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EVOLVING GOLD CORP.

(A Pre-Exploration Stage Company)

REPORT AND FINANCIAL STATEMENTS

March 31, 2005 and 2004

(Stated in Canadian Dollars)

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|**A PARTNERSHIP OF
      INCORPORATED PROFESSIONALS** | **AMISANO HANSONCHARTERED ACCOUNTANTS**
|----------------------------------------------------- | ---------------------------------------

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Directors, 
  Evolving Gold Corp.
  (A Pre-Exploration Stage Company)

We have audited the balance sheets of Evolving Gold Corp. as at March 31, 2005 and 2004 and the statements of loss and deficit, cash flows and shareholders equity (deficiency) for the year ended March 31, 2005 and the period June 19, 2003
(Date of Incorporation) to March 31, 2004. 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 with 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 financial statements present fairly, in all material respects, the financial position of the Company as at March 31, 2005 and 2004 and the results of its operations and its cash flows for the year ended March 31, 2005 and the
period June 19, 2003 (Date of Incorporation) to March 31, 2004 in accordance with generally accepted accounting principles in Canada.

|Vancouver, Canada | AMISANO HANSON     
|----------------- | ---------------------
|July 21, 2005     | Chartered Accountants

COMMENTS BY AUDITORS FOR U.S. READERS ON CANADA  U.S.
  REPORTING CONFLICT

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the
Companys ability to continue as a going concern.  The accompanying financial statements have been prepared on the basis of accounting principles applicable to a going concern that assumes the realization of assets and discharge of liabilities
in the normal course of business.  As discussed in Note 1 to the accompanying financial statements and in respect of the Companys working capital deficiency and accumulated losses from operations, substantial doubt about the Companys
ability to continuing as a going concern exists.  The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our report to the shareholders dated July 21, 2005, is expressed in accordance with Canadian reporting standards, which do not permit a reference to such events and conditions in the auditors report when these are adequately disclosed in the
financial statements.

|Vancouver, Canada                 | AMISANO HANSON         
|--------------------------------- | -------------------------
|July 21, 2005                     | 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

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EVOLVING GOLD CORP.(A Pre-Exploration Stage Company) 
  BALANCE SHEETS
  March 31, 2005 and 2004 
  (Stated in Canadian Dollars)

|ASSETS                                                         |   | 2005     |   |   | 2004     |  
|-------------------------------------------------------------- | - | -------- | - | - | -------- | -
|Current                                                        |   |          |   |   |          |  
|Cash                                                           | $ | 2,754    |   | $ | 113,186  |  
|Accounts receivable                                            |   | 3,985    |   |   | 3,979    |  
|Prepaid expenses  Note 6                                      |   | -        |   |   | 25,550   |  
|                                                               |   |          |   |   |          |  
|                                                               |   | 6,739    |   |   | 142,715  |  
|                                                               |   |          |   |   |          |  
|Mineral properties  Notes 3 and 6, Schedule 1                 |   | 216,140  |   |   | 27,000   |  
|                                                               |   |          |   |   |          |  
|                                                               | $ | 222,879  |   | $ | 169,715  |  
|                                                               |   |          |   |   |          |  
|LIABILITIES                                                    |   |          |   |   |          |  
|Current                                                        |   |          |   |   |          |  
|Accounts payable and accrued liabilities
       Notes 6 and 7 | $ | 140,450  |   | $ | 15,233   |  
|Advance payable 
      Note 4                                 |   | 10,000   |   |   | -        |  
|                                                               |   |          |   |   |          |  
|                                                               |   | 150,450  |   |   | 15,233   |  
|                                                               |   |          |   |   |          |  
|SHAREHOLDERS' EQUITY                                           |   |          |   |   |          |  
|                                                               |   |          |   |   |          |  
|Share capital  Notes 5, 6 and 9                               |   |          |   |   |          |  
|Authorized:                                                    |   |          |   |   |          |  
|Unlimited number of common
      shares without par value      |   |          |   |   |          |  
|Issued:                                                        |   |          |   |   |          |  
|7,350,100 shares (2004:
      100)                             |   | 498,600  |   |   | 100      |  
|Contributed surplus  Note 5                                   |   | 128,165  |   |   | -        |  
|Special warrants                                               |   | -        |   |   | 306,500  |  
|Deficit accumulated during the pre-exploration stage           |   | (554,336 | ) |   | (152,118 | )
|                                                               |   |          |   |   |          |  
|                                                               |   | 72,429   |   |   | 154,482  |  
|                                                               |   |          |   |   |          |  
|                                                               | $ | 222,879  |   | $ | 169,715  |  
|Nature and Continuance of Operations 
      Note 1            |   |          |   |   |          |  
|Commitments  Notes 3 and 5                                    |   |          |   |   |          |  
|Subsequent Events  Notes 5 and 9                              |   |          |   |   |          |  

