undivided 70% interest in Evolvings option to purchase 100% of
        the right, title and interest in the Winnemucca Claims.

---

Evolving Gold Corp.
  (An Exploration Stage Company)
  Notes to the Consolidated Financial Statements
  March 31, 2007 and 2006
  (Stated in Canadian Dollars)  Page 7

|Note 4 | Mineral Properties Note 6 
      (contd)
|------ | -------------------------------------------

| | c) | Winnemucca Property (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | To complete the earn-in Meridian must make
        the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | Upon Meridian satisfying its obligations and
        the successful completion of the earn-in, Meridian and the Company will
        form a joint venture for purposes of carrying out the project.                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | d) | Malone Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    | On April 17, 2006 the Company entered into
        a quitclaim deed and royalty agreement with Newmont North America Exploration
        Limited whereby the Company was granted all rights, title, estate and
        interest in unpatented mineral claims located in Lordsburg, New Mexico,
        United States of America in exchange for payment of US$ 10,000 (paid)
        and an additional US$ 10,000 payable in one year (paid subsequent to March
        31, 2007). The agreement is subject to a royalty of 2% of net smelter
        returns.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | e) | Fisher, Siesta and Alpha Butte Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

The Company has acquired by staking three new properties
  comprising approximately 7,700 hectares in Nevada.

|Note 5 | Share Capital Note 9                                                                                                        
|------ | -----------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                              
|       | Escrow Shares                                                                                                                
|       |                                                                                                                              
|       | As at March 31, 2007 there were 199,401 (2006:
      598,215) shares held in escrow. These shares were subsequently released.

---

Evolving Gold Corp.
  (An Exploration Stage Company)
  Notes to the Consolidated Financial Statements
  March 31, 2007 and 2006
  (Stated in Canadian Dollars)  Page 8

|Note 5 | Share Capital Note 9  (contd)
|------ | --------------------------------

Commitments:

Warrants

In September 2006, the Company completed
  a private placement of 1,500,000 units at $0.30 per unit resulting in proceeds
  of $450,000. Each unit was comprised of one common share and one share purchase
  warrant. Each warrant will entitle the holder to purchase one common share of
  the Company at a price of $0.40 per share until September 7, 2008.

The Company applied the residual approach
  and allocated the total proceeds of $450,000 to the common shares and $nil to
  the attached warrants to the private placement. Finders fees for the September
  2006 private placement were paid by the issue of 100,000 units with a fair market
  value of $30,000. This amount has been charged to share issue costs and credited
  to share capital.

In January 2007, 260,000 warrants were
  exercised at $0.25 per share for proceeds of $65,000 and an additional 210,000
  warrants expired.

At March 31, 2007, there were 3,786,742
  share purchase warrants outstanding entitling the holders thereof the right
  to purchase one common share for each warrant held:

| | Number of Shares | Exercise Price | Expiry Date       
| | ---------------- | -------------- | ------------------
| |                  |                |                   
| | 432,742          | $0.35          | May 25, 2007      
| | 290,000          | $0.55          | September 14, 2007
| | 1,464,000        | $0.40          | January 18, 2008  
| | 1,600,000        | $0.40          | September 7, 2008 
| |                  |                |                   
| | 3,786,742        |                |                   

In May 2007 the Company received exchange
  approval to change the exercise price of 432,742 warrants issued in May 2005
  from $0.82 to $0.35 per share. Also in May, 2007 321,969 of these warrants were
  exercised for proceeds of $112,689 and the remaining 110,773 warrants expired.

