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**UNITED STATESSECURITIES AND EXCHANG
COMMISSION**Washington, 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 February 28, 2007

OR

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

Commission File Number 000-30084

LINUX GOLD CORP.(Exact
name of registrant as specified in its charter)

British Columbia, Canada(Jurisdiction
of incorporation or organization)

240-11780 Hammersmith WayRichmond, British
Columbia V7A 5E9, Canada(Address of principal executive
offices)

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value(Title of Class)

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

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
  class of capital or common stock as of the close of the period covered by the
  annual report.

|Title of Each Class         | Outstanding at February 28, 2007
|--------------------------- | --------------------------------
|Common Shares, no par value | 71,250,099                      

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

Indicate by check mark whether the registrant is a large accelerated
  filer, or a non-accelerated filer. See definition of accelerated filer
  and large accelerated filer in Rule 12b-2 of the Exchange Act. 
  Large accelerated filer  [   ]     
  Accelerated file  [   ]      Non-accelerated
  filer  [X]

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

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

1

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TABLE OF CONTENTS

PART I
      
    7ITEM 1.
      IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
    7ITEM 2.
      OFFER STATISTICS AND EXPECTED TIMETABLE
    7ITEM 3.
      KEY INFORMATION
    8A.
      SELECTED FINANCIAL DATA
    8B.
      CAPITALIZATION AND INDEBTEDNESS
    9C.
      REASON FOR THE OFFER AND USE OF PROCEEDS
    9D.
      RISK FACTORS
    9ITEM 4.
      INFORMATION ON THE COMPANY
    13A.
      HISTORY AND DEVELOPMENT
    13B.
      BUSINESS OVERVIEW
    14C.
      ORGANIZATIONAL STRUCTURE
    33D.
      PROPERTY, PLANT AND EQUIPMENT
    33ITEM 4A.
      UNRESOLVED STAFF COMMENTS
    33ITEM 5.
      OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    33A.
      OPERATING RESULTS
    33C.
      RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC
    35D.
      TREND INFORMATION
    35ITEM 6.
      DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    38A.
      DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    38B.
      COMPENSATION
    39C.
      BOARD PRACTICES
    40D.
      EMPLOYEES
    41E.
      SHARE OWNERSHIP
    41ITEM 7.
      MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    41A.
      MAJOR SHAREHOLDERS
    41B.
      RELATED PARTY TRANSACTIONS.
    42C.
      INTERESTS OF EXPERTS AND COUNSEL.
    42ITEM 8.
      FINANCIAL INFORMATION
    42A.
      CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
    42B.
      SIGNIFICANT CHANGES
    42ITEM 9.
      THE OFFER AND LISTING
    42ITEM 10.
      ADDITIONAL INFORMATION
    43A.
      SHARE CAPITAL
    43B.
      MEMORANDUM AND ARTICLES OF ASSOCIATION
    43C.
      MATERIAL CONTRACTS
    44D.
      EXCHANGE CONTROLS
    45E.
      TAXATION
    46F.
      DIVIDENDS AND PAYING AGENTS
    47G.
      STATEMENT BY EXPERTS.
    47H.
      DOCUMENTS ON DISPLAY.
    47I.
      SUBSIDIARY INFORMATION
    47ITEM 11.
      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    47ITEM 12.
      DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    48PART II
      
    48ITEM 13.
      DEFAULTS, DIVIDEND ARREARAGES AND DELIQUENCIES
    48ITEM 14.
      MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
        AND USE OF PROCEEDS.
    48A.
      MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
    48B.
      USE OF PROCEEDS.
    48ITEM 15.
      CONTROLS AND PROCEDURES
    48ITEM 16.
      [Reserved]
    49ITEM 16A.
      Audit Committee Financial Expert
    49ITEM 16B.
      Code of Ethics
    49ITEM 16C.
      Principal Accountant Fees and Services
    50ITEM 16D.
      Exemptions from the Listing Standards for Audit Committees
    50ITEM 16E.
      Purchases of Equity Securities by the Issuer and Affiliated
        Purchasers
    50


2

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|PART III       |                      | 50
|-------------- | -------------------- | --
|ITEM 17.       | FINANCIAL STATEMENTS | 50
|ITEM 18.       | FINANCIAL STATEMENTS | 50
|ITEM 19.       | EXHIBITS             | 50
|               |                      |   
|SIGNATURE PAGE | 53                  

3

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GLOSSARY OF MINING TERMS

The following is a glossary of some of the terms used in the
mining industry and referenced herein:

$/yd3 dollars per cubic yard.

Alluvial -a term used to identify particular types of,
or minerals found associated with, deposits made by flowing water, such as
alluvial gold

Arsenopyrite -a major ore of arsenic, Arsenopyite can
  contain a small amount of gold as an impurity

Assay  a precise and accurate analysis of the metal
contents in an ore or rock sample

Au - gold.

Auger drill  a handheld machine that produces small,
continuous core samples in unconsolidated materials

Biotite  dark-colored mica rich in iron, magnesium, and
potassium

Breccia a fragmental rock; any rock formation
essentially composed of uncemented, or loosely consolidated, small angular

Colluvium - A loose deposit of rock debris accumulated
through the action of gravity at the base of a cliff or slope.

Conglomerate  a sedimentary rock composed of rounded
fragments larger than 2 mm in diameter.

Contained gold  total measurable gold in grams or
ounces estimated to be contained within a mineral deposit. Makes no allowance
for economic criteria, mining dilution or recovery losses.

Diamond drill  a large machine that produces a more or
less continuous core sample of the rock or material being drilled.

Dike- a tabular igneous intrusion that cuts across the
layering of the country rock.

Feasibility study  a detailed report assessing the
feasibility, economics and engineering of placing a mineral deposit into
commercial production

Foliated said of a rock in which mineral grains have
been aligned in a planar fabric by shearing or metamorphism.

Fracture -the general term to include any kind of
discontinuity in a body of rock if produced by mechanical process such as shear
stress or tensile stress

gm/mtor gpt- grams per metric tonne.

Gold deposit - means a mineral deposit mineralised with
gold.

Gold resource  see geological or mineral resource

Grams per cubic meter - alluvial mineralisation measured
by grams of gold contained per cubic meter of material, a measure of gold
content by volume not by weight.

Graphite -a allotropic form of carbon found in nature

Greenstone  a rock in which the original igneous
minerals are replaced by dark green metamorphic minerals.

Inferred mineral resource -that part of a 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

Hornblende  a dark a dark-colored, prismatic or
needle-shaped mineral rich in iron, magnesium, sodium and calcium.

Indicated mineral resource -that part of a 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

Intrusive -cuts across (is intrusive into)

4

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Listwanite -(carbonate altered serpentinite) is
associated with gold mineralization.

Lode mining  mining of gold bearing rocks, typically in
the form of veins or stockworks

Mafic  said of a dark-colored, iron and magnesium rich
igneous rock.

Measured resourcemeans 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.

Mineral claim or mining claim -the portion of
mining ground held under law by a claimant.

Mineralization -implication that the rocks contain
sulphide minerals and that these could be related to ore.

Net profit interest (NPI)  effectively a royalty based
on the net profits generated after recovery of all costs

Net smelter royalty or NSR - a royalty based on
the gross proceeds received from the sale of minerals less the cost of smelting,
refining, freight and other related costs.

Ore  a naturally occurring rock or material from which
economic minerals can be extracted at a profit

Ounce or oz. - a troy ounce or 20 pennyweights or 480
grains or 31.103 grams.

Oz/yd3ounces per cubic
  yard.

opt troy ounces per short ton

Placer -a place where gold is obtained by washing; an
alluvial or glacial deposit, as of sand or gravel, containing particles of gold
or other valuable minerals including gemstones.

Pluton  an igneous rock or body formed at depth within
the earth.

Probable reserve- the economically mineable part of an
indicated, and in some circumstances a measured resource demonstrated by at
least a preliminary feasibility study. This study must include adequate
information on mining, processing, metallurgical, economic, and other relevant
factors that demonstrate, at the time of reporting, that economic extraction can
be justified.

Prospect  an area prospective for economic minerals
based on geological, geophysical, geochemical and other criteria

Proven reservemeans the economically mineable part of a
measured resource demonstrated by at least a preliminary feasibility study. This
study must include adequate information on mining, processing, metallurgical,
economic, and other relevant factors that demonstrate, at the time of reporting,
that economic extraction is justified.

Pyrite  an iron sulfide mineral.

Quartz monzonite - a light-colored intrusive rock
composed of quartz and feldspar with moderately abundant biotite and hornblende
crystals

Reserve -that part of a mineral deposit which could be
economically and legally extracted or produced at the time of the reserve
determination.

Reverse circulation drill a large machine that
produces a continuous chip sample of the rock or material being drilled

Silicic  said of a light colored rock composed
primarily of silica and aluminum.

Skarn -a finegrained metamorphic rock that is usually
coloured green or red, ocassionally grey, black, brown or white. It forms
through thermal metamorphism as the mineralogical, chemical and crystallographic
changes in a solid-state rock, i.e. without melting, in response to new
conditions of pressure and/or temperature, and/or introduction of fluids.

Slickensides - a polished, striated rock surface caused
by one rock mass sliding over another in a fault plane

Stockwork -small veins of mineralization that have so
penetrated a rock mass that the whole rock mass can be considered mineralized

Syenite  Potassium-rich intrusive rock; at Granite
Mountain the syenite commonly has an abundance of mafic minerals.

Ton- short ton (2,000 pounds).

5

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Tonne- metric tonne (2,204.6 pounds).

Trenching  the surface excavation of a linear trench to
expose mineralization for sampling

Vein  a tabular body of rock typically of narrow
thickness and often mineralized occupying a fault, shear, fissure or fracture
crosscutting another pre-existing rock

For ease of reference, the following conversion factors are
provided:

1 mile
    = 1.609 kilometres
    2,204 pounds
    = 1 tonne1 yard
    = 0.9144 meter
    2,000 pounds/1 short ton
    = 0.907 tonne1 acre
    = 0.405 hectare
    1 troy ounce
    = 31.103 grams


Unless the context otherwise requires, all references to the
Registrant or the Company or Linux refer to Linux Gold Corp. All monetary
figures are in terms of United States dollars unless otherwise indicated.

6

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BUSINESS OF LINUX GOLD CORP.

We make expenditures on acquiring mineral properties and
carrying out exploration work. The recoverability of amounts shown for
investments, mineral properties and the related deferred expenditures are
dependent upon the existence of economically recoverable reserves, the ability
to obtain the necessary financing to complete the exploration, the profitability
of future production or our ability to dispose of those assets on a profitable
basis. Our ongoing operation is dependent upon cash flow from successful
operations and equity financing. The Company has incurred a loss of $3,898,870
in the year ended February 28, 2007 (2006 - $810,105 (re-stated); 2005 -
$748,369 (re-stated)). These consolidated financial statements do not include
adjustments that would be necessary should it be determined that we may be
unable to continue as a going concern.

FINANCIAL AND OTHER INFORMATION

In this Annual Report, unless otherwise specified, all dollar
amounts are expressed in Canadian Dollars (CDN$ or $). The Government of
Canada permits a floating exchange rate to determine the value of the Canadian
Dollar against the U.S. Dollar (US$).

FOREIGN PRIVATE ISSUER STATUS

Linux Gold Corp. (the "Company), is a Canadian corporation
incorporated under the laws of the Province of British Columbia. Over 50% of its
common stock is held by non-United States citizens and residents; our business
is administered principally outside the United States; and more than 50% of our
assets are located outside the United States. As a result, we believe that we
qualify as a "foreign private issuer" for continuing to report regarding the
registration of our common stock using this Form 20-F annual report format.

FORWARD-LOOKING STATEMENTS

Certain statements in this document constitute forward-looking
statements. Some, but not all, forward-looking statements can be identified by
the use of words such as anticipate, believe, plan, estimate, expect,
and intend, statements that an action or event may, might, could,
should, or will be taken or occur, or other similar expressions. Although we
have attempted to identify important factors that could cause actual results to
differ materially from expected results, such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause our
actual results, performance or achievements, or other future events, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following risks: the risks associated with outstanding
litigation, if any, risks associated with project development; the need for
additional financing; operational risks associated with mining and mineral
processing; fluctuations in metal prices; title matters; uncertainties and risks
related to carrying on business in foreign countries; environmental liability
claims and insurance; reliance on key personnel; the potential for conflicts of
interest among certain officers, directors or promoters with certain other
projects; the absence of dividends; currency fluctuations; competition;
dilution; the volatility of our common share price and volume; and tax
consequences to U.S. Shareholders. We are obligated to keep our information
current and revise any forward-looking statements because of new information,
future events or otherwise.

PART I

ITEM 1.         
 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

This Form 20-F is being filed as an annual report under the
Exchange Act, and accordingly, the information called for in Item 1 is not
required. Please see Item 6  Directors, Senior Management and Employees 
Directors and Senior Management.

ITEM
2.           OFFER
STATISTICS AND EXPECTED TIMETABLE

This Form 20-F is being filed as an annual report under the
Exchange Act, and accordingly, the information called for in Item 2 is not
required.

7

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ITEM
3.           KEY INFORMATION

A.          
SELECTED FINANCIAL DATA

The summary consolidated financial information set forth below
should be read in conjunction with, and is qualified in its entirety by
reference to, the Consolidated Financial Statements, as of and for the years
ended February 28, 2007 and February 28, 2006, together with the notes thereto,
which appear elsewhere in this annual report. The Consolidated Financial
Statements as of and for the years ended February 28, 2007 and February 28, 2006
have been audited by Smythe Ratcliffe LLP, Chartered Accountants. The
Consolidated Financial Statements are prepared in accordance with U.S. GAAP. See
Note 3 of the Notes to Consolidated Financial Statements.

The selected financial data set forth in the following table is
expressed in Canadian dollars. Since June 1, 1970, the Government of Canada has
permitted a floating exchange rate to determine the value of the Canadian dollar
as compared to the United States dollar. At February 28, 2007, US$1.00 was equal
to approximately C$1.17.

The following represents our selected financial data for each
of the past five fiscal years, ending on February 28/29. The data presented is
prepared in accordance with generally accepted accounting principles in the
United States:

Fiscal Years Ended February 28/29

2007
    2006
    2005 (Re-stated)
    2004 (Re-stated)
    2003Net Revenue
    $                    
      -
    $                     -
    $                     -
    $                     -
    $                     -Income (loss) from continuing operations
    (3,898,870)
    (810,105)
    (748369)
    (372,951)
    (125,020)Income (loss) from discontinued operations
    -
    -
    -
    369,213
    (25,000)Income (loss) from continuing operations per Common Share
    (0.06)
    (0.01)
    (0.01)
    (0.01)
    -Income (loss) from discontinued operations per Common Share
    -
    -
    -
    0.01
    -Total Assets
    737,837
    669,057
    650,625
    382,956
    92,719Working Capital (deficit)
    (651,053)
    69,670
    128,204
    (91,924)
    (514,235)Shareholders Equity (deficit)
    (334,974)
    206,262
    254,646
    (25,578)
    (514,233)Cash Dividends per common share
    $ nil
    $ nil
    $ nil
    $ nil
    $ nil


Reference is made to "Item 4. Information on the Company" and
"Item 5. Operating and Financial Review and Prospects for a description of the
initiation and progression of our activities since incorporation.

Currencies and Exchange Rates:

We publish our financial statements in Canadian dollars. Unless
otherwise indicated, monetary amounts referred to in this annual report are in
Canadian dollars. Unless otherwise indicated, all translations from Canadian
dollars to US dollars have been made at a rate of CDN$ 1.17 to US$ 1.00, the
noon buying rate as certified for customs purposes by the Federal Reserve Bank
of New York (the "Noon Buying Rate") on February 28, 2007. We do not represent
that Canadian dollar or US dollar amounts could be converted into US dollars or
Canadian dollars, as the case may be, at any particular rate, the rates below or
at all. On June 13, 2007, the Noon Buying Rate was CDN$ 1.1233 to US$ 1.00. The
following table sets forth noon buying rate for US dollars in New York City for
cable transfers in Canadian dollars as certified for customs purposes by the
Federal Reserve Bank of New York for the periods indicated:

8

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The following table reflects the monthly high and low exchange
rates for U.S.$1.00 to the Canadian dollar for the following periods.

Month
    Year
    High (CAD$)
    Low (CAD$)November
    2006
    1.1474
    1.1275December
    2006
    1.1652
    1.1415January
    2007
    1.1824
    1.1647February
    2007
    1.1852
    1.1586March
    2007
    1.1136
    1.0701April
    2007
    1.1583
    1.1068May
    2007
    1.1810
    1.1530


The following table lists the average exchange rate for US$1.00
to the Canadian dollar for the last five years based on the average month-end
exchange rates.

Year
    Average
    Low/High
    February 29/282007
    1.1374
    1.0989/1.1852
    1.172006
    1.1992
    1.1379/ 1.2425
    1.13792005
    1.2888
    1.1774/1.3968
    1.23142004
    1.3667
    1.269 / 1.4905
    1.34052003
    1.5438
    1.5995 / 1.488
    1.4880


B.          
CAPITALIZATION AND INDEBTEDNESS

This Form 20-F is being filed as an annual report under the
Exchange Act, and accordingly, the information called for in this Item 3.B is
not required

C.           REASON
FOR THE OFFER AND USE OF PROCEEDS

This Form 20-F is being filed as an annual report under the
Exchange Act, and accordingly, the information called for in Item 3.C is not
required.

D.           RISK
FACTORS

The occurrence of any of the following risks could hurt our
business, financial condition or results of operations. In such case, the
trading price of our shares could decline and you could lose all or part of your
investment. Other risks and uncertainties not now known to us or that we think
are immaterial may also impair our business.

RISK FACTORS RELATED TO OUR BUSINESS

Our Limited and Changing Operating History.We initially focused the business of the Company on natural resource
development. We changed direction becoming involved in the information
technology industry to take advantage of the booming technology sector and the
declining precious metals markets. We were not successful in that industry
segment. We have returned our focus on mining and exploration.

Financing Risks.There is no assurance that we
will be able to secure the financing necessary to explore, develop and produce
our mineral properties.

We do not presently have sufficient financial resources or
operating cash-flow to undertake solely all of our planned exploration and
development programs. The development of our properties may therefore depend on
obtaining a joint venture partners, and on our ability to obtain additional
required financing. There is no assurance we will be successful in obtaining the
required financing, the lack of which could result in the loss or substantial
dilution of our interests (as existing or as proposed to be acquired) in our
properties as disclosed herein. In addition, we have no experience in developing
mining properties into production and its ability to do so will be dependent
upon securing

9

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the services of appropriately experienced personnel or entering
into agreements with other major mining companies which can provide such
expertise.

As noted in our audited consolidated financial statements for
the year ended February 28, 2007 we have incurred significant operating losses
and have an accumulated deficit of $ 12,985,227 at February 28, 2007.
Furthermore, we had working capital deficit of $ 651,053 as at February 28,
2007, which is not sufficient to achieve our planned business objectives. Our
ability to continue as a going concern is dependent on continued financial
support from our shareholders and other related parties, the ability of the
Registrant to raise equity financing, and the attainment of profitable
operations, external financings and further share issuances to meet our
liabilities as they become payable.

Our ability to continue as a going concern is dependent on
continued financial support from our shareholders and other related parties, our
ability to raise equity capital financing, and the attainment of profitable
operations, external financings and further share issuance to satisfy working
capital and operating needs. The auditors report on the February 28, 2007
consolidated financial statements include additional comments for U.S. readers
that states that conditions exist that raise substantial doubt about our ability
to continue as a going concern. The consolidated financial statements do not
include adjustments that might result from the outcome of this uncertainty.

Significant Losses for the Foreseeable Future.We expect to incur significant losses for the foreseeable future and cannot
be certain when or if we will achieve profitability. Failure to become and
remain profitable will adversely affect the value of our Common Shares and our
ability to raise capital and continue operations.

Going concern assumption used by our auditor highlights
doubts on our ability to successfully continue.Our consolidated
financial statements have been prepared assuming we will continue on a going
concern basis; however unless additional funding is obtained this assumption
will have to change.

Volatility of the Over-The-Counter Bulletin Board (OTC
BB) may adversely affect the price of the Common Stock.Certain
stocks listed on the OTC BB have recently experienced significant price and
volume fluctuations and decreases which have adversely affected the market price
of our and other stocks listed on the OTC BB without any regard to the
underlying fundamentals of such stocks. These broad market fluctuations, which
may occur in the future may continue to adversely affect the market price of the
Common Stock.

We do not expect to pay cash dividends.We
intend to retain any future earnings to finance our business and operations and
any future growth. Therefore, we do not anticipate paying any cash dividends in
the foreseeable future.

Potential lack of attractive investment targets.Continued volatility of stock prices on the OTC BB may have a material
adverse effect on our ability to raise capital on the OTC BB or by private
investment, and the price of our common stock could fluctuate substantially.

Other Factors. Our areas of business may
be affected from time to time by such matters as changes in general economic
conditions, changes in laws and regulations, taxes, tax laws, prices and costs,
and other factors of a general nature which may have an adverse effect on our
business.

Conflict of Interest. Some of our current
officers and directors have other unrelated full-time positions or part-time
employment. Some officers and directors will be available to participate in
management decisions on a part-time or as-needed basis only. Our management may
devote its time to other companies or projects which may compete directly or
indirectly with us.

U.S. Investors May Not Be Able To Enforce Their Civil
Liabilities Against Us or Our Directors, Controlling Persons and Officers.We are organized under the laws of Canada. All of our directors,
controlling persons and officers are residents of Canada and all or a
substantial portion of their assets and substantially all of our assets are
located outside of the United States. As a result, it may be difficult for U.S.
holders of our common shares to effect service of process on these persons
within the United States or to realize in the United States upon judgments
rendered against them. In addition, you 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

10

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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 they are in compliance with applicable Canadian legislation regarding
the limitation of actions. Also, a judgment obtained in a U.S. court would
generally be recognized by a Canadian court except, for example:

|- | where the U.S. court where the judgment was rendered had
      no jurisdiction according to applicable Canadian law;                                                                                                                                                                                       
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                            
|- | the judgment was subject to ordinary remedy (appeal,
      judicial review and any other judicial proceeding which renders the
      judgment not final, or enforceable under the laws of the applicable state)
      or not final, conclusive or enforceable under the laws of the applicable
      state;
|  |                                                                                                                                                                                                                                                                                                            
|- | the judgment was obtained by fraud or in any manner
      contrary to natural justice or rendered in contravention of fundamental
      principles of procedure;                                                                                                                                           
|  |                                                                                                                                                                                                                                                                                                            
|- | 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;                               
|  |                                                                                                                                                                                                                                                                                                            
|- | the outcome of the judgment of the U.S. court was
      inconsistent with Canadian public policy;                                                                                                                                                                                                          
|  |                                                                                                                                                                                                                                                                                                            
|- | 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                                                                                                                                        
|  |                                                                                                                                                                                                                                                                                                            
|- | there has not been compliance with applicable Canadian
      law dealing with the limitation of actions.                                                                                                                                                                                                   

Changes to Economic Policies in China.We are
currently exploring our property in China. We could be adversely affected if
China changes its economic policies. As part of its economic reform, China has
designated certain areas as Special Economic Zones. Foreign enterprises in these
areas benefit from greater economic autonomy and more favorable tax treatment
than enterprises in other parts of China. Changes in the policies or laws
governing Special Economic Zones could have a material adverse effect on us.
Moreover, economic reforms and growth in China have been more successful in
certain provinces than others, and the continuation or increase of these
disparities could affect the political or social stability of China.

Management has no Significant Minerals Exploration
Technical Training.No member of our management team has significant
technical training in minerals exploration or mining and starting and operating
a mine. Due to these factors, our management may not be fully aware of many of
the specific requirements related to working within his industry, that their
decisions may not take into account standard engineering or managerial
approaches mineral exploration companies commonly use. This risk is that our
operations, earnings and ultimate financial success could suffer due to
managements lack of experience in this industry.

RISK FACTORS RELATED TO THE NATURAL RESOURCE INDUSTRY

Exploration and Development Risks.There is no
assurance given by the Company that our exploration and development programs and
properties will result in the discovery, development or production of a
commercially viable ore body. The business of exploration for minerals and
mining involves a high degree of risk. Few properties that are explored are
ultimately developed into producing mines. At present, none of the Registrants
properties have defined ore bodies with reserves and resources, and the proposed
exploration programs are an exploratory search for ore. There is no assurance
that our mineral exploration and development activities will result in any
discoveries of bodies of commercial ore. The probability of an individual
prospect ever having reserves and being commercially viable is extremely
remote, and, in all probability, our properties do not contain any reserves, and
any funds spent on exploration will probably not be recovered. Unusual or
unexpected geological structures or formations, fires, power outages, labour
disruptions, floods, explosions, cave-ins, land slides and the inability to
obtain suitable or adequate machinery, equipment or labour are other risks
involved in the operation of mines and the conduct of exploration programs. We
have relied and may continue to rely upon consultants and others for
construction and operating expertise. The economics of developing gold and other
mineral properties are affected by many factors including capital and operating
costs, variations of the grade of ore mined, fluctuating mineral markets, costs
of processing equipment and such other factors as government regulations,
including regulations relating to

11

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royalties, allowable production, importing and exporting of
minerals and environmental protection. Depending on the price of gold or other
minerals produced, we may determine that it is impractical to commence or
continue commercial production. Substantial expenditures are required to
establish reserves through drilling, to develop metallurgical processes to
extract metal from ore and to develop the mining and processing facilities and
infrastructure at any site chosen for mining. No assurance can be given that
funds required for development can be obtained on a timely basis. The
marketability of any minerals acquired or discovered may be affected by numerous
factors which are beyond our control and which cannot be accurately foreseen or
predicted, such as market fluctuations, the global marketing conditions for
precious and base metals, the proximity and capacity of milling facilities,
mineral markets and processing equipment, and such other factors as government
regulations, including regulations relating to royalties, allowable production,
importing and exporting minerals and environmental protection.

Estimates of Mineral Deposits.There is no
assurance that any estimates of mineral deposits herein will not change.
Although all figures with respect to the size and grade of mineralized deposits
included herein have been carefully prepared by the Company, or, in some
instances have been prepared, reviewed or verified by independent mining
experts, these amounts are estimates only and no assurance can be given that any
identified mineralized deposit will ever qualify as a commercially viable
mineable ore body that can be legally and economically exploited.

Mineral Prices.There is no assurance that
mineral prices will not change. The mining industry is competitive and mineral
prices fluctuate so that there is no assurance, even if commercial quantities of
a mineral resource are discovered, that a profitable market will exist for the
sale of same.