|APPROVED BY THE DIRECTORS: |          |                        |         
|-------------------------- | -------- | ---------------------- | --------
|                           |          |                        |         
|Warren
      McIntyre    | Director | Chris
      Osterman | Director

SEE ACCOMPANYING NOTES

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EVOLVING GOLD CORP.(A Pre-Exploration Stage Company) 
  STATEMENTS OF LOSS AND DEFICIT 
  for the year ended March 31, 2005 and 
  for the period from June 19, 2003 (Date of Incorporation) to March 31, 2004
  
  (Stated in Canadian Dollars)

|                                                 |   |            |   |   | June 19, 2003  |  
|------------------------------------------------ | - | ---------- | - | - | -------------- | -
|                                                 |   |            |   |   | (Date of       |  
|                                                 |   |            |   |   | Incorporation) |  
|                                                 |   | Year ended |   |   | to             |  
|                                                 |   | March 31,  |   |   | March 31,      |  
|                                                 |   | 2005       |   |   | 2004           |  
|                                                 |   |            |   |   |                |  
|Administrative expenses                          |   |            |   |   |                |  
|Accounting                                       | $ | 16,390     |   | $ | 5,603          |  
|Bank charges and interest                        |   | 920        |   |   | 223            |  
|Consulting  Note 6                              |   | 87,764     |   |   | 20,500         |  
|Legal                                            |   | 30,820     |   |   | 21,450         |  
|Management fees  Note 6                         |   | 51,379     |   |   | 53,400         |  
|Office and miscellaneous                         |   | 4,689      |   |   | 635            |  
|Promotion, advertising and travel 
      Note 6 |   | 31,389     |   |   | 6,537          |  
|Rent and administration
      fees  Note 6      |   | 16,800     |   |   | 41,445         |  
|Stock-based compensation  Note 5                |   | 128,165    |   |   | -              |  
|Transfer agent and filing
      fees             |   | 33,909     |   |   | 2,340          |  
|                                                 |   |            |   |   |                |  
|Loss for the period before other item            |   | (402,225   | ) |   | (152,133       | )
|                                                 |   |            |   |   |                |  
|Other item:                                      |   |            |   |   |                |  
|Interest income                                  |   | 7          |   |   | 15             |  
|                                                 |   |            |   |   |                |  
|Net loss for the period                          |   | (402,218   | ) |   | (152,118       | )
|                                                 |   |            |   |   |                |  
|Deficit at beginning of the period               |   | (152,118   | ) |   | -              |  
|                                                 |   |            |   |   |                |  
|Deficit at end of the period                     | $ | (554,336   | ) | $ | (152,118       | )
|                                                 |   |            |   |   |                |  
|Basic and diluted loss per share                 | $ | (0.07      | ) | $ | N/A            |  
|                                                 |   |            |   |   |                |  
|Weighted average number of shares outstanding    |   | 5,601,196  |   |   | 1              |  

SEE ACCOMPANYING NOTES

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EVOLVING GOLD CORP.(A Pre-Exploration Stage Company) 
  STATEMENTS OF CASH FLOWS 
  for the year ended March 31, 2005 and 
  for the period from June 19, 2003 (Date of Incorporation) to March 31, 2004
  