| |                                |  | 2007            |   |   | 2006     | 
| | ------------------------------ |  | --------------- | - | - | -------- | 
| |                                |  | Number of       |   |   | Weighted | 
| |                                |  | Shares issuable |   |   | Average  | 
| |                                |  | Pursuant to     |   |   | Exercise | 
| |                                |  | Warrants        |   |   | Price    | 
| |                                |  |                 |   |   |          | 
| | Outstanding, beginning of year |  | 2,656,742       |   | $ | 0.46     | 
| | Issued                         |  | 1,600,000       |   | $ | 0.40     | 
| | Cancelled                      |  | (210,000        | ) | $ | 0.25     | 
| | Exercised                      |  | (260,000        | ) | $ | 0.25     | 
| |                                |  |                 |   |   |          | 
| | Outstanding, end of year       |  | 3,786,742       |   | $ | 0.41     | 

---

Evolving Gold Corp.
  (An Exploration Stage Company)
  Notes to the Consolidated Financial Statements
  March 31, 2007 and 2006
  (Stated in Canadian Dollars)  Page 9

|Note 5 | Share Capital Note 9  (contd)
|------ | --------------------------------

Commitments (contd)

Stock Option Plan and Stock-based
  Compensation

Details of stock options outstanding
  as at March 31, 2007 are as follows:



| | Number of Shares | Exercise Price | Expiry Date       
| | ---------------- | -------------- | ------------------
| |                  |                |                   
| | 250,000          | $0.25          | September 15, 2009
| | 240,000          | $0.36          | April 7, 2011     
| | 490,000          |                |                   



A summary of the status of the stock
  option plan as of March 31, 2007 and 2006 and changes during the years then
  ended is presented below:

| |                                |  | 2007      |   |   | 2006     | 
| | ------------------------------ |  | --------- | - | - | -------- | 
| |                                |  |           |   |   | Weighted | 
| |                                |  |           |   |   | Average  | 
| |                                |  | Number of |   |   | Exercise | 
| |                                |  | Options   |   |   | Price    | 
| |                                |  |           |   |   |          | 
| | Outstanding, beginning of year |  | 585,000   |   | $ | 0.44     | 
| | Granted                        |  | 430,000   |   | $ | 0.36     | 
| | Cancelled                      |  | (525,000  | ) | $ | 0.51     | 
| | Exercised                      |  | -         |   | $ | -        | 
| |                                |  |           |   |   |          | 
| | Outstanding, end of year       |  | 490,000   |   | $ | 0.35     | 

The Company established a share purchase
  option plan (the Plan) in September 2004. The Board of Directors
  administers the Plan, pursuant to which the Board of Directors may grant from
  time to time incentive stock options up to an aggregate maximum of 10% of the
  issued and outstanding shares of the Company to directors, officers, employees,
  consultants or advisors. All options granted under the Plan shall expire not
  later than the fifth anniversary of the date the options were granted.

The exercise price of an option is determined
  by the Board of Directors, but shall not be less than the market price of the
  common shares of the Company on the TSX on the last business day before the
  date on which the options are granted, less any discount permitted by the rules
  of the exchange. Vesting and terms are at the discretion of the Board of Directors.

---

Evolving Gold Corp.
  (An Exploration Stage Company)
  Notes to the Consolidated Financial Statements
  March 31, 2007 and 2006
  (Stated in Canadian Dollars)  Page 10

|Note 5 | Share Capital Note 9  (contd)
|------ | --------------------------------

Commitments (contd)

Stock Option Plan and Stock-based
  Compensation (contd)

During the year ended March 31, 2007,
  the Company granted options to directors and three consultants for 430,000 shares
  pursuant to the Plan exercisable at $0.36 per share. Based on this transaction
  the Company recorded stock-based compensation expense of $136,675 (2006: $224,925)
  and transferred $Nil (2006: $74,315) of stock-based compensation that had previously
  been recorded as contributed surplus, to share capital which related to exercised
  options.