Title Opinions. The existence of title
opinions should not be construed to suggest that we have good and marketable
title to all of our properties. We follow the usual industry practice in
obtaining title opinions with respect to our lands. No examination has been made
of the ground to determine if any of our mineral claims have been staked or
assessment work carried out.

Regulatory Approvals. Our operations
require the procurement of numerous permits and compliance with an extensive
number of codes and regulations. Mining, exploration and exploitation permits
are required. While we believe that all requirements in this regard have been
met, failure to comply with regulatory requirements could result in permits
being withdrawn or suspended. Further, changes in these regulations or in their
application may adversely affect our operations.

Environmental Issues. We must comply with
environmental laws and regulations. There can be no assurance that violations
will not occur. In the event of a future violation of environmental laws we
could be held liable for damages and for the costs of remedial actions.
Environmental laws could become more stringent over time imposing greater
compliance costs and increasing risks and penalties associated with a violation.

Third Party Reliance.Our rights to acquire
interests in certain mineral properties have been granted by third parties who
themselves hold only an option to acquire such properties. As a result, we may
have no direct contractual relationship with the underlying property holder.

UNCERTAINTIES AND RISKS RELATING TO COMMON SHARES

There is only a limited public market for our common
shares on the OTC Bulletin Board and that market is extremely volatile.There is only a limited public market for our common shares on the OTC
Bulletin Board, and there is a risk that that a broader or more active public
trading market for our common shares will never develop or be sustained, or that
current trading levels will not be sustained.

The market price for the common shares on the OTC Bulletin
Board has been and we anticipate will continue to be extremely volatile and
subject to significant price and volume fluctuations in response to a variety of
external and internal factors. This is especially true with respect to emerging
companies such as ours. Examples of external factors, which can generally be
described as factors that are unrelated to the operating performance or
financial condition of any particular company, include changes in interest rates
and worldwide economic and market conditions, as well as changes in industry
conditions, such as changes in oil and natural gas prices, oil and natural gas
inventory levels, regulatory and environment rules, and announcements of
technology innovations or new products by other companies. Examples of internal
factors, which can generally be described as factors that are directly related
to our consolidated financial condition or results of operations, would include
release of reports by

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securities analysts and announcements we may make from
time-to-time relative to our operating performance, drilling results, advances
in technology or other business developments.

Because we have a limited operating history and no profits to
date, the market price for the common shares is more volatile than that of a
seasoned issuer. Changes in the market price of the common shares, for example,
may have no connection with our operating results or prospects. No predictions
or projections can be made as to what the prevailing market price for the common
shares will be at any time, or as to what effect, if any, that the sale of
shares or the availability of common shares for sale at any time will have on
the prevailing market price.

You will be subject to the penny stock rules to the
extent our stock price on the OTC Bulletin Board is less Than $5.00.Since the common shares are not listed on a national stock exchange or
quoted on the NASDAQ Market within the United States, trading in the common
shares on the OTC Electronic Bulletin Board is subject, to the extent the market
price for the common shares is less than $5.00 per share, to a number of
regulations known as the "penny stock rules". The penny stock rules require a
broker-dealer to deliver a standardized risk disclosure document prepared by the
SEC, to provide the customer with additional information including current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction, monthly account statements showing the
market value of each penny stock held in the customer's account, and to 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.
To the extent these requirements may be applicable they will reduce the level of
trading activity in the secondary market for the common shares and may severely
and adversely affect the ability of broker-dealers to sell the common shares.

You should not expect to receive dividends.We
have never paid any cash dividends on shares of our capital stock, and we do not
anticipate that we will pay any dividends in the foreseeable future. Our current
business plan is to retain any future earnings to finance the expansion of our
business. Any future determination to pay cash dividends will be at the
discretion of our board of directors, and will be dependent upon our
consolidated financial condition, results of operations, capital requirements
and other factors as our board of directors may deem relevant at that time.

Our right to issue additional capital stock at any time
could have an adverse effect on your proportionate ownership and voting rights.We are authorized under our Articles of Incorporation to issue
200,000,000 common shares. Subject to compliance with applicable corporate and
securities laws, we may issue these shares under such circumstances and in such
manner and at such times, prices, amounts and purposes as our board of directors
may, in their discretion, determine to be necessary and appropriate. Your
proportionate ownership and voting rights as a common shareholder could be
adversely affected by the issuance of additional common shares, including a
substantial dilution in your net tangible book value per share.

ITEM
4.           INFORMATION
ON THE COMPANY

A.           HISTORY
AND DEVELOPMENT

The Company was incorporated on February 27, 1979 under a
perpetual charter pursuant to the British Columbia Company Act by registration
of its Memorandum and Articles and was extra-provincially registered in the
Province of Alberta on October 12, 1995 under the name Flame Petro-Minerals
Corp. At an extraordinary general meeting held on March 15, 2000, our
shareholders approved the change of name of the Company from Flame
Petro-Minerals Corp. to LinuxWizardry Systems, Inc, which name change was
effected on March 21, 2000. At our annual meeting of shareholders on February
20, 2003, our shareholders approved the change of name of the Company from
LinuxWizardry Systems, Inc. to Linux Gold Corp., which name change was effected
March 18, 2003. Our authorized capital consists of 200,000,000 Common Shares
without par value. Of these, 71,250,099 shares were issued and outstanding as of
February 28, 2007 and 73,650,646 shares were issued and outstanding as of the
date of this Form 20-F. Our head office is located at #240 -11780 Hammersmith
Way, Richmond, B.C., V7A 5E9.

On February 20, 2003 we held a shareholders meeting at which
our shareholders voted to change our name from LinuxWizardry Systems, Inc. to
Linux Gold Corp. and obtained a new OTC BB trading symbol LNXGF. We believe our
new name, Linux Gold Corp. more closely represents our true business activities.

On March 29, 2004, the new British Columbia Business
Corporations Act (the "BCA") came into force in British Columbia and replaced
the former British Columbia Company Act (Former Act) , which is the statute
under which we were previously governed. Under the BCA, we have two years within
which to transition ("Transition") under the new statute. In accordance with the
BCA, we cannot amend our Articles or Notice of Articles until the Transition to
the BCA

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is completed. We filed a transition application with the
Registrar of Companies British Columbia and completed the Transition on June 11,
2004.

Concurrent with the completion of the Transition, we were
required in accordance with the BCA to incorporate certain provisions known as
the "Pre-Existing Company Provisions" (the "Pre-Existing Company Provisions")
into our Notice of Articles, which replaced the existing Memorandum . The
Company is a pre-existing company under the BCA (that is, a company in
existence at the time the BCA came into force). The Pre-Existing Company
Provisions provide our company with certain default provisions in case certain
provisions which are required to be included in the Articles under the BCA are
not included in our Articles.

We filed our Notice of Articles with the Registrar of Companies
which contains basic information relating to the Company, including our name,
the particulars of the directors and the authorized capital. This was a
mandatory requirement for transition to the BCA.

On August 16, 2004, at the Annual General Meeting of
shareholders, our shareholders passed a special resolution that the Notice of
Articles, filed September 15, 2005, be altered to remove the Pre-existing
Company Provisions set forth in Part 16 of the Regulations to the Business
Corporations Act (British Columbia); and delete and replace our Articles in
their entirety and no longer apply to Linux Gold Corp. The New Articles, among
other things, incorporate and amend certain of the information required by the
Pre-Existing Company Provisions.

Our Incorporation Number is BC0187279. Our Articles do not
restrict the nature of the business that may be carried on by the Company.

Since our inception and during the three fiscal years ending in
February 2007, we have been involved in oil and gas exploration/production and
mineral property exploration. We have investigated several mineral properties in
Canada, the United States, China and Chile.

We also own a 1.277% net working interest in an oil well
located in Fayette County, Texas. To date, we have received no revenues from our
mining property activities, and have received negligible net revenues after
operating costs from our interest in the Fayette County oil well during the past
five fiscal years. As a result, we wrote off our interest in the oil well
located in Fayette County.

We have no current plans to pursue further activities in either
the oil or gas business.

Our current plans are to joint venture and explore our mineral
properties in Northern B.C., Alaska and China. The Company has acquired a 100%
interest in the TY and ORO properties in B.C. and has a 50% interest in the Fish
Creek property in Alaska, which is optioned to Teryl Resources Corp., have
staked claims in the Granite Mountain property in Alaska, have staked 6,400
acres of mineral exploration claims in the Livengood-Tolovana Mining District,
and 12 State of Alaska mining claims (760 acres) located on the Dime Creek
alluvial gold and platinum deposit. Linux Gold Corp is 100% owner of the claims,
and an option on a private company, which has an option to earn up to 85% of a
mining property in Hebei Province, China.

We are currently in the exploration stage and equity financing
is required to continue exploration work on our mineral claims. As a result of
the uncertainty that is typical in an explorative company there is doubt about
our ability to continue as going concern as ultimate success will be based on
securing adequate equity financing and/or the determination of economically
recoverable mineral reserves on its mineral property claims.

B.          
BUSINESS OVERVIEW

Nature of the Companys Operations

Mineral Properties

We are an exploration stage company and there is no assurance
that a commercially viable mineral deposit exists on any of our properties.
Further exploration will be required before a final evaluation as to the
economic and legal feasibility is determined.

If we complete our current exploration programs and if we are
successful in identifying a mineral deposit, we will have to spend substantial
funds on further drilling and engineering studies before we will know if we have
a commercially viable mineral deposit or reserve on any of our properties.

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We will seek equity financing to provide working capital and to
meet exploration commitments on all our properties.

Fish Creek Claims, Alaska

We currently own a 50% joint venture interest in 30 state of
Alaska mining claims, comprising 1,032 acres, known as the Fish Creek Prospect,
located in the Fairbanks Mining District in Alaska. These claims are subject to
an option agreement with Teryl Resources Corp. Teryl Resources Corp. may
purchase the 5% net royalty for $500,000 U.S. within 1 year after production on
a 25% working interest. Teryl also agrees to expend a minimum of $500,000 U.S.
after three years from the date of the agreement. The claims are legally
maintained by recording an affidavit of annual labor for a minimum expenditure
of $100 per claim ($3,000 total) and by paying annual rental to the State of
Alaska in the amount of $130 per claim ($3,900 total). All mechanized
exploration activity must be permitted by the Alaska Division of Mining, Alaska
Department of Fish and Game, and the U.S. Corps of Engineers. Water can be
withdrawn from Fish Creek to support exploration activities with oversight from
the Alaska Department of Conservation. Currently, we are permitted to conduct
exploration by drilling. To the best of our knowledge, we are operating in
compliance with all applicable environmental regulations. There currently are no
unusual social, political or environmental encumbrances to mining on the
project. We currently holds a valid exploration permit on the project.
Additional permits for future work will be acquired from the Division of Mining,
Alaska Department of Fish and Game, and the U.S. Corps of Engineers on an
as-needed basis.

The Fish Creek project is located 25 miles north of Fairbanks
in an important mining district with permissive land status and excellent road
access to the property. Currently, there are only primitive trails developed
within the property to access exploration sites. The project is located within
metamorphic and plutonic host rocks that are similar in composition and age to
rock units that contain commercially viable mineralization elsewhere in the
Fairbanks Mining District. The property is also located on a drainage that was
mined extensively for alluvial gold in the past both upstream and downstream of
the Fish Creek project. Limited exploration conducted between 1992 and 2003 did
not reveal significant bedrock exposures of mineralization, however, very widely
spaced placer drilling over a large area of the property conducted in 1996
indicated the presence of placer gold in the alluvial deposits. More extensive
and closer spaced placer gold drilling conducted in 2004 confirmed the presence
of significant concentrations of placer gold on the claims.

Two independent technical consultants are utilized by the
Company for work on the Fish Creek property. Evaluations for alluvial (placer)
gold are managed by Jeff Keener of NordWand Enterprize, P.O. Box 82811,
Fairbanks, Alaska, 99708, USA. Mr. Keener is a graduate of the University of
Alaska, with a B.S. degree in Geology (1991). Mr. Keener is a member of the
Alaska Miners Association and has applied for membership with the American
Institute of Professional Geologists. From 1986 to the present he has been
actively employed in various capacities in the mining industry in numerous
locations in Alaska, Nevada, Arizona, and California and is recognized as an
expert in the field of placer examination.

For lode gold exploration we utilize Avalon Development Corp.
of Fairbanks, Alaska, to conduct any proposed exploration work on the Fish Creek
Property. Mr. Curt Freeman is the President of Avalon Development Corporation,
P.O. Box 80268, Fairbanks, Alaska, 99708, USA. Mr. Freeman is a graduate of the
College of Wooster, Ohio, with a B.A. degree in Geology (1978), and a graduate
of the University of Alaska with an M.S. degree in Economic Geology (1980). Mr.
Freeman is a licensed geologist in Alaska (AA#159) and is a member of the
American Institute of Professional Geologists (CPG#6901), the Society of
Economic Geologists, the Geological Society of Nevada, the Alaska Miners Assoc.
and the Prospectors and Developers Assoc. of Canada. From 1980 to the present,
he has been actively employed in various capacities in the mining industry in
numerous locations in North America, Central America, South America, New Zealand
and Africa.

The following map shows the location of and access to our
property.

15

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A ground magnetic survey was completed on the Fish Creek
property on November 20, 2003 on the right limit (southeast) side of Fish Creek
Valley, approximately 600  700 feet down-valley from the toe of the Fort Knox
mine fresh water supply dam. This program was an orientation survey to test the
right limit bench of Fish Creek for a suspected buried placer gold-bearing
channel. Magnetic surveys of this type have been successful in locating elevated
magnetic field intensities associated with the heavy, magnetic mineral
concentrations often associated with placer gold accumulations. The field survey
consisted of two lines with 200-foot line spacing and 10-foot station spacing,
which appears to provide sufficient detail to extrapolate magnetic data between
lines. Signatures from the two traverses are interpreted to cross five features,
of which three have the possibility of being associated with alluvial
concentrations of various characteristics. A program of additional ground
magnetics surveying followed by trenching and/or large-diameter auger drilling
to evaluate the two most promising alluvial gold targets was recommended for
early 2004.

In the 2004 drilling program, samples were collected every five
feet. Placer samples were concentrated on-site with a small hydraulic
concentrator and panned to extract the visible gold. The placer gold particles
were dried and weighed with a precision Haigis balance and retained in glass
sample vials. Placer analysis was performed by Mr. Keener, who also is storing
the gold samples and concentrate reject in his office located in Fairbanks,
Alaska. Bedrock samples were collected in large sample bags and transported to
the Kinross rock core storage facility in Fox, Alaska where they were
subsequently transferred to Alaska Assay Laboratory for splitting and
preparation. Reduced samples were sent to Nevada Assay Laboratory of Reno,
Nevada to be analyzed for 69 elements by ICP-MS techniques and for gold by fire
assay. The pulps and rejects are being stored by Alaska Assay Laboratory at
their facility in Fairbanks, Alaska. Bedrock chip samples, collected every five
feet from the two lode holes, are retained in conventional chip trays and are
being stored in Mr. Keeners Fairbanks office.

In June, 2005, we commenced an auger drilling program near Too
Much Gold Creek to collect soil samples from the top of bedrock. An auger track
rig was used to drill 36 holes to a maximum depth of 60 feet on lines spaced 500
feet apart where holes were spaced 200 feet apart. No significant mineralization
was found in the 2005 soil sampling program. Soil samples were transferred to
Alaska Assay Laboratory in Fairbanks, Alaska, for preparation and were analyzed
by ICP-MS for 69 elements and fire assay for gold by Reno Assay Laboratory in
Reno, Nevada. Pulps and rejects are being stored by Alaska Assay Laboratory at
their Fairbanks facility. The total cost for the 2005 soil sampling program was
$16,000.

Currently, there are no resources or reserves on the Fish Creek
property that comply with the Canadian Institute of Mining and Metallurgy (CIM)
Standards on Mineral Resources and Reserves Definitions and Guidelines adopted
by CIM Council on August 20, 2000. While encouraging in its results, the
drill-hole density of the 2004 placer drilling campaign at Fish Creek was not
sufficient to allow estimation of CIM compatible resources or reserves.

Additional work on the Fish Creek property will be based on
results from the previous drilling programs. Each successive phase of
exploration is dependent on generation of encouraging results from the previous
programs and the increasing potential for delineation of commercially viable
resources on the project.

16

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In October 2006, six new geophysical targets were located on
the Fish Creek property. An interpretive report titled Proposed Drill Sites,
Fish Creek Gold Property, Fairbanks Mining District, Alaska. Fugro Airborne
Survey, Inc., under contract to Fairbanks Gold Mining, Inc./Kinross Gold,
initiated an HEM Airborne geophysical area and identified six main targets on
the Fish Creek property.

The following interpreted targets are based on linear
resistivity features inferring regional structural trends. Conductive gradients
at depth or along a structure suggest areas of higher fracture density. The high
magnetic anomalies with good depth extent are interpreted as intrusives and the
linear magnetic highs may be calc-silicates.

Proposed Drill Site 01: Interpreted Target  Conductive Shear /
High Fracture Density Proposed Drill Site 02: Interpreted Target 
Conductive Shear / High Fracture Density Proposed Drill Site 03: Interpreted
Target  Calc-silicate / High Fracture Density Proposed Drill Site 04:
Interpreted Target  Calc-silicate / High Fracture Density Proposed Drill
Site 05: Interpreted Target  Intrusive Contact / High Fracture Density
Proposed Drill Site 06: Interpreted Target  Manto Type Magnetic Anomaly

Together with Teryl Resources Corp. we planned to implement an
exploration program durig the winter of 2006 on the Fish Creek gold property.
Linux Gold Corp. has received permits to conduct exploration drilling on the
Fish Creek property.

There currently are no resources or reserves on the Fish Creek
property that comply with the Canadian Institute of Mining and Metallurgy (CIM)
Standards on Mineral Resources and Reserves Definitions and Guidelines adopted
by CIM Council on August 20, 2000. While encouraging in its results, the drill
hole density of the 2004 placer drilling campaign at Fish Creek was not
sufficient to allow estimation of CIM compatible resources or reserves

Additional work on the Fish Creek property will be based on
results from the previous drilling programs. Each successive phase of
exploration is dependent on generation of encouraging results from the previous
programs and the increasing potential for delineation of commercially viable
resources on the project. A two phase program has been recommended as follows:

|1. | Infill
      Reverse Circulation Drilling: Infill drilling using large diameter reverse
      circulation methods is warranted on the property to better define the
      placer gold mineralization outlined in 2004. Previous experience by Keener
      and other operators within the Fish Creek drainage has shown that drilling
      is an effective method of sampling and valuating the placer deposit and
      provides predictable estimates of subsequent production. Previous work
      suggests that drilling to obtain samples with volumes of 0.05 cubic yards
      each are adequate to estimate the volume and value of the placer gold
      deposit. Sampling procedures similar to those utilized in 2004 should be
      followed except that the volume of each sample should be measured to
      provide a more accurate estimate of the gold grades and to evaluate the
      recovery of the drilling system. Additionally, all holes should be
      continued into bedrock for at least 25 feet to test for the presence of
      lode gold mineralization. The primary goal of this program would be to
      enable industry acceptable mineral resources to be calculated between the
      two lines of drilling completed in 2004. A secondary goal would be to
      determine if significant lode gold mineralization exists in the area
      drilled. Recommended future work on the Fish Creek property should include
      drilling 20 reverse circulation drill holes (8 diameter) for a total of
      1,600 feet of drilling. Construction of an all-weather creek crossing for
      off-road vehicles, near the mouth of Odden Creek, will facilitate this
      work. The estimated cost of such work is $50,000. Fieldwork will take
      about one to two weeks, whereas sample analysis and reporting will take an
      additional two to four weeks.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | Step-out
      Reverse Circulation Drilling: if results of the phase 1 infill drilling
      are encouraging, step- out drilling using large diameter reverse
      circulation methods is warranted on the property to expand on the placer
      gold mineralization outlined in 2004. Sampling procedures similar to those
      utilized in 2004 should be followed except that the volume of each sample
      should be measured to provide a more accurate estimate of the gold grades
      and to evaluate the recovery of the drilling system. Additionally, all
      holes should be continued into bedrock for at least 25 feet to test for
      the presence of lode gold mineralization. The primary goal of this program
      would be to enable industry compliant mineral resources to be calculated
      for areas of the property that lie up and downstream from the 2004 drill
      lines. A secondary goal would be to determine if significant lode gold
      mineralization exists in the area drilled. Recommended future work on the
      Fish Creek property should include drilling 55 reverse circulation drill
      holes (8 diameter) for a total of 4,400 feet of drilling. Construction of
      an all-weather creek crossing for off-road vehicles, near the mouth of
      Odden Creek, will facilitate this work. The estimated cost of such work is
      $150,000. Fieldwork will take about two to three weeks, whereas sample
      analysis and reporting will take an additional four to six
  weeks.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Dime Creek Property

In November 2006, we receive the results of a preliminary heavy
mineral sampling program on the Dime Creek mineral property in western Alaska,
about 150 miles east of Nome. Dime Creek is located 16 miles south of the
Granite Mountain polymetallic prospect, also being explored by Linux Gold Corp.
The Company owns 12 State of Alaska mining claims (760 acres) located on the
Dime Creek alluvial gold and platinum deposit.

Jeff Keener, our project manager for our Granite Mountain
exploration program, collected placer samples from six widely spaced locations
along the stream, including virgin gravel, old tailings, and dumps alongside
shafts. Shallow pits were dug with a shovel and placer samples were concentrated
on-site with a goldpan. Multiple pans were collected from each site and bulked
together as a single sample. All visible gold particles were removed and weighed
to obtain placer ore-grades and the remaining concentrates were analyzed for
gold, platinum, and other elements by Acme Laboratories using fire assay and
ICP-ES techniques.

Two samples of virgin gravel and bedrock yielded coarse
particles of lustrous placer gold with ore grades of 0.035 and 0.087 ounces of
gold per cubic yard. The purity of the placer gold previously recovered on Dime
Creek is unusually high and reported to be 950 fine. No grains of native
platinum were observed in the pan samples, however, assays of the remaining
concentrates returned concentrations of 633 ppb and 9230 ppb of platinum for the
respective placer samples. Other samples of tailings and dumps yielded finer
grains of placer gold and contained up to 816 ppb platinum.

The alluvial deposits on Dime Creek are composed of mostly
volcanic andesite and basalt sand and gravel with occasional cobbles of
intrusive olivine dunite. Where seen, bedrock underlying the stream is the same
volcanic rock as found in the gravel. This relationship and in consideration of
the high purity of placer gold and the significant component of platinum
suggests a mafic-ultramafic source for the precious metals.

Based on the positive results of the preliminary sampling and
the observation that large amounts of un-mined placer material remain within the
drainage, Keener recommends a Phase One placer examination in 2007. This program
would include mapping and sampling of the old mine workings, digging pits and
sampling placer gravel in un-mined ground, and identifying targets for
mechanical exploration in 2008. In addition to the placer examination, soil and
rock samples would be collected along valley walls and rims to investigate
possible sources for the gold and platinum found in the stream deposits.

Other nearby streams were also sampled for heavy minerals,
including the upper part of Quartz Creek, several miles northwest of Granite
Mountain. Multiple-pan, bulk samples were collected within an old placer mine
pit, yielding fine grains of placer gold and giving ore-grades of 0.003 and
0.008 ounces of gold per cubic yard. The remaining concentrates were analyzed by
Acme Laboratories using ICP-MS techniques and resulted in 92.5 ppm and 186.2 ppm
uranium, as well as elevated amounts of hafnium, niobium, tantalum, yttrium,
thorium, tungsten, and zircon. These results suggest an intrusive source of
rare-earth zircon and warrant further geological investigation in the upper part
of the drainage.

The preliminary results of the 2006 exploration program
indicate two new and significant gold anomalies were located by geochemical
sampling of soils and rocks, one at the head of the Kiwalik River and the other
on the lower reach of Quartz Creek. Limited core drilling verified significant
base metal mineralization at the Saddle Prospect and indicate gold
mineralization at the Quartz Pluton Prospect. Pan samples of alluvial deposits
at Dime Creek revealed high-grade placer gold and platinum concentrations, as
well, as uranium at the head of Quartz Creek.

The results of the 2006 exploration program suggest the
potential to locate important deposits of precious and base metals on the
Granite Mountain and Dime Creek properties. The following highlights are offered
for review:

|• | Samples of mineralized rocks at the surface of the Saddle
      Prospect yielded assays of up to 2.58 g/t gold, 250 g/t silver, and 3.0%
      combined lead and zinc. Soil samples collected on a 100m x 100m grid
      placed over the Saddle Prospect defined a new precious metal anomaly on an
      altered contact zone over an area measuring 1,500 meters by 200 to 300
      meters with concentrations of gold to 148 ppb and silver to 12.8 ppm.
      Coincident arsenic anomalies (arsenic to 9,817 ppm) are found in soils
      overlying the plutonic and volcanic rocks outboard of the gold and silver
      anomaly within the contact zone.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|• | A new gold prospect was found in exposures of oxidized
      veins within intensely altered plutonic rocks along Quartz Creek at the
      north end of the claims. Grab samples of rocks, over a distance of 550
      meters of exposed gossan, yielded assays of gold from114 to 325 ppb,
      silver from 10.6 to 35.4 ppm, with copper to 872 ppm and combined lead and
      zinc to 2.1%.                                                                                                                                                                                                                                                                

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- The Gossan Ridge soil grid (100m x 100m) was extended to the west and
  indicate a low-level precious metal anomaly over an area of about 1,300 meters
  x 100 to 400 meters with concentrations of gold to 66 ppb, silver to 9.5 ppm,
  lead to 2,163 ppm, and zinc to 3,223 ppm.
- Pan concentrates collected from the head of Quartz Creek yielded visible
  grains of gold and values of uranium to 186.2 ppm and thorium to 685.9 ppm.
- Significant molybdenum-uranium mineralization was found in silicified,
  syenite breccia at the Peace River Prospect where rock samples gave
  concentrations of molybdenum from 587 to 632 ppm, uranium from 65.8 to 131.9
  ppm, and silver to 4.0 ppm. Two rock samples collected near this site in 2005
  assayed 1,111 and 1,159 ppm molybdenum with copper to 561 ppm copper and
  silver to 5.1 ppm.
- Pan samples of alluvial gravels within old placer workings on Dime Creek
  yielded grades of 1.4 to 3.5 grams of coarse gold per cubic meter. Assays of
  the pan concentrates yielded platinum from 0.63 to 9.23 g/t and chromium to
  1.2%. Documentation of early mining indicates that the placer gold found on
  Dime Creek is of unusually high purity, averaging 960 fine. The high purity of
  the placer gold and the presence of platinum and chromium in the concentrates
  suggests the presence of mineralized plutonic rocks within the drainage.
- Two other gold prospects were found in scout sampling with gold assays as
  high as 3.48 g/t in soils collected near an exposure of silicified volcanic
  rocks.