  (Stated in Canadian Dollars)

|                                                        |   | 2005     |   |   | 2004     |  
|------------------------------------------------------- | - | -------- | - | - | -------- | -
|                                                        |   |          |   |   |          |  
|Operating Activities                                    |   |          |   |   |          |  
|Net loss for the period                                 | $ | (402,218 | ) | $ | (152,118 | )
|Add items not affecting cash:                           |   |          |   |   |          |  
|Stock-based
      compensation                          |   | 128,165  |   |   | -        |  
|Special warrants issued
      for legal fees            |   | -        |   |   | 10,000   |  
|Changes in non-cash working
      capital items related |   |          |   |   |          |  
|to operations:                                          |   |          |   |   |          |  
|Accounts
      receivable                               |   | (6       | ) |   | (3,979   | )
|Prepaid expenses                                        |   | 25,550   |   |   | (25,550  | )
|Accounts
      payable and accrued liabilities          |   | 125,217  |   |   | 15,233   |  
|                                                        |   |          |   |   |          |  
|                                                        |   | (123,292 | ) |   | (156,414 | )
|                                                        |   |          |   |   |          |  
|Investing Activities                                    |   |          |   |   |          |  
|Deferred exploration costs                              |   | (56,093  | ) |   | -        |  
|Acquisition of resource
      properties                |   | (37,047  | ) |   | (17,000  | )
|                                                        |   |          |   |   |          |  
|                                                        |   | (93,140  | ) |   | (17,000  | )
|                                                        |   |          |   |   |          |  
|Financing Activities                                    |   |          |   |   |          |  
|Issue of common shares for cash                         |   | 96,000   |   |   | 100      |  
|Special warrants                                        |   | -        |   |   | 286,500  |  
|Advance payable                                         |   | 10,000   |   |   | -        |  
|                                                        |   |          |   |   |          |  
|                                                        |   | 106,000  |   |   | 286,600  |  
|                                                        |   |          |   |   |          |  
|Increase (decrease) in cash during the year             |   | (110,432 | ) |   | 113,186  |  
|                                                        |   |          |   |   |          |  
|Cash, beginning of the period                           |   | 113,186  |   |   | -        |  
|                                                        |   |          |   |   |          |  
|Cash, end of the period                                 | $ | 2,754    |   | $ | 113,186  |  
|                                                        |   |          |   |   |          |  
|Supplemental disclosure of cash flow information:       |   |          |   |   |          |  
|Exchange of special warrants
      for common shares    | $ | 306,500  |   | $ | -        |  
|Shares issued for acquisition of mineral
      property |   | 96,000   |   |   | -        |  
|                                                        |   |          |   |   |          |  
|                                                        | $ | 402,500  |   | $ | -        |  
|                                                        |   |          |   |   |          |  
|Cash paid for:                                          |   |          |   |   |          |  
|Interest                                                | $ | -        |   | $ | -        |  
|                                                        |   |          |   |   |          |  
|Income
      taxes                                      | $ | -        |   | $ | -        |  

SEE ACCOMPANYING NOTES

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EVOLVING GOLD CORP.(A Pre-Exploration Stage Company) 
  STATEMENT OF SHAREHOLDERS EQUITY
  for the period from June 19, 2003 (Date of Incorporation) to March 31, 2005
  (Stated in Canadian Dollars)