The weighted fair value of the share
  purchase options granted during the year ended March 31, 2007 of $0.30 per option
  (2006: $0.46) is estimated using the Black-Scholes option valuation model with
  the following assumptions:

| |                                 |  | 2007    |  |  | 2006      | 
| | ------------------------------- |  | ------- |  |  | --------- | 
| |                                 |  |         |  |  |           | 
| | Average risk-free interest rate |  | 4.13%   |  |  | 3.4-3.8%  | 
| | Expected life                   |  | 5 years |  |  | 4-5 years | 
| | Expected volatility             |  | 118%    |  |  | 111-125%  | 
| | Expected dividends              |  | Nil     |  |  | Nil       | 

In May 2007, the Company granted 2,060,000
  share purchase options exercisable at $0.42 per share until May 2, 2012 and
  200,000 share purchase options exercisable at $0.50 per share until May 13,
  2012, to directors and consultants.

|Note 6 | Related Party Transactions
|------ | --------------------------

During the years ended March 31, the
  Company incurred charges to significant shareholders, directors and former directors
  of the Company as follows:

| |                              |   | Year ended March 31, | 
| | ---------------------------- | - | -------------------- | 
| |                              |   | 2007                 | 
| |                              |   |                      | 
| | Consulting                   | $ | 39,600               | 
| | Management fees              |   | 145,059              | 
| | Promotion and advertising    |   | 15,713               | 
| | Rent and administration fees |   | 3,000                | 
| | Deferred exploration costs   |   |                      | 
| | - geological consulting      |   | 110,573              | 
| | - staking cost and recording |   | 11,825               | 
| |                              |   |                      | 
| |                              | $ | 325,770              | 

---

Evolving Gold Corp.
  (An Exploration Stage Company)
  Notes to the Consolidated Financial Statements
  March 31, 2007 and 2006
  (Stated in Canadian Dollars)  Page 11

|Note 6 | Related Party Transactions (contd)
|------ | ------------------------------------

These transactions were measured by
  the exchange amount, which is agreed upon by the transacting parties.

Prepaid expenses include $11,360 (2006:
  Nil) derived from payments to directors.

Accounts payable and accrued liabilities
  include $101,950 (2006: $64,257) due to significant shareholders, directors
  and former directors of the Company.

|Note 7 | Corporation Income Taxes
|------ | ------------------------

The Company has accumulated approximately
  $1,075,000 in Canadian and foreign development and exploration resource expenditures.
  These amounts are available to carry forward and offset future taxable income
  at various rates per year.

The Company has approximate accumulated
  non-capital losses totalling $1,345,000 that can be used to offset taxable income
  of future years. The non-capital losses expire as follows:

| | 2011 | $ | 152,000   | 
| | ---- | - | --------- | 
| | 2015 |   | 274,000   | 
| | 2016 |   | 375,000   | 
| | 2027 |   | 544,000   | 
| |      |   |           | 
| |      | $ | 1,345,000 | 

The significant components of the Companys
  future income tax assets are as follows:

| |                                    |   | 2007     |   |   | 2006     |  
| | ---------------------------------- | - | -------- | - | - | -------- | -
| |                                    |   |          |   |   |          |  
| | Non-capital losses carried forward | $ | 459,000  |   | $ | 276,000  |  
| | Temporary differences              |   | 11,000   |   |   | 12,000   |  
| | Resource property                  |   | 17,000   |   |   | 15,000   |  
| | Less: valuation allowance          |   | (487,000 | ) |   | (303,000 | )
| |                                    |   |          |   |   |          |  
| |                                    | $ | -        |   | $ | -        |  

The Company has recorded a valuation
  allowance against its future income tax assets based on the extent to which
  it is more likely than not that sufficient taxable income will be realized in
  the future to utilize all the future tax assets.