Four small-diameter (BXTW), diamond drill holes were also
completed for a total of 2,970 feet during 2006 and the final results from the
split core samples have been received. All drill holes intersected well
mineralized, hydrothermally altered volcanic rocks, intruded by dikes or sills
of syenite and granodiorite, and both invaded by later swarms of narrow
rhyolitic to dacitic dikes. Alteration patterns exhibit propyllitic, sericitic,
and potassic assemblages going into the plutonic rocks. The volcanic rocks are
composed of clastic flows, from fine-grained tuffs and siltstones to coarse
sandstones. The volcaniclastic country rocks display brittle fracture and have
high to very high quartz and quartz-carbonate vein densities. These rocks are
considered to be ideal hosts for deposition of fracture-filling mineralization.

The best results were found in Hole 3 (KW06-03), drilled to a
depth of -499 feet at an angle of -60° to explore the contact zone of the
volcanic country rock and altered intrusive rocks at the Saddle Prospect.
Significant base metal mineralization was intersected at the surface. From -5
feet to -110 feet, six 5-ft intervals exceeded 1,000 ppm lead (up to 6,600 ppm)
and twelve intervals exceeded 1,000 ppm zinc with three intervals exceeding
10,000 ppm (1.1% to 2.3%) zinc and silver is present to 10.2 grams per ton.

Hole 2 (KW06-02) was placed at the Quartz Pluton Prospect,
located ~2,000 meters south of Hole 3, and was also drilled at an angle of -60°
to explore the contact zone to a depth of 767 feet. This hole intersected rocks
similar to Hole 3 and penetrated a stibnite rich zone from -260 feet to -420
feet where seventeen 5-ft intervals exceeded 100 ppm antimony with two intervals
exceeding 4,000 ppm. Towards the base of the antimony zone, vein densities
increase and the volcaniclastic andesite is intruded by dacite breccia with a
narrow zone of gold mineralization from -395 to -405 feet. Assays for gold
average 0.28 grams per ton and silver average 9.15 grams per ton within the
breccia zone.

Jeff Keener, project geologist, has noted that polymetallic
mineralization has been traced for 17 kilometers along the Kiwalik Mineral Trend
and that the evidence gathered so far, suggests the possibility of locating
porphyry-related epithermal and mesothermal vein deposits, as well as
intrusive-hosted gold and molybdenum deposits on the Granite Mountain mining
claims. In addition, Keener says the Dime Creek alluvial gold and platinum
deposit has a high potential for development and production. Keener recommends a
9,000 feet drilling program with details of the 2007 exploration program to be
announced.

In February 2007, the 2007 exploration program was submitted by
our Geologist, Jeff Keener. The exploration program on the Dime Creek &
Quartz Creek (near Granite Mountain, Alaska) will consist of mapping historical
placer workings, collecting pan samples from the placer workings and in un-mined
ground, and to analyze the concentrates for gold, platinum and uranium. The goal
of this program is to identify placer and lode drill targets, and determine the
source of the high grade pan concentrates for potential lode deposits.

The Dime Creek and Quartz Creek properties assays from 7 pan
concentrates are as follows:

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Sample #
      Location
      Placer Grade 
        (oz/m3)
      ICP - MS*Au 
        (ppb)
      Pt 
        (ppb)
      U 
        (ppm)60302
      Dime Ck
      0.113
      786
      9230
      0.660305
      Dime Ck
      0.045
      84
      633
      0.560306
      Dime Ck
      0.006
      6
      816
      0.660307
      Dime Ck
      nil
      3
      127
      0.660317
      Unnamed Ck
      0.003
      749
      13
      3660321
      U. Quartz Ck
      0.004
      325
      5
      92.560322
      U. Quartz Ck
      0.010
      713
      7
      186.2* ICP - MS performed after removal of coarse
        placer gold


Jeff Keener completed the placer grades, Alaska Assay Labs did
the fire assays, and Acme Analytical Lab did the Pt and U ICP-MS analysis.

An additional work program for 2007 is to be announced on the
Granite Mountain property, in Alaska, upon completion of last years exploration
report.

We do not consider the Dime Creek property to be a material
property.

TY Gold Property, Bralorne Mining District, British
Columbia

The Ty and ORO properties are located adjacent to one another
and roughly 6 miles east of Goldbridge, British Columbia. Access to the property
from either Goldbridge (10 km west) or Lillooet (96 km east) is readily gained
by way of a gravel highway, which runs along the north side of Carpenter Lake.
Since the property is situated close to the coast of British Columbia and lies
between 640 and 1040 meters altitude, it has reasonably long, warm summers and
short, crisp winters.

The Alpha zone is situated in a 20 meter wide shear zone in
massive green and purple volcanics. It strike N80E and dips vertically. The Beta
zone is not explored over its full width due to bedrock depths at both ends of
the backhoe trenches being beyond the digging range of a backhoe. The zone
strikes NE/SW and dips 30° - 50° NW. It is bounded on the hanging wall by a 3 
5 cm wide, rusty shear which shows well developed slickensides and graphite (the
footwall side was not exposed because the bedrock surface slopes off too steeply
and is beyond digging range).

The Beta zone may have a hanging wall and footwall vein  as is
typical of gold systems in the Bridge River area and many other vein gold
districts (ie the Motherlode system of California). This would explain the
presence of two intersections in some of the holes. The geology of the zone is
not yet understood, as rotary drill cuttings are not as informative as drill
core.

On May 2, 2003 we announced that we had acquired an option to a
100% interest in 21 units in the Bralorne/Lillooet mining division in British
Columbia, called the TY Gold Property. We will pay $30,000 over three years and
150,000 common shares. The TY Gold Property is subject to a 2% net smelter
interest (NSR). We have an option to purchase each 1% NSR for $1,000,000 prior
to production. The TY Gold Property is adjacent to our newly acquired ORO
Property. We now have a total of 41 units in the Bralorne area.

Previous drilling completed on the TY Gold Property on the Beta
zone encountered values up to 5 feet of 5.86 oz/ton silver and 1.129 oz/ton
gold. Additional drilling was recommended by Sampson Engineering Inc. to further
explore the Beta zone.

In August 2003, we completed a phase I drill program. Four
diamond drill holes of approximately 200 feet each in length were drilled in the
Beta Gold zone to confirm the high-grade results of drilling in 1987.

All four holes drilled have encountered extensive stockwork
zones and listwanite alteration, favourable geology for hosting Bralorne-type
gold deposits. The core was split and assayed for gold and silver. Soil sampling
is also underway

20

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to ascertain the strike length and surface extent of the Beta
zone. Based on drill results, a phase II, 3,000 foot diamond drilling program
will be recommended to explore the western side of the Beta zone.

On September 2, 2003, we announced that additional units had
been staked surrounding the Companys TY Gold property and in several strategic
locations in the Bralorne Mining District. Four diamond drill holes have been
completed on the TY Gold property to confirm the high-grade results. Results
from the 4 holes are expected in early September.

In September 2003, we continued a second phase of drilling on
the TY Gold property. The purpose of the program was to confirm high-grade
results encountered by previous drilling on the property.

On November 6, 2003, we announced that diamond drilling results
from Holes 3TD-1 through 6. Gold values were mixed though generally low-grade
with slightly elevated lead/zinc values over minor intervals. The highest gold
value seen (1.48 g/t  hole 3TD 1:84-89) occurred within a highly stockworked,
altered volcanic breccia.

While favorable gold indicators such as listwanite alteration,
abundant stockworking and arsenopyrite mineralization were frequently
encountered gold values were somewhat lower than anticipated. The drill program
is to be extended for additional holes in an attempt to intercept higher-grade,
known mineralization encountered by previous drilling in the 1980s.

We will continue exploration work on the TY Gold property and
will meet the terms of the acquisition agreement unless the Company decides to
not continue due to poor results or economic reasons.

There currently are no resources or reserves on the Ty property
that comply with the Canadian Institute of Mining and Metallurgy (CIM) Standards
on Mineral Resources and Reserves Definitions and Guidelines adopted by CIM
Council on August 20, 2000. While encouraging in its results, the previous
drilling at Ty was not sufficient to allow estimation of CIM compatible
resources or reserves

We do not consider the Ty property to be a material property.

ORO Property, Lillooet Mining Division, British Columbia

The Ty and ORO properties are located adjacent to one another
and roughly 6 miles east of Goldbridge, British Columbia. Access to the property
from either Goldbridge (10 km west) or Lillooet (96 km east) is readily gained
by way of a gravel highway, which runs along the north side of Carpenter Lake.
Since the property is situated close to the coast of British Columbia and lies
between 640 and 1040 meters altitude, it has reasonably long, warm summers and
short, crisp winters.

The Alpha zone is situated in a 20 meter wide shear zone in
massive green and purple volcanics. It strike N80E and dips vertically. The Beta
zone is not explosed over its full width due to bedrock depths at both ends of
the backhoe trenches being beyond the digging range of a backhoe. The zone
strikes NE/SW and dips 30° - 50° NW. It is bounded on the hanging wall by a 3 
5 cm wide, rusty shear which shows well developed slikensides and graphite (the
footwall side was not exposed because the bedrock surface slopes off too steeply
and is beyond digging range).

The Beta zone may have a hanging wall and footwall vein  as is
typical of gold systems in the Bridge River area and many other vein gold
districts (ie the Motherloade system of California). This would explain the
lower intersection in some of the holes. The geology of the zone is not yet
understood, as rotary drill cuttings are not as informative as drill core.

In April 2003, we acquired a 100% interest in 20 mineral claim
units, subject to a 2% net smelter return, called the ORO property in the
Lillooet Mining Division, BC, for $10,000 and 100,000 shares of Linux Gold Corp.
We have the option to purchase back each 1% NSR return for $1,000,000 prior to
production. Several Very Low Frequency  Electromagnetic (VLF-EM) conductive
zones have been located on the ORO property. The magnetic survey shows the
entire property is underlain with sediments and volcanics, which are important
in the placement of gold bearing quartz veins.

The Company has met the terms and conditions of the acquisition
agreement by issuing 25,000 of its shares to the vendor during the nine months
ended November 30, 2004. This was the final requirement of the purchase
agreement. The vendor retains a 2% net smelter return interest.

We will continue exploration work on the ORO Gold property and
will meet the terms of the acquisition agreement unless the Company decides to
not continue due to poor results or economic reasons.

21

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There currently are no resources or reserves on the ORO
property that comply with the Canadian Institute of Mining and Metallurgy (CIM)
Standards on Mineral Resources and Reserves Definitions and Guidelines adopted
by CIM Council on August 20, 2000.

We do not consider the Oro property to be a material property.

BLN Gold Property, Hebei Province, China

The Bo Luo Nuo (BLN) covers an area of 161km2. It
is connected by road to Beijing (about 4 hours drive). The elevation of this
mountainous area is between 750-900 meters. The highest point is the peak of
Mount Guang Ling which is 1,434 meters high and consists of Mesozoic granite.
The climate is cool continental. The maximum annual temperature ranges between
35.7°C and -28.3°C.

BLN is located at the northern edge of the Northern China
Platform, which is mainly composed of Archean crystallized basement. The most
common rocks in this area are Archean metamorphic rocks including schist,
gneiss, granulite, plagioamphibolite, marble, quartzite, and migmatite. Locally,
the outcrops of the Jurassic sedimentary and volcanic rocks can be seen, which
include shale, sandstone, basalt and andesite.

Faults and folds are also well developed in the area. There are
three groups of structures in the area. NNE, NNW and EW faults. The former two
are the vital ore-host structures in the area.

The strike of the mineralization bodies in the north half part
of the BLN is different from that of those in the southern part. The NNW or NW
strike of the mineralization bodies in the north appears to have a dip to the NE
while the NNE strike of mineralization bodies in the south have a dip to the SE.
This may imply that the gold mineralization bodies are controlled by at least
two different groups of faults.

The gold mineralization can be divided into two types: brown
oxidized mineralizations and primary quartz-sulphide mineralization. The Oxided
mineralization mainly consist of gold, quartz, hematite and limonite. Primary
mineralization mineral assemblage is mainly gold, quartz cubic pyrite, galena,
sphalerite, magnetite, chalcopyrite and chlorite. There is almost no difference
about the mineral assemblage of primary mineralization in the various mines in
the area.

On January 20, 2004 the Company acquired an option to purchase
100% of the shares of Ginyen Recovery Inc. Ginyen Recovery Inc. has an 85%
interest in a co-operative joint venture with Bo Luo Neo Wang Yuan Gold Mine
Company (BLN Gold) of Heibei Province, China. BLN Gold holds an operational
gold recovery mill; option to acquire the and license to operate all existing
small mines in the district; the option to explore, develop and produce gold and
silver in the district and options to expand to other districts. The Company can
earn a 100% interest in the private company, subject to a 5% net profits
interest, by issuing 200,000 shares of Linux Gold Corp. in four stages and
paying $50,000 cash, and expending a total of $500,000 in a three-phase work
program.

We entered into a consulting agreement with Jim Yin, Ph.D.,
consulting geologist. Mr. Yin completed his Ph.D. of Science at the China
University of Geosciences, Beijing, China. Mr. Yin has previously supervised
four joint ventures as the project representative for mining exploration in
China and completed a preliminary investigation report on the Linux Gold
optioned property in December 2002.

22

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In April, 2004 we announced assay results indicating high grade
gold and silver on the Tuo Dao Gou gold zone, one of many prospects on the Bo
Luo Nuo property in China. The Tuo Dao Gou gold zone reported 5.5 ounces of gold
per ton with 9 ounces of silver by Acme Analytical Laboratories on April 1,
2004. The Lan Ying has the highest results, with one sample which assayed 11.75
ounces of gold and 5.75 ounces of silver per ton. The average grade from 15
samples on the Ge Di Gou was 23.36 grams per ton. The third important zone is
the Tuo Dao Gou, which was a gold producer zone with stable higher grade gold.
The average grade from 18 samples was 11.58 grams per ton gold.

A total of 118 samples were collected from 12 different known
gold zones for gold and silver and 32 samples were collected from the platinum,
palladium prospect .

The gold zones/veins should be the main targets to follow up in
the next exploration program to develop economic high grade gold reserves to
feed the 50 ton a day mill.

On June 9, 2004 we announced that Bisheng Liu, of Beijing,
China, has been appointed Vice President Corporate Administrator for our gold
mining interests in the Peoples Republic of China. Mr. Bisheng is a resident of
Beijing, the Peoples Republic of China, educated in the Tianjins Institute of
Foreign Trade and received a Bachelor of Economics degree in China. Previous
jobs included a position with the Ministry of Foreign Trade in Beijing and also
work with the Chinese Embassy in Singapore for a three year period as Third
Secretary for the commercial office. Mr. Liu is currently working as project
manager with Cirque Du Soleil. The board of directors is very pleased to have a
representative in China, such as Bisheng Liu, which is the fastest growing
economy in the world today, and look forward to a successful relationship with
our projects in China.

On October 12, 2004 we announced that we had received
confirmation of approval for exploration for Wang Yuan Mine, an additional
permit for exploration is to be submitted on the nearby Lan Ying Mine. The
objective of this years exploration program is to develop sufficient gold
reserves to feed the 50 ton per day mill, which is located on our optioned
property. An exploration program has commenced on the Wang Yuan mine to dewater
the mine and commence a sampling program on the known gold zone.

In November 2004, we announced that the exploration license for
the Dong Gou Gold project has been negotiated by Bisheng Liu, of Beijing, China,
our Vice President Corporate Administrator for this project. The terms and
conditions are pursuant to the co-operative joint venture company agreement that
has an option on mineral exploration rights in Hebei Province, China, covering
an area of 161 kilometres.

The Dong Gou Gold project consists of 5.12 square kilometres.
This area has had three small mines operating in the last seven years, which
were mined mainly by hand by the Chinese farmers in the area. One of the past
producing mines, the Lan Ying Mine, appears to be the best organized mine in the
area. About 90,000 tons of mineralization has been mined out by hand in the
past, at rates of 35 tons of ore per day, grading 11 grams (1/3 of an ounce) of
gold per tonne. The exploration goal for this property, together with the
adjacent Wang Yuan Gold project, is to develop sufficient economic gold reserves
for the 50 ton per day mill, which is on the property. The sampling program on
the Wang Yuan property known gold zones completed and the assays were completed
in February 2005.

The term of the license is effective until a production
decision is made by the Company.

In February 2005, we announced assays results for 22 rock
samples on the Wang Yuan mine. Based on the results of the samples, a drilling
program was recommended.

There currently are no resources or reserves on the BLN
property that comply with the Canadian Institute of Mining and Metallurgy (CIM)
Standards on Mineral Resources and Reserves Definitions and Guidelines adopted
by CIM Council on August 20, 2000.

Additional work on the BLN property will be based on results
from the previous exploration programs. Each successive phase of exploration is
dependent on generation of encouraging results from the previous programs and
the increasing potential for delineation of commercially viable resources on the
project.

We do not consider the BLN gold property to be a material
property.

Livengood-Tolovana Mining District Claims

In May of 2006, the Company staked 6,400 acres of mineral
exploration claims in the Livengood-Tolovana Mining District. Linux Gold Corp is
100% owner of the claims. The Linux Gold Corp claims are strategically placed to
capture

23

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key target areas for gold mineralization based upon new data
issued by the state Geological Survey. Exploration will focus toward collecting
large volume samples in search of low-grade, high tonnage deposits with locally
high-grade gold concentrations, characteristic of the gold-endowed geologic
setting.

We do not consider the Livengood-Tolovanaproperty to be
a material property.

Granite Mountain Property, Seward Peninsula, Alaska

In March 2005, we staked several mineralized areas in western
Alaska, near Granite Mountain on the eastern Seward Peninsula, Alaska. Granite
Mountain lies on the boundary of the historic Koyuk Mining District and
Fairhaven Mining District and is known for the productive placer gold and
platinum group metal deposits and igneous hosted base-metal, precious metal and
uranium prospects located on its flanks. All the staked lands are State of
Alaska public lands and open to mineral entry. A portion of the claims lie
within the North West Arctic Borough. Staking was accomplished by helicopter and
conforms to the MTRSC method of locating 160 acre state mining claims.

The Kiwalik igneous-hosted polymetallic property is located in
western Alaska, approximately 240 kilometers (150 miles) northeast of the city
of Nome and 56 kilometers (35 miles) north of the village of Koyuk (Candle B-5
and C-5 quadrangles). The propertys east boundary is four kilometers (21⁄2 miles)
west of Granite Mountain the tallest point on this part of the eastern Seward
Peninsula, at 864 meters (2,835 feet) above sea level. The continental divide
runs just east of the Kiwalik property and all streams originating within the
property flow to the Kiwalik River, which flows north to Kotzebue Sound.

24

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The Kiwalik Claim Block includes 120 State of Alaska 160 acre
MTRSC mining claims covering almost 7770 hectares (19,200 acres) of state lands
open to mineral entry The mining claims are located on the Quartz Creek pluton
and the surrounding volcanic and sedimentary country rock and is thought to be
prospective for lode deposits of precious metals and base metals.

The Peace River Claim Block includes 16 mining claims (4
square-miles) and is located on a satellite intrusive stock on the east flank of
Granite Mountain at the headwaters of the Peace River. This area was examined in
the early 1950s for its potential as a uranium prospect and was re-examined
during the 1968 USGS Heavy Minerals Program. Samples of soil and rock indicated
anomalous concentrations of base metals including over 2,000 ppm molybdenum
obtained from a composite grab sample of veined syenite rubble. Pan concentrates
collected from these headwater streams by the U.S. Geological Survey in 1951 and
1952 (Gault, et al, 1953, USGS Circ-250) showed an abundance of base metal
sulfide minerals including bornite, as well as concentrations of uranothorianite
and gummite (up to 0.76%eU) . Particles of placer gold were also found. The
local concentration of uranothorianite in the placer deposits is believed to be
the best lead to a potentially economic uranium lode deposit.

The Dime Creek Claim Block is located about 15 miles to the
south of Granite Mountain and is composed of 12 mining claims (3 square-miles).
The placer gold-platinum deposits on Dime Creek were discovered in 1910, but it
wasnt until 1915 that rich pay was found, setting off a stampede to the area.
By 1917, about 12,500 ounces of gold and platinum were recovered from
shoveling-in on the creek placer and from underground drifting on several bench
placers (Harrington, 1917, USGS B-692). The placer gold is unusually pure with a
fineness of 960 and occurs in placer concentrates in a ratio to native platinum
particles of 25:1 to 10:1. In later years, a small bucket-ladder dredge operated
on the valley bottom from 1928 to 1941 while small open-cut and drifting
operations continued on the

25

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benches until at least 1955. Total production is not known, but
incomplete historical data shows production to be at least 25,000 ounces of gold
and platinum. The placer deposit is considered to be highly prospective for
significant additional placer reserves, as well as for lode sources of the
placer gold and platinum.

ACCESS, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE, AND
PHYSIOGRAPHY

The property is located in a remote region in western Alaska,
about 240 kilometers (150 miles) by air northeast of the city of Nome. Nome is a
modern city of about 4,000 residents with an international airport, a recently
improved small boat harbor, and barge loading facilities. Villages near the
property include Koyuk, 56 kilometers (35 miles) to the south, Council, about
130 kilometers (80 miles) to the west, and Buckland, about 97 kilometers (60
miles) to the north. There are several winter trails that may be permitted by
government regulatory agencies to access the property with heavy equipment from
Koyuk, Council, or Kiwalik Lagoon, about 64 km (40 miles) to the north.
Currently, there is no improved overland access to the property and the only
immediate access is by air transport. Koyuk, the nearest village to the Kiwalik
property, is located at the mouth of the Koyuk River at the northeast head of
Norton Bay. Koyuk enjoys a 760 meter (2,500 foot) airstrip capable of landing a
loaded DC-6. Barge facilities are limited to loading from a stationary barge
moored to the western bank of the Koyuk River. Koyuk is the seat of the Koyuk
Village Corporation and owns the surface of the lands from the coast to the
south shore of the Koyuk River near

26

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Dime Landing, 35 kilometers (22 miles) to the north. The Koyuk
River is shallow and, without dredging, is only navigable by shallow-draft
watercraft, barges and landing craft.

A fifty-foot easement from Koyuk to Dime Landing exists through
the private corporate lands and allows for passage of heavy equipment. A native
allotment at Dime Landing has been applied for by a resident of Koyuk, however,
the grant has not been approved by the Bureau of Land Management. From Dime
Landing to the Kiwalik mining claims, access is by way of existing winter trails
for which authorization from the appropriate regulatory agencies must be
acquired. Several airstrips are located near the Kiwalik property: at Granite
Mountain, Quartz Creek, Bear Creek and at Haycock, near the Dime Creek claim
block. The Granite Mountain airstrip was constructed by the U.S. Air Force in
1957 to support the U. S. Department of Defense microwave relay facility (White
Alice) on the summit of Granite Mountain. This facility was decommissioned in
1978 and lies abandoned. The Granite Mountain airstrip is located about five
kilometers (three miles) east of the Kiwalik property at an elevation of 380-
400 meters (1250-1300 feet ) above sea level. It is improved with crushed and
graded gravel over a length of 1220 meters (4,000 feet ). The landing surface is
occasionally maintained by local miners and hunters who use it as primary access
to stage equipment and supplies to outlying mines and hunting camps. The Granite
Mountain airstrip is formally closed to the public, however, local air charter
services have permission to land there.

The Quartz Creek airstrip, at 305 meters (1,000 feet) above sea
level, is limited to short take-off and landing aircraft and is located about
800 meters (one-half mile) east of the Kiwalik property. The Bear Creek airstrip
is150 meters (500 feet) above sea level and about 460 meters (1,500 feet) long
and has been maintained well by the local placer miners. This airstrip is
located about 15 kilometers (9 miles) northeast of the Kiwalik property and is
linked the Granite Mt. airstrip and the Kiwalik property by unimproved trails.
The airstrip at Haycock is 520 meters (1,700 feet) long, but has not been
maintained for several years.

The property is rugged and dominated by tundra and talus
covered hills and ridges. Elevation varies from approximately 137 meters (450
feet) along the Kiwalik River, to 512 meters (1680 feet) on Weather Ridge; and
climbs to 864 meters (2835 feet) a few kilometers to the east at Granite
Mountain. Outcroppings of bedrock are sparse. Valley floors are narrow and
recently developed, perhaps initiated by former alpine glaciation and controlled
by regional structures. The climate is semi-arid with short moderate summers and
long cold winters, typical of subarctic, interior Alaska.

The area is usually snow-free from early June to mid-September.
There is no infrastructure developed on the any of the claim blocks on the
property and no power is available. As development of the property progresses
roads and other infrastructure may allow for year-round operation.

GEOLOGIC SETTING

Country rocks underlying the Granite Mountain area consist of
interlayered mafic lava flows and sedimentary rocks deposited over a time span
lasting from about 160 million years to about 110 million years ago. The
sedimentary rocks are predominantly pebbly sandstone, but include sparsely
scattered conglomerate and mudstone. The mudstone is composed of numerous layers
that are one to several centimeters thick. In the conglomerate well rounded
volcanic fragments as large as 5 cm in diameter are suspended within a fine to
medium grained sandy matrix. Layering in the conglomerate, if present, is too
thick to be observed in outcrop.

The interlayered lava flows and sedimentary rocks are crosscut
by numerous dikes and larger intrusive bodies. The Kiwalik claim block is
centered around the ~109 million year old quartz monzonite of the Quartz Creek
pluton. The Peace River claim block is underlain in part by a syenitic intrusion
that is a satellite of the larger Granite Mountain syenite. Dikes range in
composition from mafic rocks similar to the lava flows, to silicic rocks more
like the larger plutonic bodies. All of the volcanic rocks in the prospect area
have been metamorphosed to greenstone. Many of the volcanic rocks are magnetic;
some have traces of very fine-grained sulfide minerals, probably pyrite. Primary
igneous and sedimentary features are preserved and the rocks are not foliated.

The structural geology of the Granite Mountain area is poorly
understood, but landforms and drainage patterns suggest that the bedrock in the
prospect area is tilted, folded, and faulted. The few bedding orientations
measured during reconnaissance mapping in 2005 suggest broad folding around a
west or northwest trending axis and are consistent with bedding orientations
mapped in outcroppings north and east of the prospect area. In some parts of the
Dime Creek claim block the tilted lava flows and sedimentary rocks are overlaid
by younger, mostly flat-lying lava flows. These younger flows have been eroded
away in the Kiwalik and Peace River claim blocks.

Mineralization within the Kiwalik claim block is concentrated
along the eastern contact of the Quartz Creek pluton, where it abuts volcanic
and sedimentary country rocks. At the north end of the Kiwalik claim block
mineralized

27

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rocks and silicic dikes are exposed in a fault zone that crops
out along the west bank of Quartz Creek. On Gossan Ridge, deeply weathered
sulfide veins are marked by rusty orange and red altered rock that locally have
elevated contents of gold and base metals.