|                                |            |           |              |   |         |         |  |            |           |   |          |             |   |         |             |   |          | Deficit     |   |          |         | 
|------------------------------- | ---------- | --------- | ------------ | - | ------- | ------- |  | ---------- | --------- | - | -------- | ----------- | - | ------- | ----------- | - | -------- | ----------- | - | -------- | ------- | 
|                                |            |           |              |   |         |         |  |            |           |   |          |             |   |         |             |   |          | Accumulated |   |          |         | 
|                                |            |           |              |   |         |         |  |            |           |   |          |             |   |         |             |   |          | During the  |   |          |         | 
|                                |            |           |              |   |         |         |  |            |           |   |          |             |   |         |             |   |          | Pre-        |   |          |         | 
|                                |            |           | Common Stock |   |         | Special |  |            |           |   |          | Contributed |   |         | Exploration |   |          |             |  
|                                |            |           | Shares       |   |         | Amount  |  |            | Warrants  |   |          | Amount      |   |         | Surplus     |   |          | Stage       |   |          | Total   | 
|                                |            |           |              |   |         |         |  |            |           |   |          |             |   |         |             |   |          |             |   |          |         | 
|Issuance of shares  at $1      |            | 100       |              | $ | 100     |         |  | -          |           | $ | -        |             | $ | -       |             | $ | -        |             | $ | 100      |        
|Issuance of A warrants        |            |           |              |   |         |         |  |            |           |   |          |             |   |         |             |   |          |             |   |          |        
|                                | - at $0.01 |           | -            |   |         | -       |  |            | 1,400,000 |   |          | 14,000      |   |         | -           |   |          | -           |   |          | 14,000  | 
|Issuance of B warrants        |            |           |              |   |         |         |  |            |           |   |          |             |   |         |             |   |          |             |   |          |        
|                                | - at $0.05 |           | -            |   |         | -       |  |            | 3,250,000 |   |          | 162,500     |   |         | -           |   |          | -           |   |          | 162,500 | 
|Issuance of F warrants        |            |           |              |   |         |         |  |            |           |   |          |             |   |         |             |   |          |             |   |          |        
|                                | - at $0.10 |           | -            |   |         | -       |  |            | 1,100,000 |   |          | 110,000     |   |         | -           |   |          | -           |   |          | 110,000 | 
|Issuance of L warrants        |            |           |              |   |         |         |  |            |           |   |          |             |   |         |             |   |          |             |   |          |        
|                                | - at $0.05 |           | -            |   |         | -       |  |            | 200,000   |   |          | 10,000      |   |         | -           |   |          | -           |   |          | 10,000  | 
|Issuance of P warrants        |            |           |              |   |         |         |  |            |           |   |          |             |   |         |             |   |          |             |   |          |        
|for mineral property            |            |           |              |   |         |         |  |            |           |   |          |             |   |         |             |   |          |             |   |          |        
|acquisition                     | - at $0.05 |           | -            |   |         | -       |  |            | 200,000   |   |          | 10,000      |   |         | -           |   |          | -           |   |          | 10,000  | 
|Net loss for the period ended   |            |           |              |   |         |         |  |            |           |   |          |             |   |         |             |   |          |             |   |          |        
|March 31, 2004                  |            | -         |              |   | -       |         |  | -          |           |   | -        |             |   | -       |             |   | (152,118 | )           |   | (152,118 | )      
|                                |            |           |              |   |         |         |  |            |           |   |          |             |   |         |             |   |          |             |   |          |         | 
|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 | )      
|                                |            |           |              |   |         |         |  |            |           |   |          |             |   |         |             |   |          |             |   |          |         | 
|Balance, March 31, 2005         |            | 7,350,100 |              | $ | 498,600 |         |  | -          |           | $ | -        |             | $ | 128,165 |             | $ | (554,336 | )           | $ | 72,429   |        

SEE ACCOMPANYING NOTES

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Schedule 1

EVOLVING GOLD CORP.(A Pre-Exploration Stage Company) 
  SCHEDULE OF RESOURCE PROPERTIES 
  for the year ended March 31, 2005 and
  for the period June 10, 2003 (Date of Incorporation) to March 31, 2004 
  (Stated in Canadian Dollars)

|                            |   | Canada   |  |   | United States |  |   |         | 
|--------------------------- | - | -------- |  | - | ------------- |  | - | ------- | 
|                            |   | Murray   |  |   | Winnemuca     |  |   |         | 
|                            |   | Property |  |   | Property      |  |   | Total   | 
|                            |   |          |  |   |               |  |   |         | 
|Acquisition costs           |   |          |  |   |               |  |   |         | 
|Cash                        | $ | 17,000   |  | $ | -             |  | $ | 17,000  | 
|Special warrants            |   | 10,000   |  |   | -             |  |   | 10,000  | 
|                            |   |          |  |   |               |  |   |         | 
|Balance, March 31, 2004     |   | 27,000   |  |   | -             |  |   | 27,000  | 
|                            |   |          |  |   |               |  |   |         | 
|Deferred exploration costs  |   |          |  |   |               |  |   |         | 
|Drafting                    |   | -        |  |   | 314           |  |   | 314     | 
|Field expenses and other    |   | -        |  |   | 5,300         |  |   | 5,300   | 
|Geological consulting       |   | 2,411    |  |   | 12,691        |  |   | 15,102  | 
|Staking and recording costs |   | 5,206    |  |   | 30,172        |  |   | 35,378  | 
|                            |   |          |  |   |               |  |   |         | 
|                            |   | 7,617    |  |   | 48,477        |  |   | 56,094  | 
|                            |   |          |  |   |               |  |   |         | 
|Acquisition costs           |   |          |  |   |               |  |   |         | 
|Cash                        |   | -        |  |   | 37,046        |  |   | 37,046  | 
|Shares                      |   | -        |  |   | 96,000        |  |   | 96,000  | 
|                            |   |          |  |   |               |  |   |         | 
|                            |   | -        |  |   | 133,046       |  |   | 133,046 | 
|                            |   |          |  |   |               |  |   |         | 
|Balance, March 31, 2005     | $ | 34,617   |  | $ | 181,523       |  | $ | 216,140 | 