---

Evolving Gold Corp.
  (An Exploration Stage Company)
  Notes to the Consolidated Financial Statements
  March 31, 2007 and 2006
  (Stated in Canadian Dollars)  Page 12

|Note 8 | Segmented Information
|------ | ---------------------

The Company operates in one reportable
  operating segment, being the exploration and evaluation of mineral properties
  for development. Geographical information is as follows:

| |              |   |          |   |   | Year ending March 31, |   |   |          |  
| | ------------ | - | -------- | - | - | --------------------- | - | - | -------- | -
| |              |   | 2007     |   |   | 2006                  |  
| |              |   | Canada   |   |   | United States         |   |   | Canada   |  
| |              |   |          |   |   |                       |   |   |          |  
| | Net loss     | $ | (799,694 | ) | $ | (31,584               | ) | $ | (584,379 | )
| |              |   |          |   |   |                       |   |   |          |  
| | Total assets | $ | 133,862  |   | $ | 1,113,875             |   | $ | 287,919  |  

|Note 9 | Subsequent Events Notes 4 and 5
|------ | --------------------------------

In April 2007, the Company completed
  a non-brokered private placement of 2,350,000 units at $0.25 per unit resulting
  in proceeds of $587,500 of which $100,000 is included in share subscriptions
  as at March 31, 2007. Each unit is comprised of one common share and one share
  purchase warrant. Each warrant will entitle the holder to purchase one common
  share of the Company at a price of $0.35 per share until April 19, 2009. Finders
  fees of 55,000 units were issued with respect to this issue.

Also in April, 2007, the Company completed
  a brokered private placement of 12,053,000 units at $0.25 per unit resulting
  in net proceeds of $2,955,039. The agent for this private placement elected
  to receive their commission of 8% of gross proceeds in cash of $36,500 together
  with 818,000 units. Each unit is comprised of one common share and one share
  purchase warrant. Each warrant will entitle the holder to purchase one common
  share of the Company at a price of $0.35 per share until April 26, 2009. The
  agent also received 1,205,300 compensation options which entitle the agent to
  purchase that number of units at $0.30 per unit for two years.

The Company has negotiated a private
  placement of up to 14,050,000 units at $0.40 per unit for proceeds of $5,620,000.
  Each unit will consist of one common share and one-half of a share purchase
  warrant. Each whole warrant will entitle the holder thereof to purchase one
  additional share of the Company at a price of $0.60 per share for a two year
  period from the date of issue. The Company will pay a finders fee of 10% of
  the proceeds in cash and 7% in warrants, which are exercisable at $0.65 per
  warrant over a two year period from the date of issue. This is subject to regulatory
  approval.

|Note 10 | Commitments Note 5
|------- | -------------------

| | a) | The Company has signed three employment agreements with
        directors or companies controlled by directors of the Company whereby
        the Company will pay fixed monthly management fees of $7,500, $6,500 and
        $5,000 respectively. These employment agreements have a term of two years
        and expire on January 31, 2009.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

Evolving Gold Corp.
  (An Exploration Stage Company)
  Notes to the Consolidated Financial Statements
  March 31, 2007 and 2006
  (Stated in Canadian Dollars)  Page 13

|Note 10 | Commitments Note 5  (contd)
|------- | ------------------------------

| | b) | Effective March 14, 2007 the Company is also committed
        to a one year consulting agreement whereby fees will be paid based on
        services provided to a maximum of US$8,250 per month.                                                                                                                                                                                         
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                            
| | c) | The Company signed a memorandum of agreement to pay
        a consultant $3,000 per month for four months commencing February 21,
        2007, for internet services. This agreement can be renewed for an additional
        four months with the issue of 50,000 options.                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                            
| | d) | The Company signed an office lease expiring April 30,
        2012 which calls for monthly payments of $4,394 plus an applicable portion
        of operating costs. Operating costs are subject to change but are currently
        $3,217 per month. The total estimated annual commitment over the term
        of the lease, based on the current amount of operating costs is $91,329.

|Note 11 | Differences Between Canadian and United States
        Generally Accepted Accounting Principles
|------- | -----------------------------------------------------------------------------------------------

The financial statements have been prepared
  in accordance with accounting principles generally accepted in Canada (CDN
  GAAP) that differ in certain respects with those principles and practices
  that the Company would have followed had its financial statements been prepared
  in accordance with accounting principles and practices generally accepted in
  the United States of America (US GAAP).