During August of 2005, we conducted geologic mapping and
geochemical sampling on the Kiwalik, Peace River, and Dime Claim Blocks.
Although the results to date are very encouraging, no trenching or drilling has
taken place. No quantifiable mineral resource has been established on any part
of the properties. Phase I orientation and reconnaissance exploration consisted
of mapping rock contacts and units and collecting rock, soil, stream sediment
and pan concentrate samples during ridge and stream traverses. This work
confirmed and added more detail to previous mapping and sampling performed by
the U.S. Geological Survey. Phase II mineral exploration during 2006 is
recommended to consist of an airborne geophysical survey, additional geological
mapping and geochemical sampling, and drilling two- 1,000 ft and four- 500 ft
(total 4,000 ft) diamond drill holes.

Four types of geochemical samples were collected from the
Kiwalik and Peace claim blocks, including 153 soil samples, 93 rock samples, 45
stream sediment samples, and 31 pan concentrate samples. The results of this
program indicate that on the Kiwalik claims, a mineralized trend, striking north
with a length of over 11 kilometers, is spatially associated with the eastern
contact of the Quartz Creek pluton (quartz monzonite) and the andesitic flows
and volcaniclastic country rock. A similar trend was detected on the Peace
claims, where mineralization was found within plutonic (syenite) bedrock over a
strike length of 1.7 kilometers. On both properties the limits of the
mineralized trends are not clearly defined and may be more extensive than
currently known.

At the ground surface, the Quartz Creek mineral trend appears
to be zoned and can be partitioned into base-metal deposits within the volcanic
wallrock and precious-metal deposits within both intrusive and volcanic rocks.
Soil and rock samples collected within the base-metal zones are anomalous in
gold, silver, and antimony and highly anomalous in lead and zinc. Precious metal
zones were sampled with a soil grid placed on veined, brecciated, and oxidized
volcanic rock, as well as with grab samples of veined and intensely altered
intrusive rock, resulting in anomalous concentrations of gold, silver, arsenic,
lead, copper, and antimony. Pan concentrates that were collected on the upper
branches of the Kiwalik River show a marked enrichment of gold where the streams
erode mineralized intrusive bedrock.

The Peace claims were sampled similarly to the Kiwalik claims,
but to less extent. This work indicates that the eastern branch of the
headwaters of the Peace River is eroded into mineralized syenite and is
anomalous in precious and base metals in a relatively narrow trend, striking
northeast. Pan samples resulted in highly anomalous concentrations of gold,
tungsten, and uranium; whereas, rock and soil samples were anomalous in gold,
silver, antimony, and lead and were highly anomalous in molybdenum, copper, and
bismuth.

Exploration and development activities, require permits from
various foreign, federal, state and local governmental authorities. To the best
of our knowledge, we are operating in compliance with all applicable
environmental regulations. There currently are no unusual social, political or
environmental encumbrances to mining on the project. Linux currently holds a
valid Hardrock Exploration Permit on the project. Additional permits for future
work will be acquired from the Alaska Department of Natural Resources on an
as-needed basis.

Detailed analysis of the geochemical data is ongoing, however,
the results to date suggest that several types of polymetallic deposits may be
found near the surface along the Quartz Creek mineral trend and that a large
porphyry system may lie at depth. The relationship of the Peace River
polymetallic deposit to the Quartz Creek mineral belt is not known, but may
represent another phase or portion of a larger plutonic porphyry system. A
US$1.5 million budget is recommended in 2006 to explore the igneous system at
depth and to search for additional evidence of mineral deposits near the
surface. This work should include:

1. A regional airborne geophysical survey to indicate rock
contacts, structure and alteration, as well as for the presence of sulfide
enrichment zones;

2. Additional geological mapping and geochemical sampling to
explore the extensions of the known mineralized trends and to investigate
unexplored areas;

3. Diamond drill holes to explore the rocks underlying
significant geochemical and (anticipated) geophysical anomalies;

4. Structural, chemical, and geochronological studies to
examine the relationship of the Kiwalik and Peace igneous rocks and mineral
trends with the goal of expanding the potential mineral resource.

Objectives for Drilling and Exploration Plan for 2006:

28

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To initiate a scout drilling program by placing four
diamond-core drill holes on the mineral deposits located in 2005.

|• The Gossan Ridge sub-volcanic gold-silver-copper
        prospect.                                                                                                                                                                                                                                                              
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                  
|• The Saddle cordilleran-vein
        lead-zinc-silver prospect.                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                  
|• The Quartz Creek plutonic gold-copper-bismuth
        prospect.                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                  
|• The Peace River plutonic molybdenum-copper-gold-uranium
        prospect.                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                  
|• An additional hole will be placed
        to drill into the cupola of the Quartz Creek pluton to investigate the
        volcanic thermal contact zone overlying the intrusive.                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                  
|• Continue the geochemical surveying
        program by expanding the soil grids on the Gossan Ridge and Peace River
        prospects, place a soil grid on the Saddle prospect, and run discreet
        soil lines across linear structures identified in the geophysical survey
        or through surface geological mapping.

Ongoing geological mapping will be conducted at a scale of
1:63,360 in previously unmapped areas and at a scale of 1:10,000 for detailed
structural and mineralogical data.

The proposed budget to accomplish these goals is (U.S.)
$1,500,000. Contracts and permits are currently being negotiated and applied for
to start-up field work. There are no conditions that must be met in order to
obtain or retain title to the property.

The preliminary results of the 2006 exploration program
indicate two new and significant gold anomalies were located by geochemical
sampling of soils and rocks, one at the head of the Kiwalik River and the other
on the lower reach of Quartz Creek. Limited core drilling verified significant
base metal mineralization at the Saddle Prospect and indicate gold
mineralization at the Quartz Pluton Prospect. Pan samples of alluvial deposits
at Dime Creek revealed high-grade placer gold and platinum concentrations, as
well, as uranium at the head of Quartz Creek.

The results of the 2006 exploration program suggest the
potential to locate important deposits of precious and base metals on the
Granite Mountain and Dime Creek properties. The following highlights are offered
for review:

|• | Samples of mineralized rocks at the surface of the Saddle
      Prospect yielded assays of up to 2.58 g/t gold, 250 g/t silver, and 3.0%
      combined lead and zinc. Soil samples collected on a 100m x 100m grid
      placed over the Saddle Prospect defined a new precious metal anomaly on an
      altered contact zone over an area measuring 1,500 meters by 200 to 300
      meters with concentrations of gold to 148 ppb and silver to 12.8 ppm.
      Coincident arsenic anomalies (arsenic to 9,817 ppm) are found in soils
      overlying the plutonic and volcanic rocks outboard of the gold and silver
      anomaly within the contact zone.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|• | A new gold prospect was found in exposures of oxidized
      veins within intensely altered plutonic rocks along Quartz Creek at the
      north end of the claims. Grab samples of rocks, over a distance of 550
      meters of exposed gossan, yielded assays of gold from114 to 325 ppb,
      silver from 10.6 to 35.4 ppm, with copper to 872 ppm and combined lead and
      zinc to 2.1%.                                                                                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|• | The Gossan Ridge soil grid (100m x 100m) was extended to
      the west and indicate a low-level precious metal anomaly over an area of
      about 1,300 meters x 100 to 400 meters with concentrations of gold to 66
      ppb, silver to 9.5 ppm, lead to 2,163 ppm, and zinc to 3,223
ppm.                                                                                                                                                                                                                                                                                                                                                                   
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|• | Pan concentrates collected from the head of Quartz Creek
      yielded visible grains of gold and values of uranium to 186.2 ppm and
      thorium to 685.9 ppm.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|• | Significant molybdenum-uranium mineralization was found
      in silicified, syenite breccia at the Peace River Prospect where rock
      samples gave concentrations of molybdenum from 587 to 632 ppm, uranium
      from 65.8 to 131.9 ppm, and silver to 4.0 ppm. Two rock samples collected
      near this site in 2005 assayed 1,111 and 1,159 ppm molybdenum with copper
      to 561 ppm copper and silver to 5.1 ppm.                                                                                                                                                                                                                                  
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|• | Pan samples of alluvial gravels within old placer
      workings on Dime Creek yielded grades of 1.4 to 3.5 grams of coarse gold
      per cubic meter. Assays of the pan concentrates yielded platinum from 0.63
      to 9.23 g/t and chromium to 1.2%. Documentation of early mining indicates
      that the placer gold found on Dime Creek is of unusually high purity,
      averaging 960 fine. The high purity of the placer gold and the presence
      of                                                                                                                                                                                             

29

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|  | platinum and chromium in the concentrates suggests
        the presence of mineralized plutonic rocks within the drainage.                                                  
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                             
|• | Two other gold prospects were found in scout sampling
        with gold assays as high as 3.48 g/t in soils collected near an exposure
        of silicified volcanic rocks.

Four small-diameter (BXTW), diamond drill holes were also
completed for a total of 2,970 feet during 2006 and the final results from the
split core samples have been received. All drill holes intersected well
mineralized, hydrothermally altered volcanic rocks, intruded by dikes or sills
of syenite and granodiorite, and both invaded by later swarms of narrow
rhyolitic to dacitic dikes. Alteration patterns exhibit propyllitic, sericitic,
and potassic assemblages going into the plutonic rocks. The volcanic rocks are
composed of clastic flows, from fine-grained tuffs and siltstones to coarse
sandstones. The volcaniclastic country rocks display brittle fracture and have
high to very high quartz and quartz-carbonate vein densities. These rocks are
considered to be ideal hosts for deposition of fracture-filling mineralization.

The best results were found in Hole 3 (KW06-03), drilled to a
depth of -499 feet at an angle of -60° to explore the contact zone of the
volcanic country rock and altered intrusive rocks at the Saddle Prospect.
Significant base metal mineralization was intersected at the surface. From -5
feet to -110 feet, six 5-ft intervals exceeded 1,000 ppm lead (up to 6,600 ppm)
and twelve intervals exceeded 1,000 ppm zinc with three intervals exceeding
10,000 ppm (1.1% to 2.3%) zinc and silver is present to 10.2 grams per ton.
Within this section is a higher grade zone, with average values summarized as:

Saddle Prospect

Drill Hole
    From
    To
    Length
    Lead
    Zinc
    Silver(ft)
    (ft)
    (ft)
    (ppm)
    (ppm)
    (ppm)KW06-03
    -70
    -105
    35
    2,374
    9,396
    5.1


Hole 2 (KW06-02) was placed at the Quartz Pluton Prospect,
located ~2,000 meters south of Hole 3, and was also drilled at an angle of -60°
to explore the contact zone to a depth of 767 feet. This hole intersected rocks
similar to Hole 3 and penetrated a stibnite rich zone from -260 feet to -420
feet where seventeen 5-ft intervals exceeded 100 ppm antimony with two intervals
exceeding 4,000 ppm. Towards the base of the antimony zone, vein densities
increase and the volcaniclastic andesite is intruded by dacite breccia with a
narrow zone of gold mineralization from -395 to -405 feet. Assays for gold
average 0.28 grams per ton and silver average 9.15 grams per ton within the
breccia zone.

Jeff Keener, project geologist, has noted that polymetallic
mineralization has been traced for 17 kilometers along the Kiwalik Mineral Trend
and that the evidence gathered so far, suggests the possibility of locating
porphyry-related epithermal and mesothermal vein deposits, as well as
intrusive-hosted gold and molybdenum deposits on the Granite Mountain mining
claims. In addition, Keener says the Dime Creek alluvial gold and platinum
deposit has a high potential for development and production. Keener recommends a
9,000 feet drilling program with details of the 2007 exploration program to be
announced.

In August 2006 we staked 136 new State of Alaska mining claims
on mineralized areas identified during the 2005 reconnaissance program. The
claims were located to link the Kiwalik and Peace claim blocks, thereby forming
one contiguous block of claims. This will enable assessment work to be applied
to all claims within Linux Golds Granite Mt. properties, as well as provide for
an access corridor between the Kiwalik River and Peace River drainages. This
brings the total number of claims owned by Linux Gold Corp. in the Granite Mt.
area to 284 claims or 68 square-miles. In addition, Linux Gold owns twelve State
of Alaska mining claims on Dime Creek, fifteen miles south of Granite Mt.

Drilling activity began on 28 July by collaring the first hole,
KW06-01, within a gold-in-soil anomaly on the Gossan Ridge prospect identified
during the 2005 field program. At the same time, work began to expand the Gossan
Ridge soil grid and to conduct detailed mapping of rock contacts along the east
side of the Quartz Creek pluton. An injury to one of the soil samplers has
reduced the capability of the soils team until a replacement can be found.

According to Jeff Keener, our project manager for the Granite
Mt. prospect, hole KW06-01 was drilled vertically to 880 feet and encountered
sheared and veined intermediate volcaniclastic andesite country rock and
interbedded felsic rhyolite to rhyodacite units. The volcanic rocks have
undergone sericite alteration nearer to the surface and potassic alteration at
depth. Felsic units are from 1 to 10 feet thick and well-mineralized with
pyrite, pyrrothite, & bismuthinite in carbonatized quartz veins and
veinlets, and as disseminated grains. The mineralized intervals are numerous and
occur in stacked sets over the entire drilled section. It is estimated that 80%
to 85% of the entire drilled section is mineralized. The hole was

30

---

terminated in altered quartz monzonite intersected at 870 feet
below the surface. The intrusive rocks are also mineralized with disseminated
pyrite replacing biotite and pyrite and bismuthinite in quartz-carbonate
veinlets.

In December 2006 we received a report on the 2006 exploration
program on the Granite Mountain Property reported by Jeff Keener, its project
Geologist, which indicated that new gold anomalies were discovered, suggesting
the potential for significant gold mineralization.

• Found up to 0.087 ounces of gold per cubic yard and 9.23
  g/t platinum at Dime Creek alluvial gold and platinum deposit.

• Surface samples of mineralized rocks near the Saddle
  Prospect area yielded assays of 2.58 g/t for gold, greater than 10,000 ppm lead
  and zinc, and over 200 g/t silver. Soil samples collected on a 100m x 100m grid
  on the Saddle area indicate that an area 1200 meters by 200 to 300 meters is
  anomalous in gold with assays to 148 ppb.

• A new gold prospect at the north end of the claims yielded
  rock assays from 114 to 325 ppm over a distance of 1,700 feet along intensely
  altered and oxidized plutonic rock.

• Two other gold prospects with results as high as 3.48
  g/t gold in soil collected from a silicified stump of volcanic rock.

• Significant molybdenum mineralization on the Peace Prospect
  ran values from 587 to 1,159 ppm at the surface. The four diamond drill holes
  results have been received from the 2006 reconnaissance drilling program.

All drill holes intersected well mineralized volcanic rocks,
which have been intruded by swarms of dacitic dikes. These rocks have high to
very high vein densities and are intensely altered exhibiting propyllitic,
sericitic, and potassic assemblages nearing the mineralizing plutonic rocks. The
volcanic rocks are composed of clastic flows, from fine-grained silts to coarser
conglomerates, and in numerous places are brecciated and broken. These rocks are
considered to be ideal hosts for deposition of fracture filling mineralization.

The best results came from hole 3, drilled 499 feet at an angle
of -60° to explore the contact zone of the volcanic country rock and altered
intrusive rocks, intersected significant base metal mineralization at the
surface. From -5 feet to -110 feet six intervals exceeded 1,000 ppm lead (up to
6,600 ppm) and 12 intervals exceeded 1,000 ppm zinc, with three intervals
exceeding 10,000 ppm zinc. Silver is present to 10.2 grams per ton.

Jeff Keener recommends a 9,000 feet drilling program on the
Granite Mountain Prospect with details of the 2007 exploration program to be
announced.

Corporate Finance

During the year ended February 28, 2007:

| | a) | the Company issued 2,586,076 common shares upon the
      conversion of debentures with a principal amount of $644,749.               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                       
| | b) | the Company issued 323,750 common shares at a value of
      US$0.10-US$0.30 per share pursuant to the exercise of stock
  options.   
| |    |                                                                                                                                       
| | c) | the Company issued 52,500 common shares at a value of
      US$0.25 per share pursuant to the exercise of share purchase
    warrants.

During the year ended February 28, 2006:

a)      the
Company issued 50,000 common shares at a value of $0.41 per share pursuant to
the Ty mineral property option agreement.

b)    
 the Company completed a private placement and issued 3,000,000 units at a
price of US$0.20 per unit for proceeds of $600,000. Each unit consists of one
common share and one-half warrant. One whole warrant entitles the holder thereof
to purchase an additional common share, exercisable for a period of two years
from the date of closing, exercisable at a price of US$0.25 in the first year
and US$0.30 in the second year. The 3,000,000 common shares and the common
shares issued as part of the units upon conversion of the warrants are subject
to a one-year hold period from the date of issuance of the units. The Company
issued 100,000 shares and paid $42,571 in cash as a finders fee in connection
with the private placement.

31

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c)      the
  Company issued 93,750 common shares at a value of US$0.10 per share pursuant
  to the exercise of stock options.

d)      the
  Company issued 92,500 common shares at a value of US$0.20 per share pursuant
  to the exercise of share purchase warrants.

During the year ended February 28, 2005:

| | a) | the Company issued 25,000 common shares at a value of
      $0.10 per share pursuant to the mineral Oro mineral property option
      agreement .                                                                                                                                                                                                                                                                                                                                              
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | b) | the Company issued 50,000 common shares at a value of
      $0.39 per share and issued 50,000 common shares as a finders fee pursuant
      to the BLN Gold Property option agreement .                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | c) | the Company completed a private placement and issued
      2,777,777 units at a price of US$0.18 per unit for proceeds of $620,850
      (US$500,000) before issue costs of $2,185. Each unit consisted of one
      common share and one warrant. One whole warrant entitles the holder to
      purchase one share at a price of US$0.18 per share for a two year period.
      The Company issued 208,333 shares as a finders fee in connection with
      this private placement offering.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | d) | the Company completed a private placement and issued
      1,219,500 units at a price of US$0.15 per unit for proceeds of $241,424
      (US$182,925). Each unit consisted of one common share and one-half
      warrant. One whole warrant entitles the holder to purchase one share at a
      price of US$0.20 per share in the first year and US$0.25 per share in the
      second year.                                                                                                 

Additionally, 87,500 stock options were exercised.

Shareholder approval for the granting and exercise of incentive
stock options was obtained at the Companys annual general meeting held on
August 14, 2006.

Description of the Markets in Which the Company Competes

This is no longer applicable due to the discontinuance of the
business operations of our wholly-owned subsidiary.

Competition

Significant and increasing competition exists for the limited
number of gold acquisition opportunities available in North, South and Central
America and elsewhere in the world. As a result of this competition, some of
which is with large established mining companies which have greater financial
and technical resources than the Registrant, the Registrant may be unable to
acquire additional attractive gold mining properties on terms it considers
acceptable. Accordingly, there can be no assurance that the Registrants
exploration and acquisition programs will yield any new reserves or result in
any commercial mining operation.

Seasonality

We can only carry out exploration when weather is favourable.
Typically, we cannot carry out any work during the months of November to March
on our mineral properties.

Availability of Raw Materials

We do not manufacture any products directly.

Marketing Strategy

We do not have any plans for a marketing strategy at this time.
Dependence on Certain Commercial Agreements or Intellectual Property We
do not have any material agreements upon which we are dependent.

Material effects of Government Regulation

Exploration and development activities, require permits from
  various foreign, federal, state and local governmental authorities. To the best
  of our knowledge, we are operating in compliance with all applicable environmental
  regulations.

32

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Mineral Exploration

Exploration and development activities, require permits from
various foreign, federal, state and local governmental authorities. To the best
of our knowledge, we are operating in compliance with all applicable
environmental regulations. Our current and anticipated future operations,
including further exploration activities, require permits from various state and
other governmental. Such operations are subject to various laws governing land
use, the protection of the environment, production, exports, taxes, labor
standards, occupational health, waste disposal, toxic substances, well safety
and other matters. Unfavorable amendments to current laws, regulations and
permits governing operations and activities of oil and gas and resource
exploration companies, or more stringent implementation thereof, could have a
materially adverse impact on us and cause increases in capital expenditures
which could result in our ceasing operations. We have had no material costs
related to compliance and/or permits in recent years, and anticipate no material
costs in the next year.

C.           ORGANIZATIONAL
STRUCTURE

For a list of our significant subsidiaries, see Item 10 
Additional Information  Subsidiary Information.

D.           PROPERTY,
PLANT AND EQUIPMENT

We do not own any properties. Our executive offices are located
in rented premises in a commercial business park located in Richmond, British
Columbia, Canada, a suburb of Vancouver. The space is shared with several other
companies which share common management. The Company will pay monthly rent of
$1,833.33 plus a proportionate share of operating costs. We have occupied these
facilities since November 1, 2006. These facilities are believed to be adequate
for meeting our needs for the immediate future. If required in the future, we do
not anticipate that we will have any difficulty in obtaining additional space at
favorable rates. There are no current plans to purchase or otherwise acquire any
properties in the near future.

Since our inception and during the three fiscal years ending in
February 2007, we had been involved in oil and gas exploration/production and
more recently, mineral property exploration and development.

Please refer to section 4.B. BUSINESS OVERVIEW, Nature of the
Companys Operations, Mineral Properties for a description of our mineral
properties.

ITEM 4A.        UNRESOLVED
STAFF COMMENTS

This section is not applicable as we are not an accelerated
filer or a large accelerated filer, as defined in Rule 12b-2 of the Exchange
Act, or a well-known seasoned issuer as defined in Rule 405 of the Securities
Act.

ITEM
5.           OPERATING
AND FINANCIAL REVIEW AND PROSPECTS

The following discussion should be read in conjunction with the
  Consolidated Financial Statements and Notes thereto included elsewhere herein.
  The Consolidated Financial Statements have been prepared in accordance with
  US GAAP.

A.          
OPERATING RESULTS

Discontinued Operations

During fiscal 2002, we discontinued the business operations of
our wholly-owned subsidiary, LinuxWizardry, Inc.

Continuing Operations

Fiscal Year Ended February 28, 2007 compared to Fiscal year
Ended February 28, 2006

Results of Operations

During fiscal 2007, we received no revenues from operations as
compared to $nil revenues in 2006.

Administrative expenses in 2007 totaled $2,870,000 as compared
to $501,000 in 2006. The expenses increased from the prior year due to the
increased activity of the Company. Professional fees totaled $79,000 compared to
$55,000 in 2006. We also incurred an imputed interest charge of $54,000 compared
to $32,000 in 2006. Imputed interest at 15% was charged to operations based on
the advances from related parties and treated as donated capital. This amount
increased

33

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during 2007 due to the additional advances received in 2007.
Consulting and subcontract expenses increased to $869,000 in 2007 from $134,000
in 2006. This increase was due to the inclusion of stock-based compensation of
$437,000 recognized from the granting of stock options and increased consulting
due to increased activity. Travel increased from $24,000 in 2006 to $445,000 in
2007 due to increased operations. Interest expense increased to $1,260,670 from
$nil in 2006 due to financing acquired in 2007. Office, rent, foreign exchange
and telephone totaled $104,000 compared to $205,000 in 2006.

We paid $1,075,000 for mining exploration work in 2007 as
compared to $310,000 (re-stated) in 2006.

Fiscal Year Ended February 28, 2006 compared to Fiscal year
Ended February 28, 2005

Results of Operations

During fiscal 2006, we received no revenues from operations as
compared to $nil revenues in 2005.

Administrative expenses in 2006 totaled $501,000 as compared to
$611,000 in 2005. The expenses decreased from the prior year due not issuing
stock-based compensation in 2006. Travel totaled $24,000 compared to $40,000 in
2005. A significant portion of the decrease relates to the decrease in
consulting costs of $134,000 in 2006 as compared to $234,000 in 2005. This
decrease was due to not granting stock options for stock-based compensation as
compared to 2005.

We paid $310,000 (re-stated) for mining exploration work in
2006 as compared to $137,000 (re-stated) in 2005.

Fiscal Year Ended February 28, 2005 compared to Fiscal year
Ended February 29, 2004

Results of Operations

During fiscal 2005, we received no revenues from operations as
compared to $nil revenues in 2004.

Administrative expenses in 2005 totaled $611,000 as compared to
$312,000 in 2004. The expenses increased from the prior year due to the
increased activity of the Company. Office, rent and telephone totaled $194,000
compared to $62,000 in 2004. Professional fees totaled $42,000 compared to
$28,000 in 2004. We also incurred an imputed interest charge of $35,000 compared
to $23,000 in 2004. Imputed interest at 15% was charged to operations based on
the advances from related parties and treated as donated capital. This amount
increased during 2005 due to the additional advances received in the first three
fiscal quarters of 2005, before being paid down in the last fiscal quarter of
2005. Consulting and subcontract expenses increased to $234,000 in 2005 from
$174,000 in 2004. This increase was due to the inclusion of stock-based
compensation of $100,000 recognized from the granting of stock options. Travel
increased from $4,000 in 2004 to $40,000 in 2005 due to increased operations.

We paid $137,000 (re-stated) for mining exploration work in
2005 as compared to $122,000 in 2004.

B.           LIQUIDITY
AND CAPITAL RESOURCES

Liquidity and Capital Resources

The audited financial statements have been prepared assuming
that the Company will continue as a going-concern. As discussed in note 2 to the
financial statements, the Company has no revenues and limited capital, which
together raise substantial doubt about its ability to continue as a
going-concern. Management plans in regard to these matters are also described in
note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

In the past, we have derived most of our development and
operating capital primarily from the issuance of capital stock. Minor amounts
were derived from interest.

We have been successful in the past in acquiring capital
through the issuance of shares of our Common Stock, and through advances from
related parties. Although we intend to continue utilizing these sources, there
has been no assurance in the past that these sources and methods would continue
to be available in the future. On July 16, 1999, we received from John G.
Robertson, its then President, currently the Chairman of the Board, a
"Commitment to Provide Financing to Flame Petro-Minerals Corp. as Required for
Ongoing Operations". In substance, the Commitment states that if we are not able
to obtain funds required for maintaining our ongoing operations and status as a
publicly traded company, from other sources, Mr. Robertson agrees and commits to
provide, and/or arrange for any such funds for us on either a loan, equity, or
combination basis, on mutually agreeable terms, and which comply with any
regulatory rules and regulations applicable to such transactions. Mr. Robertson
further states that such maintenance funding requirements are estimated at
approximately $50,000 per year and that he is capable of arranging for such
funding and/or is able to

34

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generate net earnings from revenues which will sustain our
ongoing operations.