SEE ACCOMPANYING NOTES

---

EVOLVING GOLD CORP.(A Pre-Exploration Stage Company) 
  NOTES TO THE FINANCIAL STATEMENTS
  March 31, 2005 and 2004 
  (Stated in Canadian Dollars)

|Note 1 | Nature and 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. At March 31, 2005, the Company was in the pre-exploration stage
        and had interests in mineral properties located in the Northwest Territories
        and Nevada, United States of America.
      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.
      These financial statements have been prepared on a going
        concern basis. As at March 31, 2005, the Company has a working capital
        deficiency of $143,711, has yet to achieve profitable operations and has
        accumulated losses of $554,336 since inception. Its ability to continue
        as a going concern is dependent upon the ability of the Company to generate
        profitable operations in the future and/or to obtain the necessary financing
        to meet its obligations and repay its liabilities arising from normal
        business operations when they come due. The outcome of these matters cannot
        be predicted with any certainty at this time and raise substantial doubt
        that the Company will be able to continue as a going concern. These financial
        statements do not give effect to adjustments that would be necessary to
        the carrying values and classification of assets and liabilities should
        the Company be unable to continue as a going concern.
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|Note 2 | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|       | The 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 American 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
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|       | The financial statements, have
        in managements opinion, been properly prepared within the framework
        of the significant accounting policies summarized below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|

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Evolving Gold Corp.
  (A Pre-Exploration Stage Company) 
  Notes to the Financial Statements 
  March 31, 2005 and 2004  Page 2
  (Stated in Canadian Dollars)

|Note 2 | Summary of Significant Accounting Policies
|------ | ------------------------------------------
|       |                                           
|       | a)                                        
|       |                                           
|       |                                           
|       |                                           
|       |                                           
|       |                                           
|       | b)                                        
|       |                                           
|       |                                           
|       |                                           
|       | c)                                        
|       |                                           
|       |                                           
|       |                                           
|       |                                           

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Evolving Gold Corp.
  (A Pre-Exploration Stage Company) 
  Notes to the Financial Statements 
  March 31, 2005 and 2004  Page 3 
  (Stated in Canadian Dollars)

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

|       |                   
|------ | ------------------
|Note 3 | Mineral Properties
|       |                   
|       | a)                
|       |                   
|       |                   
|       |                   
|       |                   

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Evolving Gold Corp.
  (A Pre-Exploration Stage Company) 
  Notes to the Financial Statements 
  March 31, 2005 and 2004  Page 4 
  (Stated in Canadian Dollars)

|Note 3 | Mineral Properties
        (contd)
|------ | ------------------------------------
|       |                                     
|       | a)                                  
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       | b)                                  
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     
|       |                                     

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Evolving Gold Corp.
  (A Pre-Exploration Stage Company) 
  Notes to the Financial Statements 
  March 31, 2005 and 2004  Page 5
  (Stated in Canadian Dollars)

|Note 3 | Mineral Properties (contd)
|------ | ----------------------------
|       |                             
|       | b)                          
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             
|       |                             

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Evolving Gold Corp.
  (A Pre-Exploration Stage Company) 
  Notes to the Financial Statements 
  March 31, 2005 and 2004  Page 6 
  (Stated in Canadian Dollars)

|Note 4 | Advance Payable
      The advance payable is unsecured, non-interest bearing
        and has no specific terms for repayment.                                   
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                 
|Note 5 | Share Capital Note 9
      As at March 31, 2005, 997,029 shares were held in escrow.
      The schedule of release for the escrow shares is as
        follows:

| | 199,406 shares at March 31,
      2005 | 
| | -------------------------------------- | 
| | 199,406 shares at September 30, 2005   | 
| | 199,406 shares at March 31,
      2006 | 
| | 199,406 shares at September 30, 2006   | 
| | 199,405shares at March
      31, 2007  | 
| |                                        | 
| | 997,029                                | 
| |                                        | 