The Companys CDN GAAP differ from
  US GAAP as follows:

Mineral Properties and Deferred Exploration
  Costs

Under CDN GAAP, mineral properties,
  including exploration and acquisition costs, are carried at cost and written
  down if the properties are abandoned, sold or if management decides not to pursue
  the properties. Under SEC interpretation of US GAAP, the costs associated with
  mineral rights are capitalized as an intangible asset with all other mineral
  property and/or exploration costs expensed in the period incurred. Therefore
  an additional mineral property expense is required under US GAAP.

Exploration Stage Company

The Company is an exploration stage
  company as defined in Statement of Financial Accounting Standards No. 7, Accounting
  and Reporting by Development Stage Enterprises and the Securities and
  Exchange Commission Exchange Act Guide 7. The Company is devoting its present
  efforts to exploring and developing its mineral properties. All losses accumulated
  since inception has been considered as part of the Company exploration stage
  activities.

---

Evolving Gold Corp.
  (An Exploration Stage Company)
  Notes to the Consolidated Financial Statements
  March 31, 2007 and 2006
  (Stated in Canadian Dollars)  Page 14

|Note 11 | Differences Between Canadian and United States
      Generally Accepted Accounting Principles  (contd)
|------- | --------------------------------------------------------------------------------------------------------

New Accounting Standards

In June 2006, the Financial Accounting
  Standards Board (FASB) issued FASB Interpretation No. 48, Accounting
  for Uncertainty in Income Taxes. The interpretation clarifies the accounting
  for uncertainty in income taxes recognized in a companys financial statements
  in accordance with Statement of Financial Accounting Standards No. 109, Accounting
  for Income Taxes. Specifically, the pronouncement prescribes a recognition
  threshold and a measurement attribute for the financial statement recognition
  and measurement of a tax position taken or expected to be taken in a tax return.
  The interpretation also provides guidance on the related derecognition, classification,
  interest and penalties, accounting for interim periods, disclosure and transition
  of uncertain tax position. The interpretation is effective for fiscal years
  beginning after December 15, 2006. The adoption of FIN 48 is not expected to
  have a material impact on the Companys consolidated financial position,
  results of operations or cash flows; however, the Company is still analyzing
  the effects of FIN 48.

In September 2006, the FASB issued SFAS
  No. 157, Fair Value Measurements. This Statement defines fair value
  as used in numerous accounting pronouncements, establishes a framework for measuring
  fair value in generally accepted accounting principles and expands disclosure
  related to the use of fair value measures in financial statements. The Statement
  is to be effective for the Companys financial statements issued in 2008;
  however, earlier application is encouraged. The Company is currently evaluating
  the timing of adoption and the impact that adoption might have on its financial
  position or results of operations.

In September 2006, the Securities and
  Exchange Commission (SEC) issued Staff Accounting Bulletin No. 108
  (SAB 108). Due to diversity in practice among registrants, SAB 108
  expressed SEC staff views regarding the process by which misstatements in financial
  statements are evaluated for purposes of determining whether financial statement
  restatement is necessary. SAB 108 is effective for fiscal years ending after
  November 15, 2006, and early application is encouraged. The Company does not
  believe SAB 108 will have a material impact on its financial position or results
  from operations.

On February 15, 2007, the FASB issued
  SFAS No. 159 The Fair Value Option for Financial Assets and Financial
  Liabilities. This Statement establishes presentation and disclosure requirements
  designed to facilitate comparisons between companies that choose different measurement
  attributes for similar types of assets and liabilities. SFAS No. 159 is effective
  for the Companys financial statements issued in 2008. The Company is currently
  evaluating the impact that the adoption of SFAS No. 159 might have on its financial
  position or results of operations.