In the event that Mr. Robertson were not able to raise funds,
and no other sources of capital were available to us in the future, on a
reasonable financial basis, it would face the same obstacles as many small,
undercapitalized companies do, and, in the worst case, we could be forced to
reorganize or liquidate, either of which consequence would likely have an
adverse financial effect upon our shareholders.

Liquidity

Fiscal Year Ended February 28, 2007 compared to Fiscal year
Ended February 28, 2006

During 2007 we financed our operations by the issue of 376,250
common shares for cash proceeds of $76,399. This consists of the issue of
323,750 common shares pursuant to the exercise of stock options for cash
proceeds of $75,670, and the issue of 52,500 shares pursuant to the exercise of
share purchase warrants for cash proceeds of $729. An additional $14,600 was
subsequently received. We also received subscriptions of $52,277 pursuant to a
private placement. We further received proceeds of $1,864,995, net of debt issue
costs and repayment of debt, pursuant to the issue of convertible notes.

During 2007, we spent $2,003,397 of these funds on operating
activities as discussed above under Results of Operation for the Year Ended
February 28, 2007 as compared to $703,504 the year ended February 28, 2006.

Our cash position has decreased by $269,000 to $127,000 and we
have a working capital deficit as at February 28, 2007 of $651,000.

Fiscal Year Ended February 28, 2006 compared to Fiscal year
Ended February 28, 2005

During 2006 we financed our operations by the issue of
3,336,250 common shares for cash proceeds of $727,790. This consists of the
issue of 3,000,000 common shares pursuant to private placement offerings
completed during the year to raise cash proceeds of $652,556 after issue costs,
the issue of 93,750 common shares pursuant to the exercise of stock options for
cash proceeds of $10,838, and the issue of 92,500 shares pursuant to the
exercise of share purchase warrants for cash proceeds of $21,825.

During 2006, we spent $703,000 of these funds on operating
activities as discussed above under Results of Operation for the Year Ended
February 28, 2006 as compared to $642,000 the year ended February 28, 2005.

Our cash position has decreased by $2,000 to $396,000 and our
working capital as at February 28, 2006 was $70,000.

Fiscal Year Ended February 28, 2005 compared to Fiscal year
Ended February 29, 2004

During 2005 we financed our operations by the issue of
4,543,110 common shares for cash proceeds of $908,196, net of issuance costs.
This consists of the issue of 4,205,610 common shares pursuant to private
placement offerings completed during the year to raise cash proceeds of $860,089
after issue costs, the issue of 87,500 common shares pursuant to the exercise of
stock options for cash proceeds of $10,607, and the issue of 250,000 shares
pursuant to the exercise of share purchase warrants for cash proceeds of
$37,500.

During 2005, we spent $642,000 of these funds on operating
activities as discussed above under Results of Operation for the Year Ended
February 28, 2005 as compared to $154,000 the year ended February 29, 2004.

Our cash position has increased by $247,000 to $398,000 and our
working capital as at February 28, 2005 was $128,000.

C.           RESEARCH
AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

Our aggregate research and development expenditures over the
past three years ended February 28, 2005, February 28, 2006 and February 28,
2007amount to $nil, $nil and $nil respectively. We do not hold any patents,
trademarks or copyrights.

D.           TREND
INFORMATION

We currently have no active business operations that would be
effected by recent trends in productions, sales, etc. We have no material net
sales or revenues that would be affected by recent trends other than the general
effect of mineral prices on our ability to raise capital and those other general
economic items.

35

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E.           OFF-BALANCE
SHEET ARRANGEMENTS

There are no known off-balance sheet arrangements other than
those disclosed in this Form 20-F and in our audited consolidated financial
statements for the year ended February 28, 2007.

F.           TABULAR
DISCLOSURE OF CONTRACTUAL OBLIGATIONS

The following table provides information as of the latest
fiscal year end balance sheet date with respect to the Companys known
contractual obligations specified below.

Payments due by periodContractual Obligations
      Total
      Less than 1 
        year
      1-3 years
      3-5 years
      More than 
        5 yearsMineral Property Obligations 
        (option payments necessary to retain 
        property interests)(1)
      $430,500 
        and 150,000 
        shares
      -
      $430,500 and 
        150,000 shares
      -
      -Long-term debt obligations
      -
      -
      -
      -
      -Capital (Finance) Lease obligations
      -
      -
      -
      -
      -Operating lease obligations
      $105,600
      $39,600
      $39,600
      $26,400
      -Purchase Obligations
      $41,500
      $34,500
      $7,000
      -
      -Other Long-term liabilities reflected on the 
        Companys Balance sheet under US 
        GAAP
      -
      -
      -
      -
      -Total
      $577,600 
        and 150,000 
        shares
      $74,100
      $477,100 and 
        150,000 shares
      $26,400
      -


Alaska Mineral Properties

Fish Creek Property: The Company owns a 50% joint venture
interest in 30 claims located in the Fairbanks Mining Division, Alaska, USA,
known as the Fish Creek Claims. During fiscal 2003, the Company optioned its 50%
interest in the 30 Fish Creek Claims to Teryl Resources Corp. (Teryl) (a
related company). Under the terms of the agreement, Teryl issued 200,000 common
shares to the Company at a fair value of $80,000 and must expend $500,000 over
three years. The Company retained a 5% net royalty interest, until US$2,000,000
has been received, and may convert into a 25% working interest. The Company
entered into an amending agreement with Teryl to extend the term of the original
agreement until March 7, 2007, in which Teryl issued 100,000 common shares to
the Company, and also agreed to expend a minimum of US$500,000 within two years
from the date of this amending agreement. All other terms of the original
agreement remain the same. Subsequently, the Company entered into a further
amending agreement with Teryl to extend the term of the original of the original
agreement until March 5, 2009, in which all other terms of the original
agreement remain the same.

Granite Mountain Property: The Company staked total of 284 mining
  claims located in the State of Alaska. British Columbia Mineral Properties

TY Property: The Company acquired the TY Area, TY Grid 2 and 3
(21 units) mineral claims located in the Lillooet Mining Division in British
Columbia under the following terms and conditions:

| | a. | The Company must pay $30,000 in various stages to
      December 1, 2004 (paid).                                                                                                                     
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                      
| | b. | The Company must issue 150,000 shares as follows: 100,000
      upon signing the agreement and receiving regulatory approval (issued), and
      50,000 shares upon completion of Phase III (issued).
| |    |                                                                                                                                                                                                      
| | c. | The vendor will retain a 2% net smelter return interest
      (NSR). The Company may purchase the NSR for $1,000,000 for each 1% prior
      to commercial production, in shares or in cash.       

During the year ended February 29, 2004, the Company staked an
additional three mineral claims representing 35 units.ORO Property: The
Company acquired the ORO (20 units) claim in the Lillooet Mining Division in
British Columbia

36

---

under the following terms and conditions:

| | a. | The Company paid $10,000 and issued 100,000 common
      shares.                                                                                                                              
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                               
| | b. | The vendor will retain a 2% net smelter return interest
      (NSR). The Company may purchase the NSR for $1,000,000 for each 1% prior
      to commercial production, in shares or in cash.

During the year ended February 29, 2004, the Company staked an
additional mineral claim representing 5 units. The President of the Company is
the registered owner of the mineral properties. The Company is entered into a
trust agreement stating that these mineral claims are held in trust on behalf of
the Company. The Company has re-staked the TY property and acquired additional
claims in the same area.

China Mineral Properties

(1) On January 20, 2004, the Company acquired an option to
purchase 100% of the shares of Ginyen Recovery Inc. Ginyen Recovery Inc. has an
85% interest in a co-operative joint venture with Bo Luo Neo Wang Yuan Gold Mine
Company (BLN Gold) of Heibei Province, China. BLN Gold holds an operational
gold recovery mill; the right and license to operate all existing small mines in
the district; the right to explore, develop and produce gold and silver in the
district and options to expand to other districts.

To complete the option agreement, the Company must:

| | a. | pay $55,000 as follows: $10,000 upon regulatory approval
      (paid); $15,000 upon completion of Phase I; $15,000 upon completion of
      Phase II; and a minimum of $15,000 annually or 5% of net profits paid
      quarterly, which ever is greater. The Company is currently in Phase
    1.                     
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. | issue 200,000 shares as follows: 50,000 upon regulatory
      approval (issued); 50,000 upon completion of Phase I; 50,000 upon
      completion of Phase II; and 50,000 upon completion of Phase III. The
      Company also issued 50,000 common shares as a finders fee. The Company is
      currently in Phase 1.
| | c. | incur production expenses, subject to successful results
      in each phase, of $500,000 as follows: $160,000 ($114,457 incurred) for
      Phase I; $130,000 for Phase II; and $210,000 for Phase
  III.                                                                                                             

We do not deem this to be a material property.

As we explore our properties, we decide which ones to proceed
with and which ones to abandon. To fully exercise the options under various
agreements for the acquisition of interests in properties located in Canada,
Alaska and China, we must incur exploration expenditures on the properties and
make payments to the optionors as follows:

37

---

Property
    Calendar Year
    Option/Advance Royalty Payment
    Expenditure 
        Commitment  Number of 
        SharesGranite Mountain
      20072006TY, BC, Canada
    2007
    $ -
    $ -
    -2006
    $ -
    $ -
    -ORO, BC, Canada
    2007
    $ -
    $ -
    -2006
    $ -
    $ -
    -BLN Gold Property, Hebei Province, China
    2007- 2006
    $45,000
    $385,543
    150,000


These amounts may be reduced in the future as we determine
which properties are of merit and abandon those with which we do not intend to
proceed.

**G.**          **Safe
Harbor**

This annual report includes "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements may include conclusions of prefeasibility and
feasibility studies, estimates of future production, capital and operating
costs, prices of silver and gold and other known and unknown risks. These and
other factors and uncertainties may cause material differences from future
results as expressed or implied by these forward looking statements. These
risks, uncertainties and other factors include but are not limited to the risks
involved in the exploration, development and mining business.

All statements, other than statements of historical facts,
included in this annual report that address activities, events or developments
which we expect or anticipate will or may occur in the future are
forward-looking statements. The words "believe", "intend", "expect",
"anticipate", "project", "estimate", "predict" and similar expressions are also
intended to identify forward-looking statements.

Our estimated or anticipated future results or other
non-historical facts are forward-looking and reflect our current perspective of
existing trends and information. These statements involve risks and
uncertainties that cannot be predicted or quantified, and consequently actual
results may differ materially from those expressed or implied by such
forward-looking statements. Such risks and uncertainties include, among others,
the success of our exploration and development activities, environmental and
other regulatory requirements, foreign exchange issues, mineral deposit
estimates and mineral prices, competition by other mining companies, financing
risks, mineral title issues, insider conflicts of interest, political stability
issues, and other risks and uncertainties detailed in this report and from time
to time in our other Securities and Exchange Commission (SEC) filings.

Consequently, all of the forward-looking statements made in
this annual report are qualified by these cautionary statements. We cannot
assure you that the actual results or developments anticipated by us will be
realized or, even if substantially realized, that they will have the expected
effect on us or our business or operations.

Forward-looking statements are subject to a variety of risks
and uncertainties in addition to the risks referred to in Risk Factors under
Item 3.D above.

ITEM
6.           DIRECTORS, SENIOR
MANAGEMENT AND EMPLOYEES

A.           DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES

As of February 28, 2007, our Board of Directors consisted of
four Directors, two of whom are independent (or outside) non-executive
Directors. The following table provides certain information about the members of
our Board of Directors as of February 28, 2007.

38

---

Name
    Position with Registrant
    Term of Office
    Office Held SinceJohn G. Robertson
    President, CEO and Chairman of the Board and
      Director, and Director of Subsidiary
    Annual Shareholders Meeting in 2003
    3/05/79Jennifer Lorette
    Director
    Annual Shareholders Meeting in 2003
    6/01/94Susanne Robertson
    Director
    Annual Shareholders Meeting in 2003
    8/28/02Monique van Oord
    Chief Financial Officer and Corporate Secretary
    Annual Shareholders Meeting in 2004
    8/16/04


John G. Robertson. Mr. Robertson is the Chairman of the
Board, CEO and founder of the Company and a Director of the Company since its
inception. Mr. Robertson has been the Chairman, President and Chief Executive
Officer of REGI U.S., Inc., an Oregon corporation traded on the OTC bulletin
board, since July 1992, a U.S. public company engaged in the development of a
rotary engine/compressor (Rand Cam Engine) and hydrogen separator technology.
Since October 1984 Mr. Robertson has been President and a Director of Reg
Technologies Inc., a British Columbia corporation listed on the TSX Venture
Exchange that has financed the research on the Rand Cam Engine since 1986. REGI
U.S. is ultimately controlled by Reg Technologies Inc. Mr. Robertson has been
the President and Principal Executive Officer and a Director of IAS
Communications, Inc. since its formation in December 1994, a U.S. public company
which is developing and marketing proprietary antenna technology. Since June
1997 Mr. Robertson has been President, Principal Executive Officer and a
Director of Information Highway.com, Inc., a Florida corporation. Mr. Robertson
is also the President and founder of Teryl Resources Corp., a British Columbia
company trading on the TSX Venture Exchange involved in mineral exploration.
Since May 1977 Mr. Robertson has been President and a member of the Board of
Directors of SMR Investments Ltd., a private British Columbia corporation
engaged in management of public companies. Mr. Robertson is also the President
and Director of the following private companies: JGR Petroleum, Inc., BlueCrow
Internet Co. Ltd., 394754 B.C. Ltd., dba SOVO Computer Centre, Pavlik Travel
Services Ltd., World Tel-Internet (Toronto) Ltd., International Diamond
Syndicate Ltd., Argon Investment Corporation, and Airstream Communications, Inc.
Mr. Robertson is a citizen and resident of Canada.

Jennifer Lorette - Ms. Lorette has held several
positions with the Company since June 1994. Also, since June 1994 Ms. Lorette,
has been Vice President of REGI U.S., Inc., an Oregon corporation traded on the
OTC bulletin board. Since April 1994 she has also been Vice President of
Administration for Reg Technologies, Inc., a British Columbia corporation listed
on the TSX Venture Exchange. REGI U.S. is ultimately controlled by Reg
Technologies Inc. Since June 1997 Ms. Lorette has been Secretary/Treasurer, and
a Director of Information Highway.com, Inc., a Florida corporation. Ms. Lorette
is a founder, and has been Secretary/Treasurer of IAS Communications, Inc. since
February 1995. Ms. Lorette is a citizen and resident of Canada.

Susanne Robertson - Ms. Robertson was elected a director
of the Company in August 2001. She is also a director of Teryl Resources Corp.
and owns SMR Investments Ltd. a company providing management services to public
companies. Ms. Robertson is a citizen and resident of Canada.

Monique van Oord  Ms. van Oord was elected a director
of the Company in August 2004. She is the Companys Chief Financial Officer and
Secretary. She is also a director of Teryl Resources Corp. Ms. van Oord is a
citizen and resident of Canada.

B.          
COMPENSATION

For the fiscal year ended February 28, 2007 the Company and its
subsidiaries paid $42,000 in compensation to directors, officers and related
companies as a group. $30,000 of this amount was not paid, but was accrued.

SMR Investments Ltd., a company owned by Susanne M. Robertson,
wife of John G. Robertson, receives, in accordance with a management agreement
$2,500 per month for management fees provided to the Company. A further $1,000
per month is paid to the Chairman of the Board of the Company, John G.
Robertson, as a director's fee. John G. Robertson is also president and a
director of SMR Investments Ltd.

No cash or non-cash compensation was paid or distributed to the
executive officers of the Company under any pension or other plans nor is there
any plan for such payments or distributions during the following fiscal year
contributed to the directors and officers.

39

---

During the fiscal year ended February 28, 2007 1,600,000 new
stock options were granted pursuant to stock option plans, 323,750 options were
exercised and no options were cancelled (expired)(see Note 10 to our Financial
Statements).

Total options currently exercisable at the date of this 20-F
are 3,720,000. All exercise prices are US dollars. Of those, 1,575,000 are
exercisable at $0.10 expiring on dates ranging from February 21, 2008 to
February 25, 2008. 245,000 options are exercisable at $0.18 and expire on
September 17, 2008, 75,000 are exercisable at $0.30 expiring April 22, 2009,
12,500 are exercisable at $0.20 and expire on November 9, 2009, 25,000 are
exercisable at 0.34 and expire on June 29, 2006, 1,500,000 are exercisable at
$0.35 and expire on August 9, 2011 and 75,000 are exercisable at $0.25 and
expire on dates ranging from November 2, 2011 to December 8, 2011. Please see
Note 8 to the financial statements.

Options to Purchase Registrant's Common Shares Held by Officers
  and Directors of Registrant

NAME OF OPTIONEE
    NUMBER OF OPTIONS
    EXERCISE PRICE (US $)
    EXPIRY DATEJohn G. Robertson
    1,000,000
    $0.10
    February 21, 2008Jennifer Lorette
    150,000
    $0.10
    February 21, 2008Monique van Oord
    50,000
    $0.30
    April 22, 2009Susanne Robertson
    300,000
    $0.10
    February 25, 2008TOTAL HELD AS A GROUP:
    1,500,000


Options to Purchase Registrants Common Shares Held by
Persons Other than Officers and Directors of the Registrant

Name of Optionee
      No. of Optioned Shares
      Exercise Price Per 
        Share
      Expiry DateJames Vandeberg
    75,000
    US$0.10
    February 21, 2008Bruce Bragagnolo
    50,000
    US$0.10
    February 25, 2008James Kerr
    75,000
    US$0.10
    February 25, 2008James Kerr
    75,000
    US$0.10
    September 17, 2008Peter Zihlmann
    62,500
    US$0.10
    October 20, 2008Jillian Thow
    245,000
    US$0.18
    Sept. 17, 2007Arnie Winrob
    25,000
    US$0.30
    April 22, 2009Cindy Broad
    12,500
    US$0.20
    November 9, 2009Barbara West
    25,000
    US$0.34
    June 29, 2006Michael Baybak
    1,000,000
    US$0.35
    August 9, 2011Gary Pollack
    500,000
    US$0.35
    August 9, 2011Cheryl Derbyshire
    25,000
    US$0.25
    November 2, 2011James Foley
    50,000
    US$0.25
    December 8, 2011TOTAL HELD AS A GROUP:
    2,220,000


C.           BOARD
PRACTICES

Under section 224 of the Business Corporations Act,S.B.C. 2002, c. 57, the directors of a company must, at their first meeting
on or after each annual reference date, elect an audit committee, to hold office
until the next annual reference date. The audit committee must be composed of at
least 3 directors, and a majority of the members of the committee must not be
officers or employees of the company or of an affiliate of the company. The
members must elect a chair from among their number and determine their own
procedures. The auditor of a company must be given reasonable notice of, and has
the right to appear before and to be heard at each meeting of the companys
audit committee and must appear before the audit committee when request to do so
by the committee and after being given reasonable notice to do so. Our Board of
Directors established an Audit Committee which members consist of Monique van
Oord, Susanne Robertson and Jennifer Lorette.

The Directors are elected by the shareholders to hold office
for a term of one year or until re-elected at the next annual general
meeting.

40

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D.          
EMPLOYEES

We employed no employees during any of the years ended February
28, 2007, February 28, 2006 and February 28, 2005. Our legal, accounting,
marketing and administrative functions are, and have been during the last three
fiscal years, contracted out to consultants.

We have no employees; as such, no directors of officers belong
to any labor unions. We have not been subject to any strikes or other labor
disturbances that have interfered with our operations.

E.           SHARE
OWNERSHIP

The following table sets forth the ownership of our common
shares by our Directors and Officers as at June 13, 2007:

Shareholder
    Number of shares issued and outstanding
    Percentage ownership (1)John G. Robertson
    2,434,638 (2)
    3.31%Jennifer Lorette
    238,100 (3)
    *Monique van Oord
    60,500 (4)
    *Susanne Robertson
    6,888,772 (5)
    9.35%


| | (1) | as at June 13, 2007, there were 73,650,646 issued and
      outstanding common shares.                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | includes 8,482 shares registered in the name of Access
      Information Services, Ltd., a corporation controlled by the Robertson
      Family Trust, and 1,000,000 options that are currently exercisable. Mr.
      Robertson is one of three trustees of the Robertson Family Trust, which
      acts by the majority vote of the three trustees. Mr. Robertson disclaims
      beneficial ownership of the shares owned or controlled by the Robertson
      Family Trust. Mr. Robertson's address is the same as our
address.
| | (3) | Includes 88,100 options that are currently exercisable.
      Ms. Lorette's address is the same as our address.                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (4) | Includes 50,000 options that are currently exercisable.
      Ms. van Oords address is the same as the Companys.                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (5) | includes 5,416,772 shares registered in the name of SMR
      Investments Ltd., 150,000 options that are currently exercisable, and
      375,000 warrants. Ms. Robertson's address is the same as the
    Companys.                                                                                                                                                                                                                                                                                                              

* Beneficially owns less than one percent of our common shares.

For information regarding the ownership of stock options to
acquire our common shares which are held by our Directors and Officers, and also
by our employees, please refer to Item 6.B above  Stock Options Granted to
Employees, Directors and Senior Managers.

ITEM
7.           MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.           MAJOR
SHAREHOLDERS.

To the best of our knowledge, we are not indirectly owned or
  controlled by any other corporation, foreign government or by any other natural
  or legal person, except as set out below.

As of June 13, 2006, 73,650,646 Common Shares were outstanding.
At such date, we are aware of one shareholder who owns 5% or greater of the
voting shares of the Company. Sue Robertson, our director, owns 6,363,772 of our
issued and outstanding common shares. Of these, 5416,727 shares are registered
in the name of SMR Investments Ltd., a corporate controlled by Ms. Robertson.
Mrs. Robertson does not have any different voting rights.

Over the past three years, there has not been a significant
change in the percentage ownership held by any major shareholder.

We do not know of any arrangements which could result in a
change in control of the Company.

41

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B.           RELATED
PARTY TRANSACTIONS.

We are a party to a management services agreement with SMR
Investment Ltd. (SMR) under which SMR incurred management fees of $30,000 in
each of fiscal years 2007, 2006 and 2005, and rent of $3,000 in fiscal 2004. SMR
is a private company owned by Susanne M. Robertson, the wife of John G.
Robertson.

We paid a director's fee of $12,000 to John G. Robertson, our
  Chairman of the Board, during each of fiscal years 2007, 2006 and 2005.

We had related party advances outstanding of $439,087 at the
February 2007 year-end, compared to $204,394 at the end of our previous fiscal
year. These were unsecured, non-interest bearing and with no fixed terms of
repayment.

Also refer to Liquidity and Capital Resources regarding the
"Commitment to Provide Financing to Flame Petro-Minerals Corp. as Required for
Ongoing Operations" by John Robertson.

C.           INTERESTS
OF EXPERTS AND COUNSEL.

Not applicable.

ITEM
8.           FINANCIAL
INFORMATION

A.           CONSOLIDATED
STATEMENTS AND OTHER FINANCIAL INFORMATION

See page F-1 to F-13 following Item 19.

Legal Proceedings

We are not a party to any material legal proceedings.

Dividend Distribution Policy

We have not paid any cash dividends to date and we do not
intend to pay cash dividends in the foreseeable future.

B.           SIGNIFICANT
CHANGES

None.

ITEM
9.           THE OFFER
AND LISTING

Not applicable, except for Item 9.A.4 and Item 9.C.

Our shares traded solely on the Alberta Stock Exchange (the
"ASE") between November, 1995 and December 14, 1999, at which time it
voluntarily delisted from the ASE. The Company's stock currently trades on the
Over the Counter Bulletin Board under the symbol LNXGF.

The following table shows the annual high and low closing
prices of our stock traded on the OTC Bulletin Board during the last five fiscal
years as follows:

Year
    High
    Low
    Close2007
    $0.58
    $0.195
    $0.272006
    $0.54
    $0.10
    $0.3512005
    $0.35
    $0.12
    $0.192004
    $0.455
    $0.04
    $0.302003
    $0.094
    $0.011
    $0.07


The following table shows the quarterly high and low closing
prices of our stock traded on the OTC Bulletin Board during the last two fiscal
years, for each quarter as follows:

42

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Period
    High
    Low
    Close
    Volume2007 Q4 2/28/07
    $0.30
    $0.21
    $0.27
    13,329,680Q3 11/30/07
    0.38
    0.195
    0.24
    8,630,686Q2 8/31/06
    0.45
    0.29
    0.37
    8,081,612Q1 5/31/06
    0.58
    0.32
    0.417
    25,854,3932006 Q4 2/28/06
    $0.54
    $0.23
    $0.351
    34,939,979Q3 11/30/05
    0.275
    0.11
    0.236
    9,902,368Q2 8/31/05
    0.17
    0.105
    0.1203
    3,250,142Q1 5/31/05
    0.21
    0.10
    0.125
    5,162,488


_________all prices in US$

(Information provided by The Over The Counter Bulletin Board.
The quotations reflect inter-dealer prices, without retail mark-up, markdown, or
commission and may not represent actual transactions.)

The following table shows the high and low closing prices of
our stock traded on the OTC Bulletin Board during the most recent six months,
for each month as follows:

Month
    High*
    Low*2007, May
    $0.225
    $0.162007, April
    0.265
    0.2112007, March
    0.28
    0.2112007, February
    0.30
    0.232007, January
    0.30
    0.232006, December
    0.30
    0.21


_________ * All prices are in U.S. dollars.

(Information provided by The Over The Counter Bulletin Board.
The quotations reflect inter-dealer prices, without retail mark-up, markdown, or
commission and may not represent actual transactions.)

ITEM
10.           ADDITIONAL
INFORMATION

A.           SHARE
CAPITAL

Not applicable.

B.           MEMORANDUM
AND ARTICLES OF ASSOCIATION

The Memorandum and Articles of the Company are incorporated by
reference to the information in our registration statement on Form 20-F filed
with the Securities and Exchange Commission, in Washington, D.C. on June 4,
1999, which became effective August 3, 1999, to which our Articles of
Incorporation and Memorandum were filed as exhibits.

On March 29, 2004, the new British Columbia Business
Corporations Act (the "BCA") came into force in British Columbia and replaced
the former Company Act (Former Act) , which is the statute under which we were
previously governed. Under the BCA, we have two years within which to transition
("Transition") under the new statute. In accordance with the BCA, we cannot
amend our Articles or Notice of Articles until the Transition to the BCA is
completed. We filed a transition application with the Registrar of Companies
British Columbia and completed the Transition on June 11, 2004.

Concurrent with the completion of the Transition, we were
required in accordance with the BCA to incorporate certain provisions known as
the "Pre-Existing Company Provisions" (the "Pre-Existing Company Provisions")
into our Notice of Articles, which replaced the existing Memorandum . The
Company is a pre-existing company under the BCA (that is, a company in
existence at the time the BCA came into force). The Pre-Existing Company

43

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Provisions provide our company with certain default provisions
in case certain provisions which are required to be included in the Articles
under the BCA are not included in our Articles.