| | Commitments
      Warrants
      During the year ended March 31, 2005, each Series A,
        B, F, L and P Special
        Warrant was exchanged into one common share of the Company.
      The Company also completed a non-brokered private placement
        of 600,000 units at a price of $0.16 per unit for proceeds of $96,000.
        Each unit consists of one common share and one share purchase warrant.
        Each warrant entitles the holder thereof the right to purchase one additional
        common share of the Company at a price of $0.25 per share to January
        10, 2007.
      Stock Option Plan and Stock-based Compensation
      A summary of the status of the stock option plan as
        of March 31, 2005 and 2004 and changes during the period then ended is
        presented below:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

Evolving Gold Corp.
  (A Pre-Exploration Stage Company) 
  Notes to the Financial Statements March 31, 2005 and 2004  Page 7 
  (Stated in Canadian Dollars)

|Note 5 | Share Capital Note 9  (contd)
      Stock Option Plan and Stock-based Compensation  (contd)
|------ | ------------------------------------------------------------------------------------------------

| |                              | 2005      |  |   | 2004     | 
| | ---------------------------- | --------- |  | - | -------- | 
| |                              |           |  |   | Weighted | 
| |                              |           |  |   | Average  | 
| |                              | Number of |  |   | Exercise | 
| |                              | Options   |  |   | Price    | 
| |                              |           |  |   |          | 
| | Outstanding, beginning of    |           |  |   |          | 
| | period                       | -         |  | $ | -        | 
| | Granted                      | 550,000   |  | $ | 0.26     | 
| |                              |           |  |   |          | 
| | Outstanding and exercisable, |           |  |   |          | 
| | end of period                | 550,000   |  | $ | 0.26     | 

Details of stock options outstanding as at March 31, 2005 are as follows:


| | Number of |  | Exercise |  |                    | 
| | --------- |  | -------- |  | ------------------ | 
| | Shares    |  | Price    |  | Expiry             | 
| |           |  |          |  |                    | 
| | 250,000   |  | $0.25    |  | July 15, 2009      | 
| | 250,000   |  | $0.25    |  | September 15, 2005 | 
| | 50,000    |  | $0.34    |  | December 8, 2009   | 
| |           |  |          |  |                    | 
| | 550,000   |  |          |  |                    | 

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 CNQ 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.
  (A Pre-Exploration Stage Company) 
  Notes to the Financial Statements 
  March 31, 2005 and 2004  Page 8 
  (Stated in Canadian Dollars)

|Note 5 | Share Capital Note 9  (contd)
      During the year ended March 31, 2005, the Company granted
        options to directors and a consultant for 500,000 and 50,000 shares pursuant
        to the Plan exercisable at $0.25 and $0.34 per share respectively. Compensation
        costs of stock options granted under the Plan have been estimated using
        an option-pricing model. Assumptions used in the pricing model are as
        follows:
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                 |  | 2005         | 
| | ------------------------------- |  | ------------ | 
| |                                 |  |              | 
| | Average risk-free interest rate |  | 3.6% to 4.0% | 
| | Expected life                   |  | 5.0 years    | 
| | Expected volatility             |  | 138% to 155% | 
| | Expected dividends              |  | Nil          | 

|       | The granted options were accounted for using the
      fair value-based methodology. Accordingly $128,265 was recorded as contributed
      surplus and charged to the statement of loss. Subsequent to March 31, 2005,
      185,000 additional options were granted to a director and officer of the
      company.
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|
|       |                                                                                                                                                                                                                                                                                                                      
|Note 6 | Related Party Transactions                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                      
|       | During the years ended March 31, the Company incurred
      charges to a former significant shareholder, a company with a common director
      and directors as follows:                                                                                                                                            
|

| |                              |   |            |  |   | June 19, 2003  | 
| | ---------------------------- | - | ---------- |  | - | -------------- | 
| |                              |   |            |  |   | (Date of       | 
| |                              |   |            |  |   | Incorporation) | 
| |                              |   | Year ended |  |   | to             | 
| |                              |   | March 31,  |  |   | March 31,      | 
| |                              |   | 2005       |  |   | 2004           | 
| |                              |   |            |  |   |                | 
| | Consulting                   | $ | 52,500     |  | $ | 10,500         | 
| | Management fees              |   | 17,500     |  |   | 52,400         | 
| | Promotion and advertising    |   | 450        |  |   | 2,500          | 
| | Rent and administration fees |   | 4,050      |  |   | 41,445         | 
| |                              |   |            |  |   |                | 
| |                              | $ | 74,500     |  | $ | 106,845        | 