---

Evolving Gold Corp.
  (An Exploration Stage Company)
  Notes to the Consolidated Financial Statements
  March 31, 2007 and 2006
  (Stated in Canadian Dollars)  Page 15

|Note 11 | Differences Between Canadian and United States
      Generally Accepted Accounting Principles  (contd)
|------- | --------------------------------------------------------------------------------------------------------

New Accounting Standards
  (contd)

Reconciliation of net loss determined
  in accordance with CDN GAAP to net loss determined under US GAAP are as follows:

| |                                              |   | Year ended March 31, |  
| | -------------------------------------------- | - | -------------------- | -
| | Statement of Operations                      |   | 2007                 |  
| |                                              |   |                      |  
| | Net loss for the year per Canadian GAAP      | $ | (831,278             | )
| | Mineral property exploration and acquisition |   |                      |  
| | costs                                        |   | (533,771             | )
| |                                              |   |                      |  
| | Net loss for the year per US GAAP            | $ | (1,365,049           | )
| |                                              |   |                      |  
| | Basic and diluted loss per share per US      |   |                      |  
| | GAAP                                         | $ | (0.12                | )

The effects of the differences in accounting
  under CDN GAAP and US GAAP on the statements of cash flows and the balance sheets
  are as follows:

| |                                                                  |   | Year ended March 31, |  
| | ---------------------------------------------------------------- | - | -------------------- | -
| | Statement of Cash Flows                                          |   | 2007                 |  
| | Cash flows used in operating activities per Canadian             |   |                      |  
| | GAAP                                                             | $ | (431,238             | )
| | Mineral properties acquired and exploration costs incurred       |   | (470,060             | )
| | Cash flows used in operating activities per
      US GAAP        |   | (901,298             | )
| | Cash flows used in investing activities per Canadian GAAP        |   | (335,974             | )
| | Mineral properties acquired and exploration
      costs incurred |   | 470,060              |  
| | Cash flows provided by investing activities per US GAAP          |   | 134,086              |  
| | Cash flows provided by financing activities
      per            |   |                      |  
| | Canadian and US GAAP                                             |   | 610,201              |  
| | Increase (decrease) in cash per Canadian and
      US GAAP       | $ | (157,011             | )

---

Evolving Gold Corp.
  (An Exploration Stage Company)
  Notes to the Consolidated Financial Statements
  March 31, 2007 and 2006
  (Stated in Canadian Dollars)  Page 16

|Note 11 | Differences Between Canadian and United States
      Generally Accepted Accounting Principles  (contd)
|------- | --------------------------------------------------------------------------------------------------------

New Accounting Standards
  (contd)

| |                                                    |   | Year ended March 31, |  
| | -------------------------------------------------- | - | -------------------- | -
| | Balance Sheet                                      |   | 2007                 |  
| |                                                    |   |                      |  
| | Total assets per Canadian GAAP                     | $ | 1,247,737            |  
| | Mineral property exploration and acquisition costs |   | (1,102,515           | )
| |                                                    |   |                      |  
| | Total assets per US GAAP                           |   | 145,222              |  
| | Total liabilities per Canadian and US GAAP         |   | (288,995             | )
| |                                                    |   |                      |  
| |                                                    | $ | (143,773             | )
| |                                                    |   |                      |  
| | Shareholders Equity                               |   |                      |  
| |                                                    |   |                      |  
| | Deficit, per Canadian GAAP                         | $ | (1,976,393           | )
| | Mineral property exploration and acquisition costs |   | (1,102,515           | )
| |                                                    |   |                      |  
| | Deficit, per US GAAP                               |   | (3,078,908           | )
| | Share capital per Canadian and US GAAP             |   | 2,408,045            |  
| | Share subscription                                 |   | 100,000              |  
| | Contributed surplus per Canadian and US GAAP       |   | 427,090              |  
| |                                                    |   |                      |  
| |                                                    | $ | (143,773             | )

---