We filed our Notice of Articles with the Registrar of Companies
which contains basic information relating to the Company, including our name,
the particulars of the directors and the authorized capital. This was a
mandatory requirement for transition to the BCA.

On August 16, 2004, at the Annual General Meeting of
shareholders, our shareholders passed a special resolution that the Notice of
Articles, once filed, be altered to remove the Pre-existing Company Provisions
set forth in Part 16 of the Regulations to the Business Corporations Act(British Columbia); and delete and replace our Articles in their entirety
and no longer apply to Linux Gold Corp.

The New Articles, among other things, incorporate and amend
certain of the information required by the Pre-Existing Company Provisions.

Our Incorporation Number is BC0187279. Our Articles do not
restrict the nature of the business that may be carried on by the Company.

On June 6, 2006, we registered in the State of Alaska under a
Certificate of Authority.

C.           MATERIAL
CONTRACTS

During the past two years ended February 28, 2007 and February
28, 2006, we entered into the following material contracts.

Property Option Agreement  Peter Tse

Ginyen Recovery Inc. (Ginyen) has a license to mine the Bo
Luonuo (the BLN Project) District of Hebei Province in China. Peter Tse own
100% of Ginyen. Tse granted Linux the sole, exclusive and irrevocable option to
purchase up to 100% of the rights, title and interest in and to 100% of all the
outstanding shares of Ginyen, subject to the grant of a 5% Net Profits royalty
in the BLN Project.

Linux exercised an option as to 25% of the Optioned Shares by
paying to Tse, $10,000 and issuing 50,000 Linux Shares to Tse and causing to be
carried out the Phase I mining exploration and/or development work in respect of
the BLN and expending in connection therewith the total sum of $160,000.

Linux may exercise the option as to a further 35% of the
Optioned Shares following the completion of the Phase I Program by (i) paying
the additional sum of $15,000 and issuing a further 50,000 Linux Shares to Tse;
and (ii) causing to be carried out the Phase II mining exploration and/or
development work in respect of the BLN Project or such other secondary work
program as shall be recommended by a qualified engineer or geologist acceptable
to the parties hereto (the "Phase II Program") and expending in connection
therewith the total sum of $130,000.

Provided that Linux has previously exercised the 35% Option we
may exercise the option as to a further 25% of the Optioned Shares following the
completion of the Phase II Program by (i) paying the additional sum of $15,000
and issuing a further 50,000 Linux Shares to Tse; and (ii) causing to be carried
out the Phase III mining exploration and/or development work in respect of the
BLN Project or such other continuing work program as shall be recommended by a
qualified engineer or geologist acceptable to the parties hereto (the "Phase III
Program") and expending in connection therewith the total sum of $210,000.
Provided that Linux has previously exercised the above mentioned options, we may
exercise the Option as to the final 5% of the Optioned Shares, following the
completion of the Phase III Program by (i) issuing a further 50,000 Linux Shares
to Tse; and (ii) entering into a Royalty Agreement which grants to Tse a Net
Profits Royalty in the BLN Project.

If and when the option is exercised in full, 100% of all right,
title and interest in and to the Optioned Shares shall vest in Linux free and
clear of all charges, encumbrances and claims.

Fish Creek Joint Venture Agreement

On
March 5, 2002 we announced that a joint venture has been completed for a 50%
interest in 30 Fish Creek claims in Alaska based on the following terms and
conditions. Teryl Resources Corp. will issue 200,000 treasury shares of its
common shares, which shares were issued on December 16, 2002, and will give to
Linux Gold Corp. a 5% royalty

44

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interest until $2,000,000 U.S. has been received from the
royalty payments. Teryl Resources Corp. may purchase the 5% net royalty for
$500,000 U.S. within 1 year after production. Teryl also agrees to expend a
minimum of $500,000 U.S. after three years from the date of the agreement.

On
November 4, 2002, we amended the March 5, 2002 agreement with Teryl Resources
Corp. We agreed that in consideration for receiving a mining license which was
not disclosed to us at the time of the March 5, 2002 agreement, both parties
agreed to grant Linux a back in working interest for a 25% interest in the
mining lease after Teryl completes the US$500,000 expenditures.

In
March 2005, the joint venture agreement was extended until March 5, 2007. Other
than the extension, all other terms remain the same. Subject to regulatory
approval, Teryl shall issue 100,000 shares of its common stock to Linux Gold
Corp. as consideration for the extension.

On
March 5, 2007, the Joint Venture Agreement between the Company and Teryl
Resources on the Fish Creek Claims was extended to March 5, 2009 with all the
other terms of the Agreement remaining the same.

Corporate

The
Company signed a consulting agreement with CEOcast, Inc. on December 2, 2006 for
investor relations services at US$7,500 per month for six months, and 350,000
shares of the Company common stock.

The
Company entered into a consulting agreement dated August 9, 2006 for the
provision of financial development services. Under the terms of the agreement,
the Company agreed to pay US$1,000 per month plus expenses for a term of two
years, and issue stock options for 1,000,000 common shares exercisable at US$
0.35 per share. The agreement may be terminated by either party before the end
of the term by giving a 90-day written notice. During the year ended February
28, 2007, consulting fees of $89,278 (2006 - $nil) were incurred.

The
Company entered into a consulting agreement dated August 9, 2006 for the
provision of financial development services. Under the terms of the agreement,
the Company agreed to pay expenses incurred for a term of two years, and issue
stock options for 500,000 common shares exercisable at US$ 0.35 per share. The
agreement may be terminated by either party before the end of the term by giving
a 90-day written notice. During the year ended February 28, 2007, consulting
fees of $40,618 (2006 - $nil) were incurred.

The
Company entered into a lease agreement dated September 7, 2006 for a term of
three years commencing November 1, 2006 to October 31, 2009. Under the terms of
the agreement, the Company will pay monthly rent of $1,833.33 plus a
proportionate share of operating costs. The Company shares the rentable area
with related parties who reimburse the Company for 2/3 of the total monthly
rental fee. The future commitment is as follows:

Fiscal year ending February 28, 2008
    $
    39,574Fiscal year ending February 28, 2009
    $
    39,574Fiscal year ending February 28, 2010
    $
    26,383$
    105,531


In August 2006, Michael Baybak was appointed Vice President of
  Financial Development, and Garry Pollack, as the Assistant Financial Advisor,
  for the Company. For their services, the Company will issue incentive stock
  options to purchase up to 1,500,000 common shares at a price of US$0.35 per
  share, exercisable for a period of five years from the date of granting.

D.           EXCHANGE
CONTROLS.

There are no governmental laws, decrees or regulations in
Canada relating to restrictions on the export of capital affecting the
remittance of interest, dividends or other payments to nonresident holders of
the Registrant's shares. Any such remittances, however, are subject to
withholding tax. See Item 10.E, "Taxation".

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
Company on the right of foreigners to hold or vote the shares of the Company.
However, under the provisions of the Investment Canada Act, when control of a
Canadian business is acquired by a non- Canadian, the transaction may be
reviewable in certain circumstances by Investment Canada, an agency of the
federal government of Canada. Reviewable transactions are those in which a
non-Canadian acquires the assets of a Canadian business or the

45

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voting shares of a Canadian corporation the value of which
assets or shares exceeds $5 million (Canadian). Also, certain transactions are
specifically exempted from review.

E.          
TAXATION.

Withholding

Generally, cash dividends paid by Canadian corporations to
nonresident shareholders are subject to a withholding tax of 25 percent.
However, pursuant to Article X[2 of the Canada-United States tax treaty,
dividends paid to a resident if a company of the United States are only subject
to a 15 percent withholding tax. Further, if the United states resident owns 10
percent or more of the voting shares of the Canadian company paying the
dividends, the withholding tax is reduced to 10 percent. In addition to dividend
withholding, interest paid to United States residents is subject to a 15 percent
withholding tax pursuant to Article XI[2 of the Canada-United States tax treaty.

Capital Gains

A nonresident purchaser who holds shares of the Company as
capital property will not be subject to tax on capital gains realized on the
disposition of such shares unless such shares are "taxable Canadian property"
within the meaning of the Income Tax Act (Canada) and no relief is afforded
under any applicable tax treaty. The shares of the Company would be taxable
Canadian property of a nonresident purchaser if the nonresident purchaser used
the shares in carrying on a business in Canada or if at any time during the
five-year period immediately preceding the disposition not less than 25 percent
of the issued shares of any class of the Company belonged to the particular
purchaser, persons with whom the purchaser did not deal at arm's length or any
combination thereof.

Dispositions of Common Shares

Under the Canadian Tax Act, a taxpayers capital gain or
capital loss from a disposition of a share of our common stock is the amount, if
any, by which his or her proceeds of disposition exceed (or are exceeded by,
respectively) the aggregate of his or her adjusted cost base of the share and
reasonable expenses of disposition. The capital gain or loss must be computed in
Canadian currency using a weighted average adjusted cost base for identical
properties. The capital gains net of losses included in income are as follows.
For gains net of losses realized before February 28, 2000, as to 75%. For gains
net of losses realized after February 27, 2000 and before October 18, 2000, as
to 66 2/3%. For gains net of losses realized after October 17, 2000, as to 50%.
There are special transitional rules to apply capital losses against capital
gains that arose in different periods. The amount by which a shareholders
capital loss exceeds the capital gain in a year may be deducted from a capital
gain realized by the shareholder in the three previous years or any subsequent
year, subject to certain restrictions in the case of a corporate
shareholder.

Under the Canadian Tax Act, a non-resident of Canada is subject
to Canadian tax on taxable capital gains, and may deduct allowable capital
losses, realized on a disposition of taxable Canadian property. Shares of our
common stock will constitute taxable Canadian property of a shareholder at a
particular time if the shareholder used the shares in carrying on business in
Canada, or if at any time in the five years immediately preceding the
disposition 25% or more of the issued shares of any class or series in our
capital stock belonged to one or more persons in a group comprising the
shareholder and persons with whom the shareholder and persons with whom the
shareholder did not deal at arms length and in certain other circumstances.

The Convention relieves U.S. residents from liability for
Canadian tax on capital gains derived on a disposition of shares unless:

(a) the value of the shares is derived principally from
real property in Canada, including the right to explore for or exploit
natural resources and rights to amounts computed by reference to production;

(b) the shareholder was resident in Canada for 120 months
during any period of 20 consecutive years preceding, and at any time during the
10 years immediately preceding, the disposition and the shares were owned by him
when he or she ceased to be resident in Canada; or

(c) the shares formed part of the business property of a
permanent establishment that the holder has or had in Canada within the
12 months preceding the disposition.

Holders of Common Shares of the Company should seek independent
advice from their own professional tax advisors with respect to the Canadian
Income Tax consequences arising from the holding of Common Shares of the
Company.

46

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F.           DIVIDENDS
AND PAYING AGENTS

Not applicable.

G.           STATEMENT
BY EXPERTS.

Not applicable.

H.           DOCUMENTS
ON DISPLAY.

We filed a registration statement on Form 20-F filed the
Securities and Exchange Commission in Washington, D.C. (Registration No.
000-30084) on June 4, 1999, which became effective August 3, 1999. The
Registration Statement contains exhibits and schedules. Any statement in this
annual report about any of our contracts or other documents is not necessarily
complete. If the contract or document is filed as an exhibit to the Registration
Statement, the contract or document is deemed to modify the description
contained in this annual report. You must review the exhibits themselves for a
complete description of the contract or documents.

You may inspect and copy our registration statements, including
their exhibits and schedules, and the reports and other information we file with
the Securities and Exchange Commission in accordance with the Exchange Act at
the public reference facilities maintained by the Securities and Exchange
Commission at Judiciary Plaza, 450 Fifth Street, Room 1024, N.W., Washington,
D.C. 20549 and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. You may also inspect the registration statements, including
their exhibits and schedules, at the office of the New York Stock Exchange, Wall
Street, New York, New York 10005. Copies of such material may also be obtained
from the Public Reference Section of the Securities and Exchange Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You may
obtain information regarding the Washington D.C. Public Reference Room by
calling the Securities and Exchange Commission at 1-800-SEC-0330 or by
contacting the Securities and Exchange Commission over the Internet at its
website at http://www.sec.gov.

I.           SUBSIDIARY
INFORMATION.

We hold a 100% interest in LinuxWizardry, Inc., a private
Florida corporation which is currently inactive.

ITEM
11.           QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In June 2006, the Financial Accounting Standards Board (FASB)
issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes,
an interpretation of FASB Statements No. 109. FIN 48 clarifies the accounting
for uncertainty in income taxes by prescribing a two-step method of first
evaluating whether a tax position has met a more likely than not recognition
threshold and second, measuring that tax position to determine the amount of
benefit to be recognized in the financial statements. FIN 48 provides guidance
on the presentation of such positions within a classified statement of financial
position as well as on derecognition, interest and penalties, accounting in
interim periods, disclosure, and transition. FIN 48 is effective for fiscal
years beginning after December 15, 2006. The adoption of this statement is not
expected to have a material effect on the Company's future reported financial
position or results of operations.

In February 2006, the FASB issued SFAS No. 155, "Accounting for
Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and
140", to simplify and make more consistent the accounting for certain financial
instruments. SFAS No. 155 amends SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", to permit fair value re-measurement for any
hybrid financial instrument with an embedded derivative that otherwise would
require bifurcation, provided that the whole instrument is accounted for on a
fair value basis. SFAS No. 155 amends SFAS No. 140, "Accounting for the
Impairment or Disposal of Long-Lived Assets", to allow a qualifying
special-purpose entity to hold a derivative financial instrument that pertains
to a beneficial interest other than another derivative financial instrument.
SFAS No. 155 applies to all financial instruments acquired or issued after the
beginning of an entity's first fiscal year that begins after September 15, 2006,
with earlier application allowed. The adoption of this statement is not expected
to have a material effect on the Company's future reported financial position or
results of operations.

In March 2006, the FASB issued SFAS No. 156, "Accounting for
Servicing of Financial Assets, an amendment of FASB Statement No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities". This statement requires all separately recognized servicing
assets and servicing liabilities be initially measured at fair value, if
practicable, and permits for subsequent measurement using either fair value
measurement with changes in fair value reflected in earnings or the amortization
and impairment requirements of Statement No. 140. The subsequent measurement of
separately recognized servicing assets and servicing liabilities at fair value
eliminates the necessity for

47

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entities that manage the risks inherent in servicing assets and
servicing liabilities with derivatives to qualify for hedge accounting treatment
and eliminates the characterization of declines in fair value as impairments or
direct write-downs. SFAS No. 156 is effective for an entity's first fiscal year
beginning after September 15, 2006. The adoption of this statement is not
expected to have a material effect on the Company's future reported financial
position or results of operations.

In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements. The objective of SFAS 157 is to increase consistency and
comparability in fair value measurements and to expand disclosures about fair
value measurements. SFAS 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. SFAS 157 applies under other
accounting pronouncements that require or permit fair value measurements and
does not require any new fair value measurements. The provisions of SFAS No. 157
are effective for fair value measurements made in fiscal years beginning after
November 15, 2007. The adoption of this statement is not expected to have a
material effect on the Company's future reported financial position or results
of operations.

In September 2006, the FASB issued SFAS No. 158, Employers
Accounting for Defined Benefit Pension and Other Postretirement Plans  an
amendment of FASB Statements No. 87, 88, 106, and 132(R). This statement
requires employers to recognize the overfunded or underfunded status of a
defined benefit postretirement plan (other than a multiemployer plan) as an
asset or liability in its statement of financial position and to recognize
changes in that funded status in the year in which the changes occur through
comprehensive income of a business entity or changes in unrestricted net assets
of a not-for-profit organization. This statement also requires an employer to
measure the funded status of a plan as of the date of its year-end statement of
financial position, with limited exceptions. The provisions of SFAS No. 158 are
effective for employers with publicly traded equity securities as of the end of
the fiscal year ending after December 15, 2006. The adoption of this statement
is not expected to have a material effect on the Company's future reported
financial position or results of operations.

We are a small business issuer as defined in Rule 405 of the
Securities Act of 1933, and Rule 12b-2 of the Securities Exchange Act
of 1934, as amended, and therefore need not provide the information
requested by this item.

ITEM
12.           DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM
13.           DEFAULTS,
DIVIDEND ARREARAGES AND DELIQUENCIES

None.

ITEM
14.           MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.

A.           MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS

None.

B.           USE
OF PROCEEDS.

Not applicable

ITEM
15.           CONTROLS AND
PROCEDURES

We carried out an evaluation, under the supervision and with
the participation of our management, including the President, and the Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures [as defined in the Exchange Act Rule
13a-15(e)] as of the end of the period covered by this report. Based upon the
evaluation of the effectiveness of the disclosure controls and procedures as of
the end of the period covered by this annual report, our Chief Executive Officer
and Chief Financial Officer have concluded that, as of such date, the disclosure
controls and procedures were effective at the reasonable assurance level with
respect to such disclosure controls and procedures being designed to ensure that
information relating to the Registrant

48

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required to be disclosed by the Company in reports that we file
or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the SEC.

There are inherent limitations to the effectiveness of any
system of disclosure controls and procedures, including the possibility of human
error and the circumvention or overriding of the controls and procedures.
Accordingly, even effective disclosure controls and procedures can only provide
reasonable , and not absolute assurance, of achieving the desired control
objectives, and management necessarily was required to apply its judgement in
evaluating the cost-benefit relationship of possible controls and procedures.

There was no significant change in our internal control over
financial reporting that occurred during our most recently completed fiscal year
ended February 28, 2007 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting. Nor were there
any significant deficiencies or material weaknesses in our internal controls
requiring corrective actions.

ITEM
16.           [Reserved]

ITEM 16A.        Audit
Committee Financial Expert

We do not currently have a financial expert in our audit
committee due to our relatively small size. In 2007, we had no employees and we
relied upon the services of a chartered accounting firm in Vancouver, BC,
Canada, to prepare our interim unaudited quarterly consolidated financial
statements. Also, we retained the audit services of Smythe Ratcliffe Chartered
Accountants to perform the audit on our year-end consolidated financial
statements.

Moreover, the audit committee is comprised of seasoned business
professionals, whereby two members have over 25 years of experience in the
investment business and are board members of several corporations.

On these bases, we believe that the audit committee has
adequate resources available to it when financial expertise and advice are
necessary.

ITEM 16B.        Code
of Ethics

We have not adopted a formal written code of ethics given our
relatively small size, whereby we had no employees in 2007.

Directors are subject to the laws of the Province of British
Columbia, Canada, whereby they are required to act honestly, in good faith and
in the best interests of the Company.

49

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ITEM 16C.        Principal
Accountant Fees and Services

The following table discloses accounting fees and services of
the Registrant:

(Stated in terms of Canadian dollars)

2007
    2006Type of Services Rendered
    Fiscal Year
    Fiscal Year


(a) Audit Fees
    $29,500
    $18,708(b) Audit-Related Fees
    $nil
    $1,200(c) Tax Fees
    $1,200
    $870(d) All Other Fees
    $nil
    $nil


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

Not applicable.

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

Not applicable.

PART III

ITEM
17          . FINANCIAL
STATEMENTS

The Company has elected to provide financial statements
pursuant to Item 18.

ITEM
18.           FINANCIAL
STATEMENTS

Reference is made to Item 19 for a list of all financial
statements filed as part of this annual report.

Our consolidated financial statements are stated in Canadian
Dollars (CDN$) and are prepared in accordance with U.S. Generally Accepted
Accounting Principles (GAAP). The consolidated financial statements as required
under Item 18 are included immediately following the text of this Report.

ITEM
19.           EXHIBITS

The following consolidated financial statements, together with
the report of Smythe Ratcliffe Chartered Accountants on the annual financial
statements referred to below, are filed as part of this annual report, and are
included immediately following the text of this 20-F:

|Report of Registered Public
      Accounting Firm dated June 9, 2007                                                 
|---------------------------------------------------------------------------------------------------------------------
|Consolidated Balance Sheets as at February
      28, 2007 and 2006                                                   
|Consolidated Statements
      of Operations as at February 28, 2007, February 28, 2006 and February 28,
      2005   
|Consolidated Statements of Stockholders
      Deficiency, March 1, 2003 to February 28, 2007                        
|Consolidated Statements
      of Cash Flows as at February 28, 2007, February 28, 2006 and February 28,
      2005   
|Notes to the Consolidated Financial Statements
      as at February 28, 2007, February 28, 2006 and February 28, 2005

Documents filed as exhibits to this annual report:

50

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Number
      Description1.1
      Memorandum and articles of incorporation with
        bylaws dated February 27, 1979
      (1)1.2
      Altered memorandum and special resolution dated
        September 20, 1993 increasing the authorized capital to 100,000,000 common
        shares from 90,000,000 and redesignating Class A Common voting
        shares without par value as common shares without par value and redesignating
        Class B Common non-voting shares as common shares without
        par value
      (1)1.3
      Altered memorandum and special resolution dated
        March 15, 2000 changing the name of the Company from Flame Petro-Minerals
        Corp. to LinuxWizardry Systems, Inc.
      (3)1.4
      Altered memorandum and special resolution dated
        February 20, 2003 changing the name of the Company from LinuxWizardry
        Systems, Inc. to Linux Gold Corp.
      (5)1.5
      Memorandum and articles of incorporation amended
        effective September 15, 2004
      (7)2.1
      Specimen copy of Registrants common share
        certificate
      (2)4.1
      Commitment by John G. Robertson dated July 16,
        1999 to provide financing to the Registrant as required for ongoing operations
      (2)4.2
      Share Purchase Agreement dated January 7, 2000
        between Flame Petro-Minerals Corp. and Mike Carpenter and LinuxWizardry,
        Inc.
      (3)4.3
      Purchase order dated May 22, 2000 between LinuxWizardry,
        Inc. and Motorola, Inc., Personal Communications Sector
      (4)4.4
      License Agreement dated June 30, 2000 between
        LinuxWizardry Systems, Inc. and LinuxWizardry, Inc. and Lineo, Inc
      (4)4.5
      Vendor Agreement dated January 5, 2001 between
        Merrimack Services Corporation d/b/a PC Connection and LinuxWizardry Systems,
        Inc.
      (4)4.6
      Joint Venture Agreement between Linux Gold Corp.
        and Teryl Resources Corp. dated March 5, 2002
      (5)4.7
      Amendment to Joint Venture Agreement between
        Linux Gold Corp. and Teryl Resources Corp. dated November 4, 2002
      (5)4.8
      Edward Skoda Purchase Agreement  TY Gold
        Property
      (6)4.9
      Edward Skoda Purchase Agreement  ORO Mineral
        Claims
      (6)4.10
      Property Option Agreement  Peter Tse
      (6)4.11
      Amendment to Joint
        Venture Agreement between Linux Gold Corp. and Teryl Resources Corp. dated
        March 5, 2007
      (8)12.1
      Certification pursuant
        to Title 18, United States Code, Section 1350 as adopted pursuant to Section
        302 of the Sarbanes-Oxley Act of 2002 (John G. Robertson)
      (8)12.2
      Certification pursuant
        to Title 18, United States Code, Section 1350 as adopted pursuant to Section
        302 of the Sarbanes-Oxley Act of 2002 (Monique van Oord)
      (8)13.1
      Certification pursuant
        to Title 18, United States Code, Section 1350 as adopted pursuant to Section
        906 of the Sarbanes-Oxley Act of 2002 (John G. Robertson)
      (8)13.2
      Certification pursuant
        to Title 18, United States Code, Section 1350 as adopted pursuant to Section
        906 of the Sarbanes-Oxley Act of 2002 (Monique van Oord)
      (8)14.1
      Consent of Independent
        Auditors  Smythe Ratcliffe LLP
      (8)14.2
      Consent of Independent
        Auditors  Manning Elliott LLP
      (8)


51

---

|(1) | incorporated by reference to the Registrants
      Registration Statement on Form 20-F filed on June 4, 1999 with the US
      Securities and Exchange Commission
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | incorporated by reference to the Registrants Amendment
      No. 1 to the Registration Statement dated July 22, 1999                                             
|(3) | incorporated by reference to the Registrants Annual
      Report on Form 20-F filed on September 14, 2000                                                        
|(4) | incorporated by reference to the Registrants Annual
      Report on Form 20-F filed on July 14, 2001                                                             
|(5) | incorporated by reference to the Registrants Annual
      Report on Form 20-F filed on August 25, 2003                                                           
|(6) | incorporated by reference to the Registrants Annual
      Report on Form 20-F filed on July 19, 2004                                                             
|(7) | incorporated by reference to the Registrants Annual
      Report on Form 20-F filed on July 19, 2005                                                             
|(8) | attached hereto.                                                                                                                                                  

52

---

SIGNATURE PAGE

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

LINUX GOLD CORP. REGISTRANT

|Dated: July 16, 2007 | By: | /s/ John G. Robertson                          
|-------------------- | --- | -----------------------------------------------
|                     |     | John G. Robertson                              
|                     |     | President, Chairman of the
      Board/Director

53

---











LINUX GOLD CORP. 
  (An Exploration Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS 
  (Expressed in Canadian dollars)



February 28, 2007 and 2006

---





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE DIRECTORS AND STOCKHOLDERS OF LINUX GOLD CORP.(An Exploration Stage Company)

We have audited the accompanying consolidated balance sheets
  of Linux Gold Corp. (An Exploration Stage Company) as of February 28, 2007 and
  2006 and the related consolidated statements of operations, stockholders' deficiency
  and cash flows for each of the years in the two year period ended February 28,
  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. The statements of operations, stockholders deficiency,
  and cash flows from March 1, 2003 (date of inception of exploration stage) to
  February 28, 2005 were audited by other auditors whose report dated July 15,
  2005 expressed an unqualified opinion, with an explanatory paragraph discussing
  the Companys ability to continue as a going-concern. Our opinion on the
  statements of operations, stockholders deficiency and cash flows from
  inception of the exploration stage to February 28, 2007, insofar as it related
  to amounts for prior periods through February 28, 2005, is solely based on the
  reports of other auditors.

We also have audited the adjustments described in Note 15 that
  were applied to restate the 2005 financial statements relating to the adoption
  of EITF 04-2. In our opinion, such adjustments are appropriate and have been
  properly applied. We were not engaged to audit, review, or apply any procedures
  to the 2005 financial statements of the Company other than with respect to the
  adjustments and, accordingly, we do not express an opinion or any other form
  of assurance on the 2005 financial statements taken as a whole.

We conducted our audits in accordance 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. We believe that our audits provide
  a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of other
  auditors, the consolidated financial statements referred to above present fairly,
  in all material respects, the financial position of the Company as at February
  28, 2007 and 2006 and the results of its operations and its cash flows for each
  of the years in the two year period ended February 28, 2007 and the cumulative
  totals for the exploration stage of operations from March 1, 2003 (date of inception
  of exploration stage) through February 28, 2007 in conformity with U.S. generally
  accepted accounting principles.