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


---

Evolving Gold Corp.
  (A Pre-Exploration Stage Company) 
  Notes to the Financial Statements 
  March 31, 2005 and 2004  Page 9 
  (Stated in Canadian Dollars)

|Note 6 | Related Party Transactions- (contd)
      During the year ended March 31, 2005, the Company prepaid
        $Nil (2004: $25,550) in respect of a management services agreement to
        a company whose director acts as manager for the Company.
      Accounts payable and accrued liabilities includes $52,500
        (2004: $Nil) due to a director of the Company for consulting services.
      During the year ended March 31, 2005, the Company issued
        150,000 units at a price of $0.16 per unit for total proceeds of $24,000
        to directors of the Company.
      During the period ended March 31, 2004, the Company entered
        into a mineral property option agreement with a public company who is
        a shareholder of the Company, to which it paid cash of $17,000 and issued
        200,000 Series P Special Warrants valued at $10,000.
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Note 7 | Corporation Income Taxes
      The Company has accumulated a total of $34,617 in Canadian
        development and exploration resource expenditures and $181,523 in foreign
        exploration and development expenses. These amounts are available to carry
        forward and offset future taxable income at various rates per year.
      The Company has accumulated non-capital losses totalling
        $426,171 that can be used to offset taxable income of future years. The
        non-capital losses expire as follows:                                                                                                                                                                                                                                                                                                                                                  

| | 2011 | $ | 152,118 | 
| | ---- | - | ------- | 
| | 2012 |   | 274,053 | 
| |      |   |         | 
| |      | $ | 426,171 | 

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

| |                                    |   | 2005     |   |   | 2004    |  
| | ---------------------------------- | - | -------- | - | - | ------- | -
| | Non-capital losses carried forward | $ | 151,802  |   | $ | 56,466  |  
| | Less: valuation allowance          |   | (151,802 | ) |   | (56,466 | )
| |                                    | $ | -        |   | $ | -       |  

The Company has recorded a valuation allowance against its future income
    tax assets based on the extent to which it is unlikely that sufficient taxable
    income will be realized in the future to utilize all the future tax assets.


---

Evolving Gold Corp.
  (A Pre-Exploration Stage Company) 
  Notes to the Financial Statements 
  March 31, 2005 and 2004  Page 10 
  (Stated in Canadian Dollars)

|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:
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                       |   | 2005     |   |   | 2004    | 
| | --------------------- | - | -------- | - | - | ------- | 
| |                       |   | Canada   |   |   | US      | 
| | Net loss for the year | $ | (402,218 | ) | $ | -       | 
| | Total Assets          | $ | 41,356   |   | $ | 181,523 | 

|       |                                  
|------ | ---------------------------------
|Note 9 | Subsequent Events
        Note 5
|       |                                  
|       | a)                               
|       |                                  
|       | b)                               
|       |                                  
|       | c)                               

|Note 10 | Comparative Figures                                                                                                                                                  
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                      
|        | Certain of the comparative figures for the period
      ended March 31, 2004, have been reclassified to conform with the presentation
      used in the current year.
|

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Evolving Gold Corp.
  (A Pre-Exploration Stage Company) 
  Notes to the Financial Statements 
  March 31, 2005 and 2004  Page 11 
  (Stated in Canadian Dollars)

|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 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.
      The Companys accounting principles generally accepted
        in Canada differ from accounting principles generally accepted in the
        United States of America as follows:
      Mineral Properties and Deferred Exploration Costs
      Under accounting principles generally accepted in Canada
        (Canadian GAAP) mineral property acquisition and exploration
        costs may be deferred and amortized to the extent they meet certain criteria.
        Under accounting principles generally accepted in the United States of
        America (US GAAP) mineral property acquisition costs and exploration
        costs must be expensed as incurred unless the mineral properties have
        proven reserves. Therefore an additional mineral property acquisition
        expense is required under US GAAP.
      The impact on the financial statements is as follows:
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