The accompanying financial statements have been prepared assuming
  that the Company will continue as a going-concern. As discussed in Note 2 to
  the financial statements, the Company has no revenues and limited capital, which
  together raise substantial doubt about its ability to continue as a going-concern.
  Management plans in regard to these matters are also described in Note 2. These
  financial statements do not include any adjustments that might result from the
  outcome of this uncertainty.



Smythe Ratcliffe LLP (signed)

Chartered Accountants

Vancouver, Canada 
  June 9, 2007



---



Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of 
  Linux Gold Corp.

We have audited, before the effects of the restatement described
  in Note 15 and the previous restatement filed, the consolidated balance sheets
  of Linux Gold Corp. (An Exploration Stage Company) as at February 28, 2005 and
  the consolidated statements of operations and deficit, cash flows and stockholders
  equity for the year then ended (these consolidated financial statements before
  the effects of the restatement discussed in Note 15 and the previous restatement
  filed are not presented herein). These consolidated financial statements are
  the responsibility of the Companys management. Our responsibility is to
  express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the
  Public Company Accounting Oversight Board (United States). 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. We believe that our audit provides a reasonable
  basis for our opinion.

In our opinion, the financial statements referred to above, before
  the effects of the restatement described in Note 15 and the previous restatement
  filed, present fairly, in all material respects, the financial position of the
  Company as at February 28, 2005 and the results of its operations and its cash
  flows for the year then ended in accordance with generally accepted accounting
  principles used in the United States.

The accompanying consolidated financial statements have been
  prepared assuming the Company will continue as a going concern. As discussed
  in Note 1 to the consolidated financial statements, the Company has not generated
  profitable operations since inception. These factors raise substantial doubt
  about the Companys ability to continue as a going concern. Managements
  plans in regard to these matters are also discussed in Note 1. These consolidated
  financial statements do not include any adjustments, which might result from
  the outcome of these uncertainties.

We were not engaged to audit, review, or apply any procedures
  to the restatement described in Note 15 or the previous restatement filed and,
  accordingly, we do not express an opinion or any other form of assurance about
  whether such adjustments are appropriate and have been properly applied.

/s/ MANNING ELLIOTT LLP

CHARTERED ACCOUNTANTS

Vancouver, Canada

July 15, 2005

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  CONSOLIDATED BALANCE SHEETS 
  (Expressed in Canadian Dollars)

|                                                                               |   | February 28, |   |   | February 28, |  
|------------------------------------------------------------------------------ | - | ------------ | - | - | ------------ | -
|                                                                               |   | 2007         |   |   | 2006         |  
|                                                                               |   |              |   |   |              |  
|ASSETS (Note 7)                                                                |   |              |   |   |              |  
|Current                                                                        |   |              |   |   |              |  
|Cash and cash equivalents                                                      | $ | 126,867      |   | $ | 396,049      |  
|Amounts receivable                                                             |   | 57,038       |   |   | 53,417       |  
|Marketable securities                                                          |   | 208,000      |   |   | 72,000       |  
|Prepaid expenses and deposits                                                  |   | 29,853       |   |   | 10,999       |  
|Total Current Assets                                                           | $ | 421,758      |   | $ | 532,465      |  
|Debt Issue Costs, net of amortization of $32,067                               |   | 173,175      |   |   |             |  
|Property and Equipment (Note 4)                                                |   | 16,487       |   |   | 10,175       |  
|Mineral interests                                                              |   | 126,417      |   |   | 126,417      |  
|                                                                               |   |              |   |   |              |  
|Total Assets                                                                   | $ | 737,837      |   | $ | 669,057      |  
|                                                                               |   |              |   |   |              |  
|LIABILITIES                                                                    |   |              |   |   |              |  
|Current                                                                        |   |              |   |   |              |  
|Accounts payable                                                               | $ | 24,886       |   | $ | 142,943      |  
|Accrued liabilities                                                            |   | 176,731      |   |   | 26,643       |  
|Convertible Debentures, less unamortized
      discount of $1,181,473 (Note 7) |   | 400,232      |   |   |             |  
|Accrued liabilities
      to related parties (Note 6(a))                       |   | 31,875       |   |   | 88,815       |  
|Due to related parties (Note 6(b))                                             |   | 439,087      |   |   | 204,394      |  
|Total Current Liabilities                                                      | $ | 1,072,811    |   | $ | 462,795      |  
|Commitments (Note 11)                                                          |   |              |   |   |              |  
|                                                                               |   |              |   |   |              |  
|STOCKHOLDERS EQUITY (DEFICIT)                                                 |   |              |   |   |              |  
|                                                                               |   |              |   |   |              |  
|Common Stock (Note 8)                                                          |   |              |   |   |              |  
|Authorized:                                                                    |   |              |   |   |              |  
|200,000,000 common shares without par value                                    |   |              |   |   |              |  
|                                                                               |   |              |   |   |              |  
|Issued:                                                                        |   |              |   |   |              |  
|71,250,099 common shares (2006  68,287,773
      shares)                      |   | 12,401,724   |   |   | 9,005,424    |  
|                                                                               |   |              |   |   |              |  
|Subscriptions receivable                                                       |   | (14,600      | ) |   |             |  
|                                                                               |   |              |   |   |              |  
|Subscriptions received                                                         |   | 52,277       |   |   |             |  
|                                                                               |   |              |   |   |              |  
|Donated Capital                                                                |   | 348,852      |   |   | 295,195      |  
|                                                                               |   |              |   |   |              |  
|Accumulated Other Comprehensive Loss                                           |   | (138,000     | ) |   | (8,000       | )
|                                                                               |   |              |   |   |              |  
|Deficit Accumulated from Prior Operations                                      |   | (7,524,145   | ) |   | (7,524,145   | )
|                                                                               |   |              |   |   |              |  
|Deficit Accumulated During the Exploration
      Stage                         |   | (5,461,082   | ) |   | (1,562,212   | )
|Total Stockholders Equity (Deficit)                                           | $ | (334,974     | ) | $ | 206,262      |  
|                                                                               |   |              |   |   |              |  
|Total Liabilities
      and Stockholders Equity (Deficit)                     | $ | 737,837      |   | $ | 669,057      |  

Approved by the Directors:

|John Robertson        |  | Jennifer Lorette   
|----------------------- |  | ---------------------
|J. Robertson  Director |  | J. Lorette  Director

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

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  CONSOLIDATED STATEMENTS OF OPERATIONS 
  (Expressed in Canadian Dollars)

|                                             |   |              |   |   |              |   |   |              |   |   | Cumulative     |  
|-------------------------------------------- | - | ------------ | - | - | ------------ | - | - | ------------ | - | - | -------------- | -
|                                             |   |              |   |   |              |   |   |              |   |   | From Inception |  
|                                             |   |              |   |   |              |   |   |              |   |   | of Exploration |  
|                                             |   |              |   |   |              |   |   |              |   |   | Stage on       |  
|                                             |   |              |   |   | Years Ended  |   |   |              |   |   | March 1, 2003  |  
|                                             |   |              |   |   |              |   |   |              |   |   | Through        |  
|                                             |   | February 28, |   |   | February 28, |   |   | February 28, |   |   | February 28,   |  
|                                             |   | 2007         |   |   | 2006         |   |   | 2005         |   |   | 2007           |  
|                                             |   |              |   |   |              |   |   |              |   |   |                |  
|General and Administrative Expenses          |   |              |   |   |              |   |   |              |   |   |                |  
|Amortization of property                     |   |              |   |   |              |   |   |              |   |   |                |  
|and equipment                                | $ | 3,145        |   | $ | 10,686       |   | $ | 5,346        |   | $ | 19,178         |  
|Amortization of debt issue costs             |   | 32,067       |   |   |             |   |   |             |   |   | 32,067         |  
|Consulting and subcontract                   |   | 869,125      |   |   | 133,953      |   |   | 233,789      |   |   | 1,410,423      |  
|Filing and regulatory fees                   |   | 26,772       |   |   | 14,632       |   |   | 26,103       |   |   | 93,620         |  
|Foreign exchange loss (gain)                 |   | (6,941       | ) |   | 6,407        |   |   | 6,877        |   |   | (31,911        | )
|Imputed interest (Note 6(b))                 |   | 53,657       |   |   | 31,722       |   |   | 35,013       |   |   | 143,352        |  
|Interest                                     |   | 1,260,670    |   |   |             |   |   |             |   |   | 1,260,670      |  
|Management and directors fees (Note 6(a))   |   | 30,000       |   |   | 30,000       |   |   | 30,250       |   |   | 124,750        |  
|Office, rent and telephone (Note
      6(a)) |   | 110,824      |   |   | 198,856      |   |   | 193,522      |   |   | 565,041        |  
|Professional fees                            |   | 79,037       |   |   | 54,909       |   |   | 42,235       |   |   | 203,843        |  
|Travel                                       |   | 445,132      |   |   | 23,902       |   |   | 39,750       |   |   | 512,686        |  
|Less: Interest income                        |   | (33,207      | ) |   | (4,053       | ) |   | (1,858       | ) |   | (39,742        | )
|                                             |   | 2,870,281    |   |   | 501,014      |   |   | 611,027      |   |   | 4,293,977      |  
|Mineral interests                            |   |              |   |   |              |   |   |              |   |   |                |  
|Exploration costs                            |   | 1,074,870    |   |   | 309,091      |   |   | 137,342      |   |   | 1,582,599      |  
|                                             |   |              |   |   |              |   |   |              |   |   |                |  
|Loss from Continuing Operations              |   | (3,945,151   | ) |   | (810,105     | ) |   | (748,369     | ) |   | (5,876,576     | )
|                                             |   |              |   |   |              |   |   |              |   |   |                |  
|Income from Discontinued Operations          |   |             |   |   |             |   |   |             |   |   | 369,213        |  
|Accounts payable written-off (Note 12)       |   | 46,281       |   |   |             |   |   |             |   |   | 46,281         |  
|                                             |   |              |   |   |              |   |   |              |   |   |                |  
|Net Loss for the
      Year                  | $ | (3,898,870   | ) | $ | (810,105     | ) | $ | (748,369     | ) | $ | (5,461,082     | )
|                                             |   |              |   |   |              |   |   |              |   |   |                |  
|Net loss per share
       basic and diluted | $ | (0.06        | ) | $ | (0.01        | ) | $ | (0.01        | ) |   |                |  
|                                             |   |              |   |   |              |   |   |              |   |   |                |  
|Weighted Average Number of Common            |   |              |   |   |              |   |   |              |   |   |                |  
|Shares Outstanding                           |   | 69,105,000   |   |   | 64,981,000   |   |   | 61,345,000   |   |   |                |  

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

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  Consolidated Statements of Stockholders Deficiency 
  Period from Inception of Exploration Stage on March 1, 2003 to February 28,
  2007 
  (Expressed in Canadian Dollars)

DeficitShares of
      
      
      Common
      
      
      
      
      
      
      
      
      Deficit
      
      
      AccumulatedCommon
      
      
      Stock and
      
      
      
      
      
      
      
      
      Accumulated
      
      
      During the
      
      
      Other
      
      
      TotalStock
      
      
      Paid-in
      
      
      Subscriptions
      
      
      Donated
      
      
      from Prior
      
      
      Exploration
      
      
      Comprehensive
      
      
      StockholdersIssued
      
      
      Capital
      
      
      receivable
      
      
      Capital
      
      
      Operations
      
      
      Stage
      
      
      Income (Loss)
      
      
      DeficiencyBalance from prior operations,March 1, 2003
      57,458,413
      
      $
      6,804,412
      
      $
      
      
      $
      205,500
      
      $
      (7,524,145
      )
      $
      
      
      $
      
      
      $
      (514,233
      )Common stock issued for mineralinterest
      175,000
      
      
      17,500
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      17,500Common stock issued for services
      1,000,000
      
      
      100,000
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      100,000Common stock issued for settlementof rent obligation
      200,000
      
      
      19,2000
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      19,200Options exercised
      150,000
      
      
      19,812
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      19,812Warrants exercised
      1,300,000
      
      
      280,922
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      280,922Imputed interest
      
      
      
      
      
      
      
      
      
      22,960
      
      
      
      
      
      
      
      
      
      
      
      22,960Marketable securities adjustment
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      44,000
      
      
      44,000Net loss for period
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (3,738
      )
      
      
      
      
      (3,738
      )Balance  February 29, 2004
      60,283,413
      
      
      7,241,846
      
      
      
      
      
      228,460
      
      
      (7,524,145
      )
      
      (3,738
      )
      
      44,000
      
      
      (13,577
      )Common stock issued for mineralinterest
      125,000
      
      
      45,384
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      45,384Common stock issued for cash
      4,205,610
      
      
      860,089
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      860,089Options exercised
      87,500
      
      
      10,606
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      10,606Warrants exercised
      250,000
      
      
      37,500
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      37,500Imputed interest
      
      
      
      
      
      
      
      
      
      35,013
      
      
      
      
      
      
      
      
      
      
      
      35,013Stock based-compensation
      
      
      
      82,000
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      82,000Marketable securities adjustment
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (54,000
      )
      
      (54,000
      )Net loss for year
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (748,369
      )
      
      
      
      
      (748,369
      )Balance  February 28, 2005
      64,951,523
      
      $
      8,277,425
      
      $
      
      
      $
      263,473
      
      $
      (7,524,145
      )
      $
      (752,107
      )
      $
      (10,000
      )
      $
      254,646


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

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  Consolidated Statements of Stockholders Deficiency (Continued) 
  Period from Inception of Exploration Stage on March 1, 2003 to February 28,
  2007 
  (Expressed in Canadian Dollars)

DeficitShares of
      
      
      Common
      
      
      
      
      
      
      
      
      
      
      
      Deficit
      
      
      AccumulatedCommon
      
      
      Stock and
      
      
      
      
      
      
      
      
      
      
      
      Accumulated
      
      
      During the
      
      
      Other
      
      
      TotalStock
      
      
      Paid-in
      
      
      Subscriptions
      
      
      Subscriptions
      
      
      Donated
      
      
      from Prior
      
      
      Exploration
      
      
      Comprehensive
      
      
      StockholdersIssued
      
      
      Capital
      
      
      receivable
      
      
      received
      
      
      Capital
      
      
      Operations
      
      
      Stage
      
      
      Income (Loss)
      
      
      DeficiencyBalance  February 28, 2005
      64,951,523
      
      $
      8,277,425
      
      $
      
      
      $
      
      
      $
      263,473
      
      $
      (7,524,145
      )
      $
      (752,107
      )
      $
      (10,000
      )
      $
      254,646Common stock issued for mineral
      50,000
      
      
      20,500
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      20,500Common stock issued for cash
      3,100,000
      
      
      672,556
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      672,556Options exercised
      93,750
      
      
      10,838
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      10,838Warrants exercised
      92,500
      
      
      21,825
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      21,825Imputed interest
      
      
      
      
      
      
      
      
      
      
      
      
      31,722
      
      
      
      
      
      
      
      
      
      
      
      31,722Stock-based compensation
      
      
      
      2,280
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      2,280Marketable securities adjustment
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      2,000
      
      
      2,000Net loss for year
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (810,105
      )
      
      
      
      
      (810,105
      )Balance  February 28, 2006
      68,287,773
      
      
      9,005,424
      
      
      
      
      
      
      
      
      295,195
      
      
      (7,524,145
      )
      
      (1,562,212
      )
      
      (8,000
      )
      
      206,262Share issue costs
      
      
      
      (2,613
      )
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (2,613
      )Subscriptions received
      
      
      
      
      
      
      
      
      
      52,277
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      52,277Common issued for debt redemption
      2,586,076
      
      
      644,749
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      644,749Options exercised
      323,750
      
      
      75,670
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      75,670Warrants exercised
      52,500
      
      
      15,329
      
      
      (14,600
      )
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      729Imputed interest
      
      
      
      
      
      
      
      
      
      
      
      
      53,657
      
      
      
      
      
      
      
      
      
      
      
      53,657Intrinsic value of beneficial conversionfeature of convertible debentures
      
      
      
      963,670
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      963,670Fair value of warrants issued withconvertible debentures
      
      
      
      1,262,580
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      1,262,580Stock-based compensation
      
      
      
      436,915
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      436,915Marketable securities adjustment
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (130,000
      )
      
      (130,000
      )Net loss for the year
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
      (3,898,870
      )
      
      
      
      
      (3,898,870
      )Balance  February 28, 2007
      71,250,099
      
      $
      12,401,724
      
      $
      (14,600
      )
      $
      52,277
      
      $
      348,852
      
      $
      (7,524,145
      )
      $
      (5,461,082
      )
      $
      (138,000
      )
      $
      (334,974
      )


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

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  CONSOLIDATED STATEMENTS OF CASH FLOWS 
  (Stated in Canadian Dollars)

|                                            |   |                   |   |   |              |   |   |              |   |   | Cumulative        |  
|------------------------------------------- | - | ----------------- | - | - | ------------ | - | - | ------------ | - | - | ----------------- | -
|                                            |   |                   |   |   |              |   |   |              |   |   | From Inception of |  
|                                            |   |                   |   |   |              |   |   |              |   |   | Exploration Stage |  
|                                            |   |                   |   |   |              |   |   |              |   |   | on March 1, 2003  |  
|                                            |   | Years
      Ended |   |   | to           |  
|                                            |   | February 28,      |   |   | February 28, |   |   | February 28, |   |   | February 28,      |  
|                                            |   | 2007              |   |   | 2006         |   |   | 2005         |   |   | 2007              |  
|                                            |   |                   |   |   |              |   |   |              |   |   |                   |  
|Cash Flows Used In Operating Activities     |   |                   |   |   |              |   |   |              |   |   |                   |  
|Net loss
      for the period               | $ | (3,898,870        | ) | $ | (810,105     | ) | $ | (748,369     | ) | $ | (5,461,082        | )
|                                            |   |                   |   |   |              |   |   |              |   |   |                   |  
|Adjustments to reconcile net loss to        |   |                   |   |   |              |   |   |              |   |   |                   |  
|net cash used in operating activities:      |   |                   |   |   |              |   |   |              |   |   |                   |  
|Amortization
      of property and          |   |                   |   |   |              |   |   |              |   |   |                   |  
|equipment                                   |   | 3,144             |   |   | 10,686       |   |   | 5,346        |   |   | 19,177            |  
|Amortization
      of debt issue costs      |   | 32,067            |   |   |             |   |   |             |   |   | 32,067            |  
|Receipt of marketable securities            |   |                   |   |   |              |   |   |              |   |   |                   |  
|for
      mineral property                  |   | (16,000           | ) |   |             |   |   |             |   |   | (16,000           | )
|Imputed interest                            |   | 53,657            |   |   | 31,722       |   |   | 35,013       |   |   | 143,352           |  
|Write-off
      of outstanding debt         |   | (46,281           | ) |   |             |   |   |             |   |   | (46,281           | )
|Accretion of discount on                    |   |                   |   |   |              |   |   |              |   |   |                   |  
|convertible
      debt                      |   | 1,198,381         |   |   |             |   |   |             |   |   | 1,198,381         |  
|Stock-based compensation                    |   | 436,915           |   |   | 2,280        |   |   | 82,000       |   |   | 521,195           |  
|Shares issued
      for services            |   |                  |   |   | 20,000       |   |   |             |   |   | 120,000           |  
|Shares issued for settlement
      of       |   |                   |   |   |              |   |   |              |   |   |                   |  
|rent
      obligation                       |   |                  |   |   |             |   |   |             |   |   | 19,200            |  
|Write-off of subsidiarys
      accounts    |   |                   |   |   |              |   |   |              |   |   |                   |  
|payable                                     |   |                  |   |   |             |   |   |             |   |   | (369,213          | )
|Changes in operating assets and             |   |                   |   |   |              |   |   |              |   |   |                   |  
|liabilities
      (Note 13 (c))             |   | 233,590           |   |   | 41,912       |   |   | (15,527      | ) |   | 379,577           |  
|Cash Used in Operating Activities           |   | (2,003,397        | ) |   | (703,504     | ) |   | (641,537     | ) |   | (3,459,627        | )
|                                            |   |                   |   |   |              |   |   |              |   |   |                   |  
|Cash Flows Used In Investing Activities     |   |                   |   |   |              |   |   |              |   |   |                   |  
|                                            |   |                   |   |   |              |   |   |              |   |   |                   |  
|Mineral interest acquisition
      costs    |   |                  |   |   |             |   |   | (23,571      | ) |   | (66,417           | )
|Purchase
      of property and              |   |                   |   |   |              |   |   |              |   |   |                   |  
|equipment                                   |   | (9,456            | ) |   | (337         | ) |   | (19,871      | ) |   | (35,664           | )
|Purchase
      of marketable securities     |   | (250,000          | ) |   |             |   |   |             |   |   | (250,000          | )
|                                            |   | (259,456          | ) |   | (337         | ) |   | (43,442      | ) |   | (352,081          | )
|                                            |   |                   |   |   |              |   |   |              |   |   |                   |  
|Cash Flows Provided By Financing Activities |   |                   |   |   |              |   |   |              |   |  
|Advances
      from related parties         |   |                  |   |   | 16,238       |   |   |             |   |   | 16,238            |  
|Debt issue costs                            |   | (205,242          | ) |   |             |   |   |             |   |   | (205,242          | )
|Proceeds
      from convertible debt        |   | 2,226,251         |   |   |             |   |   |             |   |   | 2,226,251         |  
|Repayment of debt                           |   | (153,400          | ) |   |             |   |   |             |   |   | (153,400          | )
|Private placement
      costs               |   | (2,614            | ) |   | (42,571      | ) |   |             |   |   | (45,185           | )
|Subscriptions received                      |   | 52,277            |   |   |              |   |   |              |   |   | 52,277            |  
|Proceeds
      from exercise of             |   |                   |   |   |              |   |   |              |   |   |                   |  
|stock options
      and warrants            |   | 76,399            |   |   | 727,790      |   |   | 931,580      |   |   | 2,036,502         |  
|Financing Activities                        |   | 1,993,671         |   |   | 701,457      |   |   | 931,580      |   |   | 3,927,441         |  
|                                            |   |                   |   |   |              |   |   |              |   |   |                   |  
|(Decrease) Increase in Cash and Cash        |   |                   |   |   |              |   |   |              |   |   |                   |  
|Equivalents                                 | $ | (269,182          | ) | $ | (2,384       | ) | $ | 246,601      |   | $ | 115,733           |  
|                                            |   |                   |   |   |              |   |   |              |   |   |                   |  
|(Decrease) Increase in Cash and Cash        |   |                   |   |   |              |   |   |              |   |   |                   |  
|Equivalents                                 | $ | (269,182          | ) | $ | (2,384       | ) | $ | 246,601      |   | $ | 115,733           |  
|                                            |   |                   |   |   |              |   |   |              |   |   |                   |  
|Cash and Cash Equivalents,                  |   |                   |   |   |              |   |   |              |   |   |                   |  
|Beginning of Period                         |   | 396,049           |   |   | 398,433      |   |   | 151,832      |   |   | 11,134            |  
|                                            |   |                   |   |   |              |   |   |              |   |   |                   |  
|Cash and Cash Equivalents,                  |   |                   |   |   |              |   |   |              |   |   |                   |  
|End of Period                               | $ | 126,867           |   | $ | 396,049      |   | $ | 398,433      |   | $ | 126,867           |  

NON-CASH FINANCING AND INVESTING ACTIVITIES (Note 13)

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

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  February 28, 2007 
  (Stated in Canadian Dollars)

|1. | NATURE OF OPERATIONS AND CONTINUANCE OF
        BUSINESS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company was incorporated February 27,
        1979 in Canada under the British Columbia Company Act and was extra-provincially
        registered in the Province of Alberta on October 12, 1995.                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company voluntarily de-listed from the
        Canadian Venture Exchange on December 14, 1999. The Companys stock
        currently trades on the Over the Counter Bulletin Board in the United
        States under the symbol LNXGF.                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | On February 20, 2003, the shareholders approved
        a change of name to Linux Gold Corp. and increased the authorized share
        capital to 200,000,000 common shares without par value. The Company had
        been previously pursuing various business opportunities and, elective
        March 1, 2003, the Company changed its principal operations to mineral
        exploration. Accordingly, as of March 1, 2003, the Company is considered
        an exploration stage company.                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|2. | GOING-CONCERN                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | These consolidated financial statements have
        been prepared by management on the basis of generally accepted accounting
        principles applicable to a going-concern, which assumes the
        Company will continue in operation for the foreseeable future and will
        be able to realize its assets and discharge its liabilities in the normal
        course of operations.                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company has an accumulated deficit during
        the exploration stage of $5,461,082 and total since inception of $12,985,227,
        has not yet commenced revenue-producing operations, and has significant
        expenditure requirements to continue to advance its exploration and development
        activities.                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | These consolidated financial statements do
        not reflect adjustments that would be necessary if the going- concern
        assumption were not appropriate because management believes that the actions
        already taken or planned will mitigate the adverse conditions and events
        which raise doubts about the validity of the going- concern assumption
        used in preparing these consolidated financial statements. Management
        intends to raise additional capital through share issuances to finance
        operations and invest in other business opportunities.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | If the going-concern assumption were not appropriate
        for these consolidated financial statements, then adjustments would be
        necessary to the carrying values of the assets and liabilities, the reported
        revenues and expenses, and the balance sheet classifications used.                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|3. | SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  February 28, 2007 
  (Stated in Canadian Dollars)

|3. | SIGNIFICANT ACCOUNTING POLICIES(Continued)
|-- | ------------------------------------------
|   |                                           
|   | d)                                        
|   |                                           
|   |                                           
|   |                                           
|   | e)                                        
|   |                                           
|   |                                           
|   |                                           
|   | f)                                        
|   |                                           
|   |                                           
|   |                                           
|   |                                           

| |                                                                       |   | Years
      Ended      |  
| | --------------------------------------------------------------------- | - | ---------------------- | -
| |                                                                       |   | February 28,           |  
| |                                                                       |   | 2006
      (re-stated) |  
| |                                                                       |   |                        |  
| | Net loss  as reported                                                | $ | (810,105               | )
| | Add: Stock-based compensation expense included in net loss
       as |   |                        |  
| | reported                                                              |   |                       |  
| | Deduct: Stock-based compensation expense determined under fair        |   |                        |  
| | value method                                                          |   |                       |  
| |                                                                       |   |                        |  
| | Net loss  pro forma                                                  | $ | (810,105               | )
| |                                                                       |   |                        |  
| | Net loss per share (basic and diluted) 
      as reported            | $ | (0.01                  | )
| | Net loss per share (basic and diluted)  pro forma                    | $ | (0.01                  | )