Evolving Gold Corp.
  (A Pre-Exploration Stage Company) 
  Notes to the Financial Statements 
  March 31, 2005 and 2004  Page 12
  (Stated in Canadian Dollars)

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

| |                                                                 |   |            |   |   | June 19, 2003  |  
| | --------------------------------------------------------------- | - | ---------- | - | - | -------------- | -
| |                                                                 |   |            |   |   | (Date of       |  
| |                                                                 |   | Year ended |   |   | Incorporation) |  
| |                                                                 |   | March 31,  |   |   | to March 31,   |  
| |                                                                 |   | 2005       |   |   | 2004           |  
| | Statement of Loss                                               |   |            |   |   |                |  
| | Net loss for the period per Canadian GAAP                       | $ | (402,218   | ) | $ | (152,118       | )
| | Mineral property exploration and acquisition costs              |   | (189,140   | ) |   | (27,000        | )
| | Net loss for the period per US GAAP                             | $ | (591,358   | ) | $ | (179,118       | )
| | Basic and diluted loss per share per US GAAP                    | $ | (0.11      | ) |   |                |  
| | Statement of Cash Flows                                         |   |            |   |   |                |  
| | Cash flows used in operation activities per Canadian GAAP       | $ | (123,292   | ) | $ | (156,414       | )
| | Mineral property acquired and exploration costs
      incurred  |   | (93,140    | ) |   | (17,000        | )
| | Cash flows used in operating activities per US GAAP             |   | (216,432   | ) |   | (173,414       | )
| | Cash flows used in investing activities per
      Canadian GAAP |   | (93,140    | ) |   | (17,000        | )
| | Mineral property acquired and exploration costs incurred        |   | 93,140     |   |   | 17,000         |  
| | Cash flows provided by investing activities
      per US GAAP   |   | -          |   |   | -              |  
| | Cash flows provided by financing activities per Canadian        |   |            |   |   |                |  
| | and US GAAP                                                     |   | 106,000    |   |   | 286,600        |  
| | Increase (decrease) in cash per Canadian and US GAAP            | $ | (110,432   | ) | $ | 113,186        |  

---

Evolving Gold Corp.
  (A Pre-Exploration Stage Company) 
  Notes to the Financial Statements 
  March 31, 2005 and 2004  Page 13 
  (Stated in Canadian Dollars)

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

| |                                                    |   | March 31, |   |   | March 31, |  
| | -------------------------------------------------- | - | --------- | - | - | --------- | -
| |                                                    |   | 2005      |   |   | 2004      |  
| | Balance Sheet                                      |   |           |   |   |           |  
| |                                                    |   |           |   |   |           |  
| | Total assets per Canadian GAAP                     | $ | 222,879   |   | $ | 169,715   |  
| | Mineral property exploration and acquisition costs |   | (216,140  | ) |   | (27,000   | )
| |                                                    |   |           |   |   |           |  
| | Total assets per US GAAP                           |   | 6,739     |   |   | 142,715   |  
| | Total liabilities per Canadian and US GAAP         |   | (150,450  | ) |   | (15,233   | )
| |                                                    |   |           |   |   |           |  
| |                                                    | $ | (143,711  | ) | $ | 127,482   |  
| |                                                    |   |           |   |   |           |  
| | Shareholders Equity                               |   |           |   |   |           |  
| |                                                    |   |           |   |   |           |  
| | Deficit, per Canadian GAAP                         | $ | (554,336  | ) | $ | (152,118  | )
| | Mineral property exploration and acquisition costs |   | (216,140  | ) |   | (27,000   | )
| |                                                    |   |           |   |   |           |  
| | Deficit, per US GAAP                               |   | (770,476  | ) |   | (179,118  | )
| | Share capital per Canadian and US GAAP             |   | 498,600   |   |   | 100       |  
| | Contributed surplus per Canadian and US GAAP       |   | 128,165   |   |   | -         |  
| | Special warrants per Canadian and US GAAP          |   | -         |   |   | 306,500   |  
| |                                                    |   |           |   |   |           |  
| |                                                    | $ | (143,711  | ) | $ | 127,482   |  

---