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  February 28, 2007 
  (Stated in Canadian Dollars)

|3. | SIGNIFICANT ACCOUNTING POLICIES(Continued)
|-- | ------------------------------------------
|   |                                           
|   | g)                                        
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   | h)                                        
|   |                                           
|   |                                           
|   |                                           
|   | i)                                        
|   |                                           
|   |                                           

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  February 28, 2007 
  (Stated in Canadian Dollars)

|3. | SIGNIFICANT ACCOUNTING POLICIES(Continued)
|-- | ------------------------------------------
|   |                                           
|   | j)                                        
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   | k)                                        
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   | l)                                        
|   |                                           
|   |                                           
|   |                                           
|   | m)                                        
|   |                                           
|   |                                           

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  February 28, 2007 
  (Stated in Canadian Dollars)

|3. | SIGNIFICANT ACCOUNTING POLICIES(Continued)
|-- | ------------------------------------------
|   |                                           
|   | n)                                        
|   |                                           
|   |                                           
|   |                                           
|   | o)                                        
|   |                                           
|   |                                           

| |                                                     |   |              |   |   | Years Ended            |   |   |                        |  
| | --------------------------------------------------- | - | ------------ | - | - | ---------------------- | - | - | ---------------------- | -
| |                                                     |   | February 28, |   |   | February 28,           |   |   | February 28,           |  
| |                                                     |   | 2007         |   |   | 2006
      (re-stated) |   |   | 2005
      (re-stated) |  
| | Net loss for the year                               | $ | (3,898,870   | ) | $ | (810,105               | ) | $ | (748,369               | )
| | Other comprehensive income (loss)                   |   |              |   |   |                        |   |   |                        |  
| | Unrealized holding gain (loss)
      on investments |   | (130,000     | ) |   | 2,000                  |   |   | (54,000                | )
| | Comprehensive loss for the year                     | $ | (4,028,870   | ) | $ | (808,105               | ) | $ | (802,369               | )

| | p) | Property and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | Property and equipment consists of office furniture,
        computer equipment and vehicle, which are recorded at cost. Office furniture
        is amortized on a declining-balance basis at 20% per annum, and the vehicle
        is amortized on a declining-balance basis at 30% per annum.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | q) | Recent Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | In February 2007, the Financial Accounting Standards
        Board (FASB) issued SFAS No. 159, The Fair Value Option for Financial
        Assets and Financial Liabilities  Including an Amendment of FASB
        Statement No. 115.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | This statement permits entities to choose to measure
        many financial instruments and certain other items at fair value. Most
        of the provisions of SFAS No. 159 apply only to entities that elect the
        fair value option. However, the amendment to SFAS No. 115 Accounting
        for Certain Investments in Debt and Equity Securities applies
        to all entities with available-for-sale and trading securities. SFAS No.
        159 is effective as of the beginning of an entitys first fiscal
        year that begins after November 15, 2007. Early adoption is permitted
        as of the beginning of a fiscal year that begins on or before November
        15, 2007, provided the entity also elects to apply the provision of SFAS
        No. 157, Fair Value Measurements.The adoption of this
        statement is not expected to have a material effect on the Company's financial
        statements.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | In September 2006, the SEC issued Staff Accounting Bulletin
        (SAB) No. 108, Considering the Effects of Prior Year
        Misstatements when Quantifying Misstatements in Current Year Financial
        Statements.SAB No. 108 addresses how the effects of prior year
        uncorrected misstatements should be considered when quantifying misstatements
        in current year financial statements. SAB No. 108 requires companies to
        quantify misstatements using a balance sheet and income statement approach
        and to evaluate whether either approach results in quantifying an error
        that is material in light of relevant quantitative and qualitative factors.
        SAB No. 108 is effective for fiscal years ending after November 15, 2006.
        The adoption of SAB No. 108 did not have a material effect on its financial
        statements.                                                  

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  February 28, 2007 
  (Stated in Canadian Dollars)

|3. | SIGNIFICANT ACCOUNTING POLICIES(Continued)
|-- | ------------------------------------------
|   |                                           
|   | q)                                        
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           
|   |                                           

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  February 28, 2007 
  (Stated in Canadian Dollars)

|4. | PROPERTY AND EQUIPMENT
|-- | ----------------------

| |                  |   | February
      28, 2007 | 
| | ---------------- | - | ----------------------- | 
| |                  |   |                         | 
| |                  |   | Cost                    | 
| | Office furniture |   | 10,864                  | 
| | Vehicle          |   | 15,531                  | 
| |                  | $ | 26,395                  | 

| |                  |   | February
      28, 2006 | 
| | ---------------- | - | ----------------------- | 
| |                  |   |                         | 
| |                  |   | Cost                    | 
| | Office furniture |   | 1,408                   | 
| | Vehicle          |   | 15,531                  | 
| |                  | $ | 16,939                  | 

|5. | MINERAL INTERESTS
|-- | -----------------

| |                                    |   | February
      28, 2007 | 
| | ---------------------------------- | - | ----------------------- | 
| |                                    |   | Alaska                  | 
| |                                    |   |                         | 
| | Exploration and development costs: |   |                         | 
| | Assaying                           |   | 130,544                 | 
| | Field supplies and other           |   | 609,856                 | 
| | Staking and recording fees         |   | 26,357                  | 
| | Geological consulting              |   | 105,655                 | 
| | Transportation                     |   | 202,458                 | 
| |                                    |   |                         | 
| | Incurred during the year           | $ | 1,074,870               | 

| |                                    |   | February
      28, 2006 | 
| | ---------------------------------- | - | ----------------------- | 
| |                                    |   | Alaska                  | 
| |                                    |   |                         | 
| | Exploration and development costs: |   |                         | 
| | Staking and recording fees         |   | 33,938                  | 
| | Geological consulting              |   | 229,442                 | 
| | Transportation                     |   | 41,836                  | 
| |                                    |   |                         | 
| | Incurred during the year           | $ | 305,216                 | 

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  February 28, 2007 
  (Stated in Canadian Dollars)

|5. | MINERAL INTERESTS(continued)
|-- | ----------------------------
|   |                             
|   | a)                          
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   | b)                          
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  February 28, 2007 
  (Stated in Canadian Dollars)

|5. | MINERAL INTERESTS(continued)
|-- | ----------------------------
|   |                             
|   | c)                          
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|6. | RELATED PARTY TRANSACTIONS  
|   |                             
|   | a)                          
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             
|   |                             

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  February 28, 2007 
  (Stated in Canadian Dollars)

|6. | RELATED PARTY TRANSACTIONS(continued)
|-- | -------------------------------------
|   |                                      
|   | b)                                   

| |                                   |   | February 28 |   |   | Advances/    |   |   | February 28, |  
| | --------------------------------- | - | ----------- | - | - | ------------ | - | - | ------------ | -
| |                                   |   | 2006        |   |   | (Repayments) |   |   | 2007         |  
| |                                   |   |             |   |   |              |   |   |              |  
| | Access Information Services, Inc. | $ | 48,287      |   | $ |             |   | $ | 48,287       |  
| | IAS Communications Inc.           |   | (3,151      | ) |   |             |   |   | (3,151       | )
| | JGR Petroleum, Inc.               |   | 66,099      |   |   |             |   |   | 66,099       |  
| | J. Robertson, President and CEO   |   | 3,029       |   |   | 3,255        |   |   | 6,284        |  
| | Rainbow Network                   |   | 68,610      |   |   |             |   |   | 68,610       |  
| | Reg Technologies                  |   |            |   |   | (6,840       | ) |   | (6,840       | )
| | REGI U.S., Inc.                   |   | (38         | ) |   |             |   |   | (38          | )
| | SMR Investments Ltd.              |   | (18,658     | ) |   | 163,525      |   |   | 144,867      |  
| | 540330 BC Ltd.                    |   |            |   |   | 114,969      |   |   | 114,969      |  
| | Teryl Resources Corp.             |   | 40,216      |   |   | (40,216      | ) |   |             |  
| |                                   |   |             |   |   |              |   |   |              |  
| |                                   | $ | 204,394     |   | $ | 234,693      |   | $ | 439,087      |  

|7. | CONVERTIBLE DEBENTURES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The Company completed a financing of $2,226,250
        (US$2,000,000) on May 8, 2006 with several institutional investors consisting
        of secured convertible discount notes (the Discount Notes)
        with a principal amount of $2,343,373 (US$2,105,250) plus Series A and
        Series B warrants. The securities were issued in a private placement transaction
        pursuant to Section 4(2) of the Securities Act of 1933, as amended                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The Discount Notes were issued at a discount
        of 5%, are convertible into common stock at a conversion price of $0.40
        per share and mature on November 8, 2007. The Company received proceeds
        of $1,635,728 (US$1,485,000), net of issue costs, at first closing, and
        the remaining $373,428 (US$330,000), net of issue costs, was received
        upon the filing of a resale registration statement with the United States
        Securities and Exchange Commission. The registration statement was filed
        on August 9, 2006 and became effective September 1, 2006.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The investors also received Series A warrants
        to purchase, in the aggregate, 5,000,000 shares of common stock at $0.50
        per share exercisable immediately for a term of five years, and Series
        B warrants to purchase, in the aggregate, an additional 2,500,000 shares
        of common stock at $0.52 per share exercisable on September 1, 2007 for
        a term of ten years.                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Effective October 1, 2006, the Company is
        required to retire 1/15 of the principal amount per month using one of
        the following two methods:                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | As well, the Company, at its discretion, can
        use a combination of the foregoing two methods. The Company can require
        the debenture holder to convert the then outstanding portion of the note
        if the price of the common stock closes at or above $1.00 for 20 consecutive
        trading days.                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | During the year ended February 28, 2007, the
        Company retired $802,871 of principal, of which $158,122 was paid in cash
        and $644,749 was paid by the issuance of 2,585,075 common shares.                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | The Company and its wholly-owned subsidiary
        have guaranteed the convertible debt and have pledged all of its assets
        to act as collateral.                                                                                                                                                                                                                                                                                                                                                                                                                                                      

---

LINUXGOLD CORP. 
  (An Exploration Stage Company) 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  February 28, 2007 
  (Stated in Canadian Dollars)

|7. | CONVERTIBLE DEBENTURES(continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | In accordance with EITF 98-5 Accounting
        for Convertible Securities with Beneficial Conversion Features or Contingently
        Adjustable Conversion Ratios, the Company recognized the value
        of the embedded beneficial conversion feature of $963,670 (US$864,866)
        as additional paid-in capital as the debt was issued with a fair value
        conversion feature. In addition, in accordance with EITF 00-27 Application
        of Issue No. 98-5 to Certain Convertible Instruments, the Company
        allocated the proceeds of issuance between the convertible debt and the
        detachable warrants based on their relative fair values. Accordingly,
        the Company recognized the fair value of the detachable warrants of $1,262,580
        (US$1,135,134) as additional paid-in capital. The carrying value of the
        Discount Notes will be accrued to the face value of the remaining principal,
        after redemptions, of $2,343,373 (US$2,105,250) to maturity. To February
        28, 2007, interest expense of $1,198,381 has been accreted increasing
        the carrying value of the Discount Notes to $400,232, after redemptions.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|8. | COMMON STOCK                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|9. | WARRANTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | A summary of the changes in the Companys
        share purchase warrants is presented below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| |                            |  | February
      28, 2007 |   |  | February
      28, 2006 | 
| | -------------------------- |  | ----------------------- | - |  | ----------------------- | 
| |                            |  |                         |   |  | Weighted                | 
| |                            |  |                         |   |  | Average                 | 
| |                            |  |                         |   |  | Exercise                | 
| |                            |  | Number                  |   |  | Price                   | 
| |                            |  |                         |   |  |                         | 
| | Balance, beginning of year |  | 4,811,027               |   |  | US$ 0.20                | 
| | Issued                     |  | 7,500,002               |   |  | US$ 0.50                | 
| | Exercised                  |  | (52,500                 | ) |  | US$ 0.25                | 
| | Forfeited / Expired        |  | (16,000                 | ) |  | US$ 0.08                | 
| |                            |  |                         |   |  |                         | 
| | Balance, end of year       |  | 12,242,529              |   |  | US$
      0.39          | 

During the year ended February 28, 2007
  50,000 warrants were exercised but subscriptions receivable of $14,600 remained
  outstanding. Subsequent to 2007 fiscal year end the Company collected $14,600
  of share subscription receivable.

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  February 28, 2007 
  (Stated in Canadian Dollars)

|9. | WARRANTS(continued)                                                                     
|-- | ----------------------------------------------------------------------------------------
|   |                                                                                         
|   | As at February 28, 2007, the following share purchase
        warrants were outstanding:

| |                                     | Exercise      | Years Ended
| | ----------------------------------- | ------------- | -----------
| |                                     | Price         | 2007       
| |                                     |               |            
| | November 18, 2005/2007              | $ 0.20/$ 0.25 | 517,250    
| | December 6, 2007                    | $ 0.18        | 2,777,777  
| | February 21, 2007/February 21, 2008 | $ 0.25/$ 0.30 | 1,447,500  
| | May 8, 2011/May 8, 2016             | $ 0.50/$ 0.52 | 5,625,001  
| | June 28, 2011/ June 28, 2016        | $ 0.50/$ 0.52 | 1,875,001  
| |                                     |               |            
| |                                     |               | 12,242,529 

|    | During the year ended February 28, 2007, 2,777,777 warrants
        set to expire on December 6, 2006 were extended to December 6, 2007, and
        517,250 warrants set to expire on November 18, 2006 were extended to November
        18, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10. | STOCK OPTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The Company has a stock option plan to issue up to 10%
        of the issued common shares to certain directors and employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | The weighted average grant date fair value of stock
        options granted during the years ended February 28, 2007, 2006 and 2005
        was $0.35, $nil and $0.22, respectively. The weighted average exercise
        fair value of stock options exercised during the years ended February
        28, 2007, 2006 and 2005 was $0.21, $0.10 and $0.10, respectively. During
        the years ended February 28, 2007, 2006 and 2005, the Company recorded
        stock-based compensation of $436,915, $2,280 and $82,000, respectively.
        For the year ended February 28, 2007 $436,215 of stock-based compensation
        is related to fair value and $nil is related to intrinsic value. For the
        year ended February 28, 2006 $nil of stock-based compensation is related
        to fair value and $2,280 is related to intrinsic value. During the 2007
        fiscal year the Company granted 100,000 options to consultants as follows:
        June 29, 2006  25,000, November 2, 2006  25,000 and December
        8, 2006 - 50,000.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | A summary of the Companys stock option activity
        is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

| |                                |  |                   |   |  | Weighted Average |  |   | Aggregate Intrinsic | 
| | ------------------------------ |  | ----------------- | - |  | ---------------- |  | - | ------------------- | 
| |                                |  | Number of Options |   |  | Exercise Price   |  |   | Value               | 
| |                                |  |                   |   |  |                  |  |   |                     | 
| | Outstanding and exercisable at |  |                   |   |  |                  |  |   |                     | 
| | March 1, 2006                  |  | 2,443,750         |   |  | US$ 0.13         |  | $ | 2,280               | 
| |                                |  |                   |   |  |                  |  |   |                     | 
| | Granted                        |  | 1,600,000         |   |  | US$ 0.35         |  |   |                     | 
| | Exercised                      |  | (323,750          | ) |  | US$ 0.21         |  |   |                     | 
| | Forfeited                      |  |                  |   |  |                 |  |   |                     | 
| |                                |  |                   |   |  |                  |  |   |                     | 
| | Outstanding and exercisable at |  |                   |   |  |                  |  |   |                     | 
| | February 28, 2007              |  | 3,720,000         |   |  | US$ 0.22         |  | $ | 328,300             | 

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  February 28, 2007 
  (Stated in Canadian Dollars)

|10. | STOCK OPTIONS(continued)                                                      
|--- | ------------------------------------------------------------------------------
|    |                                                                               
|    | As at February 28, 2007, the following share options
        were outstanding:

| |                    | Exercise | Years Ended
| | ------------------ | -------- | -----------
| |                    | Price    | 2007       
| |                    |          |            
| | June 9, 2006       | $0.30    | 0          
| | September 17, 2007 | $0.18    | 245,000    
| | February 21, 2008  | $0.10    | 1,225,000  
| | February 25, 2008  | $0.10    | 425,000    
| | September 17, 2008 | $0.10    | 75,000     
| | October 20, 2008   | $0.10    | 62,500     
| | April 22, 2009     | $0.30    | 75,000     
| | November 9, 2009   | $0.20    | 12,500     
| | June 29, 2011      | $0.34    | 25,000     
| | August 9, 2011     | $0.35    | 1,500,000  
| | November 2, 2011   | $0.25    | 25,000     
| | December 8, 2011   | $0.25    | 50,000     
| |                    |          |            
| |                    |          | 3,720,000  

The fair value of each option grant was
  estimated on the date of the grant using the Black-Scholes option pricing model
  with the following weighted average assumptions:

| |                          | Year Ended   | Year Ended   | Year Ended  
| | ------------------------ | ------------ | ------------ | ------------
| |                          | February 28, | February 28, | February 28,
| |                          | 2007         | 2006         | 2005        
| |                          |              |              |             
| | Expected dividend yield  | 0%           | 0%           | 0%          
| | Expected volatility      | 82%          | 78%          | 154%        
| | Expected life (in years) | 5            | 5.0          | 3.0         
| | Risk-free interest rate  | 4.61%        | 3.07%        | 3.38%       

|    | Option pricing models require the input of
        highly subjective assumptions including the expected price volatility.
        Changes in the subjective input assumptions can materially affect the
        fair value estimate.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                     
|    | All options granted during the 2007 fiscal
        year end vest immediately on issue.                                                                                                                                              
|    |                                                                                                                                                                                                                                     
|11. | COMMITMENTS                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                     
|    | a)                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                     
|    | b)                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                     
|    | c)                                                                                                                                                                                                                                  

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  February 28, 2007 
  (Stated in Canadian Dollars)

|11. | COMMITMENTS(continued)
|--- | ----------------------
|    |                       
|    | d)                    

Fiscal year ending February 28, 2008
      $
      39,574Fiscal year ending February 28, 2009
      $
      39,574Fiscal year ending February 28, 2010
      $
      26,383$
      105,531


|    | e)                                                                                                                                                                                                                                              | The Company entered into a consulting agreement
        dated August 8, 2006 with a company controlled by a common director for
        financial consulting services. Under the terms of the agreement, the Company
        agreed to pay expenses incurred for a term of one year and pay a monthly
        fee of US$7,000.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                               
|12. | CONTINGENCY                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                               
|    | The Company has written off $46,281 of old,
        disputed and unsettled accounts payable. Management believes that payment
        of these liabilities is unlikely and that continued recognition in the
        accounts is not necessary.
|    |                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                               
|13. | NON-CASH FINANCING AND INVESTING ACTIVITIES                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                               
|    | a)                                                                                                                                                                                                                                              | During the year ended February 28, 2007:                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                 | i)                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                               
|    | b)                                                                                                                                                                                                                                              | During the year ended February 28, 2006:                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                 | i)                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                 | ii)                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                 |                                                                                                                                                                                                                                                                                                                               
|    | c)                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                               

| |                               |   |              |   |   |              |   |   |              |   |   | Cumulative      |  
| | ----------------------------- | - | ------------ | - | - | ------------ | - | - | ------------ | - | - | --------------- | -
| |                               |   |              |   |   |              |   |   |              |   |   | From Inception  |  
| |                               |   |              |   |   |              |   |   |              |   |   | of Exploration  |  
| |                               |   |              |   |   |              |   |   |              |   |   | Stage on        |  
| |                               |   |              |   |   |              |   |   |              |   |   | March 1, 2003   |  
| | Changes in operating assets   |   | February 28, |   |   | February 28, |   |   | February 28, |   |   | to February 28, |  
| | and liabilities:              |   | 2007         |   |   | 2006         |   |   | 2005         |   |   | 2007            |  
| |                               |   |              |   |   |              |   |   |              |   |   |                 |  
| | Accounts receivable           | $ | (3,621       | ) | $ | (3,867       | ) | $ | (41,981      | ) | $ | (55,455         | )
| |                               |   |              |   |   |              |   |   |              |   |   |                 |  
| | Prepaid expenses              |   | (18,854      | ) |   | (4,799       | ) |   | 27,009       |   |   | (106,884        | )
| | Accounts payable and          |   |              |   |   |              |   |   |              |   |   |                 |  
| | accrued
      liabilities     |   | 78,312       |   |   | 36,323       |   |   | 3,359        |   |   | 139,248         |  
| | Accrued liabilities to        |   |              |   |   |              |   |   |              |   |   |                 |  
| | related
      parties         |   | 177,753      |   |   | 14,255       |   |   | 38,560       |   |   | 266,568         |  
| | Advances from                 |   |              |   |   |              |   |   |              |   |   |                 |  
| | (repayments
      to) related |   |              |   |   |              |   |   |              |   |   |                 |  
| | parties                       |   |             |   |   |             |   |   | (42,474      | ) |   | 136,100         |  
| |                               |   |              |   |   |              |   |   |              |   |   |                 |  
| |                               | $ | 233,590      |   | $ | 41,912       |   | $ | (15,527      | ) | $ | 379,577         |  

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LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  February 28, 2007 
  (Stated in Canadian Dollars)

|14. | INCOME TAXES                                                                                                                                                                                                                                                                                                            
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                         
|    | Potential benefits of income tax losses are not recognized
        in the accounts until realization is more likely than not. The Company
        has adopted SFAS No. 109, Accounting for Income Taxes,
        as of its inception. The Company has incurred Canadian non-capital losses
        as scheduled below:

Year of
      
      Year ofLoss
      Amount
      Expiration2001
      $        1,223,000
      20082002
      238,000
      20092003
      28,000
      20102004
      347,000
      20112005
      399,000
      20152006
      464,000
      20262007
      1,055,000
      2027$        3,755,000


Pursuant to SFAS No. 109, the Company
  is required to compute tax asset benefits for non-capital losses carried forward.
  Potential benefit of non-capital losses have not been recognized in these financial
  statements because the Company cannot be assured it is more likely than not
  it will utilize the losses carried forward in future years. The reconciliation
  of income tax attributable to continuing operations computed at the statutory
  tax rates to income tax expense is:

| |                                                               |   | 2007      |   |   | 2006     |  
| | ------------------------------------------------------------- | - | --------- | - | - | -------- | -
| | Income tax benefit computed at Canadian statutory
      rates | $ | 1,331,074 |   | $ | 276,570  |  
| | Amortization in excess of capital cost allowance              |   | (12,021   | ) |   | (3,648   | )
| | Non-deductible stock-based compensation                       |   | (149,163  | ) |   | (778     | )
| | Debt issue costs                                              |   | (10,948   | ) |   |         |  
| | Temporary differences related to natural resource
      costs |   | (340,662  | ) |   | (112,522 | )
| | Other permanent differences                                   |   | (411,919  | ) |   | (8,331   | )
| | Utilized (unrecognized) tax losses                            |   | (406,361  | ) |   | (151,291 | )
| | Deferred income tax benefit                                   | $ |          |   | $ |         |  

Significant components of the Companys
  deferred tax assets and liabilities, after applying enacted corporate income
  tax rates, are as follows:

| |                                                                 |   | 2007       |   |   | 2006       |  
| | --------------------------------------------------------------- | - | ---------- | - | - | ---------- | -
| | Deferred income tax assets                                      |   |            |   |   |            |  
| | Excess of book value over market value of marketable securities | $ | 47,113     |   | $ | 2,731      |  
| | Excess of un-depreciated capital cost over
      net book       |   |            |   |   |            |  
| | value of fixed assets                                           |   | 6,547      |   |   | 2,635      |  
| | Excess of un-amortized debt issue costs over
      tax value    |   | (3,066     | ) |   |           |  
| | Excess of unused exploration expenditures for Canadian          |   |            |   |   |            |  
| | tax purposes over net book value
      of resource properties   |   | 753,960    |   |   | 413,324    |  
| | Net losses carried forward                                      |   | 1,328,046  |   |   | 942,605    |  
| |                                                                 |   | 2,132,600  |   |   | 1,361,295  |  
| | Valuation allowance for deferred income tax assets              |   | (2,132,600 | ) |   | (1,361,295 | )
| | Deferred income tax assets, net                                 | $ |           |   | $ |           |  

The valuation allowance reflects the
  Companys estimate that the tax assets, more likely than not, will not
  be realized and consequently have not been recorded in these financial statements.

---

LINUX GOLD CORP. 
  (An Exploration Stage Company) 
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 
  February 28, 2007 
  (Stated in Canadian Dollars)

|15. | RESTATEMENT                                                                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                       
|    | During the 2006, 2005 and 2004 fiscal years the Company
        expensed mineral interest acquisition costs of $20,500, $45,571 and $$60,346
        respectively. Pursuant to the adoption of EITF 04-2 these amounts aggregating
        $126,417 have been retroactively restated as a separate component of property,
        plant and equipment.
|    |                                                                                                                                                                                                                                                                                                                                                       
|    | The effect of this correction on net loss and related
        per share amounts is as follows:                                                                                                                                                                                                                                                        

| |                                                  |   |          |   |   |          |   |   | Cumulative From   |  
| | ------------------------------------------------ | - | -------- | - | - | -------- | - | - | ----------------- | -
| |                                                  |   |          |   |   |          |   |   | Inception of      |  
| |                                                  |   |          |   |   |          |   |   | Exploration Stage |  
| |                                                  |   |          |   |   |          |   |   | on March 1, 2003  |  
| |                                                  |   |          |   |   |          |   |   | Through February  |  
| |                                                  |   | 2006     |   |   | 2005     |   |   | 28, 2006          |  
| |                                                  |   |          |   |   |          |   |   |                   |  
| | Net loss as previously reported                  | $ | (830,605 | ) | $ | (793,940 | ) | $ | (5,587,499        | )
| | Mineral acquisition costs                        |   | 20,500   |   |   | 45,571   |   |   | 126,417           |  
| |                                                  |   |          |   |   |          |   |   |                   |  
| | Net loss as restated                             | $ | (810,105 | ) | $ | (748,369 | ) | $ | (5,461,082        | )
| |                                                  |   |          |   |   |          |   |   |                   |  
| | Basic net loss per share, as previously reported | $ | (0.01    | ) | $ | (0.01    | ) |   |                   |  
| | Prior period adjustments                         |   | 0.00     |   |   |          |   |   |                   |  
| |                                                  |   |          |   |   |          |   |   |                   |  
| | Basic net loss per share, as restated            | $ | (0.01    | ) | $ | (0.01    | ) |   |                   |  

|16. | SUBSEQUENT EVENTS
|--- | -----------------
|    |                  
|    | a)               
|    |                  
|    | b)               
|    |                  
|    | c)               
|    |                  
|    | d)               
|    |                  
|    | e)               
|    |                  
|    | f)               
|    |                  
|    | g)               